THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 307/09

P P MAREE

Appellant

and

CHRIS BOOYSEN T/A NVM BELEGGINGS &

Respondent
VERSEKERINGSADVISEURS

________________________________________________________________

Neutral citation:
Maree
v
C
Booysen
t/a
NVM
Beleggings
&
Versekeringsadviseurs (307/09) [2010] ZASCA 44 (31 March 2010)

CORAM:

Navsa, Mlambo and Bosielo JJA

HEARD:

11 March 2010
DELIVERED:
31 March 2010

SUMMARY:
Agreement in terms of which an insurance broker is entitled
to claim commission from the insured in the event of the latter cancelling a long-
term insurance policy within the statutory ‘cooling-off’ period is unenforceable ─
provisions of the Long-term Insurance Act 52 of 1998, the regulations thereunder
and Policy Protection Rules discussed.

________________________________________________________________
ORDER
________________________________________________________________

On appeal from:
Free State High Court (Bloemfontein) (Kruger et Mocumie JJ
sitting as court of first instance).
1.
The appeal is upheld with costs.
2.
The order of the court below is set aside and substituted as follows:
‘(a)
The appeal is dismissed and the appellant is ordered to pay 80 per cent of
the respondent’s costs.’
The Magistrate’s order is changed to the following extent:
‘(a)
The plaintiff’s claim is dismissed with costs.
(b)
The defendant’s counterclaim is dismissed with costs.‘
________________________________________________________________
JUDGMENT
________________________________________________________________

NAVSA JA (Mlambo and Bosielo JJA concurring)

[1] The Respondent, Mr Chris Booysen, conducts business as an Insurance
broker
and
consultant,
under
the
trade
name
NVM
Beleggings
&
Versekeringsadviseurs. He instituted action against the appellant, Mr P P Maree,
in the Kroonstad Magistrates’ Court, for payment of an amount of R47 638.27,
being commission he alleged would have been paid to him over a period of time
had the latter not cancelled an insurance policy procured on his behalf. The claim
was based on a written agreement between them, the provisions of which will be
dealt with in due course.

[2] Mr Maree opposed the action and in a counterclaim sought a statement
and debatement of account. The Magistrates’ Court dismissed Mr Booysen’s
claim with costs, on the basis that the written agreement on which the claim was
based contravened s 49 of the Long-term Insurance Act 52 of 1998 (the Act),
read with the regulations promulgated thereunder. The Magistrate granted

Mr Maree’s counterclaim. The applicable statutory provisions will be examined
later.

[3] Mr Booysen appealed the Magistrates’ court decision to the Free State
High Court in Bloemfontein, which (Kruger J, Mocumie J concurring) upheld the
appeal with costs, substituting the Magistrate’s order as follows:
‘1.Verweerder word gelas om eiser R47 738, 27 te betaal plus rente teen 15, 5% per jaar vanaf 4
April 2006 tot op datum van finale vereffening.
2. Verweerder se teeneis word met koste van die hand gewys.’

[4] It is against that decision and order that Mr Maree appeals, with the leave
of the court below. The background facts are largely uncontested and are set out
hereafter.

[5] Mr Booysen had rendered advisory services to Mr Maree, a successful
businessman, for approximately 20 years. The seeds of the present antagonism
between them were sown when, during July 2006, Mr Booysen advised
Mr Maree to have a current Sanlam annuity policy ‘paid up’1 and to replace it with
a Momentum Life policy. Mr Maree initially proceeded to follow that advice.

[6] On 17 July 2006, Sanlam, as it was statutorily obliged to, sent Mr Maree a
document in which it set out the impact of causing the policy to be ‘paid up’. It
appears that, following on a further discussion with another Insurance advisor
based at a local bank, Mr Maree came to the conclusion that he had been
wrongly advised by Mr Booysen and that the latter had been motivated by the
commission to be earned on the Momentum Life policy. This, of course, is denied
by Mr Booysen, who testified that the advice he gave was based on the fact that
continued premiums on the Sanlam policy was not tax-effective for Mr Maree and
that, in the long term the former would earn less in commission on the new

1 This means that the policy holder ceases paying premiums and the policy then holds a reduced
value upon maturity, relative to premiums paid plus the investment value.

policy. For reasons that will become apparent it is not necessary to resolve this
subsidiary dispute.

