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[2018] ZASCA 142
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Propell Specialised Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund NPC (1147/2017) [2018] ZASCA 142; [2019] 1 All SA 79 (SCA); 2019 (2) SA 221 (SCA) (28 September 2018)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1147/2017
In
the matter between:
PROPELL SPECIALISED
FINANCE (PTY)
LTD
APPELLANT
and
ATTORNEYS
INSURANCE INDEMNITY FUND
NPC
RESPONDENT
Neutral
citation:
Propell
Specialised Finance v Attorneys Insurance Indemnity Fund NPC
(1147/2017)
[2018] ZASCA 142
(28 September 2018)
Coram:
Lewis,
Saldulker, Zondi and Mathopo JJA and Mokgohloa AJA
Heard:
13
September 2018
Delivered:
28
September 2018
Summary:
Insurance
contract – whether indemnification rights under the Policy
providing cover for a specific class of professionals,
is cedable –
agreement to cede rights under the Policy without the consent of the
insurer is invalid ─ the nature of
contractual relationship
between the parties involves a
delectus
personae
and the adverse effect the cession will have on the insurer.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Dlodlo J sitting as court
of first instance): judgment reported
sub
nom Propell Specialised Finance (Pty) Ltd v Attorneys Insurance
Indemnity Fund & others NPC
[2017] 3 All SA 1005
(WCC).
The
appeal is dismissed with costs.
JUDGMENT
Zondi
JA (
Lewis,
Saldulker and Mathopo JJA and Mokgohloa AJA
concurring)
[1]
The issue in this appeal is whether the rights of indemnification
held by Buurman Stemela Lubbe Incorporated (BSL), a law firm,
under
the professional indemnity insurance contract (the Policy) issued by
the respondent, Attorneys Insurance Indemnity Fund NPC
(Attorneys
Insurance) are cedable. The Western Cape Division of the High Court,
Cape Town (the high court) (Dlodlo J) held that
they are not. It
dismissed the action brought by the appellant, Propell Specialised
Finance (Pty) Ltd, formerly Baedex (Propell),
for lack of locus
standi on the basis that a cession on which it relied for its cause
of action, was invalid, but granted Propell
leave to appeal to this
court.
[2]
During the period April 2010 and April 2011 Propell, a private
company carrying on a moneylending business instituted six separate

actions in the magistrate’s court against BSL, arising from a
number of bridging finance transactions. In terms of these
bridging
finance transactions, Propell lent and advanced to certain clients of
BSL monies against funds accruing to BSL’s
clients from certain
property transactions. Propell paid the loan amounts into BSL’s
trust account. BSL undertook to repay
to Propell such loans from the
proceeds of the property transactions. BSL failed to make payment as
undertaken because Mr Buurman
and/or BSL’s employee, Ms van der
Merwe misappropriated the proceeds of the property transactions.
[3]
BSL notified Attorneys Insurance of Propell’s claims and sought
indemnification from it under the Policy. Attorneys Insurance

repudiated liability in respect of Propell’s claims on the
ground that the money that was paid into BSL’s trust account

