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[2020] ZASCA 121
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Wentzel v Discovery Life Limited and Others: In Re Botha and Others NNO v Wentzel (1001/19) [2020] ZASCA 121; 2021 (6) SA 437 (SCA) (2 October 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 1001/19
In
the matter between:
MALCOLM
WENTZEL
APPELLANT
and
DISCOVERY LIFE
LIMITED
FIRST RESPONDENT
JOACHIM HENDRIK BOTHA
NO
SECOND RESPONDENT
REINETTE STEYNBURG
NO
THIRD RESPONDENT
ZOLILE ABEL DLAMINI
NO
FOURTH RESPONDENT
THE
MASTER OF THE HIGH COURT, PRETORIA
FIFTH RESPONDENT
In
re:
Cross
appeal
JOACHIM
HENDRIK BOTHA NO
FIRST CROSS-APPELLANT
REINETTE
STEYNBURG NO
SECOND CROSS-APPELLANT
ZOLILE
ABEL DLAMINI NO
THIRD CROSS-APPELLANT
and
MALCOLM
WENTZEL
RESPONDENT
Neutral
Citation:
Malcolm
Wentzel v Discovery Life Limited and Others: In Re Botha and Others
NNO v Wentzel
(Case
no 1001/19)
[2020] ZASCA 121
(2 October 2020)
Coram:
NAVSA, MBHA and MOLEMELA JJA and
EKSTEEN and UNTERHALTER AJJA
Heard:
26 August 2020
Delivered:
This judgment was handed down
electronically by circulation to the parties’ legal
representatives via email, publication on
the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand-down is
deemed to be 09h45 on 2 October 2020.
Summary:
Insolvency Act 24
of 1936
– unrehabilitated insolvent – nominated
beneficiary in life insurance policy – save for narrowly
defined exceptions,
unrehabilitated insolvent not permitted to
receive property that vests in him personally and keep it out of the
reach of the trustees
of the insolvent estate, even after liquidation
and distribution account filed and approved – proceeds of life
insurance
policy vests in the trustees.
ORDER
On
appeal from
: The
Gauteng Division of the High Court, Pretoria (Tlhapi J, sitting as
court of first instance): judgment reported
sub
nom Wentzel v Discovery Life Limited and Others
[2019]
ZAGPPHC 164;
2019 (6) SA 472
(GP).
1 The appellant's appeal
is dismissed.
2 The first to third
cross-appellants' appeal is upheld.
3 The order of the Court
a quo is set aside and replaced with the following order:
‘
(a)
It is declared that the second, third and fourth respondents, in
their respective capacities as the trustees of the insolvent
estate
of Malcolm Wentzel and Lizane Wentzel, Master’s reference
number T1179/12, are entitled to the proceeds of the Discovery
Life
Policy number 5130640002 payable by the first respondent, Discovery
Life Limited, pursuant to the provisions of such life
insurance
policy.
(b) The first respondent
is ordered to pay the proceeds of the policy referred to in (a) to
the second, third and fourth respondents
in their official capacity
as trustees.
(c) The applicant,
Malcolm Wentzel, is ordered to pay the costs of the application.’
3 The appellant is
ordered to pay the costs of the appeal and the cross-appeal, such
costs to include the costs occasioned by the
employment of two
counsel, where so employed.
JUDGMENT
Mbha
JA (Navsa and Molemela JJA and Eksteen and Unterhalter AJJA
concurring):
[1]
What this court has to decide is whether an unrehabilitated
insolvent, who is the nominated beneficiary in terms of a life
insurance policy, is personally entitled (that is, to the exclusion
of the trustees of the insolvent estate) to the proceeds of
that life
insurance policy if, on the date when such proceeds become payable,
the insolvent has not yet been rehabilitated by an
order of court,
but the first and final liquidation and distribution account in
respect of the insolvent estate has already been
filed and accepted
by the Master. If not, the question is whether the proceeds of the
life insurance policy are an asset that vest
in the trustees of the
insolvent estate and are thus to be utilised by them for purposes of
realisation and distribution. An application
and a counter
application for declarators in respect of these issues failed in the
Gauteng Division of the High Court, Pretoria
(Tlhapi J). The appeal
and the counter appeal are brought with the leave of the court below.
The factual matrix within which the
issues arose is fairly
straightforward and is set out in the paragraphs that follow.
