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[2022] ZAECQBHC 49
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Multisure Corporation (Pty) Ltd v KGA Life Limited and Others (2780/2021) [2022] ZAECQBHC 49 (15 March 2022)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, GQEBERHA)
Case
No: 2780/2021
In the matter between:
MULTISURE CORPORATION
(PTY) LTD
APPLICANT
AND
KGA LIFE LIMITED
FIRST RESPONDENT
Q LINK HOLDINGS (PTY) LTD
SECOND RESPONDENT
AFRICAN
UNITY LIFE LIMITED
THIRD RESPONDENT
JUDGMENT
SCHOEMAN
J.
[1]
The applicant is a company that does
business as an independent intermediary which primarily markets and
sells funeral cover plans
to individuals and families. The first
respondent (KGA) is a licensed long term insurer. The second
respondent (Q Link) is
a company that is authorised to alter the
deduction codes at the South African Security Agency (SASSA) whereby
the funeral policy
holders' premiums (the applicant's members) are
paid to the first respondent. The third respondent (AUL) is an
underwriting company
with whom the applicant has signed a new
intermediary agreement.
[2]
The applicant has brought an application on
an urgent basis for (a) a declaratory order that the intermediary
agreement between
the applicant and the first respondent has been
terminated; (b) directing KGA to deliver to Q Link the necessary
authorisation
to alter the deduction codes on its electronic
administrative system to provide payment to the AUL; (c) directing Q
Link to alter
the deduction codes should first respondent not comply
with the order in (b); (d) directing the first respondent to pay to
AUL
all premiums that it had collected since 1 September 2021; and
(e) costs.
[3]
The notice of motion made provision that an
interim order be granted, but when the matter was argued it was
common cause that the
applicant sought a final order.
The/acts.
[4]
The applicant contracted and entered into
an intermediary agreement with KGA in terms of which the latter
underwrote and provided
the necessary cover to the applicant's
clients who formed part of the group scheme as from I January 2015.
This agreement incorporated
a master agreement. Cover was on a month
to month basis with the applicant providing KGA each month with the
details of the members
of the group.
[5]
The majority of the members of the
applicant are recipients of
social
grants administered by the South African Social Security Agency
(SASSA). The latter appointed Q Link to administer the deductions
from the social benefits during the subsistence of the agreement. Q
Link uses deduction
codes
to
determine
to
which
entity
deductions
are
to
be
made
and informs SASSA of the amounts to be paid and to whom payment must
be made. SASSA then pays the underwriting insurer. At
the time of the
application applicant monthly informed Q Link of changes to its
clients, enabling Q Link to make the necessary
changes to its
deduction codes.
[6]
On
6
July
2021
applicant
gave
KGA
notice
of
the
confirmation
of
the cancellation of the agreement with effect from I
August 2021. But later accepted
that
it
had
to
give
a
calendar
month's
notice
and
it
was
accepted that the termination date would be
30 August 2021. KGA replied on 6 July 2021that it would "notify
our team of the
cancelation so that the necessary processes
can
commence"
and
wished
the applicant
luck
for
"the
next
chapter."
[7]
During July 2021 the applicant gave notice
to its members that the underwriters
would
change
as
from
I
September
2021.
They gave
notice
by
(a)
sending
short
message
system
(sms')
to
all
the
members;
(b)
placing
a
notice
on
its
website;
and (c)
posting
letters to their
policy holders advising them how to
download new policy documents.
Q
Link in the mean
time
required
a letter
from
KGA
confirming
the
cancelation
and
approving the transfer to AUL
as
we11 as a
letter
from AUL
confirming
its appointment.
[8]
After numerous attempts to have KGA comply
with the applicant's request to write the required letter to Q Link,
KGA wrote a letter
to the applicant that it would write the
confirmation letter to Q Link "once the necessary steps in terms
of applicable legislation
have been followed", without
specifying what those steps are and what legislation is referred to.
[9]
KGA admits that the intermediary agreement
has been cancel1ed but maintains that the underlying relationship
with the policyholders
has remained intact. It is KGA's case that
each individual policyholder has to cancel as the Master Policy
formed the contract
between KGA and the individual members.
