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[2023] ZAFSHC 201
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Majiedt N.O and Another v Prinsloo (641/2021) [2023] ZAFSHC 201 (19 May 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
I
N
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number:641/2021
REPORTABLE:
YES/NO
CIRCULATE
TO JUDGES: YES/NO
CIRCULATE
TO MAGISTRATES: YES/NO
In
the matter between:
DONOVAN
THEODORE MAJIEDT N.O.
First
Plaintiff
REINETTE
STEYNSBURG N.O.
Second
Plaintiff
and
EUGENE
Defendant
CORAM:
VAN
ZYL, J
HEARD
ON:
15
FEBRUARY 2022
DELIVERED
ON:
29
SEPTEMBER 2022; 19 MEI 2023
[1] This
matter deals with the interpretation of Section 63 of the Long
Term Insurance Act, 52 of 1998
("the LTIA").
Order:
[2]
On 29 September 2022 I made the following order:
"1.
The benefits of the long-term life insurance policy received by Nelly
Arlene Prinsloo are not protected in terms of the
provisions of
section 63 of the Long-Term Insurance Act, 52 of 1998.
2.
The costs in respect of the determination of the aforesaid separated
issue stand over
for later adjudication."
I
am hereby providing the reasons for the said order.
Background:
[3] This
matter was enrolled as a civil trial. At the commencement of the
trial I was requested,
by agreement between the parties, to order a
separation of issues in terms of Rule 33(4). In this regard they
provided me with
a draft order and I made the following order in
terms thereof:
"1.
Issues are separated in terms of Rule 33(4) as set out in the bundle
entitled 'Separation
of Issues - Rule 33(4)';
2. The
separated issue to be determined is whether the proceeds of a long
term life insurance
policy received by Nelly Arlene Prinsloo are
protected (or not) in terms of the provisions of Section 63 of the
Long-Term Insurance
Act, No. 52 of 1998;
3. Until
determination of the separated issue in 2 supra (whether by appeal or
otherwise), all
further proceedings in the action under case no.
641/2021 are stayed."
[4] The
aforesaid "Separation of Issues - Rule 33(4)"
bundle
("the
bundle")
contains a document also titled "Separation of
Issues - Rule 33(4)"
("the Rule 33(4)-document'),
together with annexures thereto. In paragraph 1.2 of the Rule
33(4)-document the parties agreed that I am to determine the
separated
issue
"on
the common cause facts and
assumed facts"
set out in the document. The said
document was signed by the attorneys of record of both parties.
[5] Both
Mr Meintjies, who appeared on behalf of the plaintiffs,
and Mr
Zietsman, who appeared on behalf of the defendant, submitted heads of
argument in support of their respective contentions.
[6] I
deem it apposite to quote the better part of the contents
of the Rule
33(4)-document, since the contents thereof constitute the basis on
which I have to determine the separated issue.
Contents
of the Rule 33(4)-document:
"RELEVANT
COMMON CAUSE FACTS:
2.
"2.1
The First Plaintiff is Donovan Theodore Majiedt N.O, a major male and
insolvency practitioner ...
2.2 The
Second Plaintiff is Reinette Steynsburg N.O, ·a major female
and insolvency practitioner...
2.3 The
Defendant is Eugene Prinsloo:
2.3.1 a
major businessman;
2.3.2
2.3.3 born
on the 1[…] of J[…] 1979; and
2.3.4
2.4 Louis
Hendrik Prinsloo (ID no. 5[…]2) [hereinafter 'the deceased' or
'the life insured'] and Nelly Arlene
Prinsloo (ID no. 5[…]1)
[hereinafter 'Nelly' or 'the beneficiary'] were married to each other
in community of property on
6 April 1974.
2.5 The
Defendant is the son born of the marriage that subsisted between the
deceased and Nelly.
2.6 The
deceased passed away from natural causes on 14 February 2018 at
Bloemfontein.
2.7 On
17 April 2018 ... the relevant Master issued Letters of Executorship
in terms whereof Johannes Petrus Daniel
Botha was appointed as
'nominee'
of Wessels & Smith Inc. in its capacity
as duly appointed
'Executor'
of the deceased joint
estate that subsisted between the deceased and Nelly.
2.8 On
10 September 2020, this ... Court issued an order whereby the
deceased joint estate of the deceased and
Nelly was placed under
provisional sequestration in the hands of the Master.
2.9 On
22 October 2020, this ... Court issued an order in terms whereof the
deceased joint estate of the deceased
and Nelly was placed under
final sequestration in the hands of the Master.
2.10
On 24 November 2020, the Master appointed the Plaintiffs as
provisional trustees
in the insolvent deceased joint estate of the
deceased and Nelly.
2.11
The Plaintiffs requested permission of this Court in terms of
Section
18(3)
of the
Insolvency Act, No. 24 of 1936
[hereinafter 'the Act']
to institute and launch the present proceedings against the
Defendant. Although the Defendant cannot accede
to the said request,
he does not object thereto.
2.12
On or about 27 September 2011, the deceased concluded a life
insurance policy with
Old Mutual under its Green Light Benefit Scheme
for a total death benefit of R10 000 000-00. A copy of the acceptance
of the life
insurance contract, dated 27 September 2011, is attached
marked Annexure 'SC1.1'.
