About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2014
>>
[2014] ZASCA 112
|
|
Hlela and Others v SA Taxi Securitisation (Pty) Ltd and Others (515/2013) [2014] ZASCA 112 (17 September 2014)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 515/2013
In the matter
between:
ROBERT
BHEKUKWENZA
HLELA
................................................................
FIRST
APPELLANT
BHABHA
CHRISTOPHER
DLAMINI
.........................................................
SECOND
APPELLANT
THENGEZAKHE
KHWELA
.............................................................................
THIRD
APPELLANT
SOUTH
AFRICAN INSURANCE BROKERS
CC
......................................
FOURTH
APPELLANT
and
SA
TAXI SECURITISATION (PTY)
LTD
......................................................
FIRST
RESPONDENT
SA
TAXI FINANCE HOLDINGS (PTY)
LTD
...........................................
SECOND
RESPONDENT
CLARENDON
TRANSPORT UNDERWRITING
MANAGERS
(PTY)
LTD
................................................................................
THIRD
RESPONDENT
SA
TAXI RISK MANAGEMENT SERVICES
(PTY)
LTD
.....................................................................................................
FOURTH
RESPONDENT
THE
NATIOINAL CREDIT
REGULATOR
..................................................
FIFTH
RESPONDENT
THE
HOLLARD INSURANCE COMPANY
LTD
........................................
SIXTH
RESPONDENT
Neutral
citation
:
Hlela
v SA Taxi Securitisation (Pty) Ltd
(515/2013)
[2014] ZASCA 112
(26 August 2014)
Coram
:
Navsa ADP, Shongwe, Majiedt, Swain JJA and Dambuza AJA
Heard
:
26 August 2014
Delivered:
17 September
2014
Summary
:
Finance agreement – cession
of motor vehicle insurance policy by debtor to lender – object
to secure ownership of lender
in vehicle– right to appoint
broker to manage ceded policy not ceded to lender.
Order
On
appeal from
the full court of the KwaZulu-Natal High Court,
Pietermaritzburg, sitting as the court of appeal, (D Pillay J with
Koen J and Henriques
J concurring):
1
The appeal is upheld with costs such costs to include the costs of
two counsel.
2
The order of the court a quo is altered to read as follows:
‘
(a)
The appeal is dismissed with costs such costs to include the costs of
two counsel.
(b)
The order of the court of first instance is altered to read as
follows:
(i)
It is declared that the first, second and third applicants are
entitled to cancel the insurance brokerage mandate held by the
second
respondent.
(ii)
The first, second, third and fourth respondents are ordered to give
effect to the first, second and third applicants’
cancellation
of the insurance brokerage mandate held by the second respondent.
(iii)
It is declared that the first, second and third applicants are
entitled to appoint brokers to manage the comprehensive short
term
motor vehicle insurance policies ceded by them to the first
respondent subject to the approval of the first respondent.
(iv)
The first, second and third respondents are ordered to pay the costs
of the application, jointly and severally, the one paying
the others
to be absolved.’
JUDGMENT
Swain
ja
(
Navsa
ADP, Shongwe and Majiedt JJA and Dambuza AJA
concurring):
[1]
The first appellant, Mr Robert Hlela, the
second appellant, Mr Bhabha Dlamini and the third appellant, Mr
Thengezakhe Khwela (the
appellants) are mini-bus taxi operators.
[2]
The appellants required finance to purchase
mini-bus taxis and approached the first respondent, SA Taxi
Securitisation (Pty) Ltd
(TS) for loans. TS agreed to provide the
funds. The finance agreements were structured as leases of the
vehicles to the appellants
by TS.
[3]
In order to secure the right of ownership
TS enjoyed in the vehicles in terms of the finance agreements, the
appellants were obliged
to insure the vehicles with a registered
insurer on terms acceptable to TS. The appellants, in terms of the
finance agreements,
ceded their ‘entire right, title and
interest in and to every insurance policy effected’ in terms of
the finance agreements
to TS.
[4]
In performance of the appellants’
obligation to insure the vehicles they signed a proposal for
insurance directed at the third
respondent, Clarendon Transport
Underwriting Managers (Pty) Ltd (Clarendon). In the proposal the
chosen broker was identified as
the second respondent, SA Taxi
Finance Holdings (Taxi Finance) and the chosen insurer was the sixth
respondent, The Hollard Insurance
Company Ltd (Hollard).
