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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

CASE NUMBER: 30795/2012

10/08/17

Reportable: NO

Not of interest to other judges: NO

In the matter between:

LIBERTY GROUP LTD                                                                                         PLAINTIFF

And

THOBEI: MOKWARI JACOB DOMINIC                                                FIRST DEFENDANT

THOBEI: CYNTHIA                                                                          SECOND DEFENDANT

 

JUDGMENT

 

TLHAPI J:

 

INTRODUCTION

[1] The plaintiff entered into a broking agreement with the first defendant on 16 July 2004. The first defendant was appointed as a brokerage, that is, an independent Intermediary, as defined in the Long-Terms Insurance Act 52 of 1998, ("the Act"). The first defendant rendered services by offering products of the plaintiff in the form of proposals to natural persons (consultants). The broking agreement describes the products as, Life Assurance, Health Insurance, Retirement Annuities, Group Benefits , etc. Proposals from the consultants were presented to the plaintiff and when accepted, a contract was concluded between the consultant and the plaintiff. The contract required the payment of premiums by the consultant to the plaintiff for the duration of the contract.

[2] As sole compensation to the first defendant payments were done in the form of commissions on premiums received from the consultant. The commissions were paid in advance, that is, prior to the plaintiff receiving any premiums from the consultants. The broking agreement also provided for situations where the brokerage ('first defendant') would be obliged to refund commission paid in advance. This occurred where the contract lapsed, or was cancelled or terminated by the plaintiff, due to the plaintiff not receiving premiums for whatever reason.

[3] On 8 June 2004 the plaintiff entered into a Suretyship agreement with the second defendant, who bound herself in 'writing as surety and co-principal debtor in solidum with the first defendant, for the payment on demand to the plaintiff, of all sums of money which the first defendant could then and from time to time in the future owe or be indebted to the plaintiff.

At trial the plaintiff called one witness and the first defendant appeared in person and he also testified. The second defendant did not testify, however, argument was presented on her behalf regarding the special plea by her counsel.

 

Terms of the Broking Agreement and Suretyship

 

[4] These were paraphrased in the particulars of claims as follows:

Broking Agreement:

5.4 The commissions ....would be paid in accordance with the Schedule of Commissions (subject to any statutory tax deductions) and subject to the terms of the Agreement;

5.5 The Schedule of Commissions could be changed by the plaintiff any time provided that such change, except where it could be imposed by statute or regulation, would be applicable on to contracts accepted by the plaintiff after effective date of the revised Schedule of Commissions.

5.6 Should a contract issued pursuant to a proposal submitted by the first defendant to the plaintiff lapse and not be reinstated within three months from the date of the lapse, no commission would be paid to the first defendant after reinstatement of the contract, unless such reinstatement was the result of the sole efforts of the first defendant

5.7 If a contract on the life of any person, which had been issued by the plaintiff was surrendered, cancelled, made paid-up, or lapsed or the sum assured or premium was reduced or an automatic premium loan was taken on the policy or a loan was taken within a period of six months before or after the date of an application to the plaintiff for a new contract on such a person's life, total commission on the new contract would be determined by the plaintiff and the first defendant would refund to the plaintiff any excess commission;

5.8 If the plaintiff decided to pay any commission on any premium not yet received by it in respect of a contract introduced by the first defendant (which the plaintiff would be entitled to do for any reason which it, in its sole discretion, deemed fit), then the first defendant would not be entitled to any commission on such premium and would refund to the plaintiff, any commission already paid thereon on demand;

5.9 In the event of termination of the agreement in terms of clause 9 thereof, payment of any commission due to the first defendant would be suspended for a period of twelve months from the date of such termination, where after the balance of commission then due would be paid to the first defendant

5.10The first defendant would not be entitled to cede any of its rights (and in particular its rights to commission whether accrued or not) in terms of the agreement

5.11…

5.12 On termination of the agreement, payment of any commission to the first defendant in terms of clause 8.9 of the agreement, would be subject to the liquidation or set off of all of the first defendant's indebtedness to the plaintiff;

5.13….

