Multisure Corporation’s attempt bring into operation the High Court order cancelling its intermediary agreement with KGA Life has failed, despite a successful High Court ruling last month, because KGA has been granted leave to appeal against that ruling too.
On 30 August, the High Court in Gqeberha ruled that the order in Multisure’s favour in March will not be suspended pending the outcome of KGA’s appeal to the Supreme Court of Appeal (SCA).
However, the judgment included the right to appeal to the full bench of the High Court in Makhanda (Grahamstown). KGA’s appeal will be heard on 7 November. As a result, until the full bench hands down its decision, both the March judgment and the August judgment are suspended.
KGA and Multisure, which mainly sells funeral cover plans, have been in a dispute since the second half of 2021 after Multisure cancelled the intermediary agreement and entered a new agreement with African Unity Life (AUL).
KGA said it could not release Multisure’s book without notification from each policyholder that he or she had cancelled his or her policy.
A key issue in this dispute is the implication of the change in the definition of a “group scheme” that resulted from the implementation of the Insurance Act.
The scheme that KGA underwrote no longer qualifies as a “group scheme”. KGA argues that the contracts between Multisure and its clients endured only as individual policies. Multisure argues that until the “group” was “converted” into individual policies, it remains “a group”.
The deadlock between KGA and Multisure led to proceedings in the High Court, which ordered KGA to release the book.
In March, Judge Irma Schoeman made the following orders:
- The intermediary agreement between KGA and Multisure, as well as the master policy that formed part of the agreement, had been cancelled from 1 September last year.
- The group scheme underwritten by KGA had been cancelled from 1 September last year and was no longer in effect.
- Payment administrator Q Link was authorised to alter the deduction codes so that the premiums are paid to AUL.
- KGA must pay AUL the premiums it has received from members of the group scheme since 1 September 2021.
KGA was granted leave to take Judge Schoeman’s decision to the SCA.
In July, the High Court heard Multisure’s urgent application seeking to bring Judge Schoeman’s order into operation pending the outcome of KGA’s appeal.
In his judgment, Judge Avinash Govindjee said that, in terms of the Superior Courts Act, it is only under exceptional circumstances that a court can decide that the operation and execution of decisions that are subject to an appeal are not suspended pending the outcome of the appeal. To do so, the court must be satisfied that the applicant has proved, on a balance of probabilities, that it “will suffer irreparable harm if the court does not so order and that the other party will not suffer irreparable harm if the court so orders”.
KGA opposed Multisure’s application, submitting that:
- Implementing the order pending the appeal would be unlawful, because it would effectively resurrect a “group” that ceased to exist upon the commencement of the Insurance Act and unlawfully create a new “group”, supposedly underwritten by AUL.
- The individual policyholders, despite being prejudiced by the implementation of the order, have not been joined. Judge Govindjee rejected this, saying his judgment would not prejudice their interests.
Multisure’s financial situation
To support its argument that it will suffer irreparable harm if the order is suspended, Multisure submitted evidence that it was in a precarious financial situation.
According to the judgment, Multisure stated that:
- It has not received any commission for intermediary services since August 2021 and has been operating at a loss since September 2021.
- It has been forced to sell shares and draw from savings to keep its business afloat. Multisure’s sole owner has also placed a property on the market as part of the efforts to keep it in business.
- Two branch offices have closed between October and December 2021, and all business is now conducted virtually. As a result, three full-time staff members and four part-time staff members have been retrenched.
- It was unable to pay bonuses in December 2021, or to offer increased monthly remuneration or salaries to match offers received by staff members. It blamed this for the loss of two senior and experienced staff members employed at its head office.
Judge Govindjee said it was clear that Multisure has been placed in an extraordinary position as a result of the events in question. “This is very different, for example, to an ordinary claim for damages where the very existence of a company is not in issue.”
Prospects that the appeal will succeed
However, in determining whether the “exceptional circumstances” test had been met, the judge said he also had to consider the prospects of KGA’s appeal against Judge Schoeman’s judgment succeeding. Judge Govindjee said KGA’s prospects “appear to be limited”.
He granted Multisure’s application and awarded costs against KGA.