2.13
The benefit was registered on 27 September 2011 under benefit number
0[…]
and the life insured was registered as the initial
beneficiary. A copy of the initial benefit details is attached
hereto, marked
Annexure 'SC1.2' and the Green Light Death Benefit
Schedules, together with its terms and conditions in respect of the
death benefit
1 and death benefit 4 are attached hereto, marked
Annexures 'SC1.3(a)', 'SC1.3(b)', 'SC1.4(a)' and 'SC1.4(b)'
respectively;
2.14
Thereafter, and on 30 August 2013, the life insured appointed Nelly
as beneficiary
of both death benefits covered in terms of the
long-term life insurance policy as is evident from a copy of the
beneficiary appointment
attached hereto, marked Annexure 'SC2';
2.15
As revealed, the deceased/life insured passed away on 14 February
2018, and as a
consequence thereof, Old Mutual paid the death
benefits of R10 000 000,00 (hereinafter
'the benefit)
in terms
of the long-term life insurance policy on 11 April 2018 to Nelly;
2.16
Nelly transferred the benefit received in terms of the long-term life
insurance policy
on 11 April 2018, to lceburg Trading 713 CC
('lceburg'). The Defendant is the sole member of lceburg; and
2.17
Upon Nelly transferring the benefit to lceburg, the Defendant caused
lceburg to transfer
the benefit to his personal account held at Absa
under account no. 4[…] in two tranches of R5 000 000,00 each
on 11 April
2018 and 12 April 2018 respectively.
PLAINTIFFS'
CONTENTIONS:
3.
The
parties attach hereto, a copy of the Plaintiffs' Amended Particulars
of Claim, marked Annexure 'SC3' and from which, inter alia,
the
following
assumed facts
are relevant, namely:
3.1 The
Defendant received the sum of R10 000 000,00 alternatively, the
Defendant benefited by the receipt of such sum
of R10 000 000,00 from
Nelly as the funds of R10 000 000,00 was channelled to the Defendant
and/or flowed to the Defendant as detailed
in paragraph 2.15 to 2.17
supra;
3.2 The
aforesaid payment/donation/transfer of R10 000 000,00 to the
Defendant constitutes a
'disposition'
by Nelly,
alternatively the deceased joint estate before the sequestration of
the insolvent deceased joint estate as contemplated
in Section 2 of
the Act;
3.3 At
all material times hereto, alternatively at all relevant stages, and
more pertinently when the said dispositions
were made, the
liabilities of Nelly, alternatively the deceased joint estate
exceeded her/its assets;
3.4 The
disposition by Nelly to the Defendant is liable to be set-aside in
terms of any of the eight Claims as detailed
in paragraph 17 to 49 of
the Plaintiffs' Amended Particulars of Claim.
THE
DEFENDANT'S CASE:
4.
The
parties attach a copy of the Defendant's Amended Plea hereto, marked
Annexure 'SC4' and in particular refer the Honourable Court
to
paragraphs 11A.6 to 11A.8 thereof and from which it is apparent that
the Defendant contends that the benefit of the long-term
life
insurance policy is protected in terms of Section 63(1)(b) of the
LTIA and is therefore not available for the purpose of payment
of the
debts of the deceased and/or the deceased insolvent joint estate.
ISSUE
TO BE DETERMINED:
5.
The
issue to be determined is whether the benefit received by Nelly is
protected or not in terms of the provisions of Section 63
of the
LTIA.
CONVENIENCE:
6.
6.1 The
parties agree that the aforesaid issue to be determined can
conveniently be decided before any evidence is led
and separately
from any other question and further that the aforesaid separated
issue is a matter of law (interpretation). As such
and until final
determination [whether by appeal or not] of the aforesaid separated
issue, all further proceedings in the action
are to be stayed and:
6.1.1 should
the Honourable Court find in favour of the Plaintiffs' interpretation
of Section 63 of the LTIA, then
costs should be awarded to the
Plaintiffs in respect of the separated issue and the action will then
be re-enrolled in order for
the Plaintiffs to prove the assumed facts
as well as any other requirements of its Claims against the
Defendant; and
6.1.2 should
the Honourable Court find in favour of the Defendant's interpretation
of Section 63 of the LTIA, then
the Plaintiffs' action should be
dismissed in toto with costs."
The
pleadings:
The
plaintiffs' particulars
of claim:
[7] One
has to be mindful that the claim by the plaintiffs, in their
capacity
as provisional trustees in the insolvent deceased joint estate of the
deceased and Nelly, who were married in community
of property, is
against the defendant and not against Nelly as such.
[8] In
paragraphs 15 and 16·of the particulars of claim the
plaintiffs, with reference to the transfer of the benefits by Nelly
to lceburg, a close corporation of which the defendant is the
sole
member, aver as follows:
"15.
The
plaintiffs contend that the aforesaid payments/donation/transfer of
R10 000 000.00 to the defendant ... constitute 'dispositions'
by
Nelly, alternatively the deceased joint estate before the
sequestration of the insolvent deceased joint estate as contemplated
in section 2 of the Act [Insolvency Act, 24 of 1936].
16.
At
all material times, alternatively at all relevant stages, and more
pertinently when the said dispositions were made, the liabilities
of
Nelly, alternatively the deceased joint estate exceeded her/its
assets."
