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[2010] ZASCA 85
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Delphisure Group Insurance Brokers Cape (Pty) Ltd v Kotze and Others (437/2009) [2010] ZASCA 85; 2010 (5) SA 499 (SCA) ; [2011] 1 All SA 109 (SCA) (31 May 2010)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no: 437/2009
In the matter between:
DELPHISURE
GROUP INSURANCE BROKERS
CAPE
(PTY) LTD
Appellant
and
GYSBERT JOHANNES KOTZé DIPPENAAR
First Respondent
GERRIT ANDRIES VISSER
Second Respondent
BEXSURE (PTY) LTD
Third Respondent
Neutral citation:
Delphisure Group Insurance
Brokers Cape v Dippenaar
(437/09)
[2010] ZASCA 85
(31 May 2010)
Coram:
MPATI P, NUGENT, MALAN and LEACH
JJA and
SERITI AJA
Heard: 4 May 2010
Delivered: 31 May 2010
Summary
Delict – negligence –
claim for damages for negligent
misrepresentation – claim
upheld.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
Western Cape High Court (Cape
Town) (Ms Acting Justice Dicker sitting as court of first instance):
The appellant’s appeal in respect of the claim of
the first respondent is dismissed.
The appeal in respect of the claim of the second
respondent is upheld, and para 3 of the order of the court a quo is
set aside
and substituted with the following:
‘
The second plaintiff’s
claim against the second defendant is dismissed, and the second
plaintiff is to pay 30 per cent of
the second defendant’s
costs.
’
The appellant is to pay the first and third
respondent’s costs of appeal, such costs to include the costs
of two counsel
where so employed.
The second respondent is to pay 30 per cent of the
appellant’s costs of appeal, such costs to include the costs
of two counsel.
______________________________________________________________
JUDGMENT
______________________________________________________________
LEACH JA (MPATI P, NUGENT, MALAN JJA and SERITI AJA
concurring):
[1] This case involves a delictual claim for pure
economic loss suffered as a result of a misrepresentation of fact.
The first
and second respondents farm wheat in the Piketburg district
of the Western Cape. The appellant (‘Delphisure’) is an
insurance brokerage that devised a crop insurance product known as
Farmsure which was marketed by the third respondent (‘Bexsure’)
for the 2004 growing season. Both the first and second respondents
applied for Farmsure insurance, but it later transpired that
no such
product in fact existed as, despite all its efforts, Delphisure had
not succeeded in having it underwritten by an insurer.
When their
crops failed, the first and second respondents instituted action in
the High Court, Cape Town against both Delphisure
and Bexsure whom
they alleged had misrepresented that the Farmsure product was in
place, thereby causing them not to take out insurance
with another
insurer, Mutual and Federal Insurance Company Ltd (‘Mutual &
Federal’), and claiming as damages the
amounts they would have
been paid by Mutual & Federal if it had insured their crops. The
claim succeeded solely against Delphisure
(the court a quo held that
Bexsure had not known that Farmsure did not exist at the material
time). With leave of the court a quo,
it appeals to this court
against that decision.
[2] Not only does Delphisure sell insurance on
behalf of insurance companies but it acts as an administrator of
insurance products
sold to third parties and is an accredited agent
of the international insurer Lloyds of London (‘Lloyds’)
on whose
behalf it has been mandated to market a range of short term
insurance policies. Farming in this country is an enterprise often
afflicted by natural perils, and many farmers insure their crops
against failure. In 2002 and 2003, Delphisure marketed a crop
insurance policy in the Northern Cape. Underwritten by Lloyds and
issued by the Cape Insurance Company Ltd, this was a policy devised
for the benefit of the members of the Griqualand West Co-operative
Society. It generated considerable interest and Mr ‘Vango’
Kolovos, at the time Delphisure’s general manager, was
approached by a representative of Bester Feed & Grain Exchange
(Pty) Ltd, a substantial player in the grain industry in the Western
Cape that handled the wheat of several hundred wheat farmers,
to
ascertain whether it would be possible to arrange a similar crop
insurance product for farmers in the Western Cape.
[3] Kolovos recognised crop insurance as being a
potentially lucrative product, particularly in the Western Cape where
wheat
is produced on a large scale, and entered into negotiations
involving the third respondent (‘Bexsure), a company in the
same
stable as Bester Feed & Grain, as well of representatives of
Lloyds, to see if it would be possible to devise a suitable product.
