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[2014] ZAGPJHC 19
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Mabasa v Mmela Financial Services (Pty) Ltd and Others (45084/13) [2014] ZAGPJHC 19 (28 February 2014)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
SOUTH
GAUTENG
LOCAL
DIVISION
JOHANNESBURG
CASE
NO: 45084
In
the matter between:
PHYLLIS
MABASA
Applicant
and
MMELA
FINANCIAL SERVICES (PTY)
LTD
First
Respondent
PHUTEGO
TRUST
Second
Respondent
SELWADI
EMMANUEL N.O.
(…………………………….) Third
Respondent
BANE
TODD
(…………………………….) Fourth
Respondent
MATLALA,
MARY-ANNE PHUTI N.O.
(…………………………….)
Fifth Respondent
CLAIMS
ADMINISTRATION AND
RECOVERY
SERVICES (PTY) LTD
(formerly
LBMJ)
Sixth
Respondent
ABSA
BANK
LIMITED
Seventh
Respondent
GUARDRISK
INSURANCE LIMITED
Eighth
Respondent
J U D G M E N T
N
F KGOMO, J
:
INTRODUCTION
[1]
On 29 November 2013 the applicant launched this application on an
urgent basis for orders –
1.1
Dispensing
with the forms and service modes prescribed by the Rules of this
Court and to dispose of this matter as one of urgency
in terms of
Rule 6(12) of the Uniform Rules of Court;
1.2
Declaring
that the applicant is entitled to the payment of the consultancy fee
by the first and/or sixth respondents in the amount
of R10 323 622,00
from the amount of R11 696 313,00 due to be transferred and paid to
them by the eighth respondent;
1.3
That
the sixth respondent is hereby forthwith interdicted and restrained
from in any way accessing and dispensing of the amount
of R11 696
313,00 once same is transferred and paid by the eighth respondent
into the sixth respondent’s bank account with
the seventh
respondent;
1.4
That
the first respondent be restrained and interdicted forthwith from in
any way accessing and dispensing of the above said amount
of R11 696
313,00 once same is transferred and paid by the eighth respondent
into the sixth respondent’s bank account with
the seventh
respondent;
1.5
Authorising
the eighth respondent to forthwith deduct the amount of R11 696
313,00 payable to the sixth respondent and forthwith
pay over the
amount of R10 323 622,00 to the applicant;
1.6
Alternatively
,
ordering the sixth respondent to itself, forthwith pay to the
applicant the consultancy fee of R10 323 622,00 immediately upon
receipt of payment of the amount of R11 696 313,00 from the eighth
respondent;
1.7
Further alternatively
,
that the eighth respondent be authorised to forthwith withhold
payment of the amount of R11 696 313,00 to the sixth respondent
and/or the first respondent until the dispute between the applicant
and the first and sixth respondents regarding payment of the
consultancy fee to the applicant would have been finalised;
1.8
Further
alternative to paragraphs 3, 4, 5 and 6 above, directing the sixth
respondent to pay directly to the applicant any amount
of the
consultancy fee that is found to be due, payable and/or agreed upon
or not in dispute in terms of the Consultancy Services
Agreement
between the parties;
1.9
That
the first and sixth respondents and/or any of the other respondents
pay the costs of this application if they opt to oppose
same, on a
scale as between attorney and client; and
1.10
Granting
the applicant such further and/or alternative relief as this Court
may deem meet.
[2]
All the respondents herein noted their intentions to oppose the
application on 2 December 2013. The first to sixth respondents
filed a joint answering affidavit. On the date of argument of this
application on 11 December 2013, the seventh respondent caused
it to
be put on record that they will abide the ruling of this Court.
As a consequence, should the applicant be substantively
successful in
this application, and costs are awarded against the unsuccessful
parties, the seventh respondent will not be part
of such costs
order.
THE
PARTIES
[3] The applicant is an
adult female insurance and risk consultant residing at [……………].
[4]
The first respondent, Mmela Financial Services (Pty) Limited (“
Mmela
Financial Services
”) is a limited
liability company and insurance broker, duly registered and
incorporated in terms of the company laws of the
Republic of South
Africa, and conducting business as an insurance broker, with its
registered address situate at [……..].