[7] On 21 July 2006 in a very curt letter to Mr Booysen, Mr Maree wrote the
following:
‘Hiermee stel ons u in kennis dat M.C. Ingenieurswerke BK2 en P.P. Maree, nie meer van N V M
Beleggings & versekerings adviseurs se dienste gebruik sal maak nie.
Ons wil nie redes verskaf nie en versoek dat u dit so sal respekteer. Ons kan u verseker dat die
besluit nie ligweg geneem is nie en dit sal nie heroorweeg word nie.’

[8] On 25 July 2006 Mr Maree wrote to Momentum Life cancelling the policy
that Mr Booysen had procured on his behalf.

[9] On 31 August 2006, Mr Maree wrote a further letter to Mr Booysen, stating
that he had decided to replace him with ABSA brokers. The following are the
relevant parts of Mr Maree’s letter:
‘My besluit om ABSA Makelaars (Neels Greeff) as my nuwe makelaar aan te stel is my keuse wat
ek hoop jy sal respekteer.
Ek het slegs ‘n tweede opinie ingewin nadat ek ‘n skrywe vanaf Sanlam, waarvan die opskrif as
volg was: “Impak om ‘n polis volopbetaald te maak” ontvang het.
Nadat ek ‘n tweede, derde en vierde opinie ingewin het, het ek besluit om by Sanlam te bly.’

[10] As a result of Mr Maree’s cancellation of the Momentum Life policy
Mr Booysen lost the commission he would otherwise have earned. This led to
further acrimonious exchanges between them and ultimately to the litigation
culminating in the present appeal. It is clear from Mr Booysen’s evidence that he
took the view that he was entitled to compensation because of the effort he had
expended in advising the appellant and procuring the best available new policy
for him.

2 M C Ingenieurswerke CC is one of Mr Maree’s businesses.

[11] In his particulars of claim the following is stated on behalf of Mr Booysen:
‘3.
Eiser en verweerder het ‘n ooreenkoms aangegaan waarvolgens eiser aan verweerder
sekere advies gelewer het in verband met sy polis portefeulje, welke advies deur verweerder
aanvaar is en is daar sekere polisse uitgeneem in terme van die advies.
4.
As gevolg van die advies is Eiser geregtig op sekere kommissie ten bedrae van
R47 638, 27.’

[12] At this stage it is necessary to have regard to the agreement on which Mr
Booysen’s claim is based. The following is the material part of the agreement:
‘Ek begryp en aanvaar dat enige versekeringsbesigheid namens my, deur my tussenganger
geplaas, voorsiening maak dat my tussenganger deur die betrokke versekeraar vergoed sal word
volgens die aard van die produk deur my aanvaar, en soos op die kwotasie van die versekeraar/s
aan my voorgelê, aangedui word. Ek en my tussenganger kom ooreen dat sodanige vergoeding
deur ons beide aanvaar sal word as vergoeding vir die dienste aan my gelewer. Indien my
tussenganger se vergoeding teruggevorder word deur die versekeraar as gevolg van my eie (die
polishouer) se optrede tot nadeel van die tussenganger, aanvaar ek, die ondergetekende dat ek
steeds verantwoordelik sal wees vir genoemde, ooreengekome vergoeding.’
The ‘tussenganger’ (intermediary) is a reference to Mr Booysen.

[13] I turn to deal with the manner in which the court below dealt with the
Magistrate’s findings.

[14] Kruger J recorded that Mr Booysen accepted that he was not entitled
to any commission from Momentum Life because of Mr Maree’s cancellation of
the policy.3 The learned judge noted that the Magistrate had decided the matter
on the basis that the agreement on which Mr Booysen relied was in contravention
of the Act and that Mr Maree’s assent amounted to a waiver which was not
competent.

[15] The court below found that Mr Booysen, as intermediary, had expended
time and energy in procuring the Momentum Life policy and, as a result of

3 Mr Maree was entitled in terms of the rules promulgated in terms of the Act to cancel the policy
within a 30 day-period of receipt of summarised information from Momentum Life ─ see para 16
infra.

Mr Maree’s cancellation, was now deprived of the commission he would
otherwise have earned. In considering the statutory provisions the Free State
High Court held that there was no prohibition against an agreement between an
intermediary and his client, in this case, between Mr Maree and Mr Booysen in
terms of which the latter was able to look to the former for compensation. It held
that the Act did not deprive the intermediary of his right to recover commission
that was his or her due. Consequently the court below made the order set out in
para 3 above. The question before us is whether these conclusions were correct.