[5]
In the certificates of insurance issued by
Clarendon, the broker was, however, not reflected as Taxi Finance,
but as the fourth
respondent, SA Taxi Risk Management Services (Pty)
Ltd (Taxi Risk). The entitlement of TS to substitute the broker of
choice of
the appellants with another broker lies at the heart of the
present dispute. (Taxi Securitisation, Taxi Finance and Taxi Risk
will
be referred to collectively as the Taxi respondents).
[6]
The present dispute arose when the
appellants appointed the fourth appellant, South African Insurance
Brokers CC (appellants’
broker) to manage their insurance
portfolios with Clarendon and to obtain more competitive insurance
rates.
[7]
TS, however, refused to agree to the
substitution of Taxi Risk by appellants’ broker, maintaining
that as the cessionary of
the respective insurance policies,
it
had the right to appoint a broker of its choice, to manage the policy
for the duration of the finance agreements.
[8]
The appellants accordingly applied in the
KwaZulu-Natal High Court, Durban for declaratory relief entitling
them to waive and/or
cancel the insurance brokerage mandate arranged
and/or held by the Taxi respondents. An order was also sought
directing those respondents,
including Clarendon, to give effect to
the termination of the mandate of Taxi Finance and Taxi Risk to act
as brokers for the appellants
in managing and arranging insurance for
the vehicles in question.
[9]
The appellants obtained the relief sought
before the court of first instance, essentially on the basis that the
cession of the insurance
policies was one
in
securitatem debiti
. It was held that
the insurance brokerage contract being a separate contract from the
insurance contract was not subject to the
cession. The appellants
accordingly retained and did not divest themselves of the right to
appoint a broker of their choice. Leave
to appeal to the full court
of the KwaZulu-Natal High Court, Pietermaritzburg (the court a quo)
was granted to the Taxi respondents
by the court of first instance.
[10]
The appeal to the court a quo was
successful. The central finding was that the cession was an outright
cession with the result that
TS as the cessionary was free to mandate
its own intermediary to manage the insurance policies. The
application was accordingly
dismissed. Special leave to appeal was
subsequently granted to the appellants by this court.
[11]
Before dealing with the merits of the
appeal, it is necessary to deal with two preliminary issues. The
first, is an application
brought by Clarendon and Hollard to
participate in the present appeal. At the hearing the application was
dismissed with costs
for the reasons which follow.
[12]
In the proceedings before the court of
first instance Clarendon and Hollard delivered notices of intention
to defend which they
then withdrew on the basis that they would both
abide the decision of the court of first instance. Clarendon and
Hollard did not
thereafter participate in the application for leave
to appeal to the court a quo, nor in the appeal itself.
[13]
In the participation application the reason
advanced for that decision was a mistaken view that the relief
claimed in the court
of first instance ‘did not impact upon the
position’ of Clarendon and Hollard. This view however, was not
erroneous.
The only possible interest that Clarendon and Hollard have
in the outcome of the present appeal is a determination of the
identity
of the broker who will represent the appellants in managing
the policies issued in their favour. This can hardly be described as
a ‘substantial interest’ in the outcome of the appeal in
the sense described by this court in
Standard
Bank of SA Ltd v Harris & another NNO (JA du Toit Inc
Intervening)
2003 (2) SA 23
(SCA) para
5. A further distinguishing feature is that the application is
opposed by the Taxi respondents. In addition, as fairly
conceded by
counsel for Clarendon and Hollard, the main purpose in seeking leave
to participate in the appeal was to advance an
additional argument
based upon condition seven contained in the insurance policies. This
condition provided that unless expressly
endorsed upon the policy, no
person other than the insured would have any rights against Hollard.
It was alleged by Clarendon and
Hollard that there was no allegation
in any of the affidavits that the policies had been endorsed to grant
any rights to TS. The
appellants, however, only referred to this
condition in their replying affidavit before the court of first
instance. The Taxi respondents
objected to any reliance being placed
by the appellants upon the condition, as it would effectively amount
to the introduction,
in reply, of a new case. In the result, the
appellants did not advance any argument before either the court of
first instance or
the court a quo based upon the condition. The
participation by Clarendon and Hollard in the appeal with this
objective would clearly
be prejudicial to the Taxi respondents.
