Mutual & Federal Insurance Co Ltd v Da Costa (243/06) [2007] ZASCA 89; [2007] SCA 89 (RSA); 2008 (3) SA 439 (SCA) (6 June 2007)

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[2007] ZASCA 89
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Mutual & Federal Insurance Co Ltd v Da Costa (243/06) [2007] ZASCA 89; [2007] SCA 89 (RSA); 2008 (3) SA 439 (SCA) (6 June 2007)

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REPUBLIC OF SOUTH AFRICA
THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
Case
number: 243/06
Reportable
In the matter between:
MUTUAL & FEDERAL
INSURANCE
CO LTD
APPELLANT
and
JAF
DA COSTA
RESPONDENT
CORAM
: FARLAM,
LEWIS et MLAMBO JJA
HEARD
: 5
MAY 2007
DELIVERED
: 6
JUNE 2007
SUMMARY:
Insurance
– misdescription of year and model of motor vehicle – whether
material – whether best evidence led on quantum of
indemnification.
Neutral
citation: This
judgment
may be referred to as
Mutual
& Federal v Da Costa
[2007] SCA 89 (RSA).
________________________________
________________________
JUDGMENT
________________________________________________________
FARLAM JA
[1]
The
respondent in this matter, a Pretoria businessman, who is a partner
in a firm of panelbeaters, sued the appellant, an insurance
company,
in the Pretoria magistrate’s court for indemnification in respect
of damage caused to a motor vehicle which, the respondent
contended,
was covered under an insurance policy issued by the appellant. His
action was successful, the trial court granting judgment
in his
favour in an amount of R48 050, with interest from 24 July 1996 (the
date the appellant repudiated liability in respect of
the claim) and
costs.
[2]
The
appellant’s appeal against this judgment was dismissed on 15
November 2005 by De Vos and Legodi JJ, sitting in the Pretoria
High
Court, and it appeals to this court with the leave of the court
a
quo.
[3]
In
argument before us counsel for the appellant raised three points in
support of the appeal,
viz:
(1) the respondent had
not proved what he called ‘the insured event’ (damage to a
vehicle in an alleged collision);
(2) the respondent had
not proved that the vehicle in respect of which he had claimed was in
fact a vehicle insured in terms of the
insurance policy issued to him
by the appellant; and
(3) that, if he had
proved ‘the insured event’ and that the claim was brought in
respect of a vehicle insured under the policy,
the quantum of his
damages had not been proved.
[4]
It
was common cause at the trial that from about June 1991 an agreement
of insurance (which I shall call in what follows ‘the policy’)
existed between the appellant and the respondent in terms of which a
number of motor vehicles belonging to the respondent were insured.
From time to time this policy was amended by the addition or removal
of motor vehicles as they were acquired or disposed of by the
respondent.
[5]
In
January 1996 the respondent acquired a further vehicle from the
brother of one of his employees by exchanging it for a Porsche.
The
respondent was under the impression that this vehicle was a 1991
model Mercedes Benz 230E. It was duly added to the list of vehicles
covered by the policy and was described as a 1991 model Mercedes Benz
230E. The registration number was originally recorded by the
appellant as TBA 111 but it appeared from the evidence that this was
what might be described as a temporary description because the
correct number was not at that stage known. ‘TBA’ standing for
‘to be advised’.
[6]
The
respondent testified that at the relevant time he only owned one
Mercedes Benz, namely the vehicle in question. Its registration
number was PNH 609 T, which was the number found on the vehicle
inspected by the appellant’s assessor during his investigations
pursuant to the respondent’s claim. It was also indicated on the
licence disc found by the assessor on the vehicle.
[7]
It
was clear on the evidence that the parties intended the addition
relating to the Mercedes Benz to which I have referred to apply
to
the vehicle which the respondent had recently acquired and which he
wanted to have added to the cover under the policy.
[8]
Although
the respondent was, as I have said, under the impression that the
vehicle he had acquired was as described in the list of
vehicles
covered by the policy, it was in fact, as the magistrate found, a
built-up vehicle, being a combination of a 1988 200 and
a 1990 230
Mercedes Benz. The appellant contended that it was only liable under
the policy in respect of a car answering to the description
contained
therein and no other. It contended further that the description of
the vehicle amounted to a warranty which had been breached.
