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: 2023-053497
1.  REPORTABLE:  YES/NO
2.  OF INTEREST TO OTHER JUDGES:  YES/NO
3.  REVISED
DATE: 22 October 2024 
SIGNATURE:  

In the matter between:

EDMUND GREGORY MISELO NTLOKWANA				      APPLICANT

and 

SANLAM LIFE INSURANCE LIMITED					  RESPONDENT

JUDGMENT

COERTZEN AJ:

THE APPLICATION AND THE AFFIDAVITS:

[1]	The applicant seeks the following declaratory and ancillary relief by way of motion proceedings:

‘1.	That the non-surrender clause contained in the Capital Preserver: Whole Life policy under policy number 1[...]2, the Single Life Annuity policy under policy number 1[...]6 and the Single Life Annuity policy under policy number 1[...]3 concluded between the Applicant and the Respondent on 17 September 2020 be declared unreasonable, unlawful and unenforceable.

2.	That the refusal by the Respondent to accept the Applicant's notice of termination dated 01 December 2020 of the Capital Preserver: Whole Life policy under policy number 1[...]2, the Single Life Annuity policy under policy number 1[...]6 and the Single Life Annuity policy under policy number 1[...]3 be declared unreasonable and be set aside.

3.	That the notice of termination given by the Applicant to the Respondent on 01 December 2020 in respect of the Capital Preserver: Whole Life policy under policy number 1[...]2, the Single Life Annuity policy under policy number 1[...]6 and the Single Life Annuity policy under policy number 1[...]3, be declared to be reasonable notice of termination.

4. 	That the insurance contract concluded between the Applicant and the Respondent on 17 September 2020 under policy numbers 1[...]2, 1[...]6 and 1[...]3 be declared to be cancelled.

5. 	That all obligations and rights under the insurance contract concluded between the Applicant and the Respondent on 17 September 2020 under policy numbers 1[...]2, 1[...]6 and 1[...]3 be declared to come to an end.

6. 	That the Respondent be ordered to release and pay all the monies held by the Applicant under policy numbers 1[...]2, 1[...]6 and 1[...]3 to the Applicant within 45 days of service of the Court Order on the Respondent.’

[2]	I deal below with the allegations in the affidavits.

THE APPLICANT’S CASE IN THE FOUNDING AFFIDAVIT:

[3]	The applicant’s case in the founding affidavit may be summarised as follows:

(a)	The applicant retired from his employment with the South African National Defence Force in 2020. On date of his retirement, the applicant had a retirement benefit with the Government Employees Pension Fund (GEPF) to the value of R9,445,893.01.

(b)	The applicant instructed the GEPF to transfer his full retirement benefit to the respondent. According to the applicant, the GEPF did so on 29 July 2020, and gave a tax directive which indicated that the applicant would be entitled to a tax free lump sum of R3,528,985.63.

(c)	The applicant alleges that the respondent only on 17 September 2020, paid an amount of R3,132,068.94 according to a ‘tax directive’ generated by ‘Personal Preservation Pension Fund’.

(d)	On the advice of an adviser, one Mr Glen Domingo, who was employed by the respondent at the time, the applicant took out the three policies referred to in the notice of motion.

(e)	According to the applicant, Mr Domingo informed him that the applicant would be charged commission of 0,6 %. The applicant alleges that he was charged amounts of commission and interest which he did not agree to.

(f)	On 20 September 2020, the applicant lodged a complaint to the Sanlam arbitrator (‘the arbitrator’), in terms of which the applicant complained about the ‘mismanagement’ of his investment. The complaint centred around the commission, and with the failure of the respondent to speedily deal with his investment, and to pay the ‘shortfall’ between the amounts of R3,132,068.94 and R3,528,985.63.

(g)	On 14 October 2020, the arbitrator ruled in the respondent's favour. According to the applicant, the arbitrator held that the reduction in the one-third lump sum was caused by the reduced investment value. According to the applicant, the arbitrator gave no explanation for the reduction in the investment value; and the arbitrator did not rule on the commission charged.

