Appeal bid after Tongaat-Hulett told it can keep its pension booty
A challenge in the high court by pensioners to force Tongaat-Hulett Limited to reverse a controversial ruling on the winding up of its now defunct pension fund that scored the sugar giant a R363-million windfall, has failed.
A total of 73 pensioners (previously 77 but some have died in the meantime) challenged their former employer who they believe systematically looted their pension fund between 2008 and 2013.
The current dispute has its roots in the outsourcing and closure of the Tongaat-Hulett Defined Benefit Fund (THDBF) with assets of R1.8 billion, to Old Mutual’s Platinum 2003 Category A Benefit Fund, in April 2013.
But having heard the matter in the High Court, Durban, in October 2016, Judge P Koen in his ruling, delivered on 23 December 2016, sided with Tongaat-Hulett’s counsel Alistair Franklin SC and the THDBF’s lawyer, Samantha Davidson (Shepstone & Wylie), who said they had no case to answer.
He found against the pensioners in every aspect of their legal challenge to have THDBF’s surplus pay-out to the employer reversed, going further, to give them a cost order, as the applicants were “pursuing the matter…in their own particular interest”.
[A bizarre judicial observation, as all litigants are generally required to have a legitimate interest in an action they bring before the court. – Ed.]
The pensioners’ and Tongaat-Hulett’s arguments were extensively covered by Noseweek (nose199) and were the subject of impassioned letters to the Editor (nose205).
On 17 January the pensioners applied for leave to appeal to the Supreme Court of Appeal.
|Bruce Moor and Willem Hazewindus|
The pensioners – led by Bruce Moor and Willem Hazewindus and represented by lawyer Nigel Carman (Fasken Martineau Inc) and Advocate Craig Watt-Pringle SC – had wanted the Durban court to set aside the decision by the pension fund trustees to pay out to Tongaat-Hulett Limited’s Employer Surplus Account (ESA) R363.2 million from the pension fund. Instead they asked for the fund to recalculate the actuarial surplus as it was last done on 30 June 2012.
They said they wanted two previous actuarial surplus allocations made to the employer’s surplus account in 2007 and 2009, totalling R222.1m to be taken into account, where no surplus was paid to the members.
They also claimed they were misled by a rule specifically created for the liquidation of the THDBF. They said the rule divided – in an 80/20 split – the fund’s “excess assets” (fund assets minus fund liabilities) in favour of the members.
They said their understanding at the time leading up to the liquidation of the fund was that “excess assets” was the same as “actuarial surplus”, which, it transpires, it is not.
They said the “excess assets” that they received already belonged to them in any event.
The pensioners went further and said the R363m “excess assets” paid to Tongaat-Hulett’s employer surplus account was a breach of section 15C of the Pension Funds Act.
They said that, according to the act, the surplus account can only receive funds from a determined “actuarial surplus” and not “excess assets” as had been the case. Actuarial surplus is excess earnings accrued by a pension fund and, depending on the fund’s rules, can be allocated to both the employer and the members’ surplus account.
The pensioners also argued that the THDBF’s board of trustees had been weighted in favour of the employer, thus prejudicing the members.
“The applicants’ case relied upon a too-narrow and – with respect – artificial interpretation of Section 15C which, if followed, would have consequences which could not have been intended by the legislature,” said Koen in his judgment.
The judge said that even if he were wrong about the applicants’ interpretation of the act, “granting the relief sought would involve an unscrambling of the proverbial egg” and the outsourcing process – which was accepted by members – comes with added offerings that cannot be separated.
“Where the applicants have accepted the other benefits bestowed upon them by the scheme, their separate and discreet attack on only one component of the composite scheme must… fail,” said Koen.
He said the allegation that the board of trustees “was weighted in favour of the employer” giving rise to a conflict of interest and bias, was not unlikely.
“There will always be an inherent institutional conflict of interest on the board. This occurs in most boards of pension funds. The board was however lawfully constituted. What must be shown is that the board acted improperly. That is what the applicants failed to prove,” said Koen.
Noseweek will update readers on further developments in the case.
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