The
difficulty I have with this contention is that the appellant never
raised a breach of warranty as a defence in its plea. It relied
instead on denials, most of which were not persisted in at the trial,
and a series of defences based on the fact that the vehicle
in
question was a built-up vehicle, combining a Mercedes Benz 200 model
body and a Mercedes Benz 230E model engine, which it stated
entitled
it to avoid the agreement between the parties on the basis of
material misrepresentation, alternatively non-disclosure on
the part
of the respondent. It specifically pleaded that the facts on which it
relied were material to its decision to insure the
vehicle,
alternatively to the terms on which it was to be insured. In the
circumstances I do not think that the appellant should
be permitted
to raise the defence of breach of warranty. (On this aspect of the
case I do not think that the ‘indulgent approach’
to the
pleadings adopted in
Labuschagne
v Fedgen Insurance Ltd
1994
(2) SA 228
(W) at 237, on which reliance was placed, can be
supported.)
[9]
In
regard to the issue as to whether the defence based on
misrepresentation or non-disclosure can be upheld, the question to be
considered
at the outset is whether the appellant proved the
allegation in its plea that the facts it relied on were material. It
led no evidence
in support of this allegation and, as the magistrate
found, it did not prove it. Counsel for the appellant contended,
however, that
evidence on this point was unnecessary. He relied on
Labuschagne
v Fedgen Insurance Ltd, supra,
at
238D-G. That case concerned a 1986 Mercedes Benz motor car which was
represented to an insurer in 1989 as being a new motor car.
It
appears from the reported judgment (at 238D) that in that case the
insurer undertook to replace the insured vehicle with a brand
new
vehicle. The court found (at 238F-G) (and counsel for the appellant
in this case relied on this finding), that ‘the description
of the
year of manufacture or model year and the age of a motor vehicle are
material aspects of the description of the risk which
the insurer is
assuming’. It referred to an English case decided in 1924,
Santer
v Poland
[1924]
19 Ll LR 29 KB, where the year of manufacture of the vehicle in
question was given as 1918 whereas the correct date was 1916.
In that
case no reasoned judgment was given. It appears from the report that
after some evidence had been led (the nature of which
does not
appear) the judge said to the plaintiff’s counsel that he could not
do anything for him, whereupon he gave judgment for
the defendant
underwriters, having said that he was sorry that the plaintiff had
not accepted the amount offered to him, which the
underwriters might
still give him, which they did. The case cannot on the facts reported
be regarded as authority for the proposition
that without any
evidence on materiality a court can assume that a misstatement as to
the year of manufacture of a motor vehicle
is
per
se
to
be regarded as material.
[10]
It
is true that in some cases a conceded or misstated fact will be held
to be material without any evidence having been led on the
point. But
this is where, as it was put in
Fire
v The General Accident, Fire and Life Assurance Corporation Ltd
1915
AD 213
at 220, ‘the fact speaks for itself’. That case concerned
the failure by an applicant for fire insurance to inform the insurer
that a policy on the same property had been cancelled by another
insurer before the expiration of the term on return of the rateable
proportion of the premium for the unexpired term. Solomon JA said (at
221) that the true test for materiality appeared to be: ‘would
a
reasonable man consider that the fact was one material to be known by
the insurer or a fact that in the words of Lord Blackburn
“might
influence the underwriter’s opinion as to the risk he is
incurring”.’ He continued: ‘And if that be the test, can
there
be any doubt that a reasonable man would consider the fact, that
there had been a cancellation of a previous contract, material,
unless at the same time a satisfactory explanation had been given of
that fact.’
[11]
I
do not think that one can say, without any evidence having been led
on the point, that the fact with which we are presently concerned
‘speaks for itself’. I see in this regard that according to John
Alan Appleman and Jean Appleman,
Insurance
Law and Practice,
revised
volume 4A, 1969, section 2630, it was held in what were described as
‘older cases’ that
‘
a misrepresentation as to the year
of manufacture of the insured automobile or the model is material to
the risk and will relieve
the insurer of all liability, even though
the insured may have acted in the highest good faith, and the
representation was innocently
made.’
Appleman points out,
however, that other states ‘have refused to regard such a matter as
material particularly where no inquiry
as to model year had been
made, no intent to deceive was shown, or the value of the vehicle was
approximately that represented.’
He refers (in footnote
43) to a Texan decision
St
Paul Fire & Marine Ins. Co v Huff.
Tex
Civ App
1915, 172 SW 755
at 756, where the following was said:
‘
If the fact untruly represented was
something not found to be material to the risk, then the policy
should not be avoided. Generally
stated, a fact would be material to
the insurance risk which would induce the insurance company to
decline the insurance altogether,
or not to accept it unless at a
higher premium. Taking this as a fair test, in a general way, of the
materiality of a fact in regard
to insurance, it is believed that
reasonably careful and intelligent men might have regarded the
answers complained of as facts not
materially affecting the insurance
contract.’
