Mokoma Insurance Brokers (PTY) LTD V Alliance Insurance Company LTD (CCT/0124/2022) [2025] LSHC 118 (30 May 2025)

IN THE HIGH COURT OF LESOTHO (COMMERCIAL DIVISION) HELD AT MASERU CCT/0124/2022 In the matter between: MOKOMA INSURANCE BROKERS (PTY) LTD PLAINTIFF AND ALLIANCE INSURANCE COMPANY LIMITED DEFENDANT CORAM: MOKHESI J HEARD: 15 FEBRUARY 2025 and 13 MARCH 2025 DELIVERED: 30 MAY 2025 Neutral Citation: Mokoma Insurance Brokers (Pty) Ltd v Alliance Insurance Company Limited [2025] LSHC 118 Comm. (30 MAY 2025) SUMMARY UNJUSTIFIED ENRICHMENT: Plaintiff instituting action to claim an amount owed by the defendant and in the alternative claiming the same amount on the basis of unjustified enrichment – the two parties, insurer and insurance broker engaged in an agreement of brokerage in circumstances where contrary to the Insurance Act 2014, the broker was not registered as such- Section 57 of the same Act prohibits payment of commission by insurers to unlicensed brokers- The defendant raised a special plea that the plaintiff could not claim commission as it was unlicensed- Held, based on the interpretation of the provisions of the Act even though the agreement between the parties was valid, it is however unenforceable, therefore the plaintiff cannot claim commission as it would defeat the purpose for which prohibition against its payment was enacted into law –Held, further, that even the alternative claim based on condictio cannot succeed. ANNOTATIONS Legislation: Insurance Act 2014 Cases: Afrisure and Another v Watson NO and Another 2009 (2) 127 (SCA) Cool Ideas 1186 CC v Hubbard 2014(4) SA 474 (CC) Geue and Another v Van der Lith and Another 2004 (3) SA 333 (SCA) Jajbhay v Cassim 1939 AD 537 Pottie v Kotze 1954(3) SA 719(A) Scheirhout v Minister of Justice 1926 AD 99 Standard Bank v Estate Van Rhyn 1925 AD 266 Taljaard v TL Botha Properties 2008 (6) SA 207 (SCA) Van der Merwe v Taylor NO 2008 (1) SA 1 (CC) Books: Van Huyssteen et al Contract-General Principles 6 ed (2020) 223 Journals: Jacques du Plessis “Some thoughts on the consequences of illegal contracts” – Acta Juridica January Vol.1 2021 202 – available at https:/doi.or/10.47348/ACTA/… It is also available at https:/www.researchgate.net/publications/353541999 JUDGMENT [1] Introduction This is an action in terms of which the plaintiff is claiming the following reliefs against the defendant: “1. Payment of retained Renewal Commission in the sum of Seven Hundred and Ninety Three Thousand Six Hundred and Fifty Six Maloti and fifty-two Lisente (793,656.52) calculated on the basis of Service Level Agreement between Mokoma Insurance Brokers (Pty) Ltd and Alliance Insurance Limited; 2. Alternatively the payment of Seven Hundred and Ninety Three Thousand Six Hundred and Fifty Six Maloti and Fifty-two Lisente (793, 656.52) as restitution for unjust enrichment; 3. Interest on the sum thereon at 18.5% per annum tempore morae from the 27th March 2020 until payment is made in full; 4. The release of Plaintiff’s commission statements from March, 2019 to date. 5. Costs of suit on attorney and client scale in case of opposition of this matter; 6. Further and/or alternative relief.” Plaintiff’s evidence [2] The plaintiff’s case is based on the evidence of a single witness – plaintiff himself – and the defence case as well was based on the evidence of one witness. Plaintiff’s witness no.1(PW1) was Mr Martin Mokoma. He is the founder and director of the plaintiff. The plaintiff company is an insurance broker. It was floated in 2013 and in 2014 it engaged in an agreement with the defendant to act as the broker in respect of its insurance products. It was paid twenty percent (20%) once off commission for every client it solicited to buy the defendant’s insurance products. In 2016, the defendant brought in some changes to the payment structure whose purpose was to improve commission payable to all its brokers. The improvements were as follows: the new business commission (newly solicited clients) was raised from twenty percent to thirty percent and there was also an additional commission of fifteen percent for the second year for all the retained new clients. In 2019, the Central Bank of Lesotho refused to renew the plaintiff’s brokerage license. The plaintiff could no longer solicit any business for the defendant. For this reason, the plaintiff expects to be paid fifteen percent renewal commission for the second year. [3] In March 2019 the Central Bank of Lesotho refused to renew the plaintiff’s brokerage license. The plaintiff could no longer solicit any business for the defendant. For this reason, the plaintiff expects to be paid fifteen percent renewal commission for the second year. In March 2020 the plaintiff applied for the said renewal commission from the defendant but was only replied to in January 2021 with the answer that the defendant would not pay him because the former did not have a valid brokerage license. The renewal commission represents new clients already in the hands of the defendant. [4] Under cross-examination PW1 told the court that commission statement shows income a broker is entitled to, and it depicts three things: new business, reinstatement of policy which had lapsed and renewal of the policy by the defendant’s clients. He told the court that retained renewal claim falls within renewal commission. Asked to explain these categories PW1 stated that new business means new