[2]
The appellant, Malcolm Wentzel, was married in community of property
to Lizane Wentzel on 25 August 2007. On 1 January 2012,
a contract of
insurance was concluded with the first respondent, Discovery Life
Limited (Discovery), in terms of which the life
of Mrs Wentzel was
insured. Mr Wentzel was appointed beneficiary of the proceeds payable
upon her death. In terms of the same policy
Mr Wentzel’s life
was also insured, though, in the event of his death, it was his wife
who was appointed as the beneficiary.
Approximately five and a half
years later, on 16 April 2017, Mr Wentzel’s wife passed away
(the deceased).
[3]
Prior to his wife’s death, their joint estate was provisionally
sequestrated by an order of court. The provisional order
was
confirmed on 3 April 2012. On 20 September 2012 the second, third and
fourth respondents were appointed as trustees of the
sequestrated
joint estate (the trustees). The first and final liquidation and
distribution account duly filed by the trustees was
accepted by the
fifth respondent, the Master of the High Court, Pretoria (the
Master), on 11 July 2014.
[4]
On 9 May 2017, shortly after his wife’s passing, Mr Wentzel
claimed payment of the proceeds of the insurance policy. Discovery
informed him that these proceeds, amounting to R5 240 345.56
(the proceeds), would be paid over to the trustees of the
insolvent
joint estate. Mr Wentzel objected and, on 5 September 2017, claimed
the proceeds in a letter of demand addressed to Discovery.
On 8
December 2017 the trustees registered their objection to Mr Wentzel’s
claim, insisting that the proceeds be paid to
them because neither Mr
Wentzel nor the deceased had been rehabilitated by an order of court
at the time when the proceeds became
payable. As the appellant was
still an unrehabilitated insolvent, the trustees insisted that
payment could only be made to the
insolvent estate. It is these
mutually exclusive claims that gave rise to the application and
counter application in the court
a quo and the relief presently
sought by the parties in this court. I pause to record that Discovery
chose to abide the decision
of the court and took no part in the
proceedings in the court below and before us.
[5]
The appellant contended, as he did in the court below, that as the
nominated beneficiary in terms of the insurance policy, the
proceeds
were due and payable to him, exclusively, when he accepted the
benefits under the policy on 9 May 2017. On the other hand,
the
trustees contended that the proceeds must be paid to them, in their
capacity as trustees of the insolvent joint estate, as
a result of
the appellant’s status as an unrehabilitated insolvent at the
time when the proceeds became payable.
[6] The high court found
that the proceeds, though payable to the appellant in terms of the
policy, nevertheless represented an
asset that had not been exempted
or excluded from the reach of the creditors of the insolvent joint
estate by the laws of insolvency.
Thlapi J thus held that the
appellant was obliged to pay over the proceeds to the trustees for
realisation and, ultimately, distribution
to the creditors of the
insolvent joint estate. However, she held further that the trustees
were ‘to notify the Master that
a situation [had] arisen
whereby a second liquidation and distribution account might be
lodged’ after they had engaged with
the creditors on the
proceeds that had since become available. She stated the following:
‘
Both
the main and the counter-applications have to be dismissed to allow
the trustees to engage such process because the applicant
as an
insolvent has not been rehabilitated and the trustees have not been
discharged’.
The
court a quo dismissed both the application and the counter
application for appropriate declaratory relief.
[7] The basis on which Mr
Wentzel claimed the proceeds may be summarised as follows:
7.1 On 3 April 2012, the
joint estate between the appellant and the deceased (which came about
as a consequence of their marriage
in community of property on 25
August 2007) was sequestrated. The respondents' first and final
liquidation and distribution account
was confirmed on 11 July 2014,
with the effect that the administration of the sequestrated joint
estate was, for all intents and
purposes, completed and finalised on
that date.
7.2 The death of the
appellant's wife on 16 April 2017 had the effect of finally
dissolving the sequestrated joint estate
ex lege
.
7.3
Because of the
ex
lege
dissolution of
his marriage, the appellant was no longer disqualified from receiving
and holding property in his own name, particularly
the proceeds of
the contract of insurance. Moreover, he accepted the benefits payable
to him in his capacity as the nominated beneficiary
of the proceeds
in the event of the deceased’s death. This acceptance, on 9 May
2017, happened after the administration of
the sequestrated joint
estate was finalised upon confirmation of the first and final
liquidation and distribution account by the
fifth respondent on 11
July 2014.
[8]
On the other hand, the respondents submitted that the appellant was,
at all relevant times, and in particular when the proceeds
of the
life insurance policy were accepted and became payable, an
unrehabilitated insolvent. As such, all property acquired by
him
during his sequestration belongs to the estate, and the estate
remains vested in the trustees until it re-vests in the appellant
upon his rehabilitation.
