About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2019
>>
[2019] ZAGPPHC 275
|
|
Concise Consulting Services (Pty) Limited v King Price Insurance Company Limited (A88/2018) [2019] ZAGPPHC 275 (9 May 2019)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED.
CASE
NO: A88/2018
9/5/2019
In the matter between;
CONCISE
CONSULTING SERVICES (PTY) LIMITED
APPELLANT
and
KING
PRICE INSURANCE COMPANY LIMITED
RESPONDENT
JUDGMENT
JOYINI
AJ
[1]
This
is an appeal in terms of Magistrate's Court Rule 51(3) read together
with Uniform Court Rule 50 from the Magistrate's Court
to the High
Court of South Africa. The Appellant noted an appeal against the
entire judgment. The Court started with the Appellant's
application
for condonation and for the re-instatement of the appeal. The
Respondent did not object to the granting of the application
and as
such, it was granted.
BACKGROUND FACTS
[2]
The
Issues that arose for determination will be best understood against
the background that follows. By way of summary, on 1 January
2014,
the Appellant's Toyota Yaris (2008) motor vehicle (registration
number [….]) sustained damage during a collision with
a wall.
It was comprehensively Insured by the Respondent. The driver at the
time of the collision was Mr Sibusiso Ngobese who is
both an employee
of the Appellant and registered as being the regular driver of the
said vehicle. After the Appellant had lodged
the claim, he provided
the Respondent
(after being
requested
by the latter) with Mr Ngobese's contact details. On 17 January 2014,
the Respondent repudiated the Appellant's claim
alleging that, during
the validation of the claim, it had come to the Respondent's
attention that Mr Ngobese supplied the Respondent
with false
information about
Inter alia
his
whereabouts before and after the accident. The trial proceedings in
the Court
a quo
were
adjudicated upon by the Honourable Magistrate Tlale, on 7 November
2016, 6 February 2017, 28 March 2017, and 25 April 2017.
[3]
On
7 November 2017, the Court a
quo
handed down the judgment in which it
was ordered that the Plaintiff's claim be dismissed with costs
including costs of a Counsel.
The said order was preceded by the
following findings of the court a
quo:
3.1
Ngobese was acting on behalf of
the Plaintiff;
3.2
The information or representations made
by Mr Ngobese formed part of the claim that was lodged by the
Plaintiff;
3.3
The information or
representations made by Mr Ngobese were material;
3.4
The Plaintiff
failed
to show on a
balance of probabilities that the Defendant's version was untrue;
3.5
The Defendant's
version was true and the Plaintiff's version was false; and
3.6
The Defendant was indeed entitled to
avoid the agreement of insurance.
ISSUES
FOR DETERMINATION
[4]
Whether the Honourable Magistrate:
4.1
Erred in finding
that the driver of the vehicle, Mr Ngobese, was acting on behalf of
the Appellant;
4.2
Erred In finding
that the Information or representations made by the driver of the
vehicle, Mr Ngobese, formed part of the claim
that was lodged by the
Appellant;
4.3
Failed to find that the Appellant was
comprehensively insured by the Respondent, regardless of whether or
not the driver of the
vehicle, Mr Ngobese, had been candid about his
route and the events of the evening of the day when the accident took
place, the
Respondent should have been obliged to honour the written
insurance agreement;
4.4
Failed
to restrictively interpret, the allegedly breached conditions upon
which the Respondent's relied in
support of the rejection of the Appellant's claim on the grounds of
dishonesty;
4.5
Erred In finding that the Information or
representation made by Mr
Ngobese
were
material.
LAW
[5]
I
agree
with the Appellant that the finding
by the Court a
quo
that
"...
the information or
representations made by Mr Ngobese
were
material",
forms
the basis of the Appellant's grounds for appeal. That is why I
have
decided to start with it.
South
African law on materiality
[6]
In
Strydom v Engen Petroleum Limited,
[1]
the insured had knowingly made a
fraudulent statement aimed at showing that he had not been negligent
in relation to the motor collision
which had resulted in damage to
his car. The fraudulent statement was, however, of no consequence, in
that it did not affect the
insurer's position to its prejudice and
was therefore not material. It was not necessary for the insured to
have made , fraudulent
statement in the first place because he was
covered against his own negligence.
