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REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA

DURBAN AND COAST LOCAL DIVISION CASE NO.5587/08

In the matter between

HEATHER WENDY SMITH Applicant

and

JEREMY ALAN SMITH First Respondent

TRANSNET RETIREMENT FUND Second Respondent

ADVOCATE JEAN MARAIS SC N.O. Third Respondent

J U D G M E N T

LUTHULI AJ.

The Background Facts

[1] This application for a declaration of rights arises out of the death of Walter Percival Smith (the deceased) who died on 25 February 2007. At the time of his death, the deceased was a pilot employed by the South African Airways and as such he was a member of the Transnet Retirement Fund, established in terms of section 14A of the Transnet Pension Fund Act 62 of 1990. The Transnet Retirement Fund (the Fund) is the second respondent in this matter.

[2] Prior to his death, the deceased and the applicant had been involved in an intimate relationship. The exact nature of the relationship is in dispute. The deceased had nominated the first respondent (his son) as nominee for the purposes of payment of death benefits according to the rules of the Fund.

[3] In terms of the rules of the Fund, upon the death of a member, a lump sum (calculated in accordance with the provisions of the said rules) would become payable to the “dependants” and/or “nominees” of such deceased member. As to who qualified as a “dependant” and as to what portion of such lump sum each dependant or nominee would obtain, were matters left to the discretion of the Fund.

[4] The Fund determined that the applicant was the deceased’s “dependant” and awarded her a portion of the lump sum. The first respondent was also awarded a portion of the lump sum. The amount awarded to the applicant was considerably in excess to that awarded to the first respondent. The first respondent was dissatisfied with these awards, contending that the applicant did not qualify as a dependant alternatively if she did, she ought not to have been awarded the amount she was.

[5] The first respondent accordingly sought to institute arbitration proceedings in terms of rule 15 of the Fund’s rules by making a demand for arbitration. The third respondent was appointed as the arbitrator. Although initially the applicant was prepared to co-operate and participate in such proceedings, a problem developed with regard to the arbitrator’s terms of reference. It was the applicant’s contention that inasmuch as the decisions of the Fund as to whether the applicant was a dependant and what amount she should receive amounted to the exercise of a discretion, the matter should be treated by the arbitrator as if it were a review of the Fund’s decision, rather than simply substituting his own decision for that of the Fund’s trustees.

[6] The applicant’s concerns in this regard were conveyed to the first respondent’s attorneys by means of a letter dated 1 April 2008. No agreement could be reached by the parties in regard to the matters raised in the said letter and the applicant instituted the present proceedings. The second respondent has consented to the jurisdiction of this court.

The Relief Sought by the Applicant

[7] In essence, the relief sought by the applicant is as follows :

7.1 In the first instance the applicant seeks a declarator that the disputes which have arisen in this matter regarding the applicant’s entitlement to receive an award from the Fund and the quantum itself, are not types of disputes contemplated in rule 15 of the rules of the Fund, which must be determined by arbitration.

7.2 Alternatively, the applicant seeks a declarator that she is not bound by an award which the arbitrator may make.

7.3 Further alternatively, the court is asked to declare that the powers of the arbitrator in regard to the aforesaid disputes are those which a court hearing a review proceedings would have.

Opposition to the Application

[8] The application is opposed by the first respondent. The Fund’s attitude is to abide the decision of the court. However, the Fund delivered an affidavit setting out its concerns. The Fund’s contention is that the disputes in this matter should be determined in a forum where the decision is binding on all three parties.

The First Respondent’s Contentions regarding the Relief sought by the Applicant.

[9] The first respondent’s contentions are :

9.1 The applicant is not entitled to the declaratory relief which she seeks. She must make an election whether or not to participate in the arbitration proceedings and she is not entitled to an opinion from the court as to whether she should do so or not.

9.2 As to whether or not any arbitration award would be binding on the applicant, she had, by lodging a claim for and accepting benefits, “acquiesced” to be bound by the Fund’s rules.

