THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:  689/2010

In the matter between:

ESKOM PENSION AND PROVIDENT FUND

Appellant
and

KRUGEL ELIZABETH MARIA

First Respondent
DE LA REY EM N.O.

Second Respondent

Neutral citation: Eskom Pension and Provident Fund v Krugel (689/10) [2011]
ZASCA 96 (31 May 2011)

Coram:
BRAND, LEWIS, MAYA, TSHIQI JJA AND PETSE AJA

Heard:
16 May 2011

Delivered: 31 May 2011

Summary: Pension – divorce proceedings – ss 7(7) and 7(8) of the Divorce Act 70
of 1979 – order in respect of ‘pension interest’ – whether applicable to a member of a
pension fund who resigns from his employment before his divorce.

___________________________________________________________________
ORDER

On appeal from: South Gauteng High Court, Johannesburg (Lamont J sitting as
court of review):

1 The appeal is upheld with no order as to costs.
2 The order of the court below is set aside and replaced with the following:
‘The second respondent’s determination under reference number
PFA/GA/10192/2006/SM made, on 11 December 2009, in terms of s 30M
of the Pension Funds Act 24 of 1956 in respect of the complaint lodged by
the first respondent is set aside and replaced with an order dismissing the
first respondent’s complaint.’

__________________________________________________________________
JUDGMENT
__________________________________________________________________
MAYA JA (BRAND, LEWIS, TSHIQI JJA AND PETSE AJA concurring):

[1] This is an unopposed appeal against the judgment of the South Gauteng High
Court, Johannesburg (Lamont J). In that judgment, the court below dismissed an
application brought in terms of s 30P of the Pension Funds Act 24 of 1956 (the
Pension Funds Act) for the review of the second respondent’s determination which
ordered the appellant (the Fund) to endorse its records to give effect to certain
provisions of a divorce order dissolving the first respondent’s marriage to Mr PJ
Krugel, a former employee of Eskom and a member of the Fund.

[2] Krugel resigned from Eskom on 31 January 1993. Upon his resignation, he

elected to defer his pension benefit in the Fund in accordance with Rule 30(2)1 of the
Fund’s rules and thus became a deferred pensioner.2 He and the first respondent were
divorced on 14 September 2001. A settlement agreement which they concluded and
was made an order of court recorded, inter alia, that
‘[Krugel] is a member of a pension fund and has a pension interest in the Eskom Pension Fund. The
parties have agreed that the first respondent is entitled to 25% (twenty five per cent) of  [Krugel’s]
pension interest with Eskom Pension Fund as calculated on date hereof, payable to the [first
respondent] as soon as [Krugel] becomes entitled to the pension benefits. [Krugel’s] attorneys,
SHAPIRO & DE MEYER INC, will secure the registration of an endorsement against the records
of the aforementioned pension fund, in order to register the above provision against it. [Krugel]
undertakes to give on demand any assistance needed in connection with the above.’3

[3] However, when approached, the Fund refused to register the required
endorsement against its records on the basis that the divorce was granted after Krugel
had already elected to become a deferred member and no longer had a pension
interest in the Fund as contemplated in the Divorce Act 70 of 1979 (the Divorce Act),
read together with s 37D of the Pension Funds Act. This prompted the first
respondent to lodge a complaint in terms of s 30A of the Pension Funds Act which
allows the lodgement of written complaints with the Fund for consideration by its
board and, if the board does not resolve a complaint satisfactorily, by the Pension
Funds

1 Rule 30(2) of the Fund rules dated 11 June 1999 deals with a member’s resignation from service and provides: ‘If a
member becomes entitled to a benefit in terms of this rule, he may elect instead that the board shall pay to him an
amount not exceeding the amount which can be taken as a tax-free withdrawal benefit in terms of the Income Tax Act,
and that the excess of the actuarial value in respect of his service, as determined by the actuary, over the amount so paid
be deemed to be a voluntary contribution made by him on the date of leaving the service.’
2 The Fund rules define a deferred pensioner as ‘a former member who has elected to defer the payment of his benefits
in terms of Rules 28, 29 or 30 to a future dates which falls between his fifty and sixty fifth birthday.’
3 Translated from the Afrikaans text which reads:
‘Eiser is ‘n lid van ‘n pensioenfonds en het ‘n pensioenbelang in die Eskom Pensioenfonds. Die partye kom ooreen dat
verweerderes geregtig is op 25% (vyf en twintig persent) van die Eiser se pensioenbelang by Eskom pensioenfonds,
bereken soos op datum hiervan, en aan die verweerderes betaalbaar sodra die pensioenvoordele die eieser toekom en/of
toeval. Die eiser se prokureurs, SHAPIRO + DE MEYER ING, sal toesien tot die registrasie van ‘n endossement teen
die rekords van voormelde pensioenfonds om die bepaling hierbo daarteen te registreer. Die eiser onderneem om alle

nodige bystand op aanvraag te lewer in bogemelde verband.’