(h)	The applicant alleges that he was not aware of the contents of his policy documents until he was provided with a copy on 25 October 2020, and that he did not sign a record of advice.

(i)	The applicant alleges that he gave the respondent a notice of termination of the policies on 1 December 2020. According to the applicant, he informed the respondent that the advice he was given was ‘not proper’ and that the adviser failed to present the applicant with a financial means test.

(j)	The applicant alleges that Mr Domingo did not provide him with the option of a joint life annuity despite being informed that the applicant is married. According to the applicant, he and his wife would have benefited from a joint life annuity.

(k)	The applicant alleges that Mr Domingo failed to inform him that no amendments to his investment could be made and/or that the guaranteed annuities cannot be cancelled or ‘transferred to another service provider’.

(l)	The applicant alleges that he requested the respondent to ‘cancel or reverse’ his investment, but the respondent refused to do so.

(m)	 The applicant alleges that the consensus between the parties was that they would ‘carry on’ with the policies, for as long as the policies benefitted their mutual interests. The policies no longer benefitted the applicant.

(n)	The applicant contends that because he only received the record of advice from Mr Domingo on 25 October 2020, the applicant’s notice of cancellation given on 1 December 2020, was still within the prescribed 30 day period in terms of the applicable Policyholder Protection Rules.

THE RESPONDENT'S ANSWER:

[4]	The respondent’s answer to the application may be summarised as follows:

(a)	The answering affidavit is deposed to by one Alma Nefdt, who is a consultant in the employ of the respondent. She points out that Mr Domingo died before the institution of the present proceedings.

(b)	She confirms that Mr Domingo was the financial adviser who advised the applicant.

(c)	The deponent relies, inter alia, on correspondence received by her from Mr Domingo, relating to the applicant’s complaint concerning policy number 1[...]4.

(d)	The deponent further relies on the record of advice which Mr Domingo had prepared for the applicant.

(e)	The deponent alleges that by virtue of the position that she holds, she is the best person to answer to the applicant’s allegations on behalf of the respondent. The deponent declares that she has access to, and where necessary, consulted the relevant books, records, and documents of the respondent.

(f)	To the extent that the respondent relies on hearsay evidence, the respondent seeks that such evidence be admitted in terms of s 3(1) of the Law of Evidence Amendment Act 45 of 1988.

(g)	After considering the relevant factors, I am of the opinion that the evidence of the respondent, as contained in the records and correspondence prepared by the respondent’s adviser, Mr Domingo, prior to his death, should be admitted in the interests of justice.

(h)	The deponent points out that upon retirement, the applicant as a member of the GEPF, withdrew a portion of his gross retirement benefit.

(i)	On 25 and 28 September 2020, the applicant utilised the remaining balance of his gross retirement benefit, to purchase two investment products from the respondent. These were:

(i)		A Single Life Annuity which provides the applicant with a guaranteed annuity income for life, under policy number 1[...]4 ('the stand- alone annuity');

(ii)	An Income with Capital Preservation Plan, comprising of a life policy under policy number 1[...]2 (which provides the applicant with life cover); an annuity under policy number 1[...]6 (the proceeds of which fund the life policy); and an annuity under policy number 1[...]3 (which provides the applicant with a guaranteed annuity income for life). It is the investment under the Capital Preservation Plan (‘the preservation plan’ or ‘the policies’) which is the subject of the dispute.

(j)	On 1 December 2020, the applicant lodged a complaint concerning the stand-alone annuity. The complaint served before the arbitrator. The arbitrator determined that the applicant cannot cancel the stand-alone policy.

(k)	The present application was launched in a bid to cancel the preservation plan and to obtain payment of the monies held by the applicant under the policies comprising the preservation plan.

