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[2013] ZAKZDHC 67
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Harikasun v New National Assurance Company Limited (190/2008) [2013] ZAKZDHC 67 (12 December 2013)
IN
HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL,
LOCAL DIVISION DURBAN
CASE NO: 190/2008
DATE:
12 DECEMBER 2013
PK
HARIKASUN
...............................................................................................
Plaintiff
And
NEW
NATIONAL ASSURANCE COMPANY
LIMITED
.................................
Defendant
JUDGMENT
MOODLEY
J
The
claim
1
This is an action instituted by the plaintiff, P K Harikasun, for
indemnification under an insurance policy issued by the defendant,
New National Assurance Company Limited, for loss suffered during an
armed robbery at his home on 4 July 2007, of goods to the value
of
R321 725.
2
The plaintiff alleges that in terms of the insurance policy (the
policy), the defendant agreed to compensate him for defined events
occurring within the period of insurance, subject to the terms and
conditions of the policy. The defined events include:
2.1 the
loss of household goods and personal effects of every description on
the plaintiff’s residential premises situated
at 2 Cadley
Close, Bakerville, Durban arising by virtue of theft; and
2.2 The
loss of property specifically stipulated in the schedule of insurance
arising out of any accident or misfortune.
3
The plaintiff alleges further that:
3.1 an
armed robbery took place at his aforesaid residence on the 4
July
2007 during the course of which, a number of items (listed on the
schedule of stolen goods (Exhibit A1-2) were stolen.
3.2 as
the theft constituted a defined event in terms of the policy, the
defendant
was liable to compensate the plaintiff for the loss;
3.3 the
defendant is in breach of its obligations in that, notwithstanding
compliance by the plaintiff of all his obligations under
the policy,
the defendant has failed and/or refused to effect payment of the sum
of R321 275 to which the plaintiff is entitled
in terms of the
policy.
The
defence
4
While admitting that it issued the policy, the defendant pleads that
the agreement of insurance was induced by the plaintiff’s
false
representation that he owned and /or bore the risk in three items of
jewellery which were included in the All Risks section
of the policy.
However these items were stolen prior to the inception date of the
policy. The defendant avers that as it extended
insurance cover in
respect of the three items relying on the plaintiff’s
misrepresentation, the policy was induced by fraud
and the defendant
is entitled to resile from the policy and has tendered repayment of
the premiums paid.
5
The defendant has further placed in dispute the robbery and the theft
of the items listed in the plaintiff’s Schedule of
stolen
goods. But, in the event that the plaintiff proves the loss, the
defendant contends that it is not obliged to indemnify
him and it is
entitled to avoid the agreement of insurance because :-
5.1
in contravention of Clause 9 of the General Conditions of the
agreement of insurance, the plaintiff lodged two fraudulent claims.
The first was for the loss of a Sony Ericsson cell phone (the cell
phone)which the plaintiff falsely represented was in use and
had a
replacement value of at R4 500. The second was for a piece of
jewellery viz an 18 carat Loasia chain (the Loasia chain) 19.4
grams
in weight with a value of R6 250, which had been stolen from him on
27 April 2006.
6
The defendant pleads that, consequently, in accordance with the terms
of the agreement of insurance, the benefit under the agreement
of
insurance has been forfeited by the plaintiff and it has properly
rejected his claim.
Issues
for determination
7
Prior to the commencement of the trial, on application by the
plaintiff, the court ordered separation of the liability and quantum
in terms of Rule 33(4) of the Uniform Rules, and the trial proceeded
only on the merits.
8
The issues for determination are :
8.1
whether the plaintiff had proved that a robbery had taken place at
his residence on 4 July 2007 and established that he had
suffered the
loss he claimed indemnification for from the defendant, in particular
in respect of the cell phone and Loasia chain.
8.2
whether the defendant was entitled to avoid the contract of insurance
because it was induced by the plaintiff’s misrepresentation
to
issue the policy and to extend insurance cover over three items which
were not in his possession;
8.3
whether the defendant could repudiate the plaintiff's claim for
compensation and cancel the insurance contract because the plaintiff
had breached the contract by his fraudulent claims for the damaged
cell phone with no value and the Loasia chain which was not
in his
possession on 4 July 2007.
ONUS
9
The onus of proof of loss and value on a balance of probabilities
burdens the Plaintiff.
Schoeman
v Constantia Insurance Co Ltd 2003(6) SA 313 at 323A
Therefore
the plaintiff must prove that that a robbery took place at his house
on 4 July 2007 and that he is entitled to be indemnified
by the
defendant for loss suffered as a result of the robbery, being a
defined event in terms of the insurance policy issued by
the
defendant.
10
However the onus of proving fraud on the part of the insured rests
with the insurer, which must also be discharged on the normal
civil
standard. The burden is an onerous one and our courts have observed
that the point of departure has to be that fraud –
the
insured’s intention to deceive and defraud the insurer –
is not to be imputed lightly.
Schoeman
v Constantia Insurance Co Ltd supra at 325 B-C
An
insurer’s plea of fraud requires strong proof; fraud on the
part of the insured cannot be presumed, but must be clearly
and
properly proved. An important element of fraud in respect of
fraudulent claims is the intention of the insured to deceive the
insurer by misrepresentation or deception and to cause the insurer
prejudice.
11
Therefore the defendant must prove, on a balance of probabilities,
that:
11.1
the misrepresentations relied upon by the defendant in paragraphs
2bis (pre-contractual fraud) and 7(b) (in breach of Clause
9 of the
General Conditions of the agreement of insurance), were made by the
plaintiff;
11.2
the plaintiff’s conduct was fraudulent as it was made knowingly
and with the intention of obtaining a benefit under the
policy.
Springgold
Investments (Pty) Ltd v Guardian National Insurance Co Ltd
2009 3 SA
235
(D) at 243 F-G
Legal
Principles
12
In regard to the pre-contractual fraud, the insurer has the right to
avoid a contract of insurance whether the proposer has misrepresented
a material fact or he has failed to disclose one.
