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[2010] ZAWCHC 90
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Foschini Retail Group (Pty) Ltd v Cellular Insurance Managers (Pty) Ltd (12262/07) [2010] ZAWCHC 90 (11 May 2010)
IN THE HIGH COURT
OF SOUTH AFRICA
[WESTERN CAPE
HIGH COURT, CAPE TOWN]
Case
No: 12262/07
In the matter
between:
FOSCHINI
RETAIL GROUP (PTY) LIMITED
Plaintiff
and
CELLULAR
INSURANCE MANAGERS (PTY) LTD
Defendant
JUDGMENT
DELIVERED:
11
MAY 2010
FOURIE,
J:
INTRODUCTION
[1]
Plaintiff is involved in the retail trade by selling diverse brands
of merchandise to the general public. This includes the
sale of cell
phones to customers who visit its Foschini stores.
[2] Defendant is
active in the cell phone insurance business,
inter
alia,
by
marketing cell phone insurance policies to distribution channels,
including retail stores.
[3] It is common
cause that during November 2001, the parties, through their
authorised representatives, concluded an oral contract
("the
oral contract") in terms of which plaintiff undertook to market
all risks insurance policies to its customers who
purchased cell
phones at Foschini stores. In terms of the insurance policies, which
were to be concluded between the insurance
company underwriting the
risk and the customer purchasing the cell phone, the customer would
be indemnified against the loss or
damage of the cell phone.
Defendant would act as the administrator (also referred to as the
broker) of the insurance scheme.
[4] The written
policies of insurance make provision for the payment of a monthly
premium by the insured customer, which premium
is deducted by
defendant from the customer's bank account by monthly debit order.
Each policy stipulates the amount of the monthly
premium payable,
depending on the indemnity limit chosen by the customer. This monthly
premium is made up of a "nett premium"
and an "admin
fee". It appears that the nett premium is utilised for the
payment of claims, costs, the fees of defendant,
the insurer and
re-insurer, as well as the provision of a statutory reserve. The
administration fee, which the customer pays as
part of the total
monthly premium, is collected by defendant for distribution to
plaintiff. The purpose of the payment of the administration
fee, is
to compensate plaintiff for the marketing of the policies and
providing certain services in connection therewith to its
customers.
[5] In its
particulars of claim, plaintiff alleges that in terms of the oral
contract, the following terms were expressly agreed
upon. The
existence of these terms are either common cause or not seriously
disputed by defendant:
(a) In respect
of each customer who purchased an insurance policy, plaintiffs staff
would:
(i)
assist
the customer to complete the application form for
insurance;
(ii)
send
the various completed forms to defendant, including
insurance
schedules, claim forms, replacement forms and
cancellation forms;
(iii)
assist
the customer in relation to any queries or claims
which he or she
may have in terms of the policy;
(iv)
undertake
the necessary head office claims verification
and reconciliation
functions; and
(v)
manage
the cell phone replacement procedure and
collection of the
applicable excess at the time of claim.
(b) The insurance
policy would remain in force while the insured customer continued
paying the premiums.
(c) In respect of
each policy purchased by a customer, defendant was obliged to pay to
plaintiff an agreed administration fee of
R5,00 (which was
subsequently increased to R7,00, thereafter to R8, 50 and finally to
R10,00) upon receipt of each and every premium
paid by the customer
to defendant.
(d) Defendant would
account to plaintiff monthly in respect of all premiums received by
it that month in terms of all policies which
had been sold by
plaintiff and pay the total amount due as administration fees, to
plaintiff.
[6] It is common
cause that from approximately November 2001 to April 2007, customers
of plaintiff purchased cell phone insurance
policies as a result of
plaintiff marketing the defendant's insurance scheme to such
customers. It is further common cause that
defendant accounted to
plaintiff monthly until 25 April 2007 in respect of all premiums
received by it under these policies, and
paid the administration fees
due to plaintiff in terms of such policies. However, as from May 2007
to December 2009 (the period
covered by plaintiff's claim), defendant
failed to account to plaintiff or to pay any administration fees to
plaintiff. It is common
cause that during this period the
administration fee amounted to R10,00 per premium paid.
