Walker v Santam Limited and Others (410/08) [2009] ZASCA 56; 2009 (6) SA 224 (SCA) ; [2009] 4 All SA 60 (SCA) (28 May 2009)

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[2009] ZASCA 56
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Walker v Santam Limited and Others (410/08) [2009] ZASCA 56; 2009 (6) SA 224 (SCA) ; [2009] 4 All SA 60 (SCA) (28 May 2009)

THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case number: 410/08
In the
matter between:
GARRY OWEN WALKER APPELLANT
and
SANTAM
LimiTeD
1
st
RESPONDENT
MUTUAL & FEDERAL INSURANCE COMPANY LTD 2
nd
RESPONDENT
ALEXANDER FORBES INSURANCE COMPANY LTD 3
rd
RESPONDENT
Neutral citation:
Walker v Santam
(410/2008)
[2009]
ZASCA 56
(28 May 2009)
Coram:
Nugent JA, Kroon and Griesel AJJA
Heard:
13 May 2009
Delivered:
28 May 2009
Summary:
Indemnity insurance – repudiation by insurers
–sufficiency of proof of loss.
ORDER
On appeal from:
High Court, Grahamstown (Leach J and Nduna AJ,
sitting as a court of appeal from a magistrate’s court):
Order
:
The appeal succeeds with costs. The order of the High Court is set
aside and substituted with the following:
‘
The appeal
is dismissed with costs.’
JUDGMENT
GRIESEL AJA
(NUGENT JA and KROON AJA concur):
Introduction
[1] On 7 August 2002 the appellant’s motor vehicle, a 1996
BMW 323i, was hi­jacked in East London and damaged beyond

repair. The appellant was insured against events of this nature with
a ‘co-insurance panel’ comprising the three respondents
herein
jointly and severally, namely Santam Limited, Mutual & Federal
Insurance Company Limited and Alexander Forbes In­surance
Company
Limited. (The policy in question was issued and administered on
behalf of the panel by Alexander Forbes). The appellant
duly lodged a
claim for com­pensation in terms of the policy, but the
respondents repudiated liability. After selling the wreck
of the
vehicle to a local scrap dealer for an amount of R21 000, the
appellant instituted action against the respondents in
the
magistrate’s court in East London, claiming the difference between
the insured value of the car in its un­damaged condition

(R98 100) and the value of the wreck, less the compulsory
excess, being five percent of the difference. The respond­ents

defended the action, but the magistrate granted judgment in favour of
the appellant for payment of R73 245 together with interest
at
the prescribed rate and costs.
[2] On appeal to the Eastern Cape High Court in Grahamstown, the
court below (per Leach J; Nduna AJ concurring) reversed
the
judg­ment of the magistrate, holding that ‘the evidence that
was placed before the court was insufficient to enable the
court to
determine the value of the motor vehicle in its damaged condition’.
In the result, so it was held, the plaintiff had
failed to prove the
quantum of his damages. The judg­ment of the magistrate was
accordingly set aside and substituted with
one of absolution from the
instance with costs. Leave to appeal against this judg­ment was
refused by the court below, but
was sub­sequently granted by this
court on petition.
Factual background
[3] The appellant has been employed in the motor vehicle industry for
more than 30 years. At the time of the incident he was the
senior
sales manager of Ronnies Motors in Nahoon, East London. On 26 July
2002 he bought the BMW in question from his employer
for use by his
wife and insured it under his existing policy with Alexander Forbes.
Less than two weeks later, while being driven
by one of the
appellant’s sons, the car was hijacked and damaged beyond repair.
[4] Some time after lodging his claim, the appellant was informed by
Mrs Photenhauer, manager of the Eastern Cape Region of Alexander