In
Mutual & Federal Insurance Co Ltd v Oudtshoorn Municipality
1985
(1) SA 419(A)
Joubert JA held at 432 E-H
that :
‘
There
is a duty on both insured and insurer to disclose to each other prior
to the conclusion of the contract of insurance every
fact relative
and material to the risk (periculum or risicum) or the assessment of
the premium. This duty of disclosure relates
to the material facts of
which the parties had actual knowledge or constructive knowledge
prior to the conclusion of the contract
of insurance. Breach of this
duty of disclosure amounts to mala fides or fraud, entitling the
aggrieved party to avoid the contract
of insurance.’
The
aforesaid dictum was applied in
Commercial Union Insurance Co of
SA Ltd v Wallace NO 2004(1) SA 326 (SCA) at 343 I-J.
13
The materiality must be tested at the time of the issue of the
policy. The onus is on the insurer to ‘prove the
representation,
its untruth (which will involve its incorrectness)
and that the incorrectness would have materially affected the
assessment of
the risk at the required time’.
South
African Law of Insurance: D M Davis 4th edition 234 - 235
14
In Mahadeo v Dial Direct Insurance Ltd
2008 (4) SA 80
(W) at 86 H –I
the court confirmed that the test remains objective:
‘
The
question whether the particular information sought to have been
disclosed is judged not from the point of the insurer, or the
insured, but from the view of the notional reasonable and prudent
person.’
15
In LAWSA (Volume 12 4th paragraph 124),
a single combined test
to ascertain materiality objectively is proposed:
‘
whether
according to the opinion of the reasonable man in the position of the
particular insured, the facts in question would be
likely to
influence the decision of a prudent, experienced insurer concerning
questions of risks and premium’.
16
The defendant relies on the exemption clause viz Clause 9 of the
General Conditions of the agreement of insurance to avoid the
agreement of insurance. Patel J made the following comments in
respect of the interpretation of exemption clauses in Springold
Investments (supra) at page 242:
‘
[21]
… If the defendant is entitled to escape liability on the
grounds of fraud, then its right to do so must be found within
the
four corners of clause 22. Clause 22 is what is commonly known as an
exemption clause and its application to the facts of this
case will
have to be determined. This in turn involves the proper construction
of that clause and the principles of interpretation
which are of
application thereto.
[22]
While it is clear that there is no general principle that exemption
clauses should be construed differently from other provisions
in a
contract, the courts are wary of contractual exclusions, since they
deprive parties of rights that they would otherwise have
had at
common law. (See Van der Westhuizen v Arnold (6) SA 453 (SCA)
([2002])
4 All SA 331)
at paras 37-40.) It is a well-recognised
principle of interpretation of insurance policies that the courts
should lean toward upholding
the policy rather than producing a
forfeiture.’
Fedgen
Insurance Ltd v Leyds
1995 (3) SA 33
(A) at 38B-E
16
As pointed out by both counsel, in the absence of direct evidence the
court has to determine the issues and the discharge of
the relevant
onus by inferential reasoning based on the conspectus of evidence. In
R v Blom
1939 AD 188
at 202-3, the court set out the two cardinal
rules of logic in the evaluation of circumstantial evidence : the
inference sought
to be drawn must be consistent with all the proven
facts and the proved facts should be such ‘that they exclude
every reasonable
inference from them save the one sought to be
drawn’. This standard is apposite when the onus of proof has
to be discharged
beyond reasonable doubt as a conviction can only be
sustained if the only reasonable inference to be drawn from the facts
points
to the guilt of the accused. On the other hand, in accordance
with the ordinary civil standard, the court must :
‘
by
balancing probabilities, select a conclusion which seems to be the
more natural, or plausible, conclusion from amongst several
conceivable ones, even though that conclusion be not the only
reasonable one’ Ocean Accident and Guarantee Corp. Ltd v Koch
1963 (4) SA 147
(AD) at 159 C – D
17
In considering the conspectus of evidence, the court must evaluate
the probabilities, the credibility of witnesses and the proven
objective facts. However as
‘……
..the
findings of credibility cannot be judged in isolation, but require to
be considered in the light of proven facts and the probabilities
of
the matter under consideration’,
Santam
Bpk v Biddulph
2004 (5) SA 586
(SCA) at 589G I have remained mindful
that :
‘ …
..the
proper test is not whether a witness is truthful or indeed reliable
in all that he says, but whether on a balance of probabilities
the
essential features of the story which he tells are true.’
Santam
Bpk v Biddulph supra at 592B
Argument
18
Mr Broster submitted that as the evidence of Tasha and the plaintiff
about the events of the evening of 4 July 2007 was not seriously
disputed in crossexamination, the plaintiff has proved on a balance
of probabilities that the robbery which triggered the liability
of
the defendant, had occurred.
On
the issue of nondisclosure, he submitted that although the items that
the plaintiff had previously been robbed of were covered
by the
policy issued by the defendant, the fact that they were not in the
plaintiff’s possession did not materially affect
the risk
assumed by the defendant. Further the plaintiff had disclosed his
previous losses in his proposal for insurance cover
from the
defendant, and had not included the items in the claim lodged with
the defendant although he had paid the premiums for
the items.
Consequently the non-disclosure is immaterial and does not fall
within the parameters of Section 53 of the Short Term
Insurance Act
53 of 1998.
19
Mr Broster contended further that fraud on the part of the plaintiff
in respect of the Loasia chain could not be inferred from
the facts
before the court, as the defendant had failed to lead any evidence in
this regard. Similarly the defendant had failed
to discharge the onus
on it to show that the plaintiff had fraudulently claimed
indemnification for the cell phone by representing
that it was in
use. The defendant had itself recorded in correspondence that the
plaintiff had not alleged that the cell phone
was in use, and the
evidence of the plaintiff and his witnesses did not sustain the
defence of fraud relied on by the defendant.
Mr
Broster submitted in conclusion that the defendant had, in the
premises, failed to discharge the onus on it and the plaintiff
ought
to be awarded his claim.
20
Ms Annandale argued that the matter could be disposed of on the
grounds that the insurance contract had been induced by the
plaintiff’s material misrepresentation that he bore the risk in
and to items of jewellery which he knew had been stolen during
a
previous robbery and for which he had been paid out by his previous
insurers. As the defendant had assumed the risk for the
aforesaid
items in the contract of insurance on the basis of the
misrepresentation, the contract is rendered voidable at the instance
of the defendant. The defendant has elected to resile from the
contract and tendered the return of premiums paid. Consequently
there
is no liability attaching to the defendant under the contract of
insurance to indemnify the plaintiff for loss.