(l)	The respondent’s opposition to the application is based on the following:
(i)	That the preservation plan is subject to legislative regulation which precludes the granting of the relief sought by the applicant.

(ii)	That the allegations in the founding affidavit are not supported by the objective documents evidencing the parties' consensus on the terms of the agreements entered into.

(m)	At the time of his retirement, the applicant's gross retirement benefit stood at approximately R9,445,893.01.

(n)	 On 30 July 2020, and after numerous telephonic discussions and meetings, the applicant met with Mr Domingo. The applicant was presented with various quotations and permutations to assist him to make an informed decision.

(o)	On 30 July 2020, the applicant applied to transfer his gross retirement benefit out of the pension fund and into the Personal Portfolio Preservation Pension Fund ('the preservation fund') where it would be 'parked'.

(p)	On 24 August 2020, the respondent provided the applicant with a written quotation in respect of the preservation plan. The applicant accepted the quotation. The preservation plan enabled the applicant to buy an income for life and a guaranteed amount that will be payable when the applicant passes away. The life cover which provides the guaranteed amount is funded through a life annuity, resulting in two annuities being issued. The quotation authorised by the applicant, and which contains his signature, expressly provides that the preservation plan may not be cancelled, commuted or reduced, with reference to the Pension Funds Act 24 of 1956 (‘the Pension Funds Act’). The applicant also completed and signed a Retirement Notification in respect of the preservation fund, which reflects his election to take one third as a cash lump sum and to use the balance to purchase a compulsory annuity from a registered insurer; and to transfer the retirement benefit to the respondent for the purchase of the investment products.

(q)	On 17 September 2020, the respondent confirmed in writing to the applicant that an amount of R6,280,061.42 was transferred from the preservation fund in payment of policy premiums. The applicant did not object to the confirmation.

(r)	On 25 September 2020, the respondent issued three related policies under policy numbers 1[...]2, 1[...]6 and 1[...]3, and sent copies of the policy documents and the record of advice to the applicant by mail.

(s)	On 25 August 2020, the respondent provided the applicant with a written quotation in respect of the stand-alone annuity. The applicant also accepted the quotation on the same day that he received it. The stand-alone annuity enabled the applicant to buy an income for life. The quotation similarly expressly provides that the product may not be cancelled, and that the annuity may not be commuted or reduced, with reference to the Pension Funds Act.

(t)	On 28 September 2020, the respondent issued policy number 1[...]4 and sent a copy of the policy document to the applicant by mail. The stand-alone annuity policy document also includes a non-surrender clause.

(u)	A record of advice dated 25 August 2020, was prepared by Mr Domingo. I do not propose to quote the contents herein, suffice it to point out that Mr Domingo recorded in the record of advice that the applicant indicated that he did not wish to speculate with his pension income or to become exposed to the fluctuations of the markets and that the applicant ‘preferred the guaranteed Capital Preservation Plan and Life Annuity.’ As for commission, Mr Domingo and the applicant agreed on a 0.75% upfront commission on the original investment. It is further recorded in the record of advice that the Life annuity was chosen as it provides a higher income due to no life cover being deducted from the income. After the guaranteed term of 20 years there is no inheritance for beneficiaries. When the respondent posted the acceptance letters and policy documents to the applicant on 25 and 28 September 2020, the record of advice was attached.

(v)	The complaint lodged by the applicant on 20 September 2020, was about the commission due to Mr Domingo in respect of the preservation fund investment; and the calculation of the one-third of the applicant's total retirement interest that could be commuted for a single payment; and the timing of the single payment; and the question of interest on the investment amount. It is common cause that the arbitrator dismissed the complaint on 14 October 2020. It appears from the arbitrator’s ruling that commission on the preservation fund investment was negotiated and appears on the signed application form. It also appears from the arbitrator’s ruling how the amount of the maximum allowable one-third at retirement was calculated, and what amount was paid to the applicant on 15 September 2020. It is common cause that there was a delay in the payment as a result of an apparently incorrect tax directive issued by the South African Revenue Service ('SARS'), an issue that was only resolved as between SARS and the GEPF on 14 September 2020. It is common cause that in the interim an advance payment was made to the applicant from Glacier’s own funds.

