Pension interest – is there a need to plead a claim?

February 1st, 2017
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By Clement Marumoagae

This article addresses the topic on which I have received various requests from magistrates, attorneys and advocates to provide legal opinions on several occasions. The question is: Whether or not there is a need to specifically plead a claim for a pension interest in divorce papers in order for the court to order a retirement fund to pay the pension interest to the non-member spouse. In my experience, some regional magistrates refuse to grant orders relating to pension interests when the name of the retirement fund is not mentioned on the papers. The law in this regard has been settled in Ndaba v Ndaba (SCA) (unreported case no 600/2015, 4-11-2016) (Petse JA (Mpati AP and Swain JA concurring)). Before this judgment, there was confusion as to whether a pension interest should be specifically pleaded and claimed in divorce papers. This was due to various differing High Court decisions, some of which have held that it should be pleaded, while others held that this need not be the case because such benefits are deemed to be part of the joint estate and they can be covered by a ‘blanket division’ of the joint estate order.

Should the ‘pension interest’ be pleaded?

The controversy started when Musi J in Sempapalele v Sempapalele and Another 2001 (2) SA 306 (O) at 312, held that:

‘It is settled law that the spouse seeking maintenance from the other must do so during the course of the divorce proceedings and obtain the necessary order. She/he cannot do it after dissolution of the marriage. … Similarly, a spouse seeking a share in the pension interest of the other spouse must apply for and obtain an appropriate Court order during the divorce proceedings.’

The essence of this decision was that the pension interest seeking spouse should specifically plead and pray for such an interest in order for the court to make an order in this regard. The reasoning of this case was followed in ML v JL (FB) (unreported case no 3981/2010, 25-4-2013) (Rampai J) at para 43, where the court held that ‘… a spouse claiming an entitlement to the pension interest of another spouse has to plead the necessary facts on which such special relief is founded or can be said to be founded’.  It is worth noting that neither the Divorce Act 70 of 1979 (the Act), nor any of the legislation regulating retirement funds, including the Pension Funds Act 24 of 1956 (PFA) requires litigants to specifically plead a pension interest in order for the court to make an order in this regard. Section 7(7) of the Act merely deems a pension interest to be part of the estate of the member of the retirement for the purposes of divorce (C Marumoagae ‘A Critical Discussion of a Pension Interest as an Asset in the Joint Estate of Parties Married in Community of Property’ (2014) 1 Speculum Juris 54). Section 7(8) of the Act simply empowers the court making a divorce order to declare that a portion of the pension interest is due and assigned to the non-member spouse and that it shall be paid by the member spouse’s retirement fund to the non-member spouse. Further, some courts will also direct the registrar of the court to liaise with the concerned retirement fund in order for such a fund to endorse its records to ensure that the non-member spouse is paid. Section 37D(4)(a) of the PFA compliments s 7(8) of the Act by introducing the clean-break principle, in order to ensure that the non-member spouse is able to execute his or her claim regarding the pension interest against the member spouse as at the date of divorce. Thus, ensuring that he or she does not wait until a future date post the divorce when such benefits are due in accordance with the rules of the fund (Marumoagae ‘Breaking up is hard to do, or is it? The clean-break principle explained’ 2013 (Oct) DR 38). While s 7(8) of the Act empowers the court to order the registrar to get the fund to pay the pension interest, s 37D(4)(a) of the PFA directly empowers the non-member spouse to submit the decree of divorce to the member spouse’s retirement fund to claim his or her portion of the pension interest as ordered in the divorce decree. In particular, s 37D(4) of the PFA specifically states that:

‘(4)(a) For purposes of section 7 (8)(a) of the Divorce Act, 1979 (Act No. 70 of 1979) the portion of the pension interest assigned to the non-member spouse in terms of a decree of divorce …

(i) Must be deducted by –

(aa) the pension fund or pension funds named in or identifiable from the decree [of divorce]’.

This section clearly illustrates that it is not a legislative imperative that the precise name of the retirement fund should be inserted in the divorce decree. It would be sufficient if such a fund is identifiable from the decree, and that may be by association due to the citation of the member spouse’s place of employment on the divorce papers. The mere fact that the member spouse belongs to a retirement fund should be enough to enable his or her non-member spouse to be able to claim a portion thereof as at the date of divorce, notwithstanding the fact that either the divorce papers or the decree of divorce is silent on the issue. In practice, some presiding officers, more particularly regional magistrates demand that the non-member spouse should in addition to specifically stating the name of the retirement fund in the pleadings, also state the retirement fund number of the member spouse. It is a pity that while most divorces are adjudicated in regional courts, judgments from these decisions are not reported, and most of them do not even get appealed.

