THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable

CASE  NO: 539/03

In the matter between :

THE AGRICULTURAL RESEARCH COUNCIL
Appellant

and

GABRIEL STEPHANUS BREDELL
First Respondent
RAYMOND THERON NAUDÉ
Second Respondent
ANDRIES PETRUS FOURIE BEZUIDENHOUT
Third Respondent
JOHANNES HENDRIK TERBLANCHÉ
Fourth Respondent
________________________________________________________________________
Before:
STREICHER, NAVSA, NUGENT, HEHER JJA & ERASMUS AJA
Heard:
2 NOVEMBER 2004
Delivered:
2 DECEMBER 2004
Summary:
Rule 17.7 of Agricultural Research Council Pension Fund - increase of
gratuity by employer – obligation to pay the Fund and not the
member – unauthorised payment not recoverable from member.

________________________________________________________________________

J U D G M E N T
(Dissenting pp 12-30)
(Concurring pp 30-32)
The order appears at paragraph 25
________________________________________________________________________

STREICHER  JA

STREICHER JA:
[1] The appellant instituted action against the respondents in the
Transvaal Provincial Division for the repayment of amounts received by
them from the Agricultural Research Council Pension Fund (‘the Fund’).
The appellant contended that it is considered in law to have made the
payments, that it had no power to make such payments, that the payments
had in any event not been authorised and that each of the respondents was
unjustly enriched by the payment received by him. The court a quo
dismissed the action and with its leave the appellant now appeals against
such dismissal.
[2] The appellant was established in terms of s 2 of the Agricultural
Research Council Act 86 of 1990 (‘the Act’). The Fund is a pension fund
established by the appellant under the Pension Funds Act 24 of 1956 in
terms of the provisions of s 19(1)(g) of the Act.
[3] After the appellant had been established 12 research institutes were
transferred to it from the Department of Agriculture. Most of the
employees of those institutes, including the respondents were, by
agreement, transferred to the appellant. As employees of the appellant the
respondents became members of the Fund.
[4] During 1997 and 1998 the respondents’ membership of the Fund was
terminated. In the case of the first and second respondents the termination
occurred in terms of rule 4.3(3) of the rules of the Fund and in the case of

the third and fourth respondents it occurred in terms of rule 4.7. Each of the
respondents exercised the option provided for in rule 7.4, which rule reads
as follows:
‘If a Member’s membership of the Fund is terminated in terms of Rules 4.1 to
4.4, 4.7, 5.1 to 5.4, 5.7 or 6.2(2), he may request the Board, before his Pension benefit
becomes payable, rather to treat his Pension benefit as follows:
(1)
Pay the Member a Gratuity equal to a maximum of one third of the value of his
Pension benefit in terms of the Rules, which value the Board shall determine in
consultation with the Actuary; in which case the balance of the Member’s
Pension benefit shall be transferred to an Insurer or an Approved Retirement
Fund, excluding such Provident Fund, for the purchase of a pension with that
Insurer or Approved Retirement Fund. Once such transfer is complete, the Fund
shall have no further obligation in respect of the Member.
(2)
Transfer the full value of the Member’s Pension benefit in (1) above, in which
case the conditions of (1) shall apply mutatis mutandis.
(3)
Apply the member’s Gratuity to secure for the Member an additional Pension
from the Fund. In such a case the Board, in consultation with the Actuary, shall
determine the amount and the conditions of payment.’
[5] Rule 7.17 provides for an increase of gratuities payable in terms of
rules 4.1 to 4.7 and 5.1 to 5.7 to compensate for income tax payable on
such gratuities. The basis for the increase and the degree to which a
member is compensated is to be agreed between the member and the
employer. The rule reads as follows:

‘(1)
Notwithstanding any other conditions of the Rules, the Board shall deduct from
the Beneficiary’s Pension benefit any amount from such benefit due in terms of
the Income Tax Act, before the benefit is paid to the Beneficiary.
(2)
The Employer increases a Gratuity payable to an A-member or his Beneficiary
(as the case may be) and to a B-member or his Beneficiary (as the case may be)
to compensate for any income tax payable by such Member or Beneficiary in
terms of Annexure 2 to the Income Tax Act, in respect of a Gratuity in terms of
Rules 4.1 to 4.7 and 5.1 to 5.7 respectively.
(3)
The basis for the increase of the Gratuity in terms of (2) above, and the degree to
which a Member or his Beneficiary is compensated is agreed upon by the
Member and the Employer. Such compensation is however only payable for as
long as, and to the degree that corresponding Gratuity benefits payable to a
member of a Previous State Fund are exempt of the provisions of Annexure 2 of
the Income Tax Act.’
[6] On 20 November 1992 the Executive Management Committee of the
appellant (‘the EMC’) accepted a ‘Hoofbestuursmemorandum’ to the effect
that no increase in a gratuity was payable to any member whose
membership had been terminated in terms of rules 4.1-4.4, 4.7, 5.1-5.4, 5.7
or 6.2(2) and who exercised the option provided for in rule 7.4.
[7] A member who exercised the option provided for in rule 7.4 is
entitled to a gratuity in terms of that rule and not to a gratuity payable in
terms of rules 4.1 to 4.7 or 5.1 to 5.7. But, only gratuities payable in terms
of rules 4.1 to 4.7 or 5.1 to 5.7 are to be increased in terms of rule 7.17. It