was entrusted to it as contemplated by s 26 of the Attorneys Act 53
of 1979
[1]
and the loss that
Propell suffered was a loss that is excluded in terms of clause
5.1.5
[2]
of the Policy.
[4]
In the meantime BSL instituted an action in the North Gauteng High
Court against its auditors, Ashton CA SA Group (Ashtons)
and its
directors for damages arising from Ashtons’ failure to detect
and prevent misappropriation of trust moneys by Mr
Buurman and/or Van
der Merwe.
[5]
Following repudiation by Attorneys Insurance of Propell’s
claims, BSL on 6 September 2012, instead of suing Attorneys
Insurance
for specific performance, purportedly ceded to Propell its
indemnification rights against Attorneys Insurance under the
Policy.
The agreement embodying the cession was entered into without
Attorneys Insurance’s consent. The agreement in its
relevant
parts read:
‘
PREAMBLE
WHEREAS Baedex  has instituted a
number of claims against BSL, Lubbe, Stemela and one EVERT GERRIT
BUURMAN (“BUURMAN”)
jointly and severally, the one paying
the other to be absolved, arising from a number of “bridging
transactions” where;
[a] Baedex lent and advanced to
certain clients of BSL monies (“the loans”) against funds
accruing to such clients from
certain property transactions; and
[b] BSL had undertaken, in writing, to
repay to Baedex such loans from the proceeds of the property
transactions; and
[c] BSL failed to make payment in
terms of the written undertakings; and
[d] Buurman and/or BSL’s
employee, van der Merwe, had misappropriated the proceeds of the
property transactions, or had stolen
the loan amounts, or failed to
make payment to Baedex and
WHEREAS neither Baedex, Stemela
and/nor Lubbe had been aware of the theft and misappropriation, or
the omission as referred to above
and
WHEREAS BSL has suffered a loss caused
by the aforesaid misappropriation or omission referred to above and
is liable to Baedex for
such funds that Baedex had lost by the
aforesaid misappropriation and/or omission, and
WHEREAS BSL is in the process of
instituting an action against its accountants
ASHTON CA SA GROUP
and three of its partners (“
ASHTONS”)
for
damages arising from the inadequate auditing of BSL’s books of
account which inadequate auditing BSL contends was the
direct cause
or foreseeable cause of the loss suffered by BSL and consequently,
the loss suffered by Baedex.
. . . .
ABANDONMENT OF CLAIMS AND PENDING
LITIGATION
11. Baedex hereby irrevocably abandons
all and every claim that it may have against Lubbe and/or Stemela
arising from any cause
of action whatsoever, but in particular
arising from their joint and several liability with BSL in respect of
the claims that Baedex
has instituted against BSL and referred to
above.
12. The pending litigation between
Baedex and BSL will be suspended with all further steps in the
litigation suspended, until the
litigation between BSL and Ashtons
has been finally resolved or if BSL abandons its claim against
Ashtons or fails to pursue the
claim with diligence. It is agreed
that each party will be liable for its own costs caused by such
suspension.
CESSION AND ASSIGNMENT
13. In the event of BSL resolving to
abandon its claim against Ashtons or failing to pursue the claim with
due diligence and care,
BSL undertakes to forthwith cede its rights
under the claim to Baedex. Baedex may then pursue the claim for its
own benefit and
at its own cost.
14. BSL hereby cedes makes over and
assigns to Baedex any claim that BSL may have against Glen Rand
Insurance Company or its successor
in title [Attorneys Insurance] on
the following terms and conditions:
14.1 Baedex may not institute any
action while the litigation between BSL and Ashtons is in progress
unless the action is instituted
to prevent the claims becoming
prescribed.
14.2 BSL does not guarantee or warrant
that it has any claim to cede and assign in terms of this cession and
the sole risk of instituting
any such claim rests on Baedex.
14.3 The cost of any proposed action
to be instituted by Baedex in terms of cession will be for the
account of Baedex and Baedex
hereby indemnifies BSL against all
claims that may arise from this cession.
15. Lubbe and/or Stemela undertake not
to take any steps to wind up or deregister BSL while the litigation
with Ashtons or Glen
Rand is pending.’
[6]
Armed with the cession, Propell on 14 October 2013 instituted action
against Attorneys Insurance in the high court as cessionary
of BSL’s
claims against Attorneys Insurance under the Policy.
[7]
Attorneys Insurance defended the action and raised three special
pleas. It contended first, that two of Propell’s six
claims had
prescribed. This special plea was subsequently withdrawn by Attorneys
Insurance. Secondly, Attorneys Insurance contended
that Propell
lacked locus standi to sue it on the ground that the cession on which
it was relying to assert its claims, was invalid.
Attorneys Insurance
relied on clauses 6.6 and 6.8 of the Policy in support of this
contention. Thirdly, Attorneys Insurance contended
that the
proceedings had to be stayed pending the finalisation of BSL’s
claims against Ashtons.