THE CONTRACTUAL
CLAIM
[7]
Plaintiff's contractual claim for the payment of administration fees
for the aforesaid period, together with interest thereon,
is based
squarely on the express terms of the oral contract. Plaintiff does
not rely on any tacit or implied terms. In particular,
plaintiff
relies on the express term that, in respect of each policy purchased
by its customers, defendant is obliged to pay plaintiff
the agreed
administration fee, upon receipt of each and every premium paid by
the customer to defendant.
[8] In response
thereto defendant pleaded as follows:
"The
defendant alleges that it was a material, express, alternatively
implied, further alternatively tacit, term of the oral
agreement
concluded between the defendant and the plaintiff, that the defendant
was obliged to pay the plaintiff an amount upon
receipt of each and
every premium paid by the customer to the defendant,
only
for so long as the oral agreement between the parties remained in _
force
(my
emphasis)
[9] It is common
cause that on 20 December 2006, plaintiff advised defendant in
writing that in March or April 2007, it would discontinue
marketing
and promoting defendant's insurance scheme. It is further common
cause that, with effect from 2 April 2007, plaintiff
no longer
invited its customers to purchase the insurance policies promoted by
defendant. In view thereof, defendant has pleaded
that the oral
contract terminated with effect from April 2007. Its formulation is
that the oral contract was cancelled by plaintiff,
alternatively that
it was repudiated by plaintiff, which repudiation was accepted by
defendant. Defendant therefore pleads that,
in view of the
termination of the oral contract, it is not obliged to pay any
administration fees to plaintiff for the period May
2007 to December
2009, or thereafter.
[10] Defendant's
counsel, relying on the principles enunciated in
Kriegler
v Minitzer and Another
1949
(4) SA 821
(A) at 828, submitted, correctly in my view, that
plaintiff bears the onus of proving that the oral contract did not
contain the
term contended for by defendant, i.e. that defendant was
obliged to pay plaintiff the administration fee upon receipt of each
and
every premium paid by the Foschini customers to defendant, only
for so long as the oral contract remained in force. As indicated
in
paragraph 7 above, plaintiff contends that it was an express term of
the oral contract that defendant is obliged to pay the
administration
fee to plaintiff for the duration of each respective policy which had
been sold to a Foschini customer. This obligation,
plaintiff
maintains, is not extinguished by the termination of the oral
contract.
[11] At this stage I
should mention that in cross-examination, defendant's witness, Mr. De
Klerk, conceded that, notwithstanding
what has been pleaded,
plaintiff did lawfully terminate the oral contract on reasonable
notice as it was entitled to do. It follows
that, in terms of the
evidence of De Klerk, there was no cancellation or repudiation of the
oral contract by plaintiff. However,
this does not, in my opinion,
preclude defendant from relying on its defence as pleaded, namely
that defendant's obligation to
pay administration fees to plaintiff
would endure only for so long as the oral contract remained in force.
On defendant's version,
as appears from the evidence of De Klerk, the
oral contract was terminated, albeit on reasonable notice by
plaintiff and not by
virtue of a cancellation or repudiation by
plaintiff.
[12] It is
necessary, firstly, to determine what the express terms of the oral
contract were. In particular, it is necessary to
decide whether it
was an express term of the oral contract that defendant was obliged
to pay the agreed administration fees to
plaintiff in respect of
insurance policies purchased by Foschini customers, only for so long
as the oral contract remained in force.
[13] The evidence of
all the main role players (Messrs. Fullalove and Lequito on behalf of
plaintiff and Mr. De Klerk on behalf
of defendant) shows that there
was no express discussion or agreement as to what would happen in the
event of the termination of
the oral contract. In particular, their
evidence shows that it was not expressly agreed that defendant was
obliged to pay the agreed
administration fees to plaintiff in respect
of insurance policies purchased by Foschini customers, only for so
long as the oral
contract remained in force. There is also no other
evidence which shows that, at the time of the conclusion of the oral
contract,
the parties expressly agreed upon a term of this nature.
