In the case before the Cape high court, the FSB and the Registrar of Pension Funds allege that Pepkor is trying to get its hands on the surplus, while former members did not get a fair share.
The FSB gave permission to the Pepkor Pension Fund to unbundle into three daughter funds in 1994. This left the fund with a large surplus of just over R91 million, no active members and only 14 pensioners.
The FSB wants its earlier approval for the unbundling reversed because, it states, the fund's levels after the unbundling were misrepresented.
"The applications (for the transfer of money to the daughter funds) was approved by the Registrar without appreciating the incorrect statement about the funding level," the FSB said in its opening address.
The FSB says the fund was unable to explain what it intended to do with the surplus, if it was not planning to transfer it to the Pepkor company.
"The Registrar accordingly concluded that the unbundling was a deliberate attempt to accumulate asset for eventual payment to Pepkor."
The FSB is also asking the court to order one of the daughter funds to repay to the mother fund more than R9 million because, it alleges, the money was transferred without the necessary permission of the Registrar of Pension Funds. This money was to fund early retirement benefits for senior executives, the FSB alleges.
The original fund now has 14 pensioner members left. They have been offered a lump-sum settlement equal to ten times their annual pension benefits in return for ceding to Pepkor their rights to the surplus.
The FSB alleges that the agreement with the pensioners is illegal under the Pension Funds Act.
One of the FSB's amended requests to court this week - that the liquidator of the Pepkor Pension Fund should be responsible for drawing up a surplus distribution plan - was turned down by the judge because there is no precedent. However, the FSB's intentions remain that the original transfer to the daughter funds be reversed, and that additional amounts be paid to the daughter funds for members who did not get a share of the surplus.
The FSB is not against Pepkor receiving a share of the surplus - it just wants fair distribution to all.
According to their documents, Pepkor and the funds dispute the authority of the Registrar to ask the court to overturn its earlier decision. It also denies many of the allegations. Pepkor and the pension funds:
- Deny that the unusually large surplus to be paid to Pepkor in terms of the draft liquidation account was accumulated irregularly;
- Deny that they failed to submit full and complete information to the Registrar concerning the unbundling;
- Deny that they had not disclosed all material facts to the Registrar concerning the unbundling, or that the facts disclosed were not correct;
- Deny that the consent of the Registrar was required for the transfer to one of the daughter funds;
- Deny that this transfer was for the benefit of certain executives;
- Deny that members who transferred out of the Pepkor Pension Fund received less than their share; and
- Deny that the agreement with the pensioners was illegal.