• Leanne van Wyk, Director - ICTS Legal Services

Section 37D withholding of benefits: A High Court case and a Pension Funds Adjudicator determination

SA Metal Group (Pty) Ltd v Deon Jeftha and others, case number, unreported, 20298/2019

A. Background

In the recent past, the requirements that a fund must meet when withholding a benefit (under section 37D of the Pension Funds Act (“the Act”)) have been fairly clear- cut. Thus, when responding to withholding requests or objections, Adjudicator and other complaints, the issues have been fairly straight-forward from the point of view of whether or not the fund has met the requirements for lawfully withholding a benefit.

In this publication, I consider a recent unreported High Court judgement: SA Metal Group (Pty) Ltd v Deon Jeftha and others, case number 20298/2019 (“Jeftha”) which judgement was delivered on 12 December 2019.

Recently, I have seen the Adjudicator refer to this Jeftha case in a determination about a withholding decision, which I have not previously seen. The original Adjudicator determination, which dispute forms the basis of the Jeftha judgement, does not appear on the website of the Adjudicator.

In my view, the Jeftha decision will lead to changes in the processes and decision-making for funds when making a section 37D withholding decision.

B. The Jeftha High Court case

The Adjudicator complaint

From the judgment, the facts of the case appear to be that the fund, in which the employer participated, had made a decision to withhold the benefit of Deon Jeftha (“Jeftha”). Jeftha complained to the Adjudicator and the Adjudicator found in his favour. The High Court case was an application by SA Metal Group (Pty) Ltd (“the Employer”) to set aside the determination of the Adjudicator. The Fund would abide by the decision of the court.

The Judge in the Jeftha case states that Jeftha, in his complaint to the Adjudicator, alleged that the Fund had:

  • improperly acquiesced to the withholding request,

  • not considered his version,

  • not investigated the allegations (indicating bias towards the employer),

  • not considered his interests; and

  • not considered the prejudice to him.

Exercise of a fund’s discretion to withhold: (i) balancing competing interests, and (ii) affording the member an opportunity to be heard

The court considered various sections of the Pension Funds Act (“the Act”) including board duties (section 7C), reduction and deductions (section 37A and 37D) and complaints (Chapter VA). Jeftha submitted that the withholding decision had been made by the Fund without complying with the principles of natural justice and without the board “exercising their discretion with care and in the process balancing the competing interests with due regards to the employer’s claim”. Jeftha argued that it was usual for the Fund not to afford employees an opportunity to respond to and test the employer’s allegations and not to balance employees’ interests against the employer’s interest. He asked the court to express its displeasure on this point and the court stated that if this was the case “it is deplorable”.

In my experience, it has not been common practice for a fund, when making a decision about whether or not to withhold a benefit, to afford the relevant employee an opportunity to be heard concerning the allegations against him/her. The more common practice is to require the employer to show that it has a case that on the face of it, and if proved, would mean that the employee was guilty of fraud, theft, dishonesty or misconduct. In addition, currently many funds do not correspond at all with the employee as regards the withholding, even around the decision to withhold, as this communication is attended to by the employer. Thus, I am not convinced that many other funds, in the same position as the Fund, would have acted differently, as regards affording the employee the opportunity to be heard or to respond to the employer’s allegations.

The Judge states that the Fund was alerted to the fact that the continued withholding of Jeftha’s benefit was unlawful and that he was being severely prejudiced and that there was no indication that the fund considered this. There were also allegations around:

  1. whether the fund followed its own withholding process;

  2. whether it received the documentation it requested from the employer;

  3. whether the employer updated the Fund regularly enough;

  4. whether and at what stage the employer alleged Jeftha’s conduct included an element of dishonesty; as well as

  5. when and why the withholding decision was made.

The Judge goes on to state that Jeftha’s circumstances legally and morally required consideration by the Fund, but that he was not given this courtesy.

According to Jeftha, when making a withholding decision, a fund is required to apply its mind appropriately, impartially and in a balanced manner. Any claim against the benefit must be carefully scrutinised and the possibility of financial prejudice must be considered.

The court in Jeftha referred to the following, often quoted, paragraph in the case of Highveld Steel and Vanadium Corporation Ltd v Oosthuizen [2009] 1 BPLR (SCA) at paragraph 20:

The Judge in Jeftha expressed the view that it would not satisfy the test in Highveld Steel, when making a withholding decision, that the fund may rely on allegations put before them by the employer, which if true would show damages arising from dishonest conduct by the employee. That would not be enough. The Judge then goes on (paragraph 62) to state that the employer’s case (as related to the fund) must be put to the employee to afford him an opportunity to respond before the fund makes its decision. We assume that this means that the fund must put the employer’s case to the employee. The Judge states that this is especially so where the employee has put forward a spirited defence.

Furthermore, the Judge states that it is trite law that it is important to afford a party affected by an exercise of a discretion which may result in severe prejudice to his rights, a proper opportunity to be heard.