[5]
The second respondent, Phuthego Trust is a trust entity duly
registered with the Master of the High Court of South Africa under
registration number 1095/11, duly represented by its trustees as
would appear hereunder; cited herein insofar as it may have interest
in this matter and which has as its registered address, R [……..].
[6]
The third respondent, Selwadi Emmanuel, is an adult male insurance
manager, cited herein in his capacity as trustee of the second
respondent, with Identity Number [……………]
as well as insofar as he may have interest in this
matter, and
residing at S [……….].
[7] The fourth
respondent, Bane Todd, is an adult male teacher and director of the
sixth respondent and also a trustee of the second
respondent, cited
herein in his representative capacity, with Identity Number [……………],
and insofar as he may have interest in the matter; ordinarily
resident at [……………].
[8]
The fifth respondent, Matlala Mary-Jane Phuti, is an adult female
insurance consultant with Identity Number [……………],
cited herein in her capacity as trustee of the second respondent, and
insofar as she may have interest in this matter; ordinarily
resident
at [……………].
[9]
The sixth respondent, Claims Administration & Recovery Services
(Pty) Ltd (formerly LBMJ Recovery Services (Pty) Ltd), is
a limited
liability company duly registered and incorporated as such in
accordance with the company laws of the Republic of South
Africa
(“
RSA
”);
cited herein in its capacity as the representative of the Mdau
Insurance Brokers, and conducting the business of an insurance
broker, with its registered address situate at [……………].
[10]
The seventh respondent, Absa Bank Limited, is a banking institution
duly established and registered as such in accordance with
the
Banking Laws of the RSA; cited herein insofar as it may have interest
in this matter; with its registered address being situate
at
[……………].
[11]
The eighth respondent, Guardrisk Insurance Limited, is a company duly
established and registered as such in accordance with
the company
laws of the RSA; carrying on business as an insurance company; with
its registered address situate at [……………].
NATURE
OF THE PROCEEDINGS
[12]
This is an interdictory and ancillary relief by the applicant against
the respondents as set out in the Notice of Motion. The
dispute
arises out of an oral consultancy services agreement entered into by
and between the applicant, acting in person and the
first and second
respondents, represented thereat by Mohobi Ramatsitsi (“
Ramatsitsi
”)
and/or Todd Bane (“
Bane
”).
[13]
The applicant claims that the amount of R10 323,00 is due and payable
to her by the first and/or second and/or sixth respondents
in respect
of completed and successful consultancy services, and that the
respondents are unlawfully or maliciously refusing or
neglecting or
procrastinating in paying her which may lead to her financial
ruin soon.
URGENCY
[14]
Counsel for the respondents argued that the matter should be struck
off the roll for lack of the requisite urgency.
[15]
After listening to argument and submissions from both sides, perusing
the papers herein and considering this aspect, I am of
the view and
finding that this matter is urgent in the requisite degree, thus
being justifiably set down in the urgent court.
INTERDICTORY
RELIEF SOUGHT
[16]
The respondents have not argued that the requirements of the grant of
an interdict have not been made out herein by the applicant.
That
regardless, I have considered the papers filed and argument submitted
on behalf of the applicant. I am satisfied that
the
requirements for the grant of an interdict have been met.
GENERAL
BACKGROUND AND FACTUAL MATRIX
[17]
The stories told by both sides herein are diametrically opposed
and/or mutually destructive. They evidenced at the end
of the
day disputes of fact that cannot be resolved on the papers alone.
They need to be referred to either evidence or full
trial.
[18]
I will come back to this aspect after setting out the respective
sides’ versions.
APPLICANT’S
VERSION
[19]
According to the applicant in early 2010, Ramatsitsi, the Managing
Director of the first respondent approached the applicant
with a
proposal that the latter enter into a consultancy agreement with the
first respondent wherein she was to act as their insurance
consultant
on an insurance project which the first respondent had with the
National Treasury Department of the Government of the
RSA. This
exploratory approach was followed by a formal meeting between the two
at the Mugg & Bean restaurant at Mulbarton,
Johannesburg South
during the same month of December 2010.
