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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 07352/2015

In the matter between:

Mostert, Antony Louis N.O.                                                                                      Applicant

and

The Registrar of Pension Funds                                                                 First Respondent

The Chief Master of the High Court                                                       Second Respondent

The Minister of Finance                                                                              Third Respondent

Hislop, Raymond                                                                                      Fourth Respondent

Summary: Application under PAJA for review and setting aside of regulation 35(4) made on 22 April 2003 under the Pension Funds Act 24 of 1956 (“the Act”) – application not brought within 180 days referred to in s.7(1)(b) – no application under s.9 for variation – affidavits all round silent – Minister raised point in argument – applicant argued period only commenced running when he might reasonably be expected to have become aware of regulation – held applicant obliged to put evidence before court on appropriate date – applicant held time-barred.

Applicant seeking declaratur in the alternative to assist in collateral challenge – applicant submitting that reg. 35(4) inconsistent with s.15B(5)(e), internally irrational, and purporting to establish contingency reserve account inconsistent with Act – question arises as to appropriateness of deciding declaratur if court has no power on the basis of applicant being time-barred – held notionally inconsistent to decide declaration of rights without engaging on legality/certainty issue, which does not arise in collateral challenge.

However, since matter fully argued, court engaged on merits of review – reg. 35(4) held not inconsistent with s.15B(5)(e), nor internally irrational, nor purporting to establish contingency reserve account inconsistent with Act – application dismissed.

Judgment

Van der Linde, J:

Introduction: the issues

[1] The applicant is the liquidator of the Picbel Groepvoorsorgfonds, a pension fund under the Pension Funds Act 24 of 1956 (“the Act”). He applies for a review and setting aside of r. 35(4) gazetted by the third respondent, the Minister of Finance, under the Act on 22 April, 2003. The first respondent is the Registrar, and the second and third respondents respectively the Chief Master of the High Court and Mr Hislop, a former member representative of the fund. Apart from the applicant, only the Registrar and the Minister participated actively in the hearing.

[2] The application was brought under the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”), the parties approaching the matter on the basis that the Minister’s making of regulations under s.36 constituted “administrative action” as defined in PAJA.[1] However, it was not brought within the period of 180 days referred to in s.7(1)(b) of PAJA, and there was no “application” under s.9 of PAJA for a variation of the 180 day period. The affidavits all round were silent on the issue, meaning that the applicant did not make such an application and the respondents did not raise the applicant’s failure to have made it as a defence.

[3] In argument the Registrar abided, but the Minister took the point and submitted that the court ought in any event to take it mero motu. He submitted that there was patently a failure on the part of the applicant to have complied with it, and that the failure rendered the application moot.

[4] The applicant submitted that the 180 days have not yet commenced running because the Registrar has not yet expected of the applicant to implement r. 35 (4); alternatively because the court was incapable of fixing the start date under s.7(1)(b) of PAJA, since the applicant was not challenged on the papers and therefore did not testify as to the date on which he was informed of the administrative action, or became aware of it, or might reasonably have been expected to have become aware of it.

[5] As a fall-back the applicant submitted that if he was non-suited under the PAJA time-bar, he would in any event collaterally challenge[2] the validity of the regulation; and since he was in dispute with the Registrar and the Minister concerning the validity of the regulation, he applied in the alternative for an appropriate declaratur. The time-bar then is the first issue.

[6] On the merits, the applicant advanced three central propositions: first, that under s.36(1) of the Act, the Minister’s power to make regulations was expressly circumscribed by the requirement of “consistency” with the Act, and r.35(4) was inconsistent with s.15B(5)(e) (thereby implicitly invoking s.6(2)(a)(i) of PAJA); second, that r.34(5) was internally irrational since the reserve account there envisaged was for the contingency that former members may be traced, and yet the express hypothesis in the regulation is the very inability to have traced the members;  further, that upon failure of the contingency the enhancement is not returned to the fund as would have been expected upon failure of a true contingency, but must instead be paid over to other (unclaimed benefit) funds (thereby implicitly invoking 6.(2)(e)(vi) of PAJA); and third, that the contingency reserve account established under r.35(4) was not a “contingency reserve account” as defined in the Act, and so, again, the Minister had no power to make the regulation (again, invoking s.6(2)(a)(i) of PAJA).