The finding

When the Judge in Jeftha turned to considering the Adjudicator’s findings for purposes of deciding whether to dismiss the application or not, the Judge stated that he agreed with her findings for the reasons she stated and that the trustees did not comply with their fiduciary duties, were not impartial or independent and the managers of the fund abdicated their responsibility to ensure the provisions of section 37D were not abused. The findings of the Adjudicator that the court referred to specifically were:

  • That Jeftha’s non-compliance with company policies would not be dishonest conduct as required by section 37D;

  • That there was not prima facie proof that Jeftha has colluded;

  • The employer’s request had been rubber-stamped by the fund without investigation into the merits of the allegations or the financial prejudice that he might suffer, and

  • Withholding was not justifiable in law.

The application was dismissed with costs.


As a result of the Jeftha case, funds will need to consider amending their section 37D processes (notwithstanding what the rules provide) such that the fund (if it is not already doing so):

  • Scrutinises withholding claims very carefully (especially where the member has put up a spirited defence);

  • Applies its mind appropriately, impartially and in a balanced manner and considers the interests of both the employer and the relevant member;

  • Specifically consider the possibility of financial prejudice to the member;

  • Directly corresponds with the employee (or his/her representative);

  • Puts the employer’s case (as related to the fund) to the employee to afford the employee an opportunity to respond before the fund makes its withholding decision;

  • Is careful to note when a withholding decision is made and the reasons for it; and

  • Follows its own processes and receives regular information.

C. Pension Funds Adjudicator decision that references Jeftha

Recently, an Adjudicator determination (“the Determination”) (not included on the Adjudicators’ website) was brought to my attention and it referenced the Jeftha decision. The fund concerned was confused by the Adjudicator’s determination.

The Determination was about a complaint where the fund had made a decision, following a request by the employer, to withhold an employee’s benefit based on a fairly strong and damning set of allegations made by the employer in relation to the activity of an employee (based on an investigation report). The employee’s employment had been terminated and the benefit became payable. In my view, the allegations against the employee by the employer included a clear element of dishonesty.

In the Determination, the Adjudicator made the following findings (amongst others):

A. The [employer] did not have a prima facie right to request withholding of the benefit;

B. The fund withheld the benefit without investigation into the merits of the allegations and thus prejudiced the complainant.

With respect to finding B, the Adjudicator referred to the Jeftha case above and I have canvassed this case above.

However, finding A is a little more perplexing. I think that the issue that the Adjudicator is raising here may have originated from paragraph 71 of the Jeftha judgement, which provides as follows:

The case of Windybrow Centre for the Arts v Sanlam Life Insurance Ltd and Others (50395/2015) [2016] ZAGPPHC 225 (24 March 2016) in this paragraph. In the Windybrow case (referred to in Jeftha), the court considered the requirements the employer (applicant) would have to meet in order for there to be interim interdict granted against the fund ordering the fund to withhold payment of the member’s benefit in the amount sought by the employer against the members in pending appeal proceedings[1].

It is an important fact that the employer had already lost in the CCMA and been ordered to compensate the employee for unfair dismissal. The employer was, at the time of applying for the interdict, appealing the CCMA’s finding.

The court in Windybrow refers to cases involving applicants seeking temporary relief and interim relief orders and considers the requirements that the court finds had to be met by those applicants. One of these requirements (as there are more requirements enumerated) is that the applicant seeking the interdict must establish a right or prima facie right:

  • “In Webster v Mitchell 1948 [1] SA 1186 (W), the court stated:

“In the grant of a temporary interdict, apart from prejudice involved, the first question for the Court in my view is whether, if interim protection is given, the applicant could ever obtain the rights he seeks to protect Prima facie that has to be shown. The use of the phrase ’prima facie established though open to some doubt’ indicates, I think, that more is required than merely look at the allegations of the applicant, but something short of a weighing up of the probabilities of conflicting versions is required. The proper manner of approach I consider is to take facts as set out by the applicant, together with any facts set out by the respondent, which the applicant cannot dispute, and to consider whether having regard to the inherent probabilities, the applicant could on those facts obtain final relief at a trial. The facts set up in contradiction by respondent should then be considered. If serious doubt is thrown on the case of applicant he could not succeed in obtaining temporary relief, for his right, prima facie established may only be open to *some doubt". But if there is mere contradiction, or unconvincing explanation, the matter should be left for trial and the right protected in the meanwhile subject of course to the respective prejudice in the grant or refusal of interim relief Although the grant of a temporary interdict interferes with a right which is apparently possessed by the respondent is protected because, although the applicant sets up a case which prima facie establishes that the respondent has not the right apparently exercised by him, the test whether or not the temporary relief is to be granted is the harm which will be done. And in a proper case it might well be that no relief would be granted to the applicant except on conditions which would compensate the respondent for interference with his right, should the applicant fail to show at the trial that he was entitled to interfere”. (Own emphasis.)