clients: Reinstatement is when a client does pay her/his monthly insurance premium. Renewal commission is when a client keeps paying and after twelve months the defendant pays a broker fifteen percent commission (renewal commission). The re-instatement is when a client’s policy is re-instated after it had lapsed, and Renewal is when a client keeps paying for twelve months after which the defendant pays 15% renewal commission to the broker. [5] The witness was asked that in his statement he did not tell the court the business the plaintiff did for which it is claiming commission. His answer was that he indicated the business in the letter he sent to the defendant – annexure “C”. He conceded that annexure “C” are payments in relation to the commission the plaintiff would be entitled to for business that was done before 11 February 2019. He was shown that the last payment on Annexure “C” was for March 2019. His answer was it was for new business commission. He conceded that he would be entitled to renewal commission of 2020. It was put to him that some of the policies for 2020 had lapsed. His answer was that the defendant’s response to its letter of demand was not that the policies had lapsed but that its brokerage licence had not been renewed. The witness conceded that renewal commission is not payable in respect of policies which have lapsed as it is calculated based on premiums of policies which have been retained for the past twelve months from their inception. [6] It was put to him that the percentages he was referring to relates to 2017 improved brokering agreements and that the plaintiff only signed the initial 2014 agreement which had only 20% once-off percentages. PW1 disagreed. He conceded that Annexure “A” is just a lump sum amount paid to the plaintiff which the witness said was new business. It was put to him that he was not saying that those payments were for 2018-2019 business. PW1 answered that it may happen that business will be done earlier and paid later. He conceded that the broker manages the policies with the help of the defendant in the sense that when a policy lapses the latter would warn the plaintiff of this fact for the broker to nudge the client into keeping up with premium payments. PW1 told the court that a broker only knows that a policy has lapsed when commission statement is released. During re-examination PW1 stated that the payment statements he attached to his papers represents his business for the year 2018- 2019. Defendant’s evidence [7] For defence Mr Makhozi Foko (DW1) was the only witness. He is the defendant’s Sales Manager. He outlined the modalities of the working relationship between the defendant and its insurance brokers, the plaintiff being one of them: a broker seeks out clients and brings back the proposal form to the defendant in client information is captured. This is called new business. The broker will have copies of this proposal in his possession. The proposed commencement date of the policy and the premiums to be paid by the member will be captured as well. The information of the client outlined in the proposal form will be captured by the defendant into its computerised system. This system then creates a unique number for the customer known as the insurance policy number. The insurance broker will be entitled to commission for these solicited clients. The commission is distributed based on the assumption that that client will continue to pay for the next twelve months from the commencement of the policy. Commission is paid on a pro- rated basis. A broker will be given a commission statement a day before it is paid, for reconciliation purposes. [8] What is called ‘business’ comprises of the following elements: new clients. In the statement the defendant indicates which client has defaulted and which ones are still in the defendant’s books. In a case where commission was paid in advance on a pro rata basis reversal is made if a client has defaulted. The witness told the court that in 2019 insurance supervisor wrote to him telling him that the plaintiff’s license had expired on 22 October 2014 and was advised to freeze everything until the plaintiff had regularized its license. On 11 February 2019 he wrote a letter to the plaintiff terminating their relationship, and even went further to advise it that despite that fact that it was terminated in the middle of the month the defendant would nonetheless pay it commission. For the reason that the parties had a long working relationship the defendant paid plaintiff an amount of M44,638.20 as commission for March 2019. The commission was for business which was conducted from 01st to 11th February 2019. [9] The witness told the court that he started making demands for the plaintiff to meet its regulatory requirements because the defendant was going to implement a new payment structure not a 20% once-off commission. All brokers submitted their up-to-date licenses in January 2018, but the plaintiff did not, hence the reason the defendant and plaintiff did not sign a new service level agreement incorporating the new commission structure. The witness worked with the plaintiff since 2018 assuming it was licensed. Commission which the plaintiff was entitled to was paid until March 2019. The other clients were followed up by the defendant because the plaintiff had been terminated. The plaintiff did not incur any expenses to follow them up when they