[9]
It is common cause that the appellant is an unrehabilitated
insolvent. It bears mentioning that the appellant has in fact brought
an application for his rehabilitation in the court a quo under a
separate case number. The trustees have applied to intervene in
this
application in order to oppose the same. This application is still
pending.
[10]
The question which this court must determine can be formulated thus:
can an unrehabilitated insolvent receive property that
is to vest in
him personally, and that is beyond the reach of his trustees, by
virtue of the
ex
lege
dissolution of
his marriage in community of property, and therefore the dissolution
of the joint estate? Put differently, can the
death of Mr Wentzel's
wife alter the ordinary consequences of insolvency and result in a
modified application of the Insolvency
Act 24 of 1936 (the
Insolvency
Act), to
allow for an insolvent to receive and own property that is
beyond the reach of the trustees of his insolvent estate?
[11]
Section 20(1)(
a
)
of the
Insolvency Act provides
expressly that the effect of the
sequestration of the estate of an insolvent shall be 'to divest the
insolvent of his estate and
to vest it in the Master until a trustee
has been appointed, and, upon the appointment of a trustee, to vest
the estate in him…’.
Section 20(2)
, in turn, provides
that for the purposes of subsection (1) the estate of an
insolvent shall include:
‘
(a)
all property of the insolvent at the date of the sequestration,
including property or the proceeds thereof which are in the hands
of
a sheriff or a messenger under writ of attachment;
(b)
all property which the insolvent may
acquire or which may accrue to him during the sequestration, except
as otherwise provided in
section twenty-three.'
In
addition, parties married in community of property both become
insolvent debtors when their joint estate is sequestrated.
[1]
[12]
It is necessary to consider the definitions section of the
Insolvency
Act. The
phrase 'insolvent estate' is there defined as 'an estate
under sequestration'. The word 'insolvent', when used as a noun, is
defined
as ‘a debtor whose estate is under sequestration and
includes such a debtor before the sequestration of his estate,
according
to the context’.
[13]
In
Du
Plessis v Pienaar NO and Others
,
[2]
the
appellant sought an order declaring that certain property, that was
owned separately by her - received as an inheritance from
her father
with the stipulation that it not form part of the joint estate of the
appellant and her husband - was excluded from
the joint estate, did
not form part of the insolvent estate and that the trustees were
accordingly prohibited from selling such
property for the benefit of
creditors. The appellant sought to escape liability by contending
that the debts that had given rise
to the claims against the
insolvent estate were debts that were incurred by the joint estate;
and that they were on this basis
only recoverable from the property
of the joint estate – not from the property that was separately
owned and thus fell outside
the joint estate. Nugent JA rightly
rejected this argument, holding that:
’…
Debts
are not incurred by a person's estate – the estate is merely
the source from which the debt is recovered. The debt is
incurred,
however, by the person who is the debtor. Accordingly, the “joint
estate” did not incur the debts that are
now sought to be
recovered and it is not the insolvent debtor. The insolvent debtors
are both the appellant and her husband, for
when spouses are married
in community of property debts incurred by one spouse generally
accrue to them both.'
[3]
[14]
Thus, the appellant's argument that, because the death of his wife on
16 April 2017 had the effect of finally dissolving,
ex
lege
, the
sequestrated joint estate, he was no longer disqualified from
receiving and holding property in his own name, in particular
the
proceeds of the policy, fails at the first hurdle. The debts he
incurred personally, which led to the sequestration order on
3 April
2012, remain extant. Sight must also not be lost of the fact that in
terms of the first and final liquidation account that
was confirmed
by the Master on 11 July 2014, there was (and still is) a deficit in
the insolvent joint estate of R3 480 986
due to the
creditors. In fact, this uncontroverted position of the insolvent
joint estate unequivocally puts paid to the appellant's
assertion
that the Master's confirmation of the aforesaid liquidation and
distribution account finalised the administration of
the insolvent
joint estate, with the effect that there were no longer any debts
still payable to the creditors.
[15]
The effects of
s 20(2)
of the
Insolvency Act are
clear. Upon the
sequestration of a debtor’s estate, all property belonging to
the insolvent first vests in the Master and
thereafter in the
appointed trustee(s). Importantly, all property that the insolvent
acquires, or which may accrue to him, during
the currency of his
insolvency also vests in the trustees.
