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[2009] ZAGPPHC 314
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Van Oudtshoorn v VVM Centurion (Edms) Bpk h/a Brokers 2000 (A1194/06) [2009] ZAGPPHC 314 (25 September 2009)
IN
THE HIGH COURT OF SOUTH AFRICA
NORTH
GAUTENG HIGH COURT, PRETORIA
)
CASE
NUMBER: A 1194/06
DATE: 25
SEPTEMBER 2009
In the matter between:
D J VAN RHEEDE VAN
OUDTSHOORN
....................................................................
APPELLANT
AND
V V M CENTURION (EDMS) BPK
h/a
BROKERS 2000
…..................................................................................................
RESPONDENT
JUDGMENT
TLHAPI.
AJ
[1]
This is an appeal against the judgment of the
magistrate’s court sitting in Pretoria. The plaintiff lodged a
claim with his
insurers through the defendant who was a broker and
who represented Compass Insurance Company Ltd (‘Compass’).
The
claim concerned certain items which were insured against theft
and which were stolen at the residence of the plaintiff. The initial
claim was for R 74 085.00. The respondent was authorized by the
insurance company whose policies it had been underwriting to settle
and pay an amount of R15 400 to the appellants in lieu of
indemnification for their claim. The appellant then sued the
respondent
for the balance in damages arising from a breach of
mandate by the respondent.
It
would be convenient at this stage to refer to the parties as they
appeared in the court a quo.
[2]
In the particulars of claim the plaintiff stated that:
“
3.
At all material times there existed between the plaintiff and the
defendant the
relationship of insured
and broker, pursuant to a mandate (‘the mandate’)
concluded between the parties during 1996,
in terms of which the
defendant was mandated by the plaintiff to act as the insurance
broker of the plaintiff in procuring, servicing
and maintaining
appropriate comprehensive insurance cover for the plaintiff in
respect of the premises then owned and occupied
by the plaintiff at
131 Annie road, Malanshof Extension 4, Randburg (‘the
premises’)
4. The following implied,
alternatively tacit, terms were included in the mandate
the
defendant would procure, service and maintain the best and most
appropriate insurance cover possible for the plaintiff; the
defendant
would procure, service and maintain insurance cover appropriate to
the plaintiffs insurance needs; the defendant would
act with due care
and skill in ensuring that the plaintiff enjoyed appropriate and
effective comprehensive insurance cover, commensurate
with the
plaintiffs insurance needs; the defendant would draw to the attention
of the plaintiff any endorsements, exclusions, conditions
or burdens
that were significant and that might affect the extent of cover the
plaintiff might reasonably expect to enjoy in relation
to the
premises, in particular if such endorsements, exclusions, conditions
or burdens were contained in a schedule and not in
the policy
wording; the defendant would act in accordance with paragraphs 4.1 to
4.4 above when accepting alterations and endorsements
in the
insurance cover procured for the plaintiff on behalf of the
plaintiff. “
THE
FACTS
[3] It is appropriate to mention
first, that no evidence was tendered on behalf of the defendant.
During 1996 the plaintiff, represented
by his wife, gave instructions
to the defendant to obtain a short term comprehensive insurance
policy to cover the risk over their
residence, outbuildings and
contents thereof. The residence consisted of one unit being, the main
house and an outside building
(the servant’s room and the son’s
room) and a garage. The outside rooms and garage were attached to the
main residence
by a wall that formed an inner enclosed court yard
measuring two and a half meters in width. The plaintiffs son, Gideon,
who was
a dependant of the plaintiff, had used one of the outside
rooms since 1996 when the policy was initially taken out. In the
initial
application form this room was described as one of three
bedrooms, the other two being in the main house. In her evidence the
plaintiffs
wife stated that she always regarded Gideon’s room
as forming part of the house even though it was situated in the
outbuilding.
The plaintiffs mandate to Ina Nel, the defendant’s
representative was to provide cover also for the contents of the
premises
which included Gideon’s room, hence their inclusion in
an inventory compiled by the said representative when the initial
insurance policy was taken out during 1996. In the application forms
signed by the plaintiffs wife, a cover amounting to R350 000
was
applied for in respect of the contents of the entire premises.
[4] Consequently, the defendant,
acting as broker, took out an insurance policy, renewable on an
annual basis on behalf of the plaintiff.
