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[2000] ZASCA 56
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Fairleigh NO v Whitehead and Another (541/98) [2000] ZASCA 56; 2001 (2) SA 1197 (SCA); 2000 (12) BCLR 1281 (SCA) (29 September 2000)
CASE
NO. 541/98
IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In
the matter between
A
R Fairleigh NO
Appellant
and
M
Whitehead
First Respondent
The Master
of the Supreme Court Second
Respondent
Before:
Hefer ADCJ, Smalberger, Olivier, Schutz JJA and Mthiyane AJA
Heard: 1 September 2000
Delivered: 29 September 2000
Interpretation
and operation of the since-invalidated ss 44(1) and (2) of the
Insurance Act 27 of 1943, which dealt with insurance
policies
effected or ceded in favour of a wife.
W P SCHUTZ
________________________________________________________________
J U D G M E N T
________________________________________________________________
SCHUTZ
JA:
[1] The issue in this appeal is
whether the deeming provision contained in s 44 (2) of the Insurance
Act 27 of 1943 (“the
Act”) came into operation in respect
of certain life policies before 27 April 1994 (when the interim
Constitution came into
force). If it did, then the proceeds of those
policies (save for an exempted sum of R30 000) fell into the estate
of the deceased,
Mr Geoffrey Dale Whitehead (“the deceased”),
who died at Durban on 10 March 1994 (that is before the interim
Constitution
became law). If the deeming provision did not operate,
then the proceeds of the policies will remain with his widow, Mrs
Margaret
Whitehead (“Mrs Whitehead”) in whose favour they
were taken out by the deceased, more than two years before his death.
The Whiteheads were married out of community of property in 1960.
She is the respondent on appeal, having successfully opposed
an
application for payment of the proceeds of the policies, brought by
the deceased’s executor, Mr Alan Robert Fairleigh
(“the
executor”) before Alexander J in the Durban and Coast High
Court. Leave to appeal was granted by the court
a
quo
.
[2] The significance of the interim
Constitution lies in the decision of the Constitutional Court in
Brink v Kitshoff NO
[1996] ZACC 9
;
1996 (4) SA 197
(CC) in holding that subsections 44 (1) and (2) were
invalid for being contrary to the equality clause (s 8). The
declaration of
invalidity was to have effect from 27 April 1994. For
the executor the decision meant that, whereas before 27 April he
would have
been entitled to rely on the appropriate deeming clause
contained in ss 44 (1) or (2), thereafter he had to show that one of
those
clauses had already vested a right in him by that date.
[3] The
relevant parts of s 44 read:
“
44(1)
If
the estate of
a man
who has ceded or effected a life policy …
has
been sequestrated
as
insolvent,
the
policy
[or its
proceeds]
shall be
deemed to belong to that estate
:
Provided that, if the transaction in question was entered into in
good faith and was completed not less than two years before
the
sequestration -
(a) by means or in pursuance of a
duly registered antenuptial contract, the preceding provisions of
this sub-section shall not apply
. . .;
(b) otherwise than by means or in
pursuance of a duly registered antenuptial contract,
only
so much
of the
total value of all such policies [or their proceeds] as exceeds
thirty thousand
rands
shall
be deemed to belong to the said estate
.
(2)
If
the estate
of a man
who has ceded or effected a life policy as aforesaid,
has
not been sequestrated
,
the policy
[or its proceeds] shall,
as
against any creditor of that man
,
be deemed to be the
property of the said man
-
(a)
in
so far
as its
value, together with the value of all other life policies ceded or
effected as aforesaid [and their proceeds]
exceeds
the sum of
thirty
thousand rands,
if
a period of two years or longer has elapsed since the date upon which
the said man ceded or effected the policy; or
(b)
entirely
,
if a period of less than two years has elapsed between the date upon
which the policy was ceded or effected, as aforesaid,
and
the date upon which the creditor concerned causes the property in
question to be attached in execution of a judgment or order
of a
court of law
.