follows that insofar as rule 7.17 is concerned the memorandum merely
confirmed what was stated in that rule.
[8] On 23 May 1997 the EMC took the following decision (‘the decision
of 23 May 1997):
‘1
Die LNR1 die gratifikasievoordeel bedoel in reël 7.17(2) saamgelees met reël 7.4
van die Reglement van die LNRPF2 sal verhoog om te vergoed vir enige
inkomstebelasting wat op die volle gratifikasievoordeel of gedeelte daarvan
volgens die keuse van die lid betaalbaar mag wees.
2.
Sodanige vergoeding slegs betaalbaar sal wees vir solank as wat die
gratifikasievoordele in die staat nie belasbaar is nie.
3.
Die maatreël met ingang van 1 Junie 1997 van toepassing is op alle uitbetalings
van gratifikasievoordele vanaf 1 Junie 1997 ongeag die datum van
uitdienstrede.’
[9] The EMC is a committee established in terms of s 16 of the Act,
which, subject to the directives and control of the appellant, is responsible
for the management of the affairs of the appellant in accordance with the
objects and policy of the appellant. During 1997 when the EMC made the
decision the fourth appellant was the president and the other respondents
were members of the EMC.
[10] In the case of the first respondent the gratuity payable in terms of
rule 7.4 amounted to R962 067,17. The appellant paid an amount of
R530 961,93 to the fund in order to increase the gratuity to an amount

1 The appellant.
2 The Fund.

which would after deduction of the income tax payable by the fund in
respect of the gratuity equal the amount of R962 067,17. In a letter by the
Fund to the appellant preceding the payment the Fund requested payment
thereof on the basis that in terms of rule 7.17 the amount was payable
(verskuldig) by the appellant to the Fund. In the event the Fund only paid
R456 441,17 income tax in respect of the gratuity. It paid R1 036 307,18
being the gratuity of R962 067,17 plus the difference between R530 961,93
and R456 441,17 (R74 520,76) less arrear taxes in an amount of R280,75 to
the first respondent.
[11] In the case of the second respondent the gratuity payable in terms of
rule 7.4 amounted to R763 068,40. The appellant paid an amount of
R422 221,95 to the Fund in order to increase the gratuity to an amount that
would after deduction of the income tax payable by the Fund in respect of
the gratuity equal the amount of R763 068,40. As in the case of the first
respondent the payment was preceded by a letter by the Fund to the
appellant in which the Fund requested payment thereof on the basis that in
terms of rule 7.17 the amount was payable by the appellant to the Fund. In
the event the Fund only paid R349 044,17 income tax in respect of the
gratuity. The Fund paid the total gratuity of R763 177,78 plus the
difference between R422 221,95 and R349 044,77 being R73 177,78 to the
second respondent.

[12] In the case of the third respondent the gratuity payable in terms of
rule 7.4 amounted to R614 275,90. The appellant paid an amount of
R265 635,55 to the Fund in order to increase the gratuity to an amount that
would after deduction of the income tax payable by the fund in respect of
the gratuity equal the amount of R614 275,90. Again, the payment was
preceded by a letter by the Fund to the appellant in which the fund
requested payment thereof on the basis that, in terms of rule 7.17, the
amount was payable by the appellant to the Fund. In the event the Fund
paid R267 582,80 income tax in respect of the gratuity. The difference
between R265 635,55 and R267 582,80 being R1 947,25 constituted an
overpayment by the fund to the South African Revenue Service (‘SARS’).
The Fund paid a sum of R621 338,52 being the total gratuity of
R614 275,90 plus interest to the third respondent.
[13] In the case of the fourth respondent the gratuity payable in terms of
rule 7.4 amounted to R1 638 820,91. The appellant paid an amount of
R1 189 898,25 to the Fund in order to increase the gratuity to an amount
that would after deduction of the income tax payable by the Fund in respect
of the gratuity equal the amount of R1 638 820,91. Once again the payment
was preceded by a letter by the Fund to the appellant in which the Fund
requested payment thereof on the basis that, in terms of rule 7.17, the
amount was payable by the appellant to the Fund. The Fund paid the

amount of R1 189 898,20 to SARS and the total gratuity of R1 638 820,91
to the fourth respondent.
[14] The appellant submitted that in law the payments of the amounts of
R530 961,93, R422 221,95, R265 635,55 and R1 189 898,25 by the
appellant to the Fund constituted payments to the respondents and that the
Fund was merely used as a convenient conduit. It was submitted,
furthermore, that the appellant did not have the power to make such
payments and that even if it had the power it had not delegated authority to
the EMC to take the decision of 23 May 1997. On that basis, relying on the
condictio indebiti alternatively the condictio sine causa, the appellant
claimed repayment by the respondents of the amounts paid to the Fund and
in turn paid by the Fund to them. The respondents contended that the
payments were made to the Fund and not to them. They were made, so the
argument went, in order to enable the Fund to pay an increased gratuity to
each of the respondents. They contended in the alternative that the
payments were intra vires and properly authorised.
[15] The court a quo held that the appellant had the power to make the
payments and that it had lawfully delegated that power to the EMC. Having
arrived at this conclusion the court a quo did not consider it necessary to
deal with the other arguments raised by the parties.
[16] As the parties did in argument before us I shall deal with the issue of
whether the payments by the appellant to the Fund are in law considered to