Forbes, that ‘it had all been sorted out, the cheque was on her
desk, it would be going into [his] account the next day’.
Apparently the amount was calculated on the basis of the insured
value of the car less the excess of five percent, such value having

been ascertained by the assessor appointed on behalf of the
respondents.
[5] A few days later, however, by letter dated 27 September 2002,
Alexander Forbes advised the appellant ‘that the insurer had

stopped settle­ment of your motor claim and requested that
further investigation be effected’. At a later stage, according
to
the appellant, Mrs Photenhauer informed him tele­phonically that
‘there’s been another issue now’ and that the matter
‘was now
going to go into dispute’. She did not, however, elaborate as to
what the other ‘issue’ was and the appellant
was not informed of
the reason for the decision.
[6] After repeatedly pressing them for reasons for their repudiation,
the appellant was informed by Alexander Forbes by letter
dated 29
October 2002 that the insurers were ‘not able to enter­tain
[his] claim’, based on ‘
inter alia’
certain clauses in
the policy, which were then quoted verbatim. The clauses in question
deal with ‘general conditions relating
to your insurance cover’,
including the definitions of ‘you’ and ‘we’ in the policy;
the duty on the insured to comply
with the terms of the policy; to
inform the insurers of any increase of risk; to give information that
is ‘complete and truthful’;
and to take reasonable care to
prevent loss, damage and accidents. The letter failed to inform the
appellant, however, in what
respect(s) he is alleged to have breached
any of those general duties.
[7] After receiving notice of repudiation of his claim, the appellant
took urgent steps to dispose of the wreck so as to avoid
incurring
storage charges. A further reason for urgency was the fact that the
appellant needed to settle the purchase price of
the vehicle with his
employer. He accord­ingly approached ‘the two main scrap-yards
in East London that buy accident damaged
vehicles’ for quotations.
The one company,
Hillbank Motor Consultants
, offered to pay
him R21 000, whereas the other,
Heine & Strydom
,
offered some R5 000 less. His evidence in this regard reads as
follows:
‘
What
happened with the wreck is I got a price, a value for it from it’s
called
Hillbank Motor Consultants
, they generally buy wrecks.
I think they’re contracted to most of the insurance companies. And
they gave a value against percentage
of book [value], I think, I’m
open to correction, I think it’s 22 or 23 percent of book value
that they pay, which is a standard
contract to the amount of most of
the insurance companies. So I asked them for a price on the car which
they duly gave me.’
Later he testified as follows:
‘
Did
you consider that you could have done things differently and obtained
a higher or better amount? --- I don’t think so. I fought
quite
hard to get that much for it.
Do you think that you did
everything that was reasonable in the circumstances? --- I do believe
I did.’
[8] The appellant thereupon contacted Mrs Photen­hauer and
informed her of the offer obtained and his intentions in that regard.

He testified as follows:
‘
And
I actually phoned Mrs Photen­hauer, although technically [it]
didn’t have anything to do with them, but I said to her
I would
like to place it on record that I’m getting so much for the wreck,
so that in case down the road if we have to end up
fighting about
this claim, it is recorded, which I did do. And they were in
agreement, that’s what they would [have] sold the
wreck for, you
know, had the claim been settled in the normal way.
[. . . ]
The
only reason I discussed it with her, that I said to her that we’re
going to go into a dispute about my claim. We’re going
to go and
fight about it, so I said I am asking you and informing you that I’m
going to sell the wreck, and this is what I have
been offered. Are
you in agreement with me that this is a fair value, I don’t want
you to come down the road and say that I gave
the thing away or
something. And that is where we got – she said to me it’s not
really her business to agree or disagree, but
she said yes, the value
that you’re getting is acceptable.’
[9] After disposing of the wreck, the appellant sent a letter, dated
6 November 2002, to Mrs Photenhauer, confirming the telephone

conversation and the sale of the wreck to Hillbank for R21 000
inclusive of VAT, to which she responded the next day:
‘
We
acknowledge receipt of your fax dated 6 November 2002 confirming that
you have sold the wreck to Hillbank Motors in amount of
R21 000
inclusive of VAT. We will keep a copy of the fax on file for record
purposes. Due to the repudiation of the abovementioned
claim by the
insurer, your action is acceptable.’
[10] At a later stage, shortly before action was instituted, the
appellant’s attorneys in a letter of demand pointed out that
their
client had not yet been informed of the respondents’ reasons for
repudiating the claim, to which Alexander Forbes replied

