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[2011] ZASCA 191
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PPS Insurance Company Ltd and Others v Mkhabela (159/11) [2011] ZASCA 191; 2012 (3) SA 292 (SCA) (14 November 2011)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case
No: 159/11
In
the matter between:
PPS
INSURANCE COMPANY LIMITED
….............................................
First
Appellant
SANLAM
TRUST LIMITED
…............................................................
Second
Appellant
SUPREME
LETLAKANA SEBATA
…...................................................
Third
Appellant
and
SIMON
MICHAEL MKHABELA Respondent
Neutral
citation:
PPS Insurance Company v Mkhabela
(159/2011)
[2011] ZASCA 191
(14 November 2011).
Coram:
Harms AP, Lewis, Van Heerden, Cachalia and Seriti JJA
Heard:
1 November 2011
Delivered:
14 November 2011
Summary:
Third party nominated
as beneficiary of life insurance policy – Policy reserving
insured’s right of cancellation or
change of nomination of
beneficiary – Nominated beneficiary predeceasing policy holder
– Executor of beneficiary estate
has no claim to proceeds of
the policy.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
South Gauteng
High Court, Johannesburg (Tsoka, Victor and Mayat JJ sitting as full
court).
The appeal succeeds, with costs, and
the order of the full court is altered to read:
‘
The appeal is dismissed with
costs.’
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA (Harms AP, Lewis, Van
Heerden, and Seriti JJA concurring):
[1] The third appellant is the
executor in the estate of the late Mmatishibe Louisa Magdeline
Sebata. Although not a party to the
original application brought in
the court of first instance, he was granted leave to join those
proceedings as the third respondent.
The first and second appellants
are named as parties to the appeal but only the third appellant is
pursuing it. The first appellant,
which is an insurance company,
elected to abide by the decision of the court, and the second
appellant decided not to persist with
the appeal.
[2] Ms Sebata was the owner of a life
policy which the first appellant had issued to her. She had nominated
her mother, Helen Mmapule
Mkhabela, as the beneficiary of the policy
in the event of her death, but reserved the right to change or cancel
the nomination
‘at any time’. Ms Mkhabela passed away on
26 May 2007. Her daughter died afterwards, on 12 August 2007,
when the
proceeds of the policy fell due, but without having
nominated another beneficiary. Simon Michael Mkhabela, the respondent
and executor
of Ms Mkhabela’s deceased estate, then claimed the
proceeds of the policy in the high court.
[3] The court of first instance
(Coetzee J) dismissed his claim with costs and directed that the
proceeds of the policy be paid
to the third appellant, as executor of
the Sebata estate. The learned judge reasoned that when Ms Mkhabela
died, her daughter’s
nomination of her as the beneficiary of
the policy ceased to exist. The policy therefore vested in Ms
Sebata’s estate and
not her mother’s.
[4] The full court (Tsoka J, Victor
and Mayat JJ concurring) took a different view. It held that, once Ms
Mkhabela accepted her
nomination as beneficiary, and the first
appellant recorded this, a binding agreement between her and the
first appellant came
into effect. On Ms Sebata’s death, so the
court reasoned, the respondent, as executor of Ms Mkhabela’s
estate, was
entitled to accept the benefit of the policy. The third
appellant takes issue with the court’s reasoning. The appeal is
before
us with special leave of this court.
[5] The approach of the full court
proceeded from the premise that the insurance agreement between Ms
Sebata and the first appellant
was a
stipulatio alteri
–
an agreement for the benefit of a third party (Ms Mkahabela). It then
reasoned as follows:
‘
The
agreement creates a
spes
for
Ms Mkhabela. Ms Mkhabela has no rights to the policy during the
lifetime of Ms Sebata. The
spes
only
becomes a right to Ms Mkhabela on the death of Ms Sebata. The
benefit, on the death of Ms Sebata, is open for acceptance by
Ms
Mkhabela. As she had already died at the time the benefit accrued and
her nomination had not been revoked, it remained open
for acceptance
by the appellant. That Ms Sebata had, during her lifetime, the right
to cancel or revoke the nomination of a beneficiary,
is beyond
question. Ms Mkahabela accepted the nomination on this basis. The
nomination of Ms Mkhabela as a beneficiary, not having
been revoked
by Ms Sebata before her death, remains a valid agreement between Ms
Mkahabela and the [insurance company]. On the
death of Ms Sebata the
proceeds of the insurance company accrue to the estate of Ms
Mkhabela. Contrary to the view taken by the
Court below, the
agreement between Ms Mkhabela and the [insurance company] did not . .