[9] In
addition to the plaintiffs' request that the plaintiffs' powers
be
extended in terms of the provisions of
section 18(3)
of the
Insolvency Act and
that the plaintiffs be granted leave, if
necessary, to continue with the present action/legal proceeding
against the defendant,
the plaintiffs claim against the defendant is
for payment of the amount of R10 000 000.00, by the defendant to the
plaintiffs and
further ancillary relief.
[10] The
aforesaid claim for the payment of the amount of R10 000
000.00 is
based upon the provisions of
section 31
of the
Insolvency
Act. In
the alternative to the aforesaid claim, the plaintiffs' claim
against the defendant is based on seven alternative claims based on
different causes of action, the details of which are not relevant for
present purposes.
The
defendant's amended
plea:
[11] In
terms of the
Rule 33(4)
-document, it is evident that it is the
defendant's case that the R10 000 000.00 benefit of the long-term
life insurance policy
is protected in terms of
section 63(1)(b)
of
the LTIA and is consequently protected from payment of the debts of
the deceased and/or the deceased insolvent joint estate...
In this
regard the following averments are pleaded in the defendant's amended
plea:
"11A.4
Upon the death of the deceased, he was survived by Nelly as his
spouse and
the defendant as his son.
11A.5
Upon the death of the deceased the policy benefits devolved upon the
spouse,
alternatively the child of the deceased.
11A.6
The said policy benefits are therefore in terms of
section 63(1)(b)
of the LTIA not available for the purposes of payment of the debts of
the deceased and/or [the] insolvent joint estate.
11A.7
The plaintiffs as provisional trustees of the insolvent joint estate
of the deceased and Nelly are therefore
not entitled to claim payment
of the proceeds of the life insurance policy, so as to make payment
of the debts of the deceased
and/or [the] insolvent joint estate.
11A.8
Wherefore the defendant requests that the plaintiffs' claim be
dismissed with costs."
The
parties' submissions on the interpretation of section 63 of the
LTIA:
[12]
Section
63
of the LTIA determines as follows:
"63
Protection of policy benefits under certain long-term policies
(1)
Subject to subsections (2), (3) and
(4),
the policy benefits
provided or to be provided to a person under one or more-
(a)
in
respect of a registered insurer, assistance, life, disability or
health policies; or
(b)
in
the case of a licensed insurer, policies written under the risk, fund
risk, credit life, funeral, life annuities, individual
investment or
income drawdown class of life insurance business as set out in Table
1 of Schedule 2 of the Insurance Act,
in
which that person or the spouse of that person is the life insured
and which has or have been in force for at least three years
(or the
assets acquired exclusively with those policy benefits) shall, other
than for a debt secured by the policy-
(i) during
his or her lifetime, not be liable to be attached or subjected to
execution under a judgment
of a court or form part of his or her
insolvent estate; or
(ii) upon
his or her death, if he or she is survived by a spouse, child,
stepchild or parent, not be available
for the purpose of the payment
of his or her debts.
(2) The
protection contemplated in subsection (1) shall apply to policy
benefits and assets acquired solely with
the policy benefits, for a
period of five years from the date on which the policy benefits were
provided.
(3) Policy
benefits are only protected as provided in-
(a)
subsection
(1)
(b},
if they devolve upon the spouse, child, stepchild or
parent of the person referred to in subsection (1) in the event of
that person's
death; and
(b)
subsection
(1)
(a)
and
(b),
if the person claiming
such protection is able to prove on a balance of probabilities that
the protection is afforded to him or
her under this section.
(4) Policy
benefits are protected as provided for in subsection (1)
(a)
and
(b),
unless it can be shown that the policy in question
was taken out with the intention to defraud creditors."
[13] Mr
Zietsman contended that in terms of section 63 the benefits of the
policy as received
by Nelly are not liable to be attached or
subjected to execution under a judgment of a Court, are not available
for payment of
the debts of the deceased and do not form part of the
insolvent joint deceased estate.
[14] Mr
Meintjies contended that a
''person"
as contained in
section 63 is to be interpreted to be a reference to
"the
policyholder'.
Mr Zietsman, however, contended that a
"person"
is to be interpreted to be a reference to
"the beneficiary''.
[15] According
to both counsel the consequential/eventual question which will depend
on the determination
of the last-mentioned interpretation, will be
whether the policy benefits are protected, or not, from the creditors
of the policyholder
(the deceased
in casu)
and/or from the
creditors of the beneficiary (Nelly
in casu).
[16] Within
the context of sub-section (1) Mr Zietsman submitted that "a
person"
is -
1. the
person to whom the policy benefits are provided or to be provided;
and
2. that
person or the spouse of that person is the life insured.
[17] Mr
Zietsman pointed out that although the deceased, who was also the
life insured,
was initially registered as the beneficiary, the
deceased on 13 August 2013 appointed Nelly to receive the benefits in
terms of
the long-term life insurance policy. He contended that Nelly
was therefore the
"person"
to whom the policy
benefits were
"to be provided'
on the death of the
life insured; hence, on the death of the deceased.
[18] Mr
Zietsman further submitted that the second limitation is that -
"the
person to whom the policy benefits are provided must be the life
insured; or the spouse of the person to whom the policy
benefits are
provided must be the life insured."
