Professor A T Mokadi was employed as Rector and Vice-Chancellor of the Vaal University of Technology until his dismissal on 11 July 2006 for misconduct including fraud, corruption, theft, abuse of power and abuse of University funds. He was a member of the National Tertiary Retirement Fund (the Fund). Following his dismissal, the University requested the Fund to withhold Mokadi's pension benefit pending finalisation of criminal charges and subsequently a civil action for damages in the amount of R6,073,215.01. The Board of Trustees resolved to withhold Mokadi's benefit under s 37D(1)(b) of the Pension Funds Act 24 of 1956. Mokadi was acquitted of criminal charges in February 2009. On 3 January 2010, Mokadi lodged a complaint with the Pension Funds Adjudicator. The Fund maintained his benefit should be withheld pending the civil action which was set down for hearing on 2 June 2010. However, the University ultimately decided not to pursue the civil action, but this was only clarified in July 2012. The Fund finally paid the pension benefit (excluding interest) on 1 October 2012. The Adjudicator determined on 19 September 2012 that the Fund must pay Mokadi's withdrawal benefit plus interest at 15.5% from 2 June 2010.
The appeal was dismissed. The determination of the Pension Funds Adjudicator ordering the Fund to pay Mokadi's withdrawal benefit together with interest at 15.5% from 2 June 2010 was upheld. No order as to costs was made as Mokadi appeared in person.
Section 30N of the Pension Funds Act confers a discretion on the Pension Funds Adjudicator to order payment of interest where a determination consists of an obligation to pay money, and to determine the rate at which, and date from which, interest shall accrue. This discretion must be exercised fairly and appropriately. The purpose of s 30N is to recompense a member for late payment of a benefit so as to place the member in substantially the same position they would have been in had the benefit been paid timeously. The Adjudicator is not bound by the Prescribed Rate of Interest Act and may use any appropriate interest rate including inflation rates or fund return rates. The Adjudicator may order interest to run from various dates including the date of determination, date of payment, or the date when the benefit should originally have been paid (when the fund was in mora). 'Fund return' and 'interest' under s 30N are independent concepts serving different purposes - fund return relates to speculation gains on invested capital while interest compensates for deprivation of use of capital. Payment of both does not constitute a double benefit. The Adjudicator may order interest even where there is no contractual provision or fund rule providing for such payment.
The court noted that fund return is fundamental to the rationale of a pension fund as it accrues as part of the objective for which moneys are invested - to yield speculation gains. The court observed that contributions to retirement funds often extend across members' lifetimes and are perhaps the most significant source of saving for most individuals in formal employment, explaining why the regulatory framework aims to protect pension benefits. The court referenced the central purpose of the regulatory framework for occupational pension funds as being to protect the pension benefits of members. The court also reaffirmed the principle from Meyer v Iscor Pension Fund regarding the nature of appeals under s 30P as appeals in the wide sense, where the High Court can consider the matter afresh and make any order it deems fit, though limited to consideration of the merits of the complaint as defined, and that factual disputes on papers must be decided in accordance with Plascon-Evans principles with the complainant regarded as the 'applicant' throughout.
This case is significant in South African pension funds law as it authoritatively interprets section 30N of the Pension Funds Act and establishes the broad discretionary power of the Pension Funds Adjudicator to award interest on late payment of pension benefits. The judgment clarifies that: (1) the Adjudicator has wide discretion to determine whether interest should be awarded, the rate of interest, and the date from which it runs; (2) the Prescribed Rate of Interest Act does not apply to determinations under s 30N; (3) the Adjudicator may use various interest rates including inflation or fund return rates depending on what is appropriate; (4) 'fund return' and 'interest' are distinct concepts serving different purposes and payment of both does not constitute a double benefit; and (5) interest can be awarded even where there is no contractual provision or fund rule providing for it. The case reinforces the protective purpose of pension funds regulation and ensures members are properly compensated for delayed payment of benefits. It also clarifies the nature of appeals under s 30P as appeals in the wide sense.