. become extinct . . ..’
[6] The full court was correct in its
view that Ms Sebata’s nomination of her mother as the
beneficiary under the policy was
a contract for the benefit of her
mother as a third party, which was capable of acceptance upon the
death of the policy holder.
1
But it then, with respect, erroneously
found that Ms Mkhabela’s acceptance of her
nomination
as a beneficiary had some legal
significance.
[7] It is well established that a
nominated beneficiary does not acquire any right to the proceeds of a
policy during the lifetime
of the policy owner. It is only on the
policy owner’s death that the nominated beneficiary is entitled
to accept the benefit
and the insurer is obligated to pay the
proceeds of the policy to the beneficiary.
2
Until the death of the policy owner,
the nominated beneficiary only has a
spes
(an expectation) of claiming the
benefit of the policy – the nominated beneficiary has no vested
right to the benefit.
3
[8] It follows that if the nominated
beneficiary predeceases the policy owner, she would have had no right
to any benefit of the
policy at the time of her death. Put simply,
when the nominated beneficiary dies, the
spes
evaporates. It falls away.
The fact that a nominated beneficiary accepts the nomination cannot
change this.
[9] Likewise, where, as here, the
insured expressly reserves the right to change or cancel the
nomination, the nominated beneficiary
has no claim to the benefit of
the policy until the insured’s death. For if the insured
subsequently chooses another beneficiary
thereby revoking the first,
the first nominee’s acceptance becomes nugatory.
4
And, where the insured does not revoke
the nomination of the nominated beneficiary, as in this case, the
beneficiary is in exactly
the same position as if there were no
revocation clause. In other words, until the death of the insured the
nominated beneficiary
has no right to claim any benefit of the
policy. This means that because Ms Mkhabela died before her daughter,
her
spes
logically expired at the same time.
There was thus no enforceable right that was transmissible to the
Mkhabela estate. The benefit
remained with the insured, Ms Sebata,
until her death approximately two months later, when it fell into her
estate.
[10] That the approach adopted by the
full court does not withstand scrutiny was demonstrated by Mr
Mundell, who appeared for the
appellant. He asked what would have
happened to the
spes
if the nominated beneficiary had died two
years, instead of two months, before the policy owner, and her estate
was finally wound
up before the policy owner’s death. And the
spes
, not being an enforceable right, is not reflected in the
Liquidation and Distribution account. The consequence of the full
court’s
reasoning is that the
spes
would have somehow
revived and become enforceable on the death of the policy owner,
which is simply not possible.
[11] In the result the appeal must
succeed, with costs, and the order of the full court should be
altered to read:
‘
The appeal is dismissed with
costs.’
_________________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
For 2
nd
and 3
rd
Appellant: A R G Mundell SC
Instructed
by:
Werksmans
Inc, Sandton
Symington
& De Kok, Bloemfontein
For
Respondent: E M Matanda
Instructed
by:
Mankoe Inc c/o Tsebane Molaba Inc,
Johannesburg
Mphafi
Khang Inc, Bloemfontein
1
Moonsamy
v Nedcor Bank Ltd
2004 (3) SA 513
(D) at 518B.
2
Ibid
518A-B.
3
It
should be noted that although the parties referred to
Mutual Life
Insurance Co of New York v Hotz
1911 AD 556
, the case does not
assist the decision here since the facts were completely different.
There, the policy owner claimed the surrender
value on his father’s
death. The court held that the father’s estate had already
accepted the right that had accrued
(not a
spes
) and that the
policy owner was not entitled to claim the surrender value.
4
D
M Davis
Gordon and Getz on The South African Law of Insurance
4
ed at 335.