Dipping into the ‘cookie jar’ = losing benefits
Soko v Caltex Oil Provident Fund and Another (PFA) 

By Mtendeweka Mhango

Can a pension fund deduct from a complainant’s pension benefits an amount that the complainant was accused by his or her employer of stealing from the company? This was the issue that the pension funds adjudicator had to determine in Soko v Caltex Oil Provident Fund and Another (PFA) (unreported case no PFA/GA/23047/2008/MN/LPM). While the adjudicator was not able to rule on the merits of the complaint because the matter had prescribed, the Supreme Court of Appeal has upheld the power of a pension fund to deduct pension benefits pending proceedings in a court of law by a participating employer (see Highveld Steel and Vanadium Corporation Ltd v Oosthuizen 2009 (4) SA 1 (SCA)). Despite the fact that the Soko case was decided in 2008, it remains important to warrant academic commentary. 	

The Soko case

This case involved the deduction from the complainant’s pension benefit of an amount that the complainant was accused by his employer of stealing from the company. The complainant was employed by Caltex Oil SA (Pty) Ltd (the employer) until he was dismissed in 2001. An amount of R 42 000 was withheld by the first respondent for alleged damage suffered by the employer, but for which criminal charges had not proceeded.

The complainant complained that Alexander Forbes Financial Services (the second respondent) withheld his benefit without his approval. He submitted that the second respondent claimed that it acted on the employer’s instruction and that it was agreed that the money deducted would be withheld until the criminal case against him was finalised. However, despite the case being withdrawn more than six years ago, his benefits had not been paid to him. The complainant therefore lodged a complaint with the adjudicator and sought an order against the second respondent to pay him his benefits.

The second respondent, citing the High Court case Metro Group Retirement Fund and Another v Murphy NO and Another (WCC) (unreported case no 8278/2001, 23-7-2002) (HJ Erasmus J), responded that this matter had prescribed in terms of the Prescription Act 68 of 1969. Furthermore, the second respondent stated that the court in the Metro Group case held that the Prescription Act does not grant the adjudicator any power to condone a claim lodged after a period of three years from the date on which the debt became due. It therefore requested the adjudicator to dismiss the complaint on the basis that the complainant’s claim had prescribed in terms of the Prescription Act.

The second respondent advanced another argument that it carried out an investigation to establish exactly what benefits were paid to the complainant. The second respondent noted that it was not in a position to retrieve any information relating to the complainant’s case. Despite this, the second respondent submitted that it had complied with its obligations to maintain records for the period prescribed by law and that the complainant’s request for information, insofar as it relates to the payment of his benefit, falls outside the prescribed time. This period is set at five years in terms of s 18 of the Financial Advisory and Intermediary Services Act 37 of 2002.

In resolving this complaint, the adjudicator observed that an amount of R 42 000 was withheld from the complainant’s withdrawal benefit by the second respondent following the complainant being suspected of defrauding the employer in the same amount, and that the issues complained of ensued in 2001. The adjudicator found that the complaint was lodged with this office on 11 February 2008, seven years after the cause of action arose. As a result, the adjudicator ruled that pursuant to s 30I of the Pension Funds Act 24 of 1956, it had no authority to investigate and adjudicate on any complaint that is time-barred and dismissed the complaint.

Comment and analysis

While the adjudicator’s ruling was determined on a technical matter, namely s 30I of the Pension Funds Act, it should be noted that, had the adjudicator been given an opportunity to rule on the merits, it probably would have sustained the second respondent’s power to withhold the pension benefits. This is because the power to withhold pension benefits has recently been upheld by the Supreme Court of Appeal in the Highveld Steel case. 

What is more, the complainant’s argument that his benefits were withheld without his approval would not have succeeded under the authority of the Highveld Steel case and other previous rulings by the adjudicator, namely Twigg v Orion Money Pension Purchase Fund and Another (1) [2001] 12 BPLR 2870 (PFA), Charlton and Others v Tongaat-Hulett Pension Fund and Other [2006] 2 BPLR 94 (D), and Appanna Kelvinator Group Services of SA Provident Fund [2000] 2 BPLR 126 (PFA). Moreover, it is likely that the reasoning and judgment in the Highveld Steel case will apply to cases involving both pending civil and criminal proceedings. Put differently, the fact that the proceedings in the present determination were criminal and not civil would probably not preclude the application of the judgment in the Highveld Steel case. 

The latter proposition was recently confirmed by the adjudicator in Coka and Another v Old Mutual Superfund Pension Fund and Others [2013] JOL 30751 (PFA) who ruled that an employer may recover legal costs against benefits of members and that such costs must be related to the recovery of financial damages owing to dishonesty, theft, fraud or misconduct of the employee.

Mtendeweka Mhango BA (Morehead State University) JD (Michigan State University) LLM (Wayne State University) is an associate professor and acting head of the School of Law at the University of the Witwatersrand.