The Prudential Authority (PA) has lost its urgent application to replace Yashoda Ram as the provisional curator of 3Sixty Life, with the Gauteng High Court ruling on Thursday that the regulator had “adopted an incompetent procedure” to seek her removal.
The PA obtained a provisional curatorship order against 3Sixty Life in December last year, in terms of section 5 of the Financial Institutions (Protection of Funds) Act, on the grounds that the life insurer did not meet the minimum capital and solvency requirements.
The PA sought to “swop out” Ram’s name on the provisional curatorship order with that of Tinashe Mashoko, because her qualifications and credentials were allegedly misrepresented in the PA’s original interim curatorship application.
The PA’s application was brought against Ram, 3Sixty Life, the National Union of Metalworkers of SA (the National Manufacturing Workers Investment Trust indirectly owns 3Sixty Life) and BDO Advisory Services, which suspended Ram as head of actuarial, predictive analytics and insurance when the alleged discrepancies in her CV came to light.
In her curator’s report filed last month, Ram said the PA should not have placed 3Sixty Life under curatorship, and it wants to remove her so that it is “not embarrassed”.
Counsel for 3Sixty agreed with Ram’s assertion that the attempt to unseat her was because she does not support the PA’s case. Advocate Vuyani Ngalwana argued that the application was “a ruse” intended to prevent the discharge of the rule nisi and setting aside of the curatorship order.
Judge Denise Fisher said it seemed the PA wanted to have Ram removed “under the guise” of a variation of the court order. She said, “such an approach is not competent. If the removal of Ms Ram is sought, this must be done expressly.”
The PA also contended that even if the variation of the order is not the correct procedure, a case has been made for the cancellation of the curatorship order under section 5(9) of the Protection of Funds Act.
Judge Fisher said that when enquiring into granting a curatorship order, a court involves itself less in the credentials of the curator and more in the determination of whether the curatorship is appropriate.
“Clearly, the court faced with such an application will rely on the applicant’s assertions as to the suitability of the suggested curator. It will be assumed by the court that such qualifications and experience as is deemed appropriate will have been corroborated by the applicant given its position as regulatory functionary […] Whilst not to underestimate the importance of the qualifications of the suggested curator in an application for removal, it is generally considered that the expertise and actual conduct of a functionary will form a large part of the basis for any application for removal.”
She said the grounds on which the PA sought the variation of the curatorship order were not the usual allegations that “one expects in removal applications of fiduciaries; conflict of interest, bias, maladministration, fraud – are not present”.
Lack of qualifications does not mean PA suffers prejudice
Judge Fisher disagreed with the PA’s contention that the grounds for the variation of a curatorship order and those for the cancellation of a curatorship are the same.
In the former procedure, the question is whether there is some irregularity in the process that vitiates the order; in the latter procedure, the inquiry centres on the performance of the curator, her suitability for the position, her conduct of the curatorship administration and how it has affected those whom the curatorship serves.
“In my view, Ms Ram has been unfairly deprived of the opportunity to deal with these aspects – which are central to the inquiry,” Judge Fisher said.
She said the dispute over whether Ram misled BDO and the PA cannot be determined without more evidence.
“The urgency of this application is dependent on the applicant showing the prejudice to be suffered if Ms Ram is not removed urgently. It has shown none. The fact that Ms Ram may not be as qualified as the applicant believed her to be for whatever reason does not mean she is not performing her function properly.”
The hearing to determine whether the curatorship order should be confirmed is scheduled for 22 March.
In a statement welcoming the High Court’s decision, 3Sixty Global Solutions Group (GSG) said the PA’s attempt to remove Ram was “desperate”.
“Through this application, the PA exposed itself that it did not do its homework before placing 3Sixty Life under curatorship. This is embarrassing from an institution that is supposed to preside over all financial services,” it said.
3Sixty GSG also responded to the findings of a report by Deloitte into the relationship between the National Union of Metalworkers of SA and the life insurer. Read: ‘Embattled life insurer paid for Irvin Jim’s birthday party’
In its statement, 3Sixty said the PA had the report from Deloitte on the investigation it ordered since August 2020. It never followed up with 3Sixty Life on issues in the report and did not take regulatory action against the company.
“The bigger truth about the transactions in the Deloitte report is that such transactions, which we stand by as 3Sixty Life [for adding value], are an insignificant portion of 3Sixty Life’s annual premium income and expenses,” it said.
It said companies in 3Sixty GSG, including 3Sixty Life, are “unashamed” of their “symbiotic” relationship with Numsa.
“3Sixty GSG was built over many years to be antifragile, and the media onslaught will achieve the opposite effect to that intended by our detractors.”
BDO SA said it respected the court’s ruling and would continue to work with all the parties to provide the necessary support for the curatorship process in the best interests of 3Sixty Life’s policyholders.