THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case no: 1159/2020

In the matter between:

MUNICIPAL EMPLOYEES’ PENSION FUND
FIRST APPELLANT

AKANI RETIREMENT FUND
ADMINISTRATORS (PTY) LTD
SECOND APPELLANT

and

PANDELANI MIDAS MUDAU
FIRST RESPONDENT

VHEMBE DISTRICT MUNICIPALITY
SECOND RESPONDENT

Neutral citation:  Municipal Employees’ Pension Fund and Another v
Pandelani Midas Mudau and Another (Case no 1159/2020)
[2022] ZASCA 46 (8 April 2022)

Coram:
DAMBUZA, VAN DER MERWE and CARELSE JJA and
SMITH and WEINER AJJA

Heard:

25 February 2022

Delivered: This judgment was handed down electronically by circulation to the
parties’ representatives via email, publication on the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is deemed to be
10h00 on 8 April 2022.

Summary: Pension Funds – amendment of pension fund rules to reduce
members’ withdrawal benefits with retroactive effect – such rule valid and
enforceable provided that it is adopted in terms of the fund rules and the
applicable statutory regime.

ORDER

On appeal from: Gauteng Division of the High Court, Pretoria (Avvakoumides
AJ and Kubushi J concurring, with Leathern AJ dissenting):

The appeal is upheld with costs.
The order of the full court is set aside and substituted with the following:
‘2.1 The appeal is upheld with costs.
2.2 The order of the Pension Fund Adjudicator is set aside and
substituted with the following order:
‘The complaint is dismissed with costs.’

JUDGMENT

Smith AJA (Dambuza, Van der Merwe and Carelse JJA and Weiner AJA
concurring)

[1] This is an appeal against the judgment of the full court of the Gauteng
Division, Pretoria, upholding a determination by the Pension Fund Adjudicator
(the Adjudicator) by majority decision. The appeal is with the leave of this Court.

[2] The first appellant (the Fund) is a pension fund established in terms of the
provisions of the Pension Funds Act 24 of 1956 (the Act). The Fund’s members
are previously disadvantaged persons employed by local government authorities.
The second appellant is the administrator of the Fund.

[3] The first respondent, Mr Mudau, was employed by the second respondent,
the Vhembe District Municipality, and in that capacity also became a member of
the Fund during 2003. Mr Mudau resigned from his position with effect from 31
May 2013 and his membership of the Fund also terminated on that date.

[4] At the time, s 37(1)(b)(ii) of the Fund rules provided that a member who
joined the Fund after June 1998 would upon resignation be entitled to withdrawal
benefits calculated as follows: the member’s contributions, plus interest,
multiplied by three (the original rule). Having been warned by its actuaries that
the rule provided for unsustainably high returns, which could operate to the
financial detriment of the Fund, it resolved on 21 June 2013 to amend the rule,
with effect from 1 April 2013, by providing for membership withdrawal benefits
to be: member’s contribution, plus interest, multiplied by 1,5.

[5] The stated rationale for the amendment was to reduce the risk of the Fund
not meeting its liabilities in the future. By making the amendment retroactive it
sought to prevent a ‘run’ on the Fund, that is, to avoid the danger that members
may resign in their numbers if they were aware of the impending reduction of
withdrawal benefits.

[6] The Fund duly applied for the registration of the new rule on 22 July 2013,
and the Registrar approved and registered it on 1 April 2014, with the effective
date being 1 April 2013. In the meantime, Mr Mudau had applied for his
withdrawal benefits, which were paid to him on 18 October 2013, in terms of the
amended rule.

[7] Aggrieved by the reduced pay-out, Mr Mudau lodged a complaint with the
Adjudicator, contending that his benefits should have been calculated in terms of
the original rule, since, in terms of s 12(4) of the Act, the proposed amendment
would only take effect after it had been duly registered.

[8] The Adjudicator ultimately upheld the complaint, determining that the
amended rule could not be applied to Mr Mudau’s withdrawal benefits since it
had not yet been approved by the Registrar when the benefits became due, and
furthermore, that the amended rule could not be applied to benefits which accrued
before the amendment became effective. Although the parties made submissions
to the Adjudicator before the amended rule was approved and registered, she
made her determination during July 2014, a few months after the amendment had
taken effect.

[9] The Fund, being of the view that the Adjudicator’s ruling was ultra vires
her powers and incorrect on the merits, launched an application in the Gauteng

High Court, challenging the ruling. It sought an order setting aside the
Adjudicator’s decision and replacing it with an order dismissing the complaint.

[10] Section 30P of the Act allows a party who is aggrieved by the Adjudicator’s
determination, to approach the division of the high court having jurisdiction for
appropriate relief. That section effectively provides for a hearing de novo, with
or without additional evidence, and the court may make any order it deems fit.