9.3 In any event, whether the applicant was bound by the arbitration award is irrelevant. The arbitration in essence, is one between the first respondent and the Fund. If the arbitrator should set aside the award made to the applicant, then the recovery of the same is a matter between the Fund and the applicant and is no of concern to the first respondent.

9.4 As to whether the arbitrator’s powers should be that of a court hearing a review or simply to substitute his own decision for that the Fund, this was a matter for the arbitrator himself to determine. If he errs, then after the arbitration award is made the applicant may apply to review the arbitrator’s decision in terms of section 33 of the Arbitration Act 42 of 1965.

Is the Applicant entitled to the Declaratory orders which she seeks?

[10] Section 19(1)(a)(iii) of the Supreme Court Act 59 of 1959 gives the High Court the power to grant declaratory orders. That subsection provides that a court has the power :

“In its discretion, and in the instance of any interested person, to enquire into and determine any existing, future or contingent right or obligation, notwithstanding that such person cannot claim any relief consequential upon the determination.”

[11] The first respondent’s contention is that it is not for the court to give the applicant advice in the guise of declaratory orders. They contend that the applicant must make her election whether to participate or not to participate in the arbitration proceedings on prudent advice from her legal advisers.

On the other hand the applicant’s contention is that a lawyer’s opinion is not binding on other parties and the applicant seeks declaratory orders that will be binding on the other parties.

[12] Dealing with section 19(1)(a)(iii) of the Supreme Court Act, Blieden J in Letseng Diamonds Ltd v JCI Ltd and Others; Trinity Asset Management (Pty) Ltd and Others v Investec Bank Ltd and Others 2007(5) SA 564 (WLD) at 574 E-G, stated :

“[24] The Supreme Court of Appeal in Cordiant Trading cc v Daimler Chrysler Financial Services (Pty) Ltd 2005(6) SA 205 (SCA) at 212H confirmed the correctness of the approach adopted by Watermeyer JA in commenting on a similar section in previous legislation in Durban City Council v Association of Building Societies 1942 AD 27 at 32, where the learned Judge said :

‘The question whether or not an order should be made under this section has to be examined in two stages. First the court must be satisfied that the applicant is a person interested in an “existing, future or contingent right or obligation”, and then, if satisfied on that point, the court must decide whether the case is a proper one for the exercise of the discretion conferred on it.”

[13] The two stage approach is discussed by Jafta JA in the Cordiant Trading case supra at 213 E-G as follows:

“[18] Put differently, the two-stage approach under the subsection consists of the following. During the first leg of the enquiry the Court must be satisfied that the applicant has an interest in an ‘existing, future or contingent right or obligation’. At this stage the focus is only upon establishing that the necessary conditions precedent for the exercise of the Court’s discretion exist. If the Court is satisfied that the existence of such conditions has been proved, it has to exercise the discretion by deciding either to refuse or grant the order sought. The consideration of whether or not to grant the order constitutes the second leg of the enquiry.”

[14] The applicant must therefore have a legal interest and there must be interested parties on whom the declaration would be binding. Unless the effect of the declaratory order is one that binds some parties it is not open to any litigant to bring an application praying for declaratory relief merely to be advised of their legal position (see the Letseng Diamonds case supra at 575 G-H). In the present case I am satisfied that the applicant is not merely asking for legal advice from the court in the guise of a declaratory order.

[15] In the present case there is a dispute and the applicant has a legal interest in whether the dispute is of the type covered by the rules and whether an award that may be made by the arbitrator would be binding on her and what the terms of reference of the arbitration should be. The declaratory orders sought would be binding on the parties in this matter. I am of the view that in the present case the applicant has an interest in an “existing, future, or contingent right or obligation”. The court must therefore exercise its discretion by deciding either to refuse or grant the orders sought.

Is the Dispute between the Parties the Type of Dispute contemplated in Rule 15 of the Fund?

[16] In paragraph 2 of the Notice of Motion, the applicant seeks an order :

“That it be and is hereby declared that the dispute which exists between the parties regarding the payment of death benefits to the Applicant by the Second Respondent pursuant to the provisions of Rule 10 of the Rules of the Transnet Pension Fund (‘the dispute’) is not the type of dispute contemplated in rule 15 of the said rules which must be determined by arbitration.”