(3) When a woman, who is married in
community of property,
owns
a life policy
. . .
which falls outside that community . . ., but which may lawfully be
wholly or partly attached in execution of a judgment
given against
her husband, that policy, . . . shall not be so attached by any
creditor of her husband, unless the assets which
they own jointly are
insufficient to satisfy the creditor’s claim, and if the policy
. . . is used in payment of any such
claim, the woman shall be
entitled to a refund . . . out of any policy or money
belonging
to her husband
which is withheld from his creditors or the trustee of his insolvent
estate in terms of section
thirty-nine
.”
(Emphasis
supplied.)
[4] The
executor was appointed on 21 November 1994. On 28 August 1995 he
made demand on Mrs Whitehead to pay over the proceeds
of the policies
(save for R30 000 to which she was in any event entitled.) On 16
November 1995 he gave notice to the creditors
of the estate in terms
of s 34(1) of the Administration of Estates Act 66 of 1965 (“the
Estates Act”) that unless otherwise
instructed he intended to
administer the estate as if he were a trustee in insolvency. The
creditors were content that he should
do so. Accordingly a “deemed
state of sequestration” came into operation in December 1995.
At no stage has the estate
been sequestrated by the court.
[5] Section 44 dealt with two
situations in which insurance benefits conferred on a wife by her
husband could be utilized for the
benefit of his creditors, either to
the full extent of the benefit or to so much of it as exceeded R30
000. The first situation
was where the husband’s estate “has
been sequestrated” (s 44 (1)). The second was where his estate
“has
not been sequestrated” (s 44 (2)). Assuming for the
sake of argument that the executor’s notification operated as a
sequestration for the purposes of s 44, the executor cannot rely upon
it now, because the notification took effect long after the
section
ceased to be law (December 1995 as against April 1994). That does
not mean, however, that a s 44 (1)
situation
did not come into existence, even if too late for the executor’s
purposes. As the deceased’s estate was in fact insolvent,
it
was only a matter of time before it would be sequestrated (in the
technical sense) or administered as insolvent under s 34 of
the
Estates Act. So far I have assumed that a s 34(1) notification
satisfies the “has been sequestrated” pre-condition
for
the operation of s 44 (1). In
Hugo
NO v Lipkie
1961
(3) SA 66
(O) it was held that the predecessor of s 34(1) (s 48 (3)
(b) of the Administration of Estates Act 24 of 1913) did not satisfy
the requirement. The main reason for so holding was that the former
section did not fix a time when the process of realisation
and
distribution would begin (at 70 G-H). The current section does
provide for a fixed time, so that this problem in interpretation
has
fallen away. Moreover, since
Hugo’s
case, this court has held that the procedures under the old Estates
Act had an effect similar to a sequestration order, even though
there
was no order of court:
Ward
v Barrett NO and Another NO
1963 (2) SA 546
(A) at 552 B-H. See also Gordon & Getz on
The
SA Law of Insurance
4 ed 349 - 350. I do not think that there is any reason to treat s
44 as being narrowly focussed upon forms of procedure. It
is
concerned rather with distinguishing between the situation where an
estate is being administered as insolvent and the situation
where it
is treated as solvent. Accordingly I conclude that s 44 (1) would
have applied in this case had the subsection not been
declared
invalid. The executor has not based his appeal on s 44(1).
[6] But the conclusion that I have
reached concerning s 44(1) leaves unanswered the further question,
whether s 44 (2) may have
operated so as to vest the policies in the
deceased before his death on 10 March 1994, so that they passed to
his deceased estate
before the coming into operation of the interim
Constitution on 27 April 1994, which, as the Constitutional Court
later declared,
had the effect of repealing s 44 because of its
inconsistency with the equality clause.
[7] Two opposed interpretations of s 44 (2) have been
put forward. For the
executor,
emphasis is placed on the words in s 44 (2) “. . . the policy .
