Case  CCT 34/21
[2022] ZACC 09

Hearing Date: 04 November 2021

Judgement Date: 11 March 2022

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Monday, 14 March 2022 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal dated 23 December 2020, in which it dismissed an appeal against an order of the High Court granted against the first applicant, the Municipal Employees Pension Fund (MEPF). The appeal concerned inter alia the jurisdiction of the Pension Funds Adjudicator (PFA). The Supreme Court of Appeal endorsed the High Court’s judgment and held that the PFA had jurisdiction to adjudicate the claim of the respondent, Ms Mongwaketse.

A brief history of the matter was that on 1 February 2012, Ms Mongwaketse was appointed as the chief audit executive at the Ngaka Modiri Molema District Municipality (Municipality) for a five-year period. On 17 February 2012 she applied to become a member of the MEPF. She completed an application form and acknowledged that the Municipality would make a contribution amounting to 22% of her pensionable emoluments and that her contribution would be 7.5%. The member’s contribution was, over the life of a member’s membership, to be invested by the MEPF in accordance with its investment strategy. The Municipality's contribution was to be used by the MEPF to fund the services, products and benefits which were made available to its members, the administration costs of the fund, and withdrawal and retirement benefits payable to members upon termination of their employment. Pursuant to Ms Mongwaketse’s aforementioned application, the MEPF admitted Ms Mongwaketse as a member on the aforementioned basis.

However, in terms of the MEPF’s rules, persons employed by the Municipality for a limited duration were not eligible for membership. In November 2014, Ms Mongwaketse discovered, from a benefit statement, that upon the termination of her supposed membership on the expiry of her contract, she would only receive back a sum of money based on her own contributions, whereas all the contributions paid in respect of her supposed membership, including the Municipality’s 22% share, came out of her own remuneration. On this basis, Ms Mongwaketse instructed the Municipality to cease further payments to the MEPF.

Ms Mongwaketse’s fixed-term contract of employment terminated at the end of January 2017 and was not renewed. On 7 February 2017, Ms Mongwaketse completed a withdrawal of benefits form but was only paid out a withdrawal benefit based on the 7.5% contribution which excluded the 22% contribution supposedly made by her employer, the Municipality. Under clause 37(1)(b) of the MEPF’s rules, the member’s withdrawal benefit was calculated as the member’s contribution (being 7.5%) plus interest multiplied by 1.5, subject to member minimum benefits, less certain deductions. Dissatisfied with the withdrawal benefit, she lodged a complaint with the PFA in March 2017, requesting that the PFA order the payment to her of the Municipality’s 22% contribution multiplied by the 1.5 withdrawal benefit factor referred in the MEPF’s rules. The MEPF responded by stating that she had been paid out all the amounts due under the MEPF’s rules and nothing further was owed to her.

The PFA received further correspondence from Ms Mongwaketse on 21 June 2017, 3 August 2017 and 10 October 2017, in which, according to the MEPF, Ms Mongwaketse first raised a potential claim for repayment to her of the full amount of all contributions paid on her behalf on the basis of unjustified enrichment. The MEPF claimed that this correspondence was never put to it and was only disclosed by the PFA in subsequent legal proceedings. In her determination made on 10 November 2017, the PFA found that Ms Mongwaketse was precluded from being a member of the MEPF as she was a fixed-term employee, and was thus not covered by the MEPF’s rules. In the result, the PFA ordered the MEPF to refund Ms Mongwaketse the total of all the contributions made by her in the amount of R856 489.94 (less any deductions and plus interest), within two weeks from the date of the determination.

Aggrieved by the PFA’s determination, the MEPF instituted an application in the High Court of South Africa, Gauteng Local Division, Johannesburg (High Court) in terms of section 30P of the Pension Funds Act 24 of 1956 (the Act) and the Promotion of Administrative Justice Act (PAJA), on the basis that the determination was unlawful, unreasonable, procedurally unfair and incorrect on the law and facts and flawed on various bases. One of the bases included that the PFA lacked jurisdiction as Ms Mongwaketse’s grievance did not meet the definitional requirements of a “complaint” as contemplated in the Act. In addition, so the MEPF contended, the PFA was not statutorily empowered to decide civil law claims between a pension fund and strangers to a pension fund. If Ms Mongwaketse never in law became a member of the MEPF, she was, the MEPF contended, a stranger to the pension fund. Ms Mongwaketse then lodged a conditional counter-application seeking an order that the MEPF’s decision to accept her as a member should be reviewed and set aside, and advancing a claim under the condictio indebiti. The High Court held that the PFA had the jurisdiction to determine Ms Mongwaketse’s claim and dismissed both the MEPF’s application and Ms Mongwaketse’s counter-application, but granted the MEPF leave to appeal to the Supreme Court of Appeal.

The majority of the Supreme Court of Appeal agreed with the High Court, finding that the PFA had jurisdiction to determine the complaint in the way she did, and that the elements of unjustified enrichment were present. The Supreme Court of Appeal found that the MEPF’s approach was “undesirably technical” and that the MEPF was not entitled to invoke PAJA. On the merits, the majority held, on the strength of Abrahamse v Connock’s Pension Fund 1963 (2) SA 76 (W), that if a contract was entered into beyond the express or implied terms of the constitution of a pension fund, such a contract is null and void. From this legal principle, the majority determined not only that Ms Mongwaketse did not become a member of the MEPF, but that she enjoyed no benefits of membership at any time. It held on that basis that the MEPF could renege on any insurance products which it procured for Ms Mongwaketse, that the MEPF was enriched at her expense and that the enrichment was at the cost of her impoverishment. In relation to the other grounds raised by the MEPF, the majority found that Ms Mongwaketse’s membership was unlawful and that estoppel could not operate to defeat her claim. The majority also dismissed the waiver and prescription arguments which were raised by the MEPF. It found that there was no right which could be waived; there was only a fact that Ms Mongwaketse was not a member. It decided that prescription was inapplicable because Ms Mongwaketse only became aware of her rights in November 2014. Accordingly, the appeal was dismissed.

