Acting Pension Funds Adjudicator, Dr Elmarie de la Rey
The Acting Pension Funds Adjudicator has dismissed the case of a South African woman living in the United States of America, who sought an order directing her former spouse’s South African retirement annuity funds to pay her a share of the pension interest assigned to her in terms of their US divorce decree.
Former Durbanite LL Edgar lodged the complaint with the Acting Pension Funds Adjudicator, Dr Elmarie de la Rey, in November 2008.
Edgar and her husband were divorced in December 2000 by a court order issued by the Circuit Court of the Ninth Judicial Circuit in Orange County, Florida.
The complainant and her former husband had several retirement annuities – seven with Old Mutual South Africa in the husband’s name and two in the wife’s name, while there was one more with Momentum Life in the husband’s name.
The couple’s divorce settlement stipulated that any accounts in their respective names be changed from individual accounts to joint accounts that would be equally owned by the parties. The two would be required to agree in writing any decisions affecting these accounts. This included the assigned 50% each share of the maturity value of the retirement annuities.
The complainant said that while the fourth respondent, Old Mutual Life Assurance Company (SA) Ltd, had noted her pension interest entitlement from policies listed in the settlement agreement, the first respondent Momentum Retirement Annuity Fund, and its administrator, the second respondent, Momentum Group Limited, had refused to do so.
The tribunal took into consideration all arguments, from which several key issues emerged.
Wait for benefit
The respondents’ legal departments argued that because the divorce decree was issued prior to amendments in the Pension Funds Act on 13 September 2007, the complainant could only claim if the former spouse decided to claim a portion of the proceeds of the retirement benefit, or on early retirement.
However the Acting Adjudicator ruled that the latest amendments to the Pension Funds Act now meant the complainant no longer needed to wait until the member spouse retired in order to access her portion of the pension interest. However, it needed to be established whether or not the pension interest order was enforceable.
Pension interest
The definition and calculation of pension interest was also interrogated by the tribunal.
Section 7(7) of the Divorce Act states “the pension interest of a party shall... be deemed to be part of his assets.” The Divorce Act computes “pension interest” in a retirement annuity fund as the member’s contributions plus prescribed interest thereon up to the date of divorce.
Dr De La Rey determined that the settlement agreement did not use the term “pension interest”, nor did it comply with this definition or calculation of pension interest.
In its response as the administrator of the first respondent, second respondent Momentum Group Limited argued that the settlement agreement was not binding because it did not specifically provide that the first respondent should pay the amount concerned to the complainant. It added the pension interest was not defined and there was no order binding the first respondent to endorse the policy.
It said the complainant could consider seeking legal advice on an inter partes action to claim her rights in terms of the court order.
The fourth respondent, Old Mutual Life Assurance Company, submitted that the term “50% of pension interest” did not have the same meaning as 50% of the value of the policies. It argued that if the court order was to have the same meaning it would have to be carefully constructed to prevent future problems.
In addition, the complainant’s action contravened Section 37A of the Pension Act, which states no benefit provided for in the rules of a registered fund should be capable of being reduced, transferred or otherwise ceded, other than the limited instances as set out in the Act itself.
Domicile
The complainant and the former spouse reside in the USA. In her ruling to determine whether the complainant was entitled to the payment of pension interest by the respondents or not, Dr de la Rey emphasised that domicile played an important role in determining whether the judgment of a foreign court would be recognised and endorsed in South Africa.
The common-law procedure to have this done is to bring an action in a South African court to make the foreign judgment its own.
The settlement agreement provided that the laws of the State of Florida governed the entire settlement agreement and the complainant had not applied to a South African Court to have the court order recognised and enforced in South Africa.
Members who have emigrated could apply for their full benefits to be paid in cash (subject to the possibility of income tax being deducted).
If the former spouse wished to retire from the South African Retirement Annuity Fund, he could have received the cash lump sum and not been forced to use two-thirds of the proceeds to purchase an annuity.
The former spouse could then have come to a separate agreement with the complainant to achieve the same object as the court order.
SA Court Endorsement
Dr De la Rey reiterated the statements of Momentum Retirement Annuity Fund and South African Retirement Annuity Fund regarding the validity and enforcing of foreign judgements in South Africa.
Both pointed out that in South Africa “a foreign judgment is not directly enforceable, but constitutes a cause of action which will be enforced by our courts provided the court which delivered the judgment had jurisdiction to hear the case.”
The fund representatives said the complainant was at liberty to approach a South African Court for the endorsement of a foreign court order and to protect her pension interest.
Dr De la Rey agreed that the court order was unenforceable as it stands, but said it provided the foundation on which the complainant could approach the South African courts.
Dismissed
This complaint had been referred to conciliation in October 2009 to afford the parties an opportunity to settle the matter. However, the parties could not reach settlement and the matter was referred to adjudication.
The fourth respondent in its response suggested certain changes to the court order to assist its fund to make payment to the complainant, while all respondents suggested alternatives for the payment of the proceeds from the retirement annuity fund policies.
The Acting Pension Fund Adjudicator ruled that the complaint could not succeed and it was dismissed.
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