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[2024] ZAMPMBHC 71
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Sanlam Life Insurance Limited v Chigombo (A14/2024) [2024] ZAMPMBHC 71 (30 September 2024)
THE
HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA MAIN SEAT
APPEAL
CASE NO. A14 / 2024
MC
CASE NO. MRCC 10 / 2023
(1)
REPORTABLE: NO
(2)
OF INTEREST TO OTHER JUDGES: NO
(3)
REVISED.
DATE:
30
September 2024
SIGNATURE
In
the matter between:
SANLAM
LIFE INSURANCE LIMITED
APPELLANT
and
NOSIFISO G.
CHIGOMBO
RESPONDENT
JUDGMENT
RATSHIBVUMO ADJP:
Delivered:
This judgment was handed down
electronically by circulation to the parties' representatives by
email. The date and time for hand-down
is deemed to be 08H00 on 30
September 2024.
Introduction.
[1]
It is often said that the best economical
thing to do when one has a windfall of cash, is to invest it. While
this could be true
for most people, those who have been in the
financial sector long enough know that the best financial advice is
the one tailored
according to individual’s needs. Facts of this
case illustrate that even the best financial advice can be disastrous
when
not suited to fit one’s persona. The Respondent’s
windfall came as an inheritance when her mother passed on. Following
this general advice, she opted to invest her inheritance with the
Appellant under policy investment called Cumulus Fixed Return.
The
policy was issued under the insurance licence of Sanlam Developing
Markets Limited and administered by Sanlam Life Insurance,
which is
governed by the Long Term Insurance Act, no. 52 of 1998 (the
Long
Term Insurance Act).
[2
]
On 06 December 2021, the Respondent
deposited R320 000.00 into the investment policy referred to
above. The policy was to run
for five years, from 01 January 2022
until 01 January 2027. By then, the maturity benefit would be
R418 368.20. This soon
became a dream far-fetched when on 20
January 2022, three weeks from the date of contract, the Respondent
applied for a partial
withdrawal of R120 000.00 from this
investment. This request was processed by the Appellant and the
Respondent was paid the
amount she required. In early January 2023,
the Respondent approached the Appellant for the second time in order
to make another
partial withdrawal. She needed cash to pay “tuition
fees”. This request was declined by the Appellant. She then
demanded
that the contract be cancelled so that all her investment
funds could be returned to her. This too, was refused by the
Appellant.
[3]
On 17 January 2023, the Respondent launched
an application at the Nelspruit Regional Court (court
a
quo
), seeking an order in terms of
which, the Appellant is ordered to cancel the contract and pay
R167 000.00 to her. The founding
affidavit does not disclose how
this figure was calculated. The application was opposed on various
grounds, mainly, the contractual
limitations of
pacta
sunt servanda
. The application was
however granted by the court
a quo.
The judgment granting this order was delivered about six weeks after
the matter was argued. The court
a quo
reasoned that “a party may enter into a contract but if for
whatever reason they want to cancel the contract, it is in terms
of
the law allowed and the court feels it will be untenable to refuse a
party or a consumer an opportunity to cancel an agreement
in respect
of which they entered in a voluntary manner.” It concluded
therefore that to force a person to be a party to an
agreement
wherein she no longer wishes to be, would not be in the interest of
justice.
On appeal.
[4]
While a few technical issues were raised as
grounds of appeal, they shall not be the focus of this judgment as
they have very little
impact, if any, on the outcome of the appeal.
Moreover, it is often preferred that in litigations such as this one,
involving indigent
members of the public, where practically possible,
judgments should be handed down on their merits, so as to give
finality to the
litigation, as opposed to judgments on
technicalities, which only afford a party in default, an opportunity
to remedy the wrong.
[5]
The argument presented before this court on
appeal is to a large extent similar to what was presented before the
court
a quo
.
The Appellant argues that the court
a
quo
, erred in reasoning that what it
considered to be in the interests of justice should weigh more than
the contractual obligations
and the legislative provisions. The
legislative provision thereof is
section 54
read with
regulation 4.2
of the
Long Term Insurance Act. It
was also submitted that the court
a quo
allowed the Respondent to argue a different case to the one presented
before it in the affidavits. It was also argued that to the
extent
that the court
a quo
relied on the provisions of the Consumer Protection Act, no. 68 of
2008 (the
Consumer Protection Act), it
based its reasoning on
non-existing legal provisions which were not even presented before
it.
