Old Mutual Life Assurance Company (South Africa) Ltd v Brand and Another (532/08) [2009] ZAECPEHC 47 (3 September 2009)

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[2009] ZAECPEHC 47
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Old Mutual Life Assurance Company (South Africa) Ltd v Brand and Another (532/08) [2009] ZAECPEHC 47 (3 September 2009)

FORM A
FILING SHEET FOR EASTERN CAPE,
PORT ELIZABETH
PARTIES
:
OLD MUTUAL LIFE ASSURANCE COMPANY (SOUTH AFRICA) LIMITED v J C
BRAND + 1
NOT
REPORTABLE
Case
Number:
532/08
High
Court:
PORT
ELIZABETH
DATE
HEARD:
20
AUGUST 2009
DATE
DELIVERED:
3
SEPTEMBER 2009
JUDGE(S):
EKSTEEN
AJ
LEGAL
REPRESENTATIVES –
Appearances:
for
the Plaintiff(s):
ADV
MULLINS
for
the Defendant(s):
MR
SPRUYT
Instructing
attorneys:
Plaintiff(s):
JOUBERT
GALPIN AND SEARLE
Defendant(s):
FRIEDMAN
SCHECKTER
CASE
INFORMATION -
Nature
of proceedings
:
Key
Words
:
Summary:
IN
THE HIGH COURT OF SOUTH AFRICA
NOT
REPORTABLE
EASTERN
CAPE, PORT ELIZABETH
Case No.:
532/08
Date
delivered:
In
the matter between:
OLD
MUTUAL
LIFE ASSURANCE COMPANY
(SOUTH
AFRICA) LIMITED
Applicant
a
nd
JOHANNES
CHRISTOFFEL BRAND
First Respondent
CAROL
ANN BRAND
Second Respondent
JUDGMENT
EKSTEEN
AJ:
This the return
day of a provisional sequestration order in respect of the estate of
the first respondent. The applicant seeks
a final order of
sequestration. The application is opposed
by the first respondent. At the hearing hereof the first respondent
sought leave to introduce a fourth set of affidavits. The

application was not opposed and I accordingly ordered that such
further affidavits, together with the applicants reply thereto,
be
admitted.
The applicant
relies in its founding affidavit on a judgment debt granted in his
favour against the first respondent in the amount
of R595 498,43,
together with interest thereon, on 7 July 2008. Pursuant to the
j
udgment
the applicant caused a writ of execution to be issued and received a
nulla
bona
return. Prompted by these events the applicant launched an
application for the sequestration of the first respondent’s
estate.
In its application
it alleged that the first respondent was the joint owner, together
with the second respondent of a property
valued in an amount of
R1 750 000 over which bonds were registered in the amount of R982
000. The applicant accordingly alleged that the first respondent’s

half share in the equity in the property amounted to approximately
R384 000 and accordingly that there was an advantage to creditors
if
the estate of the first respondent were sequestrated.
The
application for a provisional order of sequestration was vehemently
opposed. The sole basis of the opposition to the granting
of the
provisional order of sequestration was that first respondent alleged
that there would be no advantage to creditors if
his estate was
sequestrated. Affidavits were filed on both sides and the matter
was fully argued before Tshiki AJ who found
in favour of the
applicant holding that an advantage to creditors had been
established.
On the return day the first
respondent filed a fresh affidavit in opposition, now relying on
very different grounds.
The first
respondent alleges that at all times material hereto he has operated
as an independent insurance broker and he is registered
as a
financial services provider. This registration entitles him,
inter
alia
,
to render the services of a personal financial planner (“
PFA
”),
which entails individual insurance, retirement annunities and
investment products. In this capacity he had contracts with
a
number of major insurance and investment houses in South Africa,
including the applicant. In terms of his contract with the

