Hewan v Kourie NO and Another

• Judge: Du Plessis J, Joffe J and De Villiers J
• Judgment Date: 04 December 1992
• Citation: 1993 (3) SA 233 (T)
• Hearing Date: 06 May 1992
• Court: Transvaal Provincial Division

Du Plessis, J.:

Convac CC had two members. The one was the late Mr W J I Jenkins. He had an 80% interest. The other member, the present appellant, had a 20% interest. In terms of an agreement entered into during early 1989, the two members agreed that, in the event of the death or disability of either, the other member would be obliged to purchase such member's interest. They further agreed that each would insure the life of the other. The proceeds of such insurance would then, in terms of the J agreement, be utilised to pay the purchase price of the interest to be

Du Plessis J

A purchased. (The agreement was referred to as a 'buy/sell' agreement.) Pursuant to the buy/sell agreement, the appellant insured the life of the deceased for R320 000. The deceased in turn insured the life of the appellant for R80 000. The two policies were issued on 20 April 1989.

The deceased passed away on 12 February 1990. The present first B respondent is the executor of the deceased's estate. The second respondent is the widow and sole heiress of the deceased. It is common cause that the proceeds of the policy on the life of the deceased, ie R320 000, have been paid out to the appellant.

The first respondent (as applicant) applied in the Court a quo for an order directing the appellant (first respondent) to pay to the first C respondent, in his representative capacity, the proceeds of the policy. The present second respondent was also second respondent in the application. She was joined only because of her interest in the matter. No relief was sought against her.

The first respondent contended that the buy/sell agreement between the D appellant and the deceased is recorded in an unsigned document, being annexure MAK6 to the founding affidavit. Clause 4 of MAK6 provides as follows:

'Purchase price

The purchase price shall be the greater of the net proceeds of the relevant policy or the amount determined in accordance with the provisions of clause 7.' E

(Clause 7 provides for a method to determine the value of an interest.)

It is common cause that the value of the deceased's interest is substantially less than the proceeds of the policy. Accordingly, the first respondent maintains that the purchase price in terms of clause 4 is the amount of R320 000.

F In his answering affidavit the appellant avers that MAK6 is no more than a draft which he intended to use as a basis for drawing up the actual buy/sell agreement between him and the deceased. Despite good intentions to do so, the appellant never got around to drawing up the actual agreement between him and the deceased. The actual agreement, the G appellant said, was that the purchase price would be the actual value of the interest determined in terms of the agreement. The appellant admitted that the insurance policies were taken out in terms of the agreement, but said that the purpose was merely to utilise the proceeds thereof in order to pay the purchase price as determined.

H Faced with the dispute of fact apparent from the aforegoing, the application was referred for the hearing of oral evidence on the following question:

'What was the agreement reached between William Joseph Jenkins and the first respondent in regard to the intended application of the proceeds of the insurance policy procured over the life of the said Jenkins?'

I The matter came before Harms J. After the hearing of evidence, he found for the present first respondent. He accordingly granted judgment for the first respondent for R320 000 plus interest and costs. The appellant now appeals against this judgment and order.

The first respondent's case was based on the evidence of the second J respondent and that of her attorney, Mr Cameron. The second respondent

Du Plessis J

A said that her late husband, when he and the appellant had taken out the policies, came home and told her about it. He said that, if anything should happen to him, the appellant would take over Convac and she would receive R320 000. He added that she would be financially better off after his death. After her husband's death, the appellant told her that she B would not receive the R320 000. The two of them had a discussion of which the appellant prepared a typed minute. (Annexure MAK7 to the application.) Paragraph 2 of this minute records that, '(w)hilst no "buy/sell" agreement was signed between the members (T E Hewan and W Jenkins), there was every intention to do so'. According to MAK7, the appellant further offered to C take over 40% of the interest in Convac at a value to be agreed upon. The appellant offered to gradually purchase over the ensuing 5-10 years the remaining 40% held by the deceased.

The first respondent discussed the matter with her attorney, Cameron. Cameron deduced from para 2 of the minute that there was in fact a buy/sell agreement in existence, albeit unsigned. He further deduced that D the appellant thought that it was not binding because it was unsigned. Cameron arranged a meeting with the appellant. At this meeting the take-over of the entire interest by either the appellant or the first respondent was discussed. Cameron also enquired about the existence of a buy/sell agreement. According to Cameron, the appellant said that there was such a document but that, as it was not signed, he did not consider E himself bound by it. At Cameron's request the appellant undertook to look for the agreement. At a later meeting the document was handed to Cameron by the appellant. There is some dispute as to what exactly happened when the document was handed over and as to whether it was called a draft agreement or an agreement at that stage. Be that as it may, the document F handed over is annexure MAK6.

One Bird, an insurance broker, one Douglas, a chartered accountant, and Miss Hindmarch, the personal assistant to the appellant, gave evidence for the appellant. The appellant himself also testified. The evidence of Douglas and Miss Hindmarch deals mainly with the meeting when the document MAK6 was handed to Cameron. Bird said that he was present when the G appellant and the deceased entered into the buy/sell agreement. According to Bird, the agreement was that the purchase price of the interest of a deceased or disabled member would be equal to the net asset value of such interest plus the loan account of the deceased or disabled member. The net asset value would be determined in terms of the agreement. Bird explained H the existence of MAK6 thus: In the course of his business as an insurance broker, he had been given such draft buy/sell agreements by insurance companies. During 1988 he had already given the appellant such a draft agreement in regard to another close corporation, S A Skins CC, in which the appellant had an interest. Shortly before the agreement under consideration was entered into, Bird had procured a new personal computer. I Bird had entered a buy/sell agreement on its word processing programme. He offered to have that printed and to give the appellant a copy thereof to use as a draft from which to draw up the agreement entered into with the deceased. Explaining why he made that offer in view of the fact that he had already by then given the appellant a draft buy/sell agreement, Bird J said that he was keen to utilise his new

Du Plessis J

A personal computer. Bird entered the personal particulars of the parties and particulars of the policies that he had procured into his computer, and MAK6 was printed. Bird also prepared and printed annexures A and B to MAK6. These did not form part of the draft already in the word processing programme.

B The evidence of the appellant regarding the agreement and the existence of annexure MAK6 was to the same affect as that of Bird. He explained that MAK6 did not reflect the agreement between him and the deceased and that he had simply never got around to finalising it.

When the second respondent gave evidence, her evidence as to what her C late husband told her was formally objected to as being inadmissible hearsay. The learned Judge a quo admitted the evidence provisionally, on the basis that the admissibility thereof would be decided at the end of the trial. The learned Judge at the end of the trial admitted the evidence in terms of s 3(1)(c) of the Law of Evidence Amendment Act 45 of 1988. It is submitted on behalf of the appellant that the learned Judge erred in D this regard.

Section 3(4) of the Law of Evidence...