REPUBLIC OF SOUTH AFRICA
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
In the matter between CASE NUMBER : 196 / 03
GUSTAV MARTHINUS JOHANNES PIETERSE APPELLANT
and
GARY MARK SHROSBREE
SAREL ALBERTUS COETZEE
JOHANNES MARTHINUS ABRAHAM LOUW NNO
In their capacities as the Trustees of the
Insolvent Estate of the Late Amelia Pieterse FIRST RESPONDENT
DEBORAH VAN ROOYEN NO
In her capacity as Trustee of the Insolvent
Estate of Gustav Marthinus Johannes Pieterse SECOND RESPONDENT
MOMENTUM GROUP LIMITED THIRD RESPONDENT
AND
In the matter between CASE NUMBER : 435 / 0 3
GARY SHROSBREE NO APPELLANT
and
COLLEEN CHERRY LOVE FIRST RESPONDENT
MAUREEN EUNICE LOVE SECOND RESPONDENT
SANLAM LIFE INSURANCE LIMITED THIRD RESPONDENT
CORAM : MPATI DP, STREICHER, FARLAM, HEHER JJA AND PONNAN AJA
DATE OF HEARING : 10 SEPTEMBER 2004
DATE OF DELIVERY : 23 SEPTEMBER 2004
SUMMARY
Long Term Insurance Act 52 of 1998- s 63 - does not purport to regulate the payment of the
proceeds of a life policy.
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J U D G M E N T
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PONNAN AJA
[1] ' … [O]ne might say of the la w on the effect of insolvency on
insurance policies, as did Oscar Wilde of truth ( The Importance of Being
Ernest (1895) Act 1), that it is a subject "rarely pure and never simple".'1
[2] Despite the outward trappings, th e real and substantial issue in
each of these appeals is whether the trustee of an insolvent deceased’s
estate is entitled, in preference to the nominated benefi ciaries, to the
proceeds of certain ins urance policies, for dist ribution to the deceased’s
creditors. That entitlement, so it is asserted, derives from section 63 of
the Long Term Insurance Act 52 of 1998 (‘the Act’). Dissonant decisions
on that subject are now on appeal bef ore this court, in each instance
with leave of the court a quo. The first, a decision by Pillay AJ, has been
reported sub nom Shrosbree and Others NNO v Van Rooyen NO and
Others 2004 (1) SA 226 (SE) ('the Pieterse matter') and, the second, a
judgment by Plasket AJ has been reported sub nom Love and Another v
Santam Life Insurance Ltd and Another 2004 (3) SA 445 (SE) ('the Love
matter').
1 Alistair Smith: ‘The Protection of Insurance Policies from Insolvency under section 63 of the Long
Term Insurance Act 52 of 1998’ (2000) 12 SA Merc LJ p 94
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[3] With the leave of the Deputy P resident of this court both appeals
were heard on the same day. The background necessary for a
determination of each appeal and the relevant facts which had been
agreed between the parties, were succinctly set out and filed of record
pursuant to the provisions of SCA Rule 8(8)(e).
[4] Those facts in the Pieterse matter are:
4.1 The appellant and Amelia Pieterse were married to
each other out of community of property.
4.2 Amelia Pieterse ('the deceased') committed suicide on
28 September 2000.
4.3 The appellant was at all relevant times an
unrehabilitated insolvent, hi s estate having been
sequestrated on 16 August 1995.
4.4 The second respondent Deborah van Rooyen NO is
the trustee of the insolvent estate of the appellant.
4.5 Three minor children were born of the union between
the appellant and the deceased.
4.6 During her lifetim e the deceased operated, either in her
personal capacity or throu gh her close corporation (G
& A Agencies CC) a money lending business on a
large scale. The three appo inted trustees of the
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insolvent estate of the deceased have been cited as
the first respondent ('the trustees').
4.7 Gary Mark Shrosbree one of the trustees is also the
co-liquidator of G & A Agencies CC.
4.8 The deceased in condu cting her money-lending
business obtained investment s from a large number of
investors, which she dive rted through the various
entities controlled by her. At the time of her death the
deceased, in her personal capacity, owed investors in
excess of R 20 million.