21
In the event that the court does not find that argument dispositive
of this matter, Ms Annandale has submitted that the plaintiff
did not
discharge its onus to prove the robbery as the only eyewitness to the
robbery did not testify although available, and the
evidence of the
plaintiff and Tasha lacked credibility. Therefore the plaintiff
failed to establish the insured event.
22
As the final leg of her argument, Ms Annandale advanced in detail the
numerous improbabilities in and contradictions between
the evidence
of the plaintiff and his witnesses in respect of the cell phone and
Loasia chain, which render the evidence false
and to be rejected. She
contends that the defendant has therefore established fraud on the
part of the plaintiff and that the plaintiff’s
claim falls to
be dismissed.
23
She has also contended that the plaintiff’s conduct merits
costs on a punitive scale and, given the seriousness of fraud
in
relation to insurance policies, the defendant’s employment of
senior counsel was warranted.
Summary
of Facts :
24 The
following is common cause:
24.1 The
plaintiff submitted a Personal Insurance Plan Proposal Form dated 20
March 2007 to GDI Schofield Insurance Brokers.
24.2 The
defendant issued domestic insurance policy HARIP006/0001 to the
Plaintiff, with an inception date of 1 April 2007.
24.3 Under
the the ‘All Risks Specified Section’ it insured 41 items
of jewellery. Under the ‘Household Contents
Section’, the
Limitations included:
‘
2 cover
in respect of Cellular Phones at the Insured’s private
residence is limited to R1500 unless specified. Theft must
be
accompanied by forcible and violent entry and accidental damage is
excluded.’
24.4 The
plaintiff lodged a claim form dated 6 July 2007 and a schedule dated
10 July with the defendant in respect of loss suffered
during a
robbery at his residential premises on 4 July 2007. The schedule
included 43 specified items of jewellery valued at R305
775, and the
cell phone valued at R4500.
24.5 The
plaintiff and his wife declined to take a polygraph test or
examination, citing medical and legal advice.
24.6 The
plaintiff supplied receipts and valuations for some of the jewellery
on the schedule and two affidavits in respect of the
cell phone.
24.7 MTN,
the service provider on whose system the cell phone was registered
confirmed that :
24.7.1 the
said cell phone was inspected on 18 February 2006;
24.7.2 liquid
damage was diagnosed at a repair cost of R3 780 (inclusive of VAT);
24.7.3 the
replacement cost of the cell phone was R4 028.32 (inclusive of VAT);
and
24.7.4 the
cell phone was not repaired by them.
SUMMARY
of EVIDENCE
25
The plaintiff called 2 witnesses, his daughter Tasha and a cousin,
Caveer Ramjathan, and testified himself.
Tasha
Harikasun (‘Tasha’)
26
Tasha, the plaintiff’s daughter, testified that on the evening
of 4 July 2007, she fell asleep in the TV lounge which adjoined
her
parent’s bedroom on the second storey of her home. The safe was
in her parent’s bedroom. Her bedroom and the kitchen
were on
the ground level.
27
She was awoken by laughter and unfamiliar voices. Realising that
something was wrong, she grabbed her mother’s cell phone
from a
handbag on the bed, and went down to her bedroom. She pressed the
panic button near the doorway of her room but nothing
happened. She
then ran to the kitchen and pressed the emergency button there. After
activating the alarm, Tasha hid in a cupboard
in her room from where
she telephoned the plaintiff and told him that ‘something was
happening’ and that he ought to
return home. She remained in
the cupboard until she heard the plaintiff calling her name. The
police were with her father.
28
A Sony Ericsson cell phone belonging to her father was taken during
the robbery. About a month prior to the robbery, her uncle,
Caveer
Ramjathan, had brought the cell phone with a note attached to their
home. He gave her the cell phone and told her to tell
her father to
phone him. Without checking if it was in working order, she put it
into the cupboard in the TV lounge, in which
old cell phones were
stored, and forgot to tell the plaintiff about it.
29
Tasha’s cell phone had been taken away by her parents. On the 4
July 2007 she took out the cell phone brought by Ramjathan
but left
the note it was wrapped in, in the cupboard. While her parents were
away, she put the cell phone on charge in their bedroom,
after
placing her one of her many sim cards in it, but when they returned
early she had forgotten to take it off the charger. She
informed her
parents about the cell phone on the night of the robbery.
30
Tasha had decided to charge the cell phone brought by Ramjathan
because she had thought that it had been repaired as the plaintiff
had informed her that Ramjathan had taken the phone for repairs. She
had not read the note that was wrapped around the cell phone
but she
gave the note to the plaintiff after the robbery.
31
Even allowing for Tasha’s immaturity and informal manner of
expression, the impression gained by the court was that she
was too
glib and rehearsed in some of her responses, particularly in respect
of the cell phone, and therefore unconvincing. Comparatively,
although her evidence in respect of the robbery was not detailed, and
her reaction to the presence of the robbers, unusual given
the
exposure to risk of discovery by them, her testimony in respect was
consistent and had a more truthful ring.
32
Caveer Ramjathan testified that in mid-2007 met the plaintiff, who is
his cousin, in a car park at Sandton City, Johannesburg.
Ramjathan
saw a Sony Ericsson cell phone in the boot of the plaintiff’s
car. The plaintiff told him that the cell phone was
not working.
Ramjathan offered to have the cell phone repaired by his friend Nolan
Naidoo.
33
Upon his return to Durban, Ramjathan gave the phone to Naidoo,
telling him to check what was wrong with the phone and to repair
it.
Approximately two weeks later Naidoo brought the cell phone wrapped
in paper to Ramjathan’s house and gave him the cellphone
wrapped in paper, and said to him ,” ….give it to your
cousin and get him to call me.” Ramjathan did not ask
Naidoo
what was wrong with the phone or if he had repaired it. He knew that
Naidoo usually wrapped the phones he repaired in paper
on which he
wrote his name and number.
34
Ramjathan kept the cell phone with him for two or three days before
he took it to the plaintiff’s house, where he gave
it to Tasha,
and told her tell the plaintiff to phone Naidoo.
