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PFA orders fund to pay punitive damages

31 May 2017 Muvhango Lukhaimane, PFA
Muvhango Lukhaimane, PFA Adjudicator.

Muvhango Lukhaimane, PFA Adjudicator.

The Pension Funds Adjudicator has reminded funds it is illegal to withhold the benefit of a member who is potentially liable for theft, fraud or misconduct without written admission of liability or a court judgment in respect of the compensation.

Muvhango Lukhaimane was ruling in a matter in which CA Maculuve of Florida brought a complaint against Vitae Umbrella Provident Fund (first Respondent), Glassock & Associates (Pty) Ltd (second respondent) and Kawena Distributors (Pty) Ltd (third respondent) for withholding his benefit following his exit from employment.

The complainant said he was employed by the third respondent from 1 December 1993 to 21 September 2016. He was a member of the first respondent.

Upon exiting the first respondent, a withdrawal benefit became due and payable. However, the benefit was withheld by the first respondent at the instance of the third respondent based on the allegation that he committed misconduct against the third respondent.

The allegation was that he collected monies from the third respondent’s customers in Mozambique and failed to bank approximately R25 000 collected from a customer who had placed certain orders. Two customers of the third respondent laid charges of fraud against the complainant in respect of the amounts allegedly stolen by him.

The complainant said he requested the third respondent to assist him in completing withdrawal claim forms following his dismissal from employment. However, the third respondent failed to provide him with a claim form.

The second respondent filed a response on behalf of the first respondent and provided the complainant’s benefit statement as at 8 February 2017 which indicated that his gross fund credit amounted to R254 695.21. His benefit remained invested and
continued to grow with market returns.

The second respondent contended that it was unable to pay the complainant’s fund credit as it was instructed by the third respondent to withhold his benefit in terms of section 37D(1)(b)(ii)(bb) of the Act.

The third respondent advised that it was in the process of instituting legal proceedings against the complainant for damages allegedly caused by him as a result of theft, dishonesty, fraud or misconduct to the value of R25 000. It had to pay back the money stolen from its customers and it suffered a loss in respect of the amounts paid back.

The third respondent indicated that it had prima facie evidence that it has a valid and lawful claim against the complainant on the basis of misconduct.

The attorneys for the third respondent indicated that the third respondent was no longer proceeding with litigation against the complainant. It submitted that it would be communicating with the first respondent regarding the release of the complainant’s
pension benefits.

In her determination, Ms Lukhaimane said a fund may deduct any amount due by a member to his employer in respect of damages caused by reason of theft, dishonesty, fraud or misconduct. The member should have admitted in writing to the employer or judgment should have been obtained against the member in any court.

“In the instant case, the complainant is accused of defrauding the third respondent, which resulted in the latter suffering an amount of R25 000.00.

“The third respondent’s attorneys initially advised the first respondent that it was in the process of instituting legal proceedings against the complainant in respect of damages allegedly caused to the third respondent by the complainant due to theft, fraud, dishonesty or misconduct.

“The legal proceedings against the complainant were to be instituted with a view to obtaining an order authorising the recovery of its alleged damages from the complainant’s fund credit.

“However, the third respondent’s attorneys subsequently advised that the third respondent is no longer proceeding with legal action against the complainant. The complainant had not admitted liability to the third respondent and no judgment has been obtained against him since the withholding of his withdrawal benefit.

“Further, there are no pending legal proceedings against the complainant in respect of the alleged misconduct. Thus, the first respondent must be ordered to pay the complainant his withdrawal benefit without delay.”

Ms Lukhaimane further said the withholding of the complainant’s entire benefit was unreasonable and unlawful in the circumstances.

“The second respondent submitted that the complainant’s current fund credit amounts to R254 695.21. The value of the alleged damage caused to the third respondent amounts to R25 000.

“As the value of the alleged loss suffered by the third respondent does not exceeds the value of the complainant’s fund credit, it was unjustifiable to withhold the entire fund credit in the first place pending the conclusion of any legal proceeding against the complainant. As it subsequently turned out, there are no pending legal proceedings against the complainant.”

She also said the Tribunal, like any court of law, had the power to grant punitive damages in order to mark its displeasure with the conduct of a body if circumstances fit.

In this matter, the first respondent acted negligently and as a result prejudiced the complainant in terms of payment of his withdrawal benefit unreasonably.

The first respondent was ordered to pay the complainant his withdrawal benefit plus interest at the rate of 10.5% per annum.

The first respondent was also ordered to pay the complainant compensation in the amount of R5 000 for its unreasonable conduct in failing to pay a portion of the complainant’s fund credit that was over and above the amount of the alleged loss suffered by the third respondent.

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