THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
Case no: 647/02

In the matter between:

ABSA BANK LIMITED

APPELLANT

and

HENDRIK JACOBUS BURMEISTER

1ST RESPONDENT

SHERIFF OF THE HIGH COURT
FOR THE DISTRICT OF BELLVILLE,
WESTERN CAPE

2ND RESPONDENT

SANLAM PERSONAL PORTFOLIOS
(PTY) LTD

3RD RESPONDENT
__________________________________________________

Coram:

MPATI DP, SCOTT, CAMERON, NUGENT

et  CLOETE JJA

Date of hearing: 8 MARCH 2004
Date of delivery:  26 MARCH 2004

Summary:
Interpretation of s 37D(1)(b) of Pension Funds Act 24 of
1956

JUDGMENT
_____________________________________________________

SCOTT JA/…

SCOTT JA:
[1] The question in issue in this appeal concerns the
interpretation of s 37D(1)(b) of the Pension Funds Act 24 of 1956
(‘the Act’). The facts are largely common cause.

[2] The first respondent (‘Burmeister’) was formerly employed by
the appellant bank as a manager at its branch in Springs,
Gauteng. He resigned on 15 April 1997. Some three months later
in July 1997 and at his instance the pension fund benefits accruing
to him were paid by the appellant’s pension fund, the Absa Bank
Pension Fund, to the Protector Pension Fund, a subsidiary of Old
Mutual. They were subsequently used to purchase a compulsory
linked life annuity with Sanlam Life Assurance Limited. The annuity
is administered by Sanlam Personal Portfolios (Pty) Ltd which is
the third respondent.

[3] In February 1998 the appellant issued summons against
Burmeister in the High Court, Johannesburg, claiming damages in
the sum of R1 765 269.05, being the loss it alleged it had suffered
as a result of the latter’s dishonest and fraudulent conduct while in
its employ. Burmeister initially defended the action but did not
appear on the day of the trial, 2 August 2000, and default judgment
was granted against him in the sum of R721 420.56. The judgment

remained unsatisfied and on 25 March 2002 the sheriff for the
District of Bellville, Western Cape, who is the second respondent,
purported to attach the life annuity to the extent of R300 000.

[4] Burmeister sought an order as a matter of urgency in the
High Court, Cape Town, for the setting aside of the attachment.
The only relief sought against the third respondent was an order
directing it to continue its monthly payments to Burmeister in terms
of the annuity it administered. No relief was claimed against the
second respondent other than costs in the event of his opposing.
The appellant was joined as a party at its own request.  It opposed
the application and at the same time brought a counter-application
for an order declaring in effect that its judgment against Burmeister
was of such a nature as to entitle it to cause the annuity to be
attached. The matter came before Potgieter AJ who granted an
order setting aside the attachment and dismissing the counter
application with costs. The appeal is with the leave of this court.

[5] Section 37A(1) of the Act provides that save to the extent
permitted by the Act and certain other  statutory provisions, which
are not relevant,
‘. . . no benefit provided for in the rules of a registered fund (including an
annuity  purchased  by  the  said  fund from an insurer for a member) . . . shall

. . . be liable to be attached or subjected to any form of execution under a
judgment or order of a court . . . ‘.
I interpose that it is common cause that the compulsory linked life
annuity in question falls within the ambit of this provision and,
subject to what follows, would be protected by it.
[6] Section 37A(3) reads ─

‘The provisions of subsection (1) shall not apply with reference to
anything done towards reducing or obtaining settlement of a debt ─
. . .
(c)
which a fund may reduce or settle under section 37D, to the
extent to which a fund may reduce or settle such debt . . .’.

