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[2018] ZASCA 88
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Naidoo v Discovery Limited and Others (202/2017) [2018] ZASCA 88 (31 May 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 202/2017
In
the matter between:
VASANTHI
NAIDOO
APPELLANT
and
DISCOVERY
LIFE
LIMITED
FIRST RESPONDENT
NAIDOO
SD
SECOND RESPONDENT
NAIDOO
G
THIRD RESPONDENT
NAIDOO
VD
FOURTH RESPONDENT
NAIDOO
J
FIFTH RESPONDENT
Neutral
citation:
Naidoo
v Discovery Life Limited & others
(202/2017)
ZASCA 88 (31 May 2018)
Coram:
Shongwe ADP, Wallis and Mbha JJA and
Hughes and Schippers AJJA
Heard:
10 May 2018
Delivered:
31 May 2018
Summary
:
Contract law – risk-only policy
containing beneficiary clause –
stipulatio alteri
– such policy cannot be an asset in the estate of the
policyholder and of joint estate from marriage in community of
property
– such a policy not an insurance policy in terms of s
15(2)(
c
)
of the
Matrimonial Property Act 88 of 1984
.
ORDER
On
appeal from:
Gauteng Division
of the High
Court
, Johannesburg (Tsoka J sitting
as court of first instance):
(1)
The appeal is dismissed with costs.
(2)
The second to the fifth respondents must bear their own costs.
JUDGMENT
Mbha
JA (Shongwe ADP and Wallis JA and Hughes and Schippers AJJA
concurring):
[1]
This appeal raises two questions. The first is whether a risk-only
life insurance policy with a beneficiary nomination clause
is an
asset of the policyholder during his or her lifetime; and the second,
whether the nomination of a beneficiary by a policyholder
married in
community of property, constitutes an alienation of that policy as
contemplated in
s 15(2)(
c
)
of the Matrimonial Property Act 88 of 1984 (the Act).The Gauteng
Division of the High Court, Johannesburg, answered both questions
positively. The appeal is with leave of this court.
[2]
The basic facts are the following. The appellant and Mr Merglen
Naidoo (the deceased) were married in community of property
on 17
July 1996.
[3]
On 23 May 2002, the deceased made an application to the first
respondent (Discovery) for a joint life assurance with policy
number
5100022093 (the policy). In terms of the policy, the deceased was
defined as the principal life insured and the owner of
the policy.
The deceased nominated the appellant as the beneficiary of the
proceeds of the policy upon his death. The policy provided
further
that the owner could instruct Discovery in writing to change the
beneficiary at any time and that the appointment of a
beneficiary was
revocable at all times during his lifetime. Importantly, the policy
provided that a nominated beneficiary was not
entitled to any
benefits during the lifetime of the principal life assured.
[4]
It is common cause that the policy was a risk-only policy meaning
that it had no monetary value unless and until the person
whose life
was insured died. It had no investment portion and thus no surrender
value. It also provided that no benefits would
be payable on its
cancellation.
[5]
On 11 October 2011 the deceased wrote to Discovery and requested a
change of beneficiary details to reflect both his parents,
his
brother and his sister as beneficiaries to the policy. It is common
cause that the appellant was unaware of this change.
[6]
After the deceased’s death on 6 March 2012, the newly appointed
beneficiaries accepted the benefits of the policy by claiming
payment
of the proceeds in the total sum of R3 174 357 and Discovery
duly made payment to them. The new beneficiaries were
subsequently
joined as third parties in the proceedings in the court a quo by
Discovery on the basis that in the event the court
were to find that
the nomination of such third parties, who have since been paid the
proceeds of the policy, was in breach of s
15(2)(
c
)
of the Act, the third parties would be liable to indemnify Discovery.
These conditional claims were based on unjustified enrichment.
Discovery did not pay any amount to the appellant and denied that it
had any liability to do so.
