High Court Ruling on EPF Account Mergers: A Cautionary Tale for Families

 

For many people, the savings in an Employees' Provident Fund (EPF) account may be the only savings or legacy left them. The EPF is a critical savings system designed to help a large portion of the population build personal savings for their retirement years. By compelling regular contributions from employees and employers, the EPF ensures that individuals have a financial cushion in their old age. Beyond securing retirement, the EPF also acts as a legacy tool, allowing contributors to pass on their accumulated savings to their families, thereby providing financial stability and support to their loved ones after their passing. This dual purpose marks the importance of the EPF in fostering long-term financial security and intergenerational wealth transfer.

The recent decision of the High Court in Shah Alam in Divyyaa Machap v Lembaga Kumpulan Wang Simpanan Pekerja reveals how public expectations of the fund can be undermined by the interpretation of laws governing the distribution of funds in a deceased contributor’s account.

This unprecedented case involved a contributor who had two EPF accounts. How this happened is not explained in the judgment, but it appears that the First Account was created with the contributor’s old identity card, and the Second Account with his new identity card. While the First Account had no funds in it, it did have a nominated beneficiary. The Second Account contained funds but had no nominated beneficiary.

The two accounts may not have caused any problem to a subsequent claimant to the funds. The beneficiary to the First Account would have found no funds in the First Account whilst claims to the funds in the Second Account would have been determined by the laws relating to the distribution of the estate of deceased persons including the provisions of the Probate and Administration Act 1959.

However, as the Court found, the situation became complicated when the EPF merged these two accounts into a single account. In the process, the Second Account was subsumed into the First Account. EPF’s action effectively deleted or erased the Second Account, leaving the contributor with only the First Account. The effect of the merger was that the account with a nominated beneficiary but which had no funds now had all the funds of the contributor.

The merger led to competing claims to the contributor’s funds upon the contributor’s death; between the named beneficiary to the First Account and the contributor’s daughter, who was the administrator of the contributor’s estate.

The daughter/administrator challenged the EPF’s decision to merge her father’s accounts and its subsequent decision to regard the beneficiary of the First Account as the beneficiary of the merged account.

The Court ruled in favour of the EPF. It decided that while the law did not provide the EPF with the power to merge accounts, there were no provisions within the Act, Regulations, or Rules that explicitly prohibited such action. Consequently, the Court concluded that the EPF was entitled to exercise its administrative powers to merge the contributor’s accounts.

The Court acknowledged that its decision would have a devastating impact on the Plaintiff, but it emphasized that the EPF's role was to perform its duties as mandated by statute, without any vested interest in the outcome. The Court also noted that while the contributor had not nominated a beneficiary for the merged account, he had not cancelled the beneficiary nominated for the First account.

With respect, the decision of the Court is not entirely satisfactory. While it may in some circumstances, be reasonable to imply that EPF had the power to merge accounts as an administrative action, doing so without placing on the EPF a corresponding obligation to inform the account holder about the implications of the merger is clearly unjust. At the very least, the EPF should have requested confirmation from the account holder if he wished to maintain the nominated beneficiary in the merged account. If the EPF was unable for any reason to determine the contributor’s intention, it should not have merged the two accounts which they had obviously approved at the time they were created.

EPF could have assumed from the circumstances that the account holder felt no need to change or cancel the beneficiary he nominated to the First Account as there were no funds in that account and that he did not nominate a beneficiary to the Second Account because he intended the funds in that account to devolve according to the Probate and Administration Act 1959. Contributors may not have named a beneficiary precisely because they intended their savings to be distributed in accordance with laws governing the distribution of estates and not to a single beneficiary. It would therefore be wrong to attribute to the contributor any blame for the events that led to the case.

The case reveals potential pitfalls in the administration of EPF accounts, highlighting the importance for families to establish the intentions of contributors, especially principal breadwinners of the family, regarding the distribution of their EPF savings while the contributor is still alive. However, these are sensitive matters which most families would be reluctant to broach. Hence, it must fall on the EPF to show greater engagement with contributors when they make crucial changes to their accounts and not claim the changes were made as an administrative right.  They must also be engaged to a greater degree in educating the public on the complexities of how the fund is managed through media, trade unions, and employee associations. If an individual is entitled only to a single account, that information must be reiterated to the public, whether it is law, policy or simply an administrative convenience.

A Duty to Prevent Bullying in Schools

 

By

U K Menon & Dr Wan Abdul Manan Wan Muda

The Federal Court’s decision issued on 29 March 2024 of a case of bullying in a government residential school has important implications for how schools, the Ministry of Education, and the Government respond to bullying on school premises. The court's ruling sheds light on the legal obligations and responsibilities related to preventing bullying in educational settings.

The name of the case is not being disclosed to protect the privacy of the students involved, the

Bullying in Schools

Bullying is a problem that has been present in our schools for a long time. Unfortunately, it appears to be getting worse as time goes on. According to the Ministry of Education, there were 4,994 cases of bullying reported until October of last year. This number is even higher than the already worrying 3,887 cases reported in 2022.

Acknowledging this problem, the Ministry of Education, schools, teachers, NGOs, and even the public have implemented strategies to counteract this phenomenon. Most of these strategies are focused on educating the perpetrators and victims of bullying on how to avoid or resist bullying. The Federal Court decision now adds a legal duty on schools and the education system to prevent bullying. It establishes parameters of the duty of care and the standards of safety to prevent this growing scourge.

