PFA Ruling: Regarding unlawful deductions of a member’s benefit

The Pension Funds Adjudicator has issued an important ruling in the matter of DUMISA HUMPHREY MVINJELWA Vs ALLIED PUBLISHING LTD, ALLIED PUBLISHING PROVIDENT FUND AND OLD MUTUAL LIFE ASSURANCE COMPANY (SA) LTD regarding unlawful deductions of a member’s benefit in circumstances not authorized by section 37D(1)(b)(ii) of the Pension Funds Act. The effect of the determination is that pension funds and administrators of funds have to abide by the provisions of the Act relating to permissible deductions from any benefit due to a member.

The facts of the matter are briefly the following:

Facts

Mr Mvinjelwa (“the complainant”) was a member of Allied Publishing Provident Fund (“the Fund”) during the tenure of his employment with Allied Publishing Limited (“the employer”) until his dismissal by and or/resignation from the employer and his exit from the fund on 1 May 1999. Upon the termination of his employment, the complainant became entitled to receive a withdrawal benefit from the fund. Old Mutual Life Assurance Company (SA) Ltd (“the administrator”) deducted an amount of R6 404.97 from the complainant’s withdrawal benefit and paid this amount to the employer. The deduction of the above amount from the complainant’s withdrawal benefit now forms the subject-matter of this complaint.

Complaint

The complainant is aggrieved by the deduction of the said amount from his benefit. It is the complainant’s contention that the amount deducted was never received by him. The complainant asserts that his withdrawal benefit was appropriated by the employer as a result of the loss of the employer’s motor bike which got stolen while in the lawful possession of the complainant and during the course and within the scope of his duties. Further, the complainant submitted that he had compensated the employer for the loss of the motor bike by making monthly payments of R200.00 during the duration of his employment. The complainant further stated that the employer was compensated by its insurers for the loss of the motor bike.

Furthermore, the complainant denies that he made a loan of any nature from the employer. Therefore, the complainant seeks the Adjudicator to make an order directing the fund and its administrators to effect payment of his withdrawal benefit in the amount of R6023.92 together with interest.

Response

The employer submitted that following a disciplinary hearing held in October 1998, the complainant was found guilty of negligence in respect of the loss of a motorcycle belonging to the employer. It argued that the complainant agreed to reimburse the employer, and it further averred that an amount of R11 000.00 is the book value of the motorcycle.

It contended that the complainant acknowledged his indebtedness to the employer and agreed to repay the amount in monthly instalments of R100.00. However, before the amount was fully repaid, it argued, the complainant absconded from employment whereafter the employer claimed from the fund payment of the amount of R8 149.72 in accordance with the admission of liability signed by the complainant.

Therefore, the employer stated that the complainant’s withdrawal benefit to the value of R6 023.92 was then paid by the administrator to the employer to cover the debt owed by the complainant. Moreover, the employer argued that the complainant’s complaint is time-barred in terms of section 30I of the Pension Funds Act.

Determination

After considering all the evidence and the provisions of the Pension Funds Act which regulate deductions that can be made from a member’s benefit the Adjudicator held the following:

Techninal point

As regards the issue of time-barring in terms of section 30I of the Pension Funds Act, the Adjudicator exercised her discretion to condone the delay in lodging the complaint on the grounds that the complainant’s prospects of success on the merits are strong and on the grounds the resolution of this matter is important. The Adjudicator held that she still has a discretion to condone any delay in lodging a complaint provided there is a good cause in terms of section 30I prior to its amendment by the Pension Funds Amendment Act 11 of 2007.

The merits

With regards to the merits of the complaint, the Adjudicator referred to the provisions of sections 37A 19(5)(a) and 37D(1)(b) of the Pension Funds Act, which deals with permissible deductions from benefits. She held that this complaint hinges on the question whether the employer is entitled to withhold the complainant’s withdrawal benefit in terms of section 37D(1)(b)(ii) of the Act. The Adjudicator held that it is requirement of this section that either a judgment must have been obtained against the complainant in respect of compensation due to the employer for damages caused by the complainant by reason of theft, dishonesty, fraud or misconduct, or the complainant must have admitted liability in writing for such compensation.

Held that it is common cause that the employer has not obtained a judgment in court in respect of its alleged loss and hence it relies on the agreement as an acknowledgement of debt for the withholding of the complainant’s benefit. Further, it was held that there is no evidence which suggests that the complainant acknowledged liability for damages caused to the employer by reasons of theft, fraud, dishonesty or misconduct. The complainant denies having acknowledged liability and the employers also failed to submit any evidence of a disciplinary hearing that was held in this regard. Held that the agreement is also vague as to its nature in the sense that it is not clear as to whether it is an acknowledgement of debt by the complainant to the employer for damages caused by the complainant as a result of theft, fraud, dishonesty or misconduct or whether it is an application form for a loan.

Held that as a result of the fact that requirements of section 37D(b)(ii) are placed in issue by the complainant, the onus lies on the employer to prove on a balance of probabilities that it has suffered loss as a result of the complainant’s misconduct. Held the employer has failed to discharge its onus in this regard. Furthermore, it was held that there is no evidence which indicates that the employer has suffered any loss as it did not dispute the complainant’s submission that it was compensated by its insurer for the loss of the motorcycle. Moreover, it was held that the complainant, without admitting liability, made monthly payments to the employer for the loss.

The Order

· It was declared that the fund’s deduction of the amount of R6 023.92 from the complainant’s withdrawal benefit was unlawful.

· The fund was ordered to pay the complainant R6 023.92 together with interest thereon calculated at the rate of 15.5% per annum from 1 June 1999 to date of payment, within four weeks of the date of determination.

Click here to read the full determination (PDF file 72kb)