[7] The Registrar and the Minister joined issue with these submissions. They advanced essentially two overarching propositions: that the inconsistency contended for was absent, given a proper interpretation of s.15B(5)(e) (the power issue); and that there was a rational connection between a legitimate government purpose (that pension funds should have sufficient funds to meet their liability to former members whose benefits have been calculated but who cannot yet be traced) and r.35(4) (the irrationality issue). 

[8] These propositions on the merits are then the second, third and fourth issues. Costs do not present an issue; the parties informed the court from the bar that no matter which way the application went, each accepted responsibility only for his/her own costs. 

The PAJA time-bar point

[9] The essential facts have been referred to in the introduction, although some material dates are listed below.  Relying on Supreme Court of Appeal dicta in OUTA,[3]the Minister submitted that after the lapse of the 180 day period the delay in not bringing the application is per se unreasonable, and the court is only “empowered” to entertain a review application if the interest of justice dictates an extension under s.9 of PAJA.  The Minister submitted further that absent such an extension the court has no authority to entertain the review application, and that it then matters not whether the decision was unlawful.

[10] The Minister submitted that immediately the regulation was published, it took effect, and had the capacity then to affect legal rights, whether or not it actually did affect legal rights. Reliance was here placed on the judgment of Nugent, JA in Grey’s Marine Hout Bay (Pty) Ltd v Minister of Public Works,[4] where the learned judge dispelled the notion that for a decision to qualify as “administrative action”, it had to actually affect rights, as opposed to merely having the capacity to do so. This judgment is authority against the applicant’s first submission, namely that the 180 days period only begins to run when the Registrar exacts performance of r.35(4).

[11] The regulation was, as said, published on 22 April, 2003. The applicant was appointed as curator of the fund on 17 October 2005, and as liquidator of the fund on 18 April 2008. The fund’s scheme under s.15B(1)(a) of the Act (“the apportionment scheme”) was approved by the Registrar under s.15B(9)(i) of the Act on 11 May 2012.[5] The review application was brought on 27 March 2015.

[12] Thus the Minister submitted that the regulation affected the fund by latest on 11 May 2012 and the application was thus brought substantially outside of the 180 day period prescribed by s.7(1)(b) of PAJA. Since no application under s.9 of PAJA was made, this court was not empowered to decide the application, according to the submission.[6]

[13] These submissions, given the authority on which they rely and which is binding on this court, are with respect persuasive. But they do, of course, pick up the reasoning only after the 180 day period will have been triggered. The two earlier questions are: first, on what date did the applicant acquire actual or alternatively deemed knowledge of the regulation and the reasons for it?[7] And second: whose duty is it to have placed evidence before the court on the date issue?[8]

[14] It flows better if the second question is addressed first. The potential candidates for the duty to raise the date issue are at least[9] an applicant for review and the “administrator” concerned. The trigger events for the start of 180 days period are the conclusion of internal remedies[10] or the date of the applicant’s actual or deemed knowledge of the administrative action and the reasons for it. We are not here concerned with the first category of trigger events.

[15] As to the second category of these trigger events: the date on which actual knowledge of the administrative action and the reasons for it reaches an applicant’s data bank, would in the normal course of human experience be known first to an applicant. The applicant is thus the primary source of the date of actual knowledge. That is the first consideration to locating the duty to adduce evidence of actual knowledge on an applicant.

[16] A second consideration is that the language[11] of s.7 of PAJA suggests peremptoriness. This in turn would indicate that the s.7 hurdle is one which an applicant for review has to clear. Put differently, if nothing is said about the date issue at all, it is an applicant that fails, not the administrator.

[17] A third consideration for locating the duty to adduce evidence of actual knowledge on an applicant for review, is that such an approach fits the context of this legislation. It is in the interests of the administration that finality be obtained about the lawfulness of administrative action. The uncertainty that might otherwise prevail offends the smooth running of a modern state.

[18] These three considerations drive the conclusion that the duty to place evidence before the court to fix the actual knowledge date rests on an applicant for review. The applicant in this case ought therefore to have placed evidence before the court of the date on which he acquired actual knowledge of the regulation and the reasons for it; and, if relevant, to have applied for a variation under s.9 of PAJA. Neither was done.