. . shall . . be deemed to be the property of the
said man [the
husband] . . . .” The effect of these words, so it is argued,
is that from the moment that a husband benefits
his wife with a
policy, the policy is deemed to be the property of the husband. The
provisions of subsections (a) and (b) of s
44 (2) are not
pre-conditions to such deeming, but serve merely to determine how
much of the policy falls into the husband’s
estate. This
situation continues to prevail until such time as the husband may be
sequestrated, in which case the policy falls
into his insolvent
estate under s 44 (1). I do not agree with this argument. My
reasons will be set out later.
[8] The
contrary argument is that the deeming provision does not operate from
the time that the wife is benefitted, but only if
and when a creditor
attaches the policy in execution, in order to obtain payment of a
judgment debt owed him by the husband. The
subsection is intended to
give speedy relief to a creditor who would rather not follow the
longer and more expensive route of sequestration.
[9] My
reasons for accepting the latter argument, advanced on behalf of Mrs
Whitehead, are these:
First, the words used in the section
. Section 44 (2) does not read “shall be deemed to be the
property of the said man.”
It reads “shall, as against
any creditor of that man, be deemed to be the property of the said
man”. By contrast
with the
concursus
-orientated
wording of s 44 (1) “shall be deemed to belong to that
estate”, there is a specific deeming conceived in
favour of a
particular creditor. Further, it is implicit that a particular
creditor at a particular time is envisaged. This is
so because
without a fixed time the periods of more than or less than two years
could not be established on the calendar. The
executor’s
argument, on the other hand, might involve conclusions which it is
difficult to suppose were intended. If the
deeming operated when the
wife was first benefitted, but the husband then had no creditors, one
would have to conclude that the
expression “as against any
creditor” was redundant. Or if one has to wait for the deeming
to operate only when a creditor
is acquired, is the deeming undone
when the husband again becomes creditor-free? And so on.
[10] Secondly,
if the husband is deemed to be owner from the outset, what rights
could the wife have? None, one must suppose, except
some ultimate
reversionary right. Yet the section itself envisages that she might
convert the policy into other assets. Thus,
no doubt, she might
surrender the policy. Is she to be denied the right to pledge her
policy with a bank in order to obtain an
overdraft? How can such
actions be squared with the policy “belonging” to the
husband? That it is she who owns the
policy until its attachment by
the husband’s creditor is confirmed by the express words of s
44 (3), in its opening lines,
“when a woman who is married in
community of property . . . owns a life policy . . .” The
purpose of this subsection
is to bring about that, where there are
joint assets, the burden of execution should as far as possible fall
upon them, and not
upon the policy “owned” by the wife
outside the community. See also the reference to “the policy .
. . belonging
to her husband” towards the end of the
subsection. A practical interpretation of s 44 (2) leads to the
conclusion, in my
opinion, that the wife and not the husband owns a
policy made over by him to her, until such time as a creditor
attaches it in
payment of his judgment debt. To interpret s 44 (2)
as enjoining an anticipatory nullification as a step precursory to an
event
that in all probability will never occur (attachment by a
creditor), might seriously hamper the wife whilst not conferring
upon
creditors any benefits beyond those obtained by attachment.
[11] Thirdly,
the calculation of the period of less than two years provided for in
s 44 (2) (b) depends necessarily upon there being
an attachment by a
creditor. Thus if no creditor chooses to attach, this part of s 44
(2) cannot operate. As the amount deemed
to belong to the husband
is dependent upon whether a period of more than or less than two
years has run, it would mean that subsection
44 (2) is substantially
inoperable, unless an attachment is postulated.
[12] Fourthly,
the argument for the executor must involve that at the time that the
wife is benefitted the amount of the benefit
is unknown, because it
cannot be known at that stage whether the wife will receive the
benefit of the R30 000, which may be allowed
to her. Or is it to be
concluded that initially the full amount of the policy falls into the
husband’s estate, but after
two years R30 000 disappears out of
it to find its way into the wife’s estate? An unlikely
intention, it seems to me.
[13] Finally, I think there is
substance in the remark of Hartzenberg J in
Kitshoff
NO v Brink and Andere
1997 (4) SA 117
(T) at 126 F - H that the very fact that there is a
deeming (the Afrikaans text of s 44 (2) reads “word die polis .