Adjudicator.

[4] The second respondent, relying on the provisions of s 37D (6) of the Pension
Funds Act, found that the provisions of s 37D(4) (d) – which deem the accrual date to
a member of ‘any portion of the pension interest assigned to the non-member spouse
in terms of a decree of divorce’ – include a deferred or preserved benefit to be
regarded as pension interest capable of being shared upon divorce’ and that the fact
that Krugel’s ‘benefit was deferred or preserved until the age of 55 does not affect the
right of the non-member spouse to obtain her share as at the date of divorce’. She
concluded that the benefit was deemed, in terms of s 37D (4)(a) of the Pension Funds
Act, to have accrued to the member spouse on the date on which the decree of divorce
was granted. Thus, she upheld the complaint and made an order against the Fund in
terms of which it was ordered to pay the first respondent or transfer her portion of the
pension interest to a pension fund (depending on her election) in terms of s 37D
(4)(b)(i) and (iii) of the Pension Funds Act.

[5] The Fund was not satisfied with the second respondent’s determination and, in
challenge, launched a s 30P application, the result of which is the subject of this
appeal. The court below upheld the second respondent’s findings and conclusion. It
found that the legislature, by virtue of the provisions of the Divorce Act, intended the
widest definition, to the exclusion of the one provided by the Fund’s rules, of the
term ‘member’ of a pension fund which it said meant ‘a person who possesses a right
to an asset in that fund’. The court found further – on the basis of s 37D (6) which it
said ‘purports to vary the definition of ‘pension interest’ in the Divorce Act . . . to
limit the fund . . .  created to the period terminating on the date the decree of divorce
is granted’ – that ss 7(7) and 7(8) impliedly provide a formula by which an asset
comprising a pension benefit can be determined. The court then held that Krugel ‘was
a member of the pension fund at all material times and that there was an existing asset

which fell to be divided 25% to the first respondent and 75% to her husband’.

[6] The crisp issue on appeal, which is with the leave of the court below, is
whether the provisions of ss 7(7) and 7(8) of the Divorce Act entitle a non-member
spouse4 to receive benefits from a pension fund of which the other spouse is a
member pursuant to a divorce order where the member spouse had resigned from his
employment before the date of divorce but deferred his benefit in the pension fund.

[7] Counsel for the Fund contended that on a proper interpretation of ss 7(7) and
7(8) of the Divorce Act, there was no pension interest which formed part of Krugel’s
assets which could be assigned to the first respondent. This was so, it was argued,
because Krugel had already resigned from his office on the date of divorce. His
pension interest had become payable to him before the divorce and he was,
furthermore, no longer a member of the Fund.

[8] A pension fund’s right to make deductions from a pension benefit is highly
circumscribed and may be exercised only as expressly provided by sections 37D and
37A of the Pension Fund Act.5 Relevant for present purposes is s 37D which, in
subsection (1)(d)(i), allows a fund to ‘deduct from a member’s benefit or minimum
individual reserve, as the case may be … any amount assigned from such benefit or
individual reserve to a non-member spouse in terms of a decree granted under section
7(8)(a) of the Divorce Act, 1979’. According to the provisions of subsection (4)(a),
‘the portion of the pension interest assigned to the non-member spouse in terms of a
decree of divorce or decree for the dissolution of a customary marriage is deemed to
accrue to the member on the date on which the decree of divorce or decree for the

4 ‘Non-member spouse’ is defined in s 1(1) of the Pension Funds Act as meaning ‘a person who is no longer the spouse
of that member due to the dissolution or confirmation of the dissolution of the relationship by court order and to whom
the court ordering or confirming the dissolution of the relationship has granted a share of the member’s pension interest
in the fund.
5 See Hunter, Esterhuizen, Jithoo and Khumalo The Pension Funds Act: A commentary 2010 1 ed at 662.

dissolution of a customary marriage is granted’.

