A recent High Court judgment reveals the lengths to which retirement funds must sometimes go when investigating dependency before allocating a death benefit. Identifying dependants and establishing the extent of their dependency can be particularly difficult when, by the time a fund member dies, he (and it typically is “he”) has two “households”.
Then, the member’s first or biological family may complain to the Pension Funds Adjudicator if the fund awards the deceased’s second spouse or partner a share (perhaps even the lion’s share) of the death benefit. The Adjudicator will interrogate the basis on which the fund made the allocation.
That was the case here. The fund member divorced in April 2009, and he was in another relationship from 2015 until the time of his death in December 2018.
The member created a testamentary trust in his will. The trust received more than R41.4 million from his estate. His three children were the trust’s income and capital beneficiaries.
The trust paid his major daughter, who was in her twenties and working while studying for a degree, R7 000 a month; his major son, also in his twenties but employed, R8 000 a month; and his minor son, who was in school and living with his mother, R5 000 a month.
The trust paid the member’s ex-wife R12 000 a month, which was the same amount she had been paid as maintenance in terms of their divorce order.
It also paid his mother R5 000 a month, which was what the member had contributed to her upkeep when he was alive. (The member’s mother subsequently passed away and was not party to the proceedings in the High Court in Cape Town.)
The member nominated the trust as the beneficiary of a Momentum Retirement Annuity Fund. But the trustees, exercising their authority in terms of section 37C of the Pension Funds Act (PFA), set this aside. They allocated the RA benefit of some R1.2m to the member’s life partner (“CA”).
His mother, ex-wife and children were not happy with this decision, contesting CA’s financial dependency on the deceased. They complained to the Pension Funds Adjudicator, who dismissed the complaint.
Motion against Momentum dismissed
The family brought the High Court application against the Adjudicator, the Momentum RA Fund and its administrator, Momentum Metropolitan Life.
But the High Court agreed with counsel for the fund that the notice of motion against the fund and its administrator should be dismissed. The legal principle here is res judicata (literally, “a matter already judged”): the fund and the administrator’s decision had already been adjudicated by a competent tribunal, the Adjudicator, whose determinations are deemed to be a civil judgment of any court of law, in terms of section 30O(1) of the PFA.
It was also pointed out that the applicants had not exhausted the mechanism for an internal appeal provided for in section 230 of the Financial Sector Regulation Act: taking the decision to the Financial Services Tribunal.
The applicants had to abandon their request for the court to review the fund and the administrator’s decision. The court heard an appeal against the Adjudicator’s determination only.
‘Allocation not supported by the facts’
The deceased’s family submitted that the fund’s decision to allocate the entire benefit to CA was irrational and not supported by the facts. In their view, CA was not financially dependent on the deceased. She earned a higher income than the deceased when he was alive.
In addition, they said the relationship between the deceased and CA had broken down before his death – something, they alleged, the fund had not properly investigated.
The extent of the fund’s investigation
The High Court said it was undisputed that the fund had conducted an investigation.
“Despite the first applicant [the major daughter] denying that in her founding affidavit she was contacted by an investigator, she retracted this statement in her supplementary founding affidavit wherein she admits that an investigator had interviewed her. The retraction was made after the applicants received the record containing the decision of the board, which included a forensic investigation report,” Acting Judge Selwyn Hockey said.
The forensic investigation report also disclosed that the investigator interviewed several people who knew the deceased and CA. These individuals confirmed that the two were living together, and there was evidence that they were engaged to be married, according to the judgment. The deceased and CA initially leased a property where they lived and later bought a property, which was registered in CA’s name. The deceased paid more than R500 000 towards purchasing this property.
What about the allegation that CA and the deceased had broken up at the time of his death? The applicants acknowledged that the relationship had been “tumultuous”. At times, the deceased would stay at his property in Gansbaai after disagreements. Indeed, the court accepted that this had happened a few days before his death.
The fund said it was precisely because of the contradictory versions of the nature of the relationship that it conducted its own forensic investigation, which concluded that the relationship between CA and the deceased was similar to that of marriage.
Considerable amount of information
Acting Judge Hockey said the forensic investigation report and the letter setting out the reasons for the allocation showed that the fund had gathered “a considerable amount of information” before making a decision.
It was clear that the trustees had considered all the relevant factors pertaining to the identified dependants, he said.
“The Adjudicator, or the court, can interfere in circumstances where it is demonstrated that the board took into account irrelevant, improper or irrational factors, or where its decision can be said to be one that no reasonable body of trustees properly directing themselves could have reached. This is not such a case and the adjudicator’s decision therefore cannot be faulted, in my view,” Acting Judge Hockey said.
The court dismissed the application, with costs.