applicant he was awarded a “
broker’s
code
”.
As and when the first respondent sold products of the applicant to
a member of the public his application for the product
was submitted
to the applicant under his broker’s code. Upon approval of the
application and the issuing of the policy, annuity
or investment, as
the case may be, he was paid his commission.
In the event of
any
policy subsequently lapsing for any reason, then, in terms of the
agreement with the applicant, the first respondent would
become
liable to the applicant to repay the balance of the commission which
had already been paid to the respondent as broker.
The first
respondent states that a distinction is to be drawn in the insurance
industry between PFA’s and Group Insurance
Advisors. Whilst the
former deals with private individuals relating to individual
products, the latter deals with corporate
entities with group
insurance and annuity products, in terms whereof such an entity will
take out a product for its employees
as a group. A person who is
authorised to do group insurance, cannot render PFA services unless
he is also registered to do
so. The first respondent, as an
independent broker, marketed the products of various companies. The
applicant, on the other
hand, employs on its own staff financial
service providers who market exclusively the applicant’s products
on its behalf.
Such persons do not always hold a licence to
practice as such in their personal names, they
practice under the licence of the
applicant.
The first
respondent alleges that during 2004 th
e
applicant had in its employ one Vuyani Pikashe. Pikashe was
employed in the group products division and he was not a registered

financial services provider in his own name. He was not authorised
to market individual products. The first respondent alleges
that
Pikashe “
was
ostensibly of value to the applicant in the sense that he could
penetrate the black market for the purpose of marketing the
products
of the applicant
”.
For this reason, so the first respondent contends, one Carl Geyi,
employed as “
an
assistant broker consultant
”
with the applicant, acting as a “
representative
of the applicant
”,
introduced the first respondent to Pikashe with the intention that
Pikashe would market the products of the applicant in
the black
market and submit those products to the applicant under the first
respondent’s broker’s code. The first respondent
alleges that
his role in the exercise would be to ensure that all the papers were
in order and to make his broker’s code available
to Pikashe. As
the application was submitted under the respondents brokers code the
applicant would pay the commission to the
first respondent.
An agreement was
entered into between Pikashe and the first respondent that the first
respondent would pay 70% of such commission’s
received on this
business
to Pikashe. Pikashe proceeded to sell 60-70 policies in respect of
which commission was paid to the first respondent. In due
course
all these policies lapsed and first respondent was called upon to
repay all the commissions received. It is this debt
which gave rise
to the judgment debt upon which the applicant relies. Whilst first
respondent suspected that Pikashe may have
acted fraudulently he did
nothing about it until the application for his sequestration was
filed. Thereafter he investigated
the matter and “
new
facts
”
came to light. These new facts were that Pikashe had in fact
committed fraud in respect of all the policies and that an
investigation launched by the applicant internally during 2005 and
2006 had revealed that. The first respondent contends further
that
it now emerged that Pikashe had a criminal record including two
counts of robbery and one of theft. He contends, on the
facts of
the case, that applicant was duty bound to reveal this to him.
On this basis the
first respondent contends that the relationship between him and
Pikashe was instigated by the applicant and
that it was implemented
with full knowledge, approval and support of the applicant. For
this reason it is contended that the
applicant owed a duty of care
to ensure that, when it placed the first respondent in relationship
with Pikashe as its employee
and for its own benefit, Pikashe would
be honest and that the applicant breached its said duty. It is
further advanced that
Pikashe conducted himself in the course and
scope of his employment with the applicant and that the applicant
was accordingly
vicariously liable for the conduct of Pikashe.
These averments
are, of course, strongly denied by the applicant. Affidavits were
filed by numerous managers in the broker’s
division of the
applicant denying any knowledge during 2004 of the relationship
between
Pikashe and the first respondent.
The applicant
alleges that the Pikashe was employed on 1 October 2001 as a
retirement fund manager and that he remained in that
position
throughout. He was referred to the applicant by an employment
agency “
PAG
”
which was responsible for and conducted all reference checks
regarding Pikashe. The applicant contends that it further conducted