Section 37D(1) provides in turn ─

‘A registered fund may ─
. . .
(b)
deduct any amount due by a member to his employer on the
date of his retirement or on which he ceases to be a member of
the fund, in respect of ─

. . .
(ii)
compensation (including any legal costs recoverable from
the member in a matter contemplated in subparagraph
(bb)) in respect of any damage caused to the employer
by reason of any theft, dishonesty, fraud or misconduct
by the member, and in respect of which

(aa)
the member has in writing admitted liability to the
employer; or
(bb)
judgment has been obtained against the member
in any court, including a magistrate’s court,

from any benefit payable in respect of the member or a beneficiary in

terms of the rules of the fund, and pay such amount to the employer

concerned; . . . .’

[7] On behalf of Burmeister it was contended that because the
default judgment in the present case was granted without evidence
being led, the judgment was not proved to have been one ‘in
respect of any damage caused to the employer by reason of any
theft, dishonesty, fraud or misconduct’ within the meaning of s
37D(1)(b)(ii). There is no merit in this contention. The cause of
action pleaded by the appellant was founded upon Burmeister’s
fraudulent and dishonest conduct in the execution of his duties as
manager of the appellant’s Springs branch. The judgment by
default was quite clearly granted on the basis of these allegations.

[8] As previously indicated, Burmeister’s pension fund benefits
did not remain with the Absa Bank Pension Fund but were
transferred first to the Protector Pension Fund and later used to
purchase the annuity administered by the third respondent.
Subject to Burmeister’s contention dealt with in the preceding

paragraph, it was common cause that had the pension fund
benefits remained with the Absa Bank Pension Fund, that fund
would have been authorised in terms of s 37D(1)(b) to make the
deduction in question and the benefits would not have enjoyed the
protection afforded by s 37A(1) of the Act. I should add that it was
not at any stage alleged that the pension fund benefits were
transferred with the object of avoiding the exception provided for in
s 37D(1)(b). The sole question in issue, therefore, is whether on a
proper construction of this section, its provisions extend to the third
respondent which is presently in control of the benefits. The
appellant contends they do; Burmeister contends the contrary.

[9] Section 37D(1)(b) refers to ‘a member’ of a registered fund.
‘Member’ is defined in s 1 as meaning ─
‘. . .  in relation to ─
(a)
a fund referred to in paragraph (a) of the definition of “pension
fund organization”, any member or former member of the
association by which such fund has been established;
(b)
a fund referred to in paragraph (b) of that definition, a person
who belongs or belonged to a class of persons for whose benefit
that fund has been established,
but does not include any such member or former member or person who has
received all the benefits which may be due to him from the fund and whose

membership has thereafter been terminated in accordance with the rules of
the fund; . . . ’.
The two categories set out in the definition of ‘pension fund
organization’, in so far as they are relevant, are ─
‘(a)
any association of persons established with the object of providing

annuities or lump sum payments for members or former members of

such association upon their reaching retirement dates, or for the

dependants of such members or former members upon the death of

such members or former members; or
(b)
any business carried on under a scheme or arrangement established

with the object of providing annuities or lump sum payments for

persons who belong or belonged to the class of persons for whose

benefit that scheme or arrangement has been established, when they

reach their retirement dates or for dependants of such persons upon

the death of those persons, . . .’.
It emerges from the aforegoing that ‘member’ in s 37D(1)(b)
includes a former member (or former member of a class) who
has not received all the benefits that may be due to him or her
from the fund. Expressed differently, a member remains such
until he or she has received all the benefits and that person’s
membership is terminated according to the rules of the fund.

[10] The only fund authorised to make the deduction in
terms of s 37D(1)(b) is, of course, the fund of which the person

concerned is still a member. If that person is not a member as
defined, there would, in any event, be nothing to deduct. In
terms of the section the amount that may be deducted is the
amount due by the member to his employer either on the date
of his retirement or on which he ceases to be a member. An
ordinary reading of the section suggests that the fund
contemplated is the fund of which the ex-employee was a
member at the time of his employment; in other words, the fund
in which the employer participates, in this case the Absa Bank
Pension Fund. In the event of the member retiring, and subject
to the fulfilment of the other requirements, that fund would be
entitled to make the deduction at any stage until the ex-
employee ceased to be a member of the fund. In the latter
event the fund could pay over the balance of the pension fund
benefits after deducting the amount owing to the employer on
that date. The ex-employee would then no longer be a member
and the fund would no longer be able to deduct an amount due
to the employer, if it had not yet done so.

