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The Supreme Court of Appeal has ruled that retirement funds cannot use a strict 12-month timeline from a member’s date of death to deny claims or redirect death benefits into a deceased estate.
It made this ruling on Thursday as it dismissed an appeal by the SA Retirement Annuity Fund, confirming that the statutory 12-month period outlined in the Pension Funds Act was a guideline.
The appeal concerned the interpretation of the phrase “within 12 months of the death of the member” appearing in section 37C of the Act.
The question was whether the section, properly interpreted, permitted the fund to pay the death benefit to the deceased’s estate before establishing the identity of the deceased member’s dependants.
The case stemmed from the death of Marius Viljoen in December 2019. He was a member of the fund, underwritten by Old Mutual, and left a retirement annuity benefit of R52,000. He had not nominated a beneficiary and died without leaving a will.
Because the value of his estate was below the statutory limit of R250,000, no executor was appointed.
Viljoen is survived by his wife, Sophia Viljoen, who only heard about this benefit from a broker.
“It was only on 28 March 2022, with the assistance of the aforesaid broker, that she submitted a claim to the fund. This was approximately two years and three months following the demise of Mr Viljoen,” judge of appeal Yvonne Mbatha said in a unanimous judgment of the full bench of the SCA.
The submission was two years and three months after the death of Viljoen. The fund repudiated Mrs Viljoen’s claim as it came more than 12 months after her husband’s death.
On July 18 2022, the fund resolved to pay the death benefit to the deceased estate of Viljoen. This was done despite the estate not having been reported to the relevant master of the high court.
Aggrieved by this decision, Viljoen’s widow lodged a complaint with the Pension Funds Adjudicator.
In June 2023, the adjudicator set aside the decision of the fund to pay the death benefit into the deceased’s estate. The adjudicator also directed the fund to commence with investigations to determine the deceased’s beneficiaries and their benefit entitlement within six weeks of the adjudicator’s determination.
However, the fund challenged the adjudicator’s determination in the high court in Mbombela. It contended that section 37C obliged the fund to pay the death benefit to the estate, if no dependant of the deceased member was traced within 12 months from the date of his death.
The high court dismissed the fund’s application. It rejected the fund’s construction of section 37C and held such construction would not only defeat its purpose but would fail to ensure that the fund carry out its statutory obligation to trace the dependants and investigate their dependency on the deceased member.
Aggrieved by the decision of the high court, the fund appealed to the SCA.
In her judgment, Mbatha held that the interpretation advanced by the fund was contrary to the social security purpose of the Act, which aimed to protect dependants and prevent them from being left destitute.
“The restrictive interpretation to the period of 12 months advanced by the fund leads to absurdity, as it strips the beneficiaries of the protection accorded to them by the Act,” Mbatha said.
She said many beneficiaries were unsophisticated people who lived in rural areas and had no idea that such a benefit existed.
“In general, it takes the intervention of a third party for them to become aware of the existence of such benefits. By then the period of 12 months may have elapsed.”
Mbatha said a fund’s duty to actively investigate and trace dependants was only triggered when it became aware of the member’s death.
“It is common cause that the fund did not become aware of Mr Viljoen’s death within 12 months of his passing. However, the process of tracing and determining the dependants can only commence once the fund becomes aware of the member’s death.”
She said the under Section 37C, death benefits were strictly excluded from the assets of a deceased estate to keep them safe from creditors.
Mbatha said paying the benefit to an estate can only ever be a last resort after all statutory avenues to find dependants have been completely exhausted.
Mbatha said although represented by a pro bono counsel, Viljoen’s legal representatives should be awarded costs.
“I recognise that they acted in the public interest and promoted access to justice. The recovery of costs and disbursements would encourage her legal team to re-invest into future pro bono litigation.”
She said the complexity and novelty of the issues raised in the matter, which led to the appeal before the SCA, must have been very costly to them.
She said the fund’s decision to appeal a decision where there was a pittance of pension benefit payout was also insensitive.
“A mere R52,120.53 (before tax). The fund could have used another matter as a test case.”
TimesLIVE