[17] Rule 15 of the Rules of the Fund provides as follows :

“15.1 Save in respect of those provisions of the rules which provide for their own remedies, which would be incompatible with arbitration, a dispute which arises in regard to –

15.1.1 the interpretation of; or

15.1.2 the carrying into effect of; or

15.1.3 any of any party’s rights and obligations arising from; or

15.1.4 the rectification or proposed rectification of; or

15.1.5 these rules, or out of or pursuant to these rules or on any matter which in terms of these rules requires agreement by one or more parties (other than where an interdict is sought or urgent relief may be obtained from a court of competent jurisdiction), shall be submitted to and decided by arbitration.”

[18] The applicant’s contention is that inasmuch as the current dispute can be categorised as dispute regarding “benefits”, it would appear that rule 4.9.1.2 of the Fund’s rules would apply. The aforesaid rule provides that the administration committee shall :

“attempt to settle all disputes in respect of contributions and benefits failing which the provisions of rule 15 shall apply”.

Mr Pammenter, for the applicant, submitted that rule 4.9.1.2 contemplates that any dispute should first be referred to the administration committee for it to attempt to settle the dispute, failing which the dispute should be referred to arbitration. In the present case there was no such reference to the administration committee. Mr Pammenter submitted that any reference to arbitration was therefore premature. He added that the abovementioned contention would require a minor amendment to the relief sought in terms of paragraph 2 of the Notice of Motion by way of addition of the following words at the end of that paragraph :

“by reason of the fact that the administration committee of the Transnet Pension Fund has not yet attempted to facilitate a resolution of the dispute.”

[19] Mr Harcourt, for the first respondent, submitted that the amendment required by the applicant to the relief sought in terms of paragraph 2 of the Notice of Motion is a major change. He also submitted that once the administration committee has made a distribution by way of an award then the dispute goes to the arbitrator. Accordingly, once the administration committee had made an award it became functus officio. In her replying affidavit responding to the second respondent’s answering affidavit, the applicant says :

“Once the committee had made an award it became functus officio. I have been further advised, however, that sight must not be lost out of rule 4.9.1.2 of the fund rules, which provide that the administration committee shall attempt to settle all disputes in respect of contributions and benefits, failing which the provisions of rule 15 shall apply”.

Mr Harcourt submitted that the first sentence therein is an admission of a statement of fact that once the committee had made an award it became functus officio. This could not be a qualified admission that the administration committee no longer had any role to play and that the applicant was replying to paragraph 11.1 of the second respondent’s answering affidavit by stating that as a general proposition it was correct that the committee had become functus officio.

[20] Once the administration committee had made an award it became functus officio. Once it had made an award that was the end of the matter as far as that decision is concerned. It cannot itself revisit the issue. That much was conceded by Mr Pammenter. However he submitted that the committee had an additional task to try to resolve disputes. I do not see how the committee could attempt to resolve the dispute in this matter without revisiting the award. In my view the administration committee became functus officio when it had made the award and it could not have attempted to settle the dispute regarding the same award. It therefore follows that the relief sought in terms of paragraph 2 of the Notice of Motion cannot be granted.

The Relief sought by the Applicant in Terms of Paragraph 3 of the Notice of Motion.

[21] Paragraph 3 of the Notice of Motion states as follows :

“Alternatively to paragraph 2 hereof, if the dispute is, as between the First Respondent and the Second Respondent, to be determined by arbitration in terms of the said rule 15, then it be and is hereby declared that the Applicant is not bound by any award that the Arbitrator may make.”

[22] The applicant’s contention is that she is not a party to the arbitration. She avers that at no stage did she formally consent to refer the “dispute” to arbitration. No written agreement to submit the dispute to arbitration was concluded as required by section 3(1) of the Arbitration Act 42 of 1965 read with the definition of “arbitration agreement” in section 1 thereof. Furthermore, any agreement to refer the matter to arbitration would have been incomplete and therefore non-binding for the reason that the “parties” are unable to agree on the arbitrator’s terms of reference. Acting on legal advice given to her the applicant decided not to voluntarily participate in arbitration proceedings. She needed clarification on what the arbitrator’s terms of reference should be.