5.14 A certificate setting out the indebtedness of the first defendant to the plaintiff signed by the director or divisional manager of the plaintiff would be prima facie evidence of such indebtedness and would be valid as a liquid document for the purposes of obtaining provisional sentence or summary judgment against the first defendant;

5.15 As security for any present or future indebtedness to the plaintiff, the first defendant ceded to the plaintiff its' claim to all amounts to which the first defendant could from time to time become entitled to in terms of the Agreement. The plaintiff would in its discretion and without notice to the first defendant be entitled to set off any amounts owing to it by the first defendant from any cause whatsoever, against any indebtedness of the plaintiff to the first defendant

Suretyship

7.1All admissions and acknowledgements of indebtedness by the first defendant would be binding on the second defendant;

7.2 The second defendant renounced the benefits of the legal exceptions " ordinis seu excussionis et divisionis", "non causa debiti"and revision of accounts with the force and effect of which the second defendant acknowledged herself to be fully acquainted with;

7.3The Suretyship would remain in force as a continuing security, notwithstanding any intermediate settlement of account and notwithstanding the death or legal disability of the second defendant;

7.5 The Suretyship would remain in full force and effect for so long as the first defendant was indebted to or under any obligation or commitment to the plaintiff and the second defendant would not be entitled to withdraw or cancel the Suretyship unless and until all indebtednes- . commitment and obligations of the first defendant to the plaintiff had been fully discharged......;"

[5] I this action the plaintiff claims from both defendants the refund of commissions that became due and payable as at 5 February 2012 in the amount of R 1 845 305.97 (One Million Eight Hundred and Forty Five Thousand Three hundred and Five Rand and Ninety Seven Cents). The action was defended by both defendants and they disputed that the balance as reflected in the certificate of balance was correct and challenged its enforceability. There was admission to a limited extent of indebtedness to the plaintiff. The defendants pleaded that the enforcement of the correctness of the certificate of balance was too harsh and unjustifiable. It was alleged that the amounts claimed consisted of an undeterminable number of amounts, which might have been erased by prescription, which justified the institution of a counterclaim for a statement and debatement of account.

[6] Furthermore, in the first defendant's counterclaim , payment was tendered to the plaintiff of the amount found to be due to the plaintiff, after statement and debatement of account and the consideration of prescription and any further premiums received by the plaintiff. The second defendant also raised a special plea, that the suretyship agreement was invalid in that it failed to comply with 'the General Law Amendment Act 50 of 1956'.

[7] In the special plea it was alleged firstly, that the identity of the principal debtor could not be ascertained from the suretyship; secondly, that the first defendant singed as co-principal in respect of Mokwari Thobei and that it was not clear whether such name referred to the first defendant or, a company or, partnership or, a cooperation, and that in as far as such name referred to the first defendant, he could not sign as surety for his own debt, and, thirdly that the suretyship failed to state the amount to which the second defendant stood surety and that the suretyship appeared to be for an unlimited amount.

The Deed of Suretyship reads:

"We the undersigned, MOKWARI JACOB DOMINIC THOBEI AND CYNTHIA THOBEI of [...] STREET, MONTANA GARDENS; 0159

Do hereby bind ourselves jointly and severally as sureties for and co-principal Debtors in solidum with MOKWARI THOBEI hereinafter styled the 'Debtor(s)') for the payment on demand to LIBERTY GROUP LIMITED... "

[8] Ms Chantal Muldoon testified on behalf of the plaintiff. She was employed as a debt administrator who administered the brokerage in as far as commissions payable were concerned. Commissions were paid into the first defendant's bank account as instructed by him in 'annexure 18' and, payment was effected as reflected in a commission statements similar to those annexed to the papers. These commission statements were sent to the first defendant via email or they could be generated by him from the Liberty System, on a weekly, fortnightly or monthly basis during the period of the statement. The commission statements were compiled in such a manner that the first defendant would have knowledge of the status of the individual policies from which commissions were paid and the statements also factored in those polies that had lapsed and the commission to be refunded would appear as a negative entry. The commission statement on page 80 of the papers was generated on 5 February 2012 and it reflected the amount claimed by the plaintiff and as confirmed in the certificate of indebtedness on page 94 issued by the divisional manager, legal services.

[9]In cross examination it was disputed by the first defendant that the statements generated were accurate. He wanted to know from the witness whether she was aware of the limit of R25 000.00 which could be paid by a branch manager to the brokerage without obtaining authorization and that this pertained to business which had been accepted. She advised that the systems were capped below R25 000.00 however, she was stationed at head-office and would not have knowledge of what happened at branch level. The system used was built to comply with the Long Term Insurance Act, and any business loaded in error would be rejected and, where business had been accepted commission would be paid out.

