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[2019] ZAWCHC 162
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Octofin (Pty) Ltd v Hugenote College (17084/2010) [2019] ZAWCHC 162 (27 June 2019)

THE
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
Hearing Dates: 28
and 29 January 2019; 18 March 2019
Judgment
Delivered: 27 June 2019
Appeal
Case No: A163/2018
Case
No: 17084/2010
In
the matter between:
OCTOFIN
(PTY)
LTD                                                                                                       Appellant
(Defendant
in the Court
a quo
)
and
HUGENOTE
COLLEGE                                                                                               Respondent
(An association
incorporated under Section
21)
(Plaintiff
in the Court
a quo
)
JUDGMENT
BOZALEK,
J et LE GRANGE, J et SIEVERS, AJ
[1]
This is an appeal, with the leave of court
a
quo
, against the judgement and order
whereby Respondent (the college) was awarded damages in an action
based upon the alleged breach
by Appellant (Octofin) of its
contractual obligations as the college’s short-term insurance
broker. The court held Octofin
liable for the full extent of the
college’s alleged loss and ordered it to pay an amount of R17
152 981 together with interest
and costs.
[2]
During the night of the 12
th
to the 13
th
May 2008 a unique historical building in Wellington in the Western
Cape, named Cummings Hall, was partially destroyed by fire.
Cummings
Hall was owned by the Dutch Reformed Church of South Africa and was
being utilized at the time as a student hostel by
the college. The
college was in possession of Cummings Hall pursuant to an agreement
with the church in terms of which the college
was responsible for its
maintenance and its insurance against loss or damage.
[3]
Cummings Hall was under insured at the time of the fire. The insurer
applied average and the college recovered substantially
less than the
costs of reinstatement estimated by the insurer. The college
accordingly sued Octofin, its short-term insurance broker
at the
time, alleging that Octofin had breached its agreement(s) with the
college hereby causing it loss, to the extent to which
it was
underinsured.
[4]
The college pleaded three agreements. Firstly, it alleged that during
November 2013 it appointed Octofin as its insurance broker
with the
express, alternatively tacit, alternatively implied material terms
including that Octofin would renew the comprehensive
insurance cover
for the buildings at the premises, which included Cummings Hall; that
Octofin could and would recommend replacement
building cost values
for the buildings and value the buildings; that the difference
between the replacement cost values and the
values of the buildings
would be minimal, that any under insurance would “
not
be an issue”
in respect of any
claims submitted; and that defendant was able to give recommendations
with regard to valuations (upon which the
respondent could rely) due
to its  experience, expertise and research.
[5]
In November 2003 the policy with Santam contained a survey of
insurable interests conducted on the premises of the college in