[19] The duty to place evidence before the court to enable it to arrive at a conclusion on the date of deemed knowledge, i.e. the date on which the applicant might reasonably have been expected to have acquired the knowledge, is not necessarily also on an applicant, for this reason.   That provision rather suggests that it operates to roll back the start date of the 180 day period, not to roll it forward.

[20] Put conversely, if an applicant actually acquired knowledge sooner than s/he might have been expected to have acquired it, the 180 day period would still start running on the (earlier) actual date, rather than on the (later) deemed date. Evidence to fix a deemed start date at some later point in time would then be irrelevant.

[21] But such evidence may be relevant to fix a deemed date that is earlier than an actual date asserted by an applicant for review. It would then be in the interests of the administrator to place evidence before the court of an earlier deemed date, if s/he wishes to rely on it. Also, such evidence may be relevant to fix a deemed date where, as here, the applicant fixed no actual knowledge date at all. Again, it would be in the interests of the administrator to do so, but again, only if s/he wishes to rely on it.  

[22] Accordingly, if the Minister wished to roll back a deemed date that is earlier than an asserted later actual date, or if he wished to fix a deemed date where an applicant has not put up any actual date at all, it was up to him to have placed the relevant evidence before the court.

[23] The Minister need not have done so in the present matter, since the applicant has not put up an actual date at all, and since the date of the application (27 March, 2015) falls outside of 180 days after the date of the administrative action (22 April, 2003). But since this issue was fully argued by the Minister and it forms part of the time-bar issue, I express my view on it.

[24] The Minister argued with reference to common cause facts that at best for the applicant the latest deemed knowledge date was 11 May 2012. This was when the Registrar approved the apportionment scheme.  I would have held that this is the date by which the applicant might reasonably have been expected to have become aware of r.35(4) and the reasons for it.

[25] I refer here only to the fact of the length of time between the applicant’s appointment as curator on 17 October, 2005 and 11 May, 2012, being some six and a half years, during which – absent a contrary explanation - knowledge concerning the regulations relative to the establishment of contingency reserve accounts might be expected to have been acquired.

[26] The conclusion on this part of the application means that this court has no power to entertain the applicant’s review application. The question is whether nonetheless a declaratory order is potentially appropriate. I deal with that aspect in the next section.

The relevance of the merits 

[27] If this court has no power to entertain the review application, the question arises as to the appropriateness of engaging with the merits at all. The Minister argues that it is inappropriate; the Registrar abides; but the applicant asks for a declaratory order, having regard to the anticipated collateral challenge.  

[28] If this court has no power to consider the review application because the administrative action has become validated through the delay, the following issue arises. It was pointed out in Oudekraal (1), quoted at the outset, that a court hearing a collateral challenge has no discretion but to allow a respondent to resist enforcement of an unlawful administrative act, because the validity of the administrative act is an essential prerequisite for  its enforcement.

[29] That does not apply when an applicant takes the initiative and applies for the review of an administrative act, because a court then has a discretion whether or not to grant the relief: the court has the power and the duty to moderate, as it were, the “collision” between “legality and certainty”.[12]

[30] What that means for this case is the following. If the applicant, for its main relief, had cleared the thresholds of s.7 and s.9 of PAJA, it would still have had to have legality triumph over certainty. Having regard to the passage of time since 22 April, 2003, that would have been a difficult row to hoe.

[31]The proposed declaratur is something very different. If it is to be made on the basis of PAJA but sans its s.7/s.9 prerequisite, because the assumption is that the applicant fails that hurdle, the enquiry still needs to engage the legality/certainty debate. And yet the legality/certainty debate does not arise as an issue in a collateral challenge, and so that part of the judgment would have been completely unnecessary.

[32] If, to meet this difficulty, the legality/certainty debate were also to be excluded so as to avoid traversing unnecessary ground, one would be left with a request for a declaratur in respect of a dispute that is circumscribed in a manner that does not carry the approval of at least one of the parties, and an important one at that, being the Minister who was, after all, the administrator who took the impugned decision.

