Sasol Ltd v Chemical Industries National Provident Fund (CINPF) (20612/2014) [2015] ZASCA 113 (7 September 2015) per Gorven AJA (Mpati P, Cachalia and Mhlantla JJA and Baartman AJA concurring).
The Supreme Court of Appeal disallowed the appeal and upheld the judgement of Mayat J in the High Court. It was held that in interpreting and applying the rules of a pension fund partial compliance is not sufficient. This meant that the assets and liabilities of nearly 2,500 employees were not validly transferred to four other funds.
Sasol remained liable to contribute to the CINPF from March 2013 until the effective date of transfer as specified in section 14 of the Pension Funds Act.
Extracts without footnotes
[1] This matter concerns transfers of members between funds governed by the Pension Funds Act. Prior to 1 December 2011, most employees of the first appellant (Sasol) who were members of the respondent fund (the CINPF) were not entitled to terminate their membership of the CINPF while they remained in service. The rules of the CINPF prohibited it. A number of Sasol employees wished to transfer to other funds. This led to complaints to the Pension Funds Adjudicator (the Adjudicator). An amendment to rules 3.4.1 and 10.2 of the CINPF followed.
Sasol says that after this amendment and with effect from 1 March 2013, the fifth to 2448th respondents (the 2444) in the court below have withdrawn from the CINPF and are now members of one of the second to fourth appellants (the new funds). Sasol consequently ceased paying employer and member contributions to the CINPF from that date. The CINPF says that no such withdrawal has taken place and the 2444 remain members of the CINPF. The contributions should have continued. The parties agree that the outcome of this dispute and, thus, this appeal, turns on the interpretation of the amended rules 3.4.1 and 10.2 of the CINPF and its application to the facts. . . .
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[13] The legal principles that apply to pension and provident funds are clear and uncontroversial. The trustees of a fund are bound to observe and implement the rules of that fund. Their powers and responsibilities and the rights and obligations of members and participating employers are governed by the rules, applicable legislation and the common law. The rules of a fund form its constitution and must be interpreted in the same way as all documents.
The approach to be taken to the interpretation of documents was recently summarised by this court [per MJD Wallis JA] in Natal Joint Municipal Pension Fund v Endumeni Municipality, as follows:
‘Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors.
The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used. To do so in regard to a statute or statutory instrument is to cross the divide between interpretation and legislation; in a contractual context it is to make a contract for the parties other than the one they in fact made. The “inevitable point of departure is the language of the provision itself”, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.’
[14] As so often happens with amendments to documents, those made to the rules of the CINPF in this instance caused the rules to ‘grow like Topsy’, resulting in an unsightly and unwieldy edifice. Far from clarifying matters, the amendments gave rise to considerable opacity, if not a number of anomalies. Not all of these arise or can be resolved in this judgment. It remains to construe the relevant rules.
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[20] Under rule 10.2.3, the trustees must be satisfied in two respects. First, that the proposed transfer is ‘reasonable and equitable’ and, secondly, that the proposed transfer ‘accords full recognition to the rights and reasonable expectations of the Members’. It was accepted by the parties that this requires a conscious decision to be taken by the trustees to the effect that they are so satisfied. It was also accepted by the parties that this must take place before an application under s 14 of the Act is submitted by the trustees to the Registrar.
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[31] In any event, it is clear that the CINPF consistently raised concerns about the housing loan issue. This is no trifling matter. The CINPF points out that it offers loans of up to 80 percent of the members’ fund credits. The new funds offer loans equal to only 25 percent. Some 21 percent of the 2444 have home loans with the CINPF. Sasol’s response to the concern expressed in the letter of 23 February 2013 on this issue was simply to the effect that transferring members would have to settle their home loans. In its founding affidavit, the CINPF gave examples of how this would affect the fund credit of certain members. The only response given by Sasol in its answering affidavit was that this ignores the fact that, once a loan is settled, a member will no longer have to service that loan leaving more of the salary available for additional contributions to the fund.
[32] One example given by the CINPF in its founding affidavit is of a 58 year-old employee with a fund credit of R81 640.17. Of this amount R55 905.33 is outstanding on his home loan. The tax liability on withdrawal of the latter amount from his fund credit so as to settle his outstanding home loan is R6 012.96. The fund credit which would be transferred would therefore be R19 721.88. He has only seven years before retirement and it is inconceivable that the fund credit would be reinstated by then. In these circumstances, it is understandable that, in attempting to discharge their fiduciary duties, the trustees would want to ensure that such a member fully understands these implications. In these circumstances, it would most certainly not be appropriate for a court to make a decision in their stead.