Pepcor Retirement Fund and Pepkor Limited v Financial Services Board and The Registrar of Pension Funds

The Pepcor Pension Fund was a defined benefit pension fund registered in 1973 for employees in the Pepkor Group. During the mid-1990s, the Fund was 'unbundled' into several 'daughter' funds through a series of transfers approved by the Registrar of Pension Funds under section 14(1) of the Pension Funds Act 24 of 1956. Before approving the transfers, the Registrar was furnished with information by the Fund's actuary, Meyer, concerning the funding level of the Fund. Meyer stated the funding level before transfers was 137% and after transfers would remain similar, when in fact the funding level before transfers was 151% and after transfers was 606%. Meyer achieved these misstatements by arbitrarily excluding certain amounts from his calculations. Transferring members were thus unaware of the substantial surplus remaining in the Fund. Additionally, R9,223,118 was transferred to the first appellant without following the required procedure under section 14(1). The misstatements were discovered when the Fund's trustees later applied to liquidate the Fund and sought to pay the surplus to Pepkor Limited. The Financial Services Board and the Registrar brought proceedings to review and set aside the approvals and transfers, and to recover the R9.2 million.

• Whether the Registrar of Pension Funds has locus standi to review and set aside his own administrative decisions
• Whether the Financial Services Board has locus standi to seek judicial review of decisions made by the Registrar
• Whether either the Registrar or the FSB has locus standi to claim repayment of funds transferred in contravention of the Pension Funds Act
• Whether material mistake of fact should constitute a ground of review of an administrative decision under South African law
• Whether the funding level of a defined benefit pension fund is a relevant consideration in determining whether a transfer scheme is reasonable and equitable under section 14(1)(c) of the Pension Funds Act

1. The appeal against the order granted at the suit of the Financial Services Board for repayment of R9,223,118 was upheld. 2. The appeal was otherwise dismissed. 3. The appellants were ordered jointly and severally to pay the respondents' costs of the appeal, including the costs of two counsel where two counsel were employed.

1. A functionary empowered by legislation to make decisions in the public interest has locus standi to seek judicial review of his or her own decision if it was made on an incorrect factual basis, even if the error was due to the functionary's own negligence, provided the functionary is prejudiced by the continuation of the decision. The prejudice consists in not having had the opportunity to evaluate the true facts in arriving at decisions required to be made in the public interest. 2. Material mistake of fact is a ground of review of administrative decisions in South African law. Under the constitutional doctrine of legality and the right to lawful, reasonable and procedurally fair administrative action (section 33(1) of the Constitution), a decision made in ignorance of facts material to the decision and which should have been before the functionary is reviewable. However, this ground of review must not blur the distinction between appeal and review—it does not permit a reviewing court to substitute its own view on what facts are relevant or whether they exist where that determination has been entrusted to the functionary. 3. The supervisory function of the Financial Services Board under section 3(a) of the Financial Services Board Act entitles and obliges it to seek judicial review of decisions by the Registrar of Pension Funds which it considers invalid and prejudicial to the public interest, but does not permit the FSB to itself perform functions entrusted to the Registrar. 4. Under section 14(1)(c) of the Pension Funds Act, the Registrar has a wide discretion to refuse to approve a transfer scheme that is not 'reasonable and equitable', and the funding level of a defined benefit pension fund is a relevant consideration in exercising that discretion, particularly where transferring members are unaware of a substantial surplus they are leaving behind.

The court made several non-binding observations: (1) It noted that the Promotion of Administrative Justice Act 3 of 2000, section 6(2)(e)(iii), which allows review where 'relevant considerations were not considered', could potentially be interpreted as codifying material mistake of fact as a ground of review, though this was not necessary to decide. (2) The court observed that while members of a defined benefit fund have no legal entitlement to surplus, they have a legitimate interest in knowing about it—they have 'the hope that the trustees might use the surplus to pay increased benefits' and 'the peace of mind in knowing that their benefits would be more than adequately protected.' (3) The court cautioned that recognition of material mistake of fact as a ground of review 'has its dangers' and should not be misused to blur the distinction between appeal and review. It disagreed with the view of Professors Wade and Forsyth that recognition of this ground would consign the law on jurisdictional facts to 'well-deserved oblivion', stating that the category of jurisdictional facts should be maintained. (4) The court noted that Meyer's method of calculating funding levels was 'arbitrary and indefensible' and that no attempt was made on appeal to justify his calculations. (5) The court observed that while the order might create practical difficulties in implementation, there was no evidence that it would be impossible to carry out.

This is a landmark judgment in South African administrative law for establishing that material mistake of fact constitutes a ground of review of administrative decisions. The court extended the common law grounds of review to accommodate the constitutional imperative of lawful, reasonable and procedurally fair administrative action under section 33(1) of the Constitution. The judgment is also significant for clarifying that public functionaries empowered to make decisions in the public interest have both the right and duty to seek judicial review of their own decisions when made on an incorrect factual basis. It confirms the supervisory role of the FSB over the Registrar of Pension Funds and clarifies the respective loci standi of these entities in pension fund regulation. The case demonstrates the court's willingness to develop the common law in accordance with constitutional values, while maintaining the important distinction between appeal and review.