[14] If one has
regard to the pleadings, in particular paragraphs 4.5 and 5 of the
particulars of claim, read with paragraphs 9.1
and 11 of the plea, it
is common cause that the oral contract contained an express provision
that in respect of each policy purchased
by a Foschini customer,
defendant was obliged to pay to plaintiff an agreed administration
fee of R5,00 (which was subsequently
increased to R7,00, then to
R8,50 and finally to R10,00), upon receipt of each and every premium
paid by the customer to defendant.
[15] In view of the
aforesaid, I find that the parties had expressly agreed that the
administration fees were to be paid to plaintiff
upon receipt by
defendant of each and every premium collected, i.e. for the duration
of each respective policy which had been sold
to a Foschini customer.
Put differently, it is clear to me that no limitation as to time was
agreed upon by the parties and that,
in terms of the oral contract,
the administration fees remained payable for the duration of each
insurance policy sold to a Foschini
customer.
[16] This conclusion
is underscored by the contents of the following contemporaneous
documents:
(a) In defendant's
written presentation of the terms of the intended cell phone
insurance scheme, it was stated that the administration
fee is
"an
amount per month per policy payable in respect of policy
documentation costs, premium collection costs, marketing costs,
claim
administration costs and incentives
".
No time limitation was placed upon the payment of administration
fees, nor was it suggested that payment thereof would cease
upon the
termination of the contractual arrangement between the parties.
(b) In an e-mail
sent by De Klerk to Fullalove on 4 July 2001, De Klerk recorded that
the administration fee which plaintiff required
"will
be R5,00 per subscriber per month."
Once
again, no limitation as to time was imposed for the payment of
administration fees, nor was it suggested that defendant's obligation
to pay the administration fees would cease upon termination of the
contractual arrangement between plaintiff and defendant.
(c) The relevant
insurance policies which were to be marketed to Foschini customers,
also require the monthly premium (which includes
the administration
fee) to be paid over the life of the policy, i.e. until the policy is
cancelled by either the insurer or the
customer upon 30 days notice
in writing.
[17] I now turn to
the question whether the proviso pleaded by defendant, namely that it
was obliged to pay the agreed administration
fees to plaintiff, only
for so long as the oral contract remained in force, ought to be
implied in the oral contract.
[18] An implied term
is described in
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506
(A) at
531E-F
as:
"...an
unexpressed provision of the contract which the law imports therein,
generally as a matter of course, without reference
to the actual
intention of the
parties.it
does not originate in the contractual consensus: it is imposed by the
law from without."
At 532G of the same
case the following is said:
"The implied
term.is
essentially a standardised one, amounting to a rule of law which the
court will apply unless validly excluded by the contract itself.
While it may have originated partly in the contractual intention,
often other factors, such as legal policy, will have contributed
to
its creation."
[19] Counsel for
defendant submitted that the proviso is a term incorporated by law in
the oral contract, namely that the termination
of a contract allows a
party to consider its obligations to perform thereunder as at an end.
Although the termination of a contract
puts an end to the obligations
of the parties to perform thereunder, this usually only applies to
the executory portion of the
contract. Where a right has accrued to a
party before the termination of the contract, such right is not
affected after termination,
save where the parties agree to the
contrary. See
Walker's
Fruit Farms Limited v Sumner
1930
TPD 394
and
Crest
Enterprises Ltd v Rycklof Beleggings (Bpk)
1972
(2) SA 863
(A) at
869H-870H.
[20] The oral
contract was, on the evidence of the witnesses for both parties, to
endure for an indefinite period. Such a contract
is normally referred
to as an executory contract. The nature of an executory contract was
explained as follows by Van Zijl J (as
he then was) in
Maw
v Grant
1966
(4) SA 83
(C) at 87B-D:
"I have
often wondered whether it would not have been better to have referred
to such contracts as running contracts because
during the period they
run they generally create a succession of rights and obligations that
are - if the contracts are carried
out normally - successively
extinguished by fulfilment and generally before the next set of
rights and obligations arise. In a
contract of this nature there are,
therefore, executed portions and executory portions of the contract.