During August 2001 the said policy
came up for review at the instance of the plaintiff’s wife who
wished to know whether the
premiums in the policy would change on the
plaintiff’s retirement. Again, a representative was sent out to
the residence
of the plaintiff where a fresh inventory was compiled
in the presence of the plaintiffs wife, which included the contents
of Gideon’s
room. Unlike previous years the policy of 2001
carried an endorsement which related to an outside building. In order
for full compensation
to be considered, it had to be apparent that
there was a forced or violent entry to the outbuilding The
endorsement read:
Diefstal vanuit buitegeboue vir
‘n bedrag groter as R1000, tensy toegang verkry is
op
a wesenlike, sigbare en kragdadige wyse”
The
plaintiff’s wife testified that she had noticed the
endorsement, however, she did not think that it affected Gideon’s
room because the representative did not point out to her that the
said room was considered to be an outbuilding, to which different
conditions would be applicable. Again no mention was made of any
changed circumstances even after the plaintiffs premium was reduced
due to his pensioner status. On 16 June 2002 there was a break-in in
Gideon’s room and certain items were stolen. The plaintiffs
attention to the endorsement was drawn only when the insurance claim
was considered and when the amount payable, subject to such
endorsement was calculated.
[5] According to Mr Smit of PRM
(Probatus Risk Managers) there was a contractual relationship between
PRM and Compass to underwrite
insurance policies. PRM acted on behalf
of the insurer and this also included the handling of claims against
the said policies.
He testified that the values placed on the stolen
items were not in dispute but that the claim had been repudiated by
the insurer.
The insurer relied on the exclusionary clause introduced
during 2001. In terms of the policy Gideon’s room was an
outbuilding
and it was found that the sliding door had not been
locked during the theft, the alarm had not been activated and there
was no
visible forced entry into Gideon’s room. The issue of
whether the said room was an outbuilding or not was referred to
arbitration
by the insurer. The arbitrator found in favour of the
insurer.
SUBMISSIONS
[6] It was submitted on behalf of
the plaintiff that:
(i) the learned magistrate erred
in failing to consider whether the insurance cover
procured
was the one requested by the plaintiff;
(ii) the defendant breached its
mandate;
(iii) the defendant failed to
advise the plaintiff during 2001 that the contents in Gideon’s
room did not enjoy the same cover
as they previously did or as did
the contents of the main residence;
It was submitted on behalf of the
defendant that:
(i) although an insurance broker
was expected to exercise due care, there was no general duty or
obligation to explain the contents
of the insurance policy, any
certificate or endorsement of the said policy;
(ii) however, if the only
insurance policy which the insurance broker was able to procure
contained ‘unusual, limiting or
exempting provisions’,
which provisions could
result in the policy not
conforming to the needs of the insured, the insurance broker may have
the duty to bring such provisions
to the attention of the insured;
(iii) because the action was based
on the contractual relationship between the parties, the defendant
could not be held liable in
delict for negligence which arose from a
breach of a contractual obligation;
(iv) the insured could institute a
delictual claim against the broker for the negligent performance of
his duties only where there
was an existing legal obligation to
perform and which did not arise in the instance of an ordinary
brokerage agreement.
(v) that the broker could be held
delictually liable against third parties with whom no
contractual relationship existed, and that in
this instance it was Gideon who could hold the defendant responsible
because he suffered
the financial loss.
THE
LAW
[7] Ordinarily, the relationship
between broker and the insured, is subject to the law of agency.
Depending on the circumstances
of the case, an insurance broker is
mandated by the insured to carry out certain instructions. In a
brokerage agreement, it is
required of the broker to exercise
reasonable care and skill in executing the mandate of the insured.
Stander v Raubeheimer
1996 (2) SA 670
(0), Lenaerts v JSN Motors (PTY) LTD and Another
2001 (4) SA 1100
(W), at 1108 l-J and 1109 A-G.
In
the latter matter, at 1108 G, this duty was described as ‘ the
fundamental quality of the general duty owed.” In
certain
instances such duty could extend to ensuring whether the policy
covers the needs of the insured, Stander case supra.
[8] The trial magistrate dealt
with the aspect of the mandate regarding Gideon’s room from the
basis that it had been shown
on a balance of probabilities that
Gidoen’s room was an outbuilding. The onus, therefore, rested
on the plaintiff to satisfy
the court, by giving expert evidence that
the broker had a duty to explain and advise the plaintiff that
Gideon’s room was
an outbuilding and that it was not covered by
the policy. Furthermore, according to the trial magistrate, there was
no prima facie
evidence to show that the defendant could have
provided the insurance cover required by the plaintiff because the
limitations appeared
generally in policies where outbuildings were
present. I disagree with this view because it disregarded the long
term relationship
between the plaintiff and the broker; the mandate
and, the nature and content of previous policies. Although Mr Smit
testified
that it was not unusual for similar policies to carry such
limitation clauses, it is not disputed that this was not always the
case with the plaintiffs policies.