[9] The first respondent’s entitlement, if any, must therefore derive from the
provisions of ss 7(7) and 7(8) of the Divorce Act, which deal with the pension
benefits of a divorcing member of a pension fund. The subsections6 read:
‘(7) (a) In the determination of the patrimonial benefits to which the parties to any divorce action
may be entitled, the pension interest of a party shall, subject to paragraphs (b) and (c), be deemed to
be part of his assets.
(b) The amount so deemed to be part of a party’s assets, shall be reduced by any amount of his
pension interest which, by virtue of paragraph (a), in a previous divorce –

(i)
was paid over or awarded to another party; or
(ii)
for the purposes of an agreement contemplated in subsection (1), was accounted in
favour of another party.
(c)  Paragraph (a) shall not apply to a divorce action in respect of a marriage out of community of
property entered into on or after 1 November 1984 in terms of an antenuptial contract by which
community of property, community of profit and loss and the accrual system are excluded.
(8)  Notwithstanding the provisions of any other law or of the rules of any pension fund –

(a)  the court granting a decree of divorce in respect of a member of such a fund, may make
an order that –

(i)
any part of the pension interest of that member which, by virtue of subsection (7), is
due or assigned to the other party to the divorce action concerned, shall be paid by
that fund to that other party when any pension benefits accrue in respect of that
member;
(ii)
an endorsement be made in the records of that fund that that part of the pension
interest concerned is so payable to that other party;
(b)  any law which applies in relation to the reduction, assignment, transfer, cession, pledge,
hypothecation or attachment of the pension benefits, or any right in respect thereof, in that
fund, shall apply mutatis mutandis with regard to the right of that other party in respect of
that part of the pension interest concerned.’

6 Inserted by s 2 of the Divorce Amendment Act 7 of 1989.

[10] ‘Pension interest’ and ‘pension fund’ are defined in s 1(1) of the Divorce Act,
as amended by s 1(1) of the 1989 Act, as follows:
‘“pension fund” means a pension fund as defined in s 1(1) of the Pension Funds Act 24 of 1956,
irrespective of whether the provisions of that Act apply to the pension fund or not’;
“pension interest”, in relation to a party to a divorce action who –
(a) is a member of a pension fund (excluding a retirement annuity fund), means the benefits
to which that party as such a member would have been entitled in terms of the rules of
that fund if his membership of the fund would have been terminated on the date of the
divorce on account of his resignation from his office;
(b) is a member of a retirement annuity fund which was bona fide established for the
purpose of providing life annuities for the members of the fund, and which is a pension
fund, means the total amount of that party’s contributions to the fund up to the date of
divorce, together with a total amount of annual simple interest on those contributions up
to that date, calculated at the same rate as the rate prescribed as at that date by the
Minister of Justice in terms of section 1(2) of the Prescribed rate of Interest Act, 1975,
for the purposes of that Act’.

[11] ‘Pension interest’ is narrowly defined in the Divorce Act and it refers to the
value of the interest which a member of a pension fund, on the date of his divorce,
has in the pension benefit that will accrue to him as a member of such fund at a
certain future date.7 It is readily apparent from all these statutory provisions that what
is contemplated is an award to the non-member spouse of any part of this interest
(and no other amount held by the fund in respect of the member spouse) calculated as
at the date of the divorce but with effect from a certain date in the future when the
pension benefit accrues to the member spouse.8 Once the pension benefit has accrued
ie beyond the date of divorce at which time the pension interest converts into a
pension

7 Old Mutual Life Assurance Co (SA) Ltd v Swemmer 2004 (5) SA 373 (SCA) para 18.
8 Government Employees Pension Fund v Naidoo 2006 (6) SA 304 (SCA) para 1.

benefit, the provisions of ss 7(7) and 7(8) are no longer applicable.9

[12] Here, as indicated above, Krugel resigned from his job at Eskom on 31 January
1993, long before his divorce. His pension interest, which is a benefit determinable
only at the time of an employee’s resignation, had already become payable to him
before the divorce. Clearly, he could not again be deemed to become entitled to a
resignation benefit. He simply no longer had a pension interest for purposes of ss 7(7)
and 7(8) of the Divorce Act and s 37D(4)(a) of the Pension Funds Act, which is
specifically designed for purposes of section 7(8)(a). An order premised on the terms
of these provisions, therefore, was not competent.

[13] It seems to me that the reliance placed on the provisions of the provisions of s
37D(6) was equally misplaced. The section reads:
‘Despite paragraph (b) of the definition of “pension interest” in section 1(1) of the Divorce Act,
1979, the portion of the pension interest of a member of a pension preservation fund or provident
preservation fund (as defined in the Income Tax Act, 1962), that is assigned to a non-member
spouse, refers to the equivalent portion of the benefits to which that member would have been
entitled in terms of the rules of the fund if his or her membership of the fund terminated on the date
on which the decree was granted.’