be payments by the appellant to the respondents. If they were not, any
claim the appellant might have is against the Fund and not against the
respondents. For purposes of this argument I shall assume that the
payments had not been duly authorised and that they were therefore
indebite.
[17] Each of the payments was made in response to a statement by the
Fund that the amount was payable (‘verskuldig’) in terms of rule 7.17 and a
request that payment be effected to the Fund as soon as possible. It is,
therefore, in the absence of any evidence to the contrary, probable that the
appellant intended to make the payments and the Fund intended to receive
the payments in terms of rule 7.17.
[18] Rule 7.17 provides that the employer is liable to increase the
gratuities payable to certain employees. The extent of that liability is to be
determined by agreement between the employee and the employer but once
agreed is a liability in terms of the rules of the Fund. The Fund is registered
as a pension fund in accordance with the provisions of s 4 of the Pension
Funds Act (Act 24 of 1956). Section 13A(1) of that Act provides that the
employer of any member of a fund registered in terms of s 4 shall pay to
the fund in full ‘any contribution which, in terms of the rules of the fund, is
to be deducted from the member’s remuneration and any contribution for
which the employer is liable in terms of those rules’.

[19] The employer’s liability to increase the gratuity is therefore a
liability to pay the amount required to increase the gratuity to the Fund. It
follows that it is probable that the appellant intended to make the payments
and the Fund intended to receive the payments in discharge of the
appellant’s statutory liability to make the payments to the Fund. That is so
even though the liability to pay the Fund is a liability towards the
employee.
[20] Counsel for the appellant relied on the fact that it is common cause
between the parties that payment by the appellant in terms of rule 7.17
amounts to the payment of a remuneration, alternatively an allowance,
alternatively a subsidy, alternatively a benefit to the employee concerned.
They submitted that it followed that the payments were made in order to
discharge perceived obligations owed by the appellant to the respondents.
Therefore, so the argument went, the payments to the Fund constituted
payments to the respondents.
[21] I accept that when A is liable to B to pay an amount to C (as
solutionis causa adjectus3), payment by A to C in discharge of his
obligation to B is considered to be a payment by A to B. It does, however
not follow that if A in his own name make payment to C erroneously
believing that he owes B an obligation to do so, that such payment would
be considered to be a payment by A to B.

3 Kopman and Another v Benjamin 1951 (1) SA 882 (WLD) on 886E

[22] I also accept the correctness of the decisions in Licences and General
Insurance Co v Ismay 1951 (2) SA 456 (EDL) at 462B; and Vorster v
Marine & Trade Versekeringsmaatskappy Bpk 1968 (1) SA 130 (O) at
132H-132G to the effect that where A, at the request or order of B and on
his behalf, paid an amount to C erroneously believing that he was indebted
to B in that amount, such payment is considered to be a payment by A to B.
[23] In the present case the position is quite different:
(a)
I assumed in favour of the appellant that the payments had not been
duly authorised. The appellant, therefore, did not owe the
respondents an obligation to pay the amounts to the Fund;
(b)
The appellant paid the amounts erroneously believing that it was
obliged to do so and not at the request or order of the respondents;
(c)
The appellant paid the amounts in its own name and not on behalf of
the respondents;
(d)
The appellant paid the amounts to the Fund in order to enable the
Fund to pay increased gratuities to the respondents.
In these circumstances there is in my view no basis for considering the
payments by the appellant to be payments by the appellant to the
respondents. None of the authorities referred to by the appellant supported
the appellant’s contention to the contrary and I am not aware of any
authority to that effect.

[24] It was not contended that there was, in the event of it being held that
the payments were in law not to be considered to be payments by the
appellant to the Fund, another basis on which the appellant could succeed. I
do, therefore, not consider it necessary to deal with the other arguments
raised by the appellant. If follows that the appeal should be dismissed.
[25] The appeal is dismissed with costs including the costs of two
counsel.

__________________
P E STREICHER
JUDGE OF APPEAL

ERASMUS AJA) CONCUR

NAVSA and HEHER JJA:
[26] We have read the judgment of Streicher JA. For the reasons which
follow we are unable to agree with his conclusion that the payments by the
appellant were not to the respondents but to the fund.
[27] In the second part of this judgment we will deal with that question
and the issues identified by Streicher J and the bases of the conclusions
reached by him. For the sake of convenience and because we consider it
appropriate we intend to deal first with the question of whether the
payments were properly authorised. We proceed to deal with that question.

[28] In terms of s 8 of the Act the affairs of the appellant are managed by
a council (the Council) which determines policy and objectives and
exercises control over the performance of its functions and the execution of
its duties. In terms of s 16 of the Act the appellant is obliged to appoint an
executive management committee (in the present case the EMC) which is
responsible for the management of its affairs in accordance with its objects
and policy. That committee does not ipso facto or ipso jure have power to
make the determination which the appellant is empowered by s 19(1)(b) to
make.
[29] The appellant’s case was that the decision to increase the gratuity,
taken on the 23 May 1997 by the EMC, was unauthorised. After hearing
evidence the court below held that the EMC, in deciding to increase the
gratuity in question, had acted on authority properly delegated to it by the
appellant. A consideration of the evidence leads us to disagree with this
finding for the reasons which follow.
[30] The
fourth
respondent,
Dr
Johannes
Hendrik
Terblanche
(Terblanche), was the only witness to testify. He and the other respondents
were all members of the EMC. He accepted that the appellant was
responsible for setting policy and the EMC was responsible for its
execution and implementation. The court below accepted his evidence that
there was a general delegation to the EMC by the Council and that at his
behest it was expanded over time. The court concluded that nobody was

