A High Court judgment has provided clarification on how beneficiary nominations in living annuities are to be assessed, particularly where a power of attorney is involved and where nomination forms are submitted close to – or even after – the policyholder’s death.
In a decision delivered on 6 January, the High Court in Pretoria dismissed a widow’s claim to the proceeds of a living annuity, finding that a later nomination in favour of the deceased’s daughter was legally valid, notwithstanding that it was submitted to the insurer after the deceased’s death. The Court’s reasoning turned on the scope of a general power of attorney, established principles of agency law, and the wording of the policy itself.
Background to the dispute
The case arose from competing beneficiary nominations in respect of a living annuity policy issued by Momentum Metropolitan Life.
The policy was taken out in 2012. In September 2019, the deceased appointed his daughter as his agent under a general power of attorney. Over the following years, several beneficiary nominations were executed, sometimes by the deceased personally and sometimes by his daughter acting under that power of attorney. Those nominations alternated between the deceased’s spouse and his daughter.
On 25 June 2021, shortly before the deceased’s death, he signed a beneficiary nomination in favour of his spouse. An adviser later confirmed that Momentum’s records had been updated to reflect that nomination.
On 15 July 2021, while the deceased was gravely ill, the daughter signed a further beneficiary nomination in her favour, acting under the power of attorney. That nomination was submitted to Momentum on 19 July 2021, two days after the deceased passed away on 17 July 2021.
Faced with uncertainty as to which nomination was legally valid, the life insurer declined to pay out the proceeds pending a court order.
The widow approached the High Court, contending that the later nomination was invalid on several grounds, including lack of authority under the power of attorney, impermissible self-benefit by an agent, misrepresentation, and the fact that the form had been submitted after death.
The Court focused on four legal questions:
- Whether the general power of attorney authorised the daughter to sign a beneficiary nomination on behalf of the deceased;
- Whether an agent may lawfully nominate herself as beneficiary;
- Whether the policy required that a beneficiary nomination be submitted to the insurer before the policyholder’s death to be valid; and
- Whether the later nomination was invalid due to misrepresentation or the timing of its submission.
Authority under the power of attorney
The widow argued that the power of attorney did not authorise the daughter to amend the beneficiary nomination on the living annuity.
The Court rejected this contention. The power of attorney granted the daughter wide authority to manage and transact the deceased’s affairs, including the power to sign or execute any deed or instrument in writing as effectively as the deceased could have done personally.
The Court held that a beneficiary nomination form constitutes an “instrument in writing” and therefore fell within the scope of the authority conferred by the power of attorney. In light of the breadth of the mandate, the daughter was authorised to sign such a form on the deceased’s behalf.
May an agent benefit from her own act?
A more substantial issue was whether the daughter, acting as agent, was legally entitled to nominate herself as beneficiary.
The Court reaffirmed the general principle that an agent occupies a fiduciary position and may not place herself in a position where her interests conflict with her duty or derive a secret benefit from transactions concluded on behalf of her principal. This principle has long been part of South African law.
However, the Court emphasised an equally well-established qualification: an agent may lawfully benefit from a transaction if the principal has full knowledge of the benefit and gives informed consent.
On the evidence before it, the Court found that the deceased was fully aware that the relevant beneficiary nominations would benefit his daughter, and he had instructed her, in her capacity as agent, to proceed with the nominations in her favour. In those circumstances, the prohibition against self-dealing did not apply.
The Court therefore concluded that the daughter’s self-nomination, carried out on the deceased’s instructions, was legally permissible.
What the policy required – and what it did not
The central issue in the case concerned the timing and formalities of the beneficiary nomination.
The policy provided that the insurer would pay the value of the investment to “the beneficiary you have nominated when you die”, and that in the absence of a nomination, payment would be made to the deceased estate. The policy did not prescribe a specific procedure or deadline for submitting a beneficiary nomination.
Although Momentum utilised a standard beneficiary nomination form for administrative purposes, the Court held this did not alter the substantive contractual requirement. The decisive question was whether the deceased had nominated a beneficiary prior to his death – not whether the insurer had received or processed the nomination before that time.
The Court accepted that the amended nomination form signed by the daughter constituted proof of the beneficiary nominated by the deceased prior to his death and that it therefore complied with the policy.
Submission after death and misrepresentation
The widow further argued that the later nomination was invalid because it had been submitted to the insurer only after the deceased’s death, and because it was allegedly misrepresented as having been signed on a later date.
The Court rejected both arguments.
It held that the policy did not require that a nomination be submitted before death, only that the nomination itself must have been made prior to death. The fact that the amendment was effected after the deceased’s death did not, in itself, affect the validity of the nomination.
As to misrepresentation, the Court found that the widow had failed to establish that a false or wrongful representation had been made to the insurer. The substance of the representation – that the deceased had nominated his daughter as beneficiary – was supported by the evidence. In the absence of a false representation causing patrimonial loss, the misrepresentation claim could not succeed.
Outcome and significance
The Court dismissed the widow’s claim and confirmed the validity of the nomination in favour of the daughter. Given the complexity of the matter, costs were awarded on the higher scale.
The judgment confirms that, in the context of this living annuity policy, the validity of a beneficiary nomination turned on proof of the policyholder’s intention and authority, rather than on strict administrative timing. It also underscores that a broadly framed power of attorney may extend to beneficiary nominations, and agents may lawfully benefit where the principal has given informed consent.
The judgment also illustrates the role that financial advisers may play in beneficiary nominations. In this matter, a financial adviser acted as an intermediary in supplying nomination forms, submitting them to the insurer, and confirming changes to the insurer’s records. The adviser was not a party to the litigation, and the Court made no findings regarding the adviser’s conduct. However, the Court’s reasoning shows that adviser correspondence and confirmations may later become important evidence of a policyholder’s intention, particularly where beneficiary nominations are disputed.
In a commentary published by Adams & Adams, attorneys Mtho Maphumulo and Tsholofelo Maphumulo said the decision is important for insurers and intermediaries because it clarifies that administrative formalities do not trump the substantive nomination requirement in policy terms, guides the treatment of post-death processing, and emphasises the significance of evidence demonstrating the policyholder’s intention and instruction – particularly when nominations are executed via agents under powers of attorney.