[7]
In
Visser v 1 Life Direct Insurance
Limited,
[2]
the court correctly founded that the
insurer failed
to
prove
that the deceased had a material pre existing medical condition
that should have been disclosed. The aforementioned Insurance
Acts
say that a policy cannot be invalidated and an insurer cannot exclude
or limit its obligations under a policy or increase
the policyholders
obligations under the policy due to a misrepresentation or
non-disclosure unless It is material.
[8]
In
Qilingele v South African Mutual
Life,
[3]
the court considered whether the falsehood of the misrepresentation
was such that it probably would have affected the assessment
of the
risk undertaken by the particular Insurer. This was done by comparing
an assessment of the risk or, the
basis
of facts distorted by the
misrepresentation with what the
assessment
would have been on the facts had
they been truly stated. In cases of this nature, the onus is on the
insurer to prove a material
misrepresentation. The onus
arises
from the general principle that the
party who alleges something must prove it.
[9]
In
Weber v. Santam Versekerings
msatsksppy Bpk.
[4]
it was held that the court does not
in applying this test judge the issue of materiality from the point
of view of a reasonable
insurer. Nor is it judged from the point of
view of a reasonable insured. The court judges it objectively from
the point of view
of the average, prudent person or reasonable man.
This reasonable man test is fair and just to both insurer and insured
inasmuch
as it does not give preference to one of them over the
other. Both of them are treated on a par.
English
law on materiality
[10] In
Versloot Dredging
BV and Another (Appellants) v HDI Gerling lndustrie Verslcherung AG
and Others (Respondents)
[5]
,
the issue on
this appeal Wil& whether the Insurers of a ship were entitled to
repudiate liability on the ground that the Insured
had lied in the
claim. The vessel
DC
MERWESTONE
was
incapacitated by a flood in her engine room. Her main engine was
damaged beyond repair. The flood was caused by (i) the crew's
negligence in failing to close the sea inlet valve in the emergency
fire pumps, (ii) damage to the pump,, (iii) the negligence
of
previous contractors who had failed to seal bulkheads and (iv)
defects in the engine room pumping system. The appellant owners
presented an insurance claim to the respondent Insurers for €
3,241,310.60. They told the insurer's solicitors that the crew
had
Informed them that the bilge alarm had sounded at noon that day, but
could not be investigated because the vessel was rolling
In heavy
weather. This was a lie told by the owners to strengthen the claim,
accelerate payment under the policy, and take the
focus off any
defects in the vessel for which the owners might have been
responsible.
[11]
The Supreme Court allowed
Versloot
Dredging'&
appeal by a majority
of 4 to 1, holding that the 'fraudulent device' rule does not apply
to collateral lies, which are Immaterial
to the insured's right to
recover. The fraudulent claims rule does not apply to collateral
lies. The dishonest lie is typically
immaterial and irrelevant to the
honest claim: the insured gains nothing by telling it, and the
insurer loses nothing
if
it
meets a liability that it has always had. If a collateral lie is to
preclude the claim, it must be material. The real test of
materiality
is that a collateral lie told in the course of making a claim must at
least go to the recoverability of the claim on
the true facts as
found by the court.
ARGUMENTS
[12]
It is common cause that the Respondent
repudiated the claim on the
basis
that Appellant had breached the
clauses or terms and conditions provided for in the Policy which are
as follows:
These clauses were communicated to
the Appellant through a repudiation letter which reads,
"We wish to refer you to
your policy document that
states
'The
stuff
you need
to
do...
yip you
Be honest
Always provide us with true and
complete information. This also applies when
anyone else acts on
your behalf
(emphasis added).
Keep your promises
You need to give us:
•
True
and complete Information to us and the authorities. We act on the,
information you provide, therefore any Information which
is
misleading, incorrect or false, will prejudice the validity of your
claim.'
