The High Court in Johannesburg has rejected a bid by the curators of the Cadac Pension Fund to lift a temporary order that prevents the fund from refunding the contributions of putative members who joined the fund after 2003.
Law firm Adams & Adams says the judgment provides important guidance on the role of interim interdicts in retirement fund disputes – particularly where issues of curatorship, member entitlements, and alleged fund mismanagement are concerned.
The attempt to lift the interim interdict is an aspect of broader litigation that centres on whether individuals who joined the fund after 1 March 2003 are legitimate members entitled to the full range of pension fund benefits, or not members at all, and therefore entitled only to a refund of their contributions plus interest.
The Supreme Court of Appeal (SCA) granted the interim interdict in 2021 following proceedings by Simon Nash, the former executive chairman of Cadac (Pty) Ltd and a trustee of the fund established for Cadac employees. Hudaco Industries bought Cadac in October 2022.
Background to the application
The Cadac Pension Fund formally closed to new members on 1 March 2003 and became “paid up”. Despite this, its trustees continued to admit new members and provide them with full pension benefits.
In 2010, the fund was placed under curatorship amid governance concerns, including questions about the admission of members post-closure and allegations of mismanagement. Nevertheless, it kept accepting contributions from people who had joined after March 2003.
In November 2018, Nash applied to withdraw his pension benefits. The curators, believing that he misappropriated fund surpluses while a trustee, declined to pay out, invoking potential deductions under section 37D of the Pension Funds Act (PFA). In response, Nash instituted proceedings in December 2019 for a declaratory order entitling him to his full pension benefits.
The curators concluded that all those admitted after 1 March 2003 (including Nash) should never have become “members” and therefore should be refunded only their contributions plus interest. They resolved to refuse any further contributions.
Nash then brought an interlocutory application in the High Court seeking an order (a) restraining the fund from implementing the curators’ refund decision until his main declaratory claim was determined, and (b) interdicting the fund from refusing further contributions. Three other putative members applied to intervene.
The High Court dismissed the interdict and intervention applications in May 2020. But the SCA reversed that decision in October 2021, granting Nash leave to bring his interdict application and permitting the three putative members to intervene.
Importantly, the SCA issued an interim interdict pendente lite (pending the outcome of the main application), restraining the fund from refusing further contributions and refunding any contributions already paid in.
The fund and its curators asked the High Court to lift the SCA’s interim interdict insofar as it bars the fund from refunding contributions to members who wish to accept the curators’ refund offer.
The fund said most of the putative members are tired of the litigation and want to take whatever money they can and withdraw from the fight. Some of the putative members are advanced in age and need their money urgently.
No justification for discharging the interdict
In a decision delivered in April, the High Court held that it had jurisdiction to consider the application to discharge the order, even though the interdict was granted by the SCA. The court explained that once the SCA substituted its own order for that of the High Court, the new order became the order of the court of first instance.
Judge Stuart Wilson affirmed that the power to vary or discharge an interim interdict exists, but it is exercised subject to a strict legal standard. He described this as “an exacting one”:
“There must be a material change in the circumstances that necessitated the interim order which deprives the order of its original purpose.”
Such interdicts, particularly those granted pendente lite, are intended to preserve the status quo and ensure that the court’s eventual decision remains effective and enforceable. The court emphasised it will rarely revisit such orders unless “the facts have so altered as to render the application for final relief moot”.
The court found that no material change in circumstances had occurred to justify the discharge of the interdict. The core legal and factual issues in dispute remained unresolved. These include whether Nash and other post-2003 contributors were validly admitted to the fund and are entitled to full pension benefits, or whether they are entitled only to refunds of their contributions.
This question, Judge Wilson said, “has practical effect and is not academic”. He pointed out that the difference between a refund and full benefits could have financial consequences, including potential differences in tax treatment.
Even if there were no difference in financial value between a refund and full benefits, the court held that a live legal controversy would still exist because of the “underlying point of legality” involved.
Another key reason for refusing the discharge was that the individuals who allegedly wanted to accept refunds were not joined to the application. The court expressed concern that it lacked reliable evidence about their wishes or whether they understood the implications of accepting a refund.
Finally, the court held that granting the relief sought would undermine the very purpose for which the interim interdict was granted: to preserve the status quo while the legality of the curators’ decisions was tested.
In light of all these factors, Judge Wilson concluded that the application to discharge the interdict could not succeed. The order remains in place, and no refunds may be made until the final determination of the main proceedings.
Principles and implications
The judgment offers several important insights for retirement fund administrators, curators, employers, and members, say Mzwakhe Poswa, a senior associate at Adams & Adams, and Jean-Paul Rudd, a partner at the same firm.
The key principles and implications arising from the court’s decision include:
Preservation of rights pending final determination
The judgment reinforces the principle that interim interdicts serve to maintain the status quo where serious disputes remain unresolved. In retirement fund disputes involving member rights and fund governance, the courts will be reluctant to allow steps that could irreversibly affect those rights before final adjudication.
Strict test for discharging interim interdicts
A party seeking to discharge an interim interdict bears a heavy burden. The existence of ongoing, live disputes militates against variation or discharge unless the circumstances that justified the interdict have fundamentally changed.
Fund governance under curatorship
The case underscores the complexities that can arise when funds have operated irregularly for extended periods. Decisions taken by curators, while intended to rectify past mismanagement, remain subject to judicial scrutiny where affected parties assert competing rights.
Section 37D and withholding of benefits
The fund’s resistance to paying out Nash’s pension benefits is partly grounded on section 37D of the PFA, which permits the withholding or deduction of benefits where a member is liable for damages because of misconduct. The judgment, however, did not resolve this issue on the merits; it merely ensures that neither side can act prematurely pending that determination.
In summary, Poswa and Rudd say the judgment demonstrates the judiciary’s commitment to balancing the interests of fund governance with the procedural fairness owed to putative members. Until the core questions of membership legitimacy and benefit entitlement are resolved, the status quo – protected by the interim interdict – remains sacrosanct.
