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[2012] ZAECPEHC 45
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De Lange v Ombudsman for the Long Term Insurance and Others (919/2011) [2012] ZAECPEHC 45 (26 June 2012)
NOT
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE, PORT ELIZABETH)
Case No: 919/2011
In the matter between:
MONICA DE LANGE
….....................................................................................
Applicant
And
THE OMBUDSMAN FOR LONG-TERM
INSURANCE
….....................
First
Respondent
THE APPEAL TRIBUNAL OF THE
OMBUDSMAN FOR
LONG-TERM INSURANCE
…..........................................................
Second
Respondent
MOMENTUM GROUP LIMITED
….......................................................
Third
Respondent
Coram:
Chetty, J
Heard:
31 May 2012
Delivered:
26 June 2012
Summary:
Judicial
Review
-
Of decision of Ombudsman for long term insurance – Appeal
Tribunal – Promotion of Administrative Justice Act –
Whether applicable – Whether an organ of state – decision
not an administrative act – Common Law review –
Application dismissed
________________________________________________________________
JUDGMENT
________________________________________________________________
Chetty, J
Introduction
[1] The office of the Ombudsman for
Long-term Insurance was established on 1 January 1985. Its principal
function is to mediate
in disputes arising between subscribing
members of the industry and their respective policy holders.
Ex
facie
its constitution,
subscribing members are defined as
“
Those
Members of the Long-Term insurance industry who, from time to time,
are Subscribing Members to the Rules of the Ombudsman
for Long-Term
Insurance”
. Policy
holders are defined as
“
The
holders of polices of whatever nature issued by the Subscribing
Members”
. The
Rules regulating the relationship between the parties
inter
se
are published annually,
and of relevance to the present application are those in force as
from 9 July 2009. To give effect to its
mission statement to resolve
complaints through
“
mediation,
conciliation, recommendation or determination”
,
the constitution obligates the ombud to ensure that -
“
he acts
independently and objectively in advising on any complaint received
(referred to as the complaint handling process) and
takes no
instructions from anybody regarding the exercise of his authority.
the Subscribing
Members of the industry act with fairness and with due regard to
both the letter and spirit of the contract between
the parties and
render an efficient service to those with whom they contract;
he keeps the scale in
balance between the rights of the policyholders on the one hand and
the rights of Subscribing Members on
the other; and
due weight is accorded
to considerations of equity.”
[2] It will be gleaned from the
aforegoing that the functions of the Ombudsman as adumbrated
hereinabove are of a private nature
and does not involve the exercise
of any public power. It receives and investigates complaints from the
public against insurers,
period. With that prelude, I turn to the
facts of the case.
[3] During June 2009, the applicant
lodged a claim with the third respondent under a long term policy of
insurance which she held
with it for the benefit which the policy
provided for in the case of a functional impairment. The claim was
predicated upon the
provisions of sections 21 and 26 of the policy.
It is not in issue that she suffered a loss of hearing in her right
ear, a mild
sensory-neural loss in her left ear and severe damage to
her cranial VIII vestibulocochlear nerve. The third respondent
accepted
the claim lodged under section 21 and paid her the sum of
R237 500.00. It however repudiated the claim formulated in terms
of section 26 of the policy. Section 26 provided for a 100% pay-out
for “
a
critical illness
-
Cranial nerve
VIII (vestibulocochlear nerve)”
described
as “
nerve
damage with moderately severe equilibrium and/or hearing impairment
resulting in the limitation of the daily activities requiring
assistance with self-care”
.
[4] The applicant could, had she so
desired, have instituted an action for indemnification against the
third respondent by reason
of its repudiation of her claim. Instead
she filed a complaint with the first respondent, who, in due course
furnished a provisional,
and thereafter a final determination,
dismissing her complaint. She successfully sought leave to appeal
from the first respondent
to the designated Appeal Tribunal, the
second respondent. Having thus submitted to the jurisdiction of the
second respondent, she
accepted that the appeal to it was governed by
the provisions of the Ombudsman Rules, 6.6 and 6.7 which provide –
“
6.6 All issues
of a procedural and evidentiary nature shall be determined by the
Appeal Tribunal itself.
6.7 The decision of the
Appeal Tribunal shall be final and binding:
6.7.1 if the
complainant is the appellant, on all the parties concerned;
6.7.2 if the
subscribing member is the appellant, on it.”