[6]
The Respondent on the other hand submitted
that it entered into a “written agreement with the Appellant,
in terms of which
the Appellant undertook to invest her funds for
five years and that the Appellant will pay back the same with
interest after the
lapse of five years or at any other time upon
demand.” The Respondent submitted before the court
a
quo
, as she does before this court,
that in refusing to allow her another withdrawal from the invested
funds, the Appellant breached
the terms of the contract. That breach,
so she argues, entitled her to cancel the contract. She alleges that
she notified the Appellant
of her decision to cancel the contract
while visiting its offices, but the Appellant refused to cancel the
contract and/or to refund
her the invested funds.
[7]
The Respondent further submitted that since
the contract between her and the Appellant does not contain a
termination clause, the
parties can terminate the contract on
reasonable notice to another, unless the contract was intended to
continue indefinitely,
which was not the case
in
casu
. The Respondent also submits that
she was entitled to cancel a contract based on the
Consumer
Protection Act. She
however did not specify as to what parts of that
Act gives her such entitlement. Lastly, the Respondent relied on
section 62(2)(c)
of the
Long Term Insurance Act and
quoted it as
providing, “
a
policyholder may cancel a policy under particular circumstances and
within a determined period, and what the legal consequences
shall be
if he or she does so…
”
[8]
In
its judgment, the court
a
quo
was not detailed on its findings on law. That creates some
predicament for the appeal court in that motion proceedings, unless
concerned with interim relief, are all about the resolution of legal
issues based on common cause facts. Unless the circumstances
are
special, motion proceedings cannot be used to resolve factual issues
because they are not designed to determine probabilities.
[1]
Where it seemed to make findings on law, it appears plain that the
court
a
quo
got the law wrong altogether, as demonstrated hereunder. This leaves
this court with no option but to reconsider the application
that was
presented before the court
a
quo
.
Before the court
a
quo
.
[9]
From the founding affidavit, it appears as
though there were no factual disputes. The Respondent (Applicant
before the court
a quo
)
went to the extent of attaching a contractual document entered into
between her and the Appellant. It formed the basis of her
application. She seems to have had a different understanding or
interpretation to that of the Appellant. It was only after the
answering affidavit was filed by the Appellant (Respondent before the
court
a quo
)
that the case for the Respondent shifted from what it was in the
founding affidavit, to also reflect possible dispute of facts.
[10]
From the founding affidavit, the
Respondents makes her case as follows,
“
I
entered into a written agreement of insurance in terms of which the
Respondent undertook to invest the funds invested with them
for a
period of five years and pay back same with interest after the lapse
of five-year period or
at any other time
upon demand
.
For
the purpose of convenience, I refer the Honourable Court to page 2 of
the said contract attached, marked, Annexure AA1, which
clearly
stipulates
the amounts to be available for withdrawal for each year for the
duration of the contract until maturity is reached.
”
[2]
[11]
The annexure attached by the Respondent to
which she made reference reflects the following:
“
WHAT
IF I NEED CASH
If
you need cash, you have various options:
·
You can apply for a loan from a bank or any
other institution and use your policy as security.
·
You can apply to cash in your policy, or
you can apply to make a cash withdrawal; against it.
HOW MUCH WILL THE CASH
AMOUNT BE THAT I COULD RECEIVE?
The amounts shown below
next to particular date indicate the possible cash amount that you
could receive, if we assume that our
method of calculation, policy
charges and the level of long term interest rates remain unchanged.
Date
Possible cash amount
R
01/01/2023
306 100
01/01/2024
330 900
01/01/2025
357 600
01/01/2026
386 600
ARE THERE ANY
RESTRICTIONS UNDER PRESENT LEGISLATION?
Yes. If you cash in your
policy before 01 January 2027, we are not allowed to pay you more
than an amount limited by law. So if
the cash value of your policy is
more than this limited amount, and the balance will remain invested
until that date. Also,
if you only partially cash in your policy
before 01 January 2027, you are not allowed to cash in again before
this date.
[My emphasis].
The amounts shown below
next to a particular date indicate the restricted cash amount.”
Date
Restricted cash amount
R
01/01/2023
336 000
01/01/2024
352 800
01/01/2025
370 440
01/01/2026
388 962
[12]
Even before reading the Appellant’s
answering affidavit before the court
a
quo
, it is obvious that the
Respondent’s allegations cannot be supported by the contractual
document she attached. Nowhere in
the contract referred to above is
there a provision to the effect that the Appellant undertook to pay
back the invested funds with
interest after the lapse of five-year
period
or at any other time upon demand
.
[My emphasis]. Again, the language used does not stipulate the
amounts to be available for withdrawal for each year for the duration
of the contract until maturity is reached, as she avers.