In doing so, Kolovos attempted to devise an insurance model that
would satisfy Lloyds’ requirements to underwrite the product.
Crucial to its acceptance were what Kolovos described as the
necessary demographics, which included the geographical situation
of
the farms to be insured, the likely quantities of wheat to be
produced and insured, and the anticipated value of the insured
risk.
It was of importance to Lloyds for the risk to be spread, and
consequently any model in which most of the farmers taking
insurance
were from the same district was regarded as undesirable as a
localised crop failure in that district could hold disastrous
consequences for an insurance underwriter.
[4] In addition, in order to provide a new product
likely to sell, Kolovos had to come up with a model that had
advantages over
the products of competitors already in the market. In
this regard, other insurers offered cover for no more than 65 per
cent of
a farmer’s anticipated crop and did not offer so-called
‘emergence cover’ which insured farmers in the event of
their crops not germinating and emerging from the ground. Indeed, the
other cover available was conditional upon a certificate
of emergence
being issued once sufficient germination and emergence had taken
place. Kolovos decided to better this in his model
by providing for a
product allowing a farmer an election to take up to 100 per cent crop
cover and also to include emergence cover
(the attraction of the
latter being that if germination did not take place the farmers would
still receive compensation for their
production costs in preparing
the soil and planting).
[5] All of this required ongoing consultations and
negotiations. In a letter addressed to Kolovos on 25 February 2003,
the financial
director of Bexsure, after providing certain
information relevant to a potential insurance product, concluded ‘
. . . we
need to be assured that you will be able to supply us with a
product as described with the necessary underwriting and legal
requirements
being met’. Kolovos responded by expressing the
opinion that Bexsure’s requirements were achievable but that it
would
be necessary to provide an extremely detailed presentation to
insurers in London to obtain approval.
[6] It soon became clear that it was too late to
arrange any insurance for the 2003 season and it was decided to
attempt to do
so in the following year. Consultations continued,
during which Lloyds stated that the policy should use the terms of
policies
that were tried and tested. This led to the policy wording
of Mutual & Federal’s crop insurance being used, adapted to
provide for both a choice of up to 100 per cent crop cover as well as
emergence insurance. In addition, a schedule of premium rates
was
prepared and the product was given the name ‘Farmsure’.
The suggestion by Kolovos of a condition that at least
half the
farmers in each co-operative should take the cover was regarded by
Bexsure as impractical, as Kolovos ultimately conceded.
But despite
all of this, Lloyds did not give Kolovos its unconditional support,
and still needed to be persuaded by the demographics
before agreeing
to underwrite the product.
[7] Rumours about a new crop insurance product to be
marketed by Bexsure began to do the rounds in the farming community
of the
Western Cape as the 2004 growing season approached. As a
result, and as it was the intention for Farmsure to be marketed
through
farmers’ co-operatives who would collect the premiums
from their members by debiting their accounts, Bexsure arranged a
meeting
in Stellenbosch on 21 April 2004 to which it invited
representatives of a number of co-operatives, including Mr Danie
Gouws, an
insurance consultant who was at the time employed by the
co-operative known as Boland Agri. In addition, a number of private
insurance
brokers also attended, including Mr Le Roux van Wyk, who
had persuaded Lizelle Scott (a director of Bexsure who was primarily
involved
in the marketing of Farmsure) to allow him to attend as he
had a number of farming clients who were interested in the rumoured
new crop insurance product.
[8] The meeting was addressed by Kolovos who, when he
later testified, attempted to persuade the court a quo that he had
explained
that Farmsure was not yet in existence but was conditional
upon acceptance by Lloyds, and that such acceptance was in turn
conditional
upon the demographics of the model being met by the
number of sales, the amount of insurance that was taken up, the
average percentage
of the crops insured and the geographical spread
of the farmers who purchased the product. As against this allegation,
the weight
of the evidence led from the witnesses Scott, Van Wyk and
Gouws, was that Kolovos formally announced the Farmsure product,
stated
that it was fully underwritten by Lloyds and stressed its
advantages by providing emergence cover and a choice of insurance for
up to 100 per cent of the crop. In the light of the weight of this
evidence and the inherent probabilities, the court below correctly
found that Kolovos’s evidence on this score could not be
accepted and that he had indeed created the impression that the
Farmsure product was available and was underwritten by Lloyds.
