The Germiston Municipal Retirement Fund, established in 1924 and later converted in 1994 from a primarily defined benefit fund to a hybrid fund with primarily defined contribution features, was governed by rules binding on both the Fund and its principal employer, the Ekurhuleni Metropolitan Municipality, under s 13 of the Pension Funds Act 24 of 1956. A long‑standing rule (formerly rule 43.1, later rule 10.8(1)) required the Municipality to contribute additional amounts if the rate of interest earned on the Fund’s total moneys in any financial year was less than 5.5%. In the 2002/2003 financial year the Fund’s assets declined in value by 4.3%. The Fund claimed that the Municipality was obliged under the rule to make good the shortfall between the negative return and the guaranteed 5.5%, amounting to R61 173 822. The Municipality disputed liability, contending that ‘interest actually earned’ excluded unrealised capital gains and losses and referred only to realised returns.