[8]
Attorneys Insurance argued that the purported cession on which
Propell relied, was invalid as BSL’s rights of recourse
and/or
claims against it arising out of the Policy are not capable of being
ceded and that, for that reason Propell lacked locus
standi to sue
it. The grounds upon which that contention is based are pleaded as
follows:
‘
2.1 Cession of the insured’s
rights of recourse and/or claims in terms of the contract of
insurance is
per se
a
contravention of the provisions of clause 6.6 of the contract of
insurance, inter alia because it appears
ex
facie
the Memorandum of
Agreement relied upon by Plaintiff, that the insured, i.e. Second
Defendant not only admitted liability but also
without the written
consent of the insurer negotiated in connection with the claim of the
Plaintiff.
2.2 Due to the
sui generis
identity
of the insurer, and insured involved inclusive of the
sui generis
relationship between them and due to the
sui generis
origin,
nature and extent of the insurance contract and related legislation,
the rights of recourse and/or claims of the insured
are not legally
susceptible to and/or capable of being ceded and/or intended to be
capable of being ceded.
2.3 Cession of the insured’s
rights of recourse and/or claims in terms of the insurance contract
create conflict of interest
on the part of the insured that give rise
to a breach and/or contravention and/or a violation of the provisions
of the contract
of insurance, for example inter alia the
contravention and/or violation of the insurer’s rights in terms
of clause 6.6 of
the contract.
2.4 It is implied from the
sui
generis
nature of the contract of insurance and the surrounding
circumstances applicable to claims in terms of the particular
contract of
insurance, that the insured’s rights of recourse
and/or claims in terms of the insurance contract cannot be ceded
without
the consent of the debtor, i.e. the insurer.
2.5
As a matter of principle, cession of the insured’s right of
recourse and/or claims in terms of the contract of insurance
give
rise to the weakening of the insurer’s position and/or renders
it more onerous.
3.
In addition to the content of
paragraph 2 supra, clause 6.8 of the insurance contract entered into
between the Second Defendant
and First Defendant stipulates that:
“
Unless otherwise expressly
stated nothing contained in this policy shall give any rights against
the insurer (a reference to First
Defendant) to any person other than
the insured (a reference to Second Defendant).”
4.
Properly construed and specifically
taking into consideration the identity of the parties to the
insurance contract, and the specific
nature, aim and extent of the
insurance policy, clause 6.8 thereof should be interpreted as an out
and out prohibition against
alienation and/or cession.’
[9]
At the commencement of the trial the parties asked the high court to
order a separation of issues. In terms of the separation
order, the
trial proceeded only in respect of the two remaining special pleas.
The remaining issues concerning Propell’s
damages claims stood
over for later determination.
[10]
For the purposes of determining the issue regarding Propell’s
locus standi and the validity of the cession agreement
on which
Propell relied, Attorneys Insurance relied on the evidence of its
General Manager, Mr Thomas Harban.
[11]
The high court upheld Attorneys Insurance’s plea that the
cession by BSL of its rights to Propell was not valid in law
and
dismissed the action. It held that BSL’s claims against
Attorneys Insurance under the Policy were incapable of cession
on the
grounds first, that the nature of the Policy is such that it involves
a
delectus
personae
,
secondly, that the parties to the Policy had expressly, alternatively
tacitly agreed not to cede rights and/or claims (
pactum
de non cedendo
)
and thirdly, the cession would impair Attorneys Insurance’s
position and negatively impact its rights.
[12]
In light of the dismissal of the action for lack of locus standi by
the high court it was unnecessary for it to consider the
stay of
proceedings plea as there were no proceedings to be stayed following
the dismissal of the action. Nothing further need
be said about this
special plea.
[13]
Propell’s answers to the high court’s line of reasoning
were manifold. It contended that the high court erred and
misdirected
itself by finding that the claims under the Policy were incapable of
being ceded to it on the ground that BSL was a
delectus
personae
.
Propell contended that the relationship between Attorneys Insurance
and BSL cannot be said to be personal and
sui
generis
in
nature. It argued that at all material times the relationship between
these two parties was regulated by the Policy and that
the rights and
obligations flowing from it have to be determined according to
ordinary contractual principles.
[14]
As regards the finding of the high court that on a proper
interpretation of the Policy, the parties had agreed not to cede
the
rights under it, Propell contended that the preamble and clauses 1,
2.5, 6.6 and 6.8 of the Policy on which the high court’s

