THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Not Reportable
Case No: 202/2017

In the matter between:

VASANTHI NAIDOO
APPELLANT

and

DISCOVERY LIFE LIMITED
FIRST RESPONDENT

NAIDOO SD
SECOND RESPONDENT

NAIDOO G
THIRD RESPONDENT

NAIDOO VD
FOURTH RESPONDENT

NAIDOO J
FIFTH RESPONDENT

Neutral citation:
Naidoo v Discovery Life Limited & others (202/2017) ZASCA 88 (31
May 2018)

Coram:
Shongwe ADP, Wallis and Mbha JJA and Hughes and Schippers
AJJA

Heard:

10 May 2018

Delivered:

31 May 2018

Summary:  Contract law – risk-only policy containing beneficiary clause – stipulatio
alteri – such policy cannot be an asset in the estate of the policyholder and of joint
estate from marriage in community of property – such a policy not an insurance policy in
terms of s 15(2)(c) of the Matrimonial Property Act 88 of 1984.

______________________________________________________________________

ORDER
______________________________________________________________________
On appeal from: Gauteng Division of the High Court, Johannesburg (Tsoka J sitting as
court of first instance):
(1) The appeal is dismissed with costs.
(2) The second to the fifth respondents must bear their own costs.
______________________________________________________________________

JUDGMENT
______________________________________________________________________

Mbha JA (Shongwe ADP and Wallis JA and Hughes and Schippers AJJA
concurring):

[1] This appeal raises two questions. The first is whether a risk-only life insurance
policy with a beneficiary nomination clause is an asset of the policyholder during his or
her lifetime; and the second, whether the nomination of a beneficiary by a policyholder
married in community of property, constitutes an alienation of that policy as
contemplated in s 15(2)(c) of the Matrimonial Property Act 88 of 1984 (the Act).The
Gauteng Division of the High Court, Johannesburg, answered both questions positively.
The appeal is with leave of this court.

[2] The basic facts are the following. The appellant and Mr Merglen Naidoo (the
deceased) were married in community of property on 17 July 1996.

[3] On 23 May 2002, the deceased made an application to the first respondent
(Discovery) for a joint life assurance with policy number 5100022093 (the policy). In
terms of the policy, the deceased was defined as the principal life insured and the
owner of the policy. The deceased nominated the appellant as the beneficiary of the
proceeds of the policy upon his death. The policy provided further that the owner could
instruct Discovery in writing to change the beneficiary at any time and that the
appointment of a beneficiary was revocable at all times during his lifetime. Importantly,
the policy provided that a nominated beneficiary was not entitled to any benefits during
the lifetime of the principal life assured.

[4] It is common cause that the policy was a risk-only policy meaning that it had no
monetary value unless and until the person whose life was insured died. It had no
investment portion and thus no surrender value. It also provided that no benefits would
be payable on its cancellation.

[5] On 11 October 2011 the deceased wrote to Discovery and requested a change
of beneficiary details to reflect both his parents, his brother and his sister as
beneficiaries to the policy. It is common cause that the appellant was unaware of this
change.

[6] After the deceased’s death on 6 March 2012, the newly appointed beneficiaries
accepted the benefits of the policy by claiming payment of the proceeds in the total sum
of R3 174 357 and Discovery duly made payment to them. The new beneficiaries were

subsequently joined as third parties in the proceedings in the court a quo by Discovery
on the basis that in the event the court were to find that the nomination of such third
parties, who have since been paid the proceeds of the policy, was in breach of s
15(2)(c) of the Act, the third parties would be liable to indemnify Discovery. These
conditional claims were based on unjustified enrichment. Discovery did not pay any
amount to the appellant and denied that it had any liability to do so.

[7] Counsel for the appellant contended that the aggregate of rights and obligations
under the policy vested in the joint estate, which included the right to nominate a
beneficiary, receive payment of the sum insured and revoke a nominated beneficiary.
Therefore, so it was contended, the deceased could not nominate the third parties as
beneficiaries without the appellant’s written consent as envisaged in s 15(2)(c) of the
Act.

Was the policy an asset of the policyholder during his lifetime?
[8] This court has authoritatively determined that a contract in favour of a third party
underlies the legal concept of a beneficiary clause in a life insurance policy.1 The
policyholder (stipulans) contracts with the assurer (promittens) that an agreed offer will
be made by the assurer to a third party (the beneficiary), with the intention that on
acceptance of that offer by the beneficiary, a contract will be established between the

1 Borman en De Vos, NNO en ŉ ander v Potgietersrusse Tabakkorporasie BPK en ŉ ander 1976 (3) SA
488 (A) at 506H.

beneficiary and the assurer. The offer involved is that the insurer will pay the proceeds
of the policy to the beneficiary.2