[5] On 4 November 2010 the second
respondent dismissed the applicant’s appeal. Undaunted by this
setback, the applicant once
more approached the first respondent for
a reconsideration of its previous determination, ostensibly in the
circumstances contemplated
in Ombud Rule 2.2.2. She forwarded a
further statement by herself, a document styled
“
Certification
by Audiologist”
prepared
by an audiologist, Ms
Megan
Heard
and a
“
communication
profile for the hearing impaired
”
prepared
by another audiologist, Ms
Melanie
Naude
. The first respondent
duly considered the aforesaid documentation and, in a carefully
drafted missive declined to re-open the matter
on the basis, inter
alia, -
“
The further
material you contend is new, is not in fact new in the sense required
by Rule 2.2.2. Most of it had already been made
available between the
time you lodged your complaint with my office on 31 October 2009 and
when the decision by Judge Melunsky
was made on 4 November 2010, and
to the extent that the further material may have added additional
facts most of it is information
that had been known or available to
you previously or that you could readily have obtained. Furthermore,
some of it is irrelevant
to the real questions at issue.”
[6] By notice of motion filed in this
court on 29 March 2011 the applicant seeks a judicial review of the
decisions of the first
and second respondents dismissing her
complaint. The relief sought is formulated as –
“
i. Reviewing and
setting aside the decision of the 1
st
Respondent dated 20 July 2010 and substituting that decision to read:
‘
The
Applicant’s complaint is wholly upheld and Momentum Group
Limited is ordered to pay the Applicant the functional
impairment
benefits provided for in section 26 of Momentum Policy Number
205588110.’
In the event that
this Honourable Court finding that the decision referred to in prayer
(i)
supra
should stand, the Applicant prays for the following
alternative relief:
ii. Reviewing and
setting aside the decision of the 2
nd
Respondent dated 4
November 2010 and substituting it with the following Order:
‘
The
Applicant’s appeal is substantially upheld and Momentum Group
Limited is ordered to pay the Applicant the functional impairment
benefits provided for in section 26 of the Momentum Policy Number
205588110.’
In the event that
this Honourable Court finding that the decision referred to in prayer
(ii)
supra
should stand, the Applicant prays for the following
alternative relief:
iii. Reviewing and
setting aside the decision of the 1
st
Respondent dated 22 February 2011 taken in terms of Rule
2.2.2 of the
Rules of the Ombudsman for
Long-Term Insurance
, and substituting that
decision with and Order in the following terms:
‘
The
Applicant’s claim complies with the provisions of section 26 of
her Momentum Policy Number 205588110 and the 3
rd
Respondent is
ordered to pay to the Applicant the functional impairment benefits
provided for in section 26 of the said policy.’
iv. Costs of suit
against those Respondent(-s) who oppose this application, jointly and
severally, the one paying the other to be
absolved.”
[7] The relief sought against the
first respondent is, upon a proper consideration of the Rules,
legally incompetent. Although Rule
2.2.2 obliges the first respondent
to reconsider a complaint in the circumstances provided for, it is
evident that the envisaged
reconsideration must occur prior to any
appellate intervention given the express wording of Rule 6.7 that the
decision of the Appellate
Tribunal is final and binding.
Ergo
,
the first respondent had no jurisdiction whatsoever either to
entertain or to consider the further submissions advanced on behalf
of the applicant consequent upon the final determination of the
appeal by the second respondent
[8] It is not in dispute that the
complete set of documentation concerning the dispute between the
applicant and the third respondent
served before the second
respondent. The third respondent submitted further heads of argument
whilst the applicant, in response
to a letter addressed to her by the
first respondent inviting any further submissions which she
considered should be placed before
the second respondent, advised
that she had none. She nonetheless voiced her dissatisfaction at what
she contended were vital omissions
from the appeal record. In
response, the first respondent, whilst acknowledging that the three
letters addressed to it
viz
, 25, 26 and 27 May 2010
respectively by the applicant had inadvertently been omitted from the
appeal record vouchsafed that they
would be forwarded to the second
respondent, as indeed they were.
[9] The issues which fell for
determination by the second respondent were succinctly formulated
thus –
“
In order to
arrive at a decision I have to consider three main questions. The
first, and perhaps the most difficult, concerns the
proper
interpretation to be placed on section 26 in the setting of the
Functional Impairment Benefits Schedule. The second relates
to the
question of causation, a matter that arises due to the insured’s
pre-existing emotional stress that resulted in her
having to be
treated by a psychologist. The third question is whether, on the
facts before me, Mrs de Lange’s condition can
properly be said
to fall within the ambit of section 26. I propose to deal with each
of these aspects in turn but before doing
so I will briefly set out
the history of the events leading up to the claim, together with the
views expressed by the medical and
other experts. There is no need
for me to elaborate on these matters, not only because they are well
known to the parties but also
because they do not, in themselves,
give rise to disputed factual issues.”
