Liberty Life Group Trading as Liberty Life v Englezakis and Another (177/2011) [2014] ZAGPPHC 698 (10 September 2014)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

(NORTH GAUTENG, PRETORIA)

CASE NO: 177/2011

DATE: 10 SEPTEMBER 2014

In the matter between:

LIBERTY LIFE GROUP TRADING AS LIBERTY LIFE.....................................................APPLICANT

And

SAVVA ENGLEZAKIS..............................................................................................FIRST RESPONDENT

FILOMENA GALASSO........................................................................................SECOND RESPONDENT

In re:

LIBERTY GROUP LIMITED.....................................................................................................PLAINTIFF

NVSC CALL CENTRE CC..........................................................................................FIRST DEFENDANT

JUDGMENT

WEBSTER J

1. The applicant in this matter seeks an order in the following terms:

“1. That the Second Respondent be joined as the Third Defendant in the action under case number 177/2011;

2. That the costs of this Application be costs in the cause in the action under case number 177/2011, save in the event that same is opposed that the Second Respondent pays the costs of the application”.

2. The applicant has issued summons for the repayment of commission paid but not due to the first defendant being a Close Corporation (“NVSC Call Centre CC”). The first respondent (Savva Englezakis) has been joined in the action as the second defendant.

3. The applicant trades “...under the name and style of “Liberty Life” and conducts the business of a Life Insurer, duly registered in accordance with the provisions of the Long Term Insurance Act 52 of 1998 (as amended) and the Regulations thereto...”

4. The founding affidavit to the joinder application has been deposed to by Kevin Theophilus Seeralan Nair who is employed by the applicant as the Head of Commission Finance and Debt Management and who is duly authorised. He alleges in the founding affidavit that “...In or about November 2010 LIBERTY ACTIVE LIMITED, CAPITAL ALLIANCE LIFE LIMITED and RENTMEESTER ASSURANCE LIMITED ceded all their rights, title and interest in their respective claims against the defendant to Applicant...”

5. In or about March 2009 the parties entered into a written agreement which is a “...standard form Broker Agreement...styled “BROKING AGREEMENT”...”

6. The terms of the agreement reads as follows:

“14.1 The Defendant would (subject to the provisions of Clause 3.3 of the Agreement) act as an independent intermediary as defined in the Long Term Insurance Act, to canvass for contracts on such products as shall be determined by each of the Companies from time to time;

14.2 As sole compensation for services under the Agreement, including disbursements and charges incurred, the Defendant would be paid Commission only in respect of Premiums paid in full and received by the relevant Company during the currency to the Agreement on Contracts issued pursuant to proposals submitted by Introducing Consultants and the Commission shall be paid to the Brokerage in respect of the Introducing Consultant who submitted each Contract. Commissions maybe withheld in respect of proposals not bearing the signature of one of Introducing Consultants accepted under clause 3.3 of the Agreement;

14.3 Should any Contract issued pursuant to a Proposal submitted by the Defendant lapse and not be reinstated within three months from the date of lapse, no Commission shall be paid after reinstatement of the Contract unless such reinstatement was as a result of the sold efforts of the Defendant or its Introducing Consultants;

14.4 Any change of plan or sum assured or Premium under or in respect of a Contract shall entitle the relevant Company to adjust any Commission in respect of such Contract to accord with the Schedule of Commissions;

14.5 If a Contract on the life of any person, which has been issued by the Companies, is surrendered, cancelled, made paid-up or lapsed, or the sum assured or the Premium is reduced, or an Automatic Premium Loan is taken on the policy, or a loan taken within a period of six months before or after the date of an application to the relevant Company for a new Contract on such person’s life, total Commission on a new Contract shall be determined by that Company and the Defendant shall refund to that Company any excess Commission;

14.6 Any Commission on a Contract shall cease to accrue to the Defendant from the date on which is kept in force by way of operation of A.P.L. provision or any premium waiver provisions;

14.7 If the Companies decide to pay any commission on any premium they have not yet received in respect of a Contract introduced by the Defendant (which the Companies shall be entitled to do for any reason for which, in their sole discretion deem fit) then the Defendant shall refund to the Companies on demand any Commission so paid. In the event of termination of the Agreement in terms of Clause 9 (of the Agreement) payment of any Commission due to the Defendant shall be suspended for a period of twelve (12) months from the date of such termination where after the balance of Commission then due shall be paid to the Defendant;

14.8 In the event of the Agreement being terminated for what reason whatsoever, the Defendant shall not be released from any indebtedness to the Companies. Until such indebted (together with interest thereon according to the companies’ current practice from the date of such termination to date of repayment) is liquidated, the obligations of the Defendant as set out in the Agreement in connection therewith shall remain of full force and effect."

7. Mr Nair stated that the agreement was terminated on 23 April 2010 and “...During the period for which the agreement was in force, and in accordance with their obligations aforesaid, the Companies made payment of commissions to the Defendant and the Defendant accepted such payments...Certain commissions paid as aforesaid were in respect of inter alia advances in respect of Commissions to be paid, premiums unpaid and/or premiums returned to policyholders and commissions paid ..."

