Pension Fund Matters: Section 37d: When Salary Disputes Meet Pension Protection

Brief facts of the case

Emfuleni Local Municipality employed Mr Azwindini Silence Munwai as a Senior Engineering Technician in its Parks and Cemeteries Department from November 2010. Over the years, his working relationships became strained — a protection order was granted against him in favour of his direct manager, and he was shuffled between departments. By October 2020, the Municipality attempted to transfer him permanently to Sports and Recreation, but those consultations were never finalised. His reporting line was left unresolved.

Mr Munwai continued to draw his salary. The Municipality later alleged that, from October 2020 until his resignation on 24 July 2023, he had neither reported for duty nor performed any work — yet received remuneration totalling over R 2.5 million. His resignation came just three days after a newspaper reported that the Municipality was investigating his alleged absence from work. An internal investigation followed, finding that attendance registers bore unexplained checking signatures and that the Municipality’s own systems for monitoring attendance had comprehensively failed.

The Municipality brought an application seeking a declaration that Mr Munwai had not rendered services, an order for repayment of the remuneration paid to him, and — critically — an order that the Municipality Gratuity Fund pay the amount from his pension interest should he fail to repay.

Main issues to be determined by the court

The court identified three principal issues for determination:

1. Had the Municipality proved that Mr Munwai rendered no services during the disputed period?
2. Had the Municipality established the dishonest conduct required to access Mr Munwai’s pension benefit under section 37D(1)(b) of the Pension Funds Act?
3. Could the court compel the Fund to make a deduction from Mr Munwai’s pension interest?

Court’s findings and reasons

On the factual dispute — Mr Munwai’s alleged non-performance

The court found that the Municipality had failed to prove that Mr Munwai rendered no services. While the Municipality’s witnesses confirmed that he did not report to certain managers, this only showed where he was not — it did not prove he did nothing at all.

Mr Munwai’s version was that he reported to Mr Mundalamo (the former Assistant Manager: Cemeteries) and later to Human Resources through Mr Mahlaba. His account was supported by a contemporaneous memorandum, written on the Municipality’s own letterhead, in which he stated he would report to Human Resources pending resolution of his reporting line. There was no evidence that the Municipality ever rejected this arrangement or directed him elsewhere.

Most damaging for the Municipality was the court’s finding that its own replying papers mischaracterised the evidence. The Municipality claimed that Mr Mahlaba had expressly denied Mr Munwai reported to him — but when the court examined Mr Mahlaba’s actual affidavit, it said nothing of the sort. This left Mr Munwai’s version effectively unanswered on the most significant point.

The Municipality also failed to identify any specific task Mr Munwai should have performed, any particular duty left undone, or any output whose absence would demonstrate non-performance. Its own conduct — paying him for nearly three years without discipline, only investigating after a newspaper report, and having monitoring systems that its own investigators found had failed — further undermined its position.

While the court acknowledged weaknesses in Mr Munwai’s account (he produced no work product and accepted having no office from May 2021), it held that his version was not so far-fetched or untenable as to be rejected without oral evidence.

On section 37D and the pension deduction

Even assuming the Municipality could have proved non-performance, the court held this would not have been enough to access the pension benefit. Section 37D requires proof of damage caused by theft, dishonesty, fraud, or misconduct — mere absence from work does not meet this threshold without an additional dishonest element.

The Municipality did allege fraud, claiming Mr Munwai had submitted falsified attendance registers. However, the court found this allegation was not established for several reasons. Only four isolated monthly registers were produced — not a continuous set — and the claim period began in October 2020, while the registers only dated from January 2022. No forensic evidence identified who had placed the checking signatures. Most significantly, the Municipality’s own counsel conceded that salary payments were not dependent on submission of timesheets, destroying the causal link between the allegedly falsified registers and the payments. The criminal investigation had likewise been closed as undetected.

On the order sought against the Fund

The court held that a pension fund’s discretion under section 37D to make a deduction cannot be treated as an automatic execution mechanism triggered by a court order. The Fund’s rules were not before the court, the Fund had made no decision to deduct or refuse to deduct, and its statement that it would not oppose a compliant application was not consent to the order sought.

The application was dismissed in its entirety, the interim interdict preventing payment of Mr Munwai’s pension benefit was discharged.

Conclusion

This judgment carries important implications for pension funds and the broader stakeholder community.

For employers, it serves as a stark reminder that the procedural vehicle chosen matters enormously. Seeking final relief on motion where the underlying facts are contested is a high-risk strategy. Employers who suspect employees of drawing salary without rendering services must build their evidentiary record meticulously — identifying specific duties, documenting missing outputs, and ensuring that affidavit evidence squarely addresses the respondent’s version. Vague allegations and mischaracterised evidence will not survive judicial scrutiny.

For pension funds, the decision reinforces that section 37D is a narrow exception to the robust statutory protection afforded to pension benefits under section 37A. A fund’s discretion to deduct is precisely that — a discretion — and courts will not convert it into a compulsory mechanism merely because an employer has obtained, or seeks to obtain, a money judgment. Funds should take comfort that their independent decision-making authority remains intact, but should also ensure that any deduction they do make is grounded in clear evidence of the qualifying conduct the statute demands.

Ultimately, this case illustrates that pension fund recovery is not a shortcut for employers who have failed to manage their own human resources and internal controls. Where an employer’s own systems break down, the consequences of that failure cannot simply be shifted onto a former employee’s retirement benefit.