Before the Constitutional Court, the MEPF persisted with the contentions it raised in the High Court that Ms Mongwaketse never became a member of the MEPF and that, in any event, waiver and estoppel barred her from disputing her membership. In the alternative, the MEPF submitted that if Ms Mongwaketse did not become a member, the PFA did not have jurisdiction to entertain her claim. Furthermore, that the requirements for an unjustified enrichment claim were not satisfied and that such a claim had prescribed.

The Court granted an application by the Centre for Applied Legal Studies (CALS) to be admitted as amicus curiae and to written and oral submissions. The submissions advanced by CALS were that the application turned largely on the proper interpretation of the terms “complainant” and “complaint” as those terms were defined in section 1 of the Act, as well as the powers of the PFA to grant relief to complainants. According to CALS, if the MEPF’s interpretation of paragraph (d) of the “complainant” definition was to be upheld, certain categories of people would no longer be able to lodge complaints with the office of the PFA, and that this interpretation would be inconsistent with constitutional values and the objects of the Act. CALS was of the view that Ms Mongwaketse’s grievance fell within paragraph (d) of the “complainant” definition and that her grievance contained assertions of the kind set out in the “complaint” definition. CALS argued that restitution followed as a matter of course from a finding that Ms Mongwaketse never in law became a member of the MEPF.

Ms Mongwaketse did not participate in the proceedings before the Court and instead filed a notice to abide the Court’s decision.

In a unanimous judgment, the Constitutional Court found that its jurisdiction was engaged on the basis that the interpretation of the definitions of “complainant” and “complaint” in section 1 of the Act raised arguable points of law of general public importance in terms of section 167(3)(b)(ii) of the Constitution. The Court’s constitutional jurisdiction in terms of section 167(3)(b)(i) was also engaged, because the case concerned the lawfulness and validity of the decision of a functionary exercising public power.

On the question of whether Ms Mongwaketse became a member of the MEPF, the Court conducted an interpretation of clause 24 of the MEPF’s rules, which dealt with qualification for membership, as well as clause 1, containing the definitions of “member” and “employee”. The Court held that since Ms Mongwaketse was not eligible for membership of the MEPF, the latter did not have the power to admit her as a member and her purported membership was a nullity, as the Supreme Court of Appeal correctly held when citing Abrahamse. The Court agreed with the Supreme Court of Appeal that there was no relevant right that Ms Mongwaketse could waive, and that the waiver argument was just estoppel by a different name.

On the interpretation of “complainant” and “complaint” as defined in section 1 of the Act, the Court held that on a balance of the merits of the arguments put forward by the MEPF and CALS, it preferred the wide interpretation of paragraph (d) of the “complainant” definition. It held that the main purpose of the “complaint” definition in section 1 was to identify the substantive nature of the grievances covered by the defined term. The Court agreed with the submission made by CALS that section 30G tells against the qualified interpretation advanced by the MEPF, in that that section granted the widest powers to the PFA to admit, in complaint proceedings, a person having an interest in a complaint lodged by someone else. Due to the fact that the “complaint” definition requires inter alia that the grievance should relate to the “administration of a fund”, the Court found that this was satisfied because there was a dispute about the interpretation and application of the MEPF’s rules, namely whether, in terms of the rules, Ms Mongwaketse was entitled to be a member. In any event, there was a dispute about the “administration” of the MEPF. The purported admission of Ms Mongwaketse to membership and the receipt of her contributions were acts of administration of the MEPF. Even though these acts were ultra vires it was their de facto character, not their legality, which brought them within the scope of “administration”.

On the review challenge in respect of the refund determination, the Court was of the view that it was obvious that Ms Mongwaketse was impoverished by the undue payment made to the MEPF. The MEPF did not, in the Court’s view, advance any defence before the PFA that it was in fact not enriched at all or only partially enriched. On this basis, the Court held that the PFA’s order against the MEPF for repayment of all contributions withstood the attack made on it by way of judicial review.

In respect of the section 30P appeal, the Court was of the view that if the MEPF had not instituted review proceedings, and had simply challenged the PFA’s determination on the merits by way of section 30P, it would by now have failed on the merits in the two Courts below. The Court found that it does not have jurisdiction to reassess whether, based on the facts advanced in the section 30P application before the High Court, the Supreme Court of Appeal erred in finding that Ms Mongwaketse was entitled to the refund ordered by the PFA. On prescription, this was pleaded only by the MEPF in answer to Ms Mongwaketse’s counter-application in the High Court and because the application in convention failed, the counter-application fell away, and with it the need to address prescription. Lastly, the Court dealt with the MEPF’s contention that the PFA’s determination was vitiated, because certain correspondence written by Ms Mongwaketse to the PFA in the period June to October 2017 was not disclosed to the MEPF for comment. On this, the Court held that it was not an irregularity resulting in a failure of natural justice due to the fact that much of what Ms Mongwaketse had stated in such correspondence was a repetition of what she had said in the original complaint to the PFA.

In the result, the Constitutional Court granted leave to appeal but dismissed the application with no order as to costs, on account of Ms Mongwaketse having abided the Court’s decision..

The Full judgment  here