[MEDIA SUMMARY] Moor v Tongaat-Hulett Pension Fund

The Tongaat-Hulett Defined Benefit Pension Fund (the Fund) undertook a conversion and restructuring exercise approved by the Registrar of Pension Funds in August 2013. As part of this scheme, in 2012 the Fund apportioned and distributed actuarial surplus of R363.2 million to an employer surplus account in terms of Rule 11.5.4.1, which was part of rule amendment no 3 approved by the Registrar on 13 December 2012. The surplus apportionment formed part of a composite restructuring whereby the Fund's obligations to pensioner members were outsourced to Old Mutual with effect from 1 April 2013, resulting in termination of the appellants' (former members) membership. The appellants lodged complaints with the Pension Funds Adjudicator under s 30A of the Pension Funds Act (PFA), which were dismissed. They then appealed to the KwaZulu-Natal High Court, Durban, which also dismissed the application but granted leave to appeal to the SCA.

• Whether Rule 11.5.4.1 complied with s 15C(1) of the Pension Funds Act, particularly whether the use of 'excess assets' rather than 'actuarial surplus' rendered it non-compliant
• Whether the 20% of excess assets apportioned to the employer surplus account constituted an apportionment contemplated in s 15C of the PFA
• Whether the board of the Fund was conflicted, giving rise to a reasonable apprehension of bias
• Whether the application to lead further evidence on appeal should be granted
• Whether the Biowatch Trust principle regarding costs in public interest litigation should apply

The appeal was dismissed with costs, including costs of two counsel. The application to lead further evidence was also dismissed with costs.

Where a pension fund rule provides for apportionment of funds that are in fact actuarial surplus, the rule will be considered a rule contemplated in s 15C(1) of the Pension Funds Act notwithstanding the use of different terminology such as 'excess assets' rather than 'actuarial surplus'. A narrow, technical interpretation of statutory language that would undermine the purpose of the legislation should be rejected. Where a surplus apportionment forms part of a composite, comprehensive conversion and restructuring exercise approved by the Registrar, parties who have accepted the benefits of the scheme cannot selectively challenge only certain components while leaving the remainder intact. The unavoidable structural conflict arising from trustees being members of the pension fund they administer does not automatically give rise to a disqualifying bias.

The Court observed that there is an unavoidable structural conflict inherent in all pension funds to the extent that trustees are invariably also members of those funds. The Court also commented that the Biowatch Trust principle regarding costs in public interest litigation does not apply to disputes between pension funds and their members, as these emanate from private contractual relationships rather than constituting public interest litigation, particularly where the parties act in their personal capacity and not on behalf of others.

This case clarifies the interpretation of s 15C(1) of the Pension Funds Act regarding surplus apportionment, establishing that courts should not apply an overly technical or narrow interpretation that would undermine legislative purpose. It confirms that terminology variations such as 'excess assets' versus 'actuarial surplus' should not defeat the substance of compliance where the funds in question are in fact actuarial surplus. The judgment also addresses the scope of challenges to composite restructuring schemes, establishing that parties cannot selectively challenge individual components while accepting the benefits of other parts of an integrated scheme. It provides guidance on inherent structural conflicts in pension fund governance and limits on bias challenges. The case also clarifies the application of the Biowatch Trust costs principle, confirming it does not extend to private contractual disputes between pension funds and individual members even where fund legislation is interpreted.