In Kotze v Kotze and Another (WCC) (unreported case no A 165/2012, 25-1-2013) (Saldanha J) at para 22, the full Bench agreed with the amicus that the approach adopted in the Sempapalele matter with regard to the interpretation of ss 7(7) and (8) of the Act was flawed and incorrect. The court also accepted the amicus submission that the reasoning in the Sempapalele matter that just as in respect of a claim for maintenance by a spouse, a claim to the pension benefit had to be pleaded and ordered by court was incorrect. This is because ‘[a] right to spousal maintenance does not flow automatically from a decree of divorce whereas subsection 7(7)(a) operated automatically without the need to plead it or to prove such a claim’.

In Motsetse v Motsetse [2015] 2 All SA 495 (FB) at 499, the court also disagreed with the Sempapalele case that pension interest can only be part of the division when it was pleaded and a specific order in relation to it is made by a court. In particular, the court held that ‘… when an order of court orders division of a joint estate, the pension interest of such parties who have such interest automatically fall to be divided as part of the joint estate’ (para 21). This judgment was quoted with approval in M v M (LP) (unreported case no HCA18/2015, 17-6-2016) (Makgoba JP) at para 22, where the court held that:

‘In essence the judgment in Motsetse is to the effect that where a settlement agreement provides for a blanket division of a joint estate or a Court order orders a blanket division of a joint estate (as in the present case before me), all pension funds to which any of the spouses belong and had an interest in at the date of divorce are involved, in the sense that all such pension interests are deemed to be part of the estate. If after the dissolution of the marriage, the parties dispute the division, a court can be approached to either deal with the matter itself or appoint a liquidator. Furthermore, it is not necessary that the issue of pension interest be specifically applied for or pleaded in the divorce proceedings’ (see also Motsetse at para 18).

This controversy has finally been settled in the Ndaba matter. In this case, the Supreme Court of Appeal (SCA) first held that the criticism of the ‘proposition that for the pension interest of a member’s spouse to form part of the joint estate upon divorce, it is necessary that it be claimed by the non-member spouse in his or her summons or counter-claim’ (para 28) are justified (see MC Marumoagae ‘A non-member spouse’s entitlement to the member’s pension interest’ (2014) 17 PER 2488 at 2509). In the Ndaba matter the court authoritatively further held that: ‘In the result those decisions which held that if there is no reference in the divorce order of parties married in community of property to a member spouse’s pension interest, the non-member spouse is precluded in perpetuity from benefitting from such pension interest as part of his or her share of the joint estate, were wrongly decided’ (para 31). In the context of this case, the court held it was not necessary for the parties to mention in their settlement agreement, which was silent on the issue of pension interest what ‘was obvious, namely that their respective pension interests were part of the joint assets which they had agreed, would be shared equally between them’ (para 25). This case is a clear illustration that notwithstanding the fact that the divorce order is silent on the issue of pension interest, the non-member spouse is entitled to be paid the portion of his or her member spouse’s pension interest by the member spouse’s retirement fund. I submit that if the court order is silent on the issues of the pension interest, then the retirement fund should pay at least 50% of such benefit without first requiring the non-member spouse to apply to court for the variation of the divorce order in order to insert its name thereto. Thus, once the retirement fund has confirmed that it is the relevant retirement fund to which the member spouse belongs, it should pay the pension interest. This simply means that the wording of the divorce decree should not be an issue and pension interests can and should be covered even by the ‘blanket division’ of the joint estate. As such, there is no need as it was suggested in the ML v JL matter that the ‘spouse would do well to aver facts relating to the other spouse’s employer; the other spouse occupation; the name of the pension fund; the administrator thereof; the underwriter thereof; the other spouse membership number; the agreed retirement date of the other spouse, being the date on which the pension benefits would in the normal course of events, accrue to the member spouse’ (para 43).

Conclusion

In light of the SCA decision, it is hoped that retirement funds and regional magistrates in particular, will no longer burden divorce litigants with the duty to plead and pray for pension interest in order for divorce decrees to order retirement funds to pay pension interests to non-member spouses. Furthermore, retirement funds are advised to desist from a practice of refusing to pay portions of their member’s pension interests on the basis that either their names are not reflected on the divorce decree or their names are incorrectly reflected thereon.

Clement Marumoagae LLB LLM (Wits) LLM (NWU) Diploma in Insolvency (UP) is an attorney at Marumoagae Attorneys in Itsoseng.

This article was first published in De Rebus in 2017 (Jan/Feb) DR 38.

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