[19] Mr
Zietsman consequently contended that
"it is common cause that
the deceased was the life insured and that Nelly, to whom the policy
benefits are provided, was his
spouse':
[20] It
was consequently the contention of Mr Zietsman that Nelly falls
within the definition
of a
"person"
to whom
protection is afforded in terms of section 63(1) of the LTIA.
[21] It
was therefore Mr Zietsman's contention that section 63(1) should thus
be read, within
the facts of this case, as follows:
"(1)
Subject to subsections (2), (3) and (4) the policy benefits provided
or to be provided to
[Nelly]
under one or more –
(a) ...
policies ...
in
which
[Nelly]
or the spouse of
[Nelly]
is
the life insured and which has or have been in force for at least
three years (or the assets acquired exclusively with those
policy
benefits shall, other than for a debt secured by the policy –
(i) during
... her lifetime, not form part of ... her insolvent estate; or
(ii) upon
... her death, if ... she is survived by a spouse, child, stepchild
or parent, not be available
for the purpose of the payment of ... her
debts."
[22] Mr
Zietsman ultimately submitted that, based on the aforesaid
interpretation, the
policy benefits provided/paid to Nelly, are
therefore protected in her favour in that in terms of section
63(1)(a)(i) the benefits
are not liable to be attached or subjected
to execution and the said benefits do not form part of her insolvent
estate.
[23] I
will herein later deal with the case law on which Mr Zietsman relied
as well as additional
case law.
[24] It
is not in dispute that the life insurance policy in the present
matter has been in force
for at least three years and that no debt
was secured by the policy as determined in section 63 of the LTIA. I
am consequently
not going to deal with these aspects. The issue of
fraud provided for in section 63(4) of the LTIA is also not
applicable to the
present matter.
[25]
As
stated earlier, Mr Meintjies submitted that
"person"
as contained in section 63 of the LTIA is to be interpreted to be
a reference to the policyholder. In response to Mr Zietsman's
argument that if
"person"
is to be
interpreted to be a reference to
"the policyholder'',
the
section would have pertinently stated same, Mr Meintjies submitted
that the same argument is
mutatis mutandis
applicable to Mr
Zietsman's contention that it should be interpreted to be a reference
to
"the beneficiary".
[26] With
regard to the approach to be followed for purposes of statutory
interpretation, both
Mr Meintjies and Mr Zietsman relied on the same
case law and the principles which are to be applied. Both counsel
retied on the
approach as authoritatively set out in
Natal
Joint Municipal
Pension
Fund
v
Endumeni
Municipality
2012 (4) SA 593
(SCA) at para [18]:
"[18]
... 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. Judges must be alert
to, and guard against, the temptation
to substitute what they regard as reasonable, sensible or
businesslike for the words actually
used. To do so in regard to a
statute or statutory instrument is to cross the divide between
interpretation and legislation; in
a contractual context it is to
make a contract for the parties other than the one they in fact made.
The 'inevitable
p
oint of de
p
arture is
the lan
g
ua
g
e of the
p
rovision
itself
,
read in context and havin
g
re
g
ard
to the
p
ur
p
ose of the
p
rovision
and the back
g
round to the
p
re
p
aration
and
p
roduction of the document."
(My emphasis)
[27] The
aforesaid approach has since been followed and applied in numerous
judgments.
[28] In
addition, Mr Meintjies·also relied on the judgment of
Bosch
p
oort
Ondernemin
g
s
(
Pt
y)
Ltd v
Absa Bank Ltd
2014 (2) SA 518
(SCA) at para [19], where the
following principle was re-confirmed:
[19]
It has also long been a construction of interpretation of statutes
that, in the absence of express wording to the contrary,
the
legislature did not intend to alter the law as it had previously
stood "
[29] Relying
on the aforesaid principle, Mr Meintjies cited section 39 of the
Insurance Act,
27 of 1943 (the old Act), which was repealed by the
LTIA with effect from 1 January 1999, which read as follows:
"A
life policy
effected b
y
a
p
erson u
p
on
his own life
, which has inured for a period of 3 years or longer,
shall not during
his lifetime
be liable to be attached in
execution of a judgment or order of Court of law, at the instance of
his creditors,
and shall not form part of
his insolvent
estate
, except in so far as the total value of all such policies,
together with the value of all monies and other assets protected
under
... and of which
such
p
erson
is the
owner exceeds R10 000.00: provided that if such a policy as aforesaid
has been pledged, the preceding provisions of this
sub-section shall
apply only to so much of the value of that policy as exceeds the
amount of the liability whose payment the pledge
secures."
[30] Mr
Meintjies submitted that the aforesaid section 39 of the old Act
illustrates that
the legislature's intention could only have been
that a life policy of a
policyholder
who is also the
life insured
shall not during the lifetime of
such
policyholder
be liable to attachment in execution of a judgment
or order of Court of law at the instance of such
policyholder's
creditors
and shall not form part of
such policyholder's
insolvent estate.
[31] I
have to agree with the aforesaid interpretation by Mr Meintjies. The
words "a
life policy effected by a person upon his own life"
is clearly a reference to the policyholder. The words
"his
lifetime", "his creditors
and
"his insolvent
estate"
can only be interpreted to be a reference to
the lifetime, the creditors and the insolvent estate of the
policyholder. The subsequent
words
"such person"
are
clearly then again a reference to the policyholder.
