Court rules personal loan protection policy can't be used for school fees, father's plea denied

A personal loan policy to secure debt on an overdraft cannot be used to pay everyday expenses, a judge said following an application by a father who wanted a financial services company to immediately release money to him so that he could pay his children’s school fees.

The man, only identified as CM, in desperation turned to the Gauteng High Court, Johannesburg for an urgent order to obtain the money so that his children would not be kicked out of school.

In turning down his application, Judge Susan Wentzel-Thompson said the basis for the application and the urgency arose from a fundamental misunderstanding by the applicant of the nature of his personal loan protection policy.

He earlier concluded this policy with Standard Bank Insurance Brokers to secure his indebtedness on his overdraft to Standard Bank. “It was not, as he had imagined, a wealth policy. This is readily apparent from the terms of the policy,” the judge said.

The applicant, who represented himself in court, asked for an order that he be granted an advance of the benefits under the policy pending the outcome of the main action instituted by him against the insurance brokers for the return of all his premiums.

Urgency was based on the fact that the funds were immediately required to settle the outstanding school fees for his children who were due to commence school this year. The school indicated that unless the outstanding bill was paid, the children could not return.

“With little prospects of success in the main action, there is no authority in law that I am aware of that would permit the applicant to receive the advance payment sought to pay the outstanding school fees,” the judge said.

The father also tried last year to obtain the school fees from his policy. On that occasion, the parties entered into a settlement agreement in terms of which it was agreed that the insurance broker would repay all the premiums paid by the applicant, totaling R69 000.

Instead of paying the amount towards the outstanding school fees, which he had told the judge he would do, the applicant admittedly spent the money on other expenses. 

When in December another termination notice was sent by the school to the applicant, he brought another urgent application which was struck from the roll. A previous similar application was also not entertained by the court.

This did not deter the father, who yet again launched this latest urgent application in a bid to obtain his school fees. This time he said his application warranted a reconsideration of the matter because he had applied for a bursary for the children’s schooling and this had been denied.

He pleaded that this was the last remaining avenue that he had open to enable him to pay his children’s school fees and this time around asked that the money be paid directly to the school.

The court acknowledged that it is not his fault that he did not obtain the bursary, but the judge noted that he had not placed the children in a school he could afford when his financial woes were patently obvious.

Judge Wentzel-Thompson explained to the applicant during the course of the hearing that the policy was not a wealth policy or “nest egg” as he said he believed it was.

The policy provided for payment of amounts owing to the bank in the event of the applicant’s death, dreaded disease, and permanent disability.

The judge, in turning down the application, explained to the cash-strapped father that there was simply no way in law in which the court could grant him any advance payment towards his children’s school fees.

Cape Times