35
Subsequently the plaintiff brought an affidavit to him which he
deposed to after reading it and satisfying himself as to its
contents.
36
Ramjathan was not a credible witness. His evidence was riddled with
material contradictions and inconsistencies and the explanations
he
offered were weak and lacked credibility. He changed his version
about whether he had discussed the damage to the phone with
the
plaintiff and his reasons for not wanting to involve Naidoo in the
plaintiff’s case several times. Ramjathan was also
clearly
unhappy about testifying, which was apparent from his demeanour and
discomfort under crossexamination. He eventually attempted
to
attribute his uncertainty and contradictions to his personal problems
and alleged that he could only remember that he had given
the phone
back. His testimony was undoubtedly unreliable and served only to
undermine the credibility of the plaintiff’s
version about his
claim for the cell phone.
37
The plaintiff testified that on the evening of the 4 July 2007 he
attended a meeting in Durban. While he was waiting at his flat
at the
North Beach for his children fetch him, he received a call from Tasha
who informed him that a robbery was in progress at
their home.
Immediately thereafter the alarm company contacted him and advised
him that the panic button in his house had been
activated and that
there was no response on the landline to the house. The plaintiff and
his children rushed home.
38
On the way he telephoned a neighbour, Mr Abdul, and the Newlands East
Police Services. When they arrived home Abdul and the police
were
there. The police, Abdul, Abdul’s son and a friend entered the
house. When he was told the assailants were not in the
house, the
plaintiff entered the house shouting for Tasha, who came out of a
wardrobe in her bedroom. He found his wife lying on
the bed in their
bedroom.
39
While the police were questioning him about what was taken from the
house, Tasha told him that the Sony Ericsson cell phone had
been
taken. He immediately informed a policeman whose name he could not
remember. The policeman advised him not to block the phone,
because
the phone could be traced if it were used.
40
The plaintiff had received the stolen cell phone when he took a
contract with I Talk Cellular. The cell phone was damaged some
months
later when he went into the water at Addington beach during the
sardine run with the phone in his back pocket. He handed
the phone in
for repairs at the MTN Store but was advised a few weeks later that
liquid damage did not fall under the warranty
and it was not
economically viable to repair the phone. He concluded another
contract with I Talk Cellular and obtained a new phone.
41
The plaintiff kept the damaged phone in his car. Some time later he
met two of his cousins in Johannesburg, one of whom was Caveer
Ramjathan. When Ramjathan asked him why the cell phone was in the
boot, he told Ramjathan that the phone was not usable because
of
water damage. Ramjathan offered to have the cell phone repaired by
his friend. The plaintiff had not seen Ramjathan and the
phone since
then.
42
Tasha told him that Ramjathan had brought the cell phone back about 5
or 10 days before the robbery. There was a note attached
to the cell
phone and the plaintiff was to have contacted the person whose name
was on the note. On the day of the robbery she
had taken the cell
phone out of the cupboard in the TV room, inserted one of her
simcards and placed it to charge. The plaintiff
confirmed that he had
taken Tasha’s cell phone away from her.
43
The plaintiff submitted a claim to his brokers, GDI Schofield, with a
breakdown of the items that had been taken during the robbery
(Exhibit A 2A). He listed the cell phone on the schedule at a value
of R4 500. At the request of the assessor, the plaintiff completed
the schedule (Exhibit A8-9) required by the underwriter.
44
On 23 July 2007, Rob Head, the assessor, asked the plaintiff and his
wife to take a polygraph test. The plaintiff could not remember
what
his response had been.
45
On 24 October 2007 the plaintiff and his wife were called to a
meeting with the insurers at which he was asked why he had not
declared that the cell phone was not functional or faulty. According
to the plaintiff, “I explained to them exactly what
I knew at
that point in time. That the cell phone was damaged, it went in for
repairs, it came out unrepaired and I never used
that cellphone ie
from the time it went to MTN for repairs and was returned.” He
had not said that the phone was in use.
46
The defendant requested details of the person who had effected the
repairs to the phone. The plaintiff explained to Ramjathan
what had
transpired about the cell phone and requested the details of the
person who repaired the cell phone. Ramjathan replied
that he would
get back to him, but subsequently informed the plaintiff that he had
done a favour in attempting to have the cell
phone repaired and he
did not want the repairer involved. However eventually both Ramjathan
and Nolan Naidoo deposed to affidavits,
on 30 October 2007 which were
submitted to the brokers.
47
Harikasun was crossexamined strenuously about the cell phone and
three of the items that appeared on the All Risks schedule of
the
policy issued by the defendant as items 13, 16 and 22 respectively: a
Loasia chain, a ¼ Kruger Rand with diamond, and
a hand chain.
He admitted that the aforesaid 3 items were stolen during a previous
‘smash and grab’ robbery on 27 April
2006 and he had been
compensated therefor by the insurer at the time, Mutual &
Federal, but were nevertheless covered by the
policy issued by the
defendant.
48
He was unable to answer the questions relating to the Loasia chain
and finally responded that there were two Loasia chains.
49
The plaintiff was neither an impressive nor a credible witness. His
reliance on his medical woes, unsubstantiated by any expert
evidence,
was illconceived and did little to alleviate his inability to offer
logical and pertinent responses. He alleged confidently
that he was
able to apply for insurance cover and lodge insurance claims because
he had the relevant documentation and knowledge
of the items insured.
But under pressure to explain why he included items he knew he did
not have in his possession and the anomalies
relating to the Loasia
chain, he relied on his ‘impaired memory’ and claimed
confusion and requested that he be excused
from answering questions
relating to the chain, because his wife would be able to answer the
questions about the jewellery as she
made the purchases. And yet he
was quick to retort that there was no prejudice to the defendant
although it had insured items taken
from him during a previous
robbery, because he had not claimed for those items and paid the
premiums. His ability to comprehend
at that point seemed unaffected
by the general malaise he claimed to be afflicted with.
50
When asked about what his response was to the request by the assessor
to take a polygraph test, the plaintiff alleged that he
could not
remember. And yet he knew that he and his wife had refused to take
the test, allegedly on the advices of his attorney
and his surgeon.
This was in my view a feeble attempt to impress the court with his
inability to remember.