[10] The first defendant testified that the claim related to some old policies which were not in his books but could only be found on the plaintiff's data base. He used to keep record of business submitted to the plaintiff in note books. A client had to remain in the books of the plaintiff for a minimum of 2 years failing which the policy would lapse, entitling commission paid in advance to be reclaimed by the plaintiff. Although he admitted that he was indebted to the plaintiff, he alleged that the amount claimed was too high. At least it should have been less than R1million rand. It was possible also that clients whom he had introduced would not reflect under his name, but would have been allocated to another person where there had been an increase in premiums. When this happened, he would automatically receive an erroneous negative commission on his statement and, to this would be added interest.

[11] He required a list of debits and credits from the plaintiff and a list of all his clients who were no longer on his books because he was no longer receiving credits from clients to date. Therefore, the certificate of balance does not paint a clear picture of his debit balance. He was disgruntled and sought duplicates of all statements since he started with the plaintiff, so that a fair claim is calculated. The inaccuracies he was complaining about were present when the summary judgment application was launched.

[12] The first defendant admitted during cross examination that as far back as 14 March 2014 and, at his request he was given opportunity to source documents he was

relying on in his defence. He admitted that the claim was about advance commission, but he raised the unfair policy which caused lapsed policies to be reflected under a

different code. He did not take up the issue of lapse with the clients, he could not save the policies. He admitted receipt of the plaintiff's discovery affidavit, where the commission statements from July 2004 to February 2012 were discovered and, he confirmed that he had not made use of the opportunity to ask for the copies which were tendered. The first respondent was further asked why he had not disputed the incorrect calculations in his letter of 2 December 2009, but had instead offered to reduce his debit balance by submitting new business, also in this letter acknowledging his indebtedness to the plaintiff.

 

Certificate of Balance and Counterclaim

 

[13] Mr Goslet for the plaintiff argued that since the defendants were disputing the accuracy of the certificate of balance, the evidentiary burden rested on the first defendant to demonstrate such inaccuracy.

The plaintiff's plea in 5.14 confirms that the brokering agreement at clause 10.1 provides the following:

" A certificate of balance setting out the indebtedness of the Brokerage to Liberty signed by the Director or Divisional Manager or Liberty shall be prima facie evidence of indebtedness"

[14] Although the first defendant disputed the accuracy of the certificate of balance, he admitted his indebtedness to the plaintiff in an amount less than R1 million, even though no evidence was advanced by him as to the exact amount he believed he was owing. He insisted that he could only defend himself properly if the plaintiff availed him with all the statements of commission since commencement of his appointment as an independent intermediary. He offered no explanation in cross examination why he had failed to avail himself with these statements as they were tendered in the Discovery Affidavit as reflected on page 195 (Notices bundle 2).

[15] The Discovery Affidavit was served by agreement on both defendants by email during February 2014 and, the first defendant confirmed receipt. In the said affidavit the plaintiff did not object to the production of the commission statements from which the calculation of the claim was derived. The first respondent was given an opportunity when a postponement was granted at his request, to bring information that would assist in his defense despite acknowledgement on his part during 2009 that he would reduce his debit balance by introducing new business. In argument when the first respondent wanted to introduce a documents which he claimed showed a discrepancy in the amount claimed. Although I allowed the first defendant to address the court, this was with great difficulty because the document was not discovered by him; Ms Muldoon had not dealt with it or been cross-examined on it; and, it would have served no purpose because it was not dealt with in his evidence and cross examination.

[16] In pleading to paragraphs 4 to 9 of the first defendant's counterclaim, the plaintiff denied that it constituted a proper claim in reconvention and, tendered to discover all the documents relevant to the calculation of the claim, which also served to prove the amount in the certificate of balance. It alleged that the defendants would still bear the burden of disproving the amount claimed. It was argued for the plaintiff that a claim for statement and debatement could not be raised by a defendant, where the defendant had an evidentiary burden to disprove the certificate of balance. I have already dealt with how the first defendant failed to deal with discovery of the commission statements which were tendered. In as far as the first defendant failed to take opportunity to request such documents, I am left to infer that failure to deal with such discovery, would be tantamount to an abandonment of the counterclaim.

 

Prescription

 

[17] It was correctly argued for the plaintiff that the monthly statements reflected a fresh indebtedness in that commission reversals were offset by new business. The debt in terms of the broking agreement became due and payable on demand . The first defendant had failed to disprove the correctness of the certificate of balance, in that he failed to consider the commission statements which were discovered and tendered. It is by considering these statements where he could have identified those amounts he alleged could have been erased by prescription. This being said, sight should not be lost of the fact that on 2 December 2009, he acknowledged his indebtedness with regard to commission paid in advance, of the policies which had lapsed, thereby interrupting the running of prescription. Summons was served on the defendants on 4 June 2012.