[13]
Unsurprisingly, the Appellant zoomed into
the same contractual document attached by the Respondent to the
founding affidavit to
restate what is already contained therein, to
wit; if a party (the Respondent) chooses to do a partial withdrawal
from the policy,
she would not be allowed to do another withdrawal
until the date stipulated as the last day of the contract. In a
surprising turn
of events, the answering affidavit prompted the
Respondent to present a replying affidavit wherein for the first
time, she alleged
that nothing was explained to her when she entered
into a contract with the Appellant, and that she was only told to
sign some
documents, without explaining their contents. She also
averred that there was an intermediary who helped her in signing
these documents.
[14]
A
reply of this nature invites potential dispute of facts of which
case, the
Plascon-Evans
principles become applicable. In the words of Harms JA, it is well
established under the
Plascon-Evans
rule that where in motion proceedings disputes of fact arise on the
affidavits, a final order can be granted only if the facts
averred in
the applicant's affidavits, which have been admitted by the
respondent, together with the facts alleged by the latter,
justify
such order. It may be different if the respondent's version consists
of bald or uncreditworthy denials, raises fictitious
disputes of
fact, is palpably implausible, far-fetched or so clearly untenable
that the court is justified in rejecting them merely
on the papers.
The court below did not have regard to these propositions and instead
decided the case on probabilities without
rejecting the
[respondent’s] version.
[3]
The Law.
[15]
Section 54
of the
Long Term Insurance Act
provides
,
“
54
Limitation on provisions of certain policies.
(1)
A long-term insurer may not-
(a)
undertake
to provide policy benefits, or provide policy benefits, under;
(b)
provide
consideration upon the surrender of; or
(c)
make
a loan upon the security of,
a
long-term policy contemplated in the regulations, otherwise than in
accordance with the requirements and limitations set out in
the
regulations.
(2)
The requirements and limitations set out in regulations made under
subsection (1) apply from the inception of a policy, if the
regulation so provide [sic], irrespective of the fact that the policy
was entered into before or after the commencement of this
Act or the
regulations.
”
Under
section 1 of the same Act, 'policy benefits'
is
defined as – (in respect of a registered insurer), one or more
sums of money, services or other benefits, including an
annuity;
[16]
Regulation 4.2 provides,
“
4.2 Limitations
on policies.
(1)
Subject to subregulations (2), (3), (4) and (5), a long-term insurer,
and any person who acts as intermediary between a long-term
insurer
and any person in respect of a policy or proposal for a policy, shall
not undertake to provide, or provide-
(a)
a
policy benefit under a policy during an extended restriction period;
(b)
upon
the full or partial surrender of a policy during an extended
restriction period-
(i)
if the
policy has previously been partially surrendered during the extended
restriction period concerned, any further consideration;
or…
”
[17]
Regulation 4.1
defines restricted period as,
“
a
period of 5 years which commences, if the date concerned is 1 January
1994 or later-
(a)
on
the date when the first premium period begins; or
(b)
during
a premium period after the first such period, on the first day of the
month in which an excess premium is received by the
insurer.”
[18]
There is nothing in
section 62(2)(c)
of the
Long Term Insurance Act that
counters the provisions in
section 54
read with
regulation 4.1
above. A closer look of this section will
reveal that it was actually misquoted.
Section 62(2)(c)
should not be
read in isolation, but
section 62
as a whole. It provides,
“
62 Protection
of policyholders
(1)
The Authority, by notice in the
Gazette
,
may
-
(a)
prescribe
rules not inconsistent with this Act, aimed at ensuring for the
purpose of policyholder protection that policies are entered
into,
executed and enforced in accordance with sound insurance principles
and practice in the interests of the parties and in the
public
interest generally;
(b)
vary
or rescind any such rule; and
(c)
determine
the period which must elapse before a rule, variation or rescission
takes effect after it has been published in the
Gazette
.
(2)
Without derogating from the generality of subsection (1)
(a)
,
rules may provide-
…
(c)
that
a policyholder may cancel a policy under particular circumstances and
within a determined period, and what the legal consequences
shall be
if he or she does so
…
”
[My emphasis].
The
Authority is defined under
section 1
of the
Long Term Insurance Act
as
the Financial Sector Conduct Authority established by the
Financial Sector Regulation Act.
[19]
The Respondent merely quotes the empowering
statutes that authorises a particular body to come up with a set of
rules without specifying
if such rules have been promulgated yet.
Even if such rules exist, there is nothing in the statute empowering
the Authority to
come up with the rules that would undermine the
statutory provisions, especially since that authority would exist as
a result of
that statute. Such rules would have to be read with the
legislative provisions, complementing each other, otherwise they
would
be unlawful.
