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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

THE FINANCIAL SERVICES TRIBUNAL

(“the Tribunal”)

 

Case No. PFA69/2023

 

In the matter between:

 

K[...] G[...] J[...]                                                                         Applicant

 

 and

 

PENSION FUNDS ADJUDICATOR                                           First Respondent

 

PROFESSIONAL PROVIDENT SOCIETY

RETIREMENT ANNUITY FUND                                                 Second Respondent

 

J[...] C[...] J[...]                                                                           Third Respondent

 

Summary: Reconsideration of a decision of the Pension Funds Adjudicator (30M) in terms of Section 230 of the Financial Sector Regulation Act 9 of 2017.

DECISION

INTRODUCTION

 

1.                 The Applicant is Mrs K[...] G[...] J[...] ("the Applicant").

 

2.                 The First Respondent is the Pension Funds Adjudicator ("the Adjudicator").

 

3.                 The Second Respondent is the Professional Provident Society Retirement Annuity Fund (“the Fund”).

 

4.                 The Third Respondent is J[...] C[...] J[...].

 

5.                 This is an Application in terms of Section 230 of the Financial Sector Regulation Act 9 of 2017 against the decision taken by the First Respondent, pursuant to a complaint laid in terms of Section 30M of the Pensions Fund Act 24 of 1956 ("the PFA").

 

6.                 The parties have waived their right to a formal hearing, and this is the Tribunal's decision.

 

7.                 Section 230 of the Financial Sector Regulation Act 9 of 2017 ("the FSR Act") provides the basis for the Applicant to lodge this Application for reconsideration and seek appropriate relief.

 

THE FACTS AND THE COMPLAINT

8.                 The essence of the Applicant's complaint is that she is aggrieved at the Fund’s allocation of the entire death benefit of her late ex-husband, Dr D[...] J[...] J[...] (“the deceased”), to his disabled brother, J[...] C[...] J[...].

 

9.                 The deceased passed away on 31 January 2020, and a death benefit of R945,756.00 became available for distribution in terms of Section 37 C of the PFA. The Fund allocated the entire death benefit to the deceased’s disabled brother, J[...] C[...] J[...].

 

10.             Aggrieved by death benefit allocation, the Applicant laid a complaint with the Adjudicator and submitted that:

 

10.1 She was the deceased’s legal dependant in terms of a divorce settlement agreement, she received an amount of R15,000.00 in terms of this agreement, and she shall no longer receive this maintenance.

 

10.2 The Third Respondent was only partially dependent on the deceased, was not destitute, and not only had he inherited an immoveable property where he resides, but he is cared for by his three remaining siblings;

 

10.3 In terms of the divorce settlement agreement, she was entitled to 50% of the deceased provident Fund, retirement annuity policy value and the value of all other policies not mentioned in the divorce settlement agreement.

 

10.4 The Fund had irrationally considered that although the value of the estate that the deceased had left to her was valued at approximately R2,100,000.00, the liquidation and distribution account had not been finalised.

 

11.             The Adjudicator held that the Fund had considered all factors in making the full allocation to the Third Respondent and handed down a determination on the 24^th of August 2023, dismissing the Applicant’s complaint.

 

12.             The Applicant now seeks to set aside the Adjudicator’s determination on the following basis:

 

12.1 The Adjudicator unreasonably and irrationally found that the Fund had discharged its duties imposed by section 37C of the PFA.

 

12.2 The Adjudicator failed to take into account that the Fund failed and/or neglected to consider all relevant factors, alternatively, applied its mind to irrelevant factors.

 

12.3 The Adjudicator failed to take into account that the Fund did not conduct a proper investigation in exercising its discretion, as contemplated by section 37C of the PFA.

 

12.4 The Fund improperly exercised its powers.

 

12.5 The Fund unduly fettered its discretion in allocating the full death benefit to the Third Respondent.

 

12.6 The Adjudicator and the Fund placed undue emphasis on the value of the deceased estate in the sum of R2,100,000.00 without taking into account the creditors that would make claims against the estate. At the end of the day, the Applicant was due to inherit only approximately R208,000.00 while, at the same time, losing her maintenance of R15,000.00 per month.

 

12.7 The Fund and the Adjudicator had failed to properly apply their mind to the fact that the Applicant had previously agreed to share other investments held at Old Mutual and Allan Gray with the Third Respondent on a 50-50 basis and that in the Applicant’s view, it would be fair and reasonable to share the death benefit on a similar basis.

 

12.8 The Fund and the Adjudicator had failed to properly apply their mind to the fact that, in addition to losing her monthly maintenance, she was at an advanced age and close to retirement.

