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Observations from the Du Toit determination

Complaints after practice is sold

What happens when a practice is sold, and a complaint arises from a time before the transaction?

From the recent Du Toit determination by the FAIS Ombud, it emerges that Barrington Insurance Brokers (Pty) Ltd sold its book to Galileo Risk (Pty) Ltd on 19 March 2014 and stopped conducting business.

A complaint was laid with Ombud regarding an alleged non-compliance after a claim was rejected in 2012.

This Ombud wrote to Galileo, asking them to indicate why they should not be held liable for any consequence of the transaction involved in the complaint.

“A comprehensive response was received from Galileo’s attorneys explaining why their client cannot be held liable. For purposes of this determination it is not necessary to deal with this in any detail. I merely state that this Office accepts the explanation given by Galileo and there is no legal or factual basis to hold the latter liable.”

Unfortunately, no further details are given, which is a pity, as this is possibly an area which could have provided clarification to the industry.

Company deregistration

A second interesting aspect which emerges from this complaint concerns the liability of the two respondents cited in the determination.

Barrington Insurance Brokers (Pty) Ltd informed the Ombud on 12 November 2014 that it was deregistered with the Financial Services Board in June 2014. Furthermore, it was also being deregistered from the Companies Registry (CIPC) and was a shell company with no business and no assets. It therefore indicated that the Ombud should deal with the complaint by communicating directly with the second respondent, John Frayne who, at all material times, was the managing director of Barrington.

“In the light of the current non-existent status of the first respondent (Barrington), the second respondent (Frayne) has taken responsibility for the acts and omissions of the first respondent in so far as it relates to the transaction in this complaint. The second respondent is nevertheless responsible by operation of law.”

It is interesting to note that, despite this, the Ombud ordered that the first and second respondents pay the complainant, jointly and severally, the one paying the other to be absolved, an amount of R249 700.

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