[10]
KGA contends
that
it is entitled to the premiums paid
to
it until such time as the individual members have concluded
agreements with AUL. It denies that AUL's scheme is structured
according
to statutory requirements, despite the applicant's
assertion to the contrary.
[11]
Furthermore, the applicant could not cancel
the Master Policy as the scheme is no longer a "group"
under the Insurance
Act 2017.
The
agreement.
[12]
The applicant and
KGA entered into an agreement in January
2015. A Master Policy was incorporated into the agreement. The
applicant referred to the
Master Policy in the founding affidavit,
but despite averring that it had been attached it had not been.
Neither did KGA include
the said Master
Policy in its answering affidavit, although
it averred
that
the Master Policy formed the basis of the agreement between it and
the applicant's members. An unsigned copy of this policy
formed part
of the replying affidavit. As KGA did not
object or apply to file further affidavits to such inclusion, it can
be accepted that
it is identical to the
Master Policy that had been signed by the
parties and included in the agreement. The salient terms of the
agreement are:
(a)
The applicant
requested
KGA
to underwrite a funeral group scheme in terms whereof funeral and
associated benefits were offered to the applicant's clients.
The
applicant rendered intermediary services on behalf of the
policyholders (the members of the applicant) as it principal, to
KGA.
(b)
Clause 5.14 determines: 'Should an
intermediary transfer from one underwriter to KGA
KGA reserves the right to adjust premiums
after receipt of the
transfer
certificate should a significant difference in claim history
and ratio be evident, subject to the
Policyholder Protection
Rules.'
(c)
Clause 7.3 determines: ' ... Where an
amendment form is telefaxed to KGA, the responsibility to ensure that
the relevant form or
instruction has been received and actioned by
KGA, shall lie with the intermediary and a telefax confirmation
receipt in the hands of the intermediary
shall
not be
regarded as proof that a specific document was received by KGA.
Furthermore, the intermediary indemnifies KGA against all
claims,
demands, losses, damages, expenses, and charges of whatsoever nature,
arising out of or in connection with the non-receipt
of/and or
failure to act upon any amendment from or instruction by KGA.'
(d)
Clause 8.1.6 and 8.1.7 determine that the
applicant is obliged to ensure that the members' cover do not exceed
the maximum amount
permitted under the Long-term Insurance Act 52 of
1998 or that allowed by KGA and collect participation certificates on
behalf
of members in terms of the section 48 of the Long-term
Insurance Act and provide the same to members.
(e)
Clause 8.1.14 keep and maintain proper
updated records of the members and their families in terms of the
group scheme.
(f)
Clause 8.2.7 determines that if and when
the agreement is cancelled for whatsoever reason, by the intermediary
or KGA, the intermediary
is obliged
in
terms of this contract
to
notify, in writing, each and every policyholder on the book of the
intermediary that the underwriting
agreement with KGA is cancelled.
(g)
Clause 8.2.8
determines: Proof of this notice must be
provided to KGA by the intermediary as confirmation that all the
policyholders have been
notified of the cancellation of the
underwriting agreement; and
(h)
Clause 8.2.9 determines:
'The compliance responsibility of Rule
l 5(b) of the Policyholder Protection Rules
rests with the intermediary;'
(i)
Clause 8.2.10 provides that
Non-compliance of this clause is a serious
breach of the agreement and will lead to action in terms of clause 9
below and KGA also
reserves their right to claim damages from the
intermediary.
(j)
Clause 8.2.11
provides that the intermediary acknowledges
that it is subject to the KGA compliance monitoring process policy
the terms of which
is deemed incorporated
herein.
(k)
Clause 9 determines: 'Either party may
terminate this agreement by giving not less than one calendar month's
written notice on or
before the first of the month of his intention
to cancel this agreement, provided that the requirements in clause
8.2 has been
adhered to. The intermediary shall remain liable for
premium payments during the notice month and acknowledges that no
changes
may be made to membership lists during the notice month.'
[13]
The Master Policy which was incorporated
into the agreement determines that the assurer is KGA. Although
annexure B to the Master
Policy (which determines who the
policyholder is) has not been completed, it is clear from the
context, that the policyholder is
the applicant and 'members' are the
people whose applications for membership had been accepted. The
salient provisions of the Master
Policy are as follows.
