The Office of the Pension Funds Adjudicator has blocked an attempt by an employer to be paid a retirement benefit after finding that the member signed an acknowledgement of debt (AOD) under duress.
Naheem Essop, the Deputy Pension Funds Adjudicator, set aside the decision by the Fundsatwork Umbrella Provident Fund to withhold the benefit, to pay R359 826.12 to FPG Foods (Pty) Ltd.
In terms of section 37D(1)(b)(ii) of the Pension Funds Act, an employer can claim a deduction from a member’s benefit if the member has acknowledged his or her liability to the employer in writing, and the liability relates to theft, dishonesty, fraud, or misconduct by the member perpetrated against the employer.
During her employment, the complainant was responsible for authorising payments to suppliers. The complainant committed fraud against the employer by inflating supplier invoices and benefited from the fraud by receiving bribes from the suppliers.
The employer conducted an investigation and uncovered the fraud. The complainant signed two AODs in favour of the employer in terms of which the employer would be authorised to claim a deduction from the complainant’s benefit held with the fund. The first AOD was signed on 4 May 2023 for R130 000 and the second was signed on 13 June 2023 for R359 826.12.
The dispute centred on the validity of the second AOD and the circumstances that gave rise to it, as occurred during a meeting on 13 June 2023 attended by the employer and its representative, and the complainant, who recorded the meeting.
Complainant alleges being threatened
The complainant alleged that during the meeting, the employer’s representative threatened her into signing away her entire provident fund. She submitted that she was forced to do so under duress. She alleged the representative impersonated a police officer and said he would handcuff her in front of everyone if she did not sign.
The complainant admitted to receiving kickbacks amounting to R70 000 from the employer’s vendors. She submitted that the R70 000 plus the balance of a loan of R60 000 equalled R130 000. She disputed that she received R359 826.12 and her liability in respect of that amount.
Employer says the AOD was signed voluntarily
The employer stated that on 4 May 2023, it requested the complainant to sign an AOD that would allow it to deduct R130 000 from her retirement savings benefit to recover its losses caused by the fraud. Based on the fact that the extent of the fraud was significantly more than originally calculated, the employer engaged with the complainant to arrange an in-person meeting to decide how it would recover its losses. At the time of the meeting, the fund value was R335 290.25.
The employer denied its representative engaged the complainant in a threatening manner and submitted that the complainant voluntarily indicated that she wanted this matter to end and asked how she could stop the legal proceedings.
Accordingly, the employer alleged an AOD was drafted and explained to the complainant on more than one occasion during the meeting.
The employer submitted the complainant acknowledged that she defrauded the employer to the extent of R335 390.25 and was prepared to instruct the fund to pay the retirement savings benefit in terms of section 37D.
Deputy Adjudicator’s determination
Essop said that having listened to the recording of the meeting, there were three sides to the story, and neither party had accurately described what happened during the meeting. For example, there was neither a hostage situation, as alleged by the complainant, nor were the exchanges during the meeting polite, as alleged by the employer.
“At the meeting on 13 June 2023, the complainant was threatened with criminal prosecution, and it was indicated that the amount of R130 000 (presumably in relation to the first AOD) was not enough to make up for the loss suffered by the employer.
“She was told that she has none of the money left that she had stolen, but the employer’s representative informed her that he had a solution for her. It appears that she was then given a document to sign, after which the employer undertook to get rid of the evidence and that she would be able to walk out and never hear from the employer again.
“She was told that if she did not sign, then the employer would approach the SAPS. The offer was made to the complainant by the employer to buy immunity from prosecution with the proceeds of her withdrawal benefit,” Essop said.
He said the issue of whether the threat of criminal prosecution constitutes a form of duress has come before the courts. In Arend and Another v Astra Furnishers (Pty) Ltd (1974), the court held that “a contract induced by the threat of criminal prosecution is unenforceable on the ground of duress and, in certain instances, also on the ground that it involves the compounding of a crime and the stifling of a prosecution”.
Essop said: “The complainant did not sign the AOD out of her own free will. She was induced to do so under the threat of criminal prosecution, wherein it was made clear to her that if she did not sign, she would be put into handcuffs and taken to the Commercial Crimes Unit. Further, that it if she did sign, the employer would make everything go away.”
Essop found that the complainant’s fraudulent conduct was an offence under the Prevention and Combating of Corrupt Activities Act (PRECCA). Based on the employer’s submission, it decided to report the matter to the SAPS only after the complainant had a change of heart about the second AOD.
The employer considered itself to be in a position to decide whether or not to report the matter. This was contrary to the provisions of section 34 of PRECCA, which place a positive duty on the employer to report the matter to the Directorate for Priority Crime Investigation, said Essop.
Essop found that the deal struck at the meeting on 13 June 2023 was unlawful and consequently contra bonos mores (“against good morals”). The Adjudicator cannot uphold an agreement that is unlawful.