During the validation of the
claim it came to our attention that Mr S
Ngobese
Id:
[….]
supplied us with dishonest information.”
[13]
I
agree
with the Appellant that the clauses
quoted above use wide wording more
especially
the word
"any'.
Taken literally, the said clauses
would mean that even irrelevant information which is incorrect or
false could be a ground for
repudiation. The Respondent submitted
that this appeal involves the interpretation of an insurance
agreement concluded between
the Appellant and the Respondent. In
response to this submission, this is perhaps the right time to start
by restating the main
principles governing the Interpretation of a
policy of Insurance, and to do so with reference to the decision in
Fedgen Insurance Ltd v Leyds
[6]
,
where It was said:
"The ordinary rules relating
to the Interpretation of contracts must be applied in construing a
policy of insurance. A court
must therefore endeavour to ascertain
the intention of the parties. Such intention is, in the first
instance, to be gathered from
the language used which, if clear, must
be given effect to. This involves giving the words used their plain,
ordinary and popular
meaning unless the context indicates otherwise
(
Scottish Union
&
National
Insurance
Co
Ltd
v Native Recruiting Corporation Ltd
1934
AD 458
at 464·5). Any provision which purports to place a
limitation upon a clearly expressed obligation to indemnify must be
restrictively
interpreted
(Auto
Protection Insurance
Co
Ltd v
Hanmer·Strudwlck
1964
(1) SA 349
(A) at 354C-D); for it is the insurer's duty to make clear
what particular risks it wishes to exclude
(French
Hairdressing Saloons Ltd v National Employers Mutual General
Insurance Association Ltd
1931
AO 60 at 65;
Auto
Protection Insurance
Co
Ltd v
Hanmer-Strudwick (supra
at
3540-E)). A policy normally
evidences
the contract and
an insured's obligation, and the extent to which an insurer's
liability is limited, must be plainly spelt out.
In the event of a
real ambiguity the
contra
proferentem
rule,
which requires a written document to be construed against the person
who drew it up, would operate against Fedgen as drafter
of the policy
(Kliptown
Clothing Industries (Pty) Ltd v Marine and Trade Insurance Co of SA
Ltd
1961 (1) SA
103
(A) at 108C).'
(See
also
Van
Zyl NO v Kiln Non Marine Syndicate No 510 of Lloyds of
London
[7]
)".
Absolute
Warranties
[14]
The
Respondent relied upon the aforementioned clauses and considers them
as absolute warranties. The Respondent made this submission
in its
Supplementary Heads of Argument. My view is that the clauses quoted
above, widely worded as they are, do not meet the requirements
of
being absolute warranties. Absolute warranties must provide a
specific or express indication of what is required of the insured,
who must comply exactly; if he does not, breach of the warranty will
occur. "Substantial performance" is not enough;
there must
be exact performance. The strict common-law approach, which requires
exact performance of an undertaking that has not
necessarily been
established as a "material" aspect of the contract (and
risk assessment), and entitles the insurer to
cancel a contract on
the basis of a breach of warranty despite the fact that the
representation complained of concerns an immaterial
inaccuracy, or a
matter with n bearing at all on the risk insured against, has led to
absurd results in some cases.
[15]
As
a result of such absurd results, and the potential for more,
statutory reform introduced certain curtailments regarding remedies
for breach of warranties. Section 63 of the Insurance Act
[8]
was amended in 1869. The effect of the amendment was that the insurer
was not permitted to set
aside a
contract on the grounds of breach of
an affirmative warranty unless the insurer could prove that the
correctness of the statement
or warranty was material to the
assessment of the risk at the time the policy was issued or renewed.