[9] Presumably Kolovos did not make it plain that
Lloyds had not yet approved the Farmsure policy as it would have been
impossible
to market non-existent insurance. However, he did ask the
co-operatives to complete questionnaires in order to ascertain how
many
members in each co-operative were likely to insure their wheat
crops during the forthcoming season, what premiums were likely to
be
generated, and the anticipated quantity of wheat likely to be
insured. These completed questionnaires were returned to him within
a
day. As time was of the essence (farmers were due to begin planting
within a few weeks and it had been agreed that the final
cut-off date
for Farmsure applications would be 10 May 2004) on 26 April 2004,
Kolovos telefaxed the following letter to Bexsure:
‘
This serves to confirm
and indicate the parameters of the anticipated insurance.
As per the attached, being the
minimum figures for crop per each Co-op and the minimum in total to
have a successful crop model.
Acceptance by Lloyds of London
of the exclusion of the 50% ruling as indicated by your motivational
letter.
Premiums to be paid by the
Co-op or the farmers by no later than the end of the month of the
effective date of the crop policy.
All policies to be written by
no later than 10 May 2004.
Based on the presales figures,
a final decision of acceptance will be made by the underwriter.
The crop certificates are in the
process of being created and will be available by Wednesday 28
April.’
[10]
The
schedule attached to this letter contained a synopsis of the
information contained in the completed questionnaires, including
details of the geographical areas in which the farmers who were
likely to purchase Farmsure conducted their farming operations
and
the anticipated quantity of the crops that would be insured. Scott
testified that on receipt of this letter she was both anxious
and
confused as she wanted urgently to start marketing the product and
had understood Kolovos at the Stellenbosch meeting to say
that it was
in place. She therefore contacted him, and he advised her that
everything was in fact in order but that she should
not start
marketing until he provided the necessary documentation. To that end,
a Bexsure logo was e-mailed to Delphisure for incorporation
onto
application forms. These documents, once so prepared, were generated
by Delphisure’s computer system and made available
to Bexsure.
[11] On 28 April 2004, Kolovos gave Scott the
go-ahead to market Farmsure. As part of her marketing strategy, she
arranged a
meeting on 5 May 2004 at the Winkelshoek building at
Piketberg, commonly known as the ’Rietdak’. This meeting
was attended
by a number of farmers, including the first and second
respondents, both of whom had already applied to Mutual & Federal
for
crop insurance for the season. The application of the first
respondent had already been accepted, although it was conditional
upon
the issue of an emergence certificate, while that of the second
respondent was subject to approval after an inspection of his farm
had been conducted (an issue to which I shall return in due course).
However, both had been so intrigued by the rumours of the
Farmsure
product that they had arranged for their insurance broker, Van Wyk,
to obtain quotations of the anticipated cost of premiums
from Bexsure
on their behalf.
[12] At the meeting, Scott gave details of what
Farmsure offered, explained that the cut-off date for applications
was 10 May
2004 and informed those present that the product was in
existence and was fully underwritten by Lloyds. The first and second
respondents
found the product to be so attractive that, immediately
after the meeting, they both contacted their broker, Van Wyk, through
whom
they had placed their applications for crop insurance for the
season with Mutual & Federal, and asked him to see if he could
arrange for those applications to be withdrawn or cancelled. Van Wyk
went ahead and succeeded in doing so. Meanwhile the first
and second
respondents applied to Bexsure for Farmsure insurance for the 2004
season.
[13] Unfortunately for all concerned, the sales of
Farmsure for various reasons failed to meet the demographic
requirements
of Lloyds. Despite meetings and negotiations being held
with various farmers and other interested parties, and attempts being
made
to attract underwriting from other quarters, none of which is
necessary to detail for purposes of this judgment, it proved
impossible
to obtain underwriting for Farmsure which therefore never
saw the light of day. While this was going on, the crops planted by
the
first and second respondents germinated but, despite their
initial promise, ultimately failed due to adverse weather conditions.
As the first and second respondents were left uninsured due to the
Farmsure policies for which they had applied having been still-born
and their Mutual & Federal applications having been cancelled,
they were understandably aggrieved. And so, in due course, they
instituted action claiming the amounts they alleged they would have
recovered from Mutual & Federal had they not cancelled
their
applications on the strength of Scott’s misrepresentation at
the Rietdak meeting that the Farmsure cover was in place
and fully
underwritten by Lloyds.