51
There were several inconsistencies in the plaintiff’s testimony
which impacted adversely on his credibility. He alleged
that he had
made a number of errors in the schedule he had lodged with the claim
form (Exhibit A1-2) :
51.1 At
first he confidently asserted that he had a list, and knew which
items were in the safe, which items his wife had left on
the table
and which items he was wearing. The jewellery that was not taken was
those items he had been wearing. However he then
added that he was
not sure whether all his wife’s jewellery was taken.
51.2
The plaintiff confirmed twice that the video machine listed under the
unspecified items was in his bedroom. But when he admitted
that there
was no television in his bedroom and he was asked why the
videomachine was in his bedroom, he claimed to have made a
mistake
and what he had listed as a video machine was in fact a video camera.
51.3
The plaintiff described the office desk in his bedroom that was
listed on the claim being in dimension 60cm wide by 1 meter
in
length, light weight, with no drawers and made of veneered oak. Only
under further cross examination on resumption of the trial,
did he
testify that the desk was not taken by the robbers, but broken. As
the desk was against the safe, he presumed that it had
been broken
because the robbers wanted to get to the safe. But it raises the
question as to why the desk was broken if it was lightweight
and
portable, as it would have been easier to move the desk than to break
it.
52
The plaintiff’s credibility was seriously undermined further in
version about how the cell phone sustained damage. In his
evidence in
chief the plaintiff testified that the phone was damaged when he went
into the water at Addington beach during a sardine
run, with his
phone in his back pocket. He ‘got out happily with the
sardines’ and pulled out his phone and called
his uncle who was
a keen fisherman to tell him about the sardines. To quote the
plaintiff,
“
I
said ‘come and join the fun here and pick up your sardines’
I couldn’t get through to him because the water
had gone in
already’.
53
However under crossexamination he realised that he could not have
called his uncle from the phone after entering the water, and
he
insisted that he did call his uncle, but it must have been before he
went into the water. Subsequently he changed his version
again: he
had intended to speak to his uncle but he was no longer certain that
he had.
54
But his version gained further improbability when he was reminded
that the sardine run occurred during the winter months, not
in
February as he alleged. The plaintiff then alleged that the fish were
mackerel which were being scooped from the sea in nets.
Having lived
in KwaZulu-Natal all my life, although I am not a fisherman, I have
never heard of a mackerel run, although unlike
the plaintiff, I am
familiar with the saying “To throw a sprat to catch a
mackerel”.
Unsurprisingly
the mackerel run tuned out to be ‘a red herring’.
According to the South African Sustainable Seafood
Initiative –
the species of mackerel or the King mackerel (also called Couta or
Cuda) which is found near the KwaZulu-Natal
coastline, are linefish.
This species is targeted by commercial and subsistence fishers but
also caught by recreational line and
spear fishers.
The
plaintiff’s explanation about how liquid damage was caused to
the phone while he was gathering armfuls of mackerel is
consequently
a ludicrous lie.
55
However I remain mindful that the advantage of the trial court in
evaluating the credibility of witnesses must not be overemphasised
as
‘the truthfulness or untruthfulness of a witness can rarely be
determined by demeanour alone without regard to other factors,
including, especially, the probabilities’. President of the
Republic of South Africa & Others v South African Rugby Football
Union &Others 2000(1) SA1 (CC) at par 9
56
The defendant did not call any witnesses.
THE
PLAINTIFF’S ONUS : THE ROBBERY
57
As pertinently pointed out by Ms Annandale, the only eyewitness to
the robbery was Mrs Harikasun but the plaintiff elected not
to call
her, although she was available and in court. Therefore the details
of the robbery remain sketchy. There is no evidence
that the robbery
occurred at gunpoint or that it was executed under threat of
violence, except for Tasha’s evidence that
she heard the word
‘rape’.
58
Tasha’s evidence was not satisfactory in all respects. There
was no evidence as to what language the intruder or intruders
were
speaking in, although she testified that she heard the word ‘rape’.
When she described her phone call to the plaintiff
she told him that
‘…something is happening I don’t know, please come
home’. There is no mention of a robbery
or even rape. Similarly
the plaintiff could not recall her exact words, but he understood
that they were being ‘held up’.
59
There were also some unexplained contradictions in the plaintiff’s
evidence in respect of the robbery. In the claim form
(Exhibit A2A)
the plaintiff reported the time of the robbery at 18h30; he testified
that he had estimated the time from the call
he received and the
report from his home. However according to Mrs Harikasun’s cell
phone records (Exhibit A26), Tasha phoned
him at 19h30. The
plaintiff impressed on the court that he got home in a matter of
minutes and he had phoned Abdul and the police
on his way home. But
his cell phone records reflect that he called Abdul 16 minutes after
his daughter’s call and the police
almost 1 hour later at
20h25. He was unable to explain the time lapse and the discrepancy
between his testimony that he had contacted
the police immediately
after Tasha called him and the delay of an hour reflected on the cell
phone record.
60
Similarly, although the plaintiff stated in the claim form that two
armed men had held his wife and child at gunpoint and assaulted
and
threatened them, he conceded that Tasha had not been held at gunpoint
or assaulted; but he considered that she was under threat
because of
the presence of the robbers inside the house.
61
However it was not disputed that the security company was alerted by
Tasha and that the police and the plaintiff were alerted
by the
security company. According to the plaintiff, the police arrived
almost simultaneously with him at the house. The plaintiff
had also
telephoned the police and Abdul, his neighbour, who was present with
his son and a friend. The plaintiff remained outside
while the police
and his neighbours went into the house to secure it. Tasha only
emerged from the cupboard when she heard her father,
and the police
were present. Mrs Harikasun was lying in her bedroom upstairs.
62
In my view, it is improbable that the robbery could have been faked
in the presence of so many people. If a false alarm had been
sounded
to perpetuate belief in an alleged robbery, it would have been
evident to the police and perhaps even the neighbours.
63
When Tasha testified that heard the voices emanating from her
parents’ bedroom which adjoined the TV lounge, it was put
to
her by Ms Annandale :
‘
So
when you heard the word ‘rape’ you must have realised
that there were people in the house who were threatening your
mother,
there was something badly wrong?