[16] At this stage it is necessary to consider the relevant statutory provisions,
beginning with Mr Maree’s entitlement to cancel the Momentum Life policy. In
terms of Rule 6.1 of the Policyholder Protection Rules4 (Long-Term Insurance),
promulgated under s 62 of the Act, a new policyholder has, what is commonly
referred to as a ‘cooling-off’ period, within which to cancel any policy under
appropriate qualifying circumstances. It is undisputed that Mr Maree was entitled
in terms of this rule to cancel the policy.

[17] Section 49 of the Act, the applicability of which was debated in the
Magistrates’ Court, in the court below and before us, provides:
‘No consideration shall be offered or provided by a long-term insurer or a person on behalf of the
long-term insurer or accepted by any independent intermediary for rendering services as
intermediary as referred to in the regulations, other than commission contemplated in the
regulations and otherwise than in accordance with the regulations.’

[18] Importantly, s 56 of the Act provides that an agreement, in terms of which
a person who has entered into a long-term policy waives a right to which he or
she is by virtue of the Act entitled, is void.

[19] Section 72(1)(d) of the Act empowers the Minister to make regulations
‘prohibiting any consideration from being offered or provided, or limiting the

4 Government Gazette No 26854, Government Notice No 1129, Regulation 8070.

consideration which may be offered or provided, from, by or on behalf of a long-
term insurer to any person for rendering services as intermediary. . .’.

[20] The material parts of regulation 3.2 of the Regulations, promulgated in
terms of s 72 of the Act,5 echoes s 49 and reads as follows:
‘3.2
General limitations.─ (1) No consideration shall, directly or indirectly, be provided to, or
accepted by or on behalf of, an independent intermediary for rendering services as intermediary,
otherwise than by way of the payment of commission in monetary form.

(2)
No commission shall be paid or accepted otherwise than in accordance generally
with this Part and more particularly as specified in the Table.’

[21] Regulation 3.8, consonant with s 56 of the Act, provides as follows:
‘3.8
Voidness of certain agreements.─ Any agreement, scheme or arrangement to provide
consideration for the rendering of services as intermediary otherwise than in accordance with this
Part shall be void.’ (My emphasis.)

[22] ‘Rendering services as intermediary’ is defined in the regulations as
follows:
‘[T]he performance by a person other than a long-term insurer or a policyholder, on behalf of a
long-term insurer or a policyholder, of any act directed towards entering into, maintaining or
servicing a policy or collecting, accounting for or paying premiums or providing administrative
services in relation to a policy, and includes the performance of such an act in relation to a fund, a
member of a fund and the agreement between the member and the fund.’

[23] Rule 19.1 of the Long-Term Insurance Policy Protection Rules, in line
with s 56 of the Act and regulation 3.8, provides:
‘No insurer or intermediary may request or induce in any manner a policyholder to waive any right
or benefit conferred on the policyholder by or in terms of a provision of these Rules, or recognise,
accept or act on any such waiver, and any such waiver is null and void.’

[24] It was submitted on behalf of Mr Booysen that s 49 was designed to
regulate the relationship between insurer and intermediary and not the

5 Government Gazette No 19495, Government Notice 1492 of 27 November 1998 as amended.

relationship between intermediary and insured. Counsel on behalf of Mr Booysen
contended that s 49 ought to be read so as to limit its operation so as to ensure
that it does not intrude upon the common-law right of parties to provide
separately for ‘consideration’ as between intermediary and insured.6 It was
submitted that, at the very least, s 49 was ambiguous and that courts should
strive to avoid an interpretation that would be absurd.

[25] It was contended further that the regulations and rules should be read in
the light of the interpretation of s 49 set out in the preceding paragraph.

[26] It was submitted that an absurdity flowed from holding that the agreement
in question was prohibited in terms of the statutory provisions referred to above
The absurdity, so it was submitted, was that an intermediary, such as
Mr Booysen would be deprived of his commission, notwithstanding the efforts
expended in procuring a new policy. No other example of an absurdity was
provided by counsel on behalf of Mr Booysen.

