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[2022] ZAFSHC 239
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Ioannides N.O and Others v Western National Insurance Company Limited and Another (5056/2021) [2022] ZAFSHC 239 (23 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 5056/2021
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between:
RODOS
IOANNIDES N.O.
First
Applicant
CHRISTOS
IOANNIDES N.O.
Second
Applicant
WAYNE
GARETH BEELDERS N.O.
Third Applicant
(
in
their respective official capacities as duly appointed
Trustees
of the Caramello’s Trust (IT 730/04))
and
WESTERN
NATIONAL INSURANCE COMPANY LIMITED
First
Respondent
STEPP
BLOEMFONTEIN
Second
Respondent
JUDGMENT
BY:
C
REINDERS, ADJP
HEARD
ON:
10
FEBRUARY 2022
DELIVERED
ON:
23
MAY 2022
[1]
The three Applicants are the three duly appointed trustees of the
Caramello’s
Trust (“the Trust”). The First
Respondent is an insurance company against whom relief is sought in
the form of declaratory
relief. The Second Respondent had been cited
for purposes of notice and no relief is sought against it.
[2]
The Trust operates and does business at its Caramello’s outlet
at the Preller
Plein Shopping Centre in Boemfontein. It obtained a
quotation on the 1
st
February 2019 in respect of insurance
from the First Respondent. On the 16
th
of May 2021 a fire
damaged the property on the premises resulting in the Trust lodging a
claim with the First Respondent. Ms Ankia
Pelser, the legal and
compliance manager and acting on behalf of First Respondent, declined
to indemnify the Trust in terms of
the insurance policy and decided
that the aforementioned policy is void due to the Trust’s
failure to disclose an incident
in 2018 when the Trust was double
compensated for water damage that occurred in April 2018.
[3]
The Trust therefore by way of notice of motion applies for an order
declaring the
First Respondent to be liable to indemnify the trust
for the loss suffered as a result of the fire based on the agreement
of insurance/indemnity
concluded between the parties.
[4]
From the papers, it would appear to be common cause that during April
2018 the Trust
suffered water damages. At the time the Trust,
represented by the First Applicant, enjoyed insurance cover from
Renasa Insurance
Company (“Renasa”) and submitted a claim
for the damage. At the same time the Bean & Bagle
Restaurant trading
as Caramellos and represented by the First
Applicant submitted a claim to the insurer of the contractor for the
same damage for
which compensation had been claimed from Renasa. Both
insurers paid for the same damage. Renasa on the 30
th
of
October 2018 addressed a letter to the Trust considering the Trust’s
claim to be fraudulent and claiming repayment. The
Trust repaid an
undisclosed amount to Renasa and the aforementioned letter disclosed
Renasa’s cancellation of future business
with the Trust.
[5]
The history as alluded to herein above was not disclosed to the First
Respondent and
Mr Jan Hendrik Botha (“Mr Botha”), the
head of the First Respondent’s underwriting department, avers
that had
First Respondent been aware of the double claim, it would
not have insured the Trust. He considered the double claim to be a
text
book example of what First Respondent and the insurance industry
would treat as a “moral risk” to which it is not prepared
to extend insurance cover. Such moral risk is described as “the
possible propensity of an insured using dishonest means to
extract
insurance monies”.
[6]
On behalf of the Trust it was submitted that the Trust in the
application form was
only asked to disclose or supply “its full
claims history and/or losses to the respondent for the preceding
three years.”
I was referred to the judgment of
Bruwer v
Nova Risk Partners Ltd 2011(1) SA 234 (GSJ)
and in particular
paras [27] and [28], the gist thereof being that the Trust was only
compelled to answer to the questions which
the First Respondent posed
- the argument being that the insurer drafted the policy and “it
has the duty to make clear and
spell out plainly the limitations it
wishes to impose and the risks it wishes to exclude.”
Reliance
was further placed on the provisions of
s53
of the
Short-Term
Insurance Act 53 of 1998
. My attention was invited to
Regent
Insurance Co Ltd v King’s Property Development (Pty) Ltd t/a
King’s Prop
2015 (3) SA 85
where the Supreme Court of
Appeal stated at para [23]:
“
It
is clear now, however, that since the introduction of
s 53(1)
of the
Short-term Insurance Act (and
pursuant to its amendment in 2003) the
test in respect of both misrepresentations and non-disclosures is an
objective one, thus
bringing the legislation in line with the common
law. Two principles enunciated in
Clifford
remain applicable. First the onus rests on
the insurer to prove materiality (at 155E-G), this in accordance with
the decision in
Qilingele
;
and second, the insurer must prove that the non-disclosure or
representation induced it to conclude the contract. Thus the insurer
must show that the representation or non-disclosure caused it to
issue the policy and assume the risk. As Schultz JA pointed out
(at
156E-I), however, once materiality has been proved it would be
difficult for the insured to overcome the hurdle of showing
no
causation, …”
[7]
The First Respondent referred me to the general terms and conditions
of the policy
in force which contains the following conditions in
clause 1:
“
General
Conditions
1.