its own checks including ITC checks. All checks regarding Pikashe
were positive, he had an impressive CV and enquiries from
the South
African Police elicited the response that Pikashe had no criminal
record.
Geyi
,
for his part, was employed as a “
work
portfolio clerk
”.
He was indeed the administrative assistance assigned to Mr Roberts,
the consultant dealing with the first respondent’s
portfolio and
his role was purely to process policy application forms, attend to
general office administrative work and to respond
to administrative
queries from brokers, including the first respondent. The applicant
accordingly alleges that Geyi had no authority
to market the
applicant’s products, either himself or through any third person.
Geyi was not employed for the purpose of selling
products and he had
no management functions. Significantly, the applicant contends that
he had no need to utilise Pikashe to
penetrate the black market as
it had in its own employ more that thirty duly registered black
PFA’s who were qualified and
authorised to do this business.
The applicant further annexes an
affidavit deposed to by the first respondent in September 2006
wherein the first respondent records:
1. When Pikashe
proposed the “
arrangement
”
to him in 2004 he was concerned about the lapsing of policies due
to the non- payment of premiums;
2. he told Mr
Pikashe that he required to meet with clients personally;
3. Pikashe,
however, told him that this was not possible as the clients would
not
trust
him;
4. He decided,
nevertheless, to proceed with the arrangement on the basis that he
would not meet the clients personally, because
he calculated that
he would still make money in a postulated “
worst
case scenario
”
of one third of the policies lapsing.
Finally, the first
respondent sued Pikashe in 2007 for repayment of the commission’s
paid by him to Pikashe in terms of their
arrangement. He obtained
judgment against Pikashe. In the summons, first respondent alleged
that it was a term of his arrangement
with Pikashe that, in the
event of any cancellation or lapse of any policies, he “
would
be liable to pay back the commissions to Old Mutual
”
and that Pikashe would be liable to pay back “
to
Jan Brand Brokers
”
the commissions he had received from first respondent. Applicant
therefore contends that on first respondent’s own version
he was
liable to applicant in respect of such commissions.
The first respondent contends that
what emerges from these allegations is
irresoluble
disputes of
fact as to whether the applicant’s management had been aware of
Pikashe’s background and his relationship with
the first
respondent.
He
accordingly requests that the matter be referred to oral evidence.
On these averments the application falls to be considered.
Section 12(1) of
the Insolvency Act No. 24 of 1936
(“
the
Insolvency Act
”)
provides that where, on a return day of a provisional sequestration
order, the court is satisfied that the petitioning
creditor has
established against the debtor a claim which would entitle him to an
order of sequestration, an act of insolvency
and a reasonable belief
in an advantage to creditors the court may grant a final order of
sequestration.
On the papers
there is no
dispute
relating to the debt. For as long as the judgment stands the debt
is, in my view, indisputable. To the extent that it
is argued on
behalf of the first respondent that any dispute of fact between the
parties can have bearing upon the proof of the
first respondent’s
debt to the applicant, this argument is misplaced. The dispute
relating to the debt has already been the
subject of litigation and
a binding judgment stands. In the present application there is no
attack on the judgment.
There is no
dispute that a
nulla
bona
return was issued which constitutes a deed of insolvency in terms of
the provisions of
section 8(b)
of the
Insolvency Act. The
dispute
relating to the advantage to creditors has
already been
resolved and this Court has passed
judgment
on that issue. The three essential requirements set out in
section
12(1)
of the
Insolvency Act are
accordingly unequivocally
established.
Notwithstanding
that the three essential elements required for the issue of a final
order for sequestration have been established
t
he
court nevertheless retains a discretion not to grant a final order
of sequestration. Where, however, the three essential elements
have
been established the court will not exercise its discretion in
favour of the respondent unless there are special circumstances