conclusion was based, cannot be construed as constituting a
pactum
de non cedendo
.
[15]
I agree with Propell’s contention that neither clause 6.6 nor
clause 6.8 of the Policy contains or constitutes a
pactum
de non cedendo
.
Clause 6.6 is irrelevant to the enquiry as it does not deal with the
transfer of rights under the Policy. This clause stipulates
that the
insured shall not without the written consent of the insurer
repudiate liability, negotiate or make admissions, offers,
promises
or payments in connection with any claim. Clause 6.6 embodies the
terms regulating the enforcement of an insurance claim.
The clause
merely reminds the insured (BSL) that it is the insurer, and not the
insured, who must regulate and control the institution
and
enforcement of a claim under the Policy. This makes sense because it
is the insurer who bears the risk.
[16]
The relevant clause that deals with claims against Attorneys
Insurance other than by the insured (BSL) personally, is clause
6.8.
But clause 6.8 does not prohibit cession of rights to indemnification
under the Policy. Clause 6.8 stipulates that ‘[u]nless

otherwise expressly stated nothing contained in this Policy shall
give any rights against the insurer to any person other than
the
insured’. It merely means that the Policy does not give rights
of indemnity to anyone else but the insured; in other
words, it
covers or indemnifies the insured solely or exclusively. Clause 6.8
properly construed merely emphasises the inherent
right of the
insurer, Attorneys Insurance, to insist upon the insured being in the
class of persons insurable under the Policy.
[3]
[17]
I accordingly hold that this matter concerns a
delectus
personae
not a
pactum
de non cedendo
and must therefore be approached on that basis. The question is
whether the nature of contractual rights flowing from the Policy
is
such that it excludes the transfer of the personal rights created. In
general, all contractual rights can be transmitted unless
their
nature involves a
delectus
personae
or
the contract itself shows that they were not intended to be ceded.
[4]
[18]
In
Scott on
Cession A Treatise on the Law in South Africa
1
ed (2018) at 185 Professor Susan Scott explains:
‘
A person’s
entitlement to dispose freely of his/her personal rights (assets) is
restricted in circumstances where we are dealing
with a
delectus
personae
.
This means that the nature of a particular juristic act (mostly a
contract) is such that it excludes the transfer of the personal
right
created by it. This would be the position where the nature of the
legal relationship between the parties is such that, legally,
it will
only be recognised as such if it binds the determined specific
creditor and debtor. Under these circumstances, the identity
of the
parties becomes part of the substantive content of the juristic act.’
(Footnotes omitted)
.
[19]
This court in
Densam
[5]
at 112A-D held that:
‘
The question whether a claim
(that is, a right flowing from a contract) is not cedable because the
contract involves a
delectus
personae
falls to be
answered with reference, not to the nature of the cedent’s
obligation
vis-à-vis
the debtor, which remains
unaffected by the cession, but to the nature of the debtor’s
obligation
vis-à-vis
the cedent, which is the
counterpart of the cedent’s right, the subject-matter of the
transfer comprising the cession. The
point can be demonstrated by
means of the lecture-room example of a contract between master and
servant which involves the rendering
of personal services by the
servant to his master: the master may not cede his right (or claim)
to receive the services from the
servant to a third party without the
servant’s consent because of the nature of the latter’s
obligation to render the
services; but at common law the servant may
freely cede to a third party his right (or claim) to be remunerated
for his services,
because of the nature of the master’s
corresponding obligation to pay for them, and despite the nature of
the servant’s
obligation to render them.’
[20]
To determine whether the nature of indemnification rights under the
Policy involves a
delectus
personae
and whether the Policy itself shows that the rights are not capable
of being ceded, it is necessary to interpret the terms of the
Policy
in accordance with the principles enunciated in the recent cases of
this court such as
KPMG,
[6]
Endumeni,
[7]
Bothma-Batho
[8]
and
Novartis
.
[9]
The approach to the interpretation of written instruments is usefully
summarised in
Novartis
by Lewis JA in paras 26 and 27.
[21]
In argument before us counsel for Propell relied on two grounds in
support of the appeal. He contended, first, that after the

repudiation of BSL’s claims by Attorneys Insurance the rights
under the Policy became cedable as at that stage BSL was, as
he put
it, ‘on its own’. Secondly, he contended that there is no
evidence that a cession will prejudice Attorneys Insurance
and render
its position weaker.
[22]
With regard to the first point, counsel for Propell submitted that
after Attorneys Insurance had repudiated the claims submitted
to it
by BSL, the latter had no option but to deal with the actions
instituted against it by Propell and, in the exercise of its

discretion, BSL concluded the cession agreement with Propell. He
emphasised that the effect of the cession agreement was not to