When a contract of this
nature is terminated by agreement (other than
a termination ab initio) either party can recover from the other the
contra prestation
for those portions of the contract he has
performed. If the contract has been terminated by mutual agreement
this legal provision
operates unless the parties have agreed
otherwise. "
[21] In the instant
case it is common cause that prior to 2 April 2007, plaintiff
performed its obligations by marketing the insurance
policies to its
Foschini customers and providing the necessary infrastructure for
such customers to purchase policies and derive
benefits in terms of
the said policies. The performance of these obligations created
rights for plaintiff in terms of the oral
contract, namely the
entitlement to payment by defendant of the administration fees upon
receipt of each and every premium paid
by the customer to defendant.
[22] To imply a term
in the nature of the proviso in the oral contract, would mean that
all rights which may have accrued to plaintiff
prior to 2 April 2007,
to payment of administration fees, would be disregarded. This would,
particularly in the absence of evidence
of an agreement to the
contrary upon termination of the oral contract, be in conflict with
the legal principles enunciated in the
cases referred to above.
[23] There is, of
course, a much shorter answer to this submission of defendant. That
is to be found in the trite principle that
a term that would normally
be implied by law, is excluded where it would conflict with the
express terms of the contract. As I
have already indicated, it was an
express term of the oral contract that, in respect of each policy
purchased by a Foschini customer,
defendant is obliged to pay to
plaintiff the agreed administration fee upon receipt of each and
every premium paid by the customer
to defendant. If a term is implied
that this obligation of defendant would endure only for so long as
the oral contract remained
in force, it would be in direct conflict
with the express term that defendant is obliged to pay the
administration fee upon receipt
of each and every premium paid to it
by the customer.
See
Alfred
McAlpine & Son (Pty) Limited v Transvaal Provincial
Administration
supra
at 531E and
Group
Five Building Limited v Minister of Community Development
[1993] ZASCA 75
;
1993
(3) SA 629
(A) at 653F-G.
[24]
I accordingly
find that there is no room for the importation of an implied term of
this nature in the oral contract.
[25] This brings me
to the question whether the oral contract contained a tacit term to
the effect that defendant would be obliged
to pay the administration
fees only for so long as the oral contract remained in force. In my
view there is also no room for the
importation of this proviso as a
tacit term of the oral contract.
[26] Firstly, as in
the case of an implied term, a tacit term cannot be incorporated in a
contract where it is in conflict with
an express term of the
contract. On this basis alone, for the reasons already furnished in
paragraph 23 above, defendant's reliance
upon the existence of the
tacit term, has to fail.
[27] Secondly, I am
of the opinion that, having regard to the principles applicable to a
determination of a tacit term in a contract,
it cannot be found that
the oral contract was subject to the tacit term contended for by
defendant. These principles have recently
been restated in
City
of Cape Town (CMC Administration) v Bourbon-Leftley and Another NNO
2006
(3) SA 488
(SCA) at 494G-495C, as follows:
"(A) tacit
term is based on an inference of what both parties must or would
necessarily have agreed to, but which, for some
reason or other,
remained unexpressed. Like all other inferences, acceptance of the
proposed tacit term is entirely dependent on
the facts. But, as also
appears from the cases referred to, a tacit term is not easily
inferred by the courts. The reason for this
reluctance is closely
linked to the postulate that the courts can neither make contracts
for people nor supplement their agreements
merely because it appears
reasonable or convenient to do
so.it
follows that a term cannot be inferred because it would, on the
application of the well-known 'officious bystander' test, have
been
unreasonable of one of the parties not to agree to it upon the
bystander's suggestion. Nor can it be inferred because it would
be
convenient and might therefore very well have been incorporated in
the contract if the parties had thought about it at the time.
A
proposed tacit term can only be imported into a contract if the court
is satisfied that the parties would necessarily have agreed
upon such
a term if it had been suggested to them at the time. If the inference
is that the response by one of the parties to the
bystander's
question might have been that he would first like to discuss and
consider the suggested term, the importation of the
term would not be
justified.
In
deciding whether the suggested term can be inferred, the court will
have regard primarily to the express terms of the contract
and to the
surrounding circumstances under which it was entered into. It has
also been recognised in some cases, however, that
the subsequent
conduct of the parties can be indicative of the presence or absence
of the proposed tacit term."