[7]
Counsel for the appellant contended that the aggregate of rights and
obligations under the policy vested in the joint estate,
which
included the right to nominate a beneficiary, receive payment of the
sum insured and revoke a nominated beneficiary. Therefore,
so it was
contended, the deceased could not nominate the third parties as
beneficiaries without the appellant’s written consent
as
envisaged in s 15(2)(
c
)
of the Act.
Was
the policy an asset of the policyholder during his lifetime
?
[8]
This court has authoritatively determined that a contract in favour
of a third party underlies the legal concept of a beneficiary
clause
in a life insurance policy.
[1]
The
policyholder (
stipulans
)
contracts with the assurer (
promittens
)
that an agreed offer will be made by the assurer to a third party
(the beneficiary), with the intention that on acceptance of
that
offer by the beneficiary, a contract will be established between the
beneficiary and the assurer. The offer involved is that
the insurer
will pay the proceeds of the policy to the beneficiary.
[2]
[9]
The beneficiary clause is currently widely used in assurance
contracts and this can be attributed to two main factors. First,
the
policy proceeds are immediately made available to the beneficiary on
the death of the policyholder, without the beneficiary
having to wait
until the deceased’s estate is wound up before he or she can
claim and receive the policy proceeds. Secondly,
the policy proceeds
do not form part of the deceased estate for purpose of the
calculation of the executor’s remuneration.
Clearly, at the
heart of those two main advantages is the avoidance or bypassing of
the deceased estate.
[3]
[10]
When a policy is a risk-only policy, as in this case, payment of the
policy proceeds occurs only upon the death of the insured
life. It
follows that by definition the policy proceeds can never be paid to
the policyholder or the beneficiary during the lifetime
of the
insured life. The only rights that the policyholder has during his or
her lifetime emanate from the policy itself. Typically
these are the
contractual rights to nominate a beneficiary and to change the
beneficiary nomination, the right to cede the policy
and the right to
terminate the policy.
[4]
[11]
This court has determined that the policy itself is not an asset in
the estate of the policyholder. As Rabie JA described it
in
Borman
en De Vos NNO
(above at 507A): ‘where a person has paid the premiums but has
no corresponding claim during his or her lifetime, it can
be said
that an asset has been separated or withdrawn from his estate’.
(My translation.) This court affirmed that approach
in
Pieterse
v Shrosbree NO & others
[5]
and said
that in the ordinary course the proceeds of an insurance policy will
go directly to a nominated beneficiary.
[12]
As the policy in issue was a risk-only policy which could not be an
asset in the estate of the deceased, on the strength of
the
authorities referred to above, it follows that it could never be an
asset in the joint estate. During the deceased’s
lifetime the
appellant had no right to receive the proceeds of the policy and
therefore viewed from this perspective, the policy
was also not an
asset in the joint estate.
Was
the nomination of a beneficiary an alienation under section 15(2)(
c
)?
[13]
Section 15 of the Act reads, in relevant parts, as follows:
‘
(1)
Subject to the provisions of subsections (2), (3) and (7), a spouse
in a marriage in community of property may perform any juristic
act
with regard to the joint estate without the consent of the other
spouse.
(2)
Such a spouse shall not without the written consent of the other
spouse-
(a)
alienate, mortgage, burden with a servitude or confer any other real
right in any immovable property forming part of the joint
estate;
(b)
enter into any contract for the alienation, mortgaging, burdening
with a servitude or conferring of any other real right in
immovable
property forming part of the joint estate;
(c)
alienate, cede or pledge any shares, stock, debentures, debenture
bonds, insurance policies, mortgage bonds, fixed deposits
or any
similar assets, or any investment by or on behalf of the other spouse
in a financial institution, forming part of the joint
estate;
(d)
alienate or pledge any jewellery, coins, stamps, paintings or any
other assets forming part of the joint estate and held mainly
as
investments;
(e)
withdraw money held in the name of the other spouse in any account in
a banking institution, a building society or the Post
Office Savings
Bank of the Republic of South Africa;
.