. . beskou
as die eiendom van daardie man”) indicates that the
policy is not in fact owned by the husband. The deeming provision,
it
seems to me, is designed to create the fiction that the husband
never made over the policy to the wife, so that his creditor may
attach it, rather than to vest ownership in the husband against all
comers and at all times, as the executor contends happened.
[14] My
conclusion is that s 44 (2) cannot operate unless a creditor makes an
attachment. No attachment was effected before 27
April 1994.
Therefore nothing vested in the executor before the law upon which
his case was based was consigned to history.
[15] The
appeal is dismissed with costs.
W
P SCHUTZ
JUDGE
OF APPEAL
CONCUR
HEFER ADCJ
SMALBERGER
JA
MTHIYANE
AJA
OLIVIER
JA
[1]
It
happens from time to time that the insolvency of the estate of a
person
manifests itself onlyafter his death. Those interested in the
winding up of the estate can then proceed in one of three
ways: a
creditor may apply to court for the compulsory sequestration of the
estate; the executor may surrender the estate to the
court as
insolvent, thereby achieving its sequestration; and thirdly the
executor may follow the “informal” route
of s 34 of the
Administration of Estates Act 66 of 1965 (“the 1965 Estates
Act”). This section creates the machinery
whereby the
executor can give notice to creditors that the estate is insolvent.
Unless a majority in number and value of all
the creditors instruct
him in writing within a period (not less than fourteen days)
specified in the notice, to surrender the estate
under the Insolvency
Act 24 of 1936 (“the
Insolvency Act&rdquo
;), the executor must
proceed to realize the assets in the estate and to distribute the
proceeds in the order of preference prescribed
under the
Insolvency
Act in
the case of a sequestrated estate.
[2]
In
the ordinary course the question, whether the end result of the
informal route described above amounts to a “sequestration”,
would seem to be a nice but wholly academic one. But sometimes it
assumes great practical importance. This is such a case.
[3]
Mr
Geoffrey Dale Whitehead and Mrs Margaret Whitehead were
married
to each other out of community of property on 12 November 1960. The
marriage was terminated when Mr Whitehead died on 10
March 1994. I
will refer to him as the deceased and to his widow as the first
respondent.
[4]
While
married, the deceased, during the period 1980 - 1991,
effected
various life policies on his own life and nominated the first
respondent
as the beneficiary in each. After the death of the deceased,
the
insurance companies concerned paid the proceeds of the policies to
the
first respondent as follows:
1 Old
Mutual Policy No 7065929: R45 670,00 paid on 7 April 1994;
2 Federated
Life Insurance Company Limited, Policy VA202437: R59 836,00 paid on
21 April 1994;
3 Standard
General Insurance Company Limited Policy No 846624: R565 173,05 paid
on 25 April 1994.
[5]
On
21 November 1994 the appellant was appointed executor of the
estate
of the deceased, after the resignation of a previous executor. As
the estate was unable to meet the claims of its creditors,
the
appellant, on 16 November 1995, gave notice to the creditors in terms
of s 34 (4) of the 1965 Estates Act of such insolvency.
The
appellant was not instructed by creditors to surrender the estate.
No other creditor applied for its compulsory sequestration.
The
appellant pursued the informal route described above. The deemed
date of sequestration, according to s 34 (1) of the 1965
Estates Act,
occurred in December 1995.
[6]
The
estate being unable to pay the claims of its creditors, the
appellant
now turned his attention to the various sums of money paid by the
insurance companies to the first respondent. He decided
to claim
them for the benefit of the estate. He based his claim on the
provisions of s 44 (1) and (2) of the Insurance Act 27
of 1943 (“the
Insurance Act”) which, at all times relevant hereto, read as
follows:
“(1) If
the estate of a man who has ceded or effected a life policy in terms
of s forty two or forty three
has been sequestrated
as insolvent, the policy or any money which has been paid or has
become due thereunder or any other asset into which any such money
was converted shall be deemed to belong to that estate: Provided
that, if the transaction in question was entered into in good
faith
and was completed not less than two years before the sequestration -
(a) by
means or in pursuance of a duly registered antenuptial contract, the
preceding provisions of this subsection shall not
apply in connection
with the policy, money or other asset in question;
(b) otherwise
than by means or in pursuance of a duly registered antenuptial
contract, only so much of the total value of all
such policies, money
and other assets as exceeds thirty thousand rand shall be deemed to
belong to the said estate.