November 2003. Under the heading ‘comprehensive insurance:
buildings, general’ it is stated:
“
A.1
Die kollege se onderskeie geboue bestaan uit outydse geboue met hoë
plafonne en dik mure, sommige van klip (bv. Die hoofgeboue,
huis
Cummings en ander) asook meer modern geboue. Om vervangingswaardes te
bepaal word hedendaagse boukoste in ag geneem. Dit is
dus moontlik
dat ons aanbevele waardes kan verskil van die werklike
vervangingswaardes maar die verskil is van so ‘n aard
dat
onderversekering tot ‘n minimum beperk word en, na ons mening,
nie enige eise nadelig sal beinvloed nie.
A.2
Alhoewel ons nie amptelike waardeerders is nie, is ons wel in staat
om aanbevelings te doen na gelang van inligting verskaf
deur die
professionele bestrekopnemers Davis Langdon Farrow Laing en soos
aangevul deur die BFO te Stellenbosch. Ons waardes soos
aanbeveel kan
dus effens verskil maar die verskil is van so ‘n aard dat
onderversekering nie ‘n belangrike rol sal
speel nie.”
[6]
The college pleaded that in 2003, “due to budget constraints at
the time”, it did not insure the buildings, including
Cummings
Hall at the replacement building costs values then recommended by
Octofin.
[7]
Secondly, the college alleged that in July/August 2006 it concluded a
further oral renewal agreement, subject to the same terms,
for the
renewal of the insurance for the period 1 August 2006 to 31 July
2007. It pleaded that it was agreed that the buildings
which were
insured at replacement building cost values less than those
recommended by Octofin, would be adjusted and increased
for the
period of the next renewal, for which period the buildings, including
Cummings Hall, would be insured at Octofin’s
recommended
replacement building cost values.
[8]
Thirdly, the college alleged that in July 2007 a final agreement was
concluded for Octofin to arrange and renew the insurance
cover for
the period 1 August 2007 to 31 July 2008. It was during this period
that the fire occurred, on 13 May 2008. The college
expressly pleads
that it instructed Octofin to renew the insurance of the buildings
for the replacement building cost values as
determined by Octofin.
Octofin denied this and denied that it undertook any contractual
obligation to furnish replacement building
cost values for the
buildings.
[9]
It is common cause that on 27 July 2007 Octofin presented the college
with a written summary of insurance for the period 1 August
2007 to
31 July 2008. On page two thereof the college was expressly warned
(with an example being given) of the danger of under
insurance. On
the schedule of properties set out in the summary of insurance
Cummings Hall is reflected as being 1843 m² in
extent, with a
present replacement cost per m² of R4200, giving an insured
amount of R7740 600. Under the heading ‘important
notes in
respect of fire insurance’ it is recorded that the average
replacement/building costs for hostels was between R5200
and R6400
per m². Immediately below that was a box setting out the insured
average replacement/building costs at R4500 per
m². This summary
accordingly clearly reflected that House Cummings was significantly
under insured, at between 20 to 45 %.
[10] A copy of the
agenda of a meeting held between the representatives of the parties
on 8 August 2007 records “Die hernuwingsvoorlegging
is kortliks
bespreek asook die nuwe vervangingswaarde wat nog nie heeltemal in
die kol is nie. Met volgende hernuwing sal dit moontlik
regtrek.”
[11]
On 10 August 2007 Octofin wrote to the college recording what had
been discussed during its visit the previous week. It recorded,
inter
alia, that the insured values of the buildings were not yet
completely representative of the true replacement values but
that the
agreement at the time was that they would systematically adjust the
values until they were sufficient. This is not in
dispute.
[12]
These facts cannot be reconciled with the case pleaded by the
college.
[13]
The case pleaded by the college is that had Octofin informed the
college of the actual replacement building cost values for
the
buildings situated on the premises, as it was obliged to do, the
college would have instructed Octofin to insure the buildings
at the
actual replacement cost values. As a result the college would have
been paid out the full loss, being the full replacement/restoration

costs of Cummings Hall.
[14]
This claim cannot succeed for two reasons. Firstly, the college was
at all times aware that it was under insured. This was
confirmed by
Professor Viljoen who testified on behalf of the college. Professor
Viljoen joined the college at the start of 2006
as its rector and
CEO. He confirmed that the college was aware that there was a level
of under insurance. It might not have been
aware of the degree or
extent of under insurance but that is not the claim pleaded.
[15]
Secondly, it is unlikely that the college would have insured the
buildings at their actual replacement value cost as this would
have
involved an increase in premiums in excess of 300 %. In 2003 the
college intentionally did not insure at the value recommended
by
Octofin due to ‘budget constraints at the time’.
Professor Viljoen’s evidence that he would have gone to the