(w)	On 1 December 2020, the applicant lodged a second complaint titled 'Grievance on advice given’. The second complaint concerned the stand-alone annuity and the applicants dissatisfaction with the advice he received from Mr Domingo. The applicant claimed, inter alia, that the record of advice was only provided to him on 25 October 2020 'after the retirement case was processed and finalised', and was never signed by the applicant; and that at the advice stage, the applicant was not presented with a financial needs analysis; and that the applicant was not presented with the option of a joint-life annuity, and now he has R2 million invested in a Single Life Annuity with a 20-year guarantee term, which he signed for but did not fully understand; and that he was not informed that no amendments to his investment selection can be made, and that guaranteed annuities cannot be transferred to other service providers; and that there was no full disclosure of the fees and commission applicable. The applicant concludes in numbered paragraph 7 of the second complaint: 'I hereby request Sanlam to reverse my retirement case as I am not happy with the guaranteed annuity investment options offered to me by Glen Domingo because I did not fully understand the technicalities of the annuity/investment options he advised me to take.'  The applicant states in the founding affidavit that the second complaint (as attached to the founding affidavit) is the 'notice of termination'. On 11 January 2021, the arbitrator informed the applicant that the applicant could not cancel the stand-alone policy and agreed with the respondent’s explanation and decision.

(x)	Mr Domingo provided the deponent with his response to the second complaint on 14 December 2020. I similarly do not propose to quote the contents herein. On 15 December 2020, Mr Domingo provided the deponent with further correspondence, where he stated that he informed the applicant that he is obliged to utilise two thirds of his total fund value to obtain a pension and that he is only entitled to withdraw one third in cash. The applicant was at no stage placed under the impression that these funds could be placed or invested in a 'normal investment plan'.

(y)	Whichever product the applicant chose, he was obliged to either purchase a pension or an annuity with the two-thirds balance of his retirement benefit in order to assure the receipt of a monthly pension / annuity income.

(z)	The respondent submits that in terms of the relevant provisions of the Pension Funds Act and the Income Tax Act 58 of 1962 ('the Income Tax Act'), the applicant may not receive the commutation benefit or any funds from the preservation plan, and specifically policies 1[...]2, 1[...]6 and 1[...]3, referred to in the notice of motion. Legislation requires the imposition of the impugned non-surrender clauses.

THE APPLICANT’S REPLY:

[5]	The applicant disputes in reply that the contents of the documents were fully explained to him by Mr Domingo. The applicant alleges that Mr Domingo never informed him before the applicant concluded the investment, that the applicant could not cancel his investment or transfer it to another financial service provider, should the applicant not be satisfied with the policies or the manner in which they are dealt with.

[6]	The applicant again alleges in reply that Mr Domingo never provided him with the option of a joint life annuity. According to the applicant he would have taken out a joint life annuity policy, instead of a single life annuity.

[7]	The applicant further alleges in reply that, although he admittedly signed the Single Life Annuity policy documents, the terms thereof were not fully explained to him. The applicant disputes in reply that he informed Mr Domingo that capital protection is more important to him. According to the applicant, the Single Life Annuity does not provide his wife monetary protection.

[8]	According to the applicant it was only when the applicant lodged a complaint, that Mr Domingo stated in an email that he had provided the applicant with the option of a Joint Life Annuity. The applicant alleges that Mr Domingo, and now the respondent, ‘are twisting the truth to suit their narrative.’

[9]	The applicant alleges in reply that Mr Domingo deceived him into signing the quotations without the applicant seeing the material terms thereof.

