The Financial Services Tribunal (FST) has set aside a determination by the Pension Funds Adjudicator after finding that her office did not serve the complaint on all the affected parties, thereby denying them their rights in terms of the audi alteram partem rule (both sides of the case must be heard).
The FST also drew attention to other procedural failures by the Adjudicator’s office.
The tribunal’s decision in this matter is particularly relevant with regard the application of the following sections of the Pension Funds Act (PFA):
- Section 30D, which requires the Adjudicator to dispose of complaints in a procedurally fair, economical and expeditious manner;
- Section 30A, the submission and consideration of complaints to the Adjudicator; and
- Section 30F, the Adjudicator’s jurisdiction.
The FST did not address the merits of the matter, which concerned a request by Distell to the Distell Provident Fund to withhold the withdrawal benefit of a former employee, “KM”, who allegedly misappropriated promotional liquor.
In May last year, the Adjudicator issued a determination ordering the fund to condone the absence of Distell’s signature and stamp on KM’s withdrawal claim form and pay him his fund credit of R417 680.
Earlier in 2021, in March, the fund’s legal services provider, NBC Holdings, informed the adjudicator’s office that neither the fund nor its administrator, Momentum, could process KM’s withdrawal unless it had been signed off by Distell.
Distell applied to the FST for the Adjudicator’s default determination to be reconsidered on various procedural grounds.
The tribunal upheld all the grounds and sent the determination back to the Adjudicator for reconsideration.
Adjudicator did not effectively serve the complaint on all the parties
After Distell informed KM that it would not process his withdrawal claim, because the company intended to take legal action against him, he complained to the Adjudicator’s office, which served the complaint on Distell and Momentum on 9 February 2021.
The office gave Distell and Momentum until 9 March to inform it whether they had been able to resolve the complaint to KM’s satisfaction.
On 9 March, NBC informed the Adjudicator that KM’s complaint had not been resolved internally. It also informed the office that the withdrawal form lodged with Momentum was illegitimate.
According to the FST, NBC’s email to the Adjudicator also stated that:
- The fund was investigating why the claim form had been lodged with material omissions; and
- Without a legitimate claim form, the fund and/or its administrator would not be able to resolve KM’s complaint and/or process his payment.
The FST said the complaint served on Momentum and Distell on 9 February was not an “official complaint” as envisaged by sub-section 30A(3) of the PFA. This was because the evidence presented by Distell and Momentum showed that the complaint was still subject to an internal dispute resolution process as envisaged by sub-section 30A(2).
Sub-section 30A(2) gives a fund or a participating employer 30 days in which to respond to a complaint.
Distell, the fund and NBC submitted that, as at 9 March, they were unaware the Adjudicator’s office was investigating the complaint in terms of sub-section 30A(3). This sub-section empowers a complainant to lodge a complaint with the Adjudicator if she or she is not satisfied with the fund’s or the employer’s response, or if the fund or the employer fail to respond within 30 days.
The tribunal agreed that the Adjudicator’s office was still not investigating the matter as a sub-section 30A(3) complaint at that time, because, on 4 May, it asked KM to take his withdrawal claim form to Distell for signature.
Furthermore, it seemed that even KM’s attorneys were unaware that the Adjudicator was investigating the matter in terms of sub-section 30A(3) up until that time.
It was only on 6 May that KM’s attorneys requested the Adjudicator’s office to escalate KM’s complaint to an “official complaint” in terms of sub-section 30A(3).
Non-compliance with the audi alteram partem rule
NBC’s email 9 March also informed the Adjudicator’s office that it was the fund’s legal services provider.
But the tribunal found that the Adjudicator’s office did not send the complaint to NBC, nor did it send NBC a subsequent email, dated 13 March, informing Distell and Momentum that it was investigating KM’s complaint.
The FST agreed with Distell’s contention that it was not unreasonable to expect the Adjudicator to send confirmation of the section 30A(3) complaint and/or follow-up correspondence directly to NBC.
It said there was no merit to the Adjudicator’s submission that it did not email the complaint and/or follow-up correspondence directly to NBC because NBC did not expressly request that follow-up correspondence should be sent directly to it.
The fact that the Adjudicator sent the determination to NBC clearly indicated that, at all relevant times, the Adjudicator had NBC’s email address and was aware that NBC was the fund’s legal services provider.
The FST said the complaint emailed on 13 March was not effectively served on all the affected parties and was therefore irregular, thereby denying them their rights in terms of the audi alteram partem rule.
The decision noted additional non-compliance with the audi alteram partem rule, including that Distell was not afforded an opportunity to respond to further submissions by KM to the Adjudicator in May.
Furthermore, there was no evidence that the Adjudicator had properly investigated or enquired into KM’s alleged misconduct and the alleged loss suffered by Distell before issuing her determination.
Adjudicator did not have jurisdiction
Sub-section 30H(2) of the PFA provides that the Adjudicator shall not investigate a complaint if, before the lodging of the complaint, proceedings have been instituted by any civil court in respect of a matter which would constitute the subject matter of the investigation.
Distell issued a summons against KM on 2 March in the Magistrate’s Court. The summons was served on KM on 8 April. In the summons, Distell sought, among other things, relief that the deduction of the judgment debt be made from KM’s benefit in terms of section 37D(1)(b)(ii) of the PFA.
The tribunal said it was of the view that the official complaint in terms of section 30A(3) of the Act was lodged on 6 May, which meant civil proceedings had been instituted long in advance. As a result, the Adjudicator’s jurisdiction to investigate the matter was excluded in terms of sub-section 30H(2).
Condonation of the absence of Distell’s signature was irregular
The tribunal said the courts have held that only in exceptional circumstances can a discretion entrusted to a specific functionary – in this case, the fund and Distell – be assumed to another.
It said the Adjudicator did not address the exceptional circumstances in her determination to entitle her to order that the absence of Distell’s signature on KM’s benefit claim form must be condoned and Distell’s discretion replaced with her own.