[28] I have
hereinbefore dealt extensively with the express terms of the oral
contract. For present purposes I reiterate that it
was agreed that
defendant would pay the agreed administration fees to plaintiff upon
receipt of each and every premium paid by
the customer to defendant.
It should also be stressed that no limitation as to time was imposed
and, as such, in terms of the oral
contract, the administration fees
remained payable for the duration of each policy sold up until 2
April 2007. In addition to the
express terms of the oral contract,
reference should, in the present context, also be made to the
contemporaneous documents referred
to above, which confirm that no
limitation as to time was imposed upon defendant's obligation to pay
the administration fee to
plaintiff upon receipt of each and every
premium paid by the customer to defendant. This confirms that the
administration fee was
payable over the life of each policy.
[29] If one has
regard to the surrounding circumstances under which the oral contract
was entered into, the following appear to
be relevant:
(a) Plaintiff
incurred costs and rendered services up front to market the insurance
policies. Plaintiff was not remunerated for
any unsuccessful
marketing, nor was it paid a lump sum for its marketing of the
policies. Instead, plaintiff was to be remunerated
for all of its
marketing and other services by means of an administration fee
payable per month upon receipt of each and every
premium paid by the
customer to defendant. The plaintiff's reward was the income stream
constituted by the administration fees
into the future, paid by the
policy holder who had taken out the insurance.
(b) Defendant's
obligation to pay the administration fees to plaintiff, was, in terms
of the oral contract, reciprocal to the successful
marketing of that
policy, not the continued marketing of other insurance policies in
the future. The oral contract expressly tied
the payment of the
administration fee to the payments to be made in terms of the
specific policy successfully marketed by plaintiff.
(c) The
administration fee is paid by the customer to defendant who has no
entitlement thereto. Defendant is merely the conduit
for the
distribution of the administration fee to plaintiff. There is
accordingly no basis upon which defendant can lay claim to
the
administration fee, nor does the insurer have any claim thereto.
There is accordingly
no basis in contract or in law for defendant to lay claim to the
administration fees payable in respect of
insurance policies marketed
and sold by plaintiff to its customers prior to 2 April 2007.
[30] When one
considers the conduct of the parties subsequent to the conclusion of
the oral contract, the following appears to be
noteworthy:
(a) In August 2006,
when a new scheme was mooted whereby the insurance policies would be
sold to plaintiff's customers on credit,
certain proposals were made
by defendant to plaintiff in a letter dated 7 August 2006. It is
significant that, in explaining the
different options to plaintiff,
defendant at no stage informed plaintiff that, in the event of
plaintiff terminating the existing
scheme and replacing defendant
with another administrator, plaintiff would forfeit its right to
payment of the administration fees
in respect of the policies which
had already been sold to Foschini customers. I should add that in his
evidence De Klerk said that
he did not inform plaintiff as it may
have created the impression that he was threatening plaintiff. This
explanation is rather
unconvincing and there is merit in the
submission of plaintiffs counsel that this failure of De Klerk rather
indicates that he
himself was not of the view that in such
circumstances plaintiff would forfeit its right to the payment of the
administration fees.
In fact, the evidence shows that at no stage at
all during these negotiations did De Klerk advise Fullalove of this
view of his.
In his evidence De Klerk said that he had thought of
telling plaintiff that, upon termination of the oral contract,
plaintiff would
not continue to receive the administration fees, but
that he did not do so as it was self-evident to him.
(b) In the letter of
20 December 2006, addressed by Fullalove to De Klerk, advising De
Klerk of plaintiff's decision not to continue
using the services of
defendant as administrator, Fullalove,
inter
alia,
said
the following:
"(We) will
continue to run the existing debit order business via CIM
(defendant)
until
all policies are cancelled".
This
conveys that Fullalove was of the view that, in these circumstances,
plaintiff's right to payment of the administration fees
in respect of
the policies which had already been purchased by Foschini customers,
would not be in jeopardy. In cross-examination
De Klerk conceded
that, in terms of this letter, the state of mind of plaintiff's
representatives
"was
that they would be in a position to continue to run the customers."
