Municipal Gratuity Fund v Pension Funds Adjudicator and Another 2024 (3) SA 439 (SCA)

During his lifetime, the deceased, Mr. TE Mutsila, was an employee of the Ba-Phalaborwa Municipality and a member of the Municipal Gratuity Fund (the Fund), the appellant in this case. Mr. Mutsila passed away on December 15, 2012, and a dispute arose over the allocation of his death benefits to his dependents. Ms. Tshifhiwa Shembry Mutsila, the deceased's widow and the second respondent in this case, was dissatisfied with the Fund's decision to allocate death benefits to certain beneficiaries whom she believed did not qualify. She filed a written complaint with the Pension Funds Adjudicator (the Adjudicator), who set aside the Fund's allocation and ordered it to make a new distribution.

Prior to his death, Mr. Mutsila had nominated Ms. Mutsila and their five children as the beneficiaries of his death benefits in the Fund. However, shortly before his death, he also took out a "Future Builder Family Funeral Plan" with Metropolitan Life, which included funeral benefits for himself, his life partner Ms. Masete, her three children, and three of his own children with Ms. Mutsila. Following Mr. Mutsila's death, both Ms. Mutsila and Ms. Masete applied to the Fund for payment of the death benefits. The Fund conducted an investigation and made a distribution proposal, but Ms. Mutsila was dissatisfied and filed a complaint with the Adjudicator.

The Adjudicator informed the Fund of the complaint, and the Fund responded by suggesting that the outcome of a pending custody application between Ms. Masete and her husband regarding their two minor children might impact the consideration of the complaint. The Fund requested that the Adjudicator hold the complaint in abeyance until the conclusion of the custody application. However, the Adjudicator proceeded to consider the complaint and set aside the Fund's distribution, ordering it to pay R300,000 to Ms. Mutsila for the repayment of her housing loan and to investigate and effect an equitable distribution of the remaining death benefits to all the deceased's dependants.

The Fund challenged the Adjudicator's determination in the High Court, arguing that the Adjudicator lacked jurisdiction and had failed to adhere to the audi alteram partem principle by not granting the Fund an opportunity to respond fully before making a decision. The Fund also raised a defense of lis pendens, arguing that the Adjudicator could not consider the complaint due to the pending custody application. The High Court and the full court dismissed the Fund's challenges, but the Fund appealed to the Supreme Court of Appeal (the SCA).

The SCA rejected the jurisdictional and lis pendens challenges but upheld the audi alteram partem challenge, finding that the Fund was not given a sufficient opportunity to respond before the Adjudicator set aside its award. The SCA set aside the Adjudicator's determination and held that the Fund's original distribution should prevail, as it had complied with its legislative mandate and made a correct distribution based on the factual dependency of the beneficiaries. The SCA also set aside the punitive costs orders granted in the lower courts and ordered each party to pay their own costs.

The core legal principle underlying the decision in this case is the application of the audi alteram partem principle, which requires that a party affected by a decision be given a reasonable opportunity to present their case before that decision is made. In this case, the Municipal Gratuity Fund (the appellant) challenged the determination of the Pension Funds Adjudicator (the Adjudicator) on the basis that they were not afforded an opportunity to respond to the complaint lodged by Ms. Mutsila, the deceased's widow, before the Adjudicator made a decision.

The court agreed with the Fund's argument and upheld the audi alteram partem challenge, finding that the Adjudicator had not adhered to the principle. The court held that the Adjudicator should have allowed the Fund to respond fully to the complaint before setting aside its award. As a result, the court set aside the Adjudicator's determination and held that the Fund's original distribution of the death benefits should prevail.

The court also addressed other challenges raised by the Fund, including a jurisdictional challenge and a lis pendens (pending action) defense, but found them to be without merit. The court concluded that the Adjudicator did have jurisdiction to consider the complaint and that there was no pending litigation that prevented the Adjudicator from making a determination.

The case law relied on by the court in its reasoning process includes:

Fundsatwork Umbrella Pension Fund v Guarnieri and Others [2019] ZASCA 78 - The court cited this case for the proposition that the time to determine who is a dependant for the distribution of a death benefit is when that determination is made, ensuring that the persons identified as dependants are those the section seeks to protect.
Meyer v Iscor Pension Fund [2003] 1 All SA 4 - The court referenced this case for the principle that the High Court can consider the merits of a complaint made to the Adjudicator and make any order it deems fit, but its jurisdiction is limited to the consideration of the merits of the complaint in question.

"The main object of the Adjudicator is to dispose of complaints lodged in terms of ss 30A(3) of the Act 'in a procedurally fair, economical and expeditious manner'. In order to achieve the main object, ss 30E(1)(a) provides that the Adjudicator 'shall, subject to paragraph (b) [which is not applicable in this case], investigate any complaint and may make the order which any court of law may make'. Also, the Act states that 'The Adjudicator may follow any procedure which he or she considers appropriate in conducting an investigation, including procedures in an inquisitorial manner'. Section 30F provides for an opportunity to respond before any determination is made concerning a fund or person, and stipulates as follows: 'When the Adjudicator intends to conduct an investigation into a complaint he or she shall afford the fund or person against whom the allegations contained in the complaint are made, the opportunity to comment on the allegations.'"