[23] Mr Pammenter submitted that the applicant is not a party to the arbitration proceedings. That is so because she does not fall within any of the categories of persons referred to in section 14(A)(6) of the Transnet Pension Fund Act 62 of 1990. She did not acquiesce to be bound by the rules of the Fund.

[24] Mr Harcourt submitted that by lodging an application for benefits the applicant acquiesced to be bound by the rules of the Fund since her claim was lodged in terms of the rules of the Fund. Mr Harcourt also submitted that the rules of the Fund were signed by one of the parties and that this was sufficient to make the arbitration agreement binding on all parties. He submitted that the applicant was paid by the Fund a sum of more than R6m and was a beneficiary and was therefore bound by the rules of the Fund. He further submitted that once a party has submitted to arbitration they are bound by the terms of the arbitration and cannot withdraw, except with the consent of all the parties in terms of section 3(1) of the Arbitration Act. Another submission that was made by Mr Harcourt is that it does not really matter whether the applicant is a party to arbitration because the first respondent has declared a dispute against the Fund and those two parties admit that they are bound.

[25] Rule 15 of the rules of the Fund deals with dispute resolution by way of arbitration. It refers a “party” and “parties” to a dispute. There is no definition of a “party” in the rules. Section 14(A)(6) of the Transnet Pension Fund Act states :

“(6) The rules of the pension fund, as amended from time to time, shall bind each employer which employs members of the pension fund or with employed persons who were members of the pension fund immediately before their retirement or disablement, members, pensioners, beneficiaries of such pension fund and the pension fund”.

[26] The first respondent’s contention is that the applicant is bound by the rules because she became a beneficiary by accepting the monies from the Fund. Mr Pammenter, on the other hand, submitted that the first respondent’s argument is simplistic. The argument of the first respondent being that the applicant accepted payment of monies as death benefits from the second respondent and she became a beneficiary and was therefore bound by the rules. Mr Pammenter submitted that the applicant would be a beneficiary if she was entitled to the money. However, in the present case the first respondent contends that the applicant is not entitled to the money because she is not a dependant. That would therefore mean that according to the first respondent she is not a beneficiary and is therefore not bound by the rules.

[27] “Beneficiary” is defined in the rules as “Member, Dependant or Nominee”. The applicant is not a member of the Fund. She is also not a nominee. She lodged a claim for death benefits as a dependant and was paid some monies. The first respondent says that the applicant is not a dependant and that she should not have been paid the monies. It would seem that if the applicant is not entitled to the monies it is because she is not a beneficiary. If she is not a beneficiary then she is not bound by the rules. The very dispute that is sought to be arbitrated according to the first respondent’s demand for arbitration revolves around the question as to whether or not the applicant is a dependant and therefore a beneficiary. I agree with Mr Pammenter that it does not necessarily follow from the acceptance of the monies that the applicant is bound by the rules. She may or may not be a dependant. If it turns out that she is not a dependant then she is not a beneficiary and she is not bound by the rules. I am also not persuaded that the applicant acquiesced to be bound by the rules of the Fund by lodging a claim for death benefits. In my view the applicant simply lodged a claim for death benefits . The Fund handled the claim and in their sole discretion it decided that the applicant should be paid out a certain sum of money in respect of her claim. The applicant did not consent to be bound by the rules and she did not formally consent to arbitration.