[32] Prior
to the amendment of section 63 of the LTIA on 1 July 2018 ("the
old section 63"),
it was virtually identical to the current
section 63 of the LTIA. However, previously, in terms of the old
section 63, the protection
provided was limited to a maximum amount
of R50 000.00.
[33] If
the principle in the aforesaid
Bosch
p
oort-judgment
is to be applied, I agree with the contention of Mr Meintjies that
when the wording and interpretation of the old Act and that
of the
old section 63 are considered, it appears that
"person"
in the current section 63 of the LTIA is to be interpreted as
being a reference to the policyholder. Similarly, when the wording
and the interpretation of the old Act and that of the old section 63
are considered in relation to the protection provided for,
it appears
that the protection in the current section 63(1)(a)(i) is to be
interpreted as being a reference to the insolvent estate
of the
policyholder.
[34] Mr
Meintjies further relied on the principle enunciated in the judgment
of
Minister of the Interior v Machadodor
p
Investments
(
Pt
y)
Ltd
1957 (2) SA 395
(A) at 404:
"Where
the Legislature uses the same word ... in the same enactment, it may
reasonably be supposed that out of a proper concern
for the
intelligibility of its language, it would intend the word to be
understood, where no clear indication to the contrary is
given, in
the same sense throughout the enactment. This applies with greater
force where the same word is repeated in a single
sentence. That the
same meaning was here intended, may also be gathered from the history
of the legislation:"
[35] The
aforesaid principle was subsequently followed and applied
inter
a/ia
in the judgment of
More v Minister
of
Co-O
p
eration and
Develo
p
ment
1986 (1) SA 102
(A) at 115 B - D:
"Where
the Legislature has used the same words, in this case the words
'withdraw' (Afrikaans 'trek') or 'the withdrawal' (Afrikaans
'die
trek') in the same enactment there is a reasonable supposition, if
not a presumption, that it intended the words to bear the
same
meaning throughout the enactment
(Minister
of
the
Interior
v
Machadodorp
Investments
(Pty)
Ltd
and
Another
1957
(
2
)
SA 395
(
A
)
at 404D - E;
Pantanowitz v Sekretaris van Binnelandse
lnkomste
1968
(
4
)
SA 872
(
A
)
at 879D - E; and
Durban City Council
v Shell and BP Southern Africa Petroleum Refineries (Pty) Ltd
1971
(4) SA 446
(A)
at 457A."
See
also
Head of Department, Mpumalanga Department of Education v
Hoerskool Ermelo
2010 (2) SA 415
(CC) at para [70].
[36] In
further support of his contention that "a
person"
is to be interpreted to be a reference to the policyholder, Mr
Meintjies relied on the definition of
"policyholder''
as
contained in section 1 of the LTIA, the wording of which is similar
to the wording contained in section 63(1):
"Policyholder
in respect of a –
(a)
registered insurer, means the person entitled to be provided with the
policy benefits under
a long-term policy;
(b)
"
[37]
Mr Meintjies consequently submitted that it is to be accepted that "a
person"
is a reference to the policyholder and
that
"that person': "his/her''
and
"he/she"
are also to be understood as being references to the
policyholder, with the result that section 63(1)(a)(ii) is to be
interpreted
to mean that upon the death of the policyholder, if the
policyholder is survived by a spouse, child, stepchild or parent, the
policy
benefits are protected against payment of the debts of the
policyholder and not against payment of the debts of the beneficiary.
The
case law regarding the applicability of section 63 in particular
circumstances:
[38] Both
Messrs Meintjies and Zietsman referred to and relied on the judgment
of
Pieterse v Shrosbree NO and Others; Shrosbree NO v Love and
Others
2005 (1) SA 309
(SCA) ("the
Pieterse
appeal judgment") in which judgment the Supreme Court of
Appeal dealt with the appeals against two judgments in relation to
the old section 63 of the LTIA (when the protection in terms of
section 63 was still limited to the amount of R50 000.00). The
first
matter on appeal was the one of
Shrosbree and Others NNO v Van
Rooyen NO and Others
2004 (1) SA 226
(SE) ("the
Van Rooyen
judgment") and the second
matter on appeal was the one of
Love and Another v Santam Life
Insurance Ltd and
Another
2004 (3) SA 445
(SE) ("the
Love-judgment").
For the sake of completeness and clarity
I need to point out, as did Mr Zietsman during his argument, that in
the Headnote of the
Pieterse-appeal
judgment it
is wrongly indicated that the
Van Rooyen-judgment
was
confirmed on appeal and that the
Love-judgment
was reversed on
appeal, since the exact opposite is in fact the correct position, as
reflected at the end of the
Pieterse-
appeal judgment,
at para [13] thereof.
[39] Both
Mr Meintjies and Mr Zietsman interpreted the
Pieterse-
appeal
judgment in favour of their respective contentions with regard to
the interpretation of section 63 of the LTIA. Both counsel also
referred to paragraph [12] of the judgment which deals with the
applicable principles in circumstances of the nomination of a
beneficiary. However, despite this, it appears, with respect, that
both counsel may have overlooked and/or misinterpreted applicable
dicta
in relation to section 63 of the LTIA.
