Edition: July / September 2016


Taking exception

Multi-billion rand action under way.
Can a favourable outcome for pensioners derail Transnet?

So you thought that the class action launched by two pensioners – against the Transport Pension Fund, Transnet Second Defined Benefit Fund and Transnet itself – was a noise to grow faint in the mists of time? Wrong! Although it’s taken ages to get out of the ground (TT Sept-Nov ’14), out of the ground it is now in an action that involves way over R200bn.

In the Gauteng division of the High Court, Justice Legodi has found partially for the plaintiffs and partially for the defendants on matters of “exception”. This is a legal objection to an opponent’s pleadings, described as a useful mechanism for weeding out cases without legal merit. If it does not have the effect of disposing of a case in whole or in part, and avoiding unnecessary evidence being led at the trial, the judge said that the exception should not be entertained.

The plaintiffs, Johan Pretorius and Montana Kwapa, are together suing both in their personal capacities and in the interests of the funds’ members. They have three claims.

First is that, from 1989 to 2002, a promise was made and implemented by authorised persons that pensions would annually increase by at least 70% of the inflation rate. Relief sought is that Transnet’s failure to keep this promise be declared unlawful and that the funds be ordered to keep this promise, including payment of arrear increases, with effect from 2003.

The court dismissed the defendants’ exception to this claim. However, it upheld them on the plaintiffs’ “failure to identify the terms of the promise” and their allegations of “unlawful state conduct”. Also upheld was the defendants’ exception to the plaintiffs’ claim of “unlawful labour practice”.

Second concerns the “legacy debt” by which the old SA Railways & Harbours and SA Transport Services had to pay into the funds sufficient amounts to keep them in a sound financial condition. Transnet had inherited these obligations. The amount payable to the funds had to be determined by the state actuary in consultation with an actuary appointed by the Minister of Public Enterprises. They duly determined the legacy debt, payable to the funds, at R171,8bn. The plaintiffs want an order that declares Transnet indebted to the funds for payment of R171,8bn plus interest from 1 April 1990 at a rate of not less than 12% a year determined by the state actuary; that Transnet pays the legacy debt to the funds, and that the funds and Transnet jointly and severally pay the plaintiffs’ costs.

Transnet’s exception to this claim was dismissed.

The third claim relates to an “unlawful donation”.

The plaintiffs contend that, in November 2000, trustees of the Transport Fund and Transnet agreed that the fund would donate 40% of its members’ surplus to Transnet and that trustees of the fund will thereafter implement the donation by paying R309,1m to Transnet. The donation, say the plaintiffs, was unlawful and invalid because the trustees did not have the power to make the donation. Further, the trustees made the donation in breach of their fiduciary duty to act in the best interests of the fund and its members.

Accordingly, the plaintiffs want the donation declared unlawful and invalid. They also want Transnet ordered to pay the fund R309,1m plus interest, as well as costs of the action.

The exception by all of the defendants to this claim was dismissed.

The funds had objected to the first and third claims on the basis that the particulars of them were “vague and embarrassing”, and that they do not sustain a cause of action. For its part, Transnet had objected to all three claims as being “vague and embarrassing” and disclosing no cause of action.

Because both plaintiffs and defendants had partially succeeded, the judge ruled that the respective parties pay their own costs.