[14] It is plain from the wording of these provisions that they are intended to cater
only for ‘pension interest’ of a member of a preservation fund. As was pointed out in
the unchallenged affidavit filed in support of the appellant’s application in the court
below, it was not established in the first respondent’s complaint that Krugel was a
member of a preservation fund.  It was contended that to have become a member of a
preservation fund (which is a different legal entity from a pension or provident fund
as appears in its definition in the Income Tax Act), Krugel would have had to transfer
all his pension assets and liabilities from the pension fund to a preservation fund that

9 Ibid, fn 8; De Kock v Jacobson 1999 (4) SA 436 (W) at 349 F-G.

he would have then joined as a member and that this was not shown to have
occurred. I agree. But there is, I think, a more compelling reason to discount the
applicability of these provisions. It must be borne in mind that the definition of
‘pension interest’ in paragraph (b) of subsection 1(1) of the Divorce Act, which s
37D(6) seeks to extend, is wholly irrelevant for present purposes. As illustrated
above, it is the definition of ‘pension interest’ contained in paragraph (a) thereof
which is of application to the facts of this matter. And the effect of that definition on
those facts has been dealt with above. The essence of the first respondent’s difficulty
remains that at the date of her divorce no pension interest remained as Krugel had
already ‘resigned from office’ as described in paragraph [12].

[15] Finally, it should be mentioned that this finding does not leave the first
respondent without remedy. The divorce settlement agreement between her and
Krugel (who undertook to give on demand any assistance needed in connection with
its enforcement) remains binding. It is therefore open to her to claim her share of his
deferred pension benefit when it is claimed by him after reaching the age of 55 years.

[16] It follows that the appeal succeeds. The appellant sought no order of costs both
on appeal and in the proceedings below which were also unopposed. None, therefore,
shall be made. Accordingly, the following order is made:
1 The appeal is upheld with no order as to costs.
2 The order of the court below is set aside and replaced with the following:
‘The
second
respondent’s
determination
under
reference
number
PFA/GA/10192/2006/SM made, on 11 December 2009, in terms of s 30M of the
Pension Funds Act 24 of 1956 in respect of a complaint lodged by the first

respondent is set aside and replaced with an order dismissing the first respondent’s
complaint.’

____________________

MML Maya

Judge of Appeal

APPEARANCES

APPELLANT:
P. Van Der Berg

Thyne Hunter Esterhuizen, Johannesburg

McIntyre & Van Der Post, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:  The Registrar, Supreme Court of Appeal
Date:  31 May 2011
Status:  Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

Eskom Pension and Provident Fund v Krugel (689/2010) [2011] ZASCA 96
(31 May 2011)

The Supreme Court of Appeal today upheld an appeal brought by Eskom Pension and
Provident Fund (the Fund) against the judgment of the South Gauteng High Court which
dismissed its application for the review of the Pension Adjudicator’s determination ordering
it to endorse its records to give effect to certain provisions of a divorce order dissolving Mrs
Elizabeth Maria Krugel’s marriage to Mr PJ Krugel, a former employee of Eskom and its
member.

Mr Krugel resigned from Eskom on 31 January 1993 and upon his resignation elected to
defer his pension benefit in the Fund in terms of Rule 30 (2) of the Fund’s rules. He then
divorced Mrs Krugel on 14 September 2001 and they agreed, in a settlement deed made an
order of court under s 7(8) of the Divorce Act 70 of 1979, that she would be entitled to 25%
of his pension interest. The fund however refused to endorse its records to give effect to this
agreement. The basis for the refusal was that Krugel had become a deferred pensioner upon
his resignation from Eskom and no longer had a pension interest in the Fund. Mrs Krugel’s
complained successfully to the Pension Adjudicator and this decision was also upheld on
review by the High Court.

On appeal, the SCA found that Mrs Krugel’s entitlement to Mr Krugel’s pension benefits
derived solely from section 7(7) and 7(8) of the Divorce Act and that the definition of
‘pension interest’ in that Act envisaged an award to a non-member spouse (Mrs Krugel) of
any part of a pension interest or any other amount held by a pension fund in respect of a
member spouse (Mr Krugel) calculated as the date of divorce but with effect from a certain
date in future when the pension benefit accrues to the member spouse. The SCA held that
Krugel’s pension interest was determinable only at the time of his resignation and had

become payable to him in 1993 when he resigned from Eskom, long before his divorce in
2001. He could not again be deemed to become entitled to a resignation benefit and no longer
had a pension interest for purposes of ss 7(7) and 7(8) of the Divorce Act, the court said. The
SCA concluded that Mrs Krugel could only claim her share of Krugel’s deferred pension
benefit when it accrues to him upon reaching retirement age as agreed in the settlement deed.

---ends---