[11] The matter initially came before Raulinga J, who, apparently treating it as
a review of the Adjudicator’s decision, upheld her determination. He found that
the Adjudicator did not commit a reviewable irregularity, and consequently
dismissed the application, with costs.

[12] The Fund’s appeal to the full bench was also dismissed in terms of the
majority judgment of Avvakoumides AJ, (Kubushi J concurring and Leathern AJ
dissenting). The full court upheld the Adjudicator’s ruling that the amended rule
could not be applied to withdrawal benefits that accrued prior to its approval by
the Registrar.
[13] In this Court the Fund assailed the full bench decision on two grounds,
namely that:
(a) the complaint fell outside the scope of the Adjudicator’s powers set out in ss
30H and 30M, read with the definition of a ‘complaint’ in s 1 of the Act; and
(b) the Adjudicator erred as a matter of law in finding that the amended rule could
not be applied to withdrawal benefits which accrued before it came into effect on
1 April 2014, despite its retroactive operation.

[14] Counsel for the appellants argued that the complaint pertained to the
validity of the amended rule and hence fell outside the purview of the
Adjudicator’s powers. I disagree. It is common cause that the complaint was

lodged, and the submissions made to the Adjudicator, before the amended rule
was registered. Section 1 of the Act defines ‘a complaint’ as one relating to the
administration of the fund, the investment of its funds, or the interpretation and
application of its rules. The Adjudicator is empowered to investigate and make a
determination in respect of a complaint lodged by an aggrieved member.1

[15] To my mind it is evident from the Adjudicator’s reasoning that she did not
purport to rule on the validity of the amended rule, but rather its interpretation
and application to benefits which accrued before its approval by the Registrar.
And leaving aside for the moment the issue relating to the soundness of her
reasoning, it is manifest that her ruling that Mr Mudau was entitled to pension
benefits calculated in terms of the original rule, was predicated on her finding that
the amended rules could not be applied before they were approved and registered
by the Registrar. The complaint before the Adjudicator thus related to the
interpretation and application of the Fund rules, and accordingly fell within the
scope of the powers vested in her in terms of the Act. The facts of this case can
therefore be distinguished from those in Joint Municipal Pension Fund and
Another v Grobler and Others,2 where the complaint before the Adjudicator
required her to rule on the validity of the fund rules.3 This appeal ground was
accordingly correctly dismissed by the full court.

[16] I now turn to consider the issue relating to the retroactive application of the
amended rule. In my view, the appellants’ contentions regarding this issue are
legally sound and compelling.

1 Sections 30H and 30M of the Pension Funds Act 24 of 1956.
2 Joint Municipal Pension Fund and Another v Grobler and Others [2007] ZASCA 49; 2007 (5) SA 629 (SCA).
3 Ibid para. 25.

[17] Rule 48(1) of the Fund Rules authorises the Fund to amend its rules, subject
to the provisions of s 12 of the Act. In terms of s 12 of the Act, a pension fund
may alter or rescind any rule, or make any additional rule, provided that it does
not affect any right of a creditor (other than a member or shareholder of the fund),
and it has been approved and duly registered by the Registrar. In terms of s 12(4)
of the Act, the Registrar shall register the amended rule if he or she is satisfied
that the proposed amendment is not inconsistent with the Act and is financially
sound. The amended rule would then take effect from a date determined by the
fund concerned, and if the fund has not determined a date, the rule becomes
effective on the date of registration.

[18] It is, in my view, manifest that these provisions unequivocally authorise
the Fund to amend its rules and to determine the effective application date thereof.
In National Tertiary Retirement Fund v Registrar of Pension Funds,4 this Court
held that a pension fund may adopt a rule reducing a member’s pension benefits,
provided that is it done in accordance with the fund rules and the applicable
statutory regime.

[19] While there is a strong presumption in our law against legislation operating
retroactively, if the wording of the statute is unambiguous and the intention of the
legislature (or in this case the pension fund) is clearly to interfere with vested
rights retroactively, the provisions of the retroactive instrument must be given
effect to.5 This Court held in Euromarine International of Mauren v The Ship
Berg and Others6 that the enquiry, in every case where the issue of retroactivity
arises, must be into the language of the statute and the intention of the legislature
emerging therefrom.

4 National Tertiary Retirement Fund v Registrar of Pension Fund [2009] ZASCA 41; [2009] 3 All SA 254 (SCA).
5 National Director of Public Prosecutions v Carolus [1999] ZASCA 101; [2000] 1 All SA 302 (A) para 31.
6 Euromarine International of Mauren v The Ship Berg and Others 1986 (2) SA 700 (A) at 709E-710E.

