Mostert N.O. v Old Mutual Life Assurance Co (SA) Ltd

The appellant, Mostert N.O., acted as curator of the CAF Pension Fund, an underwritten pension fund registered under the Pension Funds Act 24 of 1956. The Fund’s assets were invested with Old Mutual under an insurance policy. In December 1994, before the Fund was lawfully converted from an underwritten fund to a privately administered fund, Old Mutual paid more than R32 million of the Fund’s assets to Corporate Acceptances Finance (Pty) Ltd (CAF), a company controlled by the employer’s principals. The payments were made on instructions from consultants acting for the employer, without approval of the Registrar of Pension Funds, without lawful discontinuance of the policy, and contrary to the Fund’s rules and the Pension Funds Act. The monies were never paid into a lawful fund account and were lost. Mostert sued Old Mutual for damages based on breach of contract, breach of statutory duty, and delict. The High Court dismissed the claims, holding that the Fund had acquiesced and that causation was not established.

The appeal was upheld with costs. The judgment of the High Court was set aside and replaced with an order granting judgment in favour of the appellant for damages suffered by the Fund (the quantum having been established or remitted as appropriate).

The case is a leading authority on the separate legal personality of pension funds, the strict statutory and contractual duties of insurers administering underwritten funds, and the protection of pension fund assets. It affirms that pension fund assets may not be diverted to employers or related entities without strict compliance with the Pension Funds Act and Registrar approval.