PFA busy with complaints about withholding of withdrawal benefits

05 February 2014 Muvhango Lukhaimane, Pension Funds Adjudicator

The Pension Funds Adjudicator has started the New Year by ruling on a slew of complaints concerning the withholding of withdrawal benefits.

In the first matter, Mr Seme of Durban said he was employed by Davies Diagnostics (Pty) Ltd (third respondent) from 1 November 2006 to 28 February 2013. He was a member of Corporate Selection Retirement Fund (first respondent).

He complained that he did not receive his withdrawal benefit following his exit from the first respondent. He said he was advised that he owed the third respondent money and as a result, his withdrawal benefit would be withheld.

The third respondent submitted that it discovered that the complainant was employed by
another employer whilst he was still gainfully employed by it, which was contrary to its
policies. This, it submitted, resulted in loss and damage as it paid the complainant his
salary plus benefits for the period that he was employed by another company.

The complainant denied having been employed by another company whilst still employed by
the third respondent and submitted that the third respondent did not suffer any loss as the
salaries paid to him during the months of January 2013 and February 2013 were for services
that he rendered.

In this regard, the complainant submitted that the third respondent’s revenue was in
excess of R700 000 during the months of January 2013 and February 2013 due to the sales he made during the period in question.

The second respondent, in its capacity as the administrator of the first respondent, submitted that the complainant’s withdrawal claim form was received on 22 February 2013. The complainant’s share of fund was R100 359.72. Payment of the withdrawal benefit was not made as the third respondent advised it that a case had been opened against the complainant.

In her determination, Ms Lukhaimane said that in terms of the Pension Funds Act, a registered fund may deduct any amount due by a member to his employer "in respect of compensation in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member”.

She said by accepting employment with another company, the complainant’s conduct
amounted to a breach of contract of employment and did not amount to theft, dishonesty,
fraud or misconduct.

She said the third respondent had delayed in deciding what legal action to take against
the complainant.

"Any further delay by the third respondent in deciding whether or which legal action to
take against the complainant can only be to his prejudice.

She ordered the first respondent to pay the complainant his withdrawal benefit.

In the second matter, the complainant Mr Khan of Cape Town, was employed by Oasis Group Holdings (Pty) Ltd (third respondent) from March 2006 until 9 September 2010. He was a member of the Oasis Crescent Retirement Fund (first respondent).

In April 2008, the complainant was granted a conditional interest-free housing loan in the amount of R1 936 826 by the third respondent on condition that he remained in its employ for a period of not less than three years subsequent to the repayment of the housing loan in full.

In May 2010, the complainant paid the balance of the housing loan which stood in the amount of R1 809 826 at the time.

On 27 August 2010, the complainant tendered his letter of resignation to the third respondent and became eligible to receive a withdrawal benefit from the first respondent.

The third respondent requested the first respondent to withhold payment of the complainant’s withdrawal benefit on account of contingent interest in the amount of R445 682.00 having been added to the capital housing loan amount in accordance with the terms of the housing loan agreement, together with further interest that accrued since August 2010.

The complainant was aggrieved by the third respondent’s decision to charge interest to the housing loan amount retrospectively and calculated from the date of the commencement of the housing loan agreement, asserting that he should have been informed that interest would be charged on the capital amount from inception.

The complainant submitted that the housing loan agreement was entered into between himself and Eden Court Holdings (Pty) Ltd and not the third respondent. He further submitted that the applicable loan agreement stipulated that no interest would be charged on the capital loan amount.

The complainant further submitted that he had not received any statements from the first respondent throughout the existence of his housing loan agreement with the third respondent.

The first respondent submitted that in May 2010, the complainant paid the capital balance in the amount of R1 809 836 to the third respondent, in settlement of the outstanding housing loan. At the time, the contingent liability was in the amount of R445 682.00 for the interest that had accrued up to that date. It further submitted that the accrued interest continued to increase on the aforementioned liability, with the interest rate applied being prime less 1.5%, which was a favourable rate to the complainant.

The first respondent submitted that the third respondent had instituted legal action against the complainant in the High Court of the Western Cape, to reclaim the amount owing.

In her determination, Ms Lukhaimane said the crux of the matter before the Tribunal fell squarely on the provisions pertaining to a housing loan granted by some other person, other than the first respondent.

"The housing loan that was granted by the third respondent to the complainant was actually received from a wholly-owned subsidiary of the third respondent, namely Eden Court Holdings (Pty) Ltd and not the first respondent.

"The third respondent confirmed the nature of its relationship to Eden Court Holdings (Pty) Ltd in its response to the complaint.

"The Pension Funds Act requires the first respondent to provide a guarantee on the housing loan made to the complainant by some other person in order for the transaction to fall within Act.”

No such guarantee by the first respondent could be found on the information before this
Tribunal during its investigations.

"If the requirement for the furnishing of guarantee by the fund had been met, the first
respondent would have been authorised to withhold the amount that may be due by the
member to Eden Court Holdings (Pty) Ltd, from the member’s withdrawal benefit.

"This Tribunal finds that the first respondent acted unlawfully in withholding the complainant’s withdrawal benefit pending the outcome of the civil matter.

"The civil matter is in respect of a dispute pertaining to a term in the complainant’s contract of employment with the third respondent and as a result, is irrelevant to the withholding of the complainant’s withdrawal benefit.

"Thus the first respondent is directed to pay the complainant his withdrawal benefit.” said Ms Lukhaimane.

