PENSIONS: Criminal Conviction Not Enough to Recover from Pension Fund
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Only a compensatory order granted by a court - and not a criminal conviction alone - can make a fund deduct from the withdrawal benefit of an employee, Dr Elmarie de la Rey, the acting Pension Funds Adjudicator has determined.
ID Laing of Johannesburg, the sole partner of Fleetwood Adventure Playgrounds CC (corporation), complained to the Office of the Pension Funds Adjudicator after failing to get Orion Money Purchase Provident Fund (first respondent) and Old Mutual Life Assurance Company (South Africa) Ltd (second respondent) to pay him R19 200.95.
He said his employee B Motlhoki was a member of the first respondent. On 30 July 2009 the complainant convened a disciplinary hearing and Motlhoki was charged with misconduct and dishonesty pertaining to abuse of a petrol card for a number of years, thus causing loss of R19 200.95. Motlhoki was found guilty and his employment was terminated.
Criminal Charge for Pension Fund Losses
The complainant proceeded to lay a criminal charge against Motlhoki. On 28 September 2010 he was found guilty as charged in the Krugersdorp MagistrateÂ’s Court (court). He was sentenced to pay a fine of R3 000 or serve a term of eight months imprisonment, wholly suspended for five years.
The complainant approached the first respondent to request that it deduct from the withdrawal benefits due to Motlhoki the amount representing the losses suffered by the corporation as a result of MotlhokiÂ’s dishonesty.
The first respondent refused to accede to this request, citing that it could only do so if Motlhoki had in writing admitted liability to the corporation or if a judgment had been obtained against him in a court of law.
The complainant was dissatisfied with the first respondentÂ’s refusal to deduct the losses he had suffered. He submitted that Motlhoki would never admit liability as he had in the past denied the accusations against him.
He also said that since Motlhoki was convicted by the court, he had satisfied the requirement that a court judgment be obtained against him prior to the first respondent making the deduction.
He added that section 37D of the Act made no mention of a section 300 of the Criminal Procedure Act compensation order so there was no reason for the first respondent to refrain from deducting the losses from MotlhokiÂ’s withdrawal benefits.
In its response, the second respondent said a criminal conviction alone did not amount to a judgment envisaged in section 37D(1)(b)(ii) of the Act. In addition to the conviction, the court should have issued a compensatory order in terms of section 300 for the first respondent to be entitled to deduct the money claimed by the complainant.
As no such compensatory order was issued by the court and Motlhoki had not admitted liability to the corporation in writing, the complainant must institute civil proceedings against him. Only upon obtaining judgment against Motlhoki would the first respondent be in a position to make the deduction sought.
Dr De la Rey said in her determination that a fund may deduct money in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member, provided the member had admitted liability in writing and judgment had been obtained against the member in any court.
Dr De la Rey said while Motlhoki was successfully convicted by a criminal court, it must be determined whether or not his conviction by the court amounted to a Â“judgmentÂ” as envisaged in section 37D(1)(b)(ii).
No Compensation in Pension Fund Losses
Quoting case law, she said the magistrateÂ’s judgment for theft is based on the requirements of criminal law and criminal procedure and did not amount to a judgment in respect of compensation.
She said Section 37D(1)(b)(ii) required a judgment of court for the deduction to be effected. The judgment must be a determination of the employeeÂ’s liability to the participating employer and the monetary value of such liability.
Â“A criminal conviction without a compensatory order does not amount to a Â‘judgmentÂ’ as envisaged in the Act because although extensive investigations into the merits of the accusations made against an employee may have been conducted and accepted by the court, a conviction in this regard only finds that the employee concerned is guilty of the offence as charged.
Â“It does not proceed further to determine whether or not the employee concerned is liable to compensate his employer and if so, how much he is liable to pay to the employer.Â”
Â“Only in instances where a compensatory order in terms of section 300 of the CPA was sought and granted by the court did the employee become liable to compensate the employer. In such an instance the pension fund had legal grounds upon which to effect the deduction,Â” said Dr De la Rey.
Â“Where a compensatory order has not been granted by the court in a criminal case, there is no determination of the employeeÂ’s liability to the employer and, therefore, the fund has no power to effect the deduction sought, despite the conviction.
Â“The first respondent cannot withhold MotlhokiÂ’s benefit, nor can it pay any amount to the corporation or the complainant,Â” said Dr De la Rey, in dismissing the complaint.
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