The High Court in Johannesburg has dismissed an application by Guardrisk for summary judgment against an intermediary who allegedly misappropriated more than R25 million in premiums.
According to the judgment, handed down on 15 February, FML Life (Pty) Ltd collected insurance premiums to the value of R25 779 571 on behalf of Guardrisk between October 2018 and July 2019. Instead of paying the money over to Guardrisk, FML Life allegedly used the funds to cover its own business expenses.
In response, Guardrisk demanded that a director of FML, Baldwin Kock, stand surety for the “due performance of all obligations which are, or may at any time in future become, owing by” FML to Guardrisk. These obligations included all FML’s obligations under the intermediary agreement. Kock agreed to and signed a suretyship on these terms in October 2019.
Guardrisk contended that the effect of the suretyship is that Kock immediately became liable for the performance of FML’s obligation to pay the premiums to Guardrisk if FML did not.
Guardrisk instituted action against FML and Kock for the payment of the premiums and obtained a default judgment order against FML. It subsequently sought summary judgment against Kock on the suretyship.
According to the FSCA’s website, FML Life’s licence was withdrawn on 1 March 2022.
Kock’s and Guardrisk’s cases
Kock opposed the summary judgment on two grounds.
First, he contended that Guardrisk’s attorney, Amelia Costa, who deposed the affidavit in support of the insurer’s summary judgment application, lacked personal knowledge of the cause of action underlying its claim.
Rule 32(2) of the Uniform Rules of Court requires a deponent to an affidavit in support of a summary judgment application to be in a position to “swear positively to the facts” underlying the cause of action and to “verify” that cause of action and the amount claimed.
Kock submitted that because Costa had no direct knowledge of the suretyship, or the circumstances under which it was signed, she was not the sort of deponent that Rule 32 requires to swear to an affidavit in support of a summary judgment application.
Second, Kock argued that he has two bona fide defences to Guardrisk’s claim on the suretyship. The first defence is that the suretyship, properly interpreted, applies only to obligations that arose after it was signed. Since FML’s liability for the R25.779m arose before Kock entered into the suretyship, Kock contended that he did not, in fact, stand surety for it.
In the alternative, Kock contended that if the suretyship could not be interpreted in that manner, it must be rectified to bear that meaning. As currently written, the suretyship document failed to reflect Guardrisk’s and Kock’s common intention at the point it was signed: that Kock would only stand surety for obligations arising thereafter, not for any of FML’s existing obligations to Guardrisk at that time.
Guardrisk agreed that Costa did not have the required knowledge, per Rule 32(2), to swear positively to the facts underlying the cause of action. Nevertheless, Guardrisk argued that since all the facts were undisputed, it was irrelevant whether Costa had personal knowledge of the facts.
Guardrisk also contended that the absence of a deponent’s direct knowledge of the facts is not an insuperable obstacle to a claim for summary judgment where those facts are not in dispute.
Court’s findings
Judge Stuart Wilson said Kock’s first defence was “demonstrably bad in law”.
He said the text of the suretyship was “unambiguous”. It “plainly” applied both to FML’s indebtedness to Guardrisk at the time the suretyship was entered into and to any obligations that may arise thereafter. “There is no other meaning reasonably attributable to the text of the suretyship.”
Addressing the second defence, Judge Wilson said much of the debate between the parties centred on the senses in which the parties understood the use of the word “outstanding” in the phrase “the amount outstanding” in some of the correspondence, and whether the intention behind the use of the word was to refer to present or future amounts outstanding.
An example was an email Guardrisk sent to Kock in September 2019 in which it was proposed that FML made an “immediate lump-sum payment” of R10m, followed by settlement of the outstanding balance of the premiums by 30 June 2020. It then proposed that “all directors” of FML “sign personal surety for the outstanding balance of the premiums”.
Judge Wilson said the question arose whether “outstanding” referred to the amounts outstanding at the time the message was written, or to those outstanding after the immediate payment of R10m, or to those outstanding that the time the suretyship is entered into, or to those outstanding after the settlement of the balance by 30 June 2020.
“I incline toward the view that both parties understood the word in the sense of amounts ‘outstanding’ at the time the message was written or, at the latest, at the time the suretyship was entered into.
“But in summary judgment proceedings such an inclination is not enough. I must be satisfied that the correspondence is so unambiguous that it is not necessary to hear evidence to fix its meaning, and that Mr Kock has attempted, insincerely, to create ambiguity where there is none. I do not think that I can be that sure.
“In light of this and given also that Ms Costa cannot say from her own knowledge whether the rectification defence is advanced sincerely, it seems to me that Mr Kock is entitled to the benefit of the doubt, at least at the summary judgment stage,” Judge Wilson said.
He refused the application for summary judgment and granted Kock leave to defend the action.
