• 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 t