[9] The beneficiary clause is currently widely used in assurance contracts and this
can be attributed to two main factors. First, the policy proceeds are immediately made
available to the beneficiary on the death of the policyholder, without the beneficiary
having to wait until the deceased’s estate is wound up before he or she can claim and
receive the policy proceeds. Secondly, the policy proceeds do not form part of the
deceased estate for purpose of the calculation of the executor’s remuneration. Clearly,
at the heart of those two main advantages is the avoidance or bypassing of the
deceased estate.3

[10] When a policy is a risk-only policy, as in this case, payment of the policy
proceeds occurs only upon the death of the insured life. It follows that by definition the
policy proceeds can never be paid to the policyholder or the beneficiary during the
lifetime of the insured life. The only rights that the policyholder has during his or her
lifetime emanate from the policy itself. Typically these are the contractual rights to
nominate a beneficiary and to change the beneficiary nomination, the right to cede the
policy and the right to terminate the policy.4

2 Henckert ‘The life assurance policy, beneficiary clauses and marriage: a few aspects’ (1994) TSAR 513.
3 Henckert (above).
4 Hees NO v Southern Life Association Ltd 2000 (1) SA 943 (W) at 948A–E,; Ex Parte Calderwood NO: In
Re Estate Wixley 1981 (3) SA 727 (Z) at 736B-C.

[11] This court has determined that the policy itself is not an asset in the estate of the
policyholder. As Rabie JA described it in Borman en De Vos NNO (above at 507A):
‘where a person has paid the premiums but has no corresponding claim during his or
her lifetime, it can be said that an asset has been separated or withdrawn from his
estate’. (My translation.) This court affirmed that approach in Pieterse v Shrosbree NO
& others5 and said that in the ordinary course the proceeds of an insurance policy will
go directly to a nominated beneficiary.

[12] As the policy in issue was a risk-only policy which could not be an asset in the
estate of the deceased, on the strength of the authorities referred to above, it follows
that it could never be an asset in the joint estate. During the deceased’s lifetime the
appellant had no right to receive the proceeds of the policy and therefore viewed from
this perspective, the policy was also not an asset in the joint estate.

Was the nomination of a beneficiary an alienation under section 15(2)(c)?
[13] Section 15 of the Act reads, in relevant parts, as follows:
‘(1) Subject to the provisions of subsections (2), (3) and (7), a spouse in a marriage in
community of property may perform any juristic act with regard to the joint estate without the
consent of the other spouse.
(2) Such a spouse shall not without the written consent of the other spouse-
(a) alienate, mortgage, burden with a servitude or confer any other real right in any immovable
property forming part of the joint estate;

5 Pieterse v Shrosbree NO & others, Shrosbree NO v Love & others [2004] ZASCA 129; 2005 (1) SA 309
(SCA) para 12.

(b) enter into any contract for the alienation, mortgaging, burdening with a servitude or
conferring of any other real right in immovable property forming part of the joint estate;
(c) alienate, cede or pledge any shares, stock, debentures, debenture bonds, insurance
policies, mortgage bonds, fixed deposits or any similar assets, or any investment by or on behalf
of the other spouse in a financial institution, forming part of the joint estate;
(d) alienate or pledge any jewellery, coins, stamps, paintings or any other assets forming part of
the joint estate and held mainly as investments;
(e) withdraw money held in the name of the other spouse in any account in a banking institution,
a building society or the Post Office Savings Bank of the Republic of South Africa;
. . . .’

[14] The law relating to the interpretation of legislation in this country is well-settled. In
Natal Joint Municipal Pension Fund v Endumeni Municipality,6 this court expounded the
principle as follows:
‘[18] . . . Interpretation is the process of attributing meaning to the words used in a document, be
it legislation, some other statutory instrument, or contract, having regard to the context provided
by  reading the particular provision or provisions in the light of the document as a whole and the
circumstances attendant upon its coming into existence . . . The “inevitable point of departure is
the language of the provision itself”, read in context and having regard to the purpose of the
provision and the background to the preparation and production of the document.
. . .
[26] . . . in most cases the court is faced with two or more possible meanings that are to a
greater or lesser degree available on the language used. Here it is usually said that the
language is ambiguous, although the only ambiguity lies in selecting the proper meaning (on

6 Natal Joint Municipal Pension Fund v Endumeni Municipality  [2012] ZASCA 13; 2012 (4) SA 593 (SCA)

which views may legitimately differ). In resolving the problem, the apparent purpose of the
provision and the context in which it occurs will be important guides to the correct interpretation.
An interpretation will not be given that leads to impractical, unbusinesslike or oppressive
consequences or that will stultify the broader operation of the legislation or contract under
consideration.’(My emphasis.)

[15] The main purpose of the Act was to repeal the common law rule in terms of
which a husband obtained the marital power over the person and property of his wife.7
The effect is that husband and wife are now equal partners and she can enter into legal
transactions on her own. Section 15(1) of the Act reinforces the general rule that a
spouse in a marriage in community of property may perform any juristic act regarding
the joint estate without the consent of the other spouse.