[10]	The applicant further alleges in reply that Mr Domingo failed to explain to him that his investment could not be cancelled or withdrawn. According to the applicant, Mr Domingo was quick to charge the applicant exorbitant commission, while Mr Domingo failed in his duties, and misrepresented the policies, causing prejudice to the applicant.

[11]	The applicant denies in reply that Mr Domingo engaged extensively with the applicant and thoroughly explained the different options available to the applicant.

[12]	According to the applicant, Mr Domingo failed to provide the applicant with clear information regarding his investment options, and Mr Domingo’s commission, throughout the investment process and before finalising the investment.

[13]	The applicant alleges in reply that Mr Domingo’s advice was not suitable and that he misrepresented his commission.

[14]	The applicant submits in reply that the Pension Funds Act and the Income Tax Act do not preclude the transfer of annuities between pension funds and/or financial services providers. According to the applicant, these Acts merely protect the member against the use of their pension benefits to settle their debts. Therefore, the respondent is not entitled to rely on these Acts to prevent the applicant from cancelling his investment with the respondent and taking it elsewhere.

EVALUATION OF THE ISSUE FOR DETERMINATION:

[15]	In light of the relief as framed in the notice of motion, and in light of the factual allegations in the affidavits, the issue to be determined is whether the non-surrender clauses in the policies are unreasonable, unlawful, and unenforceable; and whether the applicant is entitled to cancel the preservation plan which he purchased from the respondent by utilising the remaining balance of his gross retirement benefit.

[16]	It is common cause that the policies at issue contain the non-surrender clauses which the applicant seeks to be declared unreasonable, unlawful, and unenforceable. These clauses in each case provide under the heading 'What are the legal restrictions on the policy?', as follows:

(a)	In the life cover policy document issued under policy number 1[...]2: 'This policy has no cash value. The policy may therefore not be surrendered or converted into a paid-up policy. Loans can also not be taken against it. The policy may only be ceded as security.'

(b)	In the annuity policy document issued under policy number 1[...]6:
'This policy may not be surrendered, pledged or ceded, or its pension payments commuted.’

(c)	In the annuity policy document issued under policy number 1[...]3:
'This policy may not be surrendered, pledged or ceded, or its pension payments commuted.'

[17]	The non-surrender clauses have their origin in legislation. In terms of s 37A of the Pension Funds Act:
‘[N]o benefit provided for in the rules of a registered fund (including an annuity purchased or to be purchased by the said fund from an insurer for a member), or right to such benefit, or right in respect of contributions made by or on behalf of a member, shall, notwithstanding anything to the contrary contained in the rules of such a fund, be capable of being reduced, transferred or otherwise ceded, or of being pledged or hypothecated, or be liable to be attached or subjected to any form of execution under a judgment or order of a court of law…’

[18]	General Note 18 issued by SARS under the Income Tax Act, which applied when the policies were issued in September 2020, required:
‘The annuity so purchased, as is the case with an annuity purchased in the name of a retirement fund or paid directly by such a fund, must be compulsory, non-commutable, payable for and based on the lifetime of the retiring member and may not be transferred, assigned, reduced, hypothecated or attached by creditors as contemplated by the provisions of sections 37A and 37B of the Pension Funds Act, 1956.’

[19]	The onus is on the applicant to plead and prove the facts upon which he wishes to impugn the policy agreements on public policy grounds. In light of the above I am unable to find that the non-surrender clauses at issue may be struck down as against public policy.

[20]	The applicant seeks final relief in motion proceedings. The Court must operate on the basis of the evidence presented to it. It is submitted in the applicant’s heads of argument that the non-disclosure by Mr Domingo that the policies are not cancellable or transferable before the applicant concluded the policies, is material and would have influenced the applicant's decision whether or not to conclude the policies; and further that such non-disclosure was a contravention of the Policyholder Protection Rules under the Long-Term Insurance Act 52 of 1998 (‘Long-Term Insurance Act’).

