Retirement benefit payments used for child maintenance

September 1st, 2018
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By Clement Marumoagae

Child maintenance is a common law duty entrusted on each parent in line with their relative means and circumstances and the needs of the child from time to time (Bursey v Bursey and Another 1999 (3) SA 33 (SCA) at 36C – H). This duty does not terminate when the child reaches a particular age, but continues after majority (H v H and Another (WCC) (unreported case no 5995/14, 11887/12, 3801/12, 25-6-2014) (Gamble J) at para 16). Parents do separate and when one of them is residing with the child the other might be ordered by the court to financially contribute towards the maintenance and care of the child. Section 15 of the Maintenance Act 99 of 1998 partially codifies the common law and provides that ‘a maintenance order for the maintenance of a child is directed at the enforcement of the common law duty of the child’s parents to support that child, as the duty in question exists at the time of the issue of the maintenance order and is expected to continue’.

This article discusses the circumstances under which the duty to maintain the child may be discharged through payments from retirement benefits and in particular, payment of future child maintenance. In South Africa (SA), pension law is regulated by various statutes, none of which directly provides for the payment of future child maintenance from retirement benefits. As such, the courts had to be innovative and use rules of interpretation to ensure that retirement fund members are forced to fulfil their child maintenance obligations through their retirement benefits.

Generally, s 37A(1) of the Pension Funds Act 24 of 1956 prohibits the reduction, hypothecation, cession, transfer and attachment of retirement benefits, unless such is specifically permitted by the Pension Fund Act, Income Tax Act 58 of 1962 and the Maintenance Act. Retirement funds are empowered by s 37D of the Pension Funds Act to ‘(d) deduct from a member’s or deferred pensioner’s benefit, member’s interest or minimum individual reserve, or the capital value of a pensioner’s pension after retirement, as the case may be –

(iA) any amount payable in terms of a maintenance order as defined in section 1 of the Maintenance Act’.

Section 21 of the Government Employees Pension Law (Proc 21 GG17135/19-4-1996) also provides that subject to s 24A ‘[n]o benefit or right in respect of a benefit payable under this Act shall be capable of being assigned or transferred or otherwise ceded or of being pledged or hypothecated or, save as is provided in section 26 or 40 of the Maintenance Act … and section 7(8) of the Divorce Act … be liable to be attached or subjected to any form of execution under a judgment or order of a court of law’.

In terms of s 26 of the Maintenance Act, when a maintenance order has been granted and the person against whom it has been granted failed to make payment in accordance with the order, such an order is enforceable by execution against the defaulter’s property. If a specific amount was ordered, that amount attracts interest. In particular, s 26(4) of the Maintenance Act specifically provides that ‘any pension, annuity, gratuity or compassionate allowance or other similar benefit shall be liable to be attached or subjected to execution under any warrant of execution or any order issued … in order to satisfy a maintenance order’.

Section 26(4) of the Maintenance Act appears to be making provision for the attachment on the basis of the maintenance that is currently due and to a larger extent the amount of maintenance that is outstanding and not necessarily that which is payable in future. It makes provision for payment of arrear child maintenance on behalf of the child from the retirement fund member’s retirement benefits (see Naleen Jeram ‘A warning to all maintenance court officials’ (2014 (Sept) DR 43)). However, before the court can order that the other parent’s retirement benefits should be attached, it must be satisfied that the party against whom such an order is made, has no other means of paying child maintenance. Claiming maintenance from the maintenance defaulting member’s retirement fund benefit should be a measure of last resort. This will obviously be the case where a maintenance order has been granted and the person against whom it has been granted has defaulted in their payments and there have been no other means other than the retirement benefits to satisfy the maintenance order.

Neither the Maintenance Act nor any of the pension legislation in SA specifically provide for payment for future maintenance. Thus, the courts have had to be innovative by considering future child maintenance payment from retirement benefits. Section 26(4) of the Maintenance Act specifically deals with arrear maintenance and not future maintenance. In Mngadi v Beacon Sweets and Chocolates Provident Fund and Others [2003] 7 BPLR 4870 (D) at 4874, the court held that:

‘It is clear from the above section, including subsection (4) that arrear maintenance is referred to and not amounts which will become applicable in the future. It is clear from the case of S v Botha 2001 (2) SACR 281 (E) per Jansen J and Liebenberg J that where an order had been made for the payment of maintenance in terms of section 29 of Maintenance Act there is no bar to making a continuing order for payment from accused’s pension fund, the Government Employees Pension Fund.’