[14] It is convenient at this stage to consider
Delphisure’s contention that Scott knew at the time of the
Rietdak meeting
that the Farmsure product was not finally in place
and was dependent upon the demographics obtained from the sales of
the product
being sufficient to
persuade Lloyds
to accept the model – it being its contention either that it
could not be held responsible for Scott’s
failure to inform the
meeting of the true state of affairs, alternatively, that even if it
was responsible, Scott was a joint wrongdoer
whose actions rendered
Bexsure jointly and severally liable with it to the first and second
respondents.
[15] Scott denied that she was aware that Farmsure
still had to be accepted by Lloyds at the time and testified that
Kolovos
had brought her under the impression that everything was in
order. It was argued by Delphisure that she could not be believed,
particularly in the light of the fifth point in the letter of 26
April 2004 in which it was stated that a final decision on acceptance
would be made by the underwriter based on the ‘pre-sales
figures’ which, so it contended, were the figures which would
be forthcoming after the policy had been marketed. This cannot be so.
Not only would it be a contradiction in terms to refer to
the figures
of actual sales as a ‘pre-sales figures’ but, bearing in
mind that the schedule attached to the letter
contained an analysis
of anticipated sales derived from the questionnaires which had been
completed, the reference therein to pre-sales
figures could only have
meant those figures set out in the schedule. Accordingly, the letter
meant only one thing, namely, that
Delphisure was awaiting a final
decision by the underwriter (Lloyds) to be taken on strength of the
information set out in the
schedule. Accordingly, when Kolovos later
told Scott everything was in order and subsequently, on 28 April
2004, gave her the
green light to go ahead to market Farmsure, she
was entitled to think that on the strength of pre-sales figures
attached to the
schedule to the letter of 2 April, Lloyds had agreed
to underwrite the product. In any event, Scott was not likely to go
out and
market a product which to her knowledge did not exist, and
the probabilities are overwhelming that she only did so as she was
under
the impression that since 26 April Lloyds’ requirements
had been met and that it had agreed to underwrite the product. The
argument that Scott was thus aware at the Rietdak meeting on 5 May
that the Farmsure product was not in place cannot be sustained.
[16] This conclusion is relevant to the question of
negligence, an issue to which I now turn, the test for which is so
well known
that it need not be repeated. In considering the question
of negligence, it is necessary to consider the foreseeability of
harm,
an issue which is also relevant to the question of legal
causation as I shall mention in due course.
[17] In regard to foreseeability, a reasonable person
in Kolovos’ position when he instructed Scott to commence her
marketing
operations would have appreciated that she would be under
the false impression that Lloyds had agreed to underwrite Farmsure
and
that, in marketing the product, she would represent that it was
available and underwritten by Lloyds. Indeed that would be a major
marketing tool, and he therefore caused Scott to go out into the
farming community to spread false information in order to sell
crop
insurance in the hope that the sales which were forthcoming would
persuade Lloyds to agree to underwrite the product.
[18] In order to avoid the obvious consequences
flowing from such conduct, counsel for Delphisure argued that it had
not been
reasonably foreseeable at the time that any farmer who
applied for Farmsure cover would suffer a loss in the event of Lloyds
ultimately
declining to underwrite the product. This contention was
based on the fact that no other crop insurance was available as all
other
insurers had already closed their applications for the 2004
season. Accordingly, so it was argued, the only farmers who it could
be foreseen might apply for Farmsure cover were those who would not
have been insured against crop failure in any event, and that
a
reasonable person would not have foreseen that farmers who had
already applied for insurance cover would cancel or withdraw their
applications in respect of that cover – or, at the very least,
would only have foreseen that those who had already applied
for
insurance would only cancel such applications once they had applied
for and been granted Farmsure insurance. Consequently,
so the
argument went, the loss suffered by the first and second respondents,
who had withdrawn their applications for crop cover
from Mutual &
Federal and who were left without cover when the Farmsure product was
stillborn, was not reasonably foreseeable
[19] These contentions, too, must be rejected.