[20]
It was at this meeting where or that Ramatsitsi told the applicant
that the first respondent had won a tender bid with reference
number
RT 68/2010 from the Treasury of the RSA for the provision of finance
and administration of Credit Life Insurance on subsidised
motor
vehicle fleets purchased by employees of the Government. The
tender was for a period of five years, ending or terminating
by
effluxion in September 2014. It was a transversal contract
utilised by employees of all Government Departments without
reservation as well as the Departments themselves.
[21]
According to the applicant further Ramatsitsi further told her that
in terms of the project the first respondent was required
to provide
short-term insurance on motor vehicles purchased by the State
employees on subsidies granted to them by the Government
as well as
provide credit life insurance cover on the lives of each employee
purchaser as security for due performance of cover
until the employee
has paid off the motor vehicle.
[22] The first respondent
had based its premium quotation on figures worked out by Centriq
Insurance Company (“
Centriq
”) at the rate of R2,50
per R1 000,00 on the total price of each vehicle insured. At
the end of it all the commission
to be earned was 7,5% of the total
values of those vehicles insured and their owners.
[23]
As the first respondent was not entirely happy with this commission
as it effectively translated in it getting only 18c from
each R2,50,
with the balance being pocketed by Centriq. Ramatsitsi then
reportedly made an offer to the applicant that she
act as their
consultant, the primary task being to research and come up with a
dispensation that can result in higher profit than
the Centriq
scheme.
[24]
It was a further term of that proposal or offer that should the
applicant secure a scheme which would yield a profit share
with an
underwriter on the basis of 50-50% profit sharing ratio, the first
respondent would pay her a consultancy fee of R3 million
from its 50%
share of the profit. Furthermore, in the event of profit gains
ultimately secured in the scheme the applicant
should research being
higher than 50% or less than the 50% ratio, the consultancy fee
payable to her would be adjusted
pro
rata
, based on the total percentage
payable to the first respondent. In particular, in the event the
applicant managed to secure a profit
margin of 100% for the first
respondent, her consultancy fee would increase to R6 million.
[25]
The applicant accepted the offer or proposal to so act as the first
respondent’s consultant. She set upon doing
research in
the execution of her part of the contract or agreement. During
that research process she discovered that the
arrangement proposed or
sought by the first respondent of a profit sharing scheme between a
broker and an underwriter had been
outlawed by the Financial Services
Board (“
FSB
”).
[26]
She went in and looked for an alternative avenue that would bear
similar results to avoid a breach of contract with the first
respondent. She came up with a scheme or arrangement based on a
cell-captive structure in terms whereof the first respondent
would
achieve the same or even better results. This was so because the
first respondent did not have an insurance licence and also
was not
by law permitted to act as both broker and underwriter or insurer at
the same time. Ramatsitsi accepted the new plan
on behalf of
the first respondent.
[27]
The structure, shape and purpose of a cell-captive scheme entailed
the following:
27.1
A
corporate entity which is separate and distinct from the first
respondent had to be formed. This new entity would in turn rent
an
insurance licence from a registered insurance company to enable it to
underwrite the risk on the credit life insurance policies
for the
buyer Government employees in line with the tender award project.
27.2
Then
another insurance company with an insurance licence would be
approached to re-insure the risk, i.e. the corporate entity would
be
underwritten by this other insurance company as a risk. In that
way a cell become established within which the corporate
entity is
captured and allowed to underwrite the credit life insurance policies
as if it was itself the initial insurer or underwriter.
27.3
The
insurance company that directly underwrites the risk would declare
and pay dividends on a quarterly, half yearly or annual sequence
or
basis, depending on the choice agreed on, directly to the new entity
formed except that in the period running up to the formation
and
commencement of operations by that entity, the dividends would be
paid to the first respondent. Insofar as the withdrawal of
funds is
concerned, the capital requirements of the cell are subject to the
level of risk within the cell and as a principle, the
higher the
total premium, the higher the capital requirements will be.
