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IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

CASE NO: 5821/05

In the matter between:

DANIEL JOHANNES DE WET Plaintiff

and

GOVERNMENT EMPLOYEE PENSION FUND Defendant

JUDGMENT

SATCHWELL J:

Introduction

1. This judgment is of importance to all State employees who take early retirement. Plaintiff was an educator who resigned his employment with effect 28 February 2002 when he was more than 55 years old but had not yet reached his pension retirement date of 65 years. He claims payment of the amount of R210,670.50 from Defendant being the amount that his pension benefits were reduced by Defendant acting in accordance with its understanding of the Rules of the Government Employees Pension Fund (“the Fund”). The issue in dispute is interpretation of the provisions of Rule 14.2.1(b) and (d) of the Fund and therefore whether or not an “early retirement adjustment factor”¹ applies to the benefits due to the plaintiff.

2. The facts underlying Plaintiff’s case are not in dispute. The parties agreed to refer the matter to the Court as a stated case in accordance with Rule 33 of the Uniform Court Rules.

Background

3. The relevant facts are firstly, that plaintiff was an educator; secondly, that he resigned his employment on the 28^th February 2002; thirdly, on date of resignation he was 55 years and 5 months old; fourthly, he then had 32 years of pensionable service to his credit.

4. Plaintiff’s terms and conditions of service were regulated by the Educators Employment Act, 76 of 1998 (as amended) (the “Educators Act”)². When plaintiff resigned on 28^th February 2002, he was acting pursuant to the provisions of the that Act which sets out, in section 10 thereof, the circumstances under which an educator shall either “have the right to retire” or may be “allow(ed) to retire”.

5. An educator is compelled to retire at the age of 65³ which therefore appears to be “pension-retirement date” provided for in terms of the Rules of the Fund. Depending on various jurisdictional factors set out in the Educators Act, an educator has the right to retire at the age of 50 years⁴ or at the age of 55 years⁵.

6. An educator may be allowed to retire before attaining the age of 55 years in certain circumstances⁶.

7. The plaintiff had the right to retire because he had attained the age of 55 years. It may be that he also had such right because he had attained the age of 50 years, had completed a period of 10 years continuous pensionable service and was in State employment before 1 May 1996. However, this case does not turn on which entitlement to retirement was exercised: it is common cause that the plaintiff had the “right to retire” and that he tendered his resignation in terms of such right.

8. As a government employee, plaintiff was a member of the Fund established by the Government Employees Pension Law⁷ which Fund provides pension and related benefits to members, pensioners and their beneficiaries on termination of service in accordance with the Rules of the Fund. Section 19 of the Government Employees Pension Law of 1996 provides that “a member shall have the right to retire on pension and shall be so retired on reaching the age determined by the law governing his or her employment”.

9. On resignation plaintiff became entitled to the benefits regulated by Rule 14.4 of the Fund which allowed him to make an election between a gratuity or a transfer benefit to an approved retirement fund⁸. Plaintiff chose to receive the transfer benefit to be paid to an approved retirement fund and gave written indication of this choice by completion of a form and provision of a letter from Sanlam⁹.

The Dispute

10. The parties differ in their views as to calculation of the plaintiff’s benefits.

11. I note that both the stated case¹⁰ and the respective heads of argument¹¹ identify the issue to be resolved by this court as involving interpretation of Rule 14.4.2(b) which deals with calculation of the “actuarial interest” being one factor in computation of the ‘transfer benefit’ paid on resignation. However, I was not addressed on such computation.

12. Instead the parties accepted that plaintiff was entitled to choose resignation benefits of either a gratuity or a transfer benefit as provided for in Rule 14.4.1. Thereafter, the argument dealt with allocation of plaintiff’s resignation/retirement into any one of the categories of retirement provided for in Rule 14.3.1 which deals with benefits on retirement. The benefits payable to one category of retiring members is subject to penalization or reduction whilst the other is not.

13. The link between the plaintiff and the resignation benefits in rule 14.3.1 was not clearly spelt out by counsel for either party. Such link appears to be common cause. It is not a matter which I must decide. However, I must be satisfied that this judgment does not concern a moot point or a wasted exercise.