(a)
Cessation of cover shall occur when the
policyholder cancels the member's membership with the assurer (clause
4.5};
(b)
When the policyholder cancels the Master
Policy with the assurer (clause 4.5);
(c)
The assurer and policyholder
may cancel the Master Policy at any time by
giving the other party one calendar month's written notice. (clause
14);
(d)
The policyholder
may not amend
the
funeral
policy or
the membership detail after the policyholder has given notice of
cancellation
of
the Master Policy in terms of clause 14. (clause
15.5).
Interpretation
of the agreement
and
master
policy.
[14]
How
interpretation of the agreement and Master Policy should be
approached has been set out in
Natal
Joint
Municipal Pension Fund v Endumeni
Municipality
[1]
in
the following terms:
'...
The
present
state of the law can
be expressed
as
follows. Interpretation is the process of attributing meaning to the
words used in a document, be it legislation,
some other statutory instrument,
or contract,
having
regard
to the
context
provided
by
reading
the
particular
provision
or
provisions
in
the light
of the
document
as a
whole and the circumstances
attendant
upon its coming into existence. Whatever
the nature of the document, consideration
must
be
given
to
the language
used
in
the
light
of
the ordinary
rules
of
grammar
and
syntax;
the
context
in
which
the
provision
appears; the apparent purpose to which it is directed and the
material known to those responsible for its production.
Where more
than one meaning is possible each possibility must be weighed in the
light of all these factors. The process is objective
not subjective.
A
sensible meaning is to be preferred to one that leads to insensible
or unbusinesslike results or undermines
the
apparent purpose of the document. . . .'
[15]
As
no
provision
is
made
in
the agreement
regarding
what
should happen on cancellation, it can be
accepted
by necessary implication that it was
a
tacit
term
of
the
agreement
that
the
parties
are
restored
to
the
position
they
were in prior to the conclusion
of
the agreement
in
the event of the cancellation of the agreement.
[2]
This is evident from the fact that clause 5.14 of the agreement
envisages that if the applicant had transferred from one underwriter
to KGA the latter would be entitled to adjust the premiums. It could
only have been done had a previous agreement made provision,
either
tacitly or expressly, that the parties would be restored to the
position they had been prior to the conclusion of the agreement.
That
would have the effect that the applicant could then again transfer to
a new underwriter on a valid cancellation of the agreement.
[16]
In
evaluating
the language
of
the agreement
and
the Master
Policy
it is obvious that both the agreement and the Master Policy make
provision for the cancellation
of
the agreement
by
the
giving
of one month's
notice by either
party. The
only
further
proviso
for
the
cancellation
by
either
the
applicant or KGA is that the applicant is to notify every
policyholder, in writing that the underwriting agreement with KGA
bas
been cancelled.
[17]
In terms of the provisions of s 1 of the
Electronic Communications and Transactions Act 25 of 2002 (the Act)
data message means
data generated, sent and
received
by
electronic means.
Furthermore,
in terms of s
12
of the Act
if
there is a requirement
that
a document
or
information must be in writing it is met if the document
or information
is
in
the form of a
data message and is accessible in a manner usable for subsequent
reference.
[18]
An affidavit was filed by Sarika Vermani, a
self-employed person who has been working for the applicant for the
past seven years
as an administrator and developer. She is versed
with the applicant's relationship management
system
and
in
charge
of
the daily
functioning
thereof.
She
sent
the
sms
message
to
all
the
active
funeral
policy
clients
with
cellphones on 30 July 2021. The wording
of
the sms was the following.
'2021/07/30
-
Notice:
A new underwriter
has
been appointed for your
funeral
policy. For details please see
www.multisure.co.za
or call 0879432502. Multisure Corp.'
[19]
The message was sent to the 7991 members
whose cellphone numbers
the
applicant
has
and
it
was
posted
to
each
client's
profile
as proof
that
the message
had
been
sent.
The deponent
to
the founding affidavit
of
the
applicant
stated
that
in
addition
to
the
sending
of
the sms' the information
was posted on its website and letters were
posted to each of the policyholders that the underwriter would be
African Unity Life.
[20]
I am of the view that the applicant
has shown that sufficient
notice
was given
in writing.
The
first respondent's regulatory role.
[21]
The
first
respondent
indicated
that
it
has
a
responsibility
to
ensure that
the applicant and the third respondent complied with the applicable
legislation and regulatory prescripts. However,
the first respondent
has not established during argument or on the papers a basis for such
overseer's role.