[27] The stated purpose of the Policy Protection Rules is to ensure that
intermediaries and insurers conduct their business honestly, fairly and with due
care and diligence.7 Several provisions of the Act are designed to protect
consumers.8 The ‘cooling-off’ period is clearly designed to afford proper time to
consider the full implications and impact of the policy in question, without the
consumer incurring any financial penalty.

6 In this regard Mr Booysen relied on Directive 132.A.ii (LT) of 30 January 2004 issued by the
Registrar of Long-Term Insurance (Financial Services Board). In this Directive approving of this
interpretation the Registrar’s office nevertheless indicated that it intended to promote a legislative
amendment to place this matter beyond doubt.
7 See Rule 2 and Peter Havenga The Law of Insurance Intermediaries (2001) p 55.
8 Section 45 of the Act for example is designed to protect the consumer against unscrupulous
salespersons who offer the prospective policyholder inducements to enter into policies. The
golden thread running through the history of insurance legislation in South Africa is a commitment
to consumer protection and to provide protection against undesirable business practices. Section
48 provides for material information to be made available to a policyholder. Section 49 referred to
above bears the heading Limitation of remuneration to intermediaries.

[28] In my view s 49 is not ambiguous. It limits the consideration to be offered
by a long-term insurer to persons such as intermediaries to commission as
contemplated in the regulations. Furthermore, it restricts the consideration that
may be accepted by an independent intermediary for rendering services as such,
to commission as contemplated by the regulations.

[29] Regulation 3.2, set out in para 18 is equally clear and echoes the
provisions of s 49. Regulation 3.8 referred to in para 18, in even clearer terms,
renders void, ‘any agreement, scheme or arrangement to provide consideration
for the rendering of services as intermediary’ other than in accordance with the
regulations. (My emphasis.) It has not been suggested that these regulations, in
their emphatic and unambiguous terms are ultra vires.

[30] It is common cause that in the circumstances of this case, namely, the
cancellation within the ‘cooling-off’ period, no commission is payable by
Momentum  Life to Mr Booysen, in terms of the tables and formulae provided for
in the regulations.

[31] In my view, the provisions of s 49, read with the regulations referred to in
preceding paragraphs, prohibit agreements of the kind on which Mr Booysen
relies.

[32] If such agreements were to be enforced it would have the effect of
penalising a consumer financially for exercising the statutory right to cancel a
policy within the ‘cooling-off’ period. The result of enforcing the agreement would
be to hold a consumer liable for the loss of a commission that never accrued. It is
that very situation that the legislature was keen to avoid.

[33] Mr Booysen is aggrieved that he has not been compensated for the effort
expended in procuring the Momentum Life policy. The evidence adduced shows
that this grievance is exaggerated. Furthermore, Mr Booysen was not unaware of

the consumer’s right to cancel a policy within the ‘cooling-off’ period. The
statutory provisions relating to restrictions on commission set out above are
provisions which should be familiar to intermediaries.

[34] One final aspect remains. The Magistrate’s order granting Mr Maree’s
counterclaim was, in the light of his conclusion in respect of the agreement on
which Mr Booysen relied, unnecessary and unjustified and liable to be set aside
with an attendant costs order. Before us no time was spent on this issue, save
that Mr Maree, in heads of argument, submitted that the Magistrate’s order on
this aspect should be set aside. In the court below some time was devoted to the
appellant’s counterclaim. The parties are agreed that 20 per cent is a fair
estimate in this regard and that in the event that Mr Maree is successful in the
present appeal his entitlement to costs should be reduced in that percentage.

[35] Following on the conclusions reached above the following order is made:
1.
The appeal is upheld with costs.
2.
The order of the court below is set aside and substituted as follows:
‘(a)
The appeal is dismissed and the appellant is ordered to pay 80 per cent of
the respondent’s costs.’
The Magistrate’s order is changed to the following extent:
‘(a)
The plaintiff’s claim is dismissed with costs.
(b)
The defendant’s counterclaim is dismissed with costs.’

_________________
M S NAVSA
JUDGE OF APPEAL

APPEARANCES:

For Appellant:
B Knoetze SC

Instructed by

HSL Du Plessis Attorneys Kroonstad

Honey Attorneys Bloemfontein

For Respondent:
P R Cronjé

Instructed by

Thabo Grimbeek Attorneys Kroonstad

Naudes Bloemfontein