14. I understand plaintiff to fall within the provisions of Rule 14.4.1 by reason of his resignation and therefore to be entitled to certain resignation benefits being either a gratuity or transfer benefit to an approved retirement fund. The transfer benefit is computed by reference, inter alia, to the actuarial interest of the resigning member in the Fund. Where the member is over the age of 55 years, that actuarial interest is calculated by reference, inter alia, to the “gratuity the member would have received in terms of the rules had he retired on that date”¹². Retirement benefits are dealt with in Rule 14.3.1. Plaintiff falls within the provisions of Rule 14.3 by reason that he had the right to retire in terms of the Educators Act. Retiring members are entitled to the benefits provided for in Rule 14.2.1 (a gratuity, an annuity and a supplementary amount). Certain categorizations of retiring members have these benefits reduced by a percentage calculated by reference to the actual date of retirement and his pension-retirement date. Accordingly, the quantum of plaintiff’s resignation transfer benefit is computed by reference to the actuarial interest he has in the Fund which, in turn, is calculated by reference to the gratuity he would have received on retirement which, in turn, depends upon the categorization of his retirement¹³.

15. The dispute therefore concerns the categorization of the plaintiff as a retiring member in accordance with the Fund Rules and therefore the dispensation which determines the resignation benefits to be paid. The difference is of some importance because only one of the two categories under consideration is subject to reduction of benefits¹⁴.

16. Although five categories of retiring members are identified in Rule 14.3.1, it is common cause that it is the interpretation and application of only two categories of retiring members which require consideration in this judgment¹⁵. Rule 14.3.1(b) is of application where a member retires “before his or her pension-retirement date in terms of the law governing his or her terms and conditions of service”. Rule 14.3.1(d) provides where a member retires “before his or her pension-retirement date, but not on a date prior to the member attaining the age of 55 years; provided that such a member has the right to retire on that date in terms of the provisions of any Act which regulates his or her terms and conditions of employment.”

17. Defendant has categorized plaintiff as falling into the class of retiring members (sub-rule (d)) whose benefits shall be reduced in accordance with a prescribed formula whilst plaintiff argues that plaintiff should be categorized as falling into that class of retiring member (sub-rule (b)) whose benefits are not so reduced ¹⁶ .

Interpretation of Sub-rules 14.3.1 (b) and (d)

18. I am aware of only one authority dealing with the provisions of Rule 4.3.3 of the Fund viz Strydom supra. I was not referred to this decision by counsel for either party in this matter. The background facts of Strydom supra were strikingly similar to this case. Respondent had resigned from employment as a magistrate once he was 55 years old when he had 36 years of pensionable service. He elected to take his transfer benefit in terms of rule 14.4.1 (b) and the Fund levied a deduction thereon in terms of rule 14.3.3(b). Initially the only issue for decision was whether the transfer benefit was to be calculated under sub rule 14.3.3(a) or (b). However, the Fund then argued that he had not validly resigned because he had done so without the permission of the Minister of Justice but the Supreme Court of Appeal found he was entitled to unilaterally resign his office. The result was that he was not entitled to an annuity or supplementary benefit and only the gratuity or transfer benefit provided in Rule 14.4.1. As to the categorization of his ‘retirement’ in Rule 14.3.1, the court did no more than to state, “as the respondent must be taken to have retired in terms of Rule 14.3.1(b), the provisions of Rule 14.3.3(a) apply to his case.” [para 35].

19. Absent indication of any argument before the Supreme Court of Appeal on the applicability of either sub-rule (b) or (d) and absent any reasons given in the judgement for the finding that sub-rule (b) was applicable, I must continue to interpret the provisions of the rule.

The ‘ordinary language’

20. The Rules should first be construed on their ordinary language¹⁷ which language should be given its ordinary grammatical meaning¹⁸.

21. Sub-rule (d) sets out three attributes for a retiring member to be covered by this sub-rule. First, the member must retire before his pension-retirement date; secondly, the member must not retire before reaching 55 years of age; thirdly, when the member retires he must have the right to retire in terms of the statute governing his employment. These requirements are all met by plaintiff. It is common cause that plaintiff did retire before his pension-retirement date of 65 years and that he did not retire before he attained the age of 55 years. It is common cause that, in terms of the Educators Act, he had the right to retire on the date which he did viz. 28 February 2002.