which justify the withholding of a final order of sequestration.
The onus to establish such special circumstances upon a balance
of
probabilities rests upon the respondent. See
Millward
v Glaser
1950 (3) SA 547
(W) at 553-554 and the cases there cited;
Chenille
Industries v Vorster
1953 (2) SA 691
(O) at 700;
Realisations
Limited v Ager
1961 (4) SA 10
(D) at 11-12 and
Benade
v Boedel Alexander
1967 (1) SA 648
(O) at 655-656. The essence of the argument
presented on behalf of the respondent was that I should exercise my
discretion in
favour of the respondent, firstly, because the issues
between the parties should be resolved by litigation and, secondly,
because
the applicant has suppressed and withheld information in its
application to Court.
It has been held
that where the respondent
prima
facie
has a claim for damages against the applicant such consideration may
constitute special circumstances. See
Els
v Priest
1931 EDL 2.
The respondent does not say that he intends to
institute an action against the applicant although the thrust of the
averments
set out in the answering affidavit are to the effect that
the applicant is liable to the respondent for damages.
The first basis upon which it is
alleged that the applicant would be liable to the respondent is that
the applicant itself instigated
the relationship between Pikashe and
the first respondent as Pikashe was ostensibly of value to the
applicant in the sense that
he could penetrate the black market for
the purpose of marketing the products of the applicant. For this
reason, it is suggested
that the applicant introduced Pikashe to the
first respondent with the intention that Pikashe would market the
products of the
applicant in the black market and submit those
products to the applicant under the first respondent’s code.
These averments
are, of course, denied by the applicant.
The applicant
contend
s
that it has thirty black PFA’s in its own employ who are qualified
and registered to sell the applicant’s products to the
black
market. Pikashe was accordingly of no special value to them for
this purpose. In addition, Rossouw, the regional general
manager of
the applicant, states that Pikashe did indeed approach him raising
the possibility of referring clients to the applicant’s
individual
life division for marketing individual retirement annuities to them.
He informed Pikashe that he was to refer these
clients to the
applicant’s PFA’s and must ensure that the relevant regulations
were complied with. I consider that it is
most improbable that the
applicant, having employed thirty people to do precisely what
Pikashe wanted to achieve, would instigate
an arrangement to utilise
an independent broker for this purpose, thereby jeopardising the
opportunities of its own employees.
I am satisfied on a
consideration of all the evidence, that the applicant’s
allegations in this regard are inherently credible
and I accept them
as correct.
The second basis
for the alleged liability of the applicant to the first respondent
is to be found in the allegations of
vicarious
liability for the actions of Pikashe and of Geyi. Pikashe was
employed in the group products division of the applicant
and was not
registered as a financial service provider. He had no authority to
market individual products. It was accordingly
not within the scope
of Pikashe’s role or authority in the applicant to market any
products in respect of individuals, either
directly or through any
third person. The very purpose of the agreement entered into
between Pikashe and the first respondent
appears to have been to
enable Pikashe to sell products which he was not authorised to
market in his employment. It was for
the very reason that he was
neither authorised nor employed to do what he intended to do that he
required the co-operation of
the first respondent. It is
inconceivable that the first respondent did not appreciate the
nature of the scheme. To put it
differently, it was because the
proposed activity fell outside of the scope of his employment that
the agreement with first
respondent was necessary.
In the matter of
Absa
Bank Limited v Bond Equipment (Pretoria) (Pty) Limited
[2000] ZASCA 136
;
2001 (1) SA 372
Zullman JA, at 378B-G said:
“[
5]
The
standard test for vicarious liability of a master for the delict of a
servant is whether the delict was committed by the employee
while
acting in the course and scope of his employment. The inquiry is
frequently said to be whether at the relevant time the employee
was
about the affairs, or business, or doing the work of, the employer….
It should not be overlooked, however, that the affairs
of the
employer must relate to what the employee was generally employed or
specifically instructed to do. Provided that the employee
was engaged
in activity reasonably necessary to achieve either objective, the
employer will be liable, even where the employee
acts contrary to
express instructions …. It is also clear that it is not every act
committed by an employee during the time of
his employment which is
for his own benefit or the achievement of his own goals which falls
outside the course and scope of his
employment …. A master is not
responsible for the private and personal acts of his servant,
unconnected with the latter's employment,
even if done during the
time of his employment and with the permission of the employer. The
act causing damage must have been done
by the servant in his capacity
qua
servant
and not as an independent individual
.”
On a consideration of the evidence
which is not in dispute I consider that it is clear that in entering
into the agreement with
the first respondent Pikashe was not about
any affairs of the employer which relate “
to
what (he) was generally employed or specifically instructed to do
”.
On the contrary it was precisely to enable him to go about affairs
which had nothing to do with the purpose for which he
was employed.
First respondent was fully aware thereof. In these circumstances I
consider, on the averments which are not in
dispute, that Pikashe
was plainly not acting within the course and scope of his employment
and his relationship with the first
respondent, even if it was with
the permission of managers in the employ of the applicant, fell
outside of the scope of his employment.
Similarly, Geyi, was employed as an
administrative clerk. His functions were merely to process policy
application forms and to
attend to general officer administrative
work. He had no management function whatsoever and the scope of his
employment had
no bearing on the marketing of any products.
Moreover, Geyi was employed as an assistant to Mr Roberts, a broker
consultant
who dealt with the first respondent’s position. Geyi’s
function in the applicant must accordingly have been known to the