Appleman continues:
‘
The strict result was undoubtedly
justified in the early development of automobile insurance law, when
the rate fluctuated violently
depending on the age of the car both as
to liability and property coverages, and valued form policies were in
vogue. Now, when the
liability rate is constant regardless of the
make or age of the car, that can be no factor. And since actual value
policies have
superseded valued form contracts almost without
exception, the only effect of representing the car to be newer than
it is would be
to require the insured to pay a higher premium than he
would otherwise have to pay. In the event of loss, he would receive
no more
than had the year been correctly stated. Since the insured
could never profit by such a misrepresentation, and might actually
penalize
himself by so doing, there is no longer any sound reason for
the courts to add additional penalties.’
It is not necessary to
decide whether this passage of Appleman correctly states our law on
the point. What it does do is to provide
support for the view that
evidence of materiality is required in a case such as this.
[12]
In
the circumstances of the present case, in the absence of evidence
indicating that a reasonable insurer in the position of the
appellant,
if it had known the true facts, would have refused to
extend the cover of the respondent’s policy to the vehicle
presently under
consideration or would have only accepted it at a
higher premium, I do not think we can hold that the misrepresentation
relied on
was material. It follows that the first point argued on
behalf of the appellant cannot be upheld.
[13]
I
am also of the view that there is nothing in the second appellant’s
second point, that the respondent had not proved what it referred
to
as the insured event. On this aspect of the case the appellant’s
counsel submitted that the respondent had not proved the collision
which allegedly gave rise to the loss. He pointed out that the
respondent only testified that he had heard from his partner, José
Ferreira (who had taken his car home on the evening of 15 February
1996 and was to bring it back the next morning), that he had been
involved in a collision and that Ferreira himself had not been called
as a witness, although he was available. Counsel submitted
further
that the respondent had failed to prove the time, place and manner in
which the damage arose so as to put himself within
the four corners
of the policy.
[14]
The
cover provided by the policy was in respect of loss of or damage to
the vehicles covered thereby: it was not limited to damage
caused in
a collision. Although respondent did not have to prove that the
vehicle was involved in a collision, in my opinion he succeeded
in
doing so, at least on a
prima
facie
basis.
The expert whom he called, Mr van Rooyen, who had examined the
vehicle at the appellant’s request, stated that it appeared
to him
that the vehicle had been involved in a collision.
[15]
Counsel
for the appellant advanced two further submissions on this part of
the case. The first was that the respondent had to prove
that the
vehicle was damaged within the territory referred to in clause 3.1.1
of the policy, which provided that the insurer would
not be liable
for loss sustained or damage caused beyond the territorial boundaries
of the Republic, Namibia, Botswana, Lesotho,
Zimbabwe and Swaziland.
The evidence was that Ferreira took the vehicle from the workshop of
the partnership in Pretoria West. The
next day the respondent had the
vehicle fetched from the police pound and taken back to the
partnership’s workshop where he looked
at it and concluded that it
was not financially viable to repair it. It is accordingly clear that
it must have been damaged in or
near Pretoria, in the territory
covered by clause 3.1.1 of the policy.
[16]
The
appellant’s counsel’s second submission on this part of the case
was that the respondent had to fail because he failed to
prove that
the damage to the vehicle was not caused by political unrest. Clause
13.4, the provision excluding liability on the part
of the insurer if
the insured property was destroyed or damaged and such destruction or
damage was caused by or occurred in connection
with various forms of
political unrest listed in the policy, was described as an exclusion
and followed immediately on exclusions
of liability in respect of any
claim which was in any respect fraudulent or in respect of loss,
damage or physical injury which was
deliberately caused by the policy
holder or anyone acting in collusion with him. At the end of clause
13.4 it was specifically provided
that if the insurer alleged on the
basis of the exclusions set out in the sub-clause that the
destruction or damage or physical injury
was not covered by the
policy then the onus would rest on the policyholder to prove the
contrary. It is clear in my opinion that
until the insurer pleaded
that the circumstances giving rise to the claim were covered by one
or other of the forms of disturbance
set out in the sub-clause it was
not incumbent on the insured to prove that they did not exist.
[17]
In
the circumstances I am satisfied that a proper construction of the
relevant clause in the policy exclusion must first be raised
as a
defence by the insurer in its plea before it becomes incumbent on the
insured to prove that on the facts of the particular
case it does
not apply.
[18]
I
turn now to consider the appellant’s contention that the respondent
did not prove the
quantum
of the
indemnification to which he was entitled. In this regard the
appellant’s counsel argued that the respondent did not present
any
evidence to the effect that the vehicle had been damaged beyond
economic repair. I do not think that this argument can be accepted.