(2) If
the estate of a man who has ceded or effected a life policy as
aforesaid,
has
not been sequestrated
,
the policy or any money which has been paid or has become due
thereunder or any other asset into which any such money was converted
shall, as against any creditor of that man, be deemed to be the
property of the said man -
(a) in
so far as its value, together with the value of all other life
policies ceded or effected as aforesaid and all moneys which
have
been paid or have become due under any such policy and the value of
all other assets into which any such money was converted,
exceeds the
sum of thirty thousand rand, if a period of two years or longer has
elapsed since the date upon which the said man
ceded or effected the
policy; or
(b) entirely,
if a period of less than two years has elapsed between the date upon
which the policy was ceded or effected, as
aforesaid, and the date
upon which the creditor concerned causes the property in question to
be attached in execution of a judgment
or order of a court of law.”
(My emphasis)
[7]
In
March 1997 the appellant launched the application now under
consideration
in the Durban and Coast Local Division of the High Court against the
first respondent, claiming payment of the said
amounts. She opposed
the application. The Master of the Supreme Court was cited as
second respondent. He abides the decision
of the court.
[8]
The application was dismissed and an appropriate costs order made by
Alexander J on 3 March 1998. The learned judge subsequently
granted
the appellant leave to appeal to this Court.
[9]
Because
of the differing legal results that emanate from the
respective
applications of ss 44 (1) and (2) of the Insurance Act I must,
therefore, turn to the vexed question whether the end
result of the
steps taken by an executor of a deceased estate in terms of s 34 of
the 1965 Estates Act, amounts to a “sequestration”,
at
least for the purposes of ss 44 (1) and (2) of the Insurance Act.
[10]
In endeavouring to find an answer to this problem, one must
distinguish between the provisions of the previous Administration
of
Estates Act 24 of 1913 (“the 1913 Estates Act”) and the
present 1965 Estates Act, relating to the “informal”
procedure whereby an executor deals with an insolvent deceased
estate.
[11]
The relevant provision of the 1913 Estates Act was s 48 (3) (b). It
read:
“
If
the Master be not satisfied as aforesaid as to the value of the
assets the executor shall immediately report, in writing, the
position of the estate to the creditors, informing them that unless a
majority in number and value of all the creditors instruct
him in
writing to surrender the estate, he will proceed to realise the
estate and will distribute the same as if he were a trustee
distributing an insolvent estate. Unless creditors to the number
and value aforesaid instruct the executor within a reasonable
time to
surrender the estate he shall proceed so to realise and distribute
the same, but nothing in this section contained shall
prevent a
creditor from applying to the Court for the sequestration of the
estate as insolvent, and the Court may order the sequestration
of the
estate if satisfied that the sequestration will be for the benefit of
the creditors generally.”
The
section did not state what the legal effect of the procedure was,
except that the executor must realise the estate and will
distribute
the same “... as if he were a trustee distributing an insolvent
estate”.
[12]
Two cases were decided in respect of the legal effects of this
“informal distribution” under the 1913 Estates Act:
Hugo
N O v Lipkie
1961 (3) SA 66
(O), decided by Potgieter J; and
Ward
v Barrett, N O and Another, N O
1963
(2) SA 546
(A), a judgment of this Court delivered by Steyn CJ.
