Mutsila v Municipal Gratuity Fund: Adequate Investigations and Death Benefit Allocations under Section 37C

On 8 August 2025, the Constitutional Court handed down its unanimous judgment in Mutsila v Municipal Gratuity Fund and Others, a case that brought into sharp focus the obligations of pension and retirement funds when allocating death benefits under Section 37C of the Pension Funds Act (“the Act”). At its heart was a dispute over whether the Fund had adequately discharged its investigative duty before deciding how to distribute the benefit. Embedded within that dispute was an important interpretive question – at what point in time should dependency be determined for purposes of such allocations?

Background

Mr Takalani Mutsila, a member of the Municipal Gratuity Fund, passed away in December 2012. This triggered a death benefit of R1 614 434.86 to be allocated in terms of Section 37C of the Act.

The applicant, Ms Tshifhiwa Mutsila, married to the deceased in terms of a civil marriage, submitted a claim for payment of the death benefit on behalf of herself and their five children.

Separately, Ms Dipuo Masete claimed a share for herself and two children she alleged were the children of the deceased. She also alleged that she was married to him in terms of customary law and that he had supported her and the children financially.

On 9 April 2014, the Fund resolved to allocate 52.5% of the benefit to Ms Masete and her children, 22.5% to Ms Mutsila, and the remainder to Ms Mutsila’s children.

Litigation History

Ms Mutsila disputed both the alleged customary marriage and the dependency of Ms Masete and her children. She lodged a complaint with the Pension Funds Adjudicator (“the Adjudicator”), challenging the Fund’s decision and alleging that it had failed to properly investigate these claims before allocating the death benefit. The Adjudicator found the Fund’s investigation inadequate and directed it to reconsider the allocation.

Following this decision, the Fund approached the High Court for a declaratory order. The High Court agreed with the Adjudicator’s substantive findings, holding that the Fund had failed to properly investigate before making an allocation. The Fund then appealed to the Full Court, which upheld the High Court’s decision.

It then appealed to the Supreme Court of Appeal (“the SCA”), which overturned the decisions of the courts below. The SCA found that the Adjudicator had breached the audi alteram partem rule by not affording the Fund a proper opportunity to respond, and held that the dependency of Ms Masete and her children had not been challenged. It reinstated the Fund’s 2014 decision.

Ms Mutsila then sought leave to appeal to the Constitutional Court.

The Constitutional Court’s Findings

The Constitutional Court agreed with the SCA that the Adjudicator’s process was procedurally flawed. Section 30F of the Act requires that the Fund be given a reasonable opportunity to respond to allegations, and this had not occurred.

However, the Constitutional Court held that the SCA was incorrect in concluding that dependency of Ms Masete and her children had not been properly challenged. The applicant’s objection to the dependency of Ms Masete and her children was explicit in her complaint to the Adjudicator and her affidavits before the courts.

On the Fund’s investigation, the Constitutional Court found it wanting. The Fund had relied on a lobola letter and affidavits from relatives to accept the alleged customary marriage and financial support, but had not independently verified these claims. It had not investigated the nature and extent of any support provided, nor had it confirmed paternity. Evidence had emerged that the biological father of the children was another man, Mr Mphafudi, who was alive and capable of supporting them, who was also found to be Ms Masete’s customary husband.

While there had been custody proceedings between Ms Masete and Mr Mphafudi, the Constitutional Court made clear that those proceedings had no bearing on its order. The question before the Court was whether, on the evidence available, the Fund had discharged its duty to conduct a proper investigation before making an equitable distribution. It had not.

The Court stressed that the extent of factual dependency is central to any equitable allocation under section 37C, and the Fund’s failure to establish this meant its decision was tainted.

When Is Dependency Determined?

The Constitutional Court proceeded to settle the interpretive issue left uncertain after the SCA’s 2019 decision in Guarnieri v Fundsatwork Umbrella Pension Fund (“Guarnieri”). In Guarnieri, the SCA held that dependency is determined at the date the fund makes its decision, and that the person must still be a dependant at the time when the distribution is made. In Mutsila, the Constitutional Court rejected this approach, holding instead that the identification of dependants must be based on their status as at the date of the member’s death.

The Court explained that section 37C involves two distinct stages:

1. Identifying dependants – This is a factual enquiry into who qualified as a dependant at the time of death, applying the statutory definition. This status is fixed at that point and does not change.
2. Making an equitable distribution – Once dependants have been identified, the fund must decide how to allocate the benefit among them. At this second stage, the fund may take account of changes in circumstances that occurred after the member’s death. For example, it may consider if a dependant has since gained employment, remarried, or received other resources, as these factors may affect the extent of their financial need.

The Court stressed that simply qualifying as a dependant at the date of death does not guarantee receipt of a share of the benefit, nor does it entitle a dependant to a particular proportion. It only means that they are entitled to be considered in the equitable allocation process.

By anchoring the dependency determination to the date of death, the Court aligned the interpretation with the statutory text, the social security purpose of section 37C, and practical fairness. This approach avoids the uncertainty and potential unfairness that can arise if dependency status could be lost merely due to post-death changes in a person’s circumstances.

The Court’s Decision

The Constitutional Court set aside the orders of the High Court, Full Court, SCA, the determination of the Adjudicator, and the Fund’s April 2014 decision. It remitted the matter to the Fund to make a fresh determination within three months, based on dependency and equitable allocation as at 9 April 2014, the date of its original decision.

Implications for Funds

By making clear that funds must conduct a thorough, evidence-based investigation before allocating a death benefit, and by settling the timing question on dependency determination, the judgment strengthens the statutory safeguards intended to protect genuine dependants. The judgment underscores that the duty to investigate is not a mere formality – it is central to ensuring fairness, accuracy, and compliance with the social security purpose of section 37C.