[14]
The second preliminary issue concerns the
contention of the Taxi respondents that the outcome of the appeal has
become moot. The
Taxi respondents filed an affidavit before the
hearing of the present appeal, setting out details of how the credit
agreements
concluded by each of the appellants had been cancelled
prior to special leave to appeal being granted. As a result of the
cancellation
of the credit agreements, the policies of insurance
issued to the appellants by Hollard lapsed, as the appellants no
longer had
an insurable interest in the motor vehicles.
[15]
The Taxi respondents accordingly contended
that the order sought by the appellants would have no practical
effect or result as contemplated
in s 21A(1) of the Supreme Court Act
59 of 1959. At the hearing, however, counsel for the appellants and
the Taxi respondents agreed
that the appeal should be heard. This
consensus reflected the practical reality that many other taxi
operators were in the same
position as the appellants. They had
concluded identical finance agreements and had been issued with
similar insurance policies
by Clarendon and Hollard. It was assumed,
without being decided in
Radio Pretoria
v Chairman Icasa
2005 (1) SA 47
(SCA)
para 40 that the ‘practical effect or result referred to in s
21A(1) of the Supreme Court Act is not restricted to
the parties
inter se
and that the expression is wide enough to include a practical effect
or result in some other respect’. In this wider sense
there
would be a practical result for other taxi operators with vehicles
financed by TS.
[16]
I turn to the merits of the appeal.
Contrary to the approach adopted by the court of first instance and
the court a quo, the issue
of whether the appellants have the right
to choose a broker of their choice during the subsistence of the
finance agreements, does
not require a resolution of the nature of
the cession contained in clause 4.6. What is required is an
examination of the relevant
documentation in the context of the
provisions of s 106 of the National Credit Act 34 of 2005 (the NCA),
the Financial Advisory
and Intermediary Services Act 37 of 2002 (the
FAIS Act) and the Code of Conduct promulgated in terms of the FAIS
Act.
[17]
TS is a registered credit provider in terms
of the NCA. It is clear that TS proposed to the appellants the
particular policies of
insurance issued by Hollard and underwritten
by Clarendon, the object of which was to insure the vehicles against
damage or loss.
TS was entitled to do this in terms of s 106(1) of
the NCA. Section 106(4), however, provides that a consumer must be
given, and
must be informed of the right to waive the proposed policy
and substitute a policy of the consumer’s choice.
[18]
Taxi Finance and Taxi Risk are registered
as intermediary services providers in terms of the FAIS Act. Section
1(1) of the FAIS
Act includes, in the definition of intermediary
services, buying, selling or managing a financial product, collecting
or accounting
for premiums payable, as well as dealing with the
claims of a client against a product supplier. A broker acts as an
intermediary
between the insured and the insurer – Joubert (ed)
The Law of South Africa
(2 ed) vol 12 para 470. In the context of the present dispute the
term ‘broker’ will be used to include an intermediary
as
defined in the FAIS Act.
[19]
Section 15 of the FAIS Act obliges the
registrar to draft and publish a code of conduct for authorised
financial services providers
which is binding on providers and their
representatives. Section 20(
a
)(i)
of the code provides that a provider must, subject to any contractual
obligations, give immediate effect to a request from
a client who
voluntarily seeks to terminate any agreement with the provider, or
relating to a financial product or advice.
[20]
Section 21 of the code prohibits a
financial services provider from requesting or inducing in any manner
a client to waive any right
or benefit conferred on the client, by or
in terms of any provision of the code or recognise, accept or act on
any such waiver
by the client. Any purported waiver is null and void.
[21]
On
the facts of this case TS was obliged to inform the appellants of
their right to waive the proposed insurance policy and substitute
it
with a policy of their choice. TS in performance of this obligation
presented for signature to Mr Hlela on 10 November 2008
a document
entitled ‘Acknowledgement of Freedom of Choice and Cession of
Rights’.
[1]
This document
reads as follows:
‘
You
have applied for finance from SA Taxi Securitisation who will require
certain security from you to protect its interest either
in the form
of a cession of a life policy or a comprehensive short-term vehicle
insurance policy or both. In the case of a short
term policy, this
will be ceded to SA Taxi Securitisation for the duration of the
finance agreement until such time as all outstanding
obligations have
been met.
With
regard to a credit life policy, you may choose whether to cede an
existing policy having the appropriate value or enter into
a new one.
If
you wish to enter into a new policy or make an existing policy
available you have the freedom of choice as to:
i.
The insurer and the broker or the
intermediary providing they are acceptable to SA Taxi Securitisation
prior to the agreement being
finalised
ii.