enigmatically:
‘
The
underwriter is not obliged to commit to one single reason for
repudiation if more than one reason exists.’
[11] The plea filed in the
magistrate
’s
court in opposition to the plaintiff’s claim like­wise failed
to shed light on the nature of the respondents’ defence:
the
appellant’s averments relating to the occurrence of the insured
event; the damage to the vehicle beyond economical repair;
his
compliance with all his obligations in terms of the policy; and the
damage suffered by him were all met with bare denials.
During the
trial, the appellant’s evidence went largely unchallenged and as
the trial progressed the initial disputes dis­appeared
one by
one. The respondents closed their case without adducing any evidence.
By the time it came to judgment, the only ‘defence’
that remained
alive, was the argument advanced on behalf of the respondents that
the appellant had failed to establish the value
of the insured
vehicle in its damaged state. (In fairness to the respondents it
should be pointed out that this very argument was
foreshadowed during
the opening address of the appellant’s counsel, when the
respondents’ attorney drew attention to the fact
that the appellant
had not filed any expert summary in respect of the post-collision
value of the vehicle.)
[12] The respondents’ opposition to the claim was based almost
entirely on the decision of this court in
Erasmus v Davis
,
1
where the majority held that evidence based on a percentage of the
pre-collision value of a vehicle was insufficient to establish
the
post-collision value of such vehicle. Referring to the evidence of
the appellant that I have quoted above, the respondents
argued that
the same conclusion should follow in this case.
[13] The magistrate, however, distinguished
Erasmus v Davis
on
the basis that the relationship between the appellant and the
respondents in this case is ‘contractual rather than delictual’.

He accordingly granted judgment in favour of the appellant.
Judgment
of the court
below
[14] In its judgment on appeal, the court below rejected the
magistrate’s attempt to distinguish
Erasmus v Davis
and said
the following:
‘
It
was argued, as I understood the argument, that in the light of the
fact that this was an insurance claim, there should be a lighter
onus
which had to be applied, which distinguished the present claim from
the decision in
Erasmus v Davis
which dealt with a delictual
claim. However, it is quite clear that this is a civil claim, and the
onus remains the same in a civil
claim whether it is delictual or
based in contract, even if the contract is one of insurance, and that
is proof on a balance of
probabilities of the amount of damages
suffered. Even if there was a somewhat lighter onus it would still
require evidence to be
led, and there was no evidence to establish
the value of the vehicle in its pre-damage [sic – should be
“post-damage”] state.’
[15] I respectfully disagree with this approach. Our law recognises a
clear distinction between claims based on contract and those
based on
delict.
2
Erasmus v Davis
dealt with an ordinary delictual claim for
damages arising out of a motor collision. This case, on the other
hand, is based squarely
on a contract of indemnity insurance, as
counsel for the respondents rightly pointed out. This fact, in my
view, has important
consequences – not only with regard to the onus
of proof, but also to the
facta probanda
required in order to
succeed.
[16] In terms of basic principles of indemnity insurance the insured
is entitled to recover the actual commercial value of what
he has
lost through the happening of the event insured against. The ordinary
rule is that an insured must prove that his claim
falls within the
primary risk insured against, whilst the onus is on the insurer
seeking to avoid liability to prove the application
of an exception.
3
In the case of total loss of the insured item, the insurer acquires a
right to salvage in whatever remains and is of value in respect
of
the item once the insurer has fully indemnified the insured.
4
There is a corres­ponding duty on the insured to surrender the
remains of the insured item as salvage. Furthermore, there is
an
implied duty on the insured to minimise his loss.
5
[17] Applied to the facts of the present case, the respondents were
liable in terms of the policy in question to compensate the
appellant
‘if the vehicle or any part of it (including accessories) is lost
or damaged’.
6
The ‘maximum amount payable’ would be the lower of ‘the sum
stated in the Policy Schedule, or the retail value (adjusted
for
mileage and condition) . . .’ The sum stated in the
Policy Schedule in this case was R98 100 and the appellant’s