better qualified than the fourth respondent to testify about the level of co-
operation between the appellant and the EMC – he had been president of
the appellant and a member of the EMC.
[31] The court below found support for the fourth respondent’s evidence,
that the EMC had acted on delegated authority in the fact that the Council
received his annual report, in which there was reference to the increased
gratuity, with acclamation and applause. (We should note, in this regard,
that not only was ratification not pleaded by the respondents but reliance on
it was expressly disavowed by their counsel.)
[32] The court below did not find it troubling that no minute of a
resolution relating to the claimed delegation was forthcoming. The learned
judge recorded that it was common cause that not all of the appellant’s
resolutions were presented to him.
[33] However, towards the end of his evidence in-chief, the fourth
respondent was asked pertinently about how the Council delegated
authority to the EMC. His response was vague and evasive. Under cross-
examination he was asked how the delegation took place. He responded by
saying that it did not take place as a result of ‘’n raadsbesluit as sodanig
nie, maar ‘n voorlegging wat ek aan die raad gemaak het en dit is om die
fine tuning te doen ten opsigte van hierdie delegasies’. But the
documentation presented to the Council by the fourth respondent did not
support his evidence that a delegation took place. The transparencies he

used during his presentation merely showed how the appellant functioned;
that it was the Council’s function to determine remuneration, subsidies and
other benefits in accordance with a system approved by the responsible
Minister with the consent of the Minister of Finance.
[34] When asked by counsel for the appellant whether it was correct that
there had been no resolution by the Council approving the EMC’s decision
to increase the gratuity in question, the fourth respondent replied in the
affirmative, stating that the decision had been taken in terms of an existing
general delegation. Pressed to produce it, he could not locate the delegation
on which he relied.
[35] When it was put to the fourth respondent, once again, that there had
been no resolution by the Council conferring upon the EMC the power to
make the decision in question, he replied in the affirmative. Later, when
questioned by the court, he sought to rely on a verbal delegation but did so,
once again, in vague and unsubstantiated terms.
[36] The fourth respondent’s evidence must be seen against the statutory
provisions regulating the manner in which the Council operates. We have
already referred to ss 8 and 16 of the Act.
[37] Section 13(4) of the Act provides:
‘A decision of the Council shall be taken by resolution of the majority of the
members present at any meeting of the Council and, in the event of an equality of votes
on any matter, the person presiding at the meeting in question shall have a casting vote
in addition to his deliberative vote as a member of the Council.’

Section 13(6) of the Act provides:
‘Minutes shall be kept of the proceedings of every meeting of the Council, and
shall as soon as possible be confirmed at a subsequent meeting of the Council.’
[38] Importantly, in terms of s 19(1)(b) of the Act it is for the appellant to
determine the remuneration, allowances, subsidies and other benefits of the
employees and then only in accordance with a system approved by two
Ministers. Terblanche was aware of this as the transparencies that he used
in his presentation showed.
[39] A delegation must be clearly proved. See: Kasiyamhuru v Minister of
Home Affairs 1999 (1) SA 643 (W) at 651 D. In our view, the respondents
failed to prove the delegated authority upon which they relied. It follows
that the court below erred in concluding that the decision in question had
been authorised. Having reached this conclusion it becomes unnecessary to
consider the submissions on behalf of the appellant that whatever decision
may have led to the amendment of the rules was not taken in accordance
with a system approved by the Minister of Agriculture in concurrence with
the Minister of Finance as envisaged in s 19(1)(b) of the Act.
[40] The payments were made by the appellant to each of the
respondents. In this part of the judgment we deal with the question whether
the payments made by the appellant to the Fund in purported satisfaction of
obligations arising under Rule 7.17 of the Rules were payments received by
the Fund or the respondents.

[41] The importance of the distinction in the present context is made clear
in the following extract from Phillips v Hughes; Hughes v Maphumulo
1979 (1) SA 225 (N) at 228H-229 (per Didcott J, Hefer J concurring):
‘The condictio indebiti does not entitle the solvens to pursue what was
mistakenly paid, wherever it goes. The recovery of the undue payment from its
recipiens is the action’s sole objective. Wessels explained this in his Law of Contract in
South Africa 2nd ed. He wrote (vol 2 paras 3712, 3713 and 3716 at 952-3):
“Even though a thing is paid in error, the solvens intends at the moment he makes the
payment to pass the ownership to the recipiens. There is no error as regards the thing
which is handed over – the error lies in the causa solvendi . . . It is the fault of the
solvens if he is under the impression that a thing is due when it is not; and if through his
act in delivering the thing to the recipiens a third party acquires rights in that thing, the
solvens has only himself to blame. Hence in strict law, as the recipiens becomes the
owner in so far that he can give title by transfer or delivery, the solvens cannot vindicate
the thing in the hands of a third party . . . The right to bring the condictio does not attach
to the thing, nor does there exist any privity between the solvens and the third party.”
This means that the condictio indebiti is enforceable against the recipiens of the undue
payment, but nobody else. The recipiens is not necessarily the person into whose hands
the money was actually put when it was paid. He is the one who must be considered, in
all the circumstances of the case, truly to have received the payment. Whenever a
payment is made to an agent with authority to accept it, for instance, the recipiens is the
principal, not the agent. A conduit through whom payment passes is likewise not its
recipiens. Instead he who obtains payment by such means is. One is not the recipiens of
a payment, on the other hand, merely because it was intended or happens in the result to
benefit one. That, on its own, does not count. All that matters is whether one can
appropriately be said to have received the payment in some or other way. Unless one