The purpose of the amendments
was to protect the insured against
repudiations by Insurers based on inconsequential inaccuracies or
trivial misstatements in insurance
proposal forms, even if they were
warranted to be true. In 1989, the insurance Act of 1943 was
repealed, Its section 63(3) was
re-enacted, without any amendment as
to substance, in section 59(1)(a) of the Long-term Insurance Act
[9]
and section 53(1)(a) of the Short term Insurance Act
[10]
,
which provided
a)
that the policy shall not be
invalidated;
b)
that the obligation of the long-term
insurer shall not be excluded or limited; and
c)
that the obligations of the policyholder
shall not be increased,
on account of any representation
or failure to disclose information made to the insurer which is not
true, whether or not the representation
or disclosure h s been
warranted to be true and correct, unless that representation or
non-disclosure is such as to be likely to
have materially affected
the assessment of the risk under the policy concerned at the time of
its issue or at the time of any renewal
or variation thereof. The Act
tries to prevent insurers from exploiting warranties made by the
insured in order to avoid paying
out on claims. The Act is intended
to ensure that an insurer will have no remedy on account of an
immaterial incorrect representation,
whether that representation was
warranted or not.
[16]
The Supreme Court of
Appeal has, in a number of
cases,
explained the
purpose and object of section 63(3):
16.1
In
SA
Eagle Insurance Co Ltd v Norman Welthagen Investments (Pty) Ltd
1994
(2)
SA
122 (A),
Nestadt
JA, at p124, said:
"The amendment must be
seen against the background of the common-law rule that a warranty,
being an essential or matt1rial
term, must be strictly complied with;
that if it is breached, the insul8r is entitled to repudiate the
claim whether or not the
undertaking Is material to the risk and even
if non-compliance has no bearing on the actual loss that takes place
(Gordon and Getz
The South African Law of Insurance 4th ed at 218)."
16.2
In
Qilingele
v South African Mutual Life Assurance Society
1993 (1) SA 69
(A),
Kriegler AJA, at p748, said:
"The object of the
enactment Is manifest, namely to protect claimants under Insurance
contracts against repudiations based
on inconsequential
inacc1,1racies or trivial misstatements in insurance proposals. An
Insurer's right to 18pudlate liability on
the basis of the untruth of
a representation made to it, whether elevated to a warranty or not,
was curtailed."
In
Clifford v Commercial Union Insurance
Co
of SA Ltd
[1998] ZASCA 37
;
1998
(4) SA 150
(SCA),
Schutz JA. at p 1570 - E, said:
"To
my mind its purpose was simply to detoxify the warranty by removing
its potential for abuse, without outlawing its
legitimate use. In
other words, materiality would regain its true meaning and that
meaning would be protected from being stifled
by contract."
Burden
of proof
[17]
As stated above, the Respondent bears
the burden of proof to establish on a preponderance of probabilities
that the Appellant made
the false statement or fraudulent
representation with the wilful intention to defraud and this was
common cause. The clauses quoted
above relied upon by the Respondent
to limit Its obligation to indemnify requires to be Interpreted
strictly with proper regard
to the main purpose, general nature and
object of the contract
(see
Videtsky
v Uberty Life Insurance Association of South Africa Ltd
[11]
and
Schoeman
v Constantia Insurance
Co
Ltd
[12]
.
The Respondent
bears
the
onus
to
establish that the Appellant willingly made false statements with the
intention to defraud and that the fa1$ehood could reasonably
have
influenced the defendant
as a
prudent
insurer to accept, reject or compromise the claim or to pay to
plaintiff a benefit higher than he is entitled to (see
Strydom
v Certain Underlining Members
at par
[6] above).
Conclusion
[18]
It
is common cause that the insurance contract was validly entered into
and was valid at the time of the accident and that the Appellant
lodged the claim in accordance with the provisions of the contract.
It is also common cause that the damage to the vehicle was
assessed
at R75 000 being the difference between its pre-accident and
post-accident value and as such, the Appellant instituted
action for
the payment of the aforementioned damage. The Appellant did not claim
a higher amount than the
assessed
one. On these premises, the
Respondent has failed to discharge the burden to establish dishonesty
or fraud on the part of the Appellant.
To sustain the defence it is
necessary for the Respondent to prove that the conduct of the
Appellant was not honest or was fraudulent
with intention to deceive
and defraud the Respondent by getting a benefit it knew it was not
entitled to. There Is no evidence
that the Appellant entertained such
an intention to defraud. This defence in these circumstances is not
sustainable.