Tasha
: Yes’
Therefore,
although her actions exposed her to detection by the robbers, and
were risky and potentially foolhardy, her conduct was
consistent with
her explanation for not remaining in the TV room:
“
I
don’t know why I didn’t but I know I just had to get
help. My mom always tells us ‘You know what. Don’t
get
into the situation. Get out and get help’.”
64
She therefore took the risk to get help which she did, by activating
the alarm and telephoning her father. She also had the presence
of
mind to take her mother’s cell phone out of her bag before she
ran downstairs. Tasha’s testimony about the robbery
and her
conduct is also corroborated to an extent by evidence of the
plaintiff. Further, although Tasha’s statement to the
police
was available, she was not tested on its contents, nor was her
evidence about hearing the robbers disputed.
65
In the premises, despite the adverse inferences I have been urged to
draw by the defendant from the failure of Mrs Harikasun
to testify, I
am of the view that the plaintiff has established, on the
probabilities, that the robbery on 4 July 2007 at his residence
did
take place.
The
INDUCEMENT of the CONTRACT of INSURANCE by a MATERIAL MISREPRESENTION
66
In order to avoid liability under the policy, the defendant has to
prove that that there was pre-contractual fraud on the part
of the
plaintiff. Within that context, the misrepresentation must have
materially affected the assessment of the risk under the
policy at
the time of issue before an insurer may avoid liability under the
policy in terms of
Section 53(1)
of the
Short-term Insurance Act 53
of 1998
, as amended by
Sections 19
and
35
of the
Insurance Amendment
Act 17 of 2003
which provides :
“
53 Misrepresentation
and failure to disclose material information
(1)(a) Notwithstanding
anything to the contrary contained in a short-term policy, whether
entered into before or after the commencement
of this Act, but
subject to subsection (2) –
(i) The
policy shall not be invalidated;
(ii) The
obligation of the short-term insurer thereunder shall not excluded or
limited; and
(iii) The
obligations of the policyholder shall not be increased,
on
account of any representation made to the insurer which is not true,
or failure to disclose information, whether or not the representation
or disclosure has been warranted to be true and correct, unless the
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.
(b)
The representation or non-disclosure shall be regarded as material if
a reasonable, prudent person would consider that the particular
information constituting the representation or which was not
disclosed, as the case may be, should have been correctly disclosed
to the short-term insurer so that the insurer could form its own view
as to the effect of such information on the assessment of
the
relevant risk”.
67
It is common cause that the plaintiff was previously insured with
Mutual & Federal insurance Co (Ltd). The plaintiff admitted
that
he was compensated by Mutual & Federal in cash for four items
(Exhibit C9 – 12) which were stolen from him during
a robbery
on 27 April 2006 : an 18 carat Loasia chain weighing 19.4 grams
valued at R6 250; an 18 carat ¼ Kruger Rand with
diamond
valued at R3 995; a 9 carat hand chain weighing 16.9 grams valued at
R3 250; and 9 carat earrings to the value of R1 995
(the plaintiff
suggested that there may have some confusion and this item viz the
earring could have been a ring that he was robbed
of).
68
The plaintiff thereafter requested cover from S A Eagle Insurance Co
(Ltd) on 8 November 2006. In the proposal, under the Specified
All
Risks section (Exhibit D3), he requested cover ‘ As per
attached list from M & F Nos 1 – 34’ viz the
34 items
of jewellery which had been insured by Mutual & Federal, which
included the Loasia chain, the ¼ Kruger Rand
and the hand
chain, which had been stolen and he had been compensated for.
69
When the plaintiff sought cover from the defendant on 20 March 2007,
in the proposal form he requested ‘All Risks’
cover for
Specified Items: ‘Jewellery as per specified schedule on
existing S A Eagle policy’ (Exhibit A65), which
again included
the aforesaid three items of jewellery. The defendant subsequently
issued policy HARIP006/0001 to the plaintiff
for 41 items of
jewellery, including the aforementioned 3 items.
70
The defendant contends that by signing the proposal form (Exhibit
D1-8), the plaintiff sought cover for at least two of these
items –
the ¼ Kruger Rand and the hand chain, with full knowledge that
he did not possess the items and therefore
bore no risk in them. The
defendant contends further that as the plaintiff’s
misrepresentation had a bearing on the fact
of the risk assumed by
the defendant because it had extended cover on the non-existent
items, it constituted a material misrepresentation
which induced the
conclusion of the contract of insurance on the terms set out in the
policy, and consequently entitles the defendant
to avoid the contract
of insurance under Section 53 of the Short Term Insurance Act
(supra).
71
I find no merit or pertinence in the plaintiff’s contention in
response that the defendant suffered no prejudice because
the he paid
the premiums on the items and did not include them in the claim he
lodged with the defendant. I am also unable to find
merit in Mr
Broster’s submission that the nondisclosure did not materially
affect the risk assumed by the defendant in respect
of the plaintiff.
The defendant extended cover for items which were non-existent and
for which the plaintiff bore no risk at the
time of the issue of the
policy, which impacted on the risk it assumed. To that extent, the
failure to inform the defendant that
cover should not be extended
over the aforesaid items is material.
72
However I am not persuaded that the contract of insurance was induced
by fraud on the part of the plaintiff, entitling the defendant
to
avoid the policy. The plaintiff was assisted by the broker in the
completion of the proposal and it was probably expedient to
transfer
the items covered under the previous insurer instead of noting each
item individually. It is apparent that the same practice
was followed
in the SA Eagle proposal. There was also a time lapse between each
proposal, and there is no evidence that the plaintiff
was aware at
the time that the schedule that was utilised in the proposal for the
policy with the defendant was the schedule that
was utilised not only
when the SA Eagle Policy was issued, but was also the schedule
utilised when he applied for the earlier policy
with Mutual &
Federal. Therefore, despite his signature to the proposal, I am not
satisfied that the plaintiff deliberately
and with intent, made a
material misrepresentation or non-disclosure in failing to note that
certain items ought not have been
transferred from the previous
schedule to the policy with the defendant, as he was not solely
responsible for listing the items
included ‘All Risks’
section in the policy.