(c) From the
correspondence subsequent to 20 December 2006, and in particular
subsequent to 2 April 2007, it is clear that plaintiffs
representatives were of the view that plaintiff was still entitled to
payment of administration fees in regard to existing policies,
while
De Klerk took the view that they were not entitled thereto.
[31] In my view,
these facts and circumstances clearly show that the parties would not
necessarily have agreed upon a tacit term
of this nature, had it been
suggested to them at the time of the conclusion of the oral contract.
It appears to me that Fullalove
would probably have considered such a
term to be unbusinesslike, prejudicial to plaintiff's interests and,
in any event, incompatible
with the express terms of the oral
contract. It may be that De Klerk would have responded differently to
the enquiry of the officious
bystander, but this is not sufficient
ground for the importation of a tacit term of this nature in the oral
contract.
[32] In the result,
I find that plaintiff has discharged the onus of proving, on a
preponderance of probabilities, that it was not
an express,
alternatively implied, further alternatively tacit, term of the oral
contract that defendant was obliged to pay the
agreed administration
fees to plaintiff only for so long as the oral contract remained in
force.
THE SECTION 48
DEFENCE
[33]
In an alternative defence, defendant relies on section 48 (1) of the
Short Term Insurance Act No. 5 of 1998 ("the Act").
It
alleges that, by virtue of the parties' failure to comply with the
provisions of this section, it is not obliged to account
to and/or to
pay any amount to plaintiff. Section 48 (1) of the Act reads as
follows:
"48.
Intermediaries: remuneration and binder agreements.
-
(1) No
consideration
shall be offered or provided by a short-term insurer or a Lloyd's
broker or a representative of such insurer or broker
or any person on
behalf of such insurer or broker or accepted by any independent
intermediary, other than someone who has entered
into an agreement
contemplated in subsection (2), for rendering services as
intermediary, and otherwise than in accordance with
the regulations."
[34] In relying
on section 48 (1) of the Act, defendant pleads that:
(a) At all material
times defendant was a short term insurer, alternatively a person
acting on behalf of a short term insurer.
(b) In rendering the
services to defendant, as set out in paragraph 4 of its particulars
of claim (see paragraph 5 above), plaintiff
acted as an independent
intermediary as defined in section 1 of the Act.
(c) Absent a written
agreement between plaintiff and defendant as contemplated in section
48 (2) of the Act, plaintiff is prohibited
from accepting any
consideration from defendant (as short term insurer or as a person
acting on behalf of a short term insurer)
for rendering services as
an independent intermediary and defendant is prohibited from paying
plaintiff such consideration.
(d) Accordingly the
oral contract on which plaintiff relies for its claim against
defendant, is unenforceable and/or void.
[35] Defendant bears
the onus of establishing the facts to support its defence that the
payment of the administration fees claimed
by plaintiff in this
action, is prohibited by virtue of the provisions of section 48 (1)
of the Act.
[36] It appears to
me that, upon a proper interpretation of section 48 (1) of the Act,
defendant has to prove the existence of the
following facts to enable
it to succeed with this defence:
(a) Defendant agreed
to pay, and made payment of, the agreed administration fees to
plaintiff, in its capacity as a short-term insurer;
or
(c) In agreeing to
pay, and making payment of, the agreed administration fees to
plaintiff, defendant acted on behalf of a short-term
insurer; and
(d) Defendant agreed
to accept, and did accept payment of, the agreed administration fees,
for rendering services as an independent
intermediary.
[37] In plaintiff's
replication to defendant's plea, read with its further particulars
for trial, plaintiff admits that it rendered
certain services as an
"intermediary", as defined in the Act. The Act defines an
"independent intermediary"
as a person other than a
representative who renders services as an intermediary. Plaintiff
does not fall within the definition
of a representative, with the
result that it rendered these services as an independent
intermediary, as defined in the Act.