Furthermore, the insurance company that insures or
underwrites
the risk would calculate the required level of capital in the cell on
a monthly basis, and the surplus from the process
or sale can either
be left in the cell-captive or withdrawn as dividends paid to the
entity formed at the agreed upon frequency
or intervals.
Technically, once a profit sharing payment is made to the entity, it
may do as it wishes with the money.
[28]
Based on the aforegoing and the acceptance of the cell-captive
structure or scheme by the first respondent, a separate and
distinct
entity was to be formed. This was the birth or creation of the
sixth respondent.
[29]
Ramatsitsi made available an entity going by the name of LBMJ
Recovery Services (Pty) Ltd in July 2011. This entity was
changed to Claims Administration and Recovery Services (Pty) Ltd
(sixth respondent) on 11 April 2013. Ramatsitsi had co-owned
this entity with the fourth respondent.
[30]
To bring her plans to fruition the applicant facilitated the
formation of a trust entity being the second respondent, Phuthego
Trust in January 2011. The third to fifth respondents became the
trustees thereof. The second respondent then in turn took
over
ownership of LBMJ (currently the sixth respondent) in July 2011, when
it was made available. Since LBMJ was not registered
as a
financial Services Provider (“
FSP
”)
and did not have an insurance licence, it rented one from an entity
known as Mdau Insurance Brokers (“
Mdau
”)
so that it could operate as a FSP for purposes of the cell-captive
structure or scheme, effectively acting as a representative
of Mdau
in return for a rental amount of R3 000,00. An entity by the names of
Phakama was then engaged to underwrite the administration
of the
credit life insurance policies on behalf of the sixth respondent in
return for a fee in that regard.
[31]
The applicant emphasised that from the aforegoing, it became an
express
alternatively
implied,
alternatively
tacit
term of the consultancy agreement that once the cell-captive
structure is completed and operational, the new entity being
the
sixth respondent (formerly LBMJ) would replace the first respondent
as the party contracting with the applicant in terms of
the
consultancy agreement and would from there onwards, become the
responsible party for the payment of the consultancy fee to
her.
[32]
The applicant encapsulated the actual and full nature and operation
or operational modalities in a document annexed to the
Founding
Affidavit as Annexure “B”, which was made available to
Ramatsitsi and the first respondent on 2 March 2012.
[33]
Further and in the course of executing her mandate by making the
cell-captive structure work, the applicant approached Liberty
Life
Insurance Company and the latter agreed to become the re-insurer of
the risk, being the sixth respondent under the licence
of a related
underwriter, Guardrisk Insurance Ltd (the eighth respondent) at a fee
rate of 36c per R1 000,00 on the total price
of each motor vehicle
purchased. The applicant personally approached the eighth
respondent who agreed to insure and underwrite
the risk. In that
manner, Liberty Life and the eighth respondent created a cell within
which the sixth respondent was captured
and enabled to become an
insurer (or underwriter) under the licence of Guardrisk Insurance
(the eighth respondent).
[34]
One of the outcomes of the cell-captive structure was that in the
three months period before it became fully operational, Liberty
Life
acted as the provisional insurer (or underwriter) and the credit life
scheme was, during that period, placed in the category
of a funeral
policy scheme which yielded higher returns than originally projected
or anticipated. The profit payments or
dividends from that
period were paid directly into the first respondent’s bank
account. This effectively yielded the first
respondent higher profit
gains on a non-sharing basis. It was a clean 100% or more
profit made. The applicant consequently
claims and argued that
in terms of their consultancy agreement she was entitled to at least
R6 million and a further
pro rata
share for higher returns received from Liberty Life through the
eighth respondent. She employed an actuary who computed her
entitlement
at the amount of R10 323 622,00 which, despite demand,
the respondents failed, neglected or refused to pay to her. She
argued that
since the inception date of the cell-captive structure or
scheme, once the sixth respondent was established in July 2011, it
immediately
replaced the first respondent and became the direct
beneficiary or payee entitled to the payment of dividends from the
eighth respondent
and it is obliged to pay the applicant its
consultancy fees. The sixth respondent has also failed or refused to
honour its obligations
towards the applicant, thus breaching their
agreement. It has retained all the dividend it received when
Liberty Life was
still the payer and has failed or refused to pay the
applicant her dues in consultancy fees since its formation after July
2011.
