2017-01-06

‘Body blow’ for Tongaat Hulett pensioners in Durban High Court

Tongaat Hulett counsel argued that the company had acted completely within the rules of the PFA, that they had considered the interests of all parties and were legally permitted to allocate all the surplus to the employer.

The 77 Tongaat Hulett pensioners who hoped for a Christmas payola have had their hopes dashed by the Durban High Court.
A few days before Christmas, Justice P Koen ruled that the dissatisfied pensioners were not entitled to a R356,2 million award, bringing to an end the almost four-year legal battle between the pensioners and the major North Coast sugar and industrial group.
Former Tongaat Hulett directors Bruce Moor and Willem Hazewindus, representing the group of pensioners – and in the case of some who have died, their widows – believed that a ‘surplus’ amount of money following the splitting off of Hulamin from the group in 2007 should have gone to the group’s 2300 pensioners, instead of back to the company.
Moor and Hazewindus, who had both been members of the pension scheme board of trustees, were suspicious when the TH Group laid claim to the R363,2 million, being 20% of a R1.8bn surplus following the winding up of the TH Pension Fund after Hulamin split from the group in 2007.
This fund had assets of nearly R6bn and catered for about 2 300 pensioners and 800 current employees. In 2012, in-service members were transferred to a new fund, the TH Defined Benefits Fund, and pensioners were outsourced to an Old Mutual pension fund.
The argument was over fund surpluses generated from exceptional investment returns on the assets of the fund. In pension fund terms, an actuarial surplus is an amount by which the value of a company’s pension fund exceeds the amount it must pay out in benefits.
The Pension Fund Act provides that an actuarial surplus may be shared between the company and pensioners. However, the company claimed that the funds involved were “excess assets” and not liable to distribution.
When the case appeared before Justice P Koen in the Durban High Court on October 21 last year, the pensioners’ lawyers told Judge Koen that there was no mention of “excess assets” in the Pension Funds Act (PFA) and this was an attempt to hijack their rightful benefits.
“Through a systematic and well planned strategy, the company has contrived to transfer all or most of the surplus assets of the two funds to the employer surplus account and to the company, with no allocations or surplus to members or a member surplus account,” they said.
Tongaat Hulett counsel argued that the company had acted completely within the rules of the PFA, that they had considered the interests of all parties and were legally permitted to allocate all the surplus to the employer.
Passing judgement, Judge Koen said the law intended pension fund members to be treated fairly, though how any surpluses were dealt with should be determined by the rules of the fund as determined by the board of trustees.
“It seems clear that all the Pension Fund Act requires in relation to any future surplus is that the rules may determine the apportionment. It does not specify what type of rule. It also does not provide that what amounts to an actuarial surplus cannot be apportioned as part of an apportionment of excess assets,” he said.
The Act left it up to the board to determine the rules, and he was satisfied that the board of trustees had approved the transfer legally. He also believed that pension fund members had been properly informed and had voted overwhelmingly in favour of the scheme. Although the details had been worked out by a working group consisting of TH executives, the scheme had been approved by the trustees.
Judge Koen said that focusing on this one matter ignored the fact that pension fund members’ rights and expectations had not only been met, but exceeded in the restructuring of the two pension funds. Consideration also had to be given to the rights of the employer as well as the fact that TH had supported an aggressive investment strategy that had caused the surpluses to be made.
He therefore dismissed the pensioners’ application and ordered they pay Tongaat Hulett’s legal costs.
Bruce Moor said the judgement had come as a “body blow” to the pensioners.
“We know our case was 100% morally correct and believed it was also legally strong. Our attorneys will now study the judgement and advise on whether we should appeal.”
 http://northcoastcourier.co.za/75954/body-blow-for-tongaat-hulett-pensioners-in-durban-high-court/