This blog was co-authored with Rory Scott, Candidate Attorney.

On 15 March 2023, the Financial Services Tribunal dismissed a reconsideration application, ruling that a fund cannot rely on a benefit being in the process of being automatically paid as a defence to a pension interest claim.

The non-member spouse filed a complaint on 12 May 2022 with the Pension Funds Adjudicator regarding the failure of a Provident Fund to pay a 50% portion of the member spouse’s pension interest to the non-member spouse.

The spouse and the member were divorced on 1 June 2020. The divorce order recorded that the spouse was entitled to 50% of the member’s pension interest held by the Fund at the date of the divorce. The member exited the Fund on 30 April 2021. When the Second Respondent sought payment of the 50% pension interest from the Fund on 2 June 2021, the Fund advised her on 9 June 2021 that the payment had been made to the member.

The Fund admitted that it had received a copy of the divorce order on 2 June 2021 from the spouse’s attorneys. But the Fund argued that it had already commenced with an automatic payment process on 2 June 2021 that could not be stopped and the benefit was paid to the member on 4 June 2021, two days after the divorce notice had been provided to it.

The Adjudicator had to determine the issue of whether the Fund had failed to pay the pension interest to the non-member spouse in terms of its rules and the Pension Funds Act of 1956. It was agreed that when the payment was made to the member, the Fund was aware of the divorce order between the member spouse and the non-member spouse. The Fund’s defence was that the payment was made using an automated payment process that was already in process and could not be stopped; the non-member spouse had allegedly taken too long after the divorce to advise the Fund of her 50% interest.

The Adjudicator ruled that the payment should have been interrupted. In reconsideration of the Adjudicator’s ruling, the Tribunal agreed with the Adjudicator, dismissed the reconsideration application and ruled that the Adjudicator’s decision must stand. The Fund had received the divorce order before making payment to the member spouse. Despite the fact that the automated process could not be interrupted this was an internal issue that must not prejudice the non-member spouse.

It is no answer to a claim for payment of a debt admittedly due that an internal process paid someone else despite the payer’s knowledge of the due debt.

Pension funds, and others, must be careful when using automated payment processes. This ruling also serves as a reminder that court orders are binding and will be enforced if not abided by.

Read more on the matter here.