4.9 It was not possible for the deceased to have repaid any
of the investors nor could she have contemplated that
possibility at the time of h er death. The entire scheme
devised by the deceased wa s an unlawful and illegal
one.
4.10 The deceased proposed for and was issued with
various insurance policies, including three life policies
by Momentum Group Limite d, the third respondent,
namely policy numbers 90269438; 904278930 and
90676356 (‘the three policies’).
4.11 The premiums on those policies were paid by the
deceased during her lifetime.
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4.12 The nominated beneficiary in each instance was the
appellant ('the nominated beneficiary').
4.13 The application for the sequ estration of the deceased's
estate was lodged on 21 November 2000. A provisional
order issued on 8 February 20 01 and the estate was
finally sequestrated on 7 March 2001.
4.14 After the death of the de ceased the appellant accepted
the policy benefits and cl aimed payment thereof. In
terms of all three policies, the total policy benefits,
excluding interest, amounted to R 2 127 297,00.
4.15 All three policies were in existence for less than three
years at the time of the deceased.
[5] Those facts in the Love matter are:
5.1 The first respondent is the widow of the late Roger
Jennings Love ('the deceased').
5.2 The second respondent is the mother of the deceased.
5.3 The first respondent and th e deceased were married to
each other out of community of property on 16 June
1979.
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5.4 The estate of the deceased was provisionally
sequestrated on 27 Sept ember 1989 and a final order
of sequestration issued on 5 October 1989.
5.5 On 29 January 1996 th e deceased proposed for and
was issued with policy number 15461978X7 (‘the
policy’) by Sanlam Life In surance Limited, the third
respondent, which commenced on 1 April 1996.
5.6 On 6 February 2001 the firs t and second respondents
were nominated the benefici aries to the policy in
proportions of 80 and 20% respectively (‘the nominated
beneficiaries’), which was recorded by the third
respondent on 16 February 2001.
5.7 On 17 February 2001 the deceased committed suicide.
5.8 On 2 March 2001 the fi rst and second respondents
accepted the benefits of the policy.
5.9 At the time of his death the deceased was hopelessly
insolvent.
5.10 On 14 March 2001 a prov isional sequestration order
was issued and the deceas ed’s estate was finally
sequestrated on 11 April 2001.
5.11 The appellant, Gary Mark Shrosbree is the Trustee of
the insolvent estate of the deceased ('the trustee').
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5.12 The benefits in terms of the policy amounted to R500
000.
5.13 At the time of his death th e policy was in existence for
a period in excess of three years.
[6] In the Pieterse matter the trustees, as t he applicant in the court a
quo, sought a declaratory order that they own th e three policies on the
deceased’s life. The nominated beneficiary sought, by way of a counter
application, an order that he or the t rustee of his inso lvent estate (who
had taken no part in those proceedings) owns the th ree policies. In the
Love matter, the nominated beneficiaries sought a decla rator that they
were entitled to the proceeds of the policy in the prop ortions of 80 and
20% respectively. The trustee, in a counter application, sought, in
addition to certain ancillary relief, an order that the nomination of the
beneficiaries was a voidable disposition (which was not persisted with on
appeal) and that he is entitled to all of the proceeds of the policy.
Neither of the insurance companies took an active part in the
proceedings either in the courts below or in this one. In each matter the
application succeeded and the counter application failed, with costs
following the result. The reasons for the trustees succ eeding in the one
matter and failing in th e other appear in the r eported decisions of the
courts a quo and require little by way of elaboration.
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[7] The Long Term Insurance Act 52 of 1998 ('the LTIA') (section 73
read with Schedule 4) repealed the In surance Act 27 of 1943 ('the old
Act') with effect from 1 January 1999. 2 The provisions of the old Act
(sections 39 and 41 - 44) dealt with the effects of insolvency on life
policies and although detailed, we re complicated and convoluted and in
some respects costly.3 Its successor, section 63 of the LTIA, reads:
'Protection of policy benefits under certain long-term policies. –
(1) Subject to subsections (2) and (3), the policy benefits provided or to be
provided to a person under one or more assist ance, life, disability or health policies
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 –
(a) during his or her lifet ime, not be liable to be attached or subjected to
execution under a judgm ent of a court or fo rm part of his or her
insolvent estate; or
(b) upon his or her death, if he or s he is survived by a spouse, child,
stepchild or parent, not be availabl e for the purpose of the payment of
his or her debts.