unchallenged evidence established that this sum equalled the retail
value of the vehicle. His evidence further established con­clusively

that the vehicle was damaged beyond repair. He has accordingly
suc­ceeded in bringing himself within the primary risk insured

against, with the result that the respon­dents were contractually
bound to indemnify him in an amount of R98 100, less
the ‘first
amount payable’ amounting to 5% of the agreed loss, unless the
respondents could establish some valid excuse for
refusing to pay.
[18] Had the respondents complied with their contractual obligations,
the value of the wreck would not have been an issue between
the
parties when the claim was made (a) because the wreck had not
yet been disposed of and (b) because the respondents
would in
any event have been entitled to the wreck of the car in accordance
with their right to salvage. In all proba­bility
the respondents
would have disposed of the wreck to the same scrap dealer that bought
it from the appellant and probably at the
same price (as Mrs
Photen­hauer admitted to the appellant).
7
[19] Instead, the respondents repudiated liability for reasons that,
to this day, remain unknown. The conclusion is irresistible
that the
respondents had no valid excuse for repudiating liability. Faced with
such repudiation, it was incumbent upon the appellant
to take
reason­able steps to minimise his loss. His own evidence that he
did everything reasonable in order to get the best
price
available went unchallenged. Thus, it was not suggested to the
appellant that the wreck could or should have been sold in a market

other than the one in which it was eventually sold – a market, I
may add, that has been established by the respondents themselves,
as
members of the short-term insurance industry. Nor was it suggested to
the appellant that the price obtained for the wreck was
in any way
unreasonable, or that a better price could have been obtained if the
wreck were to have been disposed of elsewhere or
in some other
manner, eg, by advertising in the local press; by public auction or
by approaching other scrap dealers in East London.
[20] Can the respondents in these circum­stances avoid liability
simply because the appellant has failed to adduce expert evidence
as
to the post-collision value of the wreck where they have failed to
show that there was any­thing more that he could have
or should
have done so as to minimise his loss? The answer must clearly be no.
It is not necessary for purposes of this case to
decide whether the
onus rests on the appellant to prove that he took reasonable steps to
minimise his loss, or whether it is for
the respondents to prove that
he has failed to do so. It is sufficient to hold, as I do, that on
the evidence in this case the
appellant has proved – at least prima
facie – that he has taken reasonable steps to minimise his loss and
the respondents have
failed to rebut such prima facie case.
[21] It follows from the foregoing that the reliance on
Erasmus v
Davis
, both by the respondents and by the court below, was
entirely misplaced. It is accordingly not necessary for this court to
consider
whether or not the evidence adduced on behalf of the
appellant as to the value of the vehicle in its post-damage state was
sufficient.
[22] It follows that the judgment of the court below cannot stand. In
the result, the appeal succeeds with costs. The order of
the court
below is set aside and is sub­stituted with the following:
‘
The appeal is dismissed with costs.’
b m griesel
Acting Judge of Appeal
APPEARANCES:
FOR APPELLANT: G S Wernberg
Instructed by
Van Rensburg & Associates
East London
Jordaans Rijkheer & Partners
Bloemfontein
FOR RESPONDENT: B P Geach SC
Klagsbrun de Vries & Van de Venter
Hatfield
Honey Attorneys
Bloemfontein
1
1969 (2) SA 1
(A).
2
See eg
Trotman v Edwick
1951 (1) SA 443
(A) at 449A–B.
3
Van Zyl NO v Kiln Non-Marine Syndicate No 510 of Lloyds of London
2003 (2) SA 440
(SCA) para 7.
4
Cf eg 12 Lawsa (1st reissue) paras 403–405 and the authorities
referred to therein.
5
D M Davis
Gordon & Getz The South African Law of Insurance
4ed (1993) p 251–252.
6
The term ‘compensate/compensation’ is defined in the policy as
‘[the respondents’] liability to settle your approved
claim
either by payment, by repair or by replacement (at out choice).’
7
Para 8 above.