The second respondent in a well
reasoned judgment gave careful consideration to all the relevant
facts, submissions and reports,
dismissed the appeal and recorded his
finding, pursuant to Rule 6.9.2, that the appeal was substantially
unsuccessful.
[10] The review is
brought both under the common law and under the
Promotion
of Administrative Justice Act
1
(
PAJA
).
The common law review is premised upon three main grounds, firstly,
the refusal to afford her the opportunity to be heard on
the proper
interpretation of section 26 of the policy of insurance; secondly,
the failure by the second respondent to observe a
two phase appellate
hearing
viz
to make a
provisional finding and only thereafter on receipt of further
submissions, a final determination and thirdly, that the
second
respondent acted
mala
fides
,
had an ulterior motive and failed to apply his mind. The first two
grounds can be disposed of shortly. There was no obligation
or indeed
need for the second respondent to have elicited any further
submissions from the applicant. The entire record served
before it.
The further contention that the appeal process envisages a two phase
approach is untenable. The rules make no provision
therefore. The
review, under the umbrella of
PAJA
,
is premised upon the supposition that the decision reached by the
second respondent constituted administrative action, and as
such, was
reviewable under section 6(2)(c), (action procedurally unfair),
section 6(2)(e)(iii) (irrelevant considerations taken
into
account/relevant considerations not considered), section
6(2)(f)(ii)(cc) (action not rationally connected to the information
before the second respondent) and section 6(2)(h) (unreasonable
exercise of power).
[11] Recourse to
PAJA
is entirely
misplaced. The decision taken by the second respondent did not amount
to the exercise of power nor was it given in the
performance of a
public function - in short it did not constitute administrative
action. This conclusion is fortified, as counsel
for the second
respondent correctly submitted, by the fact that –
membership by any long term insurer
of the Long Term Association is entirely voluntary;
policy holders and other complainants
who have a complaint about a long term policy issued by a
subscribing member are not obliged
to utilize the office of the
ombud. They are not members of the Long Term Association and not
contractually bound to abide by
its rules or constitution;
once a decision has been made by the
ombud which had the effect of dismissing a complainant’s
claim, the latter was not
obligated to engage in the ombud’s
appeal process. She was at liberty to institute an action against
the third respondent
or take whatever other steps she so desired.
Review under the Common Law
[12] The grounds
for review under the common law were propounded by Corbett JA in
Johannesburg
Stock Exchange and Another v Witwatersrand Nigel Ltd and Another
2
as follows –
“
Broadly,
in order to establish review grounds it must be shown that the
president failed to apply his mind to the relevant issues
in
accordance with the 'behests of the statute and the tenets of natural
justice' (see
National
Transport Commission and Another v Chetty's Motor Transport (Pty)
Ltd
1972
(3) SA 726
(A)
at
735F - G; Johannesburg Local Road Transportation Board and Others v
David Morton Transport (Pty) Ltd
1976
(1) SA 887
(A)
at
895B - C;
Theron
en Andere v Ring van Wellington van die NG Sendingkerk in Suid-Afrika
en Andere
1976
(2) SA 1 (A)
at
14F - G). Such failure may be shown by proof,
inter
alia
,
that the decision was arrived at arbitrarily or capriciously or
mala
fide
or
as a result of unwarranted adherence to a fixed principle or in order
to further an ulterior or improper purpose; or that the
president
misconceived the nature of the discretion conferred upon him and took
into account irrelevant considerations or ignored
relevant ones; or
that the decision of the president was so grossly unreasonable as to
warrant the inference that he had failed
to apply his mind to the
matter in the manner aforestated. (See cases cited above; and
Northwest
Townships (Pty) Ltd v Administrator, Transvaal, and Another
1975
(4) SA 1
(T)
at
8D - G;
Goldberg
and Others v Minister of Prisons and Others (supra
at
48D - H);
Suliman
and Others v Minister of Community Development
1981
(1) SA 1108
(A)
at
1123A.) Some of these grounds tend to overlap.”
