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NOT REPORTABLE

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE, GRAHAMSTOWN)

In the matter between: Case No: 1652/2010

KEVIN SHAUN MCHUGH .............................................................Applicant/Defendant

And

LIBERTY GROUP t/a LIBERTY LIFE ...........................................Respondent/Plaintiff

Coram: Chetty, J

Heard: 15 November 2012

Delivered: 29 November 2012

Summary: Practice – Discovery – Application to compel in terms of Rule 35(7) – Information sought already supplied to defendant – Original policy documents privileged – Application dismissed with costs.

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JUDGMENT

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Chetty, J

[1] The respondent, (hereinafter referred to as the plaintiff), a Life insurer, concluded an agency agreement with the applicant, an insurance broker, (hereinafter referred to as the defendant) during February 2006. It is common cause that the defendant’s remuneration consisted solely of commission paid in advance by the plaintiff in respect of contracts of insurance effected by him. Although there is some dispute whether the plaintiff terminated the agency agreement or the defendant, of his own volition discontinued the contractual relationship, the fact is that the hitherto existing arrangement ceased and engendered an action instituted by the plaintiff to claw back the commission and other benefits which accrued to the defendant in respect of lapsed policies. The plaintiff annexed 152 pages of commission statements to its particulars of claim, annexure C thereto, spanning the period 31 January 2009 to 10 April 2010 which provided details of the policy contract numbers, the life assured, the particular policy product, the event date and the commission paid.

[2] The plaintiff’s claim was formulated as follows –

“8. During the period for which the agreement was in force, and in accordance with its obligations aforesaid, the Plaintiff made payment of commissions to the Defendant, in respect of inter alia:

8.1 Advances in respect of Commissions to be paid, premiums unpaid and/or premiums returned to policyholders; and

8.2 Commissions paid in respect of Contracts which lapsed or went out of force subsequent to such payments as can be seen from the Companies’ Commission statement dated 27 January 2009 – 10 April 2010 as annexed as annexure C.” (Emphasis supplied)

In response, the defendant pleaded that -

“ AD PARAGRAPH 8.1

The content hereof is denied as if specifically traversed and the plaintiff is put to the proof thereof.

8.1 In amplification of this denial the defendant specifically pleads that: -

8.1.1 the only commission received by the defendant was in respect of premiums which have been paid in full and received by the plaintiff while the agreement remained in force as provided for in clause 5.1 of the agency agreement. (Emphasis supplied)

AD PAGARAPH 8.2

The content hereof is denied as if specifically traversed and the plaintiff is put to the proof thereof.”

[3] In due course and after the plaintiff’s discovery affidavit was filed, the defendant filed a notice pursuant to the provisions of Rule 35(3) of the Uniform Rules of Court, in which he sought additional documents, tabulated as: –

“1. Copies of all policy documents including, but not limited to policy schedules, amendments and/or variations to the policy in respect of the policies bearing the policy/contract numbers as set out in annexure “A” to “W” hereto which are to reflect the following: -

1. the inception date of each policy;

2. the name of the policy holder;

3. the name of the financial consultant who introduced the policy to the plaintiff;

4. the premium payable in respect of each policy;

5. the product in respect of which the policy was sold; and

6. the entity in respect of which the policy was sold.

2. Copies of all letters sent by the plaintiff to the persons referred to in annexure “A” – “W” hereto advising that (sic) the aforesaid that their premiums were in arrears.

3. Copies of the plaintiff’s letters of cancellation sent to the persons referred to in annexure “A” – “W” hereto.”

Annexure “A” – “W” referred to therein is a replica of the first page of each sequentially numbered batch of the plethora of commission statements, annexure C, to the plaintiff’s particulars of claim.

[4] In his answering affidavit, the plaintiff’s head of Commission finance and asset management, (Nair) not only delineated the precise parameters of the plaintiff’s defence to the application but stressed that the information sought was reflected in annexure C to the particulars of claim and annexed, as annexure “A” to his affidavit, a more comprehensive commission statement totalling some 154 pages. The salient and relevant paragraphs of Nair’s affidavit reads thus: -

“9.2 The Plaintiff does not rely upon the wording of policy documents, nor the wording of any schedules or annexures thereto. The Plaintiff pursues an action to claw back payments of commissions and other benefits to the Defendant in respect of policies which have lapsed. The details of the lapsed policies are annexed hereto in annexure A being a schedule setting out, in detail, all information which I believe is sufficient for the Defendant to prepare for trial. These details also appear in annexure A to W annexed to Defendant’s notice and as such he already has the required information.