22. I am satisfied that a plain reading of the legislative text means that the plaintiff falls within the provisions of rule 14.3.1 (d) of the Fund Rules.

Duplication of sub-rules

23. Plaintiff’s counsel conceded in argument that the plaintiff may fall within the provisions of sub-rule (d), but submitted that sub-rule (b) is equally of application to plaintiff. On this basis it was then argued that the least onerous of the two sub-rules should apply.

24. I do not agree that the plaintiff’s retirement is covered by both sub-rules (b) and (d) in Rule 14.3.1. In reaching this view I have regard to the language and import of the sub-rules and the Rule as a whole.

25. Firstly, the language sets out clear differences between the sub-rules Sub-rule (b) applies to persons retiring at any age prior to 65 whilst sub-rule (d) applies to persons retiring only between the ages of 55 and 65. Sub-rule (b) applies to persons whose retirement emerges from and is regulated by the law governing employment whilst sub-rule (d) applies to persons who acquired and exercised a ‘right to retire’ in terms of Statute. On the one hand, the age parameters clearly differ - the first parameter is apparently open ended whilst the latter is limited to a ten year period. On the other hand there is a difference between a retirement which is in accordance with law and a ‘right’ to retire - the distinction is between lawfulness and entitlement.

26. The plaintiff falls clearly and unambiguously within the provisions of the more specific and more prescriptive sub-rule (d).

27. Second, if I were to find that the plaintiff fell within the parameters of both sub-rule (b) and sub-rule(d) then it would follow that sub rule (d)¹⁹ need never have been enacted because it would be no more than an exemplar of that which is covered by sub-rule (b). Accordingly, to hold that the plaintiff is covered by both sub-rules and has an election to be covered by sub-rule (b) would render the provisions of sub-rule (d) purposeless.

28. Everything in the text generates meaning. Different paragraph and rule signifiers and sub-sections are meant to refer to different situations²⁰. I understand sub-rule (d) to point to and create the discrete category identified therein separately from any situations covered in the category created in sub-rule (b). To simply ignore the provisions of sub-rule (d) and turn instead to sub rule (b) would be to construe an entire sub-rule as superfluous which I cannot do without good reason²¹.

29. I am satisfied that sub-rule (d) is not purposeless verbiage and that the category enumerated in sub-rule (d) is to be considered and applied on its own and is not merely one instance of the scenarios covered within sub rule (b).

30. Thirdly, sub-rule (d) is specific in its provisions– both as to parameters of age and exercise of a right to retire. I cannot find, without further ado, that the generality of sub-rule (b) means that it revokes the specificity of sub-rule (d). Sub-rule (b) is general in its provisions- there is only one age parameter and no right is exercised, there is merely a lawful action. Although the specifics of sub-rule (d) are encapsulated within the generality of sub-rule (b), the converse does not apply – sub-rule (b) does not fall within sub-rule (d).

31. When confronted with possible overlap or duplication of classification in the sub-rules, it seems logical to accept that sub-rule (d) covers a specific situation and that the more general and varied provisions of sub-rule (b) should not interfere therewith. There is no reason why the general wording of sub-rule (b) should be extended to cover also the situation already encapsulated within sub-rule (d). There is nothing in the wording of the Rule to suggest that sub-rule (b) is intended to cover all permutations of subject of retirement prior to pension-retirement date or that the specific conditions set out in sub rule (d) should be revoked.

32. I do not find the specific provisions of sub-rule (d) to be inconsistent with the general provisions of sub-rule (b) but if it were then it is possible that the maxim generalia specialibus non derogant may be applied to assist in preservation of sub rule (d)²².

Context and Purpose of the Fund and Rules

33. It is now well established that the wording of the rules must be interpreted in the light of their context being the “the matter of the statute, its apparent scope and purpose and, within limits, its background…”²³ . I must have regard to the context in which the words of the sub-rules occur even though I have found the words themselves to be clear and unambiguous²⁴. As stated by Ngcobo J in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & Others [2004] ZACC 15; 2004 (4) SA 490 (CC) – “the emerging trend in statutory construction is to have regard to the context in which the words occur even where the words to be construed are clear and unambiguous”²⁵. This ‘technique’ is now required by the Constitution, in particular by section 39(2)²⁶.