[35]
The applicant further argued that the sixth respondent has further
not made and is not willing or prepared and/or is actually
refusing
to make any undertaking and firm commitment to pay such consultancy
fees from the dividends already received from the
eighth respondent
and/or Liberty Life, which latest payments were expected in the days
immediately following the institution of
these proceedings.
[36]
Counsel for the respondents bluntly stated in court during argument
that the respondents were refusing to pay the applicants
although
they have already received dividend payments from the eighth
respondent. When I asked what the reason was for this,
he
stated curtly that the applicant must wait her turn to be paid.
[37]
It deems to be mentioned at this stage that the respondents
acknowledged or conceded that the applicant is entitled to be paid
the sum of R6 million although they call it a bonus. According to the
applicant further, the latest payments awaited or expected
are for
the past six months.
[38]
The actuarial calculations made by Messrs Gerard Jacobson Actuaries
are attached to the Founding Affidavit as Annexure “C”.
RESPONDENT
[39]
According to the respondents, especially the first to sixth
respondents, the applicant was a full-time employee of the first
respondent, appointed on 2 January 2011. There is a letter attached
to the respondents’ Answering Affidavit marked Annexure
“O”
which the respondent rely upon as the “
contract
of employment
” between the
applicant and the first respondent. Unfortunately, this is only
a letter offering the applicant employment
as the Chief Operating
Officer (“
COO
”)
of the first respondent. It is also not signed – be it by the
first respondent’s representatives or by the
applicant.
There is no response to the “
offer
”
by the applicant. Whatever it is, this document has no legal
basis. It is an offer that ostensibly never went
beyond its
maker. It is no employment contract.
[40]
According to the respondents, LBJM Recovery Services (Pty) Ltd was
the brain child of the first respondent established as an
insurance
supplier company which was later converted by it into an insurance
product company. As this entity did not have
the right or
capacity to underwrite and insure, the first respondent took
advantage of its relationship with the eighth respondent
–
being its registered broker – and their negotiations led to the
cell-captive scheme or arrangement idea.
[41]
The end result would be as follows:
41.1
An
administrator would collect premiums from clients.
41.2
An
entity called Phakama would deduct its fees from the total income.
41.3
A
so-called risk based premium would then be paid to the cell-captive
of which eighth respondent and LBMJ Recovery Services (Pty)
Ltd would
be shareholders of the cell-captive.
41.4
The
first respondent would then in turn be paid a brokerage fee of 7,5%
of the risk premium while the cell-captive will receive
the total
premium. The understanding according to the respondent was that
the first respondent does not draw an income directly
from LBMJ
Recovery Services (Pty) Ltd.
[42]
At this stage, according to the respondents, the third respondent was
employed as the first respondent’s Sales and Compliance
Manager. According to them further, all the suffling and negotiations
that ultimately led to the coming into being of the scheme
of things
currently operative started and became realities before the applicant
was appointed as the first respondent’s Chief
Operations
Officer (“
COO
”)
– meaning that the cell-captive idea was developed and
nurtured, not by the applicant but by among others, Ramatsitsi,
the
third respondent in consultation with employees of ISS Comply
Services, particularly the latter’s Mr Chris van der Walt.
[43]
I do not propose to elaborate on the finer details of what the
respondents, through Ramatsitsi as confirmed in confirmatory
affidavits, expatiated on. Suffice to state that the totality
of whatever picture emerged at the end of the day pointed to
massive
disputes of fact that cannot be determined on the papers alone.
The dispute or issues in dispute should thus be resolved
by either
evidence on them specified or to trial. Evidential mechanisms like
those set out in milestone cases like the
Plascon-Evans
case cannot avail any of the parties herein.
[44]
Counsel for the respondents strongly submitted that the applicant’s
case is founded on false foundations coupled with
self-created
urgency.
