The interpretation of rules of pension and provident funds

labour-guideSasol Limited v CINPF: The rules take precedence

By Ayanda Nondwana, Senior Associate, Hogan Lovells (South Africa)

Often our courts are called upon to adjudicate disputes relating to the interpretation of rules of pension and provident funds where there is a lacuna or disagreement among the relevant stakeholders. Sasol Limited v Chemical Industries National Provident Fund [2015] ZASCA 113 (7 September 2015) was one such matter. The issue at hand was whether members were validly transferred from one fund to another in terms of the rules of the former fund.

Briefly the facts of the matter were as follows. Prior 1 December 2011 most employees of Sasol who were members of CINPF were not entitled to terminate their membership while they remained in service. The rules of the CINPF prohibited it. A number of Sasol employees wished to transfer to other funds.

As a result, an amendment to rules 3.4.1 and 10.2 of the CINPF was effected. In response to pressure from employees to transfer, Sasol decided to offer them an opportunity to do so during a “window period”.

Then Sasol informed CINPF that many employees wished to transfer and that a “window period” would open 1 October 2012 to 30 November 2012 during which employees would be permitted to transfer. In order to inform employees of the benefits offered by the different funds, they would be given an opportunity to attend information sessions during the window period at which presentations would be made by all the relevant funds.

On 13 September 2012, Sasol instructed all of its plants to display a notice informing employees of the window period and the forthcoming information sessions. In the notice, Sasol set 1 January 2013 as the transfer date. CINPF objected that this decision was not compliant with the CINPF’s rules and not in the best interests of members.

Sasol contended that after this amendment and with effect from 1 March 2013, its employees had withdrawn from the CINPF and were now members of new funds.

Sasol consequently ceased paying employer and member contributions to CINPF from that date. The CINPF contended that no such withdrawal had taken place and therefore the Sasol employees remained members of the CINPF, and thus the contributions should have continued.

At the outset, the court confirmed that the rules of pension and provident funds are paramount and take precedence. The court commented as follows:

“The legal principles that apply to pension and pension funds are clear and uncontroversial. The trustees of a fund are bound to observe and implement the rules of that fund.

Their powers and responsibilities and the rights and obligations of members and participating employers are governed by the rules, applicable legislation and the common law. The rules of a fund form its constitution and must be interpreted in the same way as all documents.”

The court was also confirmed with approval the approach to be taken to the interpretation of documents as enunciated in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA), in that language used in documents should be interpreted in its ordinary and grammatical meaning and such meaning which is sensible, reasonable and business-like.

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