[28] I do not agree with Mr Harcourt’s submission that the applicant submitted to arbitration because she signed the claim form and the rules were signed by the Chief Executive Officer of Transnet and the Ministers of Public Enterprises and Finance. In terms of section 1 of the Arbitration Act, an agreement referring a dispute to arbitration must be in writing. In Mervis Brothers v Interior Accoustics and Another 1999(3) SA 607 (WLD), the court stated that although section 1 of the Arbitration Act postulates signature by both parties, a document can constitute an agreement in writing even though it is only signed by one party. The court went on to say that depending on the circumstances of the case the fact that the signature of one party is lacking does not matter and that the test is whether the parties deliberately intend to record their agreement in writing show that the document so produced constituted agreement between them. In that case there was a written submission to arbitration which was signed by one of the parties. It was sent to the other party who received it and signed it. The duly signed document was returned together with another document which was signed by the other party containing further terms of the submission to arbitration. The court held that the second document constituted a counter-offer to the proposal of arbitration and that since it was received without demur by the first party, he therefore accept it. That was so even though he did not sign it. In my view Mervin’s case does not support Mr Harcourt’s submission. In the present case there is no written submission to arbitration by the applicant. I do not think that the signing of the claim form and the signing of the rules amounted to a written agreement to submit the dispute to arbitration. I am of the view that there is no evidence to support the contention that the applicant submitted to arbitration. I am accordingly of the view that there is no merit in Mr Harcourt’s submissions that the applicant acquiesced to be bound by the rules of the Fund and that she submitted to arbitration. Therefore, the question of withdrawal from arbitration does not arise.

[29] It is common cause that the first respondent declared a dispute with the Fund and demanded arbitration in terms of rule 15. It is also common cause that both the first respondent and the Fund have admitted that they are bound by the rules and that arbitration is going to take place.

[30] The Fund does not oppose this application. It indicated that it shall abide the decision of this court. However, the Fund stated that it agreed to arbitration subject to the proviso that all issues between all three parties be resolved in a single forum. The first respondent denies that he proceeded to arbitration on the basis that there would a submission by the applicant to such arbitration. The first respondent correctly contends that there is no basis for the assertion by Mr Maritz, who deposed to an affidavit for the Fund, that it is evident from the demand that the first respondent contemplated that the applicant should be a party to the arbitration.

[31] According to the demand for arbitration the parties are the first respondent and the second respondent. Both of them have admitted to be bound by the rules. They are also bound by the rules in terms of section 14(A)(6) of the Transnet Pension Fund Act because they are the “beneficiary” (nominee) and the “pension fund” The first respondent correctly contends that whether or not the applicant participates in the arbitration, is not his concern. He wants to set aside the award and to be paid as nominee what is rightly his. If there are problems in the Fund getting the money back from the applicant that is the Fund’s problem. The second respondent adopted a supine approach that it abides the decision of the court, but also sought to make representations as to the relief that ought to be granted. The second respondent elected not to enter the lists and oppose this application or make a counter-application. Mr de Bruyn, for the second respondent, submitted that the second respondent does not seek any relief from any party and that no relief is sought by the applicant from the second respondent. The first respondent is the only party that opposes the relief sought by the applicant in this matter.

[32] I accordingly find that the applicant has made out a case for the relief sought in paragraph 3 of the Notice of Motion. I am therefore of the view that the court must exercise its discretion in favour of granting the relief sought therein. The concerns raised by the second respondent are not such that the relief sought in paragraph 3 should not be granted.

[33] In the circumstances, it is not necessary to consider the further alternative relief sought by the applicant in paragraph 4(a) of the Notice of Motion. That relief is sought alternatively to paragraphs 2 and 3 in the event of it being held that any award made by the arbitrator pursuant to the said rule 15 is binding on the applicant.

Order

[34] I accordingly make the following order :

1. An order is made in terms of paragraph 3 of the Notice of Motion.

2. The first respondent is to pay the costs of the application including the costs involved in the employment of two counsel.

DATE OF HEARING 23-24 OCTOBER 2008

DATE OF JUDGMENT 12 DECEMBER 2008

APPLICANT’S COUNSEL MR.C.J. PAMMENTER SC, with him Mr P.C Prior

APPLICANT’S ATTORNEYS ANTHONY WHATMORE & COMPANY

1ST RESPONDENT’S COUNSEL MR A.W.M. HARCOURT

1ST RESPONDENT’S ATTORNEYS J.H. NICHOLSON STILLER & GESHEN

2ND RESPONDENT’S COUNSEL MR W.J. DE BRUYN

2^ND RESPONDENT’S ATTORNEYS WERKSMANS C/O

JOHNSTON & PARTNERS

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