Farmsure’s selling point was that it was a product superior to
the other
crop insurance then available, offering both crop cover of
up to 100 per cent and emergence cover – both of which were not
elsewhere available. A reasonable person would therefore have
realized that farmers who had already applied for crop insurance
from
competitors such as Mutual & Federal might seek to resile
therefrom and apply for Farmsure insurance instead. The likelihood
of
such action was all the more real in the light of, first, the
considerable interest and enthusiasm that Farmsure had generated
in
the farming community as had become apparent at the meeting at
Stellenbosch on 24 April 2004, secondly, that even though the
cut–off
date for other insurances had passed such applications might not yet
have been accepted (as was indeed the case with
the application of
the second respondent) and, thirdly, that even if such applications
for other insurance products had been accepted,
the insurance would
still be conditional upon the issue of a certificate of emergence
after germination of the crop, and that it
was only at that stage
that farmers who had applied for such insurance would be obliged to
pay their premiums. As planting for
the 2004 season was still to take
place, the issue of emergence certificates and the obligation to pay
premiums were still a long
way off and, in these circumstances, a
reasonable person in Kolovos’s postion would have foreseen that
farmers who had already
applied for crop insurance for the 2004
season, on hearing of the considerable advantages of the Farmsure
product, might well decide
to cancel their applications for other
insurance before they had to pay their premiums and, instead, apply
for a Farmsure policy
– and that in doing so they would not
necessarily wait to see if their Farmsure applications were
successful. After all,
they would have no reason to think that those
behind a new product would not wish to accommodate as much business
as possible and
reject their applications. Nor would they wish to run
the risk of becoming obliged to pay crop insurance premiums to two
different
insurers. It was thus clearly foreseeable that farmers
might well cancel their applications for crop cover that were still
pending
and, in that event, they would be left without crop insurance
for the 2004 season should Lloyds decline to underwrite Farmsure and
would suffer financial loss if their crops were to fail. The loss
suffered by the first and second respondents was therefore reasonably
foreseeable.
[20] Also relevant to the
question of negligence is whether steps could have been taken to
guard against the loss. It was a simple
matter for Kolovos to have
done so. All that was required of him was to tell the truth,
something which would in any event have
been expected from an honest
insurance broker. Had he not misrepresented to Scott that the
Farmsure product was fully underwritten
by Lloyds when he instructed
her to go out to market it, she would not have brought the first and
second respondents under the
impression that the Farmsure product was
available. Although, as Kolovos emphasised, the Farmsure application
form proclaimed that
the insurance would only become effective upon
acceptance of the application, that is a standard term in all
applications for insurance.
And there is a considerable difference
between representing, on the one hand, that an insurance policy
exists but that an application
has to be accepted before it becomes
effective and, on the other, that an insurance policy does not exist
and may only come into
existence should the underwriter in the future
agree to act as insurer. The standard terms of the policy if anything
added to the
misrepresentation of the existence of the product.
[21] Kolovos in fact took no steps
to guard against the clearly foreseeable harm which might be suffered
by persons in the position
of the first and second respondents in the
event of them being enticed into applying for Farmsure cover. In
these circumstances,
negligence on the part of Kolovos was clearly
established, and the fact that Scott was the person who made the
actual misrepresentation
to the first and second respondents in
marketing the policy on his instructions does not entitle Delphisure
to escape responsibility.
1
[22] At the same time,
Delphisure’s argument that Scott was also negligent can be
rejected. As I have said, there was no
reason for her to have
suspected that the Farmsure product had not been approved by Lloyds
and she was clearly under the impression
that the necessary
underwriting was in place. That misunderstanding was a reasonable
one, and I am not persuaded that the court
a quo in any way erred in
finding that Scott had not acted negligently in misrepresenting the
position to the first and second
respondents. Its finding in that
regard must stand.
[23] I turn now to consider the
question of the wrongfulness of Kolovos’s misrepresentation.
Where a claim is for pure
economic loss,
2
even if the conduct causing such loss is negligent, it will only be
regarded as unlawful and therefore actionable if there are
public or
legal policy considerations which require liability to follow for the
damage it caused.
3
[24] As has been correctly
observed, it is something of an understatement to say that liability
always depends on the facts of
each given case as there are certain
categories of cases in which liability will almost indubitably
follow.