[40] As
correctly pointed out by Mr Meintjies, the
Pieterse-
appeal
judgment dealt with the legal position when the policy owner,
therefore the policyholder, nominates a beneficiary, in which
instance such a nomination constitutes a
stipulatio alteri
(a
contract for the benefit of a third person). In this regard the court
stated as follows at paragraphs [8] - [9] of the judgment:
"[8]
A contract of life insurance comes into existence when a person (the
proposer) proposes for the insurance which is accepted
by the
insurer. The person on whose death the insurance is payable is the
life insured. The person who is entitled to enforce the
benefits
payable under the policy is the owner. The proposer, the life insured
and the owner may be the same person or two or three
different
persons. A proposer may effect the insurance either in his/her own
favour or in favour of someone else. If the proposer
effects the
insurance in favour of someone else, the contract of insurance is a
contract for the benefit of a third party and may
be accepted by such
third party who thereupon becomes the owner. Policies commonly
entitle the owner to nominate a beneficiary
on condition that the
nomination will confer no rights on the nominated beneficiary during
the owner's lifetime. The legal nature
of such a nomination is a
stipulation
alteri
(a contract for the
benefit of a third person).
[9]
In such a case, the policy holder (the
stipulans)
contracts
with the insurer (the
promittens)
that .an agreed offer would
be made by the insurer to a third party (the beneficiary) with the
intention that, on acceptance of
the offer by that beneficiary, a
contract will be established between the beneficiary and the insurer.
What is required is an intention
on the part of the original
contracting parties that the benefit, upon acceptance by the
beneficiary, would confer rights that
are enforceable at the instance
of the beneficiary against the insurer, for that intention is at the
'very heart of the
stipulatio
n
alteri' ..
.
"
[41] In
paragraph [11] of the said judgment the court dealt with section 63
and stated
as follows:
"[11]
Section 63 refers to assistance, life, disability or health policies.
Those are defined in s 1 of the LTIA The protection
afforded by s 63
of the LTIA applies to 'the policy benefits' provided or to be
provided to a person under one or more of the specified
types of
policies or the assets acquired exclusively with those policy
benefits.
The
p
olic
y
benefits which
are
p
rotected
are those
p
a
y
able
to the
p
rotected
p
erson in terms of a
p
rotected
p
olic
y
which
has been in force for at least three
y
ears.
The assets which are protected are those which have been acquired
solely or exclusively with the benefits of the relevant policy.
The
protection in relation to such assets operates for a period of five
years after the date upon which the relevant policy benefits
were
provided. The protection is limited to an aggregate amount of R50 000
or such other amount as may be prescribed by the Minister."
(My
emphasis)
[42]
But then, most importantly, the Supreme Court Appeal found that
section 63 is not applicable in an instance
where the policyholder
appointed a beneficiary, since the policy benefits will, as a result
thereof, be paid to the beneficiary
and not the estate of the
deceased. In this regard the court found as follows at paragraphs
[10] and [12] of the judgment:
[10]
On the death of the insured, provided that the nomination has not
been revoked during the insured's lifetime, any claim to
the policy
proceeds by the beneficiary against the insurance company would be
based on the contract of insurance between the deceased
and the
insurance company. It is to the insurance company and no one else
that the beneficiary would have to look for payment.
Section 63
does
not
re
g
ulate the
p
a
y
ment
of the
p
roceeds of the
p
olic
y
.
because
the
beneficia
ry
a
pp
ointment
until
revoked
,
has
the
effect
that
p
a
y
ment of the
p
roceeds
will be made to the beneficia
ry
and not the estate of
the deceased.
(My emphasis)
[12
]
In the ordina
ry
course
,
the
p
roceeds
of an insurance
p
olic
y
will
g
o
directl
y
to a nominated beneficia
ry
.
Absents 63
,
on the death of the
p
olic
y
holder
,
the
trustee of such
p
erson's insolvent estate would not have an
y
claim to those
p
olic
y p
roceeds.
Nothin
g
to the contra
ry
is
p
rovided
in s 63
. Section 63 does not purport to divert the proceeds of an
insurance policy from a nominated beneficiary to the insolvent estate
of a deceased policy holder. Nor, for that matter, does such a
trustee, by virtue of s 63, become a creditor of the nominated
beneficiary. Section 63 does not vest either trustee in each of these
two cases with any interest in and to the proceeds of the
policies.
It follows that
reliance b
y
the
trustees on s 63 was mis
p
laced
…" (My
emphasis)
Further
discussion:
[43] As
indicated earlier, the appeal against the
Love-judgment
was
dismissed. In my view two findings which were made in the
Love
judgment are crucial to the present matter, .which findings are
evident from paragraphs [27] - [30] of the judgment, namely:
1. The
"person"
in section 63 of the LTIA is to be
interpreted to be a reference to the policyholder/deceased under a
life insurance policy in which
the deceased or his wife was the life
insured and where the policy benefits were provided or were to be
provided to the said deceased/policyholder.
2. In
an instance where the policy benefits are payable to a third party as
the nominated beneficiary
under the policy, "third party"
meaning a beneficiary who is not also a policyholder, the provisions
of section 63 are
not applicable.