The respondent’s witness, Mr Scrimgeour, who saw the vehicle both
before and after it was damaged stated in his expert’s report,
which he confirmed in his evidence, that he was of the opinion that
as a result of the damage sustained by the vehicle it was
uneconomical
to repair the vehicle. This evidence was not challenged
in cross-examination.
[19]
Counsel
for the appellant also argued that the pre-collision value of the
vehicle had not been established and the magistrate had
erred in
adopting the robust approach to the assessment of
quantum
set out
in such cases as
Hersman
v Shapiro & Co
1926
TPD 367
and approved by this court on numerous occasions: see, eg,
Esso
Standard SA (Pty) Ltd v Katz
1981
(1) SA 964
(A) and
Southern
Insurance Association Ltd v Bailey NO
1984
(1) SA 98
(A).
[20]
The
robust approach set out in
Hersman
v Shapiro
by
Stratford J, with whom Tindall J concurred, (at 379-380) is this:
‘
Monetary damage having been
suffered, it is necessary for the Court to assess the amount and make
the best use it can of the evidence
before it. There are cases where
the assessment by the Court is very little more than an estimate; but
even so, if it is certain
that pecuniary damage has been suffered,
the Court is bound to award damages.
It
is not so bound in the case where evidence is available to the
plaintiff which he has not produced; in those circumstances the
Court
is justified in giving, and does give, absolution from the instance.
But where the best evidence available has been produced,
though it is
not entirely of a conclusive character and does not permit of a
mathematical calculation of the damages suffered, still,
if it is the
best evidence available, the Court must use it and arrive at a
conclusion based upon it.
(The emphasis is mine.)
[21]
Counsel
submitted that the robust approach should not have been adopted
because, as he put it, ‘good evidence to prove the actual
damages
was readily available but not adduced’.
[22]
Counsel’s
main point in this regard was that the pre-collision value of the
vehicle could have been established by proving the market
value of a
1988 200 Mercedes Benz at the relevant time by reference to an
information system used by the motor industry. The system
indicates
the trade and retail prices of second hand vehicles of specified
models and years of manufacture. It was argued that from
the market
value indicated by the system there had to be deducted an amount
estimated by expert evidence because the vehicle was
rebuilt.
[23]
I
do not think that this submission is correct. The vehicle in question
consisted of the engine from a 1988 200 model Mercedes Benz,
the body
from a 1990 230E model Mercedes Benz and what was described as an AMG
kit comprising non-standard bumpers, grilles, interior
trim, door
panels, seats and a steering wheel. The AMG kit which had been fitted
to the vehicle was worth at least R62 000. Mr Scrimgeour
said that a
purchaser who purchased a rebuilt vehicle would reduce the price he
was prepared to pay by approximately R20 000 to take
into account the
fact that the vehicle was a rebuilt model. He stated that when he saw
the vehicle before it was damaged he formed
the impression that it
was a 1991 model with an AMG kit. (The body of a 1988 model is the
same shape as that of a 1991 model, the
only difference between the
two models being the outside trimmings and interior appointments.) He
took the value of a 1991 model
from the trade publication to which I
have referred, deducted R20 000 from it because the vehicle was
rebuilt and arrived at a figure
of R69 000. He was criticised in
cross-examination because, as it was put to him, he was dealing with
a 1988 200 model, fitted with
an AMG kit and a 230 E engine and he
agreed with the proposition that his estimation of the vehicle’s
value was, as it was put,
‘in pieces’.
[24]
In
my opinion the magistrate was correct in adopting a robust approach
to the assessment of the value of the vehicle. Counsel for
the
appellant contended that she should not have done so because the best
evidence available had not been adduced. In this connection
it was
argued that the market value of a 1988 200 model Mercedes Benz at the
relevant time should have been proved by reference to
the publication
to which I have referred. I do not agree that that would have been
the ‘best evidence’. What had to be valued
was a vehicle built up
in the way set out above. The value of such a vehicle was not dealt
with in the publication referred to. Indeed
when it was pertinently
put to Mr Scrimgeour in re-examination that the vehicle comprised the
components which went into the rebuilt
vehicle and he was asked to
put a value on it he said he could not.
[25]
In
the circumstances the magistrate in my view was entitled to adopt the
approach that the best estimate of the value of the vehicle
on the
material before her be accepted. That estimate took into account the
fact that the vehicle was rebuilt, and that it was less
than the
amount for which the vehicle was insured.
The following order is
made:
The appeal is dismissed
with costs.
……………
..
IG
FARLAM
JUDGE
OF APPEAL
CONCURRING
LEWIS JA
MLAMBO JA