4
But each case must be considered on its own merits and there is no
simple litmus test that can be applied to determine whether
in all
cases liability should follow. Despite that, in
Fourway
Haulage SA (Pty) Ltd v SA National Roads Ltd
5
Brand JA expressed the view that our law has moved beyond the stage
where liability will be dependent upon the ‘idiosyncratic
views
of the individual judge as to what is reasonable and fair’, and
echoed the words of Nugent JA in
Minister
of Safety and Security v Van Duivenboden
6
that ‘what is called for is not an intuitive reaction to a
collection of arbitrary factors but rather a balancing against
one
another of identifiable norms’. To that may be added that such
a process involving criteria to which recognition has
been given in
the past as either favouring or operating against the recognition of
liability will advance the cause of certainty
in judicial decisions,
a result to which it is always necessary to strive.
[25] Bearing that in mind, I turn
to considerations of policy which are relevant. One important factor
is of course the fear
of so called ‘boundless liability’
and an appreciation that the law will recognise liability more
readily where there
is not a limitless number of claimants likely to
bring a multiplicity of actions.
7
Gleaned from previous decisions, important considerations to which
regard may be had are the following (the list is not intended
to be
exhaustive):
Whether the plaintiff was vulnerable to the risk (which
would favour a finding of liability) or could have avoided it by
contractual
means such as a disclaimer (which would operate against
liability);
Whether the extension of liability would impose an
unwarranted burden on a defendant or, conversely, whether it would
not unreasonably
interfere with the defendant’s commercial
activities as the defendant was already under a duty to take
reasonable care
in respect of third parties;
The nature of the relationship between the parties,
contractual or otherwise;
Whether the relationship between the parties was one of
‘proximity’ or closeness;
Whether the statement was made in the course of a
business context or in providing a professional service ;
The professional standing of the maker of the
statement;
The extent to which the plaintiff was dependant upon
the defendant for information and advice;
The reasonableness of the plaintiff relying on the
accuracy of the statement.
[26] In considering these factors,
it is of considerable importance that this is not a case in which
there is likely to be boundless
liability involving an unlimited
number of claimants. The misrepresentation was made to a limited
class, being the farmers to whom
Farmsure was offered. Counsel for
Delphisure also correctly conceded that this was not a case in which
the risk could have been
avoided by contractual means or in which the
extension of liability would impose an unwarranted burden upon
Delphisure. It is also
relevant that Kolovos knew that the
representation that Lloyds had underwritten the Farmsure product was
of great importance in
persuading farmers to purchase it, and his
misrepresentation in that regard was made in the course of his
business by a man of
substantial professional standing to parties who
were vulnerable to the risk and were dependant upon him for the
accuracy of the
information.
[27] In the light of all the
features that I have just mentioned, this is a clear case in which
considerations of policy should
impose liability for the negligent
misrepresentation if it caused the loss suffered by the first and
second respondents.
[28] Having determined the issue
of wrongfulness against Delphisure, it becomes necessary to consider
the issue of causation.
This involves two distinct enquiries: first,
the application of the so-called ‘but-for’ test in order
to determine
whether the particular action concerned can be
identified as the cause without which the loss in question would not
have been suffered;
8
the second being the question of legal causation, sometimes referred
to as remoteness of damage,
9
being whether the wrongful act is sufficiently closely linked to the
loss to attract legal liability. The latter enquiry is also
determined by considerations of policy but, although there may be an
overlapping with the factors to be taken into account, wrongfulness
should not be confused with legal causation or remoteness: and
conduct which may be regarded as wrongful may well also be too remote
for liability to follow.
10
[29] It was common cause on appeal that both factual
and legal causation had been established in respect of the claim of
the
first respondent who, had he not withdrawn his application for
insurance with Mutual & Federal after Scott’s promotion
at
the Rietdak meeting on 5 May 2004, would have insured his crop with
Mutual & Federal and been paid compensation when it
failed. In
these circumstances, it was correctly common cause that the loss
suffered by the first respondent was a direct result
of the
misrepresentation and sufficiently closely linked to the
misrepresentation to attract legal liability.
[30] On the other hand, the issue of factual
causation in respect of the second respondent’s claim is not as
straight-forward.
It was contended that the second respondent had not
shown that but for Scott’s presentation at the Rietdak meeting
his loss
would not have been suffered. The argument in this regard
was twofold. First, it was argued that even had the misrepresentation
relating to Farmsure not been made, the second respondent would in
any event have cancelled his application to Mutual & Federal
and
would thus have been uninsured during the forthcoming growing season.
Secondly, it was argued that even if the second respondent
had been
insured by Mutual & Federal, it would in all probability have
refused to pay him compensation under the policy due
to
misrepresentations he had made in his application form.