[20] There can be little doubt that, properly construed in accordance with
established canons of legal interpretation – namely, the language used in the
context of the amended rule as a whole; the circumstances in which it was adopted
by the Fund; the clear purpose to which it is directed and the factors considered
by the Fund at the time of its formulation7 - the amended rule was intended to
operate retroactively and to reduce members’ benefits with effect from 1 April
2013. The respondent’s counsel also did not take issue with this assertion, but
argued that because Mr Mudau’s benefits became due, and were in fact paid
before the rule was registered, the amended rule cannot apply to his withdrawal
benefits. He was accordingly entitled to be paid in accordance with the rules
which were in existence on 18 October 2013, or so the argument went.

[21] To my mind, the plain and unambiguous language of the amended rule
simply does not brook this contended construction. The amended rule explicitly
states that it operates retroactively and thus reduces pension benefits due to
members with effect from 1 April 2013. In my view, there can hardly be a clearer
indication of an intention to interfere with existing rights with effect from that
date. As I have mentioned earlier, there were no statutory impediments to the
Registrar approving and registering a rule which sought to impair rights that
accrued before its registration.

[22] I consequently conclude that the amended rule retroactively applied to all
pension withdrawal benefits which had accrued to the Fund’s members after 1
April 2013. However unfortunate this finding may be for Mr Mudau, the amended
rule thus also applied to his withdrawal benefits. The appeal must accordingly

7 See, for example, Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4)
SA 593 (SCA).

succeed with costs. In my view the matter was straightforward and it was not
reasonably necessary for the appellants to employ two counsel.

[23] In the result I make the following order:
The appeal is upheld with costs.
The order of the full court is set aside and substituted with the following:
‘2.1 The appeal is upheld with costs.
2.2 The order of the Pension Fund Adjudicator is set aside and
substituted with the following order:
‘The complaint is dismissed with costs.’

______________________
JE SMITH
ACTING JUDGE OF APPEAL

Appearances:

For appellants:                 A R Bhana SC (with I A Goodman)
Instructed by:                   Webber Wentzel Attorneys, Sandton
Symington De Kok Attorneys, Bloemfontein.

For first respondent:        M I Thabede (with L T Leballo)
Instructed by:
Mafuyeka & Associates Inc, Pretoria
Mhlokonya Attorneys, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
8 April 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does
not form part of the judgments of the Supreme Court of Appeal
Municipal Employees’ Pension Fund and Another v Pandelani Midas Mudau and Another
(Case no 1159/2020) [2022] ZASCA 46 (8 April 2022)

Today the Supreme Court of Appeal upheld an appeal from the Gauteng Division of the High
Court (high court) and substituted the order with one upholding the appeal and setting aside
the order made by the Pension Fund Adjudicator (the Adjudicator) with one dismissing the
complaint.
The first appellant was a pension fund (the Fund) whose members were previously
disadvantaged persons employed by local government authorities. The second appellant was
the Fund’s administrator. The first respondent was employed by the second respondent, being
the Vhembe District Municipality and, as such, qualified to become a member of the Fund.
At the time, the Fund’s rules indicated that a member who joined the fund after June 1998
would be entitled to withdraw benefits to a certain specified extent. The Fund was cautioned
about the unsustainability of this arrangement, and the rules were altered retroactively in order
to protect the Fund from members who sought to capitalise on the old rule. An application to
have the rule altered was submitted on 22 July 2013 and approved on 1 April 2014. In the
meantime, the first respondent had applied for his withdrawal benefits, which he discovered
had been substantially reduced. Aggrieved, the first respondent approached the Adjudicator,
contending that the benefits ought to be calculated in terms of the original rule. The Adjudicator

upheld the appeal, who held that the first respondent’s withdrawals should not be affected
because the amended rule was not yet in place at the time of the withdrawal.
The high court and the full bench dismissed the respective appeals as the high court was of the
view that the Adjudicator did not commit a reviewable irregularity and the full bench was of
the view that an amended rule could not be applied before it came into effect. The SCA,
however, found that rule 48(1) of the Fund’s rules authorised the Fund to amend its rules,
subject to s 12 of the Pension Funds Act 24 of 1956. The effect hereof would be that the
amended rule would take effect on a date determined by the Fund and if no date has been
determined, on the date that the rule is registered. The SCA found that this unequivocally
authorised the Fund to amend its rules and to determine the effective date thereof.
The SCA cautiously bore in mind the presumption against retroactive legislation but
maintained that if the wording of a statute is unambiguous and the intention of the legislature,
which was equated to the Fund in this instance, was to interfere with vested rights retroactively,
then such intention must be given effect to. The SCA was satisfied that the amended rule was
intended to operate retroactively.
In the result, the SCA upheld the appeal and substituted the order of the high court with one
upholding the appeal and substituting the order of the Adjudicator with one dismissing the
complaint.
--------oOo--------