The court then ordered the retirement fund concerned to retain their member’s retirement benefits ‘so as to make equitable and proper provision for the support and maintenance of the children, for such period as they are in need of such support and maintenance’ (Mngadi at 4880). In this case, the member resigned from their employment in order to avoid paying child maintenance. Thus, the court was of the view that where a member resigned from their employment and thus exited their retirement fund with the specific objective of thwarting payment then the relevant sections of the Maintenance Act and Pension Funds Act may be interpreted to include the payment of future maintenance in one lump sum. It is not clear had the retirement fund member not resigned, if the decision would have been different. Nonetheless, the court ordered the retirement fund to pay for future maintenance. In Magewu v Zozo and Others 2004 (4) SA 578 (C), the court also had to determine whether our law allows for the securing of retirement benefits for the purposes of future child maintenance obligations of the member of the retirement fund. In this case, the retirement fund member was not in arrear at the time the court made its decision. The court held in Magewu at para 15 that:

‘The Maintenance Act does not create a closed list of mechanisms available in law to assist children who have claims of maintenance and their specific situations are not expressly set out in the Act. Section 2(2) of the Maintenance Act provides that it may not be interpreted so as to derogate from the common-law duty of support relating to the liability of persons to maintain other persons. In this instance, it is clear that the applicant’s case may not fall flat due to the fact that the first respondent is not currently in arrears.’

The court then concluded at para 24 that:

‘The attachment of pension fund benefits in respect of future maintenance claims in casu is a direct and effective means of ensuring that the rights of the child and the dignity of women are upheld. There is no reason why, in this instance, the pension fund should not be directed to withhold the withdrawal benefit in order to secure the future maintenance claims of the minor child’.

In Soller v Maintenance Magistrate, Wynberg and Others [2006] 1 BPLR 53 (C) at para 29 the court held that: ‘The Maintenance Act clearly does not provide for all the remedies maintenance courts may be called upon to grant, in which event innovative remedies should be considered. They would certainly be justified if the rights and best interests of a child, which are securely entrenched in section 28 of the Constitution, should be infringed or threatened’. The court further held at para 30 that the court making a maintenance order ‘must necessarily be, fully empowered to make orders relating to the periodic payment of future maintenance from pension funds, annuities or the like’. This indicates that it is possible for retirement funds to retain their members’ retirement benefits when such benefits are due in order to direct such benefits towards the maintenance of such members’ children for such period such children may be in need of such maintenance (see also Burger v Burger and Another [2007] 1 BPLR 50 (D) at 54). It appears, however, that retirement funds cannot retain such benefits when they are, due absent a court order.

A different approach appears to have been taken in Sentinel Retirement Fund v Mtambo and Others (GP) (unreported case no 75404/2013, 1-6-2015) (Jansen J) where the retirement fund sought clarity from the court as to ‘whether the maintenance’s court can order it to make a lump sum payment of future maintenance’. In this case, the court held that ‘an order directing the [retirement fund] to pay an amount of future maintenance in one lump sum is contrary to the provisions of sections 37A and 37D of the Pensions Funds Act, 1956, read with the Maintenance Act, 1998’. The court, however, did not clarify whether or not payment of future maintenance in monthly instalments will be in line with the applicable legislation, more particularly where the member is still active in the retirement fund.

It would be naïve to suggest that the law relating to payment of future child maintenance from retirement funds is settled in SA. Thus, I submit that there is a need for legislative amendments, which will explicitly determine the circumstances under which child maintenance may be deducted from retirement benefits in SA. Nonetheless, the approaches followed in Magewu and Mngadi to the extent that retirement funds should be ordered to pay future maintenance should there be a need to do so, appear to be sound in law. If courts lean towards ordering payment of future maintenance, it will be ideal to order monthly payments as opposed to lump sum payments. Lump sum payments may not be in the best interest of the child, who is in need of parental care and support, because of the potential abuse of such funds in a short period of time. It is crucial that decisions regarding payment of maintenance from retirement benefits should be made in line with s 28(2) of the Constitution and s 7 of the Children’s Act 38 of 2005. An order for monthly future maintenance against a provident fund, which usually provides its members with lump sum payments might be a bit tricky. This is because currently, despite anticipated legislative changes relating to compulsory annuitisation, provident fund members are entitled to receive their entire benefits as lump sum payments when they retire (see Clement Marumoagae ‘Moving towards compulsory annuitisation of provident fund benefits in South Africa’ 2017 (2) SAMLJ 390). In such circumstances, there might be a need to interdict the provident fund in order to prevent it from making payment to its member when there is a need for such a member to satisfy future child maintenance obligations. Finally, I submit that when making an order for the payment of future child maintenance from the member’s retirement benefits, the court must properly assess the member’s personal circumstances as well as their means in order to determine the fair amount of future child maintenance that should be payable.

Clement Marumoagae LLB LLM (Wits) LLM (NWU) Dip Insolvency Practice (UP) is an attorney at Marumoagae Attorneys and Senior Lecturer at the University of Witwatersrand.

Mr Marumoagae writes in his personal capacity.

This article was first published in De Rebus in 2018 (Sept) DR 20.

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