34. Notwithstanding that I have found the Rules to be clear in their ordinary grammatical meaning, a brief sketch of the statutory purpose of the Fund and the Rules may perhaps assist to further appreciation of application and import of the Rules. In this regard I am indebted to Adv. Basson, who appeared for the Defendant in this matter, for his elucidation of these issues.

35. The establishment of the Fund was the result of rationalization of previous Funds and sought to provide pension benefits for many or most employees in the public sector involving a wide variety of personnel subject to different employment statutes and service conditions. The Fund Rules therefore provided for principled application to employment and service because there cannot be reference to each and every section appearing in the relevant employment legislation that influences calculation of benefits. This is seen in Rule 14.3.1 where there is general references to ‘his or her pension-retirement date’, ‘the law governing his or her terms and conditions of service’, ‘his or her service contract’, ‘the provisions of any Act which regulates his or her terms and conditions of employment’.

36. Accordingly, one can only understand and give meaning to the provisions of Rule 14.3.1 in this present case by cross-reference to the provisions of the Educators Act which is the ‘act which regulates [plaintiff’s] terms and conditions of employment’.

37. As already discussed, the Educators Act has granted educators the right to retire in certain circumstances²⁷. One such circumstance requires attainment of the age of 55 years. The Educators Act also envisages the lawful retirement of an educator before the age of 55 years where an educator requests this of his employer who grants such request when the employer is of the opinion that sufficient reason exists therefore and that the retirement will be to the advantage of the State²⁸. For purposes of calculation of retirement benefits in terms of the Fund Rules, such retirement is not explicitly dealt with in Rule 14.3.1. However, it is covered by sub-rule (b) because such retirement would be prior to pension- retirement date and would be in accordance with the law i.e. section 10(3)(b) of the Educators Act. Such retirement would not be covered by sub-rule (d).

38. If these two different retirement scenarios are covered by different sub-rules then the economic results for the retiree’s benefits are also different. The member who retires early with the ‘right to retire’ receives benefits subject to a deduction whilst the member who retires early with the negotiated retirement receives benefits without deduction.

39. The context to and the purpose of the Fund gives meaning to such differentiation between retiring members. The Fund is a funded, contributory and compulsory defined benefit pension scheme for public servants in respect of which the employer (government) bears all investment risk as also the obligation to meet additional financial burdens occasioned by actions taken by the employer or Parliament and even the employee.

40. Early retirement by contributing members to the Fund has such financial implications for the Fund. There are additional costs because of acceleration of benefits. On the one hand early retirees cease contributions to the Fund earlier than expected and the Fund is therefore actuarially undersubscribed whilst, more importantly, there is a shortened period for the employer and employee contributions to increase in value– whether by investment or interest. On the other hand early retirees receive benefits earlier than anticipated which are therefore paid out over a longer life expectancy and the Fund is therefore actuarially oversubscribed. Employers who participate in the Fund have accepted responsibility, only to a limited extent, for such additional financial obligations placed on the Fund as a result of premature retirement for the public servants ²⁹.

41. However, along with these earlier responsibilities for pensioners, the Fund has made it clear that it intends to exact a penalty from early retirees or resignees or persons who are culpable in some respect³⁰. Such penalty is explicitly stated throughout the Rules of the Fund³¹. In part this may operate as a disincentive against early retirement whilst in part this may relieve the additional burden placed upon the Fund. The penalty is expressed in a reduction of members benefits.

42. As was remarked by Farlam JA in Strydom supra, a Magistrate who resigns prior to pension-retirement date and without the approval of the Minister would be substantially disadvantaged because he would receive, on such early retirement, precisely the same benefits as if he had been discharged for misconduct. He would receive neither annuity nor supplementary benefit– only a gratuity or transfer benefit. This is “a substantial financial disincentive for Magistrates contemplating resignation “[para 26].

43. However, there are circumstances where the employer may not choose to discourage an educator from taking early retirement. Where the employer believes there are good reason for such early departure and that it is to the “advantage’ of the State. Accordingly, where the educator and the employer negotiate an early retirement then the retiring member would not be penalized because he would be dealt with as provided for in terms of sub-section (b).