[33] It is not possible to escape the conclusion that for the applicant, the anticipated collateral challenge is best served by this court not attempting to investigate whether a declaratur would be appropriate in the circumstances. Mindful of these considerations, but since these issues were fully argued, I express my brief views on the three central propositions advanced by the applicant.

R.35(4) “inconsistent” with s.15B(5)(e)

[34] The Minister has the power in terms of s.36(1) to make regulations that are not “inconsistent” with the Act. R.35(4) is inconsistent with s.15B(5)(e), argues the applicant, amongst others for this reason: both the section and the regulation deal with the allocation of the entitlement to additional benefits of members and former members whose entitlements are calculable; but whereas the section empowers the board to deal with it in its discretion, the regulation compels the board to establish a contingency reserve account as envisaged in that regulation. On the applicant’s submission, these two statutory provisions cannot stand together and so are “inconsistent” as envisaged.

[35]It is necessary to quote the subsection and the regulation. First s.15B(5)(e):

“(5) The board shall apportion the actuarial surplus between the various classes of stakeholders whom the board has determined shall participate in the apportionment in terms of subsection (4), following which such portion as is due to the employer shall be credited to the employer surplus account: Provided that-

…

(e)          the board shall determine how, in the case of existing members and former members, the allocated portion of actuarial surplus shall be applied for their benefit, including the crediting of any portion to the members' surplus accounts or to the members' individual accounts, as the case may be: Provided further that the board may allocate a portion of the actuarial surplus to be used for former members to a contingency reserve account which will be used to satisfy the claims of former members-

(i)          who have been identified in subsection (4) (a) but who cannot be traced; or

(ii)          who did not substantiate their claim during the nine-month period following the advertisement in subsection (4) (a) (iii) but who do so after the end of this period;”.

[36] R.35(4):

“(4) Where a board is able to determine the enhancement due in respect of a particular former member in terms of section 15B(5)(b) or (c) of the Act, but is unable to trace that former member to make payment, the board shall put the corresponding enhancement into a contingency reserve account specific for the purpose. Notwithstanding anything in the rules of the fund, moneys may not be released from such contingency reserve accounts except as a result of payment to such former members or as a result of crediting the Guardians Fund or some other fund established by law to include such amounts.”

[37] For completeness s.15B(4)(a) and (b) are also quoted:

“(4) The board shall determine who may participate in the apportionment of actuarial surplus, and shall include in such apportionment existing members and any former members who left the fund in the period from 1 January 1980 to the surplus apportionment date: Provided that-

(a)          the board may exclude from participation former members in respect of whom the board satisfies the registrar that insufficient records are available to enable the additional benefits that may be due to such former members to be calculated, after the board has taken reasonable steps-

(i)          to obtain such records from the administrator;

(ii)          to construct such records from the records of the-

(aa)       employer;

(bb)       any fund to which former members transferred; or

(cc)         a trade union or staff association active in the workplace during this period; or

(iii)          if the steps in subparagraphs (i) and (ii) do not yield sufficient information, to obtain such records from the potential claimants themselves following an advertisement-

(aa)       on a national basis and in the area where the former members used to work; or

(bb)       on a more limited basis as approved by the registrar if representations by the fund satisfy the registrar that limited advertisement will be adequate, inviting the former members to come forward with evidence to substantiate their claim, after which advertisement the board should wait at least six months but no longer than nine months before excluding any former members because of a lack of sufficient information to enable the calculations to be performed;

(b)          rather than excluding former members whose individual benefits cannot be determined, the board may set aside a portion of the actuarial surplus in a contingency reserve account explicitly established to satisfy claims of former members in terms of subsection (5) (e).”