[11] The appellant’s contention is, however, that the
wording of the section is wide enough to include a subsequent
fund of which the ex-employee is a member and to which the

pension benefits emanating from the original fund have been
paid. In my view such a construction is not justified.

[12] The effect of s 37A(1) is to establish a general rule
protecting pension fund benefits from inter alia attachment and
execution. (The amendment of the section by s 45 of 1998 is
not material to the present case.) Its object is clearly to protect
pensioners against being deprived of the source of their
pensions. In terms of s 37(B) such benefits are also deemed not
to form part of the assets in the insolvent estate of the person in
question. The protection afforded by s 37A(1) is, however,
subject to a number of exceptions, one of which is the exception
provided for in s 37D(1)(b). That section, therefore, affords to an
employer a right of access to pension fund benefits which other
creditors do not have. The rationale of the exception can only
be the employer’s participation in the pension fund concerned,
normally by way of employer contributions. If the exception
permitted the ex-employer access to pension fund benefits in
the hands of any pension fund, the exception could well lose its
rational basis. One thinks, for example, of the situation that may
arise where the benefits are transferred to the pension fund of a

new employer to which further contributions are made. The
inference, therefore, is  that  the  pension  fund  referred  to  in
s 37D(1)(b) was intended to be a reference to the original
pension fund, ie the employer’s pension fund which in this case
is the Absa Bank Pension Fund. It is true, as emphasized by
counsel for the appellant, that the pension benefits in the hands
of a subsequent fund could be traced back to their origin in what
I have called the employer’s pension fund. But that does not, in
my view, justify the construction sought to be placed on the
section.

[13] In the first place, such a construction is not readily
compatible with the framework of the section. It makes good
sense that the employer’s fund should be able to deduct the
amount due on the date on which the ex-employee ceases to
be a member of that fund. But a subsequent fund cannot deduct
the amount due to the employer on that date. This much is
apparent from the use of the definite article ‘the’ at the
commencement of the section which makes it clear that the
date in question is the date on which the ex-employee ceases
to be a member of the fund making the deduction, not some
other fund. But it makes no sense that a subsequent fund

should be authorised to deduct an amount due to the ex-
employer on the date the ex-employee ceases to be a member
of that subsequent fund and not on the date the ex-employee
ceased to be a member of the original fund. Applying this
construction to the facts of the present case, it would mean that
the appellant could cause only so much as was due to it on
Burmeister’s retirement to be attached, even though he might
have owed more on the date he ceased to be a member of its
fund. That fund, if it were making the deduction, would,
however, have been entitled to deduct the higher amount.

[14] It is furthermore necessary to bear in mind that this
anomaly, if the appellant’s construction were to be accepted,
would occur in a provision which creates an exception to a rule
of general application. Such a provision will normally be strictly
interpreted; in other words, the legislature will be presumed to
have intended that only cases clearly falling within the scope of
the language used are to be excepted. (See Hartman v
Chairman, Board for Religious Objection, and others 1987 (1)
SA 922 (O) at 927G-928B.) This approach to statutory
interpretation is particularly apposite when the rule of general
application has as its object the protection of a particular class

of persons considered by the legislature to be worthy of
protection, such as pensioners.

[15] It follows that in my view ‘the registered pension fund’
referred to in s 37D(1)(b) of the Act must be construed as a
reference to the pension fund of which the ex-employee was a
member at the time of his employment, ie the fund in which the
employer participated and not some other fund to which the
pension fund benefits may subsequently have been transferred.

[16] The appeal is dismissed with costs.

D G SCOTT

JUDGE OF APPEAL

CONCUR:
MPATI
DP
CAMERON
JA
NUGENT
JA
CLOETE
JA