defaulted. Most of the clients’ policies lapsed due to non-payment of premiums. [10] Under cross-examination DW1 indicated that a broker would know that a client has defaulted when a negative entry is made in the commission statement – distributed commission. No narration is made in the statement whether the commission is for new business, a renewal or retention. DW1 conceded that the commission statement with regard to the Plaintiff – Annexure “F” – shows commission which was paid to the plaintiff in terms of the new payment structure. The witness stated that he requested PW1 to produce plaintiff’s licence in 2016 when he assumed the office. The witness conceded that despite the warming from the Regulator about the plaintiff’s non-compliance with the law, he continued to do business with it. [11] In re-examination the witness explained that the letter which was written by his Chief Executive Officer (CEO) would have been based on his advice. He stated that the plaintiff had never provided any factual basis for the amount it was claiming. DW1 said he was misled by the plaintiff that it had a valid brokerage license. [12] Admitted Evidence (i) Annexure “A”: This annexure is a bundle of proof of payments of commission paid by the defendant to the plaintiff from April 2018 to March 2019 totalling M1,471,487.45. (ii) Annexure “B” A letter terminating the contract between the plaintiff and the defendant, dated 11 February 2019. (iii) Annexure “C” The defendant CEO’s response to the plaintiff’s letter of demand for payment of retained renewal commission in which the CEO rejected the demand on the basis that “Alliance only pays commission due to active and licensed brokerage as per the Insurance Act 2014, and unfortunately Mokoma Brokers has not renewed its license as required by the Act and the Regulator of Insurance Industry.” [13] Common cause facts The plaintiff was engaged as an independent contractor for soliciting clients for the defendant - brokerage. A broker receives commission for new clients – new business – depending on the insurance product sold. For all retail funeral policies, commission was paid at a rate of 30% for 1st year, that is representing a percentage of all premiums the client had to pay for twelve months paid annually in advance as commission. An additional 15% commission would be paid – retained renewal commission – for clients which were solicited by the plaintiff who remained in the books of the defendant – not lapsed for non-payment of premiums – after completing twelve months on the defendant’s books. The plaintiff’s engagement with the defendant was terminated on 11 February 2019 for not having a valid brokerage licence. [14] The plaintiff’s claim is based on the 15% of the total premiums that completed their twelve months anniversary in the books of the defendant after the former was paid commission as depicted in Annexure “A”- that is 15% of the total premium payments that remained in the defendant books for twelve months from March 2019. It is common cause that because at times the defendant pays commission on a pro rata basis upfront before it is known which clients will remain in its books for twelve months. This upfront payment of commission is regarded as a loan by the defendant to the broker until all premiums for the relevant period are paid in full, and where they are not paid in full, the defendant recoups the commission paid to the broker in terms of the set standard, which is not relevant for present purposes. [15] Before pleading over the defendant had raised a special plea that it is not liable to pay the plaintiff any commission as the latter was not licensed to carry on the business as an insurance broker during the period for which it is claiming, in terms of Section 57 of the Insurance Act 2014. In short, the defendant is raising illegality as the basis for resisting to pay the plaintiff the commission it is claiming. [16] The defendant is arguing that the court should not sanction illegality. It invokes the application of the maxims, ex turpi causa non oritur actio and in pari delicto potior est condictio defenditis. Advocate K. Letuka for the defendant argued that because the plaintiff acted in breach of the statutory prohibition by trading as an insurance broker without a valid license it should not be allowed to benefit from its illegal conduct, and he cited a case of Minister of Local Government and Another v Moshoeshoe LAC (2009- 2010) 202 at 209-210. This case dealt with an issue of a person who occupied and exercised the powers of the office of chief without first being approved by the King in terms of Section 13(5) of the Chieftainship Act. She was claiming payment for work done while illegally occupying and performing the functions of the office of Chief. The Court of Appeal in refusing to come to her rescue invoked a well-known principle of our law that a court cannot compel a party to do what is prohibited by a statute. I come back to this decision in due course. [17] It is apposite at this point to refer to the provisions of Section 57 of the Insurance Act 2014 (hereinafter “The Act”): “Prohibition on payment of commission to unlicensed insurance intermediary. 