[31] Before Mutual & Federal would accept the
second respondent’s application for insurance cover, it was
necessary
for his farm to be inspected to verify that it was likely
to produce the anticipated yield reflected in the application.
Although
this was really nothing more than a formality according to
the witness Mr E D Rabie, who admired the second respondent as a
farmer
and in whose hands the decision on acceptance lay, it led to
Mr Lou Robertson, an agricultural insurance assessor, being delegated
by Janie Louw Brokers to visit the second respondent’s farm.
This he did on 3 May 2004. Unfortunately for him, he arrived
without
having made an appointment and incurred the ire of the second
respondent for failing to do so. However, the second respondent
invited him into his office where they discussed the provisions of
Mutual & Federal’s policy. It immediately became apparent
that the second respondent had a problem with the policy being
conditional upon satisfactory emergence of the crop. Robertson
telephoned the offices of Janie Louw Brokers and obtained
confirmation that the insurance was indeed conditional upon
acceptable
emergence after germination, that the policy did not
include emergence cover and that, consequently, pre-emergence input
costs
would not be covered. According to Robertson, when the second
respondent heard this he said he would not take the cover. Robertson
then left the farm without doing the necessary inspection.
[32] There is no reason not to accept Robertson’s
evidence in this regard, his testimony having been corroborated by
the
content of a contemporaneous note he made shortly after the
incident. The second respondent’s evidence in this regard was
most unsatisfactory. He stated that he could not recall the
conversation but that emergence cover was of no real consequence to
him as germination was never a problem in the district in which he
farmed. However, he appears to have attempted to downplay the
importance of emergence cover as, shortly after Robertson had left
the farm, he telephoned his insurance broker, Van Wyk, who had
sent
Robertson to inspect the farm. According to Van Wyk, although the
second respondent complained about Roberson having arrived
at his
farm without having arranged to do so, they also discussed the
provisions of Mutual & Federal’s policy and whether
it
provided for emergence cover (which provides support for Robertson’s
version). Their conversation appears to have become
heated and,
accordingy to Van Wyk, he told the second respondent to keep his
Mutual & Federal application ‘on the table’
–
from which it must be inferred that the second respondent had said
that he wished to withdraw it – until there was
certainty over
what Farmsure would offer. It was only on 5 May 2004, after the
presentation by Scott at the Rietdak meeting, that
the second
respondent telephoned and instructed him to cancel his Mutual &
Federal application.
[33] There is no reason to reject Robertson and Van
Wyk, whose evidence on this issue, supported as it is by Robertson’s
contemporaneous note, is far more compelling than that of the second
respondent. It is clear from this that emergence cover was
of
importance to the second respondent. Not only did he tell Robertson
that he did not want Mutual & Federal’s policy
as it lacked
emergence cover but he refused to allow him to carry out his
inspection while knowing it was necessary for his application
to be
approved. Although this may in part have been due to his anger at
Robertson’s unannounced arrival, he subsequently
told Van Wyk
that he did not want to proceed with his application. In these
circumstances the fact that Van Wyk persuaded him not
to withdraw his
application until he had found out more about the Farmsure product so
that he could make an informed decision,
does not indicate a fixed
intention to persist with his application should Farmsure not prove
to be more attractive.
[34] In order to succeed, the second respondent must
show that even if there had been no talk of the Farmsure product, he
would
have insured his crop with Mutual & Federal. Van Wyk
persuaded the second respondent not to immediately withdraw his
application
to Mutual & Federal only because he believed the
Farmsure product existed. There is nothing to show that he would have
persuaded
the second respondent not to withdraw his Mutual &
Federal application if there had been no talk of Farmsure, and at no
stage
did the second respondent testify that he would have elected to
persist with his application had the Farmsure option not been offered
to him. In the light of the evidence of Robertson and Van Wyk, his
denial that he had said that he did not want Mutual & Federal’s
insurance was clearly false. But in the light of his denial, he could
hardly have testified that he would have changed his mind
had he
known the true state of affairs in regard to the Farmsure product,
and there is no acceptable evidence that justifies such
a conclusion.
[35] The second respondent has therefore failed to
show that but for the misrepresentation that was made by Kolovos he
would have
been insured by Mutual & Federal. That being so, he
failed to establish the necessary element of causation and his claim
ought
to have been dismissed. The appeal in respect of his claim must
be upheld.