substitute Propell as the insured in terms of the Policy. Propell,
counsel argued, only acquired the claims and stepped into the
shoes
of BSL.
[23]
That argument can be disposed of by having regard to the terms of the
Policy, in particular clause 1 describing the nature
of
indemnification afforded by the Policy; clause 2.5 defining ‘the
insured’ and the relevant provision of  the
Attorneys Act
which established Attorneys Insurance.
[24]
Attorneys Insurance is a non-profit, short term insurance company,
established in 1993 by the Attorneys Fidelity Fund Board
of Control
in terms of s 40A(a)(i) of the Attorneys Act and subject to the
Short-Term Insurance Act 53 of 1998
. Its primary purpose is to
provide insurance cover to attorneys who are obliged to be in
possession of a Fidelity Fund Certificate
in respect of claims which
may proceed from their professional conduct. Attorneys Insurance also
provides bonds of security to
attorneys appointed as executors of
deceased estates.
[25]
Mr Harban, explaining the nature of Attorneys Insurance and its
primary purpose, testified that Attorneys Insurance was established

in order to provide specific services to a specific group or class of
people. As a creature of statute, Attorneys Insurance can
only carry
out the functions as set out in the Attorneys Act, the empowering
legislation. Unlike any other insurance company, Attorneys
Insurance
cannot branch into other areas of business. Its duties are restricted
to legal practitioners and to provide specific
services.
[26]
Because of the nature of Attorneys Insurance’s funding ─
funded by way of a single annual premium that is paid
by the
Attorneys Fidelity Fund on behalf of all practising attorneys ─
the individual attorney is not expected to pay any
premium. Due to
its restricted nature Attorneys Insurance has one Policy applicable
to all practitioners insured by it.
[27]
In relation to the present matter the applicable Policy is one that
was issued for the period of insurance commencing on 1
July 2008 and
terminating on 30 June 2009. Consistent with the objectives of the
Attorneys Act, the Policy provided indemnity to
the insured in
respect of ‘the insured’s legal liability to any third
party arising out of the conduct of the profession
by the
insured’.
[10]
The
indemnity granted covered also approved costs. The term ‘insured’
in the Policy is defined as ‘every individual
practitioner and
every firm, partnership or incorporated practice consisting of one or
more practitioners who . . . is practising
as such in the Republic of
South Africa, and is in possession of or would have been obliged to
apply for a Fidelity Fund Certificate’
[11]
[28]
Clause 5 of the Policy deals with exceptions. In terms of clause
5.1.5 of the Policy the following event is excluded from cover:
‘
any loss, destruction or damage
whatsoever or any legal liability of whatever nature . . . arising
from theft by any principal,
partner, director, candidate attorney,
employees or “in-house” consultant of the insured . . .
of any money or other
property referred to in Section 26 of the Act’.
[29]
Clause 6, which sets out conditions of indemnity, provides inter alia
for further circumstances other than those set out in
clause 5, in
which Attorneys Insurance may repudiate liability. These conditions
are set out in clause 6.1, which requires the
insured to give
immediate written notice to the insurer of any claim or intimation of
a claim; clause 6.7.2 which provides that
all benefits afforded under
the Policy may be withdrawn by the insurer should the insured fail or
refuse to provide assistance.
Clause 6.9 stipulates that the insured
shall forfeit benefits should the insured use fraudulent means to
obtain benefits in respect
of the claim under the Policy.
[30]
The preceding analysis makes it clear that the rights flowing from
the Policy are not cedable. The specific group or class
of people for
whose benefit the insurance was established is specifically defined
in clause 2.5 of the Policy. The insured is defined
as every
individual practitioner who, on the date on which the claim was made,
is practising as such in the Republic and is in
possession of or
would have been obliged to apply for a current Fidelity Fund
Certificate. Clause 6.8 is another clause which indicates
that the
Policy applies to the restricted group of people. These factors
viewed cumulatively show that the nature of the contractual
rights
under the Policy indicate that the insured is a
delectus
personae
.
The contract gives no rights of indemnity to anyone but a legal
practitioner. These contractual provisions ensure that Attorneys