In the third matter, complainant Mr Raseruthe of Tembisa who had been employed by Ekurhuleni Metropolitan Municipality (third respondent) said he commenced employment on 8 November 1991 and was a member of the Municipal Gratuity Fund (first respondent). Coris Capital (Pty) Ltd (second respondent) was administrator of the fund.

The complainant said in July 2011, he became ill and could not go to work. The third respondent terminated his employment on the grounds that he absconded. He said he only became aware of his dismissal upon returning to work in August 2012.

Following the termination of the complainant’s employment and exit from the first respondent, he became entitled to a withdrawal benefit in terms of the rules of the first respondent.

The complainant averred that the first respondent paid his withdrawal benefit into an incorrect bank account. As a result of the first respondent’s conduct, he had not received his withdrawal benefit.

He further said the first respondent had failed to verify the legitimacy of the withdrawal claim forms and paid his benefit into an FNB account for the wrong person.

This person forged his signature and provided the first respondent with the FNB account, which was recently opened. He stated he did not know this person who also had an identity document with numbers that were the same as his.

According to the second respondent, in November 2011, it received the withdrawal
documentation from the Germiston Pay Office of the third respondent indicating that the
complainant’s last day in service was 19 July 2011.

A copy of the withdrawal documentation was annexed to the response. A copy of the
complainant’s identity document which had been stamped by the third respondent was
included in the withdrawal documentation.

The exit form indicated that the complainant had a Nedbank account, but this part of the
document was not signed by the account holder, i.e. the complainant.

In fact the complainant was correct in stating that the exit form as a whole was not signed
by him. For this reason, it did not process payment of the complainant’s withdrawal benefit
at the time.

The second respondent further submitted that it received facsimile communication
purporting to be from the complainant on 10 April 2012. A signed exit form, copy of his identity document and his new banking details were attached thereto.

The second respondent further submitted that it had noted that the exit form was identical
to that submitted by the third respondent. However the bank details had been crossed out
and replaced by a letter from FNB verifying the individual’s bank details. The identity
document submitted was identical to that submitted by the third respondent. The identity
document submitted was not the fraudulent one which the complainant traced at FNB.

The second respondent further submitted that it subsequently received a letter from an
individual who it believed to be the complainant. This letter was dated 11 May 2012 and
authorised it to make payment of the withdrawal benefit into a specified FNB account
(which corresponded with the letter from FNB which was previously submitted).

It further submitted that upon receiving the above payment instruction, it proceeded to
verify that the details of the account holder matched the details of the complainant. The
payment in the amount of R359 738.35 was made into the bank account provided, i.e. FNB
account, on 31 May 2012. The second respondent stated that at this point it considered the
matter to be finalised.

The second respondent further submitted that in August 2012, the complainant
approached it to query the payment of his withdrawal benefit. At this point it informed the
complainant that as far as it was concerned, he had been paid and the matter was
finalised. Presumably, it was at this point that the complainant approached the relevant
branch of FNB and obtained the documentation attached to the complaint.

The second respondent stated that whilst it agreed with the complainant that the
identity document provided to the bank differed from his own, the identity document provided to it was a copy of the correct identity document. At no point (until now) had it received a copy of the allegedly fraudulent identity document.

According to the second respondent, the payment was made to a bank account verified
to be that of the complainant. It further relied on a signed letter of authorisation
and a signed exit form. It even went so far as to do a verification check on the bank
account. It had discharged its obligations and did not only act reasonably, but with a level
of caution exceeding that which is normally expected of it as an administrator.

The second respondent said if the complainant alleged that the account was fraudulent,
he must prove that to be the case and he must further prove that it acted negligently or in bad faith when making payment. Falling this, the complainant had no claim against the first
respondent or it but rather against the perpetrator(s).

The complainant said he never signed the said exit documents and was still using the Nedbank account to date. He did not have an FNB account and had never had it. He did not know how FNB could verify his banking details.

In her determination, Ms Lukhaimane said the respondents submitted that they had acted reasonably and with the due caution and diligence upon receipt of claim documents with the complainant’s details and signature.

"They cannot be held liable where firstly, it has not been proven that the account into which the benefit was paid is fraudulent and secondly, were acting in good faith and with due diligence that was expected of them.

"The common law rule that he who alleges must prove is applicable to this matter. The complainant bears the onus to prove on the balance of probabilities that he had never had an FNB account and that he has a Nedbank account which he still uses to date.

"This Tribunal specifically requested the complainant to furnish it with documentary proof that he has a Nedbank account which was still open and valid at the date of payment of his withdrawal benefit, i.e. 31 May 2012.

"The complainant furnished this Tribunal with confirmation that his Nedbank account was closed on 2 February 2012.

"He also failed to furnish this Tribunal with proof that his Nedbank account was still open at the date of lodging this complaint, i.e. 27 February 2013, despite the fact that he claims he still uses this account.

"Therefore, the complainant misled this Tribunal as well as the respondents by stating that his Nedbank account was still open and valid on 31 May 2012, whist in fact it was closed.”

Ms Lukhaimane said the first and second respondents were provided with the correct copy of the complainant’s identity document.

"The complainant conceded that the copy of the identity document annexed on the withdrawal claim documentation was his correct copy of the identity document.

"In the absence of the evidence to the contrary, the first and second respondents acted reasonably and with due diligence upon receiving what appeared to be lawful and valid instructions from the complainant.

"It follows that the first and second respondents have discharged their liability towards the complainant. In the result, the complaint cannot succeed and is dismissed,” said Ms Lukhaimane.

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