The Financial Services Tribunal (FST) has decided that a retirement fund was correct in refusing to deduct a judgment debt from the withdrawal benefit of a former employee whose negligent or reckless driving resulted in damage of more than R600 000 to a truck and trailer.
The tribunal accepted that the former employee had lied about the cause of the accident and was under the influence at the time.
However, it found that his negligent or reckless driving did not constitute misconduct as envisaged in sub-paragraph 37D(1)(b)(ii) of the Pension Funds Act (PFA), and therefore it dismissed an application for Pension Funds Adjudicator’s determination to be reconsidered.
One of the key issues in this case was whether a court order obtained by the employer specifically provided for the deduction of the judgment debt from the withdrawal benefit.
With regard to the legal principles, much of the submissions by the parties focused on how the term “misconduct” in sub-paragraph 37D(1)(b)(ii) should be interpreted in relation to “dishonesty”.
Truck/trailer overturns
The timeline of events leading up to the determination by the Pension Funds Adjudicator is as follows:
- A truck/trailer combination driven by “FS”, a long-distance, heavy-duty driver employed by Anderson Transport (Pty) Ltd, overturned on the N1 in September 2016.
- Anderson Transport dismissed FS after finding him guilty of misconduct.
- Anderson issued a summons against FS. Its total loss was R602 414.90, but to bring its claim within the monetary jurisdiction of the Regional Magistrate’s Court, Anderson abandoned R202 414.90 and sought judgment against FS for R400 000.
- In September 2019, Anderson served FS with a notice (in terms of Magistrate’s Court Rule 55A) of its intention to amend the relief claimed in its particulars of claim. In terms of its amended prayer for relief, it asked the court for an order allowing the administrator of the Sanlam Umbrella Provident Fund to pay FS’s benefit to Anderson as part of the damages. It cited sub-paragraph 37D(1)(b).
- In November 2020, default judgment was granted against FS for the payment of R400 000.
- Armed with the judgment, Anderson asked the fund to deduct R400 000 from FS’s withdrawal benefit, in terms of sub-paragraph 37D(1)(b)(ii)(bb) of the PFA.
- The fund rejected the request, and Anderson complained to the Adjudicator in January 2021.
Adjudicator: negligence is not sufficient for a deduction
The Adjudicator dismissed Anderson Transport’s complaint in July last year.
She said the judgment debt did not fall within the deductions permitted in terms of sub-paragraph 37D(1)(b)(ii) because:
- The court order did not relate to allegations of theft, fraud and misconduct.
- In Anderson’s particulars of claim, its basis for seeking an order against FS was that he acted negligently and in breach of his contract of employment. However, negligence was not sufficient for a deduction in terms of sub-paragraph 37D(1)(b)(ii). “Misconduct”, as envisaged in this sub-paragraph, requires intentional dishonesty on the part of the member and, at the very least, an element of dishonesty.
- Although the summons contained a prayer for further and/or alternative relief relating to a deduction in terms of sub-paragraph 37D(1)(b)(ii), that relief was not pursued in Anderson’s request for a default judgment. The court order was limited to a judgment for R400 000. No order was made authorising the fund to deduct, in terms of sub-paragraph 37D(1)(b)(ii), the value of the judgment debt from FS’s withdrawal benefit.
Anderson Transport: employee lied about the accident
In its reconsideration application, Anderson Transport said the summons contained the averment that section 37D of the Act was applicable, and the court was requested to authorise the attachment of FS’s provident fund to satisfy its damages claim.
It submitted that FS was dishonest in the following respects:
- He lied when he was asked what had happened and tried to avoid liability by claiming that he did not know how the collision occurred and/or that he had dozed off.
- He failed a polygraph test in which it was stated that the high probability of deception in the responses indicated that FS did use alcohol on the day of the accident, which probably caused the truck/trailer to leave the road and overturn.
Anderson said although the High Court in the case of Moodley v Local Transitional Council of Scottburgh Umzinto North and Another has ruled that the term “misconduct” in sub-paragraph 37D(1)(b)(ii) must be interpreted to require an element of dishonesty, it did not define what type of dishonesty it must be.
The evidence submitted to the court showed that FS had lied about the reason for the accident. FS was also dishonest in that he knew he was not allowed to drink while he was on duty, and he tried to hide that his misconduct caused the accident. It was submitted that the court accepted this and granted the order for compensation.
When the sub-paragraph applies
The tribunal said sub-paragraph 37D(1)(b)(ii) does not apply to conduct that constitutes a breach of contract or to conduct that is not dishonest. In this regard, it cited the following cases:
- In Moodley, the High Court held that “misconduct” in sub-paragraph 37D(1)(b)(ii) must be interpreted in light of the words “theft, dishonesty and fraud”, which precede it, and thus must be interpreted to include “dishonest misconduct” or conduct that at least contains an “element of dishonesty”.
- The High Court has held that mere negligence or even gross negligence is not sufficient for a deduction (EH Charlton and 4 Others v Tongaat Hulett Pension Fund, Tongaat Hulett Sugar Ltd and the Pension Funds Adjudicator). Only intentional misconduct that contains an element of dishonesty will qualify as one of the grounds upon which a fund may deduct an amount from an erring employee’s retirement benefit.
- The Adjudicator (DF Jones v Corporate Selection Retirement Fund & Pallucci Home Depot (Pty) Ltd) has held that the breach of an employer’s policy and procedures do not give rise to the deduction as envisaged in sub-paragraph 37D(1)(b)(ii), and even if the breach of an employer’s policy and procedures can be classified as misconduct, the breach does not involve an element of dishonesty.
Tribunal: negligence, not dishonesty, caused the loss
The tribunal agreed with the Adjudicator that it was not legally permissible for the fund to withhold FS’s withdrawal benefit, nor was it permissible to deduct from his withdrawal benefit the judgment debt owed to Anderson Transport.
Its reasons for reaching this conclusion included:
- The sole cause of the loss suffered by Anderson Transport was FS’s negligent and/or reckless conduct/driving while under the influence of alcohol.
- FS’s conduct, as pleaded in Anderson’s particulars of claim, amounted to negligent and/or reckless driving.
- The particulars of claim did not establish a cause of action for a deduction in terms of sub-paragraph 37D(1)(b)(ii).
- The request for a default judgment made no reference to the deduction of the judgment debt from the withdrawal benefit. The court order did not provide for the deduction of the judgment debt from the benefit, as envisaged in sub-paragraph 37D(1)(b)(ii).
- That FS lied about the reason for the accident or whether he was under the influence of alcohol while performing his employment duties did not alter fact that the cause of Anderson Transport’s loss was FS’s negligent conduct. The lie that he had not consumed alcohol did not cause the accident. The accident was caused by his negligent and/or reckless driving, which does not meet the jurisdictional requirements of 37D(1)(b)(ii).
- Although FS’s conduct constituted misconduct in terms of Anderson Transport’s employment policy, it did not constitute misconduct as envisaged in sub-paragraph 37D(1)(b)(ii).