[16]
This general position is confirmed by the express wording of
s 23(1)
of the
Insolvency Act, which
provides that ‘[s]ubject to the
provisions of this section and of section twenty-four, all property
acquired by an insolvent
shall belong to his estate’. The only
exceptions are those cases specifically mentioned in
s 23(7)
-(9).
[4]
[17]
Clearly,
s 23
does not contain any provision excluding the
proceeds of a life insurance policy, received by an insolvent, from
the reach of trustees.
If the legislature had wanted to exclude such
proceeds from the general operation of the
Insolvency Act, it
would
have clearly provided so. It follows, then, that the proceeds payable
to the appellant in terms of the contract of insurance,
acquired
during the appellant's insolvency, must fall into his insolvent
estate for the benefit of the creditors.
[18]
In
Du
Plessis
this court observed that one has to accept that debts are incurred by
persons rather than by their estates, and that when a marriage
is in
community of property both spouses are generally liable for payment
of the debts that are incurred by one of them and that
it follows
that a creditor may look to the estates of both the debtors for the
recovery of the debt.
[5]
Nugent
JA went on to state the following:
‘
[T]he
remedies provided for by the
Insolvency Act 24 of 1936
are available
against both spouses for recovery of the debt that is due by both of
them’.
[19]
From the foregoing it is clear that, pursuant to the sequestration of
their joint estate on 3 April 2012, Mr Wentzel and the
deceased both
became ‘insolvent debtors’ for purposes of the
Insolvency
Act. The
effect is that all property acquired by the appellant as
‘the insolvent’ before the sequestration, as well as
property
that was acquired or which may have accrued to him during
the sequestration, to wit, the proceeds of the contract of insurance
payable to the appellant after the death of the deceased, vests in
the trustees to be used to meet the claims of creditors.
[20]
Mr Wentzel did not cease to be an insolvent. He maintains that status
until his rehabilitation.
[21]
The appellant's reliance on the decision in
Pieterse
v Shrosbee and Others; Shrosbree NO v Love and Others
[6]
is
misplaced. The issue for determination by this Court in
Pieterse
was whether, pursuant to the provisions of
s 63
of the
Long Term
Insurance Act 52 of 1998
, the trustee of an insolvent deceased’s
estate was entitled, in preference to the nominated beneficiaries, to
the proceeds
of certain insurance policies for distribution to the
deceased’s creditors.
[7]
[22]
This was a consolidated appeal of two cases. The facts in
Love
are entirely distinguishable from those in this case. In
Pieterse
the appellant, an unrehabilitated insolvent, had been married out of
community of property to the deceased policy holder who had
nominated
him as beneficiary in a life insurance policy. When she died her
estate was hopelessly insolvent and was subsequently
sequestrated.
Pieterse
had accepted the benefits under the policy. However, the trustees in
the insolvent estate claimed that they were entitled to the
proceeds
of the policy. This Court held that the proceeds accrue to the
trustee of
Pieterse
's
insolvent estate. In doing so it merely gave effect to
s 20(2)
and
23
of the
Insolvency Act. It
is not authority for the argument
advanced on behalf of Mr Wentzel. On the contrary it is against him.
[23]
The fact is that upon Mr Wentzel’s acceptance of the benefit,
the proceeds became an asset in his hands as an insolvent
debtor.
And, as is demonstrated above, the proceeds cannot belong to a
separate estate of the appellant where such separate estate
is not
legally recognised.
[24]
Shortly before the hearing of this appeal, a new argument, additional
and in the alternative, was raised on behalf of the Mr
Wentzel. An
attempt was made to base his exclusive entitlement to the proceeds of
the contract of insurance on the provisions of
s 23(8)
of the
Insolvency Act.
[25
]
Section 23(8)
provides that:
‘
(8)
The insolvent may for his own benefit recover any compensation for
any loss or damage which he may have suffered, whether before
or
after the sequestration of his estate, by reason of any defamation or
personal injury: Provided that he shall not, without the
leave of the
court, institute an action against the trustee of his estate on the
ground of malicious prosecution or defamation.’
[26]
The argument, as I understand it, is as follows: The contract of
insurance in issue is a pure risk policy for the provision
of an
indemnity in the event of a future risk, to wit, the death of the Mr
Wentzel’s wife. The policy
in
casu
became payable
as a result of the death of the Mr Wentzel's wife and provides for
indemnity for her death, inclusive of the loss
of consortium suffered
by the appellant. In the circumstances, so it was submitted, the
proceeds of the pure risk insurance policy
in
casu
fall squarely
within the ambit of
s 23(8)
of the
Insolvency Act and
are
payable to Mr Wentzel.