[13] The second respondent, in a
meticulously drafted and reasoned judgment had regard to the entire
body of evidential material
placed before it. It considered and
evaluated all the evidence, including the medical reports, in
wrestling with the proper interpretation
of clause 26. It commenced
the exercise by first rejecting the third respondent’s
contention that the insurer’s intention
embodied in the
definition in section 26 was to cover
“
nerve
damage with moderately severe equilibrium (impairment) with or
without hearing impairment, resulting in the limitation of
all daily
activities requiring assistance with self-care”
before
stating –
“
As the Ombudsman
pointed out in a letter to Momentum on 17 June 2010, the relevant
section covers nerve damage with moderate severe
equilibrium
and/or
hearing impairment. Whatever the insurer’s intention might have
been, it cannot override the words actually used. In my view,
therefore, the section envisages:
moderately-severe
equilibrium impairment; or
moderately-severe
hearing impairment; or
a combination of (a)
and (b).
Whether the insured
relies upon (a), (b) or (c), however, she will also have to establish
that the impairment results in
‘
the
limitation of all daily activities requiring assistance with
self-care’,
subject to my suggested
interpretation. Hidden within this phrase is a latent ambiguity: for
it is almost impossible to image how
a moderately-severe hearing
impairment could reasonably result in a limitation of all daily
activities. In this regard I agree
with the Ombudsman’s view,
set out in the final determination, that
‘
. . . it is
difficult to see how this provision can provide any cover at all,
because deafness, even if it were total and in both
ears, could
hardly give rise to a limitation of
all
daily activities’
[14] It then embarked upon an analysis
of case law in point expounding the principles of construction in
policies of insurance of
similar ilk and posed the question
“
How
then, should section 26 be construed”
before
providing the following answer -
“
[11] One way
might be to ignore the word “alle” completely but it
seems to me that it is not necessary to resort to
such a drastic
remedy, at least insofar as the Afrikaans version is concerned. It
would be sufficient to give proper effect to
the obvious intention of
the parties by replacing the expression “alle daaglikse”
with a single word “alledaagse”,
meaning “everyday”.
What would then be covered by the section would be a limitation of
the insured’s everyday
activities. A construction along these
lines would also give effect to the two rules of construction which
ordinarily benefit the
insured, viz the
contra
proferentem
rule
and the rule that the assured should be favoured (see Kliptown
Clothing
case
at 108B-C
)”
[15] It then considered the question
of causation and undertook a thorough evaluation of the applicant’s
condition with specific
regard to the effect of the damage to her
eighth cranial nerve with reference to the provisions of section 26
and the facts before
concluding,
“
[25] But however
that may be, I am far from being satisfied that Mrs de Lange’s
hearing impairment has resulted in the limitation
of her everyday
activities to such an extent that she requires assistance with
self-care. On the contrary what evidence there is
indicates with
relative certainty that, in general, she has the ability to care for
her own everyday needs without medical, professional
or other
assistance. In my opinion, therefore, Momentum was entitled to
repudiate her claim under section 26.”
The aforegoing reproduction of the
second respondent’s reasons for dismissing the appeal
demonstrate quite unequivocally that
there is no basis for the
applicant’s complaint that the second respondent failed to take
into account relevant considerations
and gave undue weight to
irrelevant ones or that the decision arrived at was arbitrary or
capricious. The third, and only remaining
common law ground for
review, is fallacious and the application accordingly falls to be
dismissed.
[16] Although the second respondent
did not oppose the application and abides the decision of this court,
it nonetheless filed an
affidavit in which the deponent refutes the
allegations leveled against him by the applicant. It is unnecessary
for purposes of
this judgment to consider the affidavit in any detail
for
ex facie
the judgment, the accusations leveled against the
second respondent are spurious and without foundation. Neither the
second respondent’s
approach nor reasoning is open to attack.
[17] The general rule is that costs
follow the result. The third respondent has however sought a punitive
costs order against the
applicant by reason of her unwarranted attack
upon the integrity of the first and second respondent. Whilst it is
indeed so that
her letters and affidavits contain gratuitous comment,
I am unpersuaded that either the first or second respondents are
particularly
affronted thereby. In the result the following order
will issue –
The application is dismissed with
costs.
________________________
D.
CHETTY
JUDGE
OF THE HIGH COURT
Obo
the Applicant: In Person (Tel: 072 713 3418)
Obo the 3
rd
Respondent:
Adv A.R.G Mundell S.C instructed by Goldberg & De Villiers, 13
Bird Street, Central, Port Elizabeth, Tel (041)
501 9806, Ref: C
Jonker
1
Act
No, 3 of 2000
2
1988
(3) SA 132
(A) at 152A-E