[21]	In terms of s 62 of the Long-Term Insurance Act, the Authority, by notice in the Gazette, ‘may prescribe rules not inconsistent with the Act, aimed at ensuring for the purpose of policyholder protection that policies are entered into, executed and enforced in accordance with sound insurance principles and practice in the interests of the parties and in the public interest generally’. Such rules may provide that a policyholder may cancel a policy ‘under particular circumstances and within a determined period, and what the legal consequences shall be if he or she does so’.

[22]	The Policyholder Protection Rules published under Government Notice R.1129 in Government Gazette 26854 of 30 September 2004 and amended by Government Notice 1214 in Government Gazette 33881 of 17 December 2010, were repealed, and replaced by the Policyholder Protection Rules (Long-term Insurance), 2017 (‘PPR 2017’).

[23]	It is common cause that the policies in question were taken out by the applicant. The relevant quotation, which was accepted and signed by the applicant, expressly records under the heading: ‘Cancellation of policy’; that the preservation plan (against which the relief sought in the notice of motion is directed) may not be cancelled, commuted or reduced, with reference to ‘Requirements in terms of the Pension Funds Act, 1956’.

[24]	The respondent contends that the policies in question can in law not be cancelled, and, by virtue of their terms and nature, are not capable of being cancelled as contemplated in Rule 4.5 of the PPR 2017; and further that such fact was disclosed to the applicant, before entering into the policies, as required by the said rule. On the evidence presented, I must agree.

[25]	I cannot find that the contracts were not freely concluded or that the clauses in question were not drawn to the attention of the applicant. To the extent that a dispute of fact exists, I similarly cannot find the respondent’s allegations as being ‘so far-fetched or clearly untenable’, that I would be justified in rejecting them merely on the papers.

[26]	As for cancellation, the applicant relies on a ‘notice of termination’ dated 1 December 2020. It is evident that the applicant refers to quoted paragraph 7 of his second complaint of 1 December 2020. The applicant alleges in paragraph 8.8 of the founding affidavit:

‘As already mentioned, I received the summary or record or (sic) advice from Mr. Domingo on 25 October 2020. Therefore, my notice of cancellation given on 01 December 2020 was within the prescribed 30 days period.’ – [emphasis added].

[27]	The allegation in the founding affidavit appears to be factually and legally incorrect. Rule 4.2(b) of the PPR 2017 provides that a policyholder may ‘within a period of 31 days after the date of receipt of [the record of advice in the present matter] cancel a policy entered into with an insurer…by way of a cancellation notice to the insurer.’ There is no basis in fact or law to declare the applicant’s ‘notice’ ‘to be reasonable notice of termination’.

[28]	I have in any event found that the policies in question can in law not be cancelled.

CONCLUSION:

[29]	In the foregoing, I am not persuaded that the applicant has made out a case for the relief sought. I agree with counsel for the respondent that should the relief sought by the applicant be granted, I would effectively be directing the respondent to act unlawfully.

[30]	Upon a consideration of the relief sought in the notice of motion, and the evidence presented in the affidavits, and the applicable law, I must therefore conclude that the application cannot succeed.

[31]	Costs should follow the result.

[32]	In the result I make the following order:

1.	The application is dismissed;

2.	The applicant is to pay the respondent’s costs.

Y COERTZEN
ACTING JUDGE OF THE HIGH COURT 
GAUTENG DIVISION, PRETORIA

Date of hearing:	18 March 2024

Date of judgment:	22 October 2024
	
The judgment was provided electronically by circulation to the parties’ legal representatives by email and by uploading the judgment to the electronic case file on Caselines.  The date and time for delivery of the judgment is deemed to be at 10h00 on 22 October 2024.

Appearances:

Counsel for the applicant:		SN Maseko
(heads of argument prepared by JV Skosana)
Instructed by:			JV Skosana Attorneys, Pretoria
					
Counsel for the respondent:	S Mathiba
					(heads of argument prepared by T Sarkas)
Instructed by:			Werksmans Attorneys, Stellenbosch