. . .’
[14]
The law relating to the interpretation of legislation in this country
is well-settled. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[6]
this court
expounded the principle as follows:
‘
[18]
. . . Interpretation is the process of attributing meaning to the
words used in a document, be it legislation, some other statutory
instrument, or contract, having regard to the context provided by
reading the particular provision or provisions
in
the light of the document as a whole and the circumstances attendant
upon its coming into existence
.
. . The “inevitable point of departure is the language of the
provision itself”, read in context and having regard
to the
purpose of the provision and the background to the preparation and
production of the document.
.
. .
[26]
. . . in most cases the court is faced with two or more possible
meanings that are to a greater or lesser degree available
on the
language used. Here it is usually said that the language is
ambiguous, although the only ambiguity lies in selecting the
proper
meaning (on which views may legitimately differ). In resolving the
problem, the apparent purpose of the provision and the
context in
which it occurs will be important guides to the correct
interpretation.
An
interpretation will not be given that leads to impractical,
unbusinesslike or oppressive consequences or that will stultify the
broader operation of the legislation or contract under
consideration
.’(My
emphasis.)
[15]
The main purpose of the Act was to repeal the common law rule in
terms of which a husband obtained the marital power over the
person
and property of his wife.
[7]
The effect
is that husband and wife are now equal partners and she can enter
into legal transactions on her own. Section 15(1) of
the Act
reinforces the general rule that a spouse in a marriage in community
of property may perform any juristic act regarding
the joint estate
without the consent of the other spouse.
[16]
Section 15(2)(
c
)
of the Act creates an exception to the general rule by prohibiting a
spouse married in community of property from alienating an
asset in
the joint estate without the written consent of the other spouse.
Clearly, whilst the intention of the legislature was
to give both
spouses equal right of disposal with regard to the joint estate, that
does not indicate a general intention that they
should act jointly in
all transactions. Except in special reserved cases, the legislation
enabled them to exercise that competence
independently of each other.
[17]
With this in mind, it follows that when examining whether a spouse is
prohibited in terms of s 15(2)(
c
)
of the Act from dealing with impugned property without the written
consent of the other spouse, the crucial enquiry is whether
such
property forms part of the joint estate. If the said property cannot
be regarded as ‘forming part of the joint estate’
then s
15(2)(
c
)
of the Act is not applicable and the spouse may deal with such
property as he or she pleases.
[18]
Applying the principles of interpretation in
Endumeni
(above), the words ‘insurance policies’ found in s
15(2)(
c
)
cannot be read in isolation. They must be interpreted consistently
with the other financial instruments listed in the section
and with
the catch-all phrase ‘any similar assets’, to refer to
insurance policies that are assets. In this context
they clearly
include policies having a current value, such as endowment policies
or retirement annuities that can be surrendered
or made paid up. Pure
risk policies such as life, motor, fire and theft or household goods
policies are of a different character.
They are contracts for the
provision of an indemnity in the event of a future risk occurring.
The interpretational issue is whether
they are ‘insurance
policies’ in terms of the section, in other words are they
assets of the joint estate.
[19]
The words must also be interpreted consistently with sub-paragraphs
(a) – (e) in the section referring specifically to
assets in
the joint estate consisting of other real rights and property like
mortgages, servitudes over immovable property, jewellery,
coins,
investments, money and so forth. Clearly, the meaning to be ascribed
to the word ‘asset’ depends on the context.
[8]
Thus in
Ex
Parte Logan
1929 TPD 201
(at 203) assets were described as property that could be
applied to the payment of debts.
[20]
From the above it follows that not every contractual right
constitutes an asset. Hence, the rights of the policyholder in a
risk-only policy before the death of the insured life are not assets
and do not constitute ‘insurance policies’ as
envisaged
in s 15(2)(
c
).