first respondent. In these circumstances I can find no basis upon
which the applicant would be vicariously liable to the first

respondent in respect of conduct of Geyi when he introduces Pikashe
to the first respondent.
The third basis upon which it is
alleged that the applicant may be liable to the first respondent is
that the applicant is alleged
to have made a representation to the
first respondent relating to the integrity of Pikashe. This, it is
said, was in breach
of its duty of care to the first respondent.
This duty of care, in turn is alleged to arise from the introduction
of Pikashe
to the first respondent and the ongoing knowledge of the
applicant of the relationship between Pikashe and the first
respondent.
I have already stated that on the issue of the
introduction of the respondent I accept the inherent credibility of
the applicant’s
version and I accordingly reject the version put
up by the first respondent that applicant instigated the
relationship (compare
Plascon-Evans Paints v Van Riebeeck Paints
[1984] ZASCA 51
;
1984 (3) SA 623
at 635A-C).
In all the circumstances I do not
consider that the first respondent has discharged the onus of
establishing on a balance of probability
that,
prima
facie
,
he has a claim of damages against the applicant. I do not consider
that a reference to evidence will disturb the probability
in favour
of the applicant’s version.
Finally, the first respondent urges
upon me to exercise my discretion in his favour as a mark of
disapproval for the applicant
having failed to disclose all material
facts that might influence the Court in deciding the application.
In support of this
argument I am referred to a number of authorities
dealing with the principle, which is trite, that an
ex
parte
applicant must
disclose all material facts that might influence the Court in
deciding the application. If the applicant fails
in this regard and
the application is nevertheless granted in the provisional form, the
Court hearing the matter on the return
day has a discretion, when
given the full facts, to set aside the provisional order or confirm
it. The difficulty with this
argument is that the application was
not brought
ex parte
.
It was brought on notice, respondents filed papers and it was fully
argued at the provisional stage on the basis that the respondent’s

contended that there was no advantage to creditors. These
authorities can accordingly find no application in the present
matter.
Even if I were incorrect in the
conclusion which I have drawn, I do not consider, where the
applicant has issued summons and obtained
a judgment, that it was
incumbent upon the applicant to set out information relating to the
underlying cause of action in the
prior litigation for purposes of
an application for sequestration.
In view of the conclusions to which I
have come above I am of the view that the disputes of fact, such as
they are, which emerge
from the papers are not material to the
exercise of my discretion.
In the result, the order which I make
is the following:
1. The first respondent’s estate is
finally sequestrated.
2. The application to refer the matter
to oral evidence is dismissed.
3. The costs of this application to be
costs in the sequestration.
____________________
J W EKSTEEN
ACTING JUDGE OF THE HIGH COURT