board of the college to reconsider the budget in July/August 2007
does not mean that the board would have authorised part or all
of the
increase in premiums. If there were indeed funds available for higher
premiums one may legitimately ask why these funds
were not utilised
previously when the college was aware that it was under insured.
[16]
Another consequence of the college’s acquiescence in respect of
being under-insured is that it has not established the
quantum of its
alleged loss. The quantum would have to be reduced to the extent that
the college had agreed to be under-insured.
The degree of under
insurance acceptable to the college was neither pleaded nor proved.
Accordingly the judgment of the court
a
quo
that the college is to be
compensated for loss calculated by deducting the amount  actually
recovered from the amount which
would have been recovered if the
building had been insured at its full replacement value cannot stand.
[17]
As a result this claim must fail and the appeal succeed at least in
large part.
[18]
The college did claim, in the alternative, payment in the amount of
R389 314, together with interest and costs. In Octofin’s
reply
to the college’s request for trial particulars Octofin admitted
that in respect of the insured value for Cummings Hall
it had
presented the college with a renewal amount of R8 293 500 (which
had been accepted by the college) but that it had
erroneously entered
an amount of R7 740 600 on the insurer’s system for the period
1 August 2007 to 1 August 2008. In its
plea, Octofin admitted that
had the correct amount been inserted the college would have been
entitled to a payment from the insurer
which was R389 314 greater
than the payment it received.
[19]
Mr Pienaar, a broker employed by Octofin testified on its behalf. He
conceded that Octofin had made a mistake in calculating
the cover for
Cummings Hall at R4200 per m² whereas it ought to have done so
at R4500 per m². Octofin accordingly advised
its own
professional indemnity insurer that, while on the official renewal
and all subsequent endorsements on insured value of
R7 740 600 was
indicated, the college had in its possession a presentation which
indicated an insurance value of R8 293 500. This
directly resulted in
the college receiving R 389 065 less that it would have received.
This claim does not relate to the fact that
the college was
underinsured but rather to Octofin loading the incorrect amount on
the system. Pienaar testified that it was not
denied that there was
such an error.  Two defences to this claim were pleaded by the
appellant, the first being that it received
a tacit instruction to
retain the insurance cover at its previous level.  No evidence
was led to support this defence however.
The alternative
defence raised was that the respondent was estopped from alleging
that the renewal of the insurance cover was effective
on any basis
other than that set out in the endorsement finally furnished to the
appellant. Again no evidence was led to prove
the elements of the
alleged estoppel and this defence too must fail.
[20]
The college would accordingly be entitled to payment of this amount
of R 389 314, 00 which was claimed as an alternative in
its
particulars of claim.
[21]
This raises the issue whether this court can find in favour of the
college on an alternative claim in the absence of a cross
appeal. As
regards the circumstances in which an issue of cross appeal is
necessary, the general rule is expressed thus in LAWSA
[1]
:
“
A
cross appeal is necessary if the respondent desires a variation of
the order appealed against because a court of appeal may not
vary an
order in favour of the respondent without a cross appeal . . .
Without a cross appeal a respondent is entitled to
seek to convince
the court to uphold the judgment or order on other or additional
grounds . . . Whether a cross appeal is necessary
depends upon the
substance of the order and not upon the way it was drawn”.
[22]
The principle that a cross appeal is necessary only where the
respondent desires a variation of the order appealed against
was
confirmed by the Appellate Division in
Municipal
Council of Bulawayo v Bulawayo Waterworks Company Ltd
[2]
.
The appeal concerned a decision by the court
a
quo
to uphold the first of two exceptions but which then proceeded to
deal with the second exception although it was not necessary
to do
so. Innes CJ, who arrived at the same conclusion as the court
a
quo
but for different reasons, had the following to say regarding whether
a cross appeal was necessary in the particular circumstances
of the
matter
[3]
:
“
My
conclusion, however, is based upon the assumption that it is
competent for this Court to deal with the first paragraph of the

