THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 103/ 2008

HIGHVELD STEEL AND VANADIUM                               Appellant
CORPORATION LTD

and

H F M OOSTHUIZEN                                                          Respondent

Neutral Citation:   Highveld Steel and Vanadium Corporation Ltd v
Oosthuizen (103/2008) [2008] ZASCA 164 (01December 2008)

Coram:                  Harms ADP, Scott, Brand, Maya JJA et Griesel AJA

Heard:                   11 November 2008
Delivered:             01 December 2008

Summary: Pension Funds Act 24 of 1956 – whether a pension fund has
discretion under s 37D to withhold payment of pension benefits due to a
member at the termination of his employment pending finalisation of a claim
for damages allegedly suffered by the member’s employer by reason of
theft, dishonesty, fraud or misconduct committed by the member.

ORDER
_____________________________________________________________

On appeal from: Pretoria High Court (Hartzenberg J)

1.
The appeal is upheld with costs, such costs to include the costs
occasioned by employment of two counsel.
2.
The order of the court below is set aside and for it is substituted the
following:
‘(a) Highveld Steel and Vanadium Corporation Ltd (Highveld) is
granted leave to intervene in the application launched by the
respondent under case number 24648/07.
(b) The application under case number 24648/07 is postponed pending
the final determination of the action instituted by Highveld in the
Transvaal Provincial Division under case number 13776/07.
(c) The costs of the application, including those of the application to
intervene, are reserved.’

_____________________________________________________________
JUDGMENT

MAYA JA: (Harms ADP, Scott, Brand, Maya JJA et Griesel AJA
concurring):

[1] This is an appeal against the judgment of the Pretoria High Court
(Hartzenberg J) dismissing the appellant’s application to intervene in
application proceedings launched by the respondent, its erstwhile employee,
against the appellant’s Pension Funds, Highveld Retirement Fund (Provident
Section) and Highveld Retirement Fund (Pension Section), (‘the Funds’), for
payment of his pension benefits in terms of the Funds’ rules. The appeal is
with leave of the court below.

[2] The issue on appeal is whether or not the boards of the Funds had the
power to withhold payment of pension benefits due to the respondent
pending the outcome of a damages action to be instituted by the appellant
against him.

[3] The background facts which gave rise to these proceedings are briefly
these. The respondent commenced employment with the appellant as an
observer in its metallurgical division and joined the Funds on 1 August
1978. He rose through the ranks over the years and by January 2006 he held
the position of Unit Manager in charge of stores with contents worth
approximately R177m at any given time. On 31 January 2007, the appellant
instituted disciplinary proceedings against the respondent for bribery, fraud,
theft and other transgressions involving dishonesty. The respondent pleaded
guilty to some of the charges. At the conclusion of the proceedings, on 16
February 2007, he was dismissed.

[4] Shortly thereafter, the respondent sought to withdraw his pension
benefits from the Funds. On 28 February 2007, at the behest of the appellant,
which intended to institute an action against the respondent to recover losses
it allegedly suffered as a result of his misconduct, the Funds resolved not to
pay the benefits due to the respondent pending the final determination of the
contemplated action which was subsequently duly instituted.

[5] The respondent brought an application for an order directing the
Funds to pay him his pension benefits. The Funds elected to abide the
court’s decision, despite initial opposition to the application. The appellant
then launched the application to intervene in the application and sought an
interdict restraining the respondent from withdrawing any of his pension
benefits and other relief. However, on appeal before us, the relief sought had
been whittled down to leave to intervene and a postponement of the
respondent’s application against the Funds pending the final determination
of its action against the respondent.

[6] In dismissing the application to intervene, the court below invoked a
judgment of this court in Absa Bank Ltd v Burmeister1 for its finding that s
37D of the Pension Fund Act 24 of 1956 (the Act), which regulates
deductions from pension benefits, must be interpreted restrictively. On that
basis, the court below held that the right of an employer in the appellant’s
position is restricted to what is specifically stated in s 37D. In its view, the
legislature would have said so expressly had it intended to vest courts with
the implicit power to protect an employer by preserving its right pending an
action to ascertain whether or not it is owed money. The court concluded

1 2004 (5) SA 595 (SCA) at para 14.

that a finding that such implicit power existed would allow employers to
‘cause tremendous hardship to ex-employees’ by instituting and then
delaying actions.

[7] The first question that arises is whether the order refusing leave to
intervene is appealable. The argument for the respondent in this regard was
that the decision of the court below was merely a procedural ruling similar to
a refusal to entertain an application as one of urgency, with no final effect to
the rights of the intervening party. The basis of this submission was that the
appellant had the option to apply for interim relief in its action after the
dismissal of the intervention application.

[8] As pointed out by Harms AJA in Zweni v Minister of Law and Order,2
a ‘judgment or order’ is a decision which, generally, is final in effect and not
susceptible of alteration by the court of first instance, is definitive of the
rights of the parties and has the effect of disposing of at least a substantial
portion of the relief claimed in the main proceedings.