[16] Section 15(2)(c) of the Act creates an exception to the general rule by prohibiting
a spouse married in community of property from alienating an asset in the joint estate
without the written consent of the other spouse. Clearly, whilst the intention of the
legislature was to give both spouses equal right of disposal with regard to the joint
estate, that does not indicate a general intention that they should act jointly in all
transactions. Except in special reserved cases, the legislation enabled them to exercise
that competence independently of each other.

[17] With this in mind, it follows that when examining whether a spouse is prohibited
in terms of s 15(2)(c) of the Act from dealing with impugned property without the written

7 Section 11(i) of the Matrimonial Property Act 88 of 1984.

consent of the other spouse, the crucial enquiry is whether such property forms part of
the joint estate. If the said property cannot be regarded as ‘forming part of the joint
estate’ then s 15(2)(c) of the Act is not applicable and the spouse may deal with such
property as he or she pleases.

[18] Applying the principles of interpretation in Endumeni (above), the words
‘insurance policies’ found in s 15(2)(c) cannot be read in isolation. They must be
interpreted consistently with the other financial instruments listed in the section and with
the catch-all phrase ‘any similar assets’, to refer to insurance policies that are assets. In
this context they clearly include policies having a current value, such as endowment
policies or retirement annuities that can be surrendered or made paid up. Pure risk
policies such as life, motor, fire and theft or household goods policies are of a different
character. They are contracts for the provision of an indemnity in the event of a future
risk occurring. The interpretational issue is whether they are ‘insurance policies’ in terms
of the section, in other words are they assets of the joint estate.

[19] The words must also be interpreted consistently with sub-paragraphs (a) – (e) in
the section referring specifically to assets in the joint estate consisting of other real
rights and property like mortgages, servitudes over immovable property, jewellery,
coins, investments, money and so forth. Clearly, the meaning to be ascribed to the word
‘asset’ depends on the context.8 Thus in Ex Parte Logan 1929 TPD 201 (at 203) assets
were described as property that could be applied to the payment of debts.

8 Benoni, Brakpan and Springs Board of Executors, Building Society and Trust Co. Ltd  v Commissioner
for Inland Revenue 1921 TPD 170 at 173.

[20] From the above it follows that not every contractual right constitutes an asset.
Hence, the rights of the policyholder in a risk-only policy before the death of the insured
life are not assets and do not constitute ‘insurance policies’ as envisaged in s 15(2)(c).
A contractual right that confers a power on the policyholder to appoint a beneficiary to
receive the proceeds of a policy upon the death of the insured life, is not a right that can
be applied to the payment of debts. The rights the deceased had during his lifetime to
deal with the policy, were not assets at all. If they were assets, these rights do not
constitute an insurance policy within the meaning of s 15(2)(c) of the Act.

[21] The restrictions imposed by s 15(2)(c) of the Act apply only to alienation of
insurance policies that are assets and form part of the joint estate. This section finds no
application to the facts in this case.

[22] The appellant’s reliance on Ndaba v Ndaba9 is misplaced. This case is clearly
distinguishable as it dealt with a pension interest which is an asset analogous to the
right to be paid a surrender value under an insurance policy with an investment portion.
The policy in issue here has no investment portion and no surrender value.

[23] The nomination of a beneficiary to receive the proceeds of a life insurance policy
and the subsequent revocation of such nomination accompanied by the substitution of
new beneficiaries does not in any event constitute the transfer of a right constituting an
asset in the joint estate. It is merely the exercise of a contractual right created by the
policy.

9 Ndaba v Ndaba [2016] ZASCA 162; 2017 (1) SA 342 (SCA) para 35.

[24] In this case, the deceased after nominating his family members as beneficiaries,
retained the right to cancel that nomination and nominate someone else. He has not
disposed of anything. He never lost the rights that he had under the policy. He retained
those rights until his death.
[25] For these reasons, the nomination of the third parties as beneficiaries did not
constitute an alienation of the policy within the meaning of s 15(2)(c) of the Act and the
appeal must fail.

[26] The third parties elected to appear at the hearing of the appeal in support of the
arguments of the respondent. This was purely a precaution on their part and added
nothing to the debate before us. They asked for an order that their costs be paid by the
respondent, but I can see no justification for making such an order. In my view they
should pay their own costs.

[27] I accordingly make the following order:
(1) The appeal is dismissed with costs.
(2) The second to the fifth respondents must bear their own costs.

_______________
B H Mbha
Judge of Appeal

APPEARANCES:

For Appellant:

J C Pieterse
Instructed by:

Corne van de Venter Incorporated, Johannesburg

c/o Honey Attorneys, Bloemfontein

For First Respondent:

A J Lamplough
Instructed by:

Keith Sutcliffe & Associates Inc, Johannesburg

c/o Rossouws, Bloemfontein

For Second to Fifth Respondents:  R B G Choudree SC  (with him M Manikam)
Instructed by:

Sha Kumar & Associates

c/o Phatsoane Henney Attorneys, Bloemfontein