has done so, one is beyond the range of the condictio indebiti, for all the payment’s
auxiliary advantages to one. (See Grotius 3.30.5 (Maasdorp’s trans at 305); Voet
12.6.11 (Gane’s trans vol 2 at 844-5); Huber 3.35.7 (Gane’s trans vol 1 at 569); Wessels
(op cit) vol 2 paras 3635, 3697, 3714 at 940, 949-50, 952; Licences and General
Insurance Co v Ismay 1951 (2) SA 456 (E) at 461F; Vorster v Marine & Trade
Versekeringsmaatskappy Bpk 1968 (1) SA 130 (O) at 131H-132A; Glasson v Peace
Real Estate (Pty) Ltd (supra at 118H).)’
The same principles, we would venture, apply to the condictio sine causa.
[42] We begin to answer this question by pointing out, as recorded by
Streicher JA, that the parties were ad idem that the payment, if authorised
in law, was one made pursuant to the provisions of s 19(1)(b) of the
Agricultural Research Act 86 of 1990. This provides as follows:
‘The ARC shall pay to its employees such remuneration, allowances, subsidies
and other benefits as the Council may determine, in accordance with a system approved
from time to time by the Minister, with the concurrence of the Minister of Finance.’
The compensation was either a subsidy or other benefit within the meaning
of the section. Whether or not it was authorized, the payment therefore
purported to be one made to the employee respondents.
[43] The rules of the Fund, are in our view, helpful in discovering the
underlying truth. Rule 7.17 provides as follows:
‘(1)
Notwithstanding any other conditions of the Rules, the Board shall deduct from
the Beneficiary’s Pension benefit any amount from such benefit due in terms of
the Income Tax Act, before the benefit is paid to the beneficiary.

(2)
The Employer increases a Gratuity payable to an A-member or his Beneficiary
(as the case may be) and to a B-member or his Beneficiary (as the case may be)
to compensate for any income tax payable by such Member or Beneficiary in
terms of Annexure 2 to the Income Tax Act, in respect of a Gratuity in terms of
Rules 4.1 to 4.7 and 5.1 to 5.7 respectively.
(3)
The basis for the increase of the Gratuity in terms of (2) above, and the degree
to which a Member or his Beneficiary is compensated is agreed upon by the
Member and the Employer. Such compensation is however only payable for as
long as, and to the degree that corresponding Gratuity benefits payable to a
member of a Previous State Fund are exempt of the provisions of Annexure 2 of
the Income Tax Act.’
(Emphasis added.)
A ‘pension benefit’ is defined in Rule 2.2 as ‘a Gratuity and/or a Pension as
the case may be’. ‘Gratuity’ means ‘a single lump sum amount payable in
terms of the Rules’.
[44] All the respondents became entitled to payment of pension benefits
by reason of Rule 4.7 the relevant provisions of which provide as follows:
‘(1)
If an A-member’s services are terminated by his employer due to his post being
abolished, or due to re-organisation of  activities by the Employer, the following
benefits shall be paid to the Member:
(i)
. . .
(ii)
If such Member’s period of Pensionable Service is ten years or more, the
benefits in terms of Rule 4.4(1) . . .
(2)
In the case of (1) (ii) above, the Employer shall compensate the Fund in respect
of any additional liability placed upon the Fund in this process, in a manner

agreed upon by the Fund and the Employer. This additional liability shall be
determined by the Actuary.
(3)
Should the Employer terminate the services of an A-member in terms of this
rule, the Board may, with the member’s approval arrange the transfer of the
Member’s benefit to an Approved Retirement Fund, after which the Fund’s
obligation in respect of the Member shall cease.’
Rule 4.4(1) provides, in so far as material hereto, that an A-member may
retire with benefits in terms of Rule 4.1 which, in turn, identifies the
following pension benefits:
(1)
A gratuity of 6,72 percent of his Pensionable Emoluments on the last day of his
period of Pensionable Service, multiplied by the period of his Pensionable
Service.
(2)
A Pension . . .’
[45] The actual procedure adopted by the administrators of the Fund,
prior to the purported amendment of the appellant’s policy which gave rise
to the present dispute, and the procedure which it proposed to follow in
consequence of the amendment, is set out in a letter sent by the
administrators to the Fund on 30 June 1997 as follows:
‘1.
AGTERGROND
Reël 7.17(2) bepaal dat die Werkgewer die gratifikasie voordeel betaalbaar aan ‘n A-lid
of B-lid of hul voordeelgeregtigde verhoog om te vergoed vir inkomstebelasting wat
deur sodanige lid of voordeelgeregtigde betaalbaar mag wees.
Reël 7.17(3) bepaal dat die basis van sodanige verhoging deur die lid en die werkgewer
ooreengekom word.