[38] Since this part of the judgment is obiter dicta, I furnish my views without full reasoning. In my view the correct interpretation of these provisions is as follows. Starting with the relevant provisions of the Act: for purposes of preparing the apportionment scheme to be approved by the Registrar in terms of s.15B(9)(i), when the additional benefits of former members cannot be calculated (or calculated in time[13]) for lack of records, the board has the power either to exclude these members from participation in the apportionment scheme,[14]or instead to include these members in participation in a particular manner. That manner is the establishment of a contingency reserve account for former members in terms of s.15B(5)(e).[15]

[39] A contingency reserve account proposed in the apportionment scheme for former members in terms of s.15B(5)(e) may be used, in the discretion of the board, to receive a portion of the actuarial surplus to be used for former members whose individual benefits cannot be calculated for lack of records supplied by former members, or supplied late by former members, as stated;[16] but also for those former members whose individual benefits cannot be calculated for lack of records because those members cannot be traced at all.[17]

[40] Thus in both these instances, former members who can be traced as well as those who cannot be traced (or not traced in time), but in respect of whom, in both instances, poor records render the calculation of their enhanced benefits impossible, the board may or may not, in its discretion, propose the establishment  a contingency reserve account. If it chooses not to establish such an account, the board excludes those former members from participation. Such a contingency reserve account, once established, is a “contingency reserve account” as defined in terms of s.1(1) of the Act.

[41] The main portion of s.15B(5)(e),[18] before the (second) proviso, does not expressly refer to the actual payment of the calculated benefits, nor to former members who cannot be traced. This portion of the subsection is instead expressly concerned not with actually making payment, but with “how” the allocated portion of actuarial surplus is to be applied in the apportionment scheme for the benefit of present and former members. The board has no discretion in this regard: it “must” determine “how” that application is to occur.

[42] Examples of ways in which the application may be done, in the discretion of the board, includes crediting the former (and present) members’ surplus accounts, or crediting the former (and present) members’ individual accounts. These ways of applying the relevant portion of actuarial surplus is concerned then, in terms, with the appropriate actuarial and accounting way of dealing with the entitlement of present and former members in the apportionment scheme.

[43] Indeed, the main portion of s.15B(5)(e) deals with present and former members indiscriminately, accepting that the benefits of members belonging to both classes are calculable. The reference to and definition of “member’s individual account” and “member surplus account” underscore this. It is not concerned with the inability actually to pay former members their allocated benefit because, as it happens, they cannot be traced.

[44] The Legislature was aware of the problem of untraceability of former members, but only in the context of the inability to calculate their benefits for lack of proper records, and at the stage when the apportionment scheme is being designed. The Legislature dealt expressly and specifically with it in the proviso to s.15B(5)(e).

[45]In this context the board is empowered, in its discretion (“may”), to allocate a portion of the actuarial surplus to be used for former members to a contingency reserve account, specifically to provide for the claims of those members whose benefits cannot be calculated, because they cannot be traced. But that is the only place where in this context the Legislature dealt with the traceability of former members,[19]and it has nothing to do with the ability to pay.

[46] It must not be assumed that untraceability for purpose of calculating the correct benefit to be applied to a former member is the equivalent of untraceability for purpose of payment to a former member. A former member may be traceable for the one purpose but not for the other; facts relative to members may change.

[47] R.35(4) on the other hand expressly addresses the class of members whose benefits have been calculated but who cannot be traced “in order to make payment”. This activity follows only after the Registrar will have approved the apportionment scheme, which will have provided for the actuarial and accounting application of the benefit entitlement. In those cases the board has no discretion; the money must be paid into a “contingency reserve account”, whence it may be released only along prescribed pathways.

[48] The regulation therefore deals not only with a different class of members, but also with a different purpose, than those dealt with in s.15B(5)(e). I return below to the asserted internal inconsistency and irrationality of the regulation; but at the level of potential inconsistency with s.15B(5)(e), the regulation deals with a topic not addressed by the section, and so no inconsistency results.

Internal irrationality of r.34(5)

[49] On the first part of the applicant’s argument on this score as set out in the introduction section of this judgment, the answer seems to be that three stages of traceability for payment are envisaged in the regulation: first, the point in time when the enhancement benefit calculated in respect of a particular former member becomes due for payment, and at that stage that member is untraceable. His/her money must then be paid (no discretion) into a “contingency reserve account specific for that purpose.” The “purpose” referred to is payment later to the member when the member is traced.

[50] The point in time when the members is subsequently traced is the second stage of traceability. The regulation expressly envisages that this is a real possibility, i.e. that such a former member may be traced, because that is one of the identified payment pathways. Payment then occurs.