Misrepresentation,
Misdescription And Non-Disclosure
Misrepresentation,
misdescription or non-disclosure in material particular shall render
voidable the particular item, section or
sub-section of the policy,
as the case may be, affected by such misrepresentation,
misdescription or non-disclosure”
[8]
Reliance was likewise placed by First Respondent on
Regent
Insurance v Kings Property Insurance supra
in general, but in
particular to para [54] where Wallis JA (as he then was) held as
follows:
“
The
reason why an insured must make a proper disclosure is to enable the
insurer to make a proper assessment of the risk it is being
asked to
cover. It cannot do that if it is not told what the risk is. This is
not a case of a slightly inaccurate or insufficient
description of
the actual risk being covered, which may raise issues of materiality.
It is a case where there was no disclosure
at all of the particular
risk. It is hard to see how a complete non-disclosure of the risk
could not be material.”
[9]
The Applicants move for final relief. The well-known rule in
Plascon
Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
1984 (3) SA 263
(A)
at 634e-635c is to be applied which in essence boils down thereto
that the relief is to be adjudicated on the respondent’s
version safe where it is so far-fetched or untenable and to be
rejected. This is also the position where the onus of proof is on
the
respondent.
See:
Orestisolve (Pty) Ltd t/a ESSA Investments v NDFT Investment
Holdings (Pty) Ltd and Another
2015 (4) SA 449
(WCC)
468
para [67]:
“
I
must emphasize, though, that the
Badenhorst
rule is conventionally formulated as requiring the company to satisfy
the court of two things: its bona fides and the reasonableness
of its
grounds for disputing the claim. If the respondents were to fail in
their reliance on the
Badenhorst
rule,
it would be for failure to satisfy the second of these requirements.
As to the first, I cannot find on the papers that
the respondents are
not genuine in disputing the claim. Bona fides is a question of fact.
At
the stage of a final order, it must be assessed in accordance with
the
Plascon-Evans
rule
.
Even
though the onus on a particular issue in motion proceedings might
rest on the respondent, this does not reverse the operation
of
the
Plascon-Evans
rule
(see
Ngqumba
en 'n Ander v Staatspresident en Andere; Damons NO en Andere v
Staatspresident en Andere;
H
Jooste
v Staatspresident en Andere
1988
(4) SA 224
(A)
at
259E – 263D;
Rawlins
and Another v Caravantruck (Pty) Ltd
1993
(1) SA 537 (A)
at
541I – 542B). (own emphasis)
[10]
Applying the aforementioned principles I have to accept that the
insurance industry treats conduct
which causes two insurance
companies to make payment in respect of the very same damage to be a
moral risk which insurers are not
prepared to insure. There is no
basis upon which I can reject such evidence to be palpably false. I
have to accept that such information
is material and therefore the
Applicants had to disclose same to the First Respondent. There is
support for the First Respondent’s
point of view in that Renasa
terminated its business agreement with the Applicants on realizing
the double claim. First Respondent
was not made aware by the
Applicants of the aforementioned double claim. According to Mr Botha
before the First Respondent determines
a premium at which it is
prepared to ensure a risk, it determines the insured’s risk
portfolio which includes the moral risk
of the insured. Claiming
compensation from two different insurance companies for the same
damage constituted a moral risk which
the respondent would not have
insured had it been aware thereof. Objectively speaking, I
cannot on the accepted evidence
before me, conclude that such a
viewpoint is untenable. On the contrary, I would be inclined to
endorse it.
[11]
It follows that I cannot in applying the aforementioned principles
grant the Applicants final
relief in motion proceedings. The
application, therefore, is to be dismissed and I see no reason why
the costs should not follow
suit. I may add that First Respondent
abandoned its first point
in limine
as to the First
Applicant’s authority to bring the application, and rightly so.
Having come to the conclusion I have, it
is not necessary to
adjudicate the second point raised
in limine
whether the order
sought is not legally tenable based on the argument that the option
is that of the insurer to indemnify, compensate
or replace and/or
repair of damaged goods. Without deciding this point, I may add that
it probably would not have found favour
with me in principle.
[12]
In the result the following order is made:
The
application is dismissed with costs.
C.
REINDERS, ADJP
On
behalf of the Applicants: Adv
C Snyman
Instructed
by: Phatsoane
Henney Attorneys
BLOEMFONTEIN
On
behalf of the first respondent:
Adv DJ Coetsee
Instructed
by: BDP
Attorneys
c/o
Kramer Weihmann Attorneys
BLOEMFONTEIN