A contractual right that confers a power on the policyholder to
appoint a beneficiary to receive the proceeds of a policy upon
the
death of the insured life, is not a right that can be applied to the
payment of debts. The rights the deceased had during his
lifetime to
deal with the policy, were not assets at all. If they were assets,
these rights do not constitute an insurance policy
within the meaning
of s 15(2)(
c
)
of the Act.
[21]
The restrictions imposed by s 15(2)(
c
)
of the Act apply only to alienation of insurance policies that are
assets and form part of the joint estate. This section finds
no
application to the facts in this case.
[22]
The appellant’s reliance on
Ndaba
v Ndaba
[9]
is
misplaced. This case is clearly distinguishable as it dealt with a
pension interest which is an asset analogous to the right
to be paid
a surrender value under an insurance policy with an investment
portion. The policy in issue here has no investment portion
and no
surrender value.
[23]
The nomination of a beneficiary to receive the proceeds of a life
insurance policy and the subsequent revocation of such nomination
accompanied by the substitution of new beneficiaries does not in any
event constitute the transfer of a right constituting an asset
in the
joint estate. It is merely the exercise of a contractual right
created by the policy.
[24]
In this case, the deceased after nominating his family members as
beneficiaries, retained the right to cancel that nomination
and
nominate someone else. He has not disposed of anything. He never lost
the rights that he had under the policy. He retained
those rights
until his death.
[25]
For these reasons, the nomination of the third parties as
beneficiaries did not constitute an alienation of the policy within
the meaning of s 15(2)(
c
)
of the Act and the appeal must fail.
[26]
The third parties elected to appear at the hearing of the appeal in
support of the arguments of the respondent. This was purely
a
precaution on their part and added nothing to the debate before us.
They asked for an order that their costs be paid by the respondent,
but I can see no justification for making such an order. In my view
they should pay their own costs.
[27]
I accordingly make the following order:
(1)
The appeal is dismissed with costs.
(2)
The second to the fifth respondents must bear their own costs.
_______________
B
H Mbha
Judge
of Appeal
APPEARANCES:
For
Appellant:
J C Pieterse
Instructed
by:
Corne van de Venter Incorporated, Johannesburg
c/o Honey
Attorneys, Bloemfontein
For
First Respondent:
A J Lamplough
Instructed
by:
Keith Sutcliffe & Associates Inc, Johannesburg
c/o Rossouws,
Bloemfontein
For
Second to Fifth Respondents: R B G Choudree SC (with him M
Manikam)
Instructed
by:
Sha Kumar & Associates
c/o Phatsoane
Henney Attorneys, Bloemfontein
[1]
Borman en De Vos, NNO en ʼn
ander v Potgietersrusse
Tabakkorporasie
BPK
en ʼn
ander
1976 (3) SA 488
(A) at
506H.
[2]
Henckert ‘The life assurance policy, beneficiary clauses and
marriage: a few aspects’ (1994)
TSAR
513.
[3]
Henckert (above).
[4]
Hees NO v Southern Life
Association Ltd
2000 (1)
SA 943
(W) at 948A–E,;
Ex
Parte Calderwood NO: In Re Estate Wixley
1981 (3) SA 727
(Z) at 736B-C.
[5]
Pieterse
v Shrosbree NO & others, Shrosbree NO v Love & others
[2004]
ZASCA 129
;
2005
(1) SA 309
(SCA) para 12.
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13; 2012 (4) SA 593 (SCA)
[7]
Section 11(i)
of the
Matrimonial Property Act 88 of 1984
.
[8]
Benoni, Brakpan and Springs
Board of Executors, Building Society and Trust Co. Ltd v
Commissioner for Inland Revenue
1921 TPD 170
at 173.
[9]
Ndaba v
Ndaba
[2016]
ZASCA 162
;
2017
(1) SA 342
(SCA) para 35
.