[9] The result of the order in the event of the respondent’s success in the
main application is that the appellant would most probably end up with a
hollow judgment, precluded from enforcing the future compensation award
it may obtain against the respondent in the pending action. As I see it, the
refusal of the intervention application, which obviously cannot be altered by
the court below, is the end of the road for the appellant in so far as seeking
the relief in issue is concerned. In my view, the decision of the court below
is a ‘judgment or order’ as envisaged in Zweni. It is therefore appealable.

2 1993 (1) SA 523 A at 532I-J.

[10] Turning to the merits of the appeal, it was contended on behalf of the
appellant that rule 12 of the Provident Section Fund read with s
37D(1)(b)(ii) of the Act implicitly confers upon the trustees of the Funds
power to withhold or delay payment of benefits due to a member pending
determination or admission of liability. It was conceded that the trustees of
the Funds were not entitled to make any deduction in the absence of a
written admission of liability by the respondent or a judgment obtained by
the appellant against him as required by s 37(1)(b)(ii). However, it was
argued that the object of that section – the protection of an employer against
loss occasioned by employees’ acts of dishonesty – would be thwarted if an
employee could simply circumvent it by resigning and claiming immediate
payment of his benefits upon discovery of his criminal conduct.

[11] For the respondent it was contended that s 37D cannot be interpreted
in isolation and must be read with s 37A(1) which contains provisions of
general application prohibiting the reduction, transfer or execution of
pension benefits. As s 37D provides an exception to that general application,
it must be strictly interpreted, so the argument continued. It was submitted
further that these provisions so interpreted and read with rules 8.3.3 and 7.3
of the Funds,3 which similarly require the payment of pension benefits to be
made ‘as soon as possible’ after a member’s termination of service, did not
confer the implied power contended for by the appellant.

3 The identical provisions read:
‘The benefit in terms of this Rule shall be paid to the Member as a lump sum. Payment shall be made as
soon as possible after the date of his leaving Service.’

[12] Rule 12 of the Provident Section Fund, which is identical to rule 11 of
the Pension Section Fund, vests the trustees with ‘the right to make such
deductions from the benefit to which a member or other beneficiary is
entitled in terms of the rules as are permitted in terms of s 37D of the
[Pension Funds] Act and in respect of which a claim has been lodged in
writing within such reasonable time of the event giving rise to the benefit as
the trustees may from time to time fix for making such claims.’

[13] Section 37A(1) reads:
‘Pension benefit is not reducible, transferable or executable.
(1) Save to the extent permitted by this Act, the Income Tax Act, 1962 (Act 58 of 1962),
and the Maintenance Act, 1998, no benefit provided for in the rules of the registered fund
(including an annuity purchased or to be purchased by the said fund from an insurer for a
member), or right to such benefit, or right in respect of contributions made by or on
behalf of a member, shall, notwithstanding anything to the contrary contained in the rules
of such a fund, be capable of being reduced, transferred or otherwise ceded, or of being
pledged or hypothecated or be liable to be attached or subjected to any form of execution
under a judgment or order of a court of law …’.
Section 37A(3) however states that the prohibition against reduction does not apply to a
reduction effected under s 37D.

[14] Section 37D(1)(b) provides:
‘(1) A registered fund may –
(a) …
(b) deduct any amount due by a member to his employer on the date of his retirement
or on which he ceases to be a member of the fund, in respect of –
(i) …
(ii) compensation (including any legal costs recoverable from the member in a
matter contemplated in subparagraph (bb)) in respect of any damage caused to the

employer by reason of any theft, dishonesty, fraud or misconduct by the member,
and in respect of which –
(aa) the member has in writing admitted liability to the employer; or
(bb) judgment has been obtained against the member in any court, including a
magistrate’s court,
from any benefit payable in respect of the member or a beneficiary in terms of the
rules of the fund, and pay such amount to the employer concerned’.

[15] It should be pointed out at the outset that the respondent’s
submissions relating to the provisions of s 37A(1) were ill-conceived for the
simple reason that the appellant did not seek any reduction of or deduction
from his pension benefits. All it asked was an order affirming the Funds’
decision to withhold payment of such benefits pending resolution of its
claim against the respondent. As stated, the issue is merely whether or not
the Funds had the discretion to accede to that request.

[16] It has been stated in a number of cases that the object of s 37D(1)(b) is
to protect the employer’s right to pursue the recovery of money
misappropriated by its employees.4 This approach is, in my view, supported
by the plain wording of the section and is, with respect, correct.