2.
HUIDIGE PROSEDURE
Die LNR se hoofbestuur het op 20 November 1992 besluit dat die voordeel slegs van
toepassing is indien die lid ‘n pensioentrekker word. (Die besluit is onlangs verander.)
Sover my kennis strek, is die basis van vergoeding, reël 7.17(3). nog nooit deur ‘n
spesifieke lid en die werkgewer onderhandel nie, en is daar ook nie ‘n bestuursbesluit
oor die metode wat gebruik moet  word nie.
Sodanige verhoging in voordeel word deur Ou Mutual as die administrateur bepaal en
aan die lid betaal. Die volgende prosedure was in plek:
•
Met uitdienstrede word ‘n belastingaanwysing van die Ontvanger aangevra.
•
Die belastingbedrag soos aangedui in die belastingwysing word van die lid se
voordeel verhaal.

Indien die lid ‘n pensioentrekker van die Fonds word, word die belasting wat van
die lid se voordeel verhaal is, deur Ou Mutual as die administrateur van die LNR
aangevra en aan die lid terugbetaal. Ons kan egter geen enkelbedragvoordeel uitbetaal
sonder om ‘n belastingaanwysing te verkry nie. Dit beteken die Ontvanger gaan vanaf
die tweede betaling ook belasting verhaal.Indien die LNR dus slegs die
belastingsbedrag aan die Fonds terugbetaal, gaan die lid minder as die belastingbedrag
ontvang.

Ten einde die probleem te oorkom, beraam Ou Mutual die belasting wat die
Ontvanger vanaf die tweede bedrag gaan aanvra, en vra dan die LNR om die verhoogde
bedrag aan die Fonds te betaal. Die gemiddelde koers wat die Ontvanger met die eerste
aanslag gebruik het, word in die berekening gebruik. Sien Bylaag 1 vir ‘n voorbeeld van
die berekening. Daar word rente bygevoeg tot datum van betaling. (Die koers wat
gebruik word, is ‘rente op laat betaling’ soos deur die Trustees bepaal.)
•
Wanneer die betrokke bedrag vanaf die LNR ontvang word, word ‘n
belastingaanwysing op die tweede betaling aangevra.

•
Wanneer die belastingaanwysing ontvang word, word die belasting van die
tweede betaling verhaal en word die balans aan die lid uitbetaal.
3.
UITBREIDING VAN VOORDEEL
Die LNR se hoofbestuurskomitee het op sy vergadering van 23 Mei 1997 besluit om
die aangeleentheid as volg te verander:
•
Die voordeel is van toepassing op alle uidienstredes (behalwe bedankings) waar
die enkelbedrag na 1 Junie 1997 uitbetaaal word. Die vereiste dat die lid ‘n
pensioentrekker moet word, verval dus.
•
Die LNR staan in vir die belasting op die volle enkelbedrag wat die lid neem, en
nie net op die gratifikasie in terme van die reëls nie. (Indien die lid se voordele
in terme van reël 7.4 uitbetaal word, is ‘n groter enkelbedragvoordeel
beskikbaar, soos geïllustreer met die voorbeeld in Bylaag 1 en Bylaag 2.)
Dit beteken dus dat die LNR in meer gevalle instaan vir die belasting, en dat die
belastingsbedrag hoër kan wees as wat onder die ou bedeling in die LNR gegeld het.
Die lede ontvang ook dus ‘n belastingvoordeel wat ruimer is as onder die RDPF,
aangesien die enkelbedrag onder reël 7.4 groter kan wees as onder die RDPF.
Die prosedure wat gevolg gaan word, sal soortgelyk wees as wat in die vorige
afdeling bespreek is.’
(Emphasis added.)
[46] Finally, regard should be had to the manner in which the parties
actually implemented the terms of rule 7.17. The dealings between the
appellant and the third respondent may be taken as representative in this
regard.
[47] On 16 May 1997 the third respondent wrote to the fourth respondent
in the latter’s capacity as President of the Council in the following terms:

‘Na oorweging van verskeie faktore, insluitend my persoonlike omstandighede,
wil ek graag van hierdie geleentheid gebruik maak om aansoek te doen vir ‘n
vrywillige skeidingspakket ooreenkomstig reel 4.7(1)(ii) van die Reglement van die
Landbounavorsingsraadpensioenfonds (LNRPF). Die pakket soos hieronder voorgestel
is in ooreenstemming met die huidige LNR beleid in hierdie verband.
SKEIDINGSVOORDELE
A.
PENSIOEN:
Uitdienstrede volgens reel 4.7(1)(ii) van die Reglement van die LNRPF. In
terme van hierdie reël is die volgende voordele betaalbaar:
(i)
‘n Gratifikasie van
R389 922
(Die LNR staan in vir die belasting)
(ii)
‘n Jaargeld van
R105 858

of
(iii)
‘n Oordragwaarde van R1 842 827. Die bedrag moet oorgedra word na
‘n versekeraar vir die aankoop van ‘n pensioen en tot een derde mag in
kontant geneem word.
B.
SKEIDINGSPAKKET:
(i)
Diensbonus – pro rata gedeelte

R     9 345.93
(ii)
Verlof – Staat (433 dae)

R 177 393.57

- LNR (13 dae)

R     7 743.60
(iii)
Byvoordele

(a)
Medies (een maand se werkgewer bydrae)