9.3 The policy documents are contracts between Plaintiff and the respective policy-holders and as such are confidential as between Plaintiff and the policy-holders. The originals are sent to policy-holders. Defendant does not appear to have asked their permission for the documents to be disclosed.

9.4 Copies of these policies are kept in archives with millions of other policies, all of which are lengthy documents. Defendant does not explain why masses of documents have to be retrieved from archives and then copied only to reflect terms and conditions of insurance as between the Plaintiff and the policy-holder. The salient details on which Plaintiff’s claim is based appear in annexures A to W of the defendant’s Notice in terms of Rule 35(3) and in annexure A hereto.” (Emphasis supplied)

Additionally, it furnished the defendant with additional documents comprised of a summary of transactions for the period 2006 – 2011 and policy details of commissions paid to him. Upon analysis the documentation furnished mirrors that previously furnished and constituted compliance with paragraphs 1.1 to 1.6 of the Rule 35(3) notice.

[5] Dissatisfied with the response furnished, the defendant, on 22 June 2012, filed a further notice to compel discovery in which the relief sought was formulated as follows –

“(a) compelling the Respondent (Plaintiff in the main action) to make available for inspection to the Applicant or furnish copies to the Applicant of the documents specified in Applicant’s Notice in terms of Rule 35(3) and served on Respondent’s Attorneys on 29^th June 2011 (being Annexure “KSM 1” to the Applicant’s founding Affidavit), within 5 (FIVE) days of date of this order;

(b) in the event of the Respondent failing to comply with the Order made in (a) supra, then and in such event, granting the Applicant leave to make further Application to the Court on the same papers, duly amplified, for an Order striking out the claim of the Respondent (as Plaintiff in the main action) with costs;

(c) granting the Applicant further and/or alternative relief;”

[6] In argument before me Mr Paterson submitted that the provided and discovered documents viz, the commission statements, the reconciliations, the summary of transactions and the policy details were wholly insufficient to satisfy the requirements of Rule 35(3). What was required, counsel submitted, was the original documentation from which the furnished information was extrapolated. What the applicant in effect seeks, as evidenced by the Rule 35(3) notice, is the underlying policy documents in respect of each insured person. The plaintiff’s contentions that: -

“The policy documents are contracts between Plaintiff and the respective policy-holders and as such are confidential as between Plaintiff and the policy-holders . . .”

was correctly not placed in issue. In my judgment the documentation furnished to the defendant constitutes compliance with the prescripts of Rule 35(3). The application accordingly falls to be dismissed with costs.

The reserved costs

[7] The matter was initially set down for hearing on 28 September 2012. I was informed from the bar by Mr Roux, without any demur from Mr Paterson that repeated assurances from the defendant’s attorneys inveigled them into believing that the matter would indeed be heard on that date. 28 September 2012 however fell within the court recess period and the matter could not proceed and had to be postponed. This was a matter peculiarly within the knowledge of the defendant’s attorneys. The expense to which the plaintiff was put could have been avoided had the defendant’s attorneys notified the plaintiff’s attorneys accordingly. The application could have been removed from the roll by agreement and the expenses occasioned by the plaintiff’s legal representatives having to travel to Grahamstown avoided. In result the following order will issue: -

The application is dismissed with costs including the costs reserved on 28 September 2012.

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D. CHETTY

JUDGE OF THE HIGH COURT

Obo the Applicant/Defendant: Adv T.J.M Paterson SC instructed by Keith Sutcliffe & Associates Inc, c/o Nettleton Attorneys, 118a High Street, Grahamstown, Ref: Mr K Sutcliffe; Tel: (046) 622 7149

Obo the Respondent/Plaintiff: Adv C.D Roux instructed by R C Christie Inc c/o J D Haydock Attorneys, Eskom Building, 110 High Street, Grahamstown, Ref: Mr Haydock;

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