[13]
The very question now under discussion arose in
Hugo
N O v Lipkie
,
supra
,
where it was held that the informal procedure described above was not
a sequestration for the purposes of ss 44 (1) and (2) of
the
Insurance Act. Potgieter J stated at 70 E – H
“
But
it seems also clear from the very wording of sec. 44 (1) of the
Insurance Act, that the Legislature could never have had a
realisation and distribution in terms of sec. 48 (3) of the
Administration of Estates Act in mind when the words ‘has been
sequestrated as insolvent’ were used. The words clearly seem
to suggest that sequestration is a condition precedent to
the policy
belonging to the estate - in other words something must first happen
before the policy is deemed to belong to the estate.
If realisation
and distribution in terms of sec. 48 (3) are also included in the
words ‘sequestrated’, at what point
of time in the
process of realisation and distribution ‘has the estate been
sequestrated’? To my mind the Legislature
must have had in
mind a fixed point of time after which the policy becomes ‘deemed
to belong to that estate’ and if
that is so the only reasonable
interpretation to be placed on the words is that the policy is deemed
to belong to the estate only
after it has been sequestrated by the
Court.”
[14]
In
Ward
,
the executrix had by letter, dated 9 June 1960, reported that the
estate was in fact insolvent. She advised the creditors that
unless
instructed by them to surrender the estate formally as insolvent in
terms of the
Insolvency Act before
23 June 1960, she would proceed to
realise and distribute it as if she were a trustee distributing an
insolvent estate. She was
not instructed by the creditors to
surrender the estate and followed the informal route of the Estates
Act. On 22 September 1960
the executrix caused a bond to be
registered over an asset in the deceased’s estate in favour of
the appellant. Later,
she refused to recognise the validity of the
bond in the liquidation and distribution account. The appellant
un-successfully
sought the assistance of the Master. She then
applied for an order requiring the account to be amended by
recognising her preference
under the bond. The application was
dismissed and the matter came before this Court.
[15]
The Court dismissed the appeal. In so doing he held that although
the position brought about by the application of the provisions
of s
48 (3) (b) of the 1913 Estates Act,
i.e.
the informal procedure, was not in all respects equivalent to that
created by a sequestration order under the
Insolvency Act, it
did
have the effect of initiating a
concursus
creditorum
.
Even in the absence of an order of court, the expiry of the date
set for instructions by the creditors “ ...was apparently
intended by the Legislature to have a similar effect.” As
from that date (
i.e.
the expiry of the date set for instructions by the creditors) there
was a
concursus
creditorum
.
In the result the executrix was not entitled to deal with an asset
of the estate in such a way that one creditor received a
preference
above others (see p 552 B - H
in
fine
).
[16]
There are important features in the
Ward
case
which should be kept in mind. The first is that the Court was not
required to interpret the word “sequestrated”.
The
second is that it in fact disavowed a full identification of the
effect of the informal procedure under s 48 (3) (b) of
the 1913
Estates Act with sequestration, notwithstanding the words in that
section that the executor, in such a case, “will
proceed to
realise the estate and will distribute the same as if he were a
trustee distributing an insolvent estate.”
The
third noteworthy feature is that no reference was made to
Hugo
N O v Lipkie
,
supra
,
either in the heads of argument of counsel for the parties, or in the
judgment itself.
[17]
The 1913 Estates Act was repealed in by the 1965 Estates Act. The
relevant provisions are now contained in s 34 the terms of
which I
have set out above. Of particular importance is the new s 34 (5),
which now provides that in so far as a date of
sequestration
is relevant for the purposes of the distribution of an estate under
that section such date shall be deemed to be the day immediately
following the date on which the period specified in the relevant
notice has expired.
[18]
The genesis of this new section was obviously the question posed by
Potgieter J in
Hugo
N O v Lipkie
,
supra,
viz
:
If realisation and distribution in terms of s 48 (3) of the 1913
Estate Act are also included in the word ‘sequestrated’,
at what point of time in the process of realisation and distribution
has the estate been sequestrated?
Section
34 (5) of the Estates Act now answers that question, and in doing so
it has removed the main
ratio
of the judgment of Potgieter J on this point; for it seems
implausible that the legislature intended that the conclusion reached
in
Hugo
N O v Lipkie
,
supra,
would remain valid. To my mind, s 34 (5) gives a clear
indication that the end result of the s 34 procedure is a
sequestration
of the estate at the moment mentioned therein. The
change in wording between the 1913 and the 1965 Estates Acts on this
aspect
is too clear to negate, especially when seen as a response to
the two decisions mentioned above.