R        350.00

(b)
Behuising

Geen

(c)
Motorlening

R   82 478.88
(iv)
Skeidingsgelde (1 week se salaries vir elke

voltooide jaar diens)

R   92 327.61

TOTAAL

R 369 639.59

Tesame met bogenoemde versoek ek verder dat die onderstaande toegewings, soos
reeds per geleentheid toegepas, oorweeg word:
(i)
Dat die LNR, indien nodig, sal instaan vir die belasting op ‘n
gratifikasiebedrag gelyk aan R 389 922 indien ek die keuse sou uitoefen om
die volle oordragwaarde uit die pensioenfonds te neem.
(ii)
Dat die LNR sal instaan vir die werkgewerbydra tot lidmaatskap van
Medihelp.
Daar word vertrou dat hierdie versoek u gunstige oorweging sal geniet.’
[48] The letter was endorsed by the fourth respondent on 21 May 1997 as
follows:
‘Mnr Bezuidenhout,
Ek het kennis geneem van u besluit om met ‘n pakket uit diens te tree, met ingang 1
Junie 1997. Die samestelling van die pakket is aanvaarbaar en in lyn met LNR
diensvoorwaardes.
J H TERBLANCHE’
This exchange manifested an agreement of the kind envisaged by rule
7.17(3).
[49] In due course SARS issued an ‘Employees Tax Deduction Directive’
to the Fund in respect of each respondent in which the amount of tax and
the amount of the lump sum payment concerned was stated.
[50] The Fund then wrote to each of the respondents notifying them that
‘LNR staan in vir die belasting wat afgetrek is van u gratifikasie’, advising
each of the gratuity benefit, the amount of tax, accrued interest (where

applicable), the total amount of the gratuity after deduction of tax, and
drawing attention to the payee’s bank statement on a given future date.
[51] The Fund apparently paid SARS the tax owed on the gratuity and the
top-up, paid the employee the after-tax amount of the gratuity, called on the
appellant to pay to it a cheque equivalent to the top-up under 7.17 and, on
receipt thereof, paid an amount equivalent to the tax deducted to the
employee. In this regard a letter dated 26 November 1998 from the Fund
Administrators to the representatives of the appellant seems to reflect the
practice:
‘LANDBOUNAVORSINGSRAADPENSIOENFONDS: 53495
TOEPASSING VAN REëL 7.17: VERHALING VAN BELASTING
LID NAAM:

JH Terblanche
VERWYSING NR:

47013305
Ons verwys na dokumente ontvang ten opsigte van bogenoemde lid se aftrede uit fonds
op 30/11/1998
In terme van reel 7.17 is die bedrag van:      R1195766.24
Deur die LNR aan die Pensioenfonds verskuldig.
(Sien aangehegte bylae)
Die nodige belastingaanwysing op bogenoemde bedrag is reeds aangevra vanaf
die Ontvanger van Inkomste. Met ontvangs van bogenoemde tjek sal die aanvanklike
belasting aan die lid terugbetaal word.
Dit sal waardeer word indien u die gevraagde tjek so gou as moontlik aan ons
kan voorsien.’

In this and other similar letters from the Fund the amount by which the
gratuity is increased is said to be due (‘verskuldig’) to the Fund by the
appellant. That however, in context, means no more than that the Fund
required payment by the appellant in order to enable it to carry out the
arrangement.
[52] We disagree with Streicher JA that amounts paid to increase a
gratuity under rule 7.17 fall within the ambit of s 13A of the Pension Funds
Act 24 of 1956. Such increases are neither a contribution which is to be
deducted from a member’s remuneration (s 13A(1)(a)) nor a contribution
for which an employer is liable in terms of the rules of the Fund (s
13A(1)(b). In the last-mentioned regard, although increase in an
employee’s gratuity by the employer is provided for in the rules, the
employer is not liable in terms of the rules for such a payment. Rule
7.17(3) makes it clear that liability to pay depends upon and arises from the
agreement of employer and employee dehors the rules. Rule 7.17 does no
more than furnish a mechanism to give effect to such an agreement. This
case provides an illustration: although the four respondents were at all
material times members of the Fund and entitled to the benefits provided
by the rules, their success or failure in this application depends on whether
their employer validly undertook to extend the benefits of Rule 7.17 to their
situation. We disagree therefore that the employer intended to make the

payments or that the Fund intended to receive them in discharge of a
statutory obligation on the employer.
[53] The conclusions which in our view may fairly be drawn from the
rules and the parties’ implementation of them are the following:
(i)
The payment by the employer under rule 7.17 was not the payment
of a gratuity, ie a lump sum payable in terms of the rules. It was an
amount paid by agreement between employer and employee which
compensated the employee for the reduction in the amount of the
gratuity caused by the deduction of his tax liability. The effect was
an increase in the gratuity.
(ii)
The contractual obligation to pay the compensatory amount to the
employee was that of the employer. The Fund was never under a
duty in terms of the rules or by contract to pay an increased gratuity
to the employee. The Fund did not intend to meet its own obligations
by paying the respondents and, therefore, could not have recovered
such payments from them by way of condiction.
(iii)
As a matter of practical convenience the Fund calculated and paid all
the tax owed by the employee (ie on the gratuity and on the top-up)
to SARS. It also paid the employee the gratuity which it was obliged
under the rules to pay and, after it had received the equivalent
amount from the employer, the top-up also.