[51] The third stage of traceability is when the purpose appears to have failed, and it is then assumed that payment to the former member cannot occur because s/he cannot be traced. Then, according to the regulation, the money can only be paid to one of the remaining pathways where it is, of course, not lost.

[52] Is this regulation irrational? The starting point must be to ask oneself what about it would be irrational. The applicant’s answer would be that the fact that the money does not revert to the discretionary control fund to which it belongs,[20] renders it irrational.

[53] Irrationality in this context is represented by the absence of a rational, not the absence of a reasonable, relationship between the impugned conduct and a legitimate government purpose. The purpose of r.35(4) is to ensure that if an untraceable former member who has a claim (a calculated benefit) is actually traced later, or actually appears later, there will be resources available to meet his/her claim; and that those resources will not have been expended on other projects.

[54] If this is a legitimate government purpose, then r.35(4) represents a rational relationship with it. The regulation offers a broad pathway of alternative payment possibilities that are aimed at preservation of the funds, should the member nonetheless be traced or appear. The prospect of the presumed lost member actually surfacing later may be remote, and to keep provision for him/her alive may even be unreasonable; but in my view it cannot be said to be irrational.

[55] The second identified aspect of irrationality is related to the first. It is said to concern that aspect of the regulation that prohibits an actuarial clean-out upon failure of the contingency. The previous paragraph answers the point.

R.35(4) establishes a contingency reserve account the characteristics of which are inconsistent with the Act

[56] The argument here was that in terms of the “Definitions” regulation, the meaning assigned to words in the Act “shall” have the same meaning assigned to them where they appear in the Regulations, but without the internal qualifier relating to context, since that qualifier is not expressly present in the Regulations.

[57] This was the springboard for the argument that “contingency reserve account” in r.35(4) must bear the meaning  assigned to this concept in the definition section 1 of the Act; and that in substance it does not. The former is therefore ultra vires the latter.

[58] First, at a textual level: accepting that the internal qualifier is not repeated in the Regulations does not seem to me to answer the point that context rules, for this reason. The “meaning”, as this word is used in the “Definitions” regulation, refers expressly to the meaning that “has been assigned” to “contingency reserve account” in section 1 of the Act. 

[59] But the “meaning” that “has been assigned” to “contingency reserve account” in the Act, is self-evidently qualified by context. So it matters not that the internal qualifier is not expressly mentioned in the “Definitions” regulation. It gets there indirectly through a proper interpretation of the definition of the concept as it appears in the Act, and so “contingency reserve account” in the regulation has the meaning indicated by the context of the regulation.

[60] Second, at a substantive level, even if the concept of a “contingency reserve account” in the Regulations has the same meaning as it has in the Act, the meaning, since it does not establish substantive rights and obligations, must yield to the express provisions of the regulation.

[61] Accepting then that r.34(5) describes a “contingency reserve account” with characteristics different from that described in the definition in the Act (sans the internal qualifier), the question is rather whether the regulation “contingency reserve account” falls within the parameters laid down s.36(1)(c).[21] Again, it seems self-evident that it does, and there is on this score also no “inconsistency” between the regulation and the Act.

Conclusion

[62] In the result I would have dismissed the review application in any event, and I accordingly make the following order:

The application is dismissed.

WHG van der Linde

Judge, High Court

Johannesburg

For the applicants: Adv. C.D.A. Loxton SC

                                  Adv. A. Milovanovic

Instructed by:  AL Mostert  & Co Inc

The Woodlands Office Park

Building 14, First Floor

Woodlands Drive

Woodmead

Johannesburg

Tel: 011-656 3880

Ref: AL Mostert/PIC2/0008

For the first respondent: Adv. A. Cockrell SC

                                              Adv. N. Mbelle

Instructed by: Rooth & Wessels Inc

C/o Le Roux Viviers Attorneys

355 Beyers Naude Drive

Northcliff Ext

Randburg

Tel: 011-4314117

Ref: M Van Rooyen/MAT26093

 

For the third respondent: Adv. S. Khumalo

                                               Adv. K. Magan

Instructed by: The Office of the Minister of Finance

c/o The State Attorney

Fourth Floor, Fedsure Forum South Block

Van der Walt Street

Pretoria

Date argued: 14 June, 2016

Date of judgement:   24 June, 2016

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