 

13.              The Tribunal requested the parties to file additional submissions on the following issue:

 

“Should the discretion exercised by the Fund in terms of section 37 C of the Pension Funds Act only be exercised in terms of 50% of the value of the death benefit as a result of the Divorce Order, which assigned 50% to the Applicant as at the date of divorce and which was payable when the deceased exited the Fund or is the Fund entitled to ignore the Divorce Order and allocate the benefits in its discretion? Put differently, as a result of the Divorce Order, was the Fund entitled to exercise any discretion with respect to the 50% portion of the deceased's death benefit that had already accrued to the Applicant?”

 

14.              The Applicant submitted that “…as a result of the Divorce Order, the Fund was not entitled to exercise any discretion with respect to be 50% portion of the deceased’s death benefit that had already accrued to the Applicant. Having regard to all of the relevant facts and, in particular, the Divorce Order, the Fund ought to have awarded the death benefit equally between the Applicant and Mr Johnson. Such a distribution will be rationally connected to the facts in this matter.”

 

15.              The Fund filed a note indicating payment to the Applicant concerning two policies, namely, policy numbers 1[...] and 4[...], on 27 June 2019, before the death of the deceased. The Fund maintains that these payments satisfied the obligations set out in the Divorce Order.

 

THE LEGISLATION

 

1.   “dependant”, in relation to a member, means—

(a)        a person in respect of whom the member is legally liable for maintenance;

 

(b)        a person in respect of whom the member is not legally liable for maintenance, if such person—

 

(i) was, in the opinion of the board, upon the death of the member in fact dependent on the member for maintenance;

 

(ii)       is the spouse of the member;

 

(iii)   is a child of the member, including a posthumous child, an adopted child and a child born out of wedlock.

 

(c)        a person in respect of whom the member would have become legally liable for maintenance, had the member not died;

 

[Definition of “dependant” inserted by s. 21 (a) of Act No. 101 of 1976, substituted by s. 10 of Act No. 80 of 1978, amended by s. 38 of Act No. 99 of 1980 and by Act No. 22 of 1996 and substituted by s. 20 of Act No. 54 of 1989 and by s. 1 (i) of Act No. 11 of 2007.]

 

37C. Disposition of pension benefits upon death of member.—

 

(1)        Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit (other than a benefit payable as a pension to the spouse or child of the member in terms of the rules of a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a member, shall, subject to a pledge in accordance with section 19 (5) (b) (i) and subject to the provisions of sections 37A (3) and 37D, not form part of the assets in the estate of such a member, but shall be dealt with in the following manner:

 

(a)   If the Fund within twelve months of the death of the member becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant or, as may be deemed equitable by the Fund, to one of such dependants or in proportions to some of or all such dependants.

[Para. (a) substituted by s. 5 (a) of Act No. 22 of 1996 and by s. 51 (a) of Act No. 45 of 2013.]

 

(bA)If a member has a dependant and the member has also designated in writing to the Fund a nominee to receive the benefit or such portion of the benefit as is specified by the member in writing to the Fund, the Fund shall within twelve months of the death of such member pay the benefit or such portion thereof to such dependant or nominee in such proportions as the board may deem equitable: Provided that this paragraph shall only apply to the designation of a nominee made on or after 30 June 1989: Provided further that, in respect of a designation made on or after the said date, this paragraph shall not prohibit a fund from paying the benefit, either to a dependant or nominee contemplated in this paragraph or, if there is more than one such dependant or nominee, in proportions to any or all of those dependants and nominees.

 

[Para. (bA) inserted by s. 21 of Act No. 54 of 1989 and substituted by s. 5 (b) of Act No. 22 of 1996.]

 

DISCUSSION

 

16.             The Fund is enjoined to investigate and ensure an equitable allocation of a death benefit to dependents. In these circumstances, the case of Sithole v ICS Provident Fund and Another 2002 (4) BPLR 430 PFA at paragraph 24-25 is instructive. The Fund is required to consider various factors, and Sithole identified the following:

 

16.1    Age of the dependants;

 

16.2    the relationship with the deceased;

 

16.3    the extent of the dependency;

 

16.4    the wishes of the deceased;

 

16.5    the future earning capacity of the beneficiary, and

 

16.6    the amount available for distribution.

 

17.             The factors to be considered by the Fund are those that exist and are apparent when the discretion is to be exercised. It does not assist the Applicant in complaining that the Fund failed to consider unknown consequences, such as the outcome of what she inherited from the estate, when these facts were not before the Fund when it reached its allocation decision. Put differently, the Fund exercises its discretion and makes the allocation decision based on the known facts at the time.

 

18.             On a conspectus of benefits received by the Applicant and the Third Respondent, I am unable to fault the allocation decision made by the Fund. Accordingly, the Adjudicator’s Determination must stand.

 

THE CONCLUSION

 

19.             In the circumstances, the Application for a reconsideration of the Adjudicator’s determination is dismissed.

 

ORDER

 

The Application for Reconsideration is dismissed.

 

Signed on behalf of the Tribunal on 21 March 2024.

 

 

PJ VELDHUIZEN

(Member)

 

 

LTC HARMS (Deputy Chair)

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