Insurance will not be exposed to the risk of defending actions at the
suit of unknown claimants.
[31]
The nature of the legal relationship between Attorneys Insurance and
BSL is such that it binds the determined specific creditor
and
debtor.
[12]
Attorneys
Insurance’s obligation to BSL is to indemnify it against legal
liability arising from its professional conduct.
In turn BSL must be
in possession of a Fidelity Fund Certificate for the relevant period
to enjoy cover. From the point of view
of Attorneys Insurance the
identity of the insured matters to it. The present matter thus falls
squarely within the ambit of the
lecture room example referred to by
Botha JA in
Densam
,
[13]
of a contract between master and servant which involves the rendering
of personal services by the servant to the master which the
master
cannot cede to a third party without the servant’s consent. BSL
may not cede its right to obtain indemnification under
the Policy
from Attorneys Insurance to a third party without Attorneys
Insurance’s consent because of the personal, restricted
and
statutorily regulated nature of Attorneys Insurance’s
obligation to BSL.
[32]
As regards Propell’s argument that after repudiation of BSL’s
claims by Attorneys Insurance, BSL’s rights
under the Policy
became cedable, a simple answer to that proposition is that
repudiation did not terminate the Policy. BSL remained
bound by the
Policy and was obliged to comply with its terms including the
restriction on the transfer of its rights. BSL could
contest the
repudiation of liability in court and if the court were to find that
the repudiation was unlawful, then Attorneys Insurance
would need to
step into the shoes of BSL in defending Propell’s claims. The
repudiation of a claim by the insurer does not
afford the insured the
right to cede the rights under the Policy.
[33]
The effect of the purported cession is that not only does Propell
become the third party who is making the claim, but it would
also be
the insured who is applying for indemnity under the Policy. In other
words, Propell, a victim of fraudulent conduct, steps
into the shoes
of the fraudster. That would bring about an untenable situation which
will undermine the significance of the unique
nature of the legal
relationship between the parties on which the Attorneys Act places a
premium.
[34]
As regards prejudice, counsel for Propell in argument before us,
rejected the suggestion that the cession impairs the position
of
Attorneys Insurance and negatively impacts its rights. He argued that
the objection to the transfer of indemnification rights
by cession,
in the absence of proof of actual prejudice to Attorneys Insurance,
is unfounded.
[35]
In para 71 of his heads of argument counsel for Propell formulated
the contention regarding prejudice as follows:
‘
[Buurman Stemela Lubbe Inc] did
not breach clause 6.6 of the Policy by entering into the Cession
Agreement, and even if it did so,
it was clearly entitled to do
because of the repudiation of the Claims. As such, even if the
respondent suffered any prejudice
because of the cession of the
Claims to the appellant, which is denied, it clearly was the author
of its misfortune in that regard.’
[36]
I do not agree with this contention for the following reasons. In
general, the change in creditor resulting from a cession
must not
impose greater burdens on the debtor than those with which he would
otherwise have been faced.
[14]
The debtor does not have to show that a cession will occasion it
actual prejudice. It must only show that a cession will impose

