South Africa: SENTINEL JUDGEMENT: SEIZING PENSION FUNDS
As a whole pensions funds are
governed by separate legislation, the Pension Funds Act. It attempts to ring-fence pension money from any
attachment in order to prevent the person who is the beneficiary thereof and
his/her family from becoming a liability to the State when he/she is old and
frail.
What happens to these funds in
the forfeiture context?
The answer depends on which application is being
considered: restraint or confiscation. It also depends on whether or not the
funds have been paid out to a defendant / respondent. Furthermore, it requires
consideration of the Pension Funds Act 24 of 1956 (PFA).
Funds paid out to
defendant
If the funds have been paid out to a defendant, that
is, they are in the form of money that the defendant for example holds in a
bank account, then like with any other money in his/her account these funds can
be restrained as realisable property, or used to pay a confiscation order.
The issue however needs indepth understanding since
the relationship between POCA and the Pension Funds Act require consideration.
In particular, are pension funds ringfenced from any attachment through
remedies catered for in POCA even if they were paid out to a defendant? Is
there some kind of exception that protects pension funds?
In the SCA judgement of Sentinel Retirement
Fund and Another v Masoanganye and Two Others (1003/2017) [2018]
ZASCA 126 (27 September 2018), the court held the following at paragraph [14] of the judgment:
“It follows that a
‘benefit’, as defined, belongs to the fund for so long as it is in the hands of
the fund, and not the member. It therefore cannot be subject to any restraint
under POCA. The fact that a payment becomes due and has accrued to the member
does not change this.”
The protection under the PFA terminates the minute the member stops
being a member of the Fund and becomes entitled to receive the pay out of the
benefit.
[16]“The high court held that once a benefit is
paid to the member, and he ceases being a member, the protection afforded to
the benefit by s 37A(1) falls away and the pay-out then becomes part of the
general estate of the former member.”
The Sentinel SCA judgment clarifies that the Pensions Funds Act does not
prevent the restraint of pension money of a defendant after it has been paid
out by a fund. It only held that while
the pension money is still “in the hands”
of the pension fund it is not susceptible to restraint nor can it be used
to pay a confiscation order.
Payment to curator?
A separate question that arises is whether or not a pension fund must
make payment to a defendant or the appointed curator in a restraint case. This
was considered in the aforesaid Senetinel judgement. The court confirmed that
[17] “The curator steps into the shoes of
the defendant … A payment to the curator
is, therefore, in truth and effect a payment to the defendant himself. As a result, payment can be made by the
pension fund to the curator directly.
The ratio in paragraph [18] of the Sentinel
case was also held in the case of Van Heerden & Another v National
Director of Public Prosecutions & Another 916910/11) [2015] ZAWCHC
96 (22 June 2015)
Pension funds to be paid out to a defendant
If the pension funds are still to be paid out to the defendant (or
curator) in a restraint case, this future payment may be restrained on the
basis of section 26(2)(c) of POCA. This section holds that a restraint order
may be made in respect of all property that is transferred to the defendant (or
respondent) after the making of a restraint order.
Position before payout
The funds in effect belong to the fund. At most,
what the defendant holds is an interest in a future payment or a claim or a right
to receive payment. POCA makes provision for the restraint of an interest (see
definition of property in s1 of POCA).
It is this interest that can be restrained.
At confiscation stage, this interest may be included
as realisable property. The question however that arises is whether or not the
realisation court can order the realisation of that interest into actual funds.
It is this latter aspect that has still to be considered by our courts.
Currently, it appears not to be possible when read with the Pension Funds Act.
The question that arises therefore is whether or not there is any purpose of
restraining such an interest. This should be decided on a case by case basis.
The matter may be one of pragmatism or timing: the
relevant fund may have taken a decision to pay out the funds or be in the
process itself of paying out the funds to a defendant in terms of the Pension
Funds Act. It is therefore not a futile exercise to restrain the interest as
well as the future property, namely the funds in terms of section 26(2)(c).
Once this process of payment has been completed then the confiscation order can
be satisfied. Engagement with the
relevant fund may be necessary.