73
Consequently, despite the duty of disclosure on the plaintiff and the
objective test to be applied in determining the materiality
of the
misrepresentation, in my view this is a matter where there is a
‘special circumstance’ as set out in Fransba
Vervoer
(Edms) Bpk v Incorporated General Insurance Ltd
1976 (4) SA 970
(W)
in the headnote at 970 E-F :
‘
The
practice of allowing evidence of materiality is firmly established,
though the Court may still hold that the fact concerned
is
immaterial. The Court will examine such evidence, as it will examine
any other evidence, to see whether it is unduly coloured
by bias or
partiality. Once the Court has found that certain facts were material
to the assessment of the risk in any case, it
follows, in the absence
of special circumstances, almost automatically, that a reasonable man
would have disclosed those facts’.
74
I am accordingly not persuaded that the defendant is entitled to rely
on the provisions of section 53 of the Short Term Insurance
Act 53 of
1998 and to avoid the policy on the grounds that it was induced by
fraud on the part of the plaintiff.
The
claim for the Cell Phone and Loasia Chain
The
cellphone
75
Earlier in this judgment, I have already found that that the evidence
of all three witnesses in respect of the cell phone unsatisfactory
and inconsistent. What has to be determined now is whether the
evidence supports the inference that the plaintiff knew that the
phone had not been repaired and therefore did not have a value of R4
500 as contended by the defendant or alternatively, as alleged
by the
plaintiff, that he was under the impression that it had been
repaired.
76
According to Tasha she wanted to use the cell phone without her
parents’ knowledge, yet despite the size of their house,
she
chose her parents’ room to charge the phone. But when this was
put to her, she responded that her mother had not noticed
the phone
charging because it was on a table on the other side of the room.
Tasha knew that the phone had been damaged and on receipt,
she had
simply put it into the cupboard; yet she selected this phone for her
use and put it on charge without switching it on or
checking if it
was working.
77
Ramjathan alleged that after taking the phone from the plaintiff, he
did not discuss the phone with the plaintiff or the insurance
company, and did not know about the claim. However he conceded under
cross- examination that he had communicated with the plaintiff
before
the affidavit was made and that he learnt about disputed claim after
the plaintiff requested the affidavit.
78
Ramjathan initially testified that the plaintiff did not tell him why
the cell phone was not working nor did he ask the plaintiff
for any
details. But when faced with the statement in his affidavit: ‘he
told me it had a faulty screen’, Ramjathan
responded “no,
well I spoke to him thereafter and I told him it could have a faulty
screen”. He then agreed to the
proposition that the plaintiff
had never told him that the phone had a faulty screen, but
subsequently changed his version again,
alleging that he had tried to
switch the phone on a day after he took the phone from the plaintiff
but there was no screen. He
then telephoned the plaintiff who told
him that it might be a faulty screen.
79
Tasha had testified that she had no idea what was on the paper, and
Ramjathan had told her to tell her father to phone him viz
Ramjathan.
According to Ramjathan, he gave Tasha the phone and told her to tell
her father to phone his friend who had repaired
the phone and whose
details were on the paper. But he admitted, when presented with the
plaintiff’s statement, that he did
not want to divulge the
details of the person who undertook to do the repairs because he was
not a registered cell phone dealer,
even though he had shortly before
testified that Naidoo always put his details on the paper he wrapped
around the phones he repaired.
Ramjathan then alleged that he could
not remember that he had given the phone to Tasha with a piece of
paper on it. He clearly
realised that his refusal to divulge his
friend’s details made no sense if Naidoo’s name and
contact details were on
the paper wrapped around the phone. Further,
after denying that he knew that the phone was not fixed, Ramjathan
admitted that Naidoo
told him that the phone had not been repaired a
week or two after returning it. Hence his concern about Naidoo
getting into trouble
was inexplicable.
80
Although Mr Broster was dismissive of any collusion between Ramjathan
and the plaintiff, he has failed to consider that Ramjathan
admitted
that he did try to switch on the phone and thereafter spoke to the
plaintiff, and that he did know that the phone was
not fixed because
Naidoo told him so. He has also failed to justify Ramjathan’s
reticence about Naidoo despite his evidence
that he knew that
Naidoo’s details were on the note handed to Tasha. As already
noted, his lapse of memory was a deliberate
attempt to avoid the
implications of the note furnishing Naidoo’s details.
81
The plaintiff, in contradiction of Ramjathan’s evidence,
testified that he told Ramjathan that “it’s (the phone)
not usable because it’s got water damage” when Ramjathan
enquired why the phone was lying in the boot of his car. Ramjathan
testified that not only did he not know at the time when he offered
to repair the phone that it had liquid damage, but the plaintiff
did
not tell him at any time what was wrong with the phone. However as
already noted, under cross-examination Ramjathan admitted
that he had
discussed the cellphone and its ‘faulty screen’ with the
plaintiff.
82
The plaintiff, too, attempted to untangle himself from the straits of
Naidoo’s note. In his evidence in chief, the plaintiff
alleged
that Tasha told him that Ramjathan had given her the phone and there
was a note attached to the phone and he had to contact
the person
whose name was on the note. But under crossexamination on the next
day, without a plausible explanation, he alleged
that it was possible
that she had told him about the note, but he could not remember.
Tasha testified that she had given the plaintiff
the note which she
had left in the cupboard when she took the phone out, but the
plaintiff alleged that he could not remember if
she had. The
plaintiff’s failure to remember was convenient because he would
otherwise have had to admit that he had Naidoo’s
details and
could therefore have ascertained the status of the cell phone.
83
According to the plaintiff Tasha told him about the cell phone while
the police were there because he had asked them if he should
bar the
phone. The logical step would have been for him to enquire whether
the phone had been repaired and was usable. As Tasha
gave him the
note he could have immediately called Naidoo, alternatively
Ramjathan, if he really did not know whether the phone
had been
repaired or not. In any event he was obliged to do so before lodging
a claim for the value of the cell phone in its usable
state.
84
Instead, even though he claimed that he was surprised that the phone
had been returned, the plaintiff made no attempt to call
Ramjathan to
find out what had happened about the phone. But even more
significantly, he did not pay Naidoo for repairs nor did
he receive
an invoice for repairs. The plaintiff admitted that if the phone had
been fixed he would ‘definitely have had
to pay for the
repairs’. This is apparent from the estimated cost of repairs
in excess of R3 000 by the service provider.
