Issue: April/June 2010


Another fund versus another union

Once again, the fund has won. High Court rules in favour of board independence.

The Ppwawu national provident fund has not been alone in its battle against union interference (see page 14). The Samwu national provident fund has similarly faced a years-long battle against the union that established it.

Only some 27 000 of the SA Municipal Workers Union (SAMWU) members belong to the Samwu fund. The rest belong to other funds or no funds at all. And, while most members of the Samwu fund are also members of SAMWU, not all of them are. The fund’s rules permit all municipal employees to join it.

When the Samwu fund was established in 1994, its rules provided that two members of its board would be appointed by the union. One of them had to be the SAMWU general secretary, regardless of whether he or she was ‘fit and proper’ for the job. The other trustees would be elected by members or appointed by employers.

The board’s struggle for independence from the union began in earnest four years ago when the fund decided to administer itself and purchased a building in which to conduct this administration. The union cried foul, apparently because it had wanted the fund to be a tenant in a building that it was going to buy itself.

Declaring that “the fund belongs to SAMWU”, the general secretary demanded that its board comply with union instructions. The union even demanded from the fund a R7m contribution towards the costs of celebrating the union’s 20th anniversary and expressed anger at the board’s refusal to use fund money in this way.

With a view to improving the governance of the fund, the board attempted to amend its rules to provide that:

  • The union could only appoint as board members people who were members of the fund, and
  • The board could expel from it a board member who was not a ‘fit and proper’ person to occupy the position of trust.

The general secretary was not a fund member. He had made it clear that, in conducting fund business, his loyalties lay with the union rather than the fund.

The fund’s first attempt to change the rules was unsuccessful because the union-appointed board members had not been invited to the board meeting at which the amendment was adopted. So, having given those board members more than two months’ notice of the meeting at which the amendment would again be considered, the board at that meeting last March again adopted the amendment.

The general secretary did not attend that meeting either. The other union-appointed board member excused himself from the meeting before the rule amendment was considered.

The union and the two union-appointed board members then applied to court for an order setting aside the amendment. They argued that the amendment could not have been made in the absence of the union-appointed board members. This argument was unsuccessful. There was ample evidence that these board members had been given more than sufficient notice of the meeting at which the amendment was proposed for adoption.

The union then argued that it was a term of an unwritten agreement between the fund and the union that no such rule amendment could be made without the consent of the union.

Acting Judge Kolbe ruled in February that there was nothing in the rules of the fund to support the union’s contention. She held that, because the rule amendment was adopted in terms of the fund’s rules and was not inconsistent with the Pension Funds Act, the Registrar was obliged to approve and register it. This meant that it was binding on the fund and its members regardless of the union’s attitude towards it.

The union is now obliged to find people to appoint to the board from among the members of the fund. This should bring about a greater alignment between the interests of union-appointed board members and the fund itself.

Further, any board member who fails to act in accordance with his or her duty to be loyal to the fund (as opposed to the union) can be expelled from the board.