Whether or not the value of the policy
benefits, taking into account any other policy benefits ceded to SA
Taxi Securitisation shall
exceed the value of your debt
iii.
SA Taxi Securitisation’s Short-term
insurance policy must include comprehensive vehicle insurance cover,
including passenger
liability and [abscondtion], violation and credit
shortfall extensions
iv.
In the case of a life policy, whether or
not the benefits are to be provided in an event other than death or
disability
It
is hereby brought to your attention that the short-term insurance
policy will be ceded to SA Taxi Securitisation for the duration
of
the agreement as per clause 4.6 of the contract.
SA
Taxi Securitisation request that you acknowledge, by signing below,
that before the policy is used as security for your debt
or
obligations to SA Taxi Securitisation:
i.
You have been given written notification of
your entitlement to freedom of choice (see above)
ii.
You have exercised this
iii.
You were not coerced or induced in any way
when in the exercising of your choice.’
[22]
On the same day Mr Hlela was required to
sign the finance agreement which endured for a period of 60 months,
commencing on 15 December
2008. Mr Hlela was obliged in terms of this
agreement to keep the vehicle insured for the duration of the
agreement, with a registered
insurer approved by TS. Clause 4.6
contained the cession of the insurance policy to TS in the following
terms:
‘
4.6
The Lessee hereby cedes his entire right, title and interest in and
to every insurance policy effected in terms of this agreement
to the
Lessor, including the right to receive any payment from the insurer
in terms of each such policy, and the Lessee undertakes,
upon demand,
to deliver each such insurance policy to the Lessor. The Lessor shall
be obliged, after termination of this agreement,
to return each such
policy of insurance to the Lessee, and to cede the right, title and
interest therein back to the Lessee. Such
obligation shall, however,
be suspended until all claims made or to be made under each such
policy of insurance in respect of causes
that arose during the
currency of this agreement have been paid by the insurer.’
[23]
Mr Hlela also signed a ‘Midi Bus
Proposal Form’ which named ‘SA Taxi Finance (Pty) Ltd’
as the chosen broker
and stipulated that the policy was underwritten
by ‘The Hollard Insurance Company Limited’. The
‘Certificate
of Insurance’ which was subsequently issued
described the insurer as the Hollard Insurance Company Limited. The
period of
insurance was from 10 November 2008 to 9 November 2010. As
pointed out above, contrary to the choice of the appellants the
broker
was not reflected as Taxi Finance but as Taxi Risk.
[24]
When the terms of the document entitled
‘Acknowledgement of Freedom of Choice and Cession of Rights’
set out above are
considered, it is clear that the choice made by the
appellants was in respect of a single comprehensive fixed short-term
vehicle
insurance policy proposed by TS. The reference to the policy
is consistently in the singular.
[25]
The parties, however, clearly envisaged the
need for more than one insurance policy to be concluded to cover the
duration of the
finance agreement of 60 months. This is self-evident
from the fact that the duration of the chosen policy was only for a
period
of two years. The terms of the finance agreement also
envisaged the need for more than one insurance policy. Clause 4.5
provides
that TS will be entitled ‘at the end of the insurance
policy effected in terms of this agreement, to procure the renewal
thereof for the remainder of the duration of this agreement’.
[26]
When an insurance policy is renewed a new
policy of insurance comes into being on the same terms as the old
policy which expires
by effluxion of time. Without a new agreement
between the appellants and Hollard no contract of insurance could
exist after the
expiry of the initial period of insurance. A new
policy of insurance would consequently exist on its renewal from time
to time,
during the existence of the finance agreement. See
Southern
Insurance Association Ltd v Cooper
1954
(2) SA 354
(A) at 360G-361B.
[27]
The right of renewal of the policy accorded
to TS in terms of the finance agreement did not release TS from the
obligation in terms
of s 106(4) of the NCA to afford to the
appellants their right to choose the new policy, which would come
into existence upon the
renewal of the old policy. The appellants
were entitled to either renew the existing policy, or substitute it
with a policy of
their choice, subject of course to the acceptance by
TS of the choice of insurer in terms of clause 4.1 of the finance
agreement.
[28]
The appellants’ right to alter their
choice of broker must be considered in the light of this conclusion.