(2) The protection contemplated in subsection (1) shall apply to –
(a) assets acquired solely with the policy benefits, for a period of five years
from the date on which the policy benefits were provided; and
2 See Proc R127of 1998 in Government Gazette 19596 of 18 December 1998.
3 Ken Douglas: ‘The Protection of Life Assurance Policies’ (1988) 10 Modern Business Law p71.
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(b) policy benefits and assets so acqui red (if any) to an aggregate amount
of R50 000 or another amount prescribed by the Minister.
(3) Policy benefits are only pr otected 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.'
[8] A contract of life insurance come s into existence when a person
('the proposer') proposes for the in surance which is accepted by the
insurer. The person on whose death the insurance is payable is the life
insured. The person w ho is entitled to enforce the benefits payable
under the policy is the owner. Th e 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 pr oposer 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 comm only entitle the owner to nominate a
beneficiary on condition that the nomi nation will confer no rights on the
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nominated beneficiary during the owner's lifetime . The legal nature of
such a nomination is a stipulatio 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 contra cting parties that the benefit, upon
acceptance by the beneficiary, would confer rights that are enforceable
at the instance of the beneficiary again st the insurer, for that intention is
at the ‘very heart of the stipulatio alteri ’ (Ellison Kahn: ‘Extension
Clauses in Insurance Contracts’ (1952) 69 SALJ 53 at 56). Thus the
beneficiary, by adopting the benefit, becomes a party to the contract
(see Total South Africa (Pty) Ltd v Bekker NO 1992 (1) SA 617 (A) at
625 D-G).
[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 again st the insurance company would be
based on the contract of insuran ce between the deceased and the
insurance company. It is to the insurance company and no one else that
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the beneficiary would have to look for payment. Section 63 does not
regulate the payment of the proceed s of the policy, because the
beneficiary appointment, until revoked, has the effect that payment of
the proceeds will be made to the beneficiary and not the estate of the
deceased.
[11] Section 63 refers to assistance, life, disability or health policies.
Those are defined in s 1 of the LTIA. The protec tion 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 pol icy benefits. The policy benefits
which are protected are thos e payable to the protect ed person in terms
of a protected policy which has been in force for at least three years.
The assets which are protected ar e those which have been acquired
solely or exclusively with the bene fits of the relevant policy. The
protection in relation to such assets operates for a period of five years
after the date upon which the rel evant policy benefits were provided.
The protection is limited to an aggregate amount of R50 000,00 or such
other amount as may be prescribed by the Minister.
[12] In the ordinary course the proceeds of an insurance policy will go
directly to a nominated beneficiary. Absent s 63, on the death of the
policy holder, the trustee of such person’s insolvent estate would not
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have any claim to those policy pro ceeds. Nothing to the contrary is
provided in s 63. Section 63 does no t 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 credit or 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
by the trustees on s 63 was misplace d. More so, it must be added, in
the Pieterse matter where all t hree policies were in existence for less
than the stipulated three years at the time of the deceased’s death. It
follows that the trustees in each case had to fa il in their quest for the
declaratory relief sought by them.
[13] In the result:-
13.1 In the Pieterse matter:
(a) The appeal is upheld with costs;
(b) The order of the court a quo is set aside and replaced
with the following:
‘(i) The application is dismissed with costs;
(ii) It is declared that the second respondent, Deborah van
Rooyen NO, in her capacity as the trustee of the
insolvent estate of Gustav Marthinus Pieterse, is
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entitled to the proceeds of the Momentum Life Policies
Numbers 90269438, 90478930 and 90676356;
(iii) The respondent in the count er application is ordered to
pay the costs of the counter application.’
13.2 In the Love matter, the appeal is dismissed with costs.
V M PONNAN
ACTING JUDGE OF APPEAL
CONCURRING:
MPATI DP
STREICHER JA
FARLAM JA
HEHER JA