[36] Consequently, Delphisure is liable to the first
respondent for whatever damages he suffered as a result of Kolovos’
negligent misrepresentation that led to him not being able to recover
compensation from Mutual & Federal when his crop failed.
The
quantum of his damages is agreed, being the sum he was awarded in the
court a quo, and the appeal in respect of his claim must
accordingly
fail. However, the appeal in respect of the second respondent’s
claim must be upheld as he failed to prove that
the appellant’s
misrepresentation caused him to suffer loss. In the light of this
conclusion, only paragraph 3 of the order
of the court a quo which
dealt with the second respondent’s claim needs to be altered.
[37] The general rule is for costs to follow the
event. The present matter is made more complicated by Delphisure
having failed
in respect of the claim of one plaintiff but succeeded
in respect of the claim of the other. In these circumstances it would
be
unfair to burden the unsuccessful plaintiff (the second
respondent) with all of Delphisure’s costs. An examination of
the
record shows that about 30 per cent of the duration of the trial
related solely to the claim of the second respondent. In addition,
the second respondent was one of three respondents in the appeal, and
the only one that was unsuccessful. In these circumstances
I think it
is fair to all to order the second respondent to pay 30 per cent of
Delphisure’s costs in both the trial and the
appeal.
[38] Two other issues must be briefly mentioned in
regard to costs. First, Delphisure contended in its heads of argument
that
if it was to be held liable so, too, should Bexsure as a result
of Scott’s negligence. In response, Bexsure contended in its
heads that it could not be held liable at this stage as Delphisure
had not served a notice on it under rule 13(8) and there was
no lis
between them as defendants. This gave rise to Delphisure bringing a
conditional application for leave to serve a notice
under rule 13(8)
should Bexsure’s contentions be upheld. There is no merit in
Bexsure’s argument and its counsel, wisely,
abandoned the point
during the appeal. In any event, in the light of the finding that
Scott had not been negligent, the issue
is academic and I mention it
only in order to record that we were informed by counsel for the
parties that no costs order relating
to this application would be
sought. Secondly, certain parties employed two counsel, and the costs
attendant upon doing so are
justifiable.
[40] It is therefore ordered:
The appellant’s appeal in respect of the claim of
the first respondent is dismissed.
The appeal in respect of the claim of the second
respondent is upheld, and para 3 of the order of the court a quo is
set aside
and substituted with the following:
‘
The second plaintiff’s
claim against the second defendant is dismissed, and the second
plaintiff is to pay 30 per cent of
the second defendant’s
costs.
’
The appellant is to pay the first and third
respondent’s costs of appeal, such costs to include the costs
of two counsel
where so employed.
The second respondent is to pay 30 per cent of the
appellant’s costs of appeal, such costs to include the costs
of two counsel.
___________________
L E LEACH
JUDGE OF APPEAL
APPEARANCES
APPELLANT: D Mitchell SC (with him A Kantor)
Instructed by
Edward Nathan Sonnenbergs, Cape Town
Webbers, Bloemfontein
FIRST AND SECOND: N Treurnicht SC (with him H du Toit)
RESPONDENT Instructed by
Werksman, Tyger Valley
McIntyre & Van der Post, Bloemfontein
THIRD RESPONDENT: R S van Riet SC
Instructed by
Rufus Dercksen & Partners, Stellenbosch
Honey Attorneys Inc, Bloemfontein
1
Ruto Flour Mills (Pty) Ltd v Moriates &
another
1957 (3) SA 113
(T) at
115F-116A.
2
As that concept was
explained
in
Telematrix (Pty) Ltd t/a Matrix
Vehicle Trading v Advertising Standards Authority
2006
(1) SA 461
(SCA);
[2006] 1 All SA 6
(SCA)
para 1.
3
See eg
Fourway
Haulage SA (Pty) Ltd v SA National Roads Agency Ltd
2009
(2) SA 150
(SCA):
[2008] ZASCA 134
para 12 and the cases there
cited.
4
Telematrix
para
15.
5
P
ara 21.
6
2002 (6) SA 431
(SCA) para 21.
7
Fourways
paras
23 and 24.
8
Cf
International
Shipping Co (Pty) Ltd v Bentley
1990
(1) SA 680
(A) at 700F-G.
9
Cf
Fourway Haulage
para 30-31.
10
Cf
Fourway Haulage
para 31-32.