Are we all truly equal in the eyes of the law?
Since 1994, South Africa has been regarded as one of the most progressive democracies in the world. In the last 20 years, government has made significant strides in ensuring equality for the greatest sector of the population possible.
However, should it not be equality for all? Is that not the point of democracy? While this is a great ideal to work towards, one cannot help but think back to the famous quote of George Orwell’s Animal Farm which says, ‘all animals are equal; some are just more equal than others.’
Inevitably, it is the rich who have more protection under the law than the poor. The danger of this is that the courts will be seen merely as the extended family of the rich and not the safe harbour for those who are fighting against injustice. Two recent cases have proven that South Africa is treading a fine line in this sense and that we are, at times, very quick to ignore the rule of the law in order to favour certain parties.
An issue close to home
There is a growing anxiety in the industry that the determinations handed down by the Office of the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud) are unnecessarily harsh on brokers. This is the just of some of the comments that FAnews has been receiving from brokers via the newsletters.
There is always the last straw that will break the camel’s back, and the latest determination in the case of Hughes versus Slippens and Gen-Assist Insurance Brokers seems to have been that straw.
Professor Robert Vivian, Professor of Finance & Insurance at the University of the Witwatersrand, believes that the Ombud could have handled the case very differently.
The legal relationship between the insurer and insured is one of contract. A contract comes into being via the process of an offer and acceptance. When an insured submits a proposal to an insurer, it is for the insurer to accept or reject that proposal. Having done so, the insurer submits a quote of the premium for acceptance by the insured.
Professor Vivian pointed out that in this case, the insured placed a proposal before the insurer to be insured for an amount of R1 million. The insurer admits that this was what it received, considered, and this is what was accepted. There is no indication that this offer was rejected.
"The Ombud decided that the broker and employee were jointly and severally liable to the insured. In law it is difficult to understand how this can be. In law, the broker accepts a mandate to place the risk with a competent insurer obtaining competitive terms," said Professor Vivian.
He added that if the only tool one has is a hammer then every problem will look like a nail. Legal disputes should be dealt with by ordinary courts of law presided over by ordinary judges applying the laws of general application. The tools available to ordinary judges are wide ranging.
The insurer should have acknowledged their error, and rectified the policy back to inception. It would then reflect the correct premium and the correct sum insured. The difference in the premium could have been charged to the client, and the claim processed accordingly.
No entry
In 1957, Little Richard had a hit single titled Keep A-Knockin. The most famous line from the song is that, ‘you keep on knocking but you cannot come in’, and if we look at the current South African legal system, this is definitely the case.
This is especially true when you are knocking on a lawyer’s door asking him to represent you against members of the banking industry. In this case, Absa Bank recently found itself in hot water with the North Gauteng High Court.
According to a report on the Acts Online News website, Absa’s troubles with its mortgage division have just got a whole lot worse. On 28 November, two Johannesburg sisters, Emmarentia and Monica Liebenberg, travelled to the North Gauteng High Court with several angry Absa clients in support to defend an attempt by the bank to obtain a summary judgment against them for allegedly defaulting on a mortgage loan taken out in 2007.
When asked to provide evidence of the loan agreements, Absa produced blank loan agreements which were not the ones signed by the defendants. Absa claimed the original documents were destroyed in a fire. The Liebenberg’s argued that these were definitely not the agreements they had signed.
The sisters admitted that they fell into arrears on their bond repayments, but when they were originally summoned by the bank they offered to settle the R180 000 arrears claimed by the bank in full, provided that Absa withdraw the summons. Absa declined this and wanted the full outstanding amount of R661 000. What actually happened is that the sisters were paying what they thought was the required monthly repayment, but because the bank stopped sending monthly statements, they inadvertently fell into arrears, not realising that the monthly repayment amount had increased.
When asked by the Liebenberg’s legal counsel if Absa would like to go ahead with the summary judgement, Absa’s legal counsel did not put up a fight. The Liebenberg’s will get their day in court.
Are we lacking moral values?
In a perfect world, the company that is acting negligently will be punished, no matter how high profile they are, or how much financial backing they have. However, we do not live in a perfect world.
As Professor Vivan said in a previous newsletter, its seems as if regulators and industry watchdogs all want their own enforcement and appeal committees and they are all demanding a confession to the violation of laws and demanding payments of fines. If they do not get it right in the first place, they go to the court system where they inevitably find support.
Are we as a society lacking basic moral values? If a company has acted in the wrong way, why are they trying to pass the buck onto someone else and then hiding behind the courts for support? And why have the courts given this support for so long?
Editor’s Thoughts:
Hopefully we will see some measure of normality in 2015, because if this persists, nobody will take the rulings of the Ombud or the courts lying down. They will fight back and the backlogged appeal processes the South African legal system currently finds itself in will just get worse. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
