uMkhonto weSizwe Party MP and former Eskom chief executive Brian Molefe is facing more legal woes after an insurance company slapped the erstwhile Transnet boss with a R4.4 million lawsuit.

AIG South Africa signed a written management liability insurance policy with Eskom in April 2017. In terms of the policy, AIG agreed to provide liability cover to the power utility’s directors, officers, and employees, including those in its subsidiaries.

Each insured person was insured independently and separately for their respective interests, according to the policy.

Molefe, in his capacity as chief executive of Eskom, qualified as an insured person under the policy and was eligible, subject to its terms and conditions, to indemnification during his time at the state-owned entity.

The policy made provision that AIG will advance cover for liability insurance, being the obligation to pay to or on behalf of an insured person any loss incurred by the insured person.

In Molefe’s case, AIG agreed to pay for his defence costs on condition that if it was found by a court that he had gained a profit or an advantage to which he was not legally entitled or that there was a commission of a dishonesty or deliberate fraudulent act, then he would have to repay the costs that had been disbursed or that would be disbursed to him or on his behalf.

The insurance company disbursed the sum of approximately R4,398,849 (about R4.4m) for his defence costs.

However, various judgments were delivered against Molefe by the Supreme Court of Appeal (SCA) and the Constitutional Court, which determined that his conduct was unlawful.

The matter relates to Molefe unsuccessfully applying for leave to appeal to both the SCA and the apex court, an earlier Gauteng High Court, Pretoria, judgment finding that his reinstatement as Eskom chief executive was at variance with the principle of legality and reviewing and setting aside the board’s decision to accept his early retirement proposal in November 2016.

The high court also reviewed and set aside the decision by then Public Enterprises minister Lynne Brown to appoint and reinstate Molefe to the position of Eskom chief executive and declared that any payment or sum of money received by Molefe under any purported pension agreement between him and Eskom is invalid and ordered him to repay such amounts within 10 days.

AIG informed Molefe of its intention to institute legal proceedings and claim the provision of his defence costs, and that he accepted the benefits conferred on him by the policy and agreed to be bound by its terms.

The company told Molefe in October 2017 that it would advance defence costs to him on a without prejudice basis, and, on the basis that should it eventuate in due course that he was not entitled to an indemnity under the policy, he would refund such costs in full and on demand.

Molefe maintained that he did not agree to the provisions of the policy and is not bound by it, as well as that he did not agree to repay the defence costs

He also insisted that an arbitration clause in the policy compelled AIG to refer disputes on the recovery of the defence costs to arbitration and raised a special plea in the pending action by the company that its case be dismissed or stayed pending resolution of the arbitration.

On August 1, Judge Allyson Crutchfield ordered that the disputes in respect of the claim instituted by AIG shall not be referred to arbitration.

The judge found that Molefe’s stance that he is not bound by the policy while simultaneously relying upon and claiming the enforcement of the arbitration clause in respect of AIG’s claims was untenable and not sustainable in law.

“The respondent’s (Molefe’s) contention that he is not bound under the policy means that he did not agree to and is not bound by the arbitration clause.

“That means that the applicant’s (AIG’s) claim in terms of the policy cannot be determined under the arbitration clause. It follows that the applicant’s claim under the policy has to be determined by the high court,” explained Judge Crutchfield.

Molefe did not respond to requests for comment on Wednesday.

loyiso.sidimba@inl.co.za

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