The rules of your retirement fund must be strictly adhered to to ensure that your retirement savings are protected properly. This was the view of Acting Judge Frank Bashall, of the South Gauteng High Court, in dismissing a claim by Absa Bank against the South African Commercial, Catering and Allied Workers' Union (Saccawu) National Provident Fund.
The case arose from widespread mismanagement of the Saccawu National Provident Fund and the misappropriation of funds, which resulted in the Financial Services Board (FSB) applying successfully in 2002 to have the fund placed under the curatorship of Tony Mostert, of law firm AL Mostert & Company.
Absa wanted the fund to pay for the losses it has incurred for failed financing agreements for the hire of R8 million worth of office equipment.
The lease contracts for the equipment were cancelled when Mostert found that the equipment had not been used and it had been hired at inflated rates.
One allegation made by the FSB in its curatorship application was that Saccawu had benefited improperly from the fund members' retirement savings.
Mostert opposed Absa's application on the basis that Abie Mosiuoa, the then principal officer of the fund, did not have the authority to enter into contracts on behalf of the fund. The fund rules required that the chairman of the board of trustees and two trustees had to sign contracts - not the principal officer.
Absa argued that the principal officer had general delegated powers to sign and that what is called the estoppel rule applied.
According to the website www.duhaime.org, estoppel is a legal rule that states that when Person A, by act or words, gives Person B reason to believe a certain set of facts, upon which Person B takes action, Person A cannot later, to his or her benefit, deny those facts or say that his or her earlier act was improper.
Fund rules rule
Bashall rejected these arguments, saying that the rules of a retirement fund should be interpreted strictly. While not suggesting that Absa had done anything improper, he said a pension fund is "created by statute to protect pensioners, often a vulnerable component of society.
"Their contributions are vested in trust in the fund. (The members) are entitled to the full protection afforded by the legislation, statutory and delegated. The assets of the fund, not infrequently viewed as a prize by commercial buccaneers, must be safeguarded."
Bashall cited various legal precedents that uphold the legal sanctity of the rules of a retirement fund, saying that Absa should have been aware of the rules of the fund before entering into any contract with the fund.
The principal officer was bound by the rules and did not have the actual authority to bind the fund to any specific contract, even though there was a general delegation to the principal officer.
The judge said, in terms of the fund's rules, the rental contracts had to be signed by the chairman and two trustees at a duly constituted meeting of the trustees.
A FSB inspection found that, before the fund was placed under curatorship, Saccawu established the Saccawu Investment Trust, which in turn set up two com-panies: Saccawu Administration Company and Saccawu Investment Holdings. The companies took control of much of the day-to-day administration and investment functions of the provident fund, with the union receiving direct and indirect benefits.