[19]
When
providing dishonest information to the Respondent, Mr Ngobese was
clearly not acting on behalf of the Appellant. He was providing
information at the request of the Respondent. The Appellant itself
did not know what the true facts were.
[20]
In
Avis Enterprises (Finance) (Pty) Ltd
v Protea Assurance
Co
Ltd
[13]
it was held that like in other
contracts, an insurance policy
"must
be interpreted in the context of the contract and object of the
policy'
and particular provision
should not be construed to defeat the main purpose of the policy.
[21]
In
Klipton
Clothing Industries (Pty) Ltd v Marine
&
Trade Insurance
Co
of South Africa Ltd
[14]
it was held that when interpreting
an insurance contract
"the court
should incline towards upholding the policy against producing
a
forfeiture".
An
insurer cannot escape liability to indemnify the insured by relying
on some insignificant incorrect statement which is not materially
connected to the risk or assessment of the claim. An untrue or
incorrect statement which does not amount to material
misrepresentation
cannot be relied upon to exclude or limit liability
simply on the fact of its untruthfulness.
[22]
False statements or misrepresentations
made by Mr Ngobese are insignificant and can in no way materially
affect the assessment of
the indemnity. The said clauses or terms and
conditions of the Policy allegedly breached by the Appellant cannot
be interpreted
to mean that any false statement made by Mr Ngobese
after a valid claim has been lodged will have the effect of tainting
the claim
with dishonesty or fraud.
[23]
I agree with the Appellant that,
"No
evidence was adduced to illustrate the materiality of the
untruthfulness"
and this also
did not happen in this Court of Appeal. There is also no record of
this illustration in the Court
a quo.
An untrue or incorrect statement
which does not amount to wrongful or material misrepresentation
cannot be relied upon to exclude
or limit liability simply on the
fact of its untruthfulness. Lies in respect of facts which are
immaterial to the insured's right
to recover do not invalidate the
claim that they relate to.
ORDER
[24] I
propose that the judgment of the Court a
quo
be set aside and
be substituted with the following orders:
24.1
The appeal is upheld with costs.
24.2
The order of the Court
a
quo
is set aside and replaced with
the following order:
(a)
The Defendant is liable to indemnify the
Plaintiff in terms of the contract of insurance between the Plaintiff
and the Defendant
in respect of the damage suffered by the Plaintiff
in
respect
of
the motor vehicle insured but damaged in the incident which occurred
on 1 January
2014.
(b)
The Defendant ls ordered to pay the
Plaintiffs costs of the action.
T E JOYINI
ACTING JUDGE OF THE HIGH COURT
I agree, and it is so ordered.
J W LOUW
JUDGE OF THE HIGH COURT
APPEARANCES
Counsel for the
Appellant: Adv T. A.
L. L. Potgieter SC
Instructed by:
Savage Jooste & Adams Inc.
Counsel for the Respondent:
Adv B. Boot
Instructed
by:
Weavind & Weavind
Date of Hearing:
16 April 2019
Date of Judgment:
9 May 2019
[1]
(18412012)
[2012] ZASCA 187
(30 November2012
[2]
(1005/13)
[2014] ZASCA 193
;
2015 (3) SA 89
(SCA) (28 November 2014)
[3]
1993 (1) SA
89 (A)
[4]
1993 (1) SA 1
(A) at p
410H to 4110)
[5]
[2018] UKSC 48:
on appeal from [2014] Wi/CA Civ 1349
[6]
(476193)
[1995] ZASCA 20
;
1995 (3) SA 33
(AD);
[1995] 2 All SA 357
(A) (27 March 1995)
[7]
2003 (2) SA 440
(SCA) at para 6
[8]
Act 27 of 1943("the Insurance Act")
[9]
Act
No. 52 of 1998
[10]
No. 53 of 1998
[11]
1990 (1)
SA 386
CN)
[12]
2002 (3)
SA 4'17
CN)
[13]
1981 (3)
SA 274
(A) at 289
[14]
1961 (1) SA 103
CA) at 106