I
deem it apposite to quote the said paragraphs [27] - [30] of the
judgment:
"[27]
Mr
Smuts
has argued that this interpretation [with reference
to the interpretation in the
Van Roo
y
en-judgment
which was subsequently reversed on appeal] of the section is wrong
because, as it is put in his heads of argument, the section
'relates
to "the policy benefits provided or to be provided
to a
person
under one or more assistance, life, disability or health
policies in which that person or the spouse of that person is the
life
insured", and in the instant matter, as in the unreported
judgment, by virtue of the nomination of beneficiaries, the policy
benefits were not "provided or to be provided" to the
deceased, rendering the section inapplicable'.
[28]
This interpretation of the section accords with that of Meskin in
Insolvency Law
who says the following:
'Since
the section operates only in relation to those policy benefits
envisaged bys 63(1) which are provided or to be provided to
a person
in terms of a policy under which that person, or his spouse is the
life insured,
where such benefits are
p
rovided or to
be
p
rovided to some
other
p
erson
,
the section is of no a
pp
lication
. It is
accordingly submitted that the section will not apply in relation to
policy benefits which are payable, eg, to a beneficiary
nominated
under the policy, upon the death of the protected person where such
beneficiary accepts the relevant benefits,
firstl
y
because
such beneficia
ry
is not the "
p
erson"
envisa
g
ed
b
y
s 63
(
1
)
and secondl
y
,
because the ri
g
ht
to claim the benefits vests in
the beneficia
ry
and does not form
p
art of the assets of the
deceased
estate.'
[29]
I am of the view that this is a correct inter
p
retation
of s 63 of the Act. It is
an inter
p
retation
that, sim
p
l
y p
ut, ascribes a consistent
meanin
g
to the same
word - the word
'
p
erson' - when it a
pp
ears in the
section,
and
is consistent too with the basic
p
remises
and
p
rinci
p
les of insurance law that form
the backdro
p
a
g
ainst which the Act
must be inter
p
reted
. It follows from this
interpretation of the section that I am of the view that the judgment
in
Shrosbree NO and Others v Van Rooyen NO and Others
is
clearly wrong.
[30]
The result is that s 63 has no a
pp
lication to this
case: the
person
contem
p
lated b
y
s 63
(
1
)
as the
p
otential
beneficia
ry
of the
p
rotection of the
section was in this case the deceased
- who did not have
any policy benefits provided to him during his life for purposes of s
63(1
)(a)
- and not his wife or mother.
In other words
,
the section onl
y
a
pp
lied if the
p
olic
y
benefits were
p
rovided
or were to be
p
rovided to the deceased under a life
insurance
p
olic
y
- for example, on the
attainment of a particular age, or on a particular date, or on the
periodical payment of a contract of annuity
insurance, or on the
payment of bonuses on a life insurance policy
- in which the
deceased or his wife was the life insured. It did not a
pp
l
y
in this case because the
p
olic
y
benefits were
p
rovided to the deceased's
beneficiaries in terms of a life
insurance
p
olic
y
in which the deceased was the life insured
. This means
that the policy benefits never were part of the deceased estate from
whence they could 'devolve upon' the deceased's
wife and mother, to
use the language of s 63(3)(aJ. The right to the policy benefits
vested in the applicants and not in the deceased
or his estate."
(My emphasis)
[44] In
an article by Hein Daffue,
"Im
p
roved Protection
for Polic
y
Benefits",
Insurance and Tax
,
Lexis Nexis, Vol. 29, No. 2, June 2014, at paragraph 2.2 thereof,
the learned author stated that in terms of section 63, the policy
benefits enjoy protection:
"1.
During the policyholder's lifetime in that it may not be attached or
be subject to execution under a judgment of a court
or form part of
the policyholder's insolvent estate; or
2.
Upon the policyholder's death if the policyholder is survived by a
spouse, child, stepchild or parent in that
it will not be
available for
payment
of the
policyholder's
debt."
(My emphasis)
[45] The
learned author further stated that with a beneficiary appointment, if
accepted
by the beneficiary at the death of a policyholder who is
also the life insured,
the
policy
benefits are
payable
directly to the beneficiary
in which
instance, based on the
Pieterse
-appeal judgment,
the
protection
of section 63 is not relevant.
(My
emphasis)
[46] The
same principles were also stated and discussed by Robyn Wynne in an
article titled
"Important reasons why an Investment in a Life
Insurance Policy can Protect an Investor,
Insurance and
Tax,
Lexis Nexis, Vol. 28, No. 4, December 2013, at paragraph
9 thereof.
[47] The
aforesaid principles were also discussed and confirmed in two very
insightful articles:
1. Z
Mabe and E Mbiriri,
'The Payout of a Life Insurance Policy into an
Unrehabilitated Insolvent's Estate:
Malcolm Wentzel v Discovery
Life Ltd: in re Botha v Wentzel (1001/19)
[2020] ZASCA 121
(2 October
2020)", PER/PELJ 2022(25)- DOI.
2. M
Roestoff and A Boraine,
"Is Genomineerde Be
g
unsti
g
des
in
g
evol
g
e Lewensversekerin
g
s
p
olisse
Uit
g
esluit van Beskermin
g
teen
lnsolvensie?
Wentzel v Discovery Life Limited: In re Botha NNO v
Wentzel
2021 (6) SA 437
(SCA)", 2022 (85) THRHR, at p.408 top.
421.