5.7 Subject to any regulations made in relation to payment of commission, no insurer shall pay any commission to an insurance intermediary that is not licensed under Part IX.” [18] This section should be read with Section 114(2) on general offences and penalties which provides that an insurer who contravenes Section 57 shall be liable on conviction to a fine of M5,000,000.00 or imprisonment for 10 years of both. Although the plaintiff is claiming the commission it alleges it is owed in the alternative based on unjustified enrichment, in my way of thinking, both the main prayer and the alternative are the same as they are based on the idea that the defendant is not entitled to refuse to pay commission despite the fact that the plaintiff rendered performance in contravention of the law- based on illegality. [19] Discussion Our law generally accepts that a contract which contravenes the law is unenforceable. This is based on the maxim ex turpi causa non oritur action (Van Huyssteen et al Contract-General Principles 6 ed (2020) 223). This maxim means that: “No action arises from a cause tainted by turpitude” (Van der Merwe v Taylor NO 2008 (1) SA 1 (CC) para. 100). [20] The leading case on the ex turpi causa and in pari delicto potior est condictio defenditis maxims is Jajbhay v Cassim 1939 AD 537 at 550-551, where it was said: “The principle underlying the general rule is that the court will discourage illegal transactions, but the exceptions show that where it is necessary to prevent injustice or to promote public policy, it will not rigidly enforce the general rule. The real difficulty lies in defining with any degree of certainty the exceptions to the general rule which it will recognize.” [21] At p.540 the court dealt with the characteristics of this maxim thus: “We are concerned with the application of two legal maxims taken from Roman law by all modern civilized legal systems. The first is the maxim ex turpi causa non aritur action and the second in pari delicto potior conditio defendentis. They have been called “cognate” doctrines, an expression, which I think, perhaps has served to confuse their essential distinctive character. In my view the first maxim prohibits the enforcement of immoral or illegal contracts and the second curtails the right of the deliguents to avoid the consequences of their performance or part performance of such contracts.” [22] Commenting on the practical operation and gamut of the ex turpi causa maxim the learned author Jacques du Plessis “Some thoughts on the consequences of illegal contracts” – Acta Juridica January Vol. 1 2021 177 at 190-19: “The first feature relates to the ‘no action arises’ or non oritur actio part. Despite the breadth of its wording, the maxim in South African Law (unlike in some other jurisdictions) does not cover actions for restitution or ‘giving up’ benefits obtained under a contract that is void due to illegality. As we have seen in the preceding section, invalid obligations could give rise to claims for restitution, but the availability of these claims is restricted by the par delictum rule. In applying the ex turpi maxim, reference is indeed made to denying enforcement of an obligation, but this is the (original) contractual obligation, not an obligation to render restitution arising, from the contract being invalid. The second feature also relates to the ‘no action’ part. The maxim does not say that turpitude has the consequence of rendering the tainted contract or related agreement void. It may be that an action is denied because no obligation exists, as the proponents of the narrow approach to illegal contracts argue, but this need not be the case. As we have seen our law sometimes denies an action of enforcement of an obligation even though it is valid; the maxim could therefore also apply to cases of illegality defined in the broad sense above. Thus, a claim for enforcement of a valid term may be denied because of public considerations. However, these cases involving illegality in the broad sense are not traditionally regarded as involving the application of the ex turpi causa rule, even though enforcement proceedings are denied.” [23] The in pari delicto potior est conditio is known as par delictum rule. In Afrisure and Another v Watson NO and Another 2009 (2) 127 (SCA) at para 40, it was stated that the central principle of the par delictum defence is that the plaintiff must render performance dishonourably or with turpitude. [24] In the practical application of the ex turpi causa maxim, whether the contract is found to be void and hence unenforceable or whether it is found to be void but enforceable, an aggrieved party, because of illegality, is not necessarily barred from seeking its enforcement. This approach is a consequence of the two pathways which have been created by the courts by means of which the harshness of the finding of illegality may be avoided: firstly, the ex turpi causa maxim may be avoided through interpretation of statues. Where the statute is contravened, the court may find that through interpretation, the finding of voidness or unenforceability need not necessarily be the consequence of the infringement of the statutory provision (Pottie v Kotze 1954(3) SA 719(A): Cool Ideas 1186 CC v Hubbard 2014(4) SA 474 (CC) para 168); Jaybhay v Cassim 1939 AD 537. [25] Secondly, ex turpi causa may be avoided through indirect enforcement of enrichment claims and their consequent award (see Jacques du Plessis (above) at p.p. 192-198. Although the courts have opened this leeway for indirect enforcement of enrichment claims, the facts of each case must cry out for enforcement of enrichment