[38] What has to be
decided, is whether defendant agreed to pay, and made payment of, the
administration fees in its capacity as
a short-term insurer or as a
person on behalf of a short-term insurer. A "short-term insurer"
is defined in the Act as
a person registered or deemed to be
registered as a short-term insurer under the Act. It is common cause
that at all material times
defendant was not, and is presently not,
registered as a short-term insurer. However, defendant contends that,
in terms of the
provisions of section 7 (3) of the Act, it is deemed
to be a short-term insurer, one of the categories of persons from
whom plaintiff
is prohibited from receiving consideration for
services rendered as an independent intermediary.
[39] It appears to
me that defendant's reliance on the provisions of section 7 (3) of
the Act, is misplaced. Section 7 (1) prohibits
persons from carrying
on any kind of short-term insurance business unless they have been
registered in terms of the Act. Sub-section
(3) provides that,
"for
the purposes of this section",
a
person shall, in the absence of evidence to the contrary, be deemed
to be carrying on short-term insurance business if that person
performs certain prescribed acts. It follows, in my view, that, in
terms of section 7 (3) of the Act, a person may be deemed to
be
carrying on short-term insurance business only for the purposes of
section 7, in which event registration as a short-term insurer
in
terms of the Act, is required. I should add that a person who carries
on short-term insurance business and fails to register
in terms of
section 7 (1) of the Act, commits a criminal offence.
[40] It follows, in
my view, that the deeming provision in section 7 (3) of the Act, has
no impact at all upon the provisions of
section 48 of the Act. In the
result, I find that defendant is not a short-term insurer and has
not, in that capacity, agreed to,
or made payment of, the
administration fees, as envisaged in section 48 (1) of the Act.
[41] Defendant's
counsel further submitted that, even if the court should find that
defendant is not a short-term insurer, it is
a person who acts on
behalf of a short-term insurer, as envisaged in section 48 (1) of the
Act. Therefore, it was submitted, defendant
falls squarely into a
category of persons from which plaintiff is prohibited, by section 48
of the Act, from accepting consideration
for rendering services as an
intermediary. In the circumstances, defendant contends, that, in
order to be legally permitted to
accept payment of the administration
fee, plaintiff, as independent intermediary having rendered services
as such, had to have
entered into the agreement contemplated in
sub-section 48 (2) of the Act. In this regard, it was contended that
the prohibition
contained in section 48 (1), is not directed at the
origin of the payment made, but prohibits the receipt of payment from
any person
which falls into the category of persons mentioned in
section 48 (1).
[42] In my view,
this submission does not take proper account of the wording of
section 48 (1). The subsection, in the context of
defendant's present
submission, provides that no consideration shall be offered or
provided by any person, on behalf of a short
term insurer, to an
independent intermediary. I am of the view that, upon a proper
interpretation of section 48 (1), it is not
the mere offering of
payment or the making of payment by defendant which is prohibited,
but the offering of payment, or the making
of payment by defendant,
on
behalf of a short-term insurer
.
[43] Consequently,
to succeed in its defence based on section 48 (1) of the Act,
defendant must establish that the consideration
(the administration
fee) was offered or provided by it on behalf of a short term insurer,
i.e. the insurer underwriting the risk
in terms of the policies
purchased by Foschini customers.
[44] It is clear
from the evidence and the relevant documentation that defendant, when
contracting to pay the administration fees
to plaintiff, never acted
on behalf of the insurance company underwriting the risk in terms of
the insurance policies purchased
by Foschini customers. It is
furthermore clear from the evidence and documentation that, when
payment of the administration fees
due in terms of the oral contract
were made to plaintiff by defendant, the latter did not act on behalf
of the underwriting insurance
company or its successors. In fact, Mr.
Blain, the Chief Executive of the insurance company presently
underwriting the said policies,
testified that the underwriter did
not have a commercial or legal interest in the administration fee.
According to him it was a
fee
"outside
the policy".
In
these circumstances the payment of the administration fees by
defendant and the acceptance thereof by plaintiff, does not bring
the
provisions of section 48 (1) into play and no written contract as
envisaged in section 48 (2) is required.
[45] In fact, a
perusal of the requirements of the contract envisaged by section 48
(2), shows that what is envisaged is a contract
between a short-term
insurer and an insurance broker, and not an agreement of the nature
of the oral contract. The contractual
terms set out in sub-sections
(a), (b), (c) and (d) of section 48 (2), would not normally be found
in a contractual relationship
of the nature embodied in the oral
contract.