[19]
The first decision on the point now under consideration under the
1965 Estates Act was that of Van den Heever J in
Miller
N O v Smit
1986 (1) SA 320
(C).
In
that case the informal route of s 34 of the 1965 Estates Act was
not
followed, but this was not a central issue in the case. What was
said by Van den Heever J in respect of the interpretation of
the word
“sequestrated” in ss 44 (1) and (2) of the Insurance Act,
must thus be regarded as
obiter.
Nevertheless the learned judge assumed that the informal route
might
have been followed. She stated at 326 H
-
I:
“
According
to
Ward
v Barrett NO and Another NO
1963 (2) SA 546
(A), a
concursus
creditorum
would be initiated by the s 34 procedure which again in the view of
many of the writers, brings s 44 (1) of the Insurance Act into
operation.”
The
learned judge did not decide the point at all, stating expressly that
s 44 (2) applied in that case - thereby accepting that
there had
not
been
a sequestration. The difference in the wording of the 1913 and the
1965 Estates Act was not mentioned.
This
case, therefore, despite favouring the synonymity of sequestration
and the informal process of s 34 of the 1965 Estates Act,
can not
really be regarded as authority one way or the other on the question
before us.
[20]
In
the Constitutional Court case of
Brink
v Kitshoff N O
[1996] ZACC 9
;
1996 (4) SA 197
(CC), ss 44 (1) and (2) of the Insurance Act were
challenged on the basis that they discriminate unfairly against
women, thereby
violating s 8 of the Constitution of the Republic of
South Africa Act 200 of 1993. The question of the meaning to be
given to
the word “sequestrated” in ss 44 (1) and (2) of
the Insurance Act was raised, but the Court, quite properly in my
view,
held that it had
no
jurisdiction
to decide either on the question when an estate becomes entitled to
the proceeds of a life insurance policy in terms
of s 44 of the said
Act or the question when a
concursus
creditorim
is deemed to have been initiated (see par [28] of the judgment of
O’Regan J). This latter question was, in terms of par
3 of
the order of the Constitutional Court, referred back to the court
a
quo
.
[21]
The matter, so referred back by the Constitutional Court, came before
Hartzenberg J (
sub
nom
Kitshoff
N O v Brink and Andere
1997
(4) SA 117
(T) ). The facts in that case were, for all intents and
purposes, similar to those in the present case (see p 122 C - 123 G
for
a summary of the facts). In respect of the question whether a
“sequestration” had taken place, Hartzenberg J solved
the
problem in this way: the Constitutional Court had declared invalid
the deeming provisions of ss 44 (1) and (2) of the Insurance
Act with
effect from 27 April 1994; the estate was not sequestrated on or
before that date; further, no
concursus
creditorum
had been effected in terms of s 34 of the 1965 Estates Act, because
such a
concursus
would only come into existence after the expiry of the notification
to creditors in terms of s 34 - this follows from the decision
in
Ward
v Barrett N O and Another N O
,
supra,
and because s 34 (5) of the 1965 Estates Act now specifically lays
down that the day after the date of expiry of the said notification
is deemed to be the date of sequestration. In the result, no
sequestration or
concursus
creditorum
had
taken place before 27 April 1994, and, for the purposes of ss 44 (1)
and (2) of the Insurance Act, there had not been a “sequestration”.
The learned judge then proceeded to deal with the matter in terms
of s 44 (2).
[22]
From
what I have said before, in paragraphs [21], [22] and [23], it will
be clear that I believe that the correct interpretation
of the word
“sequestrated” in s 44 (1) of the Insurance Act includes
the conclusion of the informal procedure followed
by the executor of
an insolvent deceased estate in terms of s 34 of the 1965 Estates
Act. It follows from this that Hartzenberg
J was wrong, on this
aspect, in the case just discussed in holding that there had
not
been
a sequestration. He did not analyse the difference between the 1913
and the 1965 Estates Acts.
