By Mukwevho Donald
Section 7(8) of the Divorce Act 70 of 1979 provides that the court, when making an order pertaining to a decree of divorce, may order that the pension interests of one member be paid to the other member who is part of the divorce and is so entitled in terms of s 7(7) of the Act, on such interests having accrued to the member of the fund. In light of the facts that came to light in the case of CNN v NN, this article seeks to provide a constructive opinion on s 7(8) of the Divorce Act and its relevance in the protection of the interests of one or all the divorcing parties.
Background
On 23 February 2023, the Gauteng Local Division of the High Court in Johannesburg handed down a judgment in the case of CNN v NN in which the court found that in terms of the current legal position, a non-member to a pension fund cannot claim directly from the fund, and especially considering the interests, which accrued to the member before the finalisation of a divorce. In this case, the applicant approached the court to vary a deed of settlement, which was entered into by the applicant and the respondent, entitling the applicant to claim the pension interests held by the pension fund the responded was a member to. The respondent having been served with the divorce summons on 18 March 2021, the respondent subsequently resigned from his work and exited his pension fund.
On the court granting an order incorporating the deed of settlement, the applicant was informed by the fund that the pension benefit had accrued to the respondent and that he is no longer a member to the fund, and as such the deed of settlement that speaks about pension interests can no longer be enforced under the current legal framework (s 7(1) and 7(8) of the Act).
The legislative provisions on the concept of pension interest
Section 1 of the Act provides that pension interests is a benefit that a party would have been entitled to in terms of the fund rules if his membership to the fund would have been terminated on divorce on account of resignation from his office. This means that pension interest includes the contributions and the interests earned on investments as calculated after divorce. Section 7(7) provides that pension interests shall be deemed as property of member in determination of the benefits any party is entitled to receive.
The court in Eskom Pension and Provident Fund v Krugel and Another [2011] 4 All SA 1 (SCA) held that once the pension benefit accrues to the member beyond the divorce, then the provisions of s 7(7) and 7(8) can no longer apply. This is to mean that the other member who would otherwise have a claim in the funds, can no longer claim as the benefits change from pension interests into pension benefits, which are not covered by the two provisions in question.
In this case, the applicant was claiming a pension interest on the benefit, which has changed to pension benefit, by virtue of the respondent resigning, terminating the contract with the fund and the funds accruing to him, hence the court held that her application cannot succeed.
The implications of the current legal framework on divorce matters
Section 37D(4)(a) of the Pension Funds Act 24 of 1956 read with s 7(7) and 7(8) of the Divorce Act have the effect that the pension interests can only be claimed on divorce, and the non-member does not have access to claim their share in any case. The problem with that is the rising trend as seen in this case, where the member to a fund served with summons decides to resign from their office and terminate their membership with the fund, having their benefits accrue to them before the divorce finalised, and thus depriving the non-member from receiving the share they would receive as entitled.
Conclusion
Although the court, in this case, did not attend to the issue as it was not the applicant’s argument, paved the way for the need to challenge the constitutionality of s 7(7) and 7(8) read with s 37D(4)(a) of the Pension Funds Act, in that they prejudice the non-members who are divorcing, through enabling the members to terminate their membership to the fund, leaving no interests to be paid to their non-member (ex) spouses. As a result, this article suggest that a future approach should be towards the reform of the above three provisions, in a manner that would prevent members to a fund acting unethically, thus prejudicing their non-member (ex) spouses. The legislature should look at amending the definition of ‘pension interest’ to make no distinction between the benefits received before and after divorce has been granted. The legislature may also consider incorporating pension benefits into the joint estate to avoid these kinds of disputes. Alternatively, the legislature may consider disallowing claiming of the pension interests once the divorce summons has been issued, and before finalisation of such divorce.
Mukwevho Donald LLB LLM (Human Rights) (Univen) is a candidate legal practitioner at Makamu & Munyai Inc in Thohoyandou.
This article was first published in De Rebus in 2023 (June) DR 27.