greater burdens on it.
[37]
Counsel for Attorneys Insurance, with reference to various clauses of
the Policy and the purpose of the insurance, demonstrated
how the
cession of rights under the Policy will compromise Attorneys
Insurance’s position. The legislative mandate ─
providing
insurance cover to attorneys ─ would be violated by the cession
because the effect of the cession would be to allow
an entity which
is not a firm or incorporated practice consisting of one or more
practitioners, to become an insured. Mr Harban
specifically testified
that BSL in the cession agreement, and in violation of the provisions
of clause 6.6 of the insurance policy,
admitted liability in respect
of the six claims that the Propell has instituted against BSL. The
admission of liability appears
from the cession agreement where it is
stated that BSL has suffered a loss caused by misappropriation of
money and is liable to
Propell for such funds that Propell has lost.
Prejudice to Attorneys Insurance is self-evident in this case.
[38]
The evidence of Mr Harban is that in addition to this admission being
in contravention of the provisions of clause 6.6 of the
Policy, it
also renders the position of Attorneys Insurance more grievous and it
in fact impacts on its rights as it would be bound
by the admission
of its insured (BSL) if it is held that it is liable in terms of the
insurance policy to indemnify the insured.
The same applies to the
right of Attorneys Insurance to insist upon assistance from BSL in
defending Propell’s claims made
against BSL, as envisaged in
clause 6.6 of the Policy in the event of it being held that Attorneys
Insurance is liable to indemnify
BSL. The effect of the cession of
BSL’s rights is thus to deprive Attorneys Insurance of the
opportunity to invoke the provision
of clause 6.6 of the Policy,
which affords it a right to insist upon the assistance from BSL in
defending Propell’s claims,
a third party.
[39]
Propell’s suggestion that because of the repudiation, the right
to step into the shoes of the insured, ie BSL, and to
defend the six
underlying claims in the name of BSL as well as the right to insist
upon assistance from BSL, can never be claimed
or relied upon after
repudiation, cannot be correct. This argument ignores entirely the
fact that the Policy did not in fact or
in law terminate as a result
of the repudiation. The Policy endured for the entire period of
insurance and continued to exist for
as long as BSL remained a legal
firm and was in possession of a Fidelity Fund Certificate or was
obliged to apply for one for the
relevant period.
[40]
I conclude therefore that the high court was correct in holding that
the rights of indemnification under the Policy are not
capable of
being ceded on the grounds that first, the nature of the contractual
relationship flowing from the Policy involves a
delectus
personae
and
secondly, the cession has the effect of burdening Attorneys
Insurance’s position. The purported agreement of cession
concluded by BSL and Propell is therefore invalid and that being the
case, it was incapable of conferring locus standi on Propell.
[41]
The appeal is dismissed with costs.
___________________
D
H Zondi
Judge
of Appeal
APPEARANCES
For
the Appellant: D Van der Merwe
Instructed
by: Marais Müller Hendricks Inc, Tygervalley
Symington
& De Kok Attorneys, Bloemfontein
For
the Respondent: G F Heyns
Instructed
by: VDT Attorneys, Pretoria
Honey
Attorneys, Bloemfontein
[1]
Section 26(1)
provides:
‘
Subject to
the provisions of this Act, the fund shall be applied for the
purpose of reimbursing persons who may suffer pecuniary
loss as a
result of─
(a)
theft
committed by a practising practitioner, his or her candidate
attorney or his or her employee, of any money or other property

entrusted by or on behalf of such persons to him or her or to his or
her candidate attorney or employee in the course of his
or her
practice or while acting as executor or administrator in the estate
of a deceased person or as a trustee in an insolvent
estate or in
any other similar capacity; and
(b)
theft
of money or other property entrusted to an employee referred to in
paragraph
(c
A
)
of
the definition of “estate agent” in section 1 of the
Estate Agents Act, 1976 (Act No.112 of 1976), or an attorney
or
candidate attorney referred to in paragraph
(d)
of
the said definition, and which has been committed by any such person
under the circumstances contemplated in those paragraphs,

respectively, and in the course of the performance─
(i) in the case of such an employee,
of an act contemplated in the said paragraph
(c
A
)
; and
(ii) in the case of such an attorney
or candidate attorney, of an act contemplated, subject to the
proviso thereof, in the said
paragraph
(d)
.
[2]
‘
5.1 Unless specifically stated
to the contrary this policy does not cover any loss, destruction or
damage whatsoever or any legal
liability of whatever nature:
.
. . .
5.1.5
arising from theft by any principal, partner, director, candidate
attorney, employees or “in-house” consultant
of the
insured or of the insured’s predecessors in practice of any
money or other property referred to in Section 26 of
the Act.’
[3]
Northern
Assurance Company Ltd v Methuen
1937
SR 103 at 112.
[4]
Friedlander v
De Aar Municipality
1944
AD 79
at 93;
Sasfin
(Pty) Ltd v Beukes
1989
(1) SA 1
(A) 31G H. Quoted with approval in
Densam
(Pty) Ltd v Cywilnat (Pty) Ltd
[1990] ZASCA 120
;
1991
(1) SA 100
(A) (
Densam
)
at 113D.
[5]
Id.
[6]
KPMG Chartered Accountants (SA) v
Securefin Ltd & another
[2009]
ZASCA 7
;
2009 (4) SA 399
(SCA) paras 39-40.
[7]
Natal Joint Municipal Pension Fund
v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18.
[8]
Bothma-Batho Transport (Edms) Bpk
v S Bothma & Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) para 12.
[9]
Novartis SA (Pty) Ltd v Maphil
Trading (Pty) Ltd
[2015]
ZASCA 111; 2016 (1) SA 518 (SCA).
[10]
Clause 1 of the
Policy.
[11]
Clause 2.5 of the
Policy.
[12]
Scott on
Cession
page 185.
[13]
Densam
Fn 4
at
112.
[14]
Goodwin Stable
Trust v Duohex (Pty) Ltd
1998
(4) SA 606
(C) at 616G-H.