(iv)
The Fund had no interest in the receipt of the top-up except as a
conduit for onward transmission to the employee.
(v)
All the parties co-operated to achieve the desired result within the
framework of the Fund rules.
(vi)
The employer and employees could have effected the same
arrangement outside of the rules of the Fund. In the circumstances
rule 7.17 should properly be construed as merely recording the
arrangement between employer and the Fund for the benefit of an
employee who chooses to rely on its provisions.
[54] The evidence proves that
(i)
the employer undertook to pay each of the employees;
(ii)
the employer intended that its payments to the Fund should be
transmitted to the employees (in several cases with interest
included);
(iii) the Fund had no intention of receiving the top-up or the interest as
a pension fund contribution (or as its own) but intended to pass it
on to the employees and in fact did so in each case. As counsel
put it, the net effect of the transactions upon the Fund was nil.
[55] For these reasons we are satisfied that the payments were made to
and received by the employees and the role of the fund was merely one of
facilitation and transmission.

[56] In the result the payments to the employee respondents to increase
their gratuities were made by the appellant under a mistaken belief that
such payments were authorised, and that it was obliged to make them. The
members of the appellant’s Executive Committee seem to have laboured
under a genuine misapprehension that they were authorised by the Council
to extend the employee benefits as they did. The fourth respondent was
chairman of the Committee as well as president of the Council and there
were other common members as well. In the circumstances the appellant’s
mistake was excusable. The condictio indebiti was therefore available to it.
[57] The appeal should accordingly succeed with costs including the costs
of two counsel. The order of the Court a quo should be set aside and
replaced with the following:
1.
The defendants are ordered to pay the following amounts to the
plaintiff-

1.1
the first defendant: R530 961,93;

1.2
the second defendant: R422 221,95;

1.3
the third defendant: R265 635,55;

1.4
the fourth defendant: 1 189 898,25.
2.
Each of the said amounts bears interest a tempore morae at 15,5%
per annum from the date of service of the summons on the defendant
concerned until date of payment.

3.
The defendants are to pay the costs of suit including the costs
attendant upon the employment of two counsel.

_____________________
M S NAVSA
JUDGE OF APPEAL

__________________________
J A HEHER
JUDGE OF APPEAL

NUGENT JA:
[58] I agree with the order that is proposed by Streicher J. Payment being
a bilateral juristic act,4 the question whether the payments were made to
and received by the Fund as principal (or merely as agent for the
respondents) depends upon what the parties intended. That is in turn a
question of fact upon which the appellant bore the burden of proof.
[59] The appellant led no evidence to establish that the payment was
intended to be made to and received by the Fund as agent for the
respondents and that was also not expressly dealt with in the agreed facts.
Counsel for the appellant referred us to the paragraph of the agreed facts in
which the parties agreed that the payments ‘amount[ed] to the payment of
remuneration, alternatively an allowance, alternatively a subsidy,
alternatively a benefit as contemplated by s 19 of the Act’ (that section

4 Saambou-Nasionale Bouvereniging v Friedman 1979 (3) SA 978 (A) 993A-C; Volkskas Bank v
Bankorp Bpk (h/a Trust Bank) 1991 (3) SA 605 (A) 612C-E; Pfeiffer v First National Bank of First
National Bank of SA Ltd 1998 (3) SA 1018 (A) 1025I-J.

authorises the appellant to make payments of that kind ‘to its employees’)
but clearly that was intended to be no more than an admission that the
payments fell within the authority conferred upon the appellant by the
statute, and it does not follow that the payments were in fact made to the
respondents directly (represented by an agent). It is quite apparent that
notwithstanding that agreement it remained in issue whether the payments
were in fact made to the respondents, or whether they were made to the
Fund.
[60] No doubt the existence or otherwise of obligations between the
parties allows for inferences to be drawn in appropriate cases as to what
was intended when a payment was made. I agree with Streicher JA that in
the present case the rules cast an obligation upon the appellant, enforceable
by the respondents, to pay the relevant amounts to the Fund, and that once
that was done the Fund became liable to pay the increased gratuity to the
respondents. But even if that construction of the rules is not correct that is
nevertheless how the appellant and the Fund appear to have understood
them, for according to the agreed facts ‘[the appellant] caused the Fund to
increase the gratuity payable to the [respondents] … and [the appellant]
paid the certain amounts to the Fund in respect of each of the
[respondents].’ Moreover, the correspondence from the Fund to the
appellant is consistent with that understanding of the nature of the
obligations. And if that was the understanding of the appellant and the

Fund I see no reason not to infer that they acted in accordance with that
understanding.
[61] I find nothing in any of the facts that have been placed before us,
whether in the agreed facts or in the evidence, from which to infer that the
appellant and the Fund had a contrary intention when the moneys were
paid. On the contrary the appellant itself alleged in its particulars of claim
that it ‘caused the Fund to increase the gratuity payable to [the
respondents]’ and that it in turn ‘paid the Fund’ the relevant amounts. Its
case against the respondents was founded on no more than the bald
assertion in the particulars of claim that ‘in the premises’ the payments
were made to the respondents, but there are no facts to support that leap.  In
my view it is probable that both the appellant and the Fund intended the
payments to be made to and received by the Fund as principal and
accordingly the claim must fail.

__________________
R W NUGENT
JUDGE OF APPEAL

ERASMUS AJA)
CONCUR