LEGAL NOTE: APRIL 2025 – Section 37C Recent Case law
- Anu Ananmalay
- Apr 1
- 5 min read
PHEBO obo TWO MINORS v OLD MUTUAL WEALTH RETIREMENT ANNUITY FUND (PFA)
The issue for determination before the Pension Funds Adjudicator (the “Adjudicator”) herein was the exclusion of children (born as a result of artificial insemination) from a death benefit.
A member of the Old Mutual Wealth Retirement Annuity Fund (the “Fund”) acted as a sperm donor for Pheto’s (the “complainant”) artificial insemination, resulting in the birth of twins. The member passed away three months into the complainant's pregnancy and upon the member’s death, the Fund excluded the twins from the member's death benefit allocation.
The complainant argued that although the deceased signed a sperm donor consent form, the form was only a formality. She and the deceased had agreed to co-parent the twins, with the deceased covering most of her medical expenses and preparing financially to support the children.
It was determined that under section 40(3) of the Children’s Act, No. 38 of 2005, a sperm donor does not acquire parental rights or responsibilities unless married to the woman giving birth. Therefore, the twins could not be considered the deceased’s legal dependants. They were also not regarded as factual dependants, as the deceased had not financially supported them and there was no evidence to suggest an intention to do so.
The Adjudicator concluded that the Fund had properly considered the relevant factors and exercised its discretion correctly in the allocation of the deceased member’s death benefit and the complaint was dismissed.
FSCA TRIBUNAL APPLICATION FOR RECONSIDERATION: MADISHA LUCAS MALAKA
Reconsideration of a decision of the Pension Funds Adjudicator (30M) in terms of Section 230 of the Financial Sector Regulation Act 9 of 2017.
The Applicant is Madisha Lucas Malaka ("the Applicant").
The First Respondent is the Caroline Malefu Chokoe ("the life partner").
The Second Respondent is Personal Portfolios Retirement Fund ("the Fund")
The Third Respondent is the Pension Funds Adjudicator ("the Adjudicator").
The Fourth Respondent is Glacier by Sanlam, the administrator of the Fund.
This is an Application in terms of Section 230 of the Financial Sector Regulation Act 9 of 2017 against the decision taken by the Adjudicator, pursuant to a complaint laid in terms of Section 30M of the Pensions Fund Act 24 of 1956 ("the PFA").
Section 230 of the Financial Sector Regulation Act 9 of 2017 ("the FSR Act") provides the basis for the Applicant to lodge this Application for reconsideration and seek appropriate relief. The parties have waived their right to a formal hearing, and this is the Tribunal's decision.
B: FACTS AND THE COMPLAINT
The essence of the Applicant's complaint is that he is aggrieved at the Fund's allocation of the death benefit of Mr Louis Malaka ('the deceased") or, more pertinently, his exclusion from the allocation. The Applicant is the deceased's brother.
The Applicant maintains that he and the deceased agreed on their shared responsibilities toward each other's families and that, in any event, he was the nominated beneficiary and should have received the death benefit.
The Applicant further maintains that the Fund ignored this agreement nomination and took into account irrelevant factors while ignoring relevant factors.
The deceased was a member of the Fund until his death on 6 December 2022.
On his passing, a death benefit of R4,181,587.21 became available for distribution in terms of Section 37 C of the PFA.
The Fund allocated the death benefit as follows:
Beneficiary | Relationship | Age | Amount |
CM Chokoe | Life Partner | 62 | R4,061,587,21 |
Y Kunene | Major Daughter | 46 | R120,000,00 |
TOTAL | 100% | R4,181,587,21 |
Aggrieved by death benefit allocation, the Applicant laid a complaint with the Adjudicator on 16 February 2024.
The Adjudicator handed down a determination on 27 June 2024, the essence of which was that the Adjudicator was satisfied that the Fund took into account all the relevant factors and ignored irrelevant factors and that there was no cause to interfere with the Fund's discretion. Accordingly, the complaint was dismissed.
The Applicant applied for a reconsideration of the Adjudicator's Determination on 23 September 2024. This application was filed out of time, and the Applicant has filed an application for condonation which is granted.
C: THE LEGISLATION
The Tribunal quoted and referred to Section 37C of the Pension Funds Act – the definition of dependent and the dissolution of the death benefit.
D: DISCUSSION
The Fund is enjoined to investigate and ensure an equitable allocation of the death benefit to beneficiaries. In these circumstances, the case of Sithole v ICS Provident Fund and Another 2002 (4) BPLR 430 PFA at paragraphs 24-25 is instructive. The Fund is required to consider various factors, and Sithole identified the following:
Age of the dependants.
the relationship with the deceased.
the extent of the dependency.
the wishes of the deceased.
the future earning capacity of the beneficiary, and 21.6 the amount available for distribution.
In its reply to the Adjudicator on 26 April 2024, the Fund comprehensively set out the methodology it adopted in compliance with Section 37 C of the PFA and the factors it considered. The Fund confirmed that it had identified six potential dependants, namely:
Caroline Malefu Chokoe – life partner, unemployed, living with the deceased, he paid for her living expenses, medical aid, deceased bequeathed 3 properties to her for rental income, she maintained the properties. Her own rental was R13,500pm.
Yvette Kunene – major daughter – received R10,000 pm from the deceased, to assist with her medical condition, arthritis – mobility challenges- her financial dependency was corroborated by the life partner.
Mpho Palesa Malaka – major daughter financially independent, 36 yrs of ages, unemployed pharmacist, lived with her mother, and moved to deceased house to assist the life partner during his illness, then moved back to her mother.
Thuto Malaka – major son, 40 yrs of age, executive manager, financially independent. Lived on his own.
Emily Pinky Malaka – ex-spouse of the deceased, financially independent, lived on her own, and was not supported by the deceased.
Modishe Lucas Malaka – brother of the deceased, financially independent, he was appointed as a nominee for the Annuity. He was awarded shares (R1.5m from the deceased estate, in terms of the WILL.
The Fund noted that the deceased had nominated the Applicant to receive the death benefit but established that Caroline Malefu Chokoe, the life partner and Yvette Kunene, a major daughter, were dependants as defined in the legislation and whose needs had not been met.
The Fund communicated its allocation to the potential dependants on 18 December 2023. Within three days, the Applicant wrote to the Fund indicating his arrangement with the deceased and that the death benefit allocation arrived at by the Fund was, therefore, incorrect.
The Fund considered the representations made by the Applicant and revisited their allocation. On 2 February 2024, the Fund advised the Applicant that their allocation was to remain unchanged.
The Fund confirmed inter alia that in arriving at its allocation, they:
acted in accordance with their duties as prescribed in the Fund's Rules and the Legislation.
determined the dependency of each potential dependant, based on the information supplied.
noted that the Applicant did not claim to be a dependant but instead relied on an agreement with the deceased, alternatively the nomination.
In the circumstances, the Fund considered its distribution fair, reasonable and in accordance with Section 37 C of the PFA. It is clear from the Determination that the Adjudicator considered the Fund to have fulfilled its duties. This Tribunal cannot fault the Adjudicator's reasoning on the facts presented by the Fund.
E: CONCLUSION
In the circumstances, the Application for a reconsideration of the Fund's decision must fail.
ORDER
The Application for Reconsideration is dismissed.
19 March 2025