It is clear that
the appellants in the document entitled
‘Acknowledgement of Freedom of Choice and Cession of Rights’
acknowledged that
they had freedom of choice as to ‘the insurer
and the broker or the intermediary’ provided they were
acceptable to
TS before the finance agreement was finalised. The
exercise of the choice as to the broker was quite clearly linked to
the choice
of the particular policy. On termination of a policy the
right to choose a new policy would accordingly include the right to
choose
a new broker or intermediary, in respect of the new policy.
[29]
In any event, the parties could never have
intended that the appellants’ exercise of their freedom of
choice as to the identity
of ‘the broker or the intermediary’
would immediately be negated by the cession of the policy to TS. This
conclusion
is reinforced by the simultaneous exercise by the
appellants of their choice of Taxi Finance as their broker. Their
expressed choice
of a broker would be an exercise in futility, if the
common intention was immediately to cede to TS the right to appoint a
broker
of its choice to manage the policy. Such an interpretation
would be insensible or unbusinesslike and undermine the apparent
purpose
of the document. See
Natal Joint
Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA) para 18.
[30]
It is therefore clear that the parties
never intended to cede to TS the right to appoint a broker to manage
the policy for its duration.
TS accordingly was not entitled to
appoint Taxi Risk to manage the insurance policies of the appellants.
The appellants were entitled
in terms of s 20(
a
)(i)
of the Code to request the termination of Taxi Finance’s
mandate as their broker. Taxi Finance was obliged to give effect
to
this request subject to any contractual obligations. The appellants
are accordingly entitled to terminate the appointment of
a broker and
appoint a new broker at any stage during the subsistence of a policy
ceded to TS. The choice of a new broker would
be subject to
acceptance by TS in terms of the ‘Acknowledgement of Freedom of
Choice and Cession of Rights’.
[31]
Before launching the proceedings before the
court a quo the appellants appointed their broker to manage the
appellants’ portfolio
with Clarendon. Clarendon refused,
however, to give effect to the appointment of the appellants’
broker on the ground that
the consent of TS and Taxi Finance was
required before this could be done. Such consent was not forthcoming
on the ground that
TS held the right to appoint the broker. The Taxi
respondents were not entitled to reject the appellants’ choice
of broker
solely on that basis. The conduct of Taxi Finance and Taxi
Risk in refusing to do so was in breach of their obligations in terms
of s 20(
a
)(i)
of the Code.
[32]
The court a quo accordingly erred in
upholding the appeal of the Taxi respondents. The relief granted by
the court of first instance
requires amendment to make it clear that
it is the mandate of Taxi Finance that the appellants were entitled
to cancel. Counsel
for the Taxi respondents conceded that if it was
found that the appellants were entitled to appoint a broker or
intermediary to
manage the policies ceded to TS, a declarator should
issue to clarify this.
[33]
The following order is made:
1The
appeal is upheld with costs such costs to include the costs of two
counsel.
2
The order of the court a quo is altered to read as follows:
‘
(a)
The appeal is dismissed with costs such costs to include the costs of
two counsel.
(b)
The order of the court of first instance is altered to read as
follows:
(i)
It is declared that the first, second and third applicants are
entitled to cancel the insurance brokerage mandate held by the
second
respondent.
(ii)
The first, second, third and fourth respondents are ordered to give
effect to the first, second and third applicants’
cancellation
of the insurance brokerage mandate held by the second respondent.
(iii)
It is declared that the first, second and third applicants are
entitled to appoint brokers to manage the comprehensive short
term
motor vehicle insurance policies ceded by them to the first
respondent subject to the approval of the first respondent.
(iv)
The first, second and third respondents are ordered to pay the costs
of the application, jointly and severally, the one paying
the others
to be absolved.’
K
G B SWAIN
JUDGE
OF APPEAL
Appearances:
For
the Appellants: J Suttner SC (with him H Gani)
Instructed
by:
Pather & Pather
Attorneys, Durban
Claude
Reid Inc, Bloemfontein
For the 1
st
,
2
nd
& 4
th
Respondents: A R G
Mundell SC
Instructed
by:
Marie-Lou
Bester Inc, Johannesburg
Bezuidenhouts
Attorneys, Bloemfontein
For the 3
rd
and 6
th
Respondents
(Intervening
Party): P T Rood SC
Instructed
by:
Kern
& Partners, Johannesburg
Horn
& Van Rensburg Bloemfontein
[1]
It
was common cause that the documents presented to Mr Dlamini and Mr
Khwela were in identical terms.