[20]
This
court was referred by the Appellant to the “
Manual
on Retirement Funds and Other Employee Benefits
”
[4]
where the learned author stipulated the following,
“
Limitation
on the payment of short term investment benefits
Section 54 continues the
demarcation regime imposed previously by section 59D of the 1943 Act.
The underlying purpose of this regime
is to demarcate the business of
the banks and insurers, by essentially preventing insurers to provide
“short term”
investment benefits.
The demarcation measures
are contained in Part 4 of the Regulations. In terms of these
measures, payment of investment benefits
under certain policies
within five years of their inception is restricted.
These restrictions
prohibit the payment of investment type benefits, but not death or
disability benefits. These restrictions do
not apply to fund policies
and fund member policies.”
[21]
In its judgment, the court
a
quo
made no reference to the above
statutory provisions, although they were referred to already in the
Appellant’s answering
affidavit and its heads of argument. No
mention was made of the possible dispute of facts introduced by the
Respondent’s
replying affidavit or how these were approached
and resolved. The court
a quo
did however come up with
section 24
of the
Consumer Protection Act,
as
a basis for holding that every consumer had a right to cancel the
contract. It is not clear where it got this section from as it
was
not referenced to by any of the parties.
[22]
A simple perusal of that Act would have
revealed that section 24 does not provide for the cancellation of
contracts. Instead, it
provides for product labelling and trade
descriptions. This aspect was brought to the attention of the
presiding Regional Magistrate
when the notice of appeal was issued,
as it was one of the grounds of appeal. He however missed a golden
opportunity to rectify
the wrong statutory reference in this regard
when on 18 December 2023, he wrote the following as reasons for
judgment in terms
of Rule 51(1) of the Magistrates Court Rules,
“
[F]acts
found to have been proved as well as reasons for the judgment are
contained in a comprehensive manner in my ex tempore judgment.
I have
nothing else to add to such reasons and I request that they be taken
as my reasons for whatever purpose the defendant may
need them.”
[23]
The hurdle in the wrong reference to the
Consumer Protection Act is
not only the non-existence of the
provisions referred to by the court
a
quo
, but it is also doubtful if that
Act would find application in a case of this nature. A consumer is
defined under
section 1
of the
Consumer Protection Act as
a person to
whom those particular goods or services are marketed in the ordinary
course of the supplier’s business. Service
is defined as,
“
(c)
any banking services, or related or similar financial services, or
the undertaking, underwriting or
assumption of any risk by one person
on behalf of another,
except
to the extent that any such service-
(i)
constitutes advice or intermediary services that is subject to
regulation in terms of the Financial
Advisory and Intermediary
Services Act, 2002 (Act No. 37 of 2002); or
(ii)
is regulated in terms of the Long-term
Insurance Act
, 1998 (Act No. 52 of
1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);
”
[My emphasis].
Conclusion.
[24]
It appears from the facts of this case that
the Respondent had her opportunity to either cancel the contract as a
whole, or do a
partial withdrawal, and she chose the latter. The
contents of the contractual document she presented, are binding on
her and the
Appellant. Nothing was advanced by the Respondent that
suggests that she could understand the clauses in the written
contract.
What she expected the court to do is against the
legislative provisions that were also incorporated into the contract
that she
signed. In allowing the Respondent to make a second
withdrawal or cancel the contract after making a partial withdrawal,
the Appellant
would not only be deviating from the agreement, but
would also be breaking the law. The appeal has to be allowed.
[25]
There is no reason why costs should not
follow the outcome.
[26]
For the aforesaid reasons, I make the
following order:
26.1
Appeal is upheld with costs.
26.2
Order of the court
a
quo
is set aside and replaced with the
following:
The application is
dismissed with costs.
TV RATSHIBVUMO
ACTING DEPUTY JUDGE
PRESIDENT
MPUMALANGA DIVISION
I agree.
L COETZEE
ACTING
JUDGE OF THE HIGH COURT
MPUMALANGA DIVISION
FOR
THE APPELLANT:
ADV
S MATHIBA
INSTRUCTED
BY:
WERKMANS
ATTORNEYS
C/O
SEYMORE DU TOIT BASSON ATT
NELSPRUIT
FOR
THE RESPONDENT:
MR.
AA MILAZI
INSTRUCTED
BY:
MILAZI
AA INCORPORATED
DATE
HEARD:
02
AUGUST 2024
JUDGMENT
DELIVERED:
30
SEPTEMBER 2024
[1]
See
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) per Harms JA, at para 26.
[2]
See
para 5.1 & 5.4 of the founding affidavit on p. 6 of the
paginated bundle.
[3]
See
National
Director of Public Prosecutions v Zuma
supra
,
at para 26
[4]
2015
Edition, p. 692 para 10.20.11.