R13M WHAMMY

Ndlambe must cough up money for retirement fund

Ndlambe Municipality has to come up with more than R13-million to pay the Municipal Workers Retirement Fund after failing to pay the full amount it was obliged to pay over a period of six years.

Of the money the Grahamstown High Court ordered the municipality to pay to the Fund, R9,705,745 is interest.

In her judgment on November 22, Judge Judith Roberson said: “It is common cause that during the period July 2007 to February 2013 the municipality did not pay to the Fund the full amount it was obliged to pay in terms of the applicable schedule to the rules of the Fund, both in respect of the members’ contributions and the municipality’s contribution.”

The total shortfall for the members’ contribution was R1,159,843 and the total shortfall for the municipality’s contribution was R2,783,588.

The interest charged was compound interest and constitutes investment income for a fund.

The municipality raised two special pleas in defence – that of prescription (when the required timeframe in which to recover a debt has passed), and non-compliance with section 3 of the Institution of Legal Proceedings against Certain Organs of State Act.

Roberson said the latter plea was “correctly not pursued”, as the Fund was not claiming for damages.

In its plea-over, Ndlambe pleaded that it had paid to the Fund the amounts which it had deducted from the member’s remuneration in accordance with the schedule; that it could not be held liable for amounts which had not been deducted from member’s remuneration; that it had paid its own contribution – but in the event it was found liable for the shortfall, it should not be held liable for interest because it was not aware that it was payable at the relevant time; and that payment should exclude contributions on behalf of employees who are no longer in the employment of the municipality.

It also pleaded that the Fund bore responsibility to notify the municipality and its employees of any short payment and because it did not do so, the municipality believed its contributions were correct.

In examination of precedent in a similar case, Roberson said the municipality had acknowledged its statutory obligation through the monthly payments it made for the period in question.

Roberson found that the defence of prescription could not succeed.

“The fact that there was a shortfall and that it believed it was paying the correct amounts each month does not detract from this acknowledgment. It follows, as stated by Heher JA, that there has been a continuing and ongoing interruption of prescription in relation to every amount which the municipality was obliged to pay to the Fund,” the judge said.

Roberson found that the defence of prescription could not succeed.

She disagreed with the municipality’s contention that it could not be held liable for amounts which it did not deduct from its members’ remuneration.

“Contributions received by the Fund are invested in the best interests of its members, and it is critical therefore that the correct amounts are paid,” Roberson said.

As for the municipality’s belief that it was paying the correct amounts, the judge said a mistaken belief cannot be a defence in the circumstances of the case.

If the municipality was able to rely on a mistake, it would be to the detriment of the employees who are entitled to their full pension benefits in terms of the PFA

“If the municipality was able to rely on a mistake, it would be to the detriment of the employees who are entitled to their full pension benefits in terms of the PFA [Pension Funds Act] and the rules of the Fund,” she said.

“For the same reason the municipality cannot on this ground avoid payment of interest of the shortfall, just because it was not aware that interest was payable at the time.”

She said the Fund was under no obligation to notify the municipality of the shortfall.

Roberson also said the payment claimed could not be restricted to those members who are current employees.

“There will have been members who have since retired in respect of whom the incorrect contributions were paid. The current pensions they receive will have been affected by the shortfall and will have to be adjusted,” she said.

Ndlambe was ordered to pay to the Fund R13,649,186.21 together with interest thereon at the repo rate plus 1/3 thereof plus 8%, capped at 20% per annum, from September 28 2018 to date of payment.

Ndlambe also has to pay costs, including wasted costs of November 6, as the matter had to be postponed for a day.

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