[22]
Although the first respondent argued that
the applicant is no longer
included
in
the
definition
of
'group'
in
Schedule 2, it is a fund
that
holds the insurance policies exclusively for the benefit of
beneficiaries.
[23]
It is clear from the reading of the present
Policyholder Protection Rules (PPR) and clause 20.3 thereof it is the
duty of the insurer
(the first respondent)
to
inform
the
Authority
of
the
termination
or
intended termination and replacement of the group
scheme by the policyholder. The third respondent has certain
obligations as the
new insurer, eg. to communicate any material
differences between the terms and conditions of the new group scheme
policy and the
group scheme being substituted or replaced and the
reasons for such differences.
[24]
It
is
not
within
the
realm
of
the
first
respondent's
rights
or
obligations to see to it that either the applicant or the third
respondent comply
with
any
regulatory
prescripts
once
the
contract
has
been
cancelled. As was said by Mr Justice PM Nienaber, the erstwhile
Ombudsman
for
Long-term Insurance
in
an article
[3]
:
'Much
of the funeral insurance business in South Africa, many believe, is
blighted:
fraud
is rife;
irregularities abound; some operators
function
both
illegally and
unscrupulously;
and the public, especially the less affluent segment, is on occasion
cynically exploited. But all is not unsavoury.
Many registered
insurers
and
licensed
intermediaries active
in
this
area
are
above-board
and
render an invaluable service to the community as a whole. Funeral
insurance
fulfils
an unmistakable need and there are thousands of policies in South
Africa operating regularly and without mishap.'
[25]
I
am
of
the
view
that
the
applicant
has
shown
that
it
is
entitled
to the relief claimed and the following
order is made.
(a)
It
is
declared
that
"the
Intermediary
Agreement
-
Multisure
Corporation
-
Underwritten by KGA life Ltd"
and
the Master policy forming part thereof (''the Agreement")
between the Applicant and the First Respondent has been cancelled
and
accordingly is of no further force and effect from 1 September 2021;
(b)
It
is
declared
that
the Group
Scheme
established
and
underwritten
by
the
First
Respondent
by
virtue
of
the
provisions
of
the
Agreement ("the Group Scheme")
has been terminated accordingly
with
effect
from
1
September
202 I
and
is of no further force and effect
(save
to the extent that the First Respondent retains any risk beyond the
termination
date
by virtue of the provisions of the Group Scheme);
(c)
Q LINK is authorised and directed within 24
hours of the service upon it of this Order to alter the deduction
codes on its electronic
administrative system which currently provide
for payment by the South African Social Security Agency
("SASSA")
to the First Respondent of premiums
payable by insured persons in terms of policies forming part the
Group Scheme, to instead provide
for payment of premiums payable by
insured persons in terms of policies transferred to and now forming
part of the group scheme
concluded with the Third Respondent ('
AUL"), to AUL;
(d)
The First
Respondent
is
directed
within
24 hours of the service upon it of this Order to pay directly to AUL,
by means of electronic funds transfer to its bank account
the full
aggregate amount of all premiums received
by the First
Respondent
from
SASSA
(as directed
by Q LINK in terms of its payment and
deduction system) from members of the
Group
Scheme
as
established
pursuant
to the
Agreement
with effect from 1 September 2021.
(e) That the First
Respondent pay the costs of this application.
Inna Schoeman
(Judge
of
the
High
Court)
COUNSEL FOR THE
APPLICANT:
ADV RICHARDS
Instructed by:
GOLDBERG & DE VILLIERS INC
PEMBRIDGE
HOUSE
13
BIRD STREET
CENTRAL
GQEBERHA
COUNSEL FOR THE
RESPONDENT:
ADV ELLIS
Instructed by:
VAN LIERES COOPER & BARLOW
c/o
GREYVENSTEINS
St
Georges House
104
Park Drive
Central
GQEBERHA
[1]
Natal
Joint Municipal Pension Fund v Endumeni Muncipality
[2]
Christie’s Law of Contract in South Africa (7
th
Ed) p 199.
[3]
Funeral Insurance: A Perception from the Office of the Ombudsman for
Long-term Insurance http://www.ombud.co.za.