[17] However, a practical problem threatens the efficacy of the remedy
afforded by the section. In many a case employers only suspect dishonesty
on the date of termination of an employee’s service and fund membership
with the consequence that pension benefits are paid before the suspected
dishonesty can be properly investigated. Furthermore, it has to be accepted

4 See, for example, Twigg v Orion Money Purchase Pension Fund (1) [2001] 12 BPLR 2870 (PFA) at para
21, Charlton v Tongaat-Hulett Pension Fund [2006] 2 BPLR 94 (D) at 97I-98B.

as a matter of logic that it is only in a few cases that an employer will have
obtained a judgment against its employee by the time the latter’s
employment is terminated because of the lengthy delays in finalizing cases
in the justice system. The result, therefore, is that an employer will find it
difficult to enforce an award made in its favour by the time judgment is
obtained against him.

[18] These practicalities lead me to disagree with the submissions for the
respondent, inter alia, that the tense used by the legislature in s
37D(b)(ii)(aa) and (bb),  in the words ‘has in writing admitted liability’ and
‘judgment has been obtained’ reflects an intention that either proof of
liability must be available on termination of the employment contract. I
similarly have a difficulty with the contention that the words ‘as soon as
possible’ in rule 7.3 require payment of the pension benefits to be effected
immediately upon termination of an employee’s service.

[19] Such an interpretation would render the protection afforded to the
employer by s 37D(1)(b) meaningless, a result which plainly cannot have
been intended by the legislature. It seems to me that to give effect to the
manifest purpose of the section, its wording must be interpreted purposively
to include the power to withhold payment of a member’s pension benefits
pending the determination or acknowledgement of such member’s liability.5
The Funds therefore had the discretion to withhold payment of the
respondent’s pension benefit in the circumstances. I daresay that such
discretion was properly exercised in view of the glaring absence of any

5 Twigg (supra) at para 21; Chalton (supra) at 98B; Appanna v Kelvinator Group Services of SA Provident
Fund [2000] 2 BPLR 126 (PFA); Buthelezi v Municipal Gratuity Fund (1) [2001] 5 BPLR 1996 (PFA);
Allison v IMATU Retirement Fund [2004] 7 BPLR 5831 (PFA).

serious challenge to the appellant’s detailed allegations of dishonesty against
the respondent.

[20] Considering the potential prejudice to an employee who may urgently
need to access his pension benefits and who is in due course found innocent,
it is necessary that pension funds exercise their discretion with care and in
the process balance  the competing interests with due regard to the strength
of the employer’s claim. They may also impose conditions on employees to
do justice to the case.

[21] In the result the following order is made:
1. The appeal is upheld with costs, such costs to include the costs
occasioned by employment of two counsel.
2. The order of the court below is set aside and for it is substituted the
following:
‘(a) Highveld Steel and Vanadium Corporation Ltd (Highveld) is granted
leave to intervene in the application launched by the respondent under case
number 24648/07.
(b) The application under case number 24648/07 is postponed pending the
final determination of the action instituted by Highveld in the Transvaal
Provincial Division under case number 13776/07.
(c) The costs of the application, including those of the application to
intervene are reserved.’

__________________
MML MAYA
JUDGE OF APPEAL

APPEARANCES:

For Appellant:
A E Franklin SC
M A Chahan

Instructed by

Brink Cohen Le Roux Inc., Houghton
c/o Claude Reid Inc., Bloemfontein

For Respondent:       J G Bergenthuin SC
N F de Jager
Instructed by

Van Zyl Le Roux and Hurter Inc., Pretoria
c/o McIntyre and 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:                 01 December 2008

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.

HIGHVELD STEEL AND VANADIUM CORPORATION LTD V H F M
OOSTHUIZEN

The Supreme Court of Appeal today upheld an appeal brought by
Highveld Steel and Vanadium (Highveld)  against the judgment of the
Pretoria High Court which dismissed its application to intervene in
proceedings launched by its erstwhile employee, Mr Oosthuizen. In the
latter proceedings Mr Oosthuizen challenged a decision taken by the
boards of Highveld’s pension funds to withhold payment of his pension
benefits pending the final determination of a claim for damages allegedly
suffered by Highveld as a result of his alleged acts of theft, dishonesty
and fraud.

The governing Act, the Pension Funds Act 24 of 1956, and the pension
funds rules do not expressly confer the power to withhold payments of
pension benefits and the Pretoria High Court had found that such power
could not be implied. Its reasoning was that the relevant provisions of
the Act contained in s 37D are to be interpreted restrictively and do not

allow a deduction from a member’s pension benefits except in the
circumscribed instances mentioned in the section which were not met in
the present case.

The Supreme Court of Appeal rejected these findings pointing out that
Highveld did not seek a reduction of or deduction from Mr. Oosthuizen
and merely asked for payment of his benefits to be delayed until its
action against him is resolved. The court held that the object of s 37D is
to protect the employer’s right to pursue the recovery of money
misappropriated by its employees. The court held further that to give
effect to that purpose the section had to be interpreted purposively to
include the power to withhold payment of a member’s pension benefits
pending the determination or acknowledgement of such member’s
liability.

The SCA however cautioned the pension funds to exercise this
discretion with care and balance the competing interests with due
regards to the strength of the employer’s claim and, if necessary, to
impose conditions on the employees to do justice to the case.