[46] I therefore
find that the defence based on section 48 of the Act, has to fail,
and that the oral contract is valid and enforceable.
In view of this
finding it is not necessary for me to deal with the various
alternatives pleaded by plaintiff in response to the
section 48
defence.
CONCLUSION
[47]
In view of the aforesaid, I find that plaintiff has proved the
existence of the oral contract and, in particular, the express
terms
thereof, upon which it relies for its contractual claim against
defendant. It is not in dispute that for the period covered
by its
claim, plaintiff has performed its obligations in terms of the oral
contract. In the result, plaintiff's claim for the payment
of
administration fees for the period May 2007 to December 2009, the
quantum of which is admitted by defendant, together with
mora
interest
thereon, should succeed. The amount payable as
mora
interest
at the rate of 15,5% per annum, on outstanding administration fees
for the period May 2007 to 31 January 2010, is R1 529
004,00,
calculated and arrived at as per Annexure "A" to
plaintiff's particulars of claim. In addition, plaintiff's claim
for
an accounting and payment in respect of administration fees received
by defendant from existing policyholders with effect from
January
2010, should similarly succeed.
[48] With regard to
costs, plaintiff as the successful party, is entitled to its costs. I
am satisfied that this is a matter which
justified the employment of
two counsel.
[49] What remains,
is the issue of the costs of the interlocutory application to set
aside a subpoena
duces
tecum
issued
by defendant against plaintiffs company secretary. The documentation
to which the subpoena relates, was subsequently discovered,
but
plaintiff contends that these documents are irrelevant and that the
issuing of the subpoena constitutes an abuse of the process
of court.
Defendant, on the other hand, maintains that it was vindicated by the
subsequent discovery of these documents by plaintiff.
The difficulty
that I am faced with, is that the merits of the application were not
argued, as the trial proceeded and the necessity
for such argument
fell away. In the circumstances, I believe that it would be just and
equitable if no order as to costs is made
in this regard.
[50] In the
result the following orders are made:
1.
Defendant
is ordered to pay plaintiff:
(a) the amount of R6
093 863,00;
(b)
mora
interest
in the amount of R1 529 004,00 for
the period May 2007
to 31 January 2010;
(c)
mora
interest
on the amount of R6 093 863,00 at
the rate of 15,5% per annum
calculated from 1
February 2010 to date of final payment.
2.
Defendant
is directed:
(a) (i) to furnish
plaintiff with monthly accounts for the period January 2010 up to and
including April 2010, in respect of all
administration fees received
by defendant from policyholders to whom plaintiff sold policies on
behalf ofdefendant, such accounts
to be in the same format as that
supplied bydefendant, such accounts to be in the same format as that
supplied by defendant to
plaintiff up until the end of December 2009;
and (ii) to pay to plaintiff the amount of the administration fees
received by it
from such policyholders during the period January 2010
to
April 2010; and
(iii) to pay
mora
interest
at the rate of 15,5% per annum on each such amount due to plaintiff
in terms of each such account with effect from the
end of the month
following the month to which each monthly account relates.
(b) (i) To furnish
plaintiff with monthly accounts with effect from May 2010 and every
month thereafter, in respect of all administration
fees received by
defendant from policy holders to whom plaintiff sold policies on
behalf of defendant, such accounts to be in the
same format as that
supplied by defendant to plaintiff up until the end of December 2009;
and
(ii)
To
pay to plaintiff the amount of the
administration
fees received by it from such
policyholders,
each month before the end
of the month
following
the
month to which each monthly account relates: and (iii) To pay
mora
interest
at the rate of 15.5% per annum on each such amount due to plaintiff
in terms of each such account with effect from the
end of the month
following the month to which each monthly account relates.
I,
Defendant
is declared liable for payment of plaintiff s costs of suit,
including the costs of two counsel. 4. No order is made
in regard
to plaintiffs application, dated 1 April 2010. to set aside the
subpoena
duces
tecum
issued
by defendant.
P
B Fourie, J