44. However, the employer who takes early retirement as of right where there is no negotiation – i.e. sufficient reason is not shown and the employer does not form the opinion that it is to the advantage of the State- is not incentivised to depart and is penalized for early departure. Hence, the jurisdictional requirements for sub-rule (d).

Constitutional interpretation

45. Contextual interpretation in statutory construction is required by the Constitution, in particular section 39(2) thereof which introduces “the mandatory requirement to construe every piece of legislation in a manner that promotes the ‘spirit, purport and objects of the Bill of Rights”³². All statutes “must be interpreted through the prism of the Bill of Rights”³³. The method of construction required by the court has been discussed in Govender v Mininster of Safety and Security 2001 (4) SA 273 SCA.

46. My attention has not been drawn by either counsel to any Constitutional rights which may be at risk when interpreting the provisions of rule 14.3.1. However, plaintiff’s counsel has made reference to two issues which, although not identified as Constitutional rights, may be considered at this point.

47. Firstly, plaintiff’s counsel argued that the legislature could not have intended an unfair result which would be the case if the plaintiff was visited with the more burdensome pension regime applicable to sub-rule (d) when the less onerous regime applicable to sub-rule (b) was available to him.

48. It is true that onerous provisions ought to be construed restrictively and equally true that preference should be given to the least arduous interpretation. However, I cannot find that these principles/ presumptions of interpretation are applicable in this case. I have already found that the two sub-rules, (b) and (d) are not in conflict. I have found that the two sub-rules neither overlap nor duplicate one another. I have found that sub-rule (d) should not be treated as superfluous. I have found that the language and jurisdictional distinction between sub-rules (b) and (d) are explicable in terms of the purpose of the Fund and the Rules.

49. Secondly, plaintiff’s counsel pointed out that the only other category of retirees in Rule 14.3.1 who have been singled out for reduction of benefits are resignees of the education service between the ages of 50 and 55 and then argued that there could be no intention to apply such special and onerous treatment to another category of resignee in the education service.

50. It should be noted that sub-rule (e) applies to educators between the ages of 50 and 55 years who have the right to retire in terms of the Educators Act³⁴. These are early retirees but are not persons who have negotiated an early retirement which the employer.

51. I have not been addressed on all other “act[s] which regulate his or her terms and conditions of employment”. It would seem that there may be a number of different employment sectors where there are employee members who have the right to retire after 55 and before pension retirement date (sub-rule (d)) while it may only be educators who have a right to retire between the ages of 50 and 55 (sub rule (e)). If that is the case then the special reference to educators in sub-rule (e) is of no significance. In any event I cannot find that this reference to educators excludes the application of any other category of retiree to educators. That would disentitle educators to pension benefits. Educators, like all retiring members, benefit in accordance with the jurisdictional factors which categorise them as retirees. I do not find that educators would be subjected to especial or unequal or discriminatory hardship if sub-rule (e) applies to some educators and sub-rule (d) applies to other educators and the benefits payable to both are subject to deduction.

Conclusion

52. It is my view that Rule 14.3.1(d) applies to the resignation/retirement of the plaintiff and that accordingly the benefits to be paid to him fall to be dealt with in terms of the provisions of 14.3.3(b) with the result that his benefits would be reduced accordingly.

53. Defendant’s counsel indicated at the hearing that this matter is of interest and application to a wider audience than only the parties. In view of the ramifications of this dispute and the significance to others of this decision, the defendant did not seek a costs order against the plaintiff in the event that the plaintiff did not succeed. This approach to a question which exercises employers and employees is to be commended.

54. In the result orders are made as follows:

1. Plaintiff’s claim is dismissed.

2. There is no order as to costs.

DATED AT PRETORIA 7^TH AUGUST 2008

___________________

K. SATCHWELL

Hearing: 29 July 2008

Plaintiff’s Counsel:

Adv. Du Toit SC instructed by Attorneys Du Plessis & Eksteen

Defendant’s Counsel:

Adv. Basson instructed by Attorneys Auret Goosen & Ledwaba

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