There is therefore no
credible basis for the plaintiff’s belief that the cell phone
was in a usable state and carried a value
of R 4500. Ramjathan
alleged that he had volunteered to have the phone repaired because he
wanted to arrange business for his friend,
but even he made no
enquiries if any payment was due to his friend for the repairs; he
did not even enquire if the cell phone was
repaired; so much for the
favour he intended doing for the plaintiff and his friend.
85
The plaintiff’s evasiveness was also evident when he agreed
that the cell phone had been damaged beyond economical repair
but was
not sure if the warranty applied. He must know that the warranty did
not apply as MTN informed him that the liquid damage
to the phone was
excluded under the warranty, or the phone would have been repaired or
replaced under the warranty.
86
The plaintiff also alleged that he had carried the damaged phone with
him in his vehicle for over a year – February 2006
until May
2007, when he gave the cell phone to Ramjathan. The fact that he kept
the damaged phone in his car for such a long time,
is remarkable as
both Tasha and the plaintiff testified that old cell phones with
expired contracts were kept in the cupboard in
the TV room.
87
I am in agreement with Ms Annandale that the plaintiff’s
version falls to be rejected as inherently improbable. In my view,
the only reasonable inference to be drawn in the light of the
aforegoing evaluation and the facts, is that the plaintiff was aware
that the cell phone was damaged, it had not been repaired and had no
value.
89
Mr Broster has contended that the defendant reliance on the
plaintiff’s misrepresentation that the cell phone was in use
was misplaced as the defendant had confirmed in its letter dated that
the plaintiff had in fact stated that the cell phone was
not in use.
This is not the defendant’s case. As pointed out by Ms
Annandale the defendant contended that the fraud consisted
in the
plaintiff’s misrepresentation that the cell phone was in a
state of repair and had a value of R4 500, which was the
loss he
suffered when the cell phone was stolen, when the plaintiff knew the
phone was damaged and had no value. This view is sustained
by the
request of the defendant by letter dated 24 October 2007 to the
plaintiff to furnish the details of the person who effected
repairs
to the cell phone.
90
I am accordingly satisfied that in lodging a claim for the cell
phone, the plaintiff acted with deliberate intent to obtain a
benefit
that was not due under the policy. The plaintiff’s claim was
‘fraudulent in the sense of having been made knowingly
and with
the intention of obtaining a benefit under the policy’.
Springgold
Investments ( supra) at page 243 F Papagapiou v Santam Limited (2005
JDR 1385 (SCA)
91
In avoiding liability the defendant relies on Clause 9 of the General
Conditions of the agreement of insurance which provides
that :
‘
If
any claim under this policy be in any respect fraudulent or if any
fraudulent means or devises be used by the Insured or anyone
acting
on his behalf to obtain any benefit under this Policy or if any
accident, loss, destruction, damage or liability be occasioned
by the
wilful act or with the connivance of the Insured all benefit under
this Policy shall be forfeited.’
92
The plaintiff’s fraudulent claim in respect of the cell phone
consequently constitutes a breach of the conditions of the
policy,
entitling the defendant to avoid the claim. In the premises, the
defendant has discharged its onus to show that the plaintiff’s
claim for the cell phone was fraudulent, and the plaintiff’s
claim for indemnification under the policy falls to be dismissed.
93
Although there is the dispute raised by the defendant, in respect of
the Loasia chain claimed by the plaintiff and there are
many
unsatisfactory aspects in the plaintiff’s evidence in relation
thereto, in particular his late allegation that there
were two such
chains, his failure to answer questions in respect thereof and
request that the questions be reserved for his wife,
who did not
testify, it is not necessary to deal with this claim any further.
Having found that the claim in respect of the cellphone
is fraudulent
the entire claim must fail.
Costs
94
There is no reason why costs should not follow the event. Ms
Annandale has contended that costs on a punitive scale is warranted
and the matter was sufficiently serious to warrants cost incidental
upon the employment of senior counsel.
Costs
are eminently within the discretion of the trial court, which
discretion must be exercised judicially.
95
The proliferation of insurance fraud is undoubtedly a serious offence
which has adverse repercussions not only for the insurer
and the
insurance industry as a whole, but also for the public in the form of
increased premiums and the scrutiny genuine claims
are subjected to.
The courts show their displeasure when an insurer unfairly and
without just cause repudiates a claim, compelling
the insured to
resort to litigation in order to enforce indemnification by the
insurer. There is no reason why the courts should
also not penalise
an insured who seeks indemnification when his claim is clearly
fraudulent. Even on the issues decided in his
favour, viz the robbery
and the nondisclosure, the probabilities favoured the plaintiff very
narrowly.
96
Punitive costs are not granted lightly, but a court may award
attorney and client costs where a party has been dishonest in
conducting the proceedings, where there has been a fraudulent claim,
false evidence presented, and where there has been a concocted
case.
(Yassen v Yassen
1965 (1) SA 438
(N) at 444) A C Cilliers : Law of
Costs at 4-21 In Waste Products Utilsation (Pty) Ltd v Wilkes &
Another
2003 (2) SA 515
(W) at 587 Lewis J confirmed that ‘One
of the recognised grounds for a punitive award is the dishonesty or
fraud of a litigant’.
The
plaintiff herein persisted with his fraudulent claim for the cell
phone even after he obtained the affidavits confirming that
the cell
phone had not been repaired and was valueless. He drew his daughter,
Ramjathan and Naidoo into his web of lies to pursue
his claim.
97
I am satisfied that this is an appropriate case for a punitive order
for costs and that the use of Senior counsel by the defendant
was
warranted.
Order
1
The plaintiff’s claim is dismissed.
2
The plaintiff is directed to pay the defendant’s costs on an
attorney and client scale, such costs to include the costs
consequent
upon the employment of senior counsel.
MOODLEY
J
Counsel
for the Plaintiff: ADV JP BROSTER
Instructed
by: HENWOOD BRITTER & CANEY
5TH
FLOOR
6
DURBAN CLUB PLACE (off Smith Street)
DURBAN
Counsel
for the Defendant: ADV A ANNANDALE
Instructed
by: LARSON FALCONER HASSAN PARSEE
93
RICHEFOND CIRCLE
RIDGESIDE
OFFICE PARK
UMHLANGA
ROCKS