ANALYSIS
[45]
I thoroughly checked authorities and the law relating to urgency and
have arrived at a conclusion that there is no self-contrived
or
self-created or artificial urgency here. The circumstances of this
case justified its enrolment in the Urgent Court.
[46]
Furthermore, the respondents do not dispute that the applicant is
entitled to at least R6 million from the moneys she is owed.
This is what the applicant has asked for in prayer 1.8 above. The
respondents confirm this in their answering affidavit.
[47]
It is my finding that there is nothing in the papers or anything said
in argument to suggest that this entitlement is not due
and payable,
more so that there is evidence that the money for it has been
received by the respondent(s). While it is so that the
disputes of
fact relating to the balance due to the applicant should be dealt
with further, it is my further finding that the applicant
should be
paid the R6 million not in dispute forthwith.
[48]
I have considered issues of whether this matter should be referred to
evidence on a specific point(s) or straight to trial.
[49]
After perusing the affidavits filed of record herein as well as
factoring what was stated by both parties in argument, it is
my
considered view and finding that the matter should be referred to
trial. It is my further view that the parties have within
them
the wisdom to settle issues herein but are protracting litigation to
put each other or the other party in its place.
That is my
personal view. If the parties feel they are sufficiently
financially endowed to continue litigating against each
other over
these issues, so be it. It is their own decision. Mine is just
to make it possible for them to do so. All the
risks are theirs.
COSTS
[50]
At a glance, one may say that it will not be in the best interests of
justice to order any of the parties to pay the costs
of this
application this far as the issues to be resolved in the full trial
are so intertwined that the entire issue of costs should
be decided
by the court dealing with the trial. If they decide to settle
their disputes in-between, they can settle the issue
of costs in
their settlement.
[51]
Normally successful parties are awarded costs of the litigation.
However, courts have a discretion to decide, based on the
facts of a
case, to whom costs should be awarded.
[52]
In this case, the respondents knew throughout that there was no
dispute over the R6 million that is due and payable to the
applicant. Yet, they, i.e. those that were in the know and
knowledge, did not put this aspect out of dispute. Even during
argument their counsel conceded that the applicant was entitled to
the above amount yet still argued that the entire application
be
dismissed, based on one or other technical point that has nothing to
do with justice between man and man.
[53]
It is thus my view and finding that the costs attaching to a
proportionate part of the dispute should be awarded to the applicant
at this stage.
[54]
The R6 million due and payable to the applicant represents roughly
60% of the total claim. As such the applicant should
be awarded
60% of the costs of litigation up to this stage. If the parties wish,
to continue litigating over the balance, then
they would know that
they are grappling with each other with a costs purse of only 40%.
ORDER
[55]
In the circumstances of this case, the following order is made:
55.1
The
sixth respondent and/or any other of the respondents who may be in
possession of or in charge or control of the resources in
issue here
is/are ordered and directed to pay to the applicant an interim amount
of R6 million (R6 000 000,00) directly and forthwith;
55.2
The
sixth respondent directly and all the others who opposed this
application are ordered to pay 60% (sixty percent) of the costs
to
the applicant;
55.3
The
above payments to be the joint and several liability of the
respondents, the one paying the others being absolved;
55.4
All
other issues raised here in except the one dealt with in paragraph
55.2 above are referred to trial;
55.5
The
applicant’s finding affidavit incorporating the replying
affidavit to stand as summons;
55.6
The
applicant to serve her declaration within 30 (thirty) days of date of
this judgment;
55.7
The
respondents to respond appropriately within the normal time frames
laid down;
55.8
The
parties to do all that is required and expected of them until the
matter is set down for trial.
__________________________________________
N
F KGOMO
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION
JOHANNESBURG
FOR THE APPLICANT
INSTRUCTED
BY DENGA
INCORPORATED
PRITCHARD
STREET
JOHANNESBURG
TEL
NO: 011 492 0037
FOR THE
RESPONDENTS
INSTRUCTED
BY SNYMAN
ATTORNEYS
HOUGHTON,
JOHANNESBURG
TEL
NO: 011 532 8803
DATE OF
HEARING DECEMBER
2013
DATE OF
JUDGMENT
28 FEBRUARY 2014