second exception.  I think that it is; but the question is not
without difficulty in view of the form of the order below,
which in
terms disallowed that paragraph, and against which there is no
cross-appeal.  In the view which I take of the matter
that order
must be varied; and the rules require that a respondent who desires
the variation of an order appealed against must
duly notify his
intention of applying for it.  But the position here is
exceptional, and is not such as was intended to be
covered by rule.
The defendant meant his first exception to extend to all the relief
asked for by the declaration, including the
prayer for damages;
indeed, he claimed an order setting aside the declaration in its
entirety on the ground of that exception.
And the learned Judge
upheld that claim, and allowed the first exception as prayed.
Having done that, it was quite unnecessary
for him to consider the
other exceptions, or to make any order upon them.  And the fact
that he did so could not alter the
effect of his order upon the first
exception, which gave the defendant all it asked.
Having
obtained all it asked there was no call on the respondent to vary the
order
.”
(
our
underlining
)
[23]
Applying these principles to the present case, it must first be noted
that the respondent obtained judgment for the full amount
it claimed
under its main claim with the result that it was unnecessary for the
trial court to deal with its second alternative
claim.  That
claim was based on the appellant’s failure to give effect to
its own recommendation to the respondent regarding
the amount for
which Cummings Hall should be insured during the relevant period and
the damages claimed for this breach were subsumed
into the main claim
for damages upheld by the trial court.  On appeal, the
respondent defends the Court
a quo’s
findings and seeks no variation in its order but, in the event that
it is unsuccessful, it seeks to persuade this Court that, at
the very
least, its second alternative claim should be granted.
[24]
In contending that a cross appeal was necessary the appellant sought
to rely on
O’Shea
NO v Van Zyl and others NO
[4]
and
Bayly
and others
[5]
v Knowles and others
.
In
O’
Shea
the Court upheld an appeal against a final order of sequestration.
It declined to consider whether it should grant a provisional
order
of sequestration at the instance of the intervening creditor which
had obtained no substantive relief before the Court
a
quo
and which entered into the appeal only to oppose the appellant’s
appeal against the order admitting it as an intervening
party. The
Court found that since the bank, the intervening creditor, had noted
no conditional cross-appeal against the failure
of the Court
a
quo
to make an order in its favour, that precluded relief on appeal.
This, in my view, was a quite different situation to that
in the
present matter.
[25]
The sole authority relied on by the court in
O’Shea
for its ruling was
Bayly
.
In that matter the Supreme Court of Appeal upheld an appeal against
an order directing and regulating the disposal of shares
in a
proprietary company where the alternative relief sought in the Court
a quo
was
a liquidation order.  On appeal counsel for the respondent
“
perhaps appreciating the weakness
of his case for the purchase of Bayly’s shares concentrated on
the relief of liquidation
on the just and equitable ground
.”
Citing no authority, the Court declined to entertain consideration of
such relief since the Court
a quo
had not made such an order and no conditional cross-appeal had been
noted against its failure to do so.  Again, in my view,
the
matter is not on all fours with the present, the relief sought in the
alternative being completely different to the main relief
granted. If
successful, the order made on appeal would not simply have been a
downwards variation of an order for contractual damages,
as in the
present case.
[26]
In
Standard
Bank of SA Ltd v Stama (Pty) Ltd
[6]
Trollip JA confirmed that the “
well-established
rule is that ordinarily a judgment or order cannot be varied against
an appellant, i.e.
to
his prejudice
,
in the absence of a necessary cross-appeal by the respondent
”
(
our
underlining
).
Applying this principle the court declined to consider a variation of
the order granted by the Court
a
quo
by extending certain dates
inter
alia
because this would have been prejudicial to the respondent and the
appellant had not cross-appealed against the order.
[27]
In
MM v MN
the Constitutional Court, dealing with the question of whether a
cross-appeal was necessary, stated as follows:
“
[22]
It has long been accepted in our law that an appeal court may support
the order of the court of first instance
on a basis different from
the reasoning of that court.  No cross-appeal by the successful
party in that court against any
particular but adverse part of the
reasoning of the judgment of the lower court in its favour is
necessary.  The reason for
this is that the adverse part of the
reasoning of the lower court does not amount to a separate ‘judgment
or order’
within the meaning of s 20(1) of the Supreme Court
Act that needs to be altered or amended.  It seems this may have
been overlooked
by, or not drawn to the attention of, the Supreme
Court of Appeal”.
[28]
In
Minister
of Police v Van der Vyver
[7]
Brand JA stated as follows:
“
Ooreenkomstig
hierdie verduideliking is ‘n appèl en derhalwe ook ‘n
kruisappèl, gerig teen die bevel van
die verhoorhof en nie die
hof se beredenering nie.  Wanneer ‘n respondent dus
tevrede is met die verhoorhof se bevel,
maar dit op ander gronde wil
verdedig as waarop die hof gesteun het, is ‘n kruisappèl
nie nodig nie.  Die feit
dat daardie gronde deur die verhoorhof
verwerp is maak aan hierdie beginsel geen verskil nie.  ‘n
Kruisappèl
word slegs vereis wanneer die respondent die hof se
bevel in sy geheel of gedeeltelik aanveg.” . . . Die respondent
is tevrede
met die bevel van die Hof a quo in sy geheel.
Gevolglik was dit nie vir hom nodig om ‘n kruisappèl te
loods
ten einde die feite daar rondom die vingerafdruk as basis vir
sy saak te steun nie.”
[29]
In the present matter, since it upheld the respondent’s main
claim for contractual damages in full, the Court
a
quo
did not even address the
respondent’s second alternative claim for a much more limited
award for such damages, based on different
facts. The respondent has
defended the court’s order, but maintained its reliance on its
alternative claim in the event it
should be unsuccessful on appeal in
its main claim. In my view, to require the respondent to have
cross-appealed makes no sense.
Bearing in mind that the trial
court did not deal with the claim (because it saw no need to) one
might well ask what order or findings
would the respondent have been
appealed against?  Apart from these practical difficulties, to
require respondents in similar
circumstances to cross-appeal, even
conditionally, could lead to a proliferation of applications for
leave to cross-appeal against
non-existent findings and orders where
trial courts, for good reason, have found it unnecessary to deal with
alternative claims.
[30]
In the present matter the respondent can hardly claim prejudice
should the contractual damages awarded to the respondent be
reduced
to a fraction of those initially awarded based on an alternative
claim fully ventilated before the Court
a
quo
and fully addressed by the
respondent in its heads of argument on appeal without any objection
from the appellant. Indeed, before
us the respondent’s counsel
initially did not take issue with the basis for the alternative claim
and in effect conceded
its merits until the point that a cross-appeal
by the respondent might be necessary was raised from the bench.
Respondent’s
counsel then embraced this point and withdrew all
concessions made, contending that the alternative claim could not be
considered
in the absence of a cross-appeal.
[31]
For all these reasons, we consider that leave to cross-appeal was
unnecessary and that on appeal this Court is entitled to
deal with
the respondent’s second alternative claim. It follows that the
respondent is entitled to judgment against the appellant
in the sum
of R389 314.00.
[32]
With regard to costs the appeal has been substantially successful
with the capital amount awarded being reduced from R17 152
981.00 to
R389 314.00. Whilst the appellant never tendered payment of this
amount, this claim would not have required any expert
evidence nor
have occupied the court for more than a day or two.  On the
other hand, much time was taken up on trial dealing
with a number of
preliminary points taken by the appellant.  These included
whether the respondent had
locus standi
to bring its claims and whether it had an insurable interest.
None of these points proved to have any substance.  Having