  • “a clear right or, if not clear that it has a prima facie right”[2];

  • "Where the applicant's right is clear and the other requisites of an interdict are present no difficulty presents itself about granting an interim interdict. Where, however, the applicant's prospects of success are nil, obviously the Court will refuse an interdict”[3].

The court then sets out what section 37D provides as regards deductions.

The court then states the following:

That is, in my view, the Judge is saying that:

  • The employer must prove it has a right or a prima facie right to the funds (the amount it is seeking against the members), among other things. This is one of the requirements of seeking an interim relief order as set out by the judge earlier in the judgement; and

  • That right must satisfy the requirements of section 37D when the employer is seeking an interdict;

  • On the facts, the employer has not proven any fraud, dishonesty or theft and any of the section 37D requirements (own emphasis). In my view, the court is referring to two separate issues here, i.e.: (i) the employer has not proven fraud, dishonesty or theft by the employees because it lost its case in the CCMA (which the judge refers to as a fatal[4]), and (ii) the requirements of section 37D must be present.


  • If an employer seeks an interim interdict against the fund to withhold benefits it will need to show that it has a right or prima facie right to the amounts it seeks to be withheld;

  • It surely cannot be that for every section 37D withholding, the employer will need to prove fraud, dishonesty or theft to the fund. That is a matter for the employer (or the State) to prove in a court of law. It is not for the fund to make a judgement about whether a case of fraud, dishonesty or theft has been actually proved against the employees by the employer. However, if on the facts the employer has shown that it has actually in fact not proved fraud, dishonesty or theft, for example because, as in this case, it has already lost its case in the CCMA, then this is fatal to the employer’s case of meeting the requirements of section 37D which require fraud, dishonesty or theft. It is a fine distinction, but it must be made if we accept that we cannot have the fund determining whether a case has been proved against the employees.

In the Jeftha case (where Windybrow was cited) it is my respectful view that the Judge is mistaken (or perhaps just inaccurate) when he states at paragraph 71 that:

“The court [in Windybrow] concluded that there was insufficient proof of a prima facie case to permit the fund to withhold pension benefits. The proof of fraud, dishonesty or theft was required before a fund could accept the existence of a prima facie right, failing which the fund was not entitled to withhold a benefit in terms of the relevant section”.

What the Judge in the Windybrow case actually found was:

In my view the court in Windybrow is stating that:

  • The employer needs a prima facie right in order to obtain an interdict.

  • The Fund has to be satisfied that there is fraud, dishonesty or theft in order to withhold funds.

  • That fraud, dishonesty or theft has not been proved.

  • Therefore, the employer does not have a prima facie right to obtain the interdict.

An element of fraud, dishonesty or theft must exist, as is required by section 37D, but the court in Windybrow does not state the Fund must determine if fraud, dishonesty or theft has been proved.

If the fraud, dishonesty or theft has actually in fact not been proved (as in this case, for example, the CCMA case was lost) then a prima facie right to the amounts that the employer is seeking from the employer may not exist and the employer will not be entitled to the interdict.

Even if I am wrong concerning the above, reference to prima facie rights in the context of the Windybrow case, is reference, in my view, to the rights that the employer has to prove it has in relation to obtaining an interim interdict. This should be contrasted with the prima facie case that is expected to exist and be capable of being illustrated to be in the fund’s knowledge when it makes a withholding decision. This latter prima facie case relates rather to the fund’s rationale for withholding the benefit from the point of view that it has balanced the competing rights of the employer and the member.

In other words, the Windybrow case refers to the requirements that must be met before an interdict will be granted by a court. Those requirements include the existence of a right or prima facie right by the employer to the moneys it is seeking to withhold. In addition, because this case involved a pension fund, the elements of section 37D were also considered a requirement by the court. However, that does not mean that the requirements that must be established to obtain an interdict are the requirements that must be met when an employer asks the fund to withhold a benefit. If that was so, then we need to apply all the requirements, not just the requirement that the employer has established a right. Thus, I am of the respectful opinion that the Adjudicator’s finding that the employer did not have a prima facie right to request withholding of the benefit is misconceived.


[1] In this case there was some confusion about whether the First Respondent was the insurer/administrator or a pension fund, but it appears that the court believed the First Respondent to be a registered pension fund.

[2] Reckitt & Colman SA (Pty) Ltd v SC Johnson & Son (SA) (Pty) Ltd [1995] 1 All SA 414 (T) 417-418; 1995 (1) SA 725 (T) 729 I- 730 Q,

[3] Olympic Passenger Services (Pty) Ltd v Ramlagan 1957 (2) SA 382 (D) at 383 C-D

[4] At paragraph 22: [22] The applicant in casu believes it has a prima facie right to have the funds of the second and third respondents preserved on the basis of the auditor’s report. The auditor’s report led to the second and third respondents' dismissal. The applicants contention is fatal because it is not in dispute that the respondents’ dismissal was found to be unfair. As a result, the applicant had to compensate the respondents for the unfair dismissal. The appeal by the applicant has not yet been decided.

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