PFA: Criminal conviction alone not enough for withdrawal benefit to be witheld

– there must be judgment on compensation

An employer has failed in his attempt to recover from an employee’s pension fund the financial losses suffered through the worker’s abuse of the company petrol card.

Only a compensatory order granted by a court - and not a criminal conviction alone - can make a fund deduct from the withdrawal benefit of an employee, Dr Elmarie de la Rey, the acting Pension Funds Adjudicator has determined.

ID Laing of Johannesburg, the sole partner of Fleetwood Adventure Playgrounds CC (corporation), complained to the Office of the Pension Funds Adjudicator after failing to get Orion Money Purchase Provident Fund (first respondent) and Old Mutual Life Assurance Company (South Africa) Ltd (second respondent) to pay him R19 200.95.

He said his employee B Motlhoki was a member of the first respondent. On 30 July 2009 the

complainant convened a disciplinary hearing and Motlhoki was charged with misconduct

and dishonesty pertaining to abuse of a petrol card for a number of years, thus causing loss

of R19 200.95. Motlhoki was found guilty and his employment was terminated.

The complainant proceeded to lay a criminal charge against Motlhoki. On 28 September

2010 he was found guilty as charged in the Krugersdorp Magistrate’s Court (court). He was

sentenced to pay a fine of R3000 or serve a term of eight months imprisonment, wholly

suspended for five years.

The complainant approached the first respondent to request that it deduct from the

withdrawal benefits due to Motlhoki the amount representing the losses suffered by

the corporation as a result of Motlhoki’s dishonesty.

The first respondent refused to accede to this request, citing that it could only do so if

Motlhoki had in writing admitted liability to the corporation or if a judgment had been

obtained against him in a court of law.

The complainant was dissatisfied with the first respondent’s refusal to deduct the losses he

had suffered. He submitted that Motlhoki would never admit liability as he had in the past

denied the accusations against him.

He also said that since Motlhoki was convicted by the court, he had satisfied the

requirement that a court judgment be obtained against him prior to the first respondent

making the deduction.

He added that section 37D of the Act made no mention of a section 300 of the Criminal

Procedure Act compensation order so there was no reason for the first respondent to refrain

from deducting the losses from Motlhoki’s withdrawal benefits.

In its response, the second respondent said a criminal conviction alone did not amount to a

judgment envisaged in section 37D(1)(b)(ii) of the Act. In addition to the conviction, the

court should have issued a compensatory order in terms of section 300 for the first

respondent to be entitled to deduct the money claimed by the complainant.

As no such compensatory order was issued by the court and Motlhoki had not admitted

liability to the corporation in writing, the complainant must institute civil proceedings

against him. Only upon obtaining judgment against Motlhoki would the first respondent be

in a position to make the deduction sought.

Dr De la Rey said in her determination that a fund may deduct money in respect of any

damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by

the member, provided the member had admitted liability in writing and judgment had been

obtained against the member in any court.

Dr De la Rey said while Motlhoki was successfully convicted by a criminal court, it must be

determined whether or not his conviction by the court amounted to a “judgment” as

envisaged in section 37D(1)(b)(ii).

Quoting case law, she said the magistrate’s judgment for theft is based on the requirements

of criminal law and criminal procedure and did not amount to a judgment in respect of

compensation.

She said Section 37D(1)(b)(ii) required a judgment of court for the deduction to be effected.

The judgment must be a determination of the employee’s liability to the participating

employer and the monetary value of such liability.

“A criminal conviction without a compensatory order does not amount to a ‘judgment’ as

envisaged in the Act because although extensive investigations into the merits of the

accusations made against an employee may have been conducted and accepted by the

court, a conviction in this regard only finds that the employee concerned is guilty of the

offence as charged.

“It does not proceed further to determine whether or not the employee concerned is liable

to compensate his employer and if so, how much he is liable to pay to the employer.”

“Only in instances where a compensatory order in terms of section 300 of the CPA was

sought and granted by the court did the employee become liable to compensate the

employer. In such an instance the pension fund had legal grounds upon which to effect the

deduction,” said Dr De la Rey.

“Where a compensatory order has not been granted by the court in a criminal case, there is

no determination of the employee’s liability to the employer and, therefore, the fund has no

power to effect the deduction sought, despite the conviction.

“The first respondent cannot withhold Motlhoki’s benefit, nor can it pay any amount to the

corporation or the complainant,” said Dr De la Rey, in dismissing the complaint.