 

Suretyship

[18] It is trite that in dealing with this special plea raised on behalf of the second defendant, we look mainly to the document to determine whether or not the Suretyship complies with the General Law Amendment Act 50 of 1956, which is to clearly identify the principal debtor, the surety and the creditor. The second defendant did not testify, but her counsel, Mr Msiza presented argument on her behalf.

 

First Ground

1. In dealing with the first ground raised, not much can be said because ex facie the document the principal debtor is identified as "MOKWARI THOBE"I.

Mr Msiza also argued that the suretyship was invalid because it was not concluded on the same day on which the broking agreement was concluded. I did not come across this ground in the special plea. He relied on Ekkehard Creutzburg Emil Eich v Commercial Bank of Namibia (SCA) 29104 (1 December 2004). In my view the facts in this case are distinguishable, in that it had more to do with which law determined the formalities of the Suretyship entered into by the parties, where the contracting parties had not made a definite choice as to which law would govern the contract. The position in terms of South African Law, which prescribed the formalities to be complied with, rendered invalid a Suretyship where the creditor has not been identified (section 6 of the General Law Amendment Act). Whereas in Namibia no formalities were prescribed by law for the conclusion of a Suretyship, and as the /ex loci contractus determined the formalities of a contract the Suretyship was declared to be valid and therefore enforceable through South African

Courts.

 

Second Ground

2. In the second ground the question is whether the surety Mokwari Jacob Dominic Thobei and the principal debtor Mokwari Thobei refer to the same person, that is, the first defendant and whether he can be surety of his own debt. Mr Msiza argued that the second defendant relied mainly on the invalidity of the document on these grounds. The question was answered in the negative and such an undertaking was declared to be unenforceable, Nedbank Ltd v Van Zyl 1990 (2) SA 469 (A); Nuform Formwork & Scaffolding (Pty) v Natscaff CC and Others 2003 (2) SA 56 (D), in the latter case Natscaff CC was identified as both surety and principal debtor. Mr Msiza relied on these authorities in support of his contention that the document be declared invalid.

Mr Goslet argued that it was not in all cases where these authorities were applicable. The test for compliance with the General Law Amendment Act was objective, that is, if 'ex facie the document', the identities of the principal debtor, creditor and surety could be could be established, the contract was valid. In Intercontinental Exports (Pty) Ltd v Fowles 1992 (2) SA 1045 (SCA) the court had to deal with the issue of rectification, and the issue of identity similar to the present matter arose, where the Suretyship in the unrectified document reflected 'Mr Frank Fowles' as the principal debtor and 'Frank Turner Fowles' as surety. Smalberger JA  stated:

Paragraph [17]

"Even if the two names were identical, it would not follow as a matter of course that they referred to the same person.....in those circumstances and a fortiori in the present, a deed of suretyship would be capable of

being construedex facie the document itself as reflecting a creditor,principal debtor and surety and would accordingly be formally valid on that score."

Paragraph [18]

".. .. .. a deed of suretyship, in my view ought not to be held to be formally invalid where ex facie the document it is reasonably capable of an interpretation consistent with validity."

In Inventive Labour Structuring (Pty) Ltd v Corfe 2006 (3) SA 107 (SCA) at paragraph [11] Jafta JA confirmed the decision in Intercontinentalsupra:

"In the case where the contract being construed is capable of more than one interpretation, one meaning leading to invalidity and the other not, preference must be given to the latter meaning in order to save the contract from invalidity."

 

Ground 3

3. It is common cause that the second defendant did not testify, I must agree with Mr Goslet that there being no evidence to support this defence, the special plea on this ground should fail.

[19] In the result the following order is granted:

1Judgment is granted against the first and second defendant, jointly and Severally, the one paying the other to be absolved, in favour of the plaintiff.

1.1 payment in the sum of R1 845 305.97 plus interest thereon calculated at a rate of 9.15% per annum from 7 March 2012 to date of final payment and

1.2 Costs of suit.

2 The second defendant shall pay the plaintiff's costs of the second defendant's application under notice of motion dated 4 November 2016.

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TLHAPI VV

(JUDGE OF THE HIGH COURT)

 

 

MATTER HEARD ON:21 FEBRUARY 2017

JUDGMENT RESERVED: ON: 21 FEBRUARY 2017

ATTORNEYS FOR THE PLAINTIFF: GERING$ ATTORNEYS

ATTORNEYS FOR THE RESPONDENT: MSIZA & ASSOCIATED

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