[27]
In my view, considering the fact that reliance on
s 23(8)
was
not even foreshadowed in the founding affidavit, the appellant is
precluded from relying on the provision at this stage.
[28]
In any event, even if the new argument were to be allowed, it is
trite that a claim for the loss of consortium is a claim for
damages.
In
DE
v RH
,
[8]
the
Constitutional Court was called upon to consider whether in this day
and age, in relation to the traditional field of claims
of contumelia
associated with loss of consortium, namely, adultery, liability
should attach. It decided that question in the negative.
If one were
to assume that a claim for loss of consortium was notionally viable
in other circumstances the obvious problem, before
looking to
indemnification, would be to identify a wrongdoer in relation to such
a claim. Therein lies an insurmountable problem
for Mr Wentzel.
[29] In the
circumstances, the appellant’s reliance on
s 23(8)
is
unfounded.
In
the light of all of the foregoing, this appeal must fail. The
respondents’ cross-appeal accordingly stands to succeed.
[30] I make the following
order:
1 The appellant's appeal
is dismissed.
2 The first to third
cross-appellants' appeal is upheld.
3 The order of the Court
a quo is set aside and replaced with the following order:
‘
(a)
It is declared that the second, third and fourth respondents, in
their respective capacities as the trustees of the insolvent
estate
of Malcolm Wentzel and Lizane Wentzel, Master’s reference
number T1179/12, are entitled to the proceeds of the Discovery
Life
Policy number 5130640002 payable by the first respondent, Discovery
Life Limited, pursuant to the provisions of such life
insurance
policy.
(b) The first respondent
is ordered to pay the proceeds of the policy referred to in (a) to
the second, third and fourth respondents
in their official capacity
as trustees.
(c) The applicant,
Malcolm Wentzel, is ordered to pay the costs of the application.’
3 The appellant is
ordered to pay the costs of the appeal and the cross-appeal, such
costs to include the costs occasioned by the
employment of two
counsel, where so employed.
_________________
B H Mbha
Judge
of Appeal
APPEARANCES:
For
appellant: G F Heyns SC
L
Badenhorst
Instructed
by:
Day
Attorneys Inc, Pretoria
Phatshoane
Henney Attorneys, Bloemfontein
In
re
For
cross-appellants: Tintingers Inc, Pretoria
Honey
Attorneys, Bloemfontein
For
respondent: J Vorster
U
Lottering
For
1
st
respondent: Instructed by:
Keith
Sutcliffe & Associates, Randburg
For
2
nd
, 3
rd
& 4
th
respondents:
Tintingers Inc, Pretoria
Honey
Attorneys, Bloemfontein
For
5
th
respondent: Master of the High Court, Pretoria
In
re
For
respondent: Day Attorneys Inc, Pretoria
Phatshoane
Henney, Bloemfontein
For
1
st
respondent: Keith Sutcliffe & Associates, Randburg
For
5
th
respondent: Master of the High Court, Pretoria
[1]
Section 21(1) of the Act provides that the effect of sequestration of
the separate estate of one of two spouses who are not living
apart
shall be to vest in the Master, until a trustee has been appointed,
all the property of the spouse whose estate has not been
sequestrated.
[2]
Du
Plessis v Pienaar NO and Others
2003
(1) SA 671 (SCA).
[3]
Ibid para 4.
[4]
Section 23 provides, in relevant part, that:
(7)
The insolvent may for his own benefit recover any pension to which
he may be entitled for services by him.
(8)
The insolvent may for his own benefit recover any compensation for
any loss or damage which he may have suffered, whether
before or
after the sequestration of his estate, by reason or any defamation
or personal injury: Provided that he shall not,
without the leave of
the court, institute an action against the trustee of his estate on
the ground of malicious prosecution
or defamation.
(9)
Subject to the provisions of subsection (5) the insolvent may
recover for his benefit, the remuneration or reward for work
done or
for professional services rendered by or on his behalf after the
sequestration of his estate.’
Subsection
(5) entitles the trustee to ‘any moneys received or to be
received by the insolvent in the course of his profession,
occupation or other employment which in the opinion of the Master
are not or will not be necessary for the support of the insolvent
and those dependent upon him’.
[5]
Para
5.
[6]
Pieterse
v Shrosbee and Others; Shrosbree NO v Love and Others
2005
(1) 309 SCA.
[7]
Ibid para 2.
[8]
DE v RH
[2015]
ZACC 18
;
2015 (5) SA 83
(CC).