regard to these factors the most appropriate costs order on trial
would be that the respondent be awarded only half of its costs.

Since it was unsuccessful in its main claim, in respect of which both
parties led the evidence of expert witnesses, it would be
appropriate
to disallow such costs for the respondent but to allow them in
respect of the appellant. Turning to the appeal, which
was argued
over three days, the respondent’s alternative claim required
limited argument although it did entail the time-consuming
issue of
whether a cross- appeal was necessary for it to be considered. In the
circumstances the most appropriate costs order on
appeal would be, we
consider, that the appellant be awarded its costs on appeal but
limited to two of the three day hearing.
[33] It is
accordingly ordered:
1) The appeal is
upheld in part.
2) The order of the
trial court is replaced with the following:
“
(a)
Plaintiff’s main and first alternative claims are dismissed;
(b) Plaintiff is
awarded the sum of R389 314.00 in respect of its second alternative
claim, together with interest at the prescribed
rate
a tempore
morae
;
(c) Plaintiff is
awarded half of its costs of trial, as taxed or agreed, excluding the
qualifying costs of any expert witnesses
called on its behalf.
The defendant is awarded the qualifying costs of any expert witnesses
called on its behalf.”
3)
The respondent shall pay the appellant’s costs on appeal
(including the costs of two counsel), but with the respondent’s

liability in respect of the appeal hearing being limited to two days.
_____________________
L J BOZALEK, J
Judge of the High
Court
Western Cape High
Court
_____________________
A
LE GRANGE, J
Judge of the High
Court
Western
Cape High Court
_________________________
F SIEVERS, AJ
Acting Judge of the
High Court
Western Cape High
Court
Counsel for
Appellant
:
Adv WRE
Duminy SC
Adv
D Welgemoed
As Instructed
by

:
Luitingh & Associates
Ref.:
JH Luitingh
Counsel for
Respondent
:
Adv A
La Grange SC
As Instructed
by

:
Werksmans Attorneys
Ref.:
[1]
Vol 4: Civil Procedure: Superior Courts para 792.
[2]
1915 AD 611.
[3]
at page 624/625.
[4]
2012(1) SA 90.
[5]
2010 (4) SA 548 (SCA).
[6]
1975(1) SA  (AD) 730 at 745
[7]
1861/2011[2013] ZASCA 39 (28 March 2013)