claim despite illegality. The court will be influenced by the following factors: “First, courts naturally consider the purpose of the provision that has been infringed, and what category of persons it is supposed to protect; linked to serving this purpose could be the need to promote certain policy grounds, such as protecting vulnerable persons. Secondly, the states of mind of the parties, and especially whether transferor knew of the illegality or acted under compulsion, may be taken into account. Thirdly, courts consider whether other sanctions other sanctions may follow, such as forfeiture of penalties, although these sanctions could be inconclusive, inasmuch as they could be a reason for granting restitution, but also for denying it. And finally, the courts consider the extent to which performance has already taken place …” [26] I revert to the case of Minister of Local Government and Another v Moshoeshoe LAC (2009-2010) 202 relied upon by the defendant’s counsel. This case relied on the well-known decision in Scheirhout v Minister of Justice 1926 AD 99 at 109, which is to the effect that any act which is performed in the face of a statutory prohibition is void and of no force and effect. However, the broad postulate of this decision that everything which is done contrary to statutory prohibition is always a nullity has been qualified over the years and flexibility has built into its obviously rigid formulation. It is now a trite principle of our law that a contract which contravenes a statutory provision is not automatically void unless the statute specifically provides that is so. The question of voidness of the contract depends on the intention of the Legislature consequent to interpretation exercise. As was stated in Standard Bank v Estate Van Rhyn 1925 AD 266 at 274: “The contention on behalf of the respondent is that when the Legislature penalises an act it impliedly prohibits it, and that the effect of the prohibition is to render the act null and void, even if no declaration of nullity is attached to the law. That, as a general proposition, may be accepted, but it is not a hard and fast rule universally applicable. After all, what we have to get at is the intention of the Legislature, and if we are satisfied in any case that the Legislature did not intend to render the Act invalid, we should not be justified in holding that it was.” [27] In the case of Pottie v Kotze 1954 (3) SA 719 (A) the contract was concluded in contravention of a statutory requirements and the act was criminalised without the express provision that the contract itself would be invalid for the reason of contravention of the statute. At p. 726H-727A the court said: “The usual reason for holding a prohibited act to be invalid is not the inference of an intention on the part of the legislature to impose a deterrent penalty for which it has not expressly provided, but the fact that recognition of the act by the court will bring about, or give legal sanction to, the very situation which the Legislature wishes to prevent.” (See also: Geue and Another v Van der Lith and Another 2004 (3) SA 333 (SCA) at para. 18) [28] It should be recalled that the plaintiff’s action is twofold; firstly, and in the main, it is seeking to enforce a contract which contravenes the statutory provision, and in the alternative, through the instrumentality of condictio ab turpem vel iniustam causam it is seeking an enrichment relief. I deal with the main claim. Section 70 of the Act prohibits anyone from carrying on business as an insurance broker unless it is registered under the Act. This section should be read with Section 57 of the Act which prohibits insurers from paying commission to unlicensed insurance intermediaries. [29] Section 114 criminalises a person who conducts a business of insurance brokerage without a valid license and an insurer who pays an unlicensed broker commission. There is nowhere where the Act specifically declares that a contract between an insurer and an unlicensed broker in these circumstances is void and unenforceable. The contract which is concluded in these circumstances is in my view valid but unenforceable. The policy behind requiring insurance brokers to be licensed in order to conduct their business is to protect the consumers who may fall victim to dubious persons who may masquerade as brokers. Because licensing a broker is linked to a specific insurer, this ensures the integrity to their business as well. In the present case Section 57 prohibit payment of commission by an insurer to an unlicensed broker. To allow a claim in these circumstances would amount to subverting the purpose of the Act, an act this court should not countenance. [30] Alternative enrichment claim. In the present circumstances are enrichment claim is not available to the plaintiff. The enrichment claim which is only cognisable only when the contract is void, but in the present circumstances where it has been found that the contract is valid and unenforceable enrichment claim cannot be pursued through condictio (Taljaard v TL Botha Properties 2008 (6) SA 207 (SCA) at para. 5). [31] In the result the following order is made: (i) The action is dismissed both in the main and in the alternative with costs. ________________________________ MOKHESI J For the Plaintiff: Adv. M. Mopeli instructed by K. J. Nthontho Attorneys For the Defendant: Adv. K. Letuka instructed by MAFTL Attorneys 19