[23]
As also indicated above, I am of the view that the sequestration in
terms of ss 44 (1) of the Insurance Act need not take place
before
the man’s death. It can occur long after his death and while
his estate is being administered by the executor: whether
because of
compulsory sequestration by a creditor; or because of voluntary
surrender by the executor; or because of conclusion
of the informal
process in terms of s 34 of the 1965 Estates Act.
It
is, therefore, wrong to say that because the sequestration in the
present case occurred after 27 April 1994 (the relevance of
which I
will discuss just now) that there had
not
been a sequestration. It is a
non
sequitur
.
Such a conclusion would also fly in the face of the plain meaning
of s 44 (1) of the Insurance Act. There was a sequestration,
no
matter when it occurred.
[24]
Based
solely on these facts and on this reasoning, I would have concluded
that s 44 (1) of the Insurance Act governs the present
case, with
resultant success for the appellant. S 44 (2) of the Insurance Act
clearly does not come into the picture, there
having been a
sequestration.
[25]
But what is the effect of the judgment of the Constitutional Court in
Brink
v Kitshoff N O
[1996] ZACC 9
;
1996
(4) SA 197
(CC)? In that case, the challenge to the constitutional
validity of s 44 (1) and (2) of the Insurance Act was successful. A
declaration to that effect was called for. As always, the effect of
the retrospectivity of such an order required careful consideration.
The Constitutional Court, per O’Regan J, specifically limited
the declaration of the invalidity of the deeming provisions
of ss 44
(1) and (2) of the Insurance Act to 27 April 1994,
i.e.
the date of commencement of the 1993 Constitution. The following
order was made at (221 G -
I
):
“
1 It
is declared that ss (1) and (2) of s 44 of the Insurance Act 27 of
1943 are invalid.
2 In
terms of s 98 (6) (a) of the Constitution it is ordered that the
declaration of invalidity made in para 1 shall invalidate
the deeming
provisions of ss 44 (1) and (2) of the Insurance Act with effect from
27 April 1994, except to the extent that the
operation of such
deeming provisions has resulted, before the date of this order, in
the payment of any money or the delivery of
any asset which, but for
such provisions, would not otherwise have formed part of the estate,
to any creditor of the man or any
beneficiary of his estate.
3 The
matter of
Brink
v Kitshoff N O
is remitted to the Transvaal Provincial division to be dealt with in
terms of this judgment.”
[26]
The crucial order is that made in par 2. The exception mentioned in
par 2 of the order is not relevant to the present matter,
as no money
has been paid or asset delivered to any creditor or beneficiary.
The question is: what is the effect of the declaration
of
invalidity of the deeming provision of s 44 (1) of the Insurance Act
as from 27 April 1994, in the context of the case before
us?
[27]
In my view the correct answer to this enquiry depends on whether the
appellant, as executor, had acquired a vested right to claim
the
proceeds of the policies as property of the estate before or after 27
April 1994. If such vesting took place before 27 April
1994, his
claim is not affected by the judgment;
aliter
if it vested after that date.
[28]
It is clear that the appellant’s claim under s 44 (1) of the
Insurance Act could only have vested (a) after he had been
appointed
as executor of the deceased estate and (b) after the sequestration
had occurred in terms of s 34 of the 1965 Estates
Act. Both these
events took place long after 27 April 1994. When the appellant’s
rights would have vested in the ordinary
course of events, s 44 (1)
of the Insurance Act was a dead letter. He could not claim under
it.
[29]
Nor
can the appellant succeed under s 44 (2) of the Insurance Act. By
virtue of the fact that the estate of the deceased
had
been sequestrated
,
he would in any event not have succeeded under s 44 (2) of that Act.
But the point is academic, for - together with ss (1)
- ss (2)
has been rendered invalid by the order made in
Brink
v Kitshoff N O
.
The claim must fail.
[30]
In the result, I would dismiss the appeal with costs.
P
J J OLIVIER JA