[48] Furthermore,
in
Mars: The Law of Insolvenc
y
in
South Africa,
10th Edition, 2019, Jutastat, E
Bertelsmann
et al,
p.214 - 217, at
paragraph
10.2.1,
the aforesaid principles are similarly stated:
"Section
63 of the LTIA ao
plies
onl
y
to
situations where the
p
rotected
policy
holder
(
and/or his or her estate
)
is
also the beneficia
ry
under the relevant
p
olic
y,
althou
g
h the insured life ma
y
be
his or her own life
.
or the life of a
spouse.
Then s 63 will apply, and the relevant policy will be protected in
favour of the protected policy holder (and will not form part
of his
or her insolvent estate), or the specified family members. Prior to
the amendment of s 63, the trustee of the insolvent
estate would have
been entitled to claim any amount exceeding the R50 000. Presently,
however, a claim would be relevant only if
the policy was taken out
to defraud creditors, as contemplated by s 63(4).
Insurance
contracts structured as a sti
p
ulation in favour of a
third
p
a
rty,
or
where the
beneficia
ry
is someone other than the '
p
olic
y
owner'
.
will exclude
the
a
pp
lication of s 63 of the LTIA
. The third-party
beneficiary will then be entitled to all the policy proceeds, to the
exclusion of the insolvent estate. For example,
if the insolvent
debtor is the 'policy owner', and the life insured is his or her own,
or the life of his or her spouse,.but the
beneficiary is a person
other than the insolvent 'policy owner'.(such.as his or her spouse,
child or other third person), s 63
of the LTIA will not apply. The
beneficia (spouse, child or third person) will be entitled to all the
policy proceeds if the event
that is insured against occurs.
Thus
the
p
rotection
envisa
g
ed
b
y
s
63
of
the
LTIA
relates onl
y
to those
p
olic
y
benefits described
in s 63
(
1
)
'
p
rovided or to
be
p
rovided to a
p
erson'
under
one
or
more
of
the
p
olicies
referred
to
in
that
section
in
which
that
p
erson or his or her s
p
ouse is the
life insured. If those
p
olic
y
benefits
are
p
rovided or to be
p
rovided to
another
p
erson
,
the
a
pp
lication of s 63 is excluded."
(My
emphasis)
Conclusions:
[49]
I consequently come to the following relevant conclusions:
1. The
word
"person"
in section 63 of the LTIA is to
be interpreted to be a reference to the policyholder and likewise the
words
"his/her'
and
"he/she"
are linked to the word
"person"
and are
consequently also to be interpreted to be references to the
policyholder.
2. Section
63 is only applicable in instances where the policyholder, or his
spouse, is the life
insured and the said policyholder is also the
beneficiary in terms of the policy.
3. In
an instance where a third party, that is somebody else than the
policyholder, is appointed
as beneficiary and the beneficiary accepts
the appointment upon the death of the policyholder, section 63 is not
applicable.
The
se
p
arated issue:
[50] In
the present matter, where the deceased as policyholder appointed
Nelly as beneficiary,
which appointment Nelly accepted upon the
deceased' s death, section 63 is not applicable.
[51] Therefore,
in relation to the separated issue, I have to find that the benefits
of the long-term life insurance policy received by Nelly are not
protected in terms of the provisions of section 63 of the LTIA.
Obiter:
[52] It
therefore seems that the action will have to be determined on the
basis of
the
Insolvency Act, combined
with the relevant principles
applicable in circumstances where the parties were married in
community of property and the joint
estate was sequestrated after the
passing of the deceased. However, it must be clear that I do not make
any finding in this regard,
since I was not called upon to do so.
Costs:
[53] As
indicated earlier in the judgment, the parties agreed that should I
find in favour
of the plaintiffs' interpretation of
section 63
of the
LTIA, then costs should be awarded to the plaintiffs in respect of
the separated issue.
[54] However,
in my view, my findings do not fall within the ambit of the aforesaid
agreement,
in that:
1. Although
I do find in favour of theplaintiffs' interpretation
that the word
"person"
in
section 63
of the LTIA is to be
interpreted to be a reference to the policyholder and likewise that
the words
"his/her''
and
"he/she"
are also to be interpreted to be references to the policyholder;
and
2. Although
I agree with the plaintiffs contention that, in circumstances
where
section 63
is indeed applicable, upon the policyholder's death the
policy benefits are protected only against the debts of the
policyholder;
3. I,
however, substantively differ from the plaintiffs interpretation
of
section 63
in so far as it was the plaintiffs case that the said
section is applicable in the circumstances of the present matter
where a
third party was appointed as beneficiary and accepted the
appointment upon the policyholder's death and received payment of the
policy benefits directly and not via the estate of the deceased;
4. Since,
according to my finding,
section 6
;
3
of the LTIA is not applicable to
the present-matter.
[55] In
the circumstances I deem it apposite that the costs in respect of the
determination of
the separated issue stand over for later
adjudication.
[56]
For the aforesaid reasons I made the order already cited at the
beginning of the judgment.
C.
VAN ZYL, J
On
behalf of the plaintiffs:
Adv
L Meintjies
Instructed
b
y
:
Noordman
Attorneys
Bloemfontein
On
behalf of the defendant:
Adv.
P.J.J. Zietsman SC
Instructed
by:
Graham
Attorneys
Bloemfontein