8. An amount of R2 080 525.08 was paid to the First Defendant. In light of the cessions referred to in paragraph 4 above, the agreement makes provision that “...the Applicant is entitled to reclaim all monies comprising inter alia advances in respect of Commissions to be paid alternatively commissions paid in respect of Contracts which were surrendered, cancelled, made paid-up or lapsed or went out of force subsequent to such payments...”

9. A “Certificate of Confirmation” appearing at page 27 of the indexed bundle of documents reflects the two members of the Close Corporation namely “NVSC Call Centre CC” as being “Englezakis, Savva” (who has been joined as the second defendant to the main action) as well as “Galasso, Filomena” (the second respondent in the current application). Englezakis became a member of the First Defendant on 31/07/2008 and Galasso became a member on 04/06/2008.

10. On 25 February 2011 a notice of de-registration of the First Defendant was published in the Government Gazette by the Registrar of Close Corporations. On 8 September, 2011, the registration of the Close Corporation was restored by the Registrar of Close Corporations.

11. Section 26(5) of the Close Corporations Act 69 of 1984 reads as follows”

“(5) If a corporation is deregistered while having outstanding liabilities, the persons who are members of such corporation at the

time of deregistration shall be jointly and severally liable for such liabilities”

12. Mr Roux, counsel for the applicant, argued that section 26 was repealed by the Companies Act No 71 of 2008 however this only came into operation on 31 May 2011 “...in terms of section 245...". He argued that “...the new Act only became effective on 31 May 2011 and as such any liability arising from deregistration must be dealt with under the old Act as deregistration occurred under the old Acf.

13. The second respondent, Filomena Galasso, stated in the answering affidavit to the joinder application “.../ was at all material times to the conclusion of the aforesaid broking agreement a member of NVSC Call Centre CC. NVSC Call Centre CC

disputes the Applicant’s claim. The claim is being defended by NVSC Call Centre CC...” In paragraph 9 at page 58 of the papers she states that “...it [the applicant] must establish that NVSC Call Centre CC was validly deregistered in terms of s26 of the Act. A deregistration under the Act is only valid if it is preceded by a notice as envisaged by s26(1).” According to the second respondent no “...notice of deregistration as contemplated by s26(1)..." was ever received by the first defendant. She alleges that “...the purported deregistration...was a nullity and accordingly I cannot be held liable for the debts of the close corporation...and my joinder to the action would serve no purpose".

14. Mr Wilks, counsel for the second respondent referred the court to a case in the Western Cape High Court marked as reportable, MB Barter and Trading (Pty) Ltd v JG Asbury, case number 7058/2007 where Davis, AJ, stated “...It is also apposite to refer to the decision in Firstrand Bank Ltd v Davis and Others in which Hurt J found that section 26(1) had not been complied with and consequently held that there had been no effective deregistration of the corporation and no resultant

liability for the members in terms of sections 26(5)."

15. It is common cause between the parties that (i) the second respondent was at all relevant times a member of NVSC Call Centre CC being the first defendant in the main action; (ii) NVSC Call Centre CC was deregistered by the Registrar of Close Corporations on 25 February 2011; (iii) the registration of the Close Corporation was restored on or about 8 September 2011.

16. In the matter of MB Barter and Trading (Pty) Ltd v JG Asbury (supra) the following is stated at paragraph 30, referring to the matter of Mouton v Boland Bank 2001(3) SA 877 (SCA), that “...It dealt with the personal liability of members in the situation where there had been a valid deregistration, but the registration of the corporation was subsequently restored in terms of section 26(7). The Court in Mouton’s case found that in such instances, the personal liability which attached to a member in terms of section 26(5) was not removed by the subsequent restoration of registration in terms of section 26(7)"

16. One of the main issues in this matter is whether the deregistration of the first Defendant by the Registrar of Close Corporations was valid or not. This court cannot make such a finding at this stage. Mr Roux submitted that “...this would be a matter of evidence and a matter for the trial court. Given that First Respondent is already joined, this issue will be ventilated at trial..." In light of the Mouton case (supra) this submission sounds persuasive. Having a matter heard piece-meal will not be in the best interests of the parties concerned. Being joined as a defendant to the main action cannot adversely prejudice the second respondent but considering the same situation from the applicant’s viewpoint, it could be extremely prejudicial to the applicant should the second respondent not be joined as a defendant as it could result in a duplication of the trial. This consideration certainly tips the scales in the applicant’s favour.

17. It is accordingly ordered:

1. THAT the Second Respondent be joined as the Third Defendant in the action under case number 177/2011;

2. THAT the Second Respondent pays the costs of the application.

G. WEBSTER

JUDGE IN THE HIGH COURT

Date of Hearing: 12 March 2014

Counsel for the Applicant: Adv CD Roux

Instructing Attorneys: R C Christie Inc.

Counsel for the Second Respondent: Adv G Wilks

Instructing Attorneys: Lazzara Leicher