The case is an extreme instance of bullying that took place in a government residential school. The student victim was assaulted by five students leaving him with injuries that left him deaf in one ear. No reasons for the assault are disclosed in the judgment. The student victim was taken into the quarters of the head prefect where he was continually assaulted in the middle of the night for almost five hours. The perpetrators beat, kicked, and assaulted him in different ways.

Despite the injuries that were inflicted on him, the student victim did not report the incident to the school authorities for fear of reprisals. He only revealed the cause of his injuries when he went for follow-up treatment at a local clinic three days after the assault. It was only then that his father was informed. His father took him to hospital and a police report was made.

The five assailants were charged at the Magistrates' Court for an offence under the Penal Code.  They each pleaded guilty to the charge and were put on good behaviour bonds for two years with a monetary surety of RM1000.00. No conviction was recorded.

The Federal Court’s decision was the culmination of a civil suit the student victim had initiated in the High Court. His action was against his five assailants, the Head of the School, the Senior Assistant in charge of student affairs, the Ministry of Education, and the Government of Malaysia, the latter two on the ground that they were responsible for the actions of the other defendants.

The High Court had decided in favour of the student victim. The judge hearing the case was satisfied that the claim was proved against all the nine defendants named in the suit. The first five defendants for the actual assault, the Head of the School, and his Senior Assistant because the assault took place on the premises of the school and were thus liable for the acts of the first five defendants. The Ministry of Education and the Government of Malaysia were held vicariously liable.

The decision of the High Court was however, reversed by the Court of Appeal which was not satisfied that there was adequate evidence to establish the assault, that the school owed a duty of care, or if there was a duty, the assault in the instance was foreseeable by the school.

The student victim applied for and was granted leave to appeal to the Federal Court, which reversed the decision of the Court of Appeal on all points raised by the latter court.

The Decision of the Federal Court

This note only deals with the Federal Court’s decision on the defendants’ liability for the bullying on the school’s premises. It does not deal with the Court of Appeal’s doubts about whether the assailants’ admission of guilt in the Magistrate’s court was sufficient to establish the civil action in tort for the assault inflicted on the student victim.

About the duty of care to students

The Federal Court emphasised the importance of safety in schools.

‘It goes without saying that schools, residential or otherwise must be safe and conducive for the purpose(s) intended. Otherwise, the providers and consumers of such institutions would face considerable difficulties in enrolment, whether of student or teaching faculty.’

Government schools, established by the Ministry of Education, despite having a physical presence and a name, are not legal entities and as such legal duties cannot be imposed on them. A duty of care for the safety of students and other persons who may be on the premises of the school falls on the teachers, the officials of the school such as the principal and ultimately on the Ministry of Education, and the Government.

Teachers’ Duty to Students

The Federal Court reiterated the special relationship between teachers and similar personnel and the student. Because of that relationship, the teachers owe a duty to the student to take reasonable care for the safety of the student. This includes a duty to supervise the students when the students are within the school to maintain discipline, safety and the wellbeing of the students. The degree of supervision depends on the circumstances of each case. This account of the relationship resonates with the traditional theory that teachers stand in the position of parents (in loco parentis) to their students. Under that theory, teachers are said to have the same power over their students and the same responsibilities as parents over their children.

Duty of the Ministry and the Government

The Federal Court held that the Ministry of Education and the Government of Malaysia also owed a duty to all students enrolled in the school, collectively and individually. According to the Court, these defendants ‘are responsible for their safety, welfare and well-being, and these students are safe from harm, whether caused by conditions of the premises themselves or by others occupying or licenced to be within the premises’. In the instant case, the Federal Court held both the Ministry and the Government vicariously liable for breaches of the duty of care by the school officials and for the actions of the students who assaulted the student victim because the assailants too were registered as students in the school.

Duty of Care to Prevent Bullying in Schools

As stated earlier the apex court’s decision establishes a duty on teachers, other school officials, the Ministry of Education, and the Government to prevent bullying in schools.

The Federal Court also lays down the standard of safeguards that must be implemented against bullying, regardless of whether the school is residential or otherwise. The Court stipulates three areas of action for schools to discharge their duty to prevent bullying.

First, there must be a dissemination of awareness of bullying through posters and other means, which the Court said would serve to prevent bullying.

Next, it stipulates that that the curriculum must include a teaching of values and mutual respect. In this respect, it states that ‘the discipline of students of all ages remains a necessary part of any education curriculum. Basic values of mutual respect for one another must be inculcated in all our young and it should not be left to expensive and unfortunate incidents such as were revealed in the appeal to remind us of these values.’

Thirdly, the Court held that teachers and other similar personnel are under a duty to supervise the students when the students are within the school, for the ultimate purpose of maintaining discipline, safety, and wellbeing of the students. The degree of supervision depends on the circumstances of each case. Evidence in the instant case revealed that spot checks that were normally carried out in the room where the assault took place were not carried out on the night of the incident.

Concluding Remarks

The Federal Court’s decision is based on a case of bullying where physical violence was inflicted on the victim

 Bullying is manifested in many ways. Physical abuse as happened in the instant case is only one way bullying is done in schools. Other forms of bullying can be subtle and covert, creating fear and anxiety in the victims that can be as serious or worse than physical abuse. Although these latter forms of bullying are not dealt with in the Federal Court’s decision, schools and the Ministry must consider them when deciding on ways to prevent bullying.

Finally, while the Federal Court’s decision was based on events in a Government school, it is submitted that the same duty of care will apply to private and international schools and institutions of higher education.