[9] In this instance, the initial
insurance policy of 1996 and subsequent renewals thereof prior to
2001 covered the contents of
Gideon’s room, the policies were
not subject to the limitation clause, which was only introduced into
the policy of the plaintiff
in 2001.
According
to Mr Smit Gideon’s room was always considered by him to be
an outbuilding. This concession is made
notwithstanding the fact that the limitation clause was only
introduced between February
and April of 2001. In August of that year
the plaintiff’s wife confirmed that the same list of items
which were included
in previous policies had to be covered by the new
insurance policy. The mandate was similar to that communicated to the
broker
during 1996, that is, regarding the cover for the contents of
Gideon’s room. This was followed by the compilation of an
inventory.
This fact was not disputed by the defendant. If the
previous policies, in my view, did not contain a limitation clause
which excluded
the items in Gideon’s room and, the new policy
contained one, the broker had to exercise reasonable care and skill
in executing
the true mandate of the plaintiff. Having regard to the
mandate, a duty arose to advise the plaintiff on the implications
entailed
in the new policy in respect of the outbuilding.
[10] It was submitted on behalf of
the defendant that the position of the broker was comparable to that
of an attorney, a banker
or any other professional person and, that
in order to determine negligence, the standard of reasonable care and
skill had to be
measured against the general or usual standard of
care and skill expected. The circumstances in
Durr v Absa Limited and Another
1997 (3) SA 448
(SCA)
were, in my view distinguishable. Expert evidence was tendered by the
respondents on how the court should determine the standard
of the
reasonable care and skill to be exercised by a ‘typical broker’
who had ‘modest accomplishments’.
The liability of the
respondents was based on the fact that the appellant had relied on
certain representations made by the respondents
which placed a duty
upon them to investigate and establish the true facts about the
company they were encouraging their client
to invest in. At
460
H - 461 A/B
, it was held that in
determining what was reasonable:
“
... .the Court will have
regard to the general level of skill and diligence possessed and
exercised at the time by the members of
the branch of
the
profession to which the practitioner belongs……..But the
decision of
what is reasonable under the
circumstances is for the court; it will pay regard to the views of
the profession, but it is not bound
to adopt them”
In this instance, except for what
appears on paper no evidence was tendered on behalf of the defendant
regarding what it considered
to be the standard of the reasonable
care and skill to be exercised in its profession. No evidence was
tendered to dispute plaintiffs
contention that the defendant failed
to exercise reasonable care and skill in carrying out the mandate
which was communicated by
the plaintiffs wife even after the
endorsement came into operation. In my view, during the August 2001
revision of the policy,
the defendant should, once more, have drawn
the plaintiff’s attention to the limitations clause regarding
the outbuilding.
My understanding is that the revision exercise
conducted was different from the other occasions where the policy was
renewed without
requiring a visit to the premises to reestablish the
facts. A revision of the policy would entail the re-visitation of the
entire
document, more so, because another inventory had been compiled
in which the plaintiff’s wife listed the items in Gideon’s
room which she intended to be covered by the policy and, in respect
of which she gave fresh mandate. Where it concerned the defendant,
in
my view, it was not about whether Gideon’s room was an
outbuilding or not, it was about the mandate to cover those items
in
his room and, which were included in the inventory. In as far as the
defendant, as broker, was representing the insurer he had
a
responsibility to draw the plaintiff’s attention to the
limitations on what the insurer considered to be an outbuilding
to
ensure that he was adequately covered. The plaintiff in this instance
discharged the onus in proving that the defendant was
in breach of
his mandate when he failed to procure cover for the contents of
Gideon’s room. In
Lappeman
diamond Cutting Works (Pty) Ltd v MIB Group (Pty) Ltd and Another
2004 (2) SA 1
(SCA) at 11A
Lewis JA
confirmed the position at law regarding the duty owed by a brokers
and as established in
Lenaerts
supra
“
the duty to exercise care
and skill in appropriate cases extends to the duty to take reasonable
steps to illicit and convey material
both from and to the insured.
This includes information about terms of the policy which if
contravened, might leave the insured
without cover. It is part and
parcel of a brokers general duty to use reasonable care to see that
the insured is covered
[11] The issue of locus standi was
not canvassed in the pleadings and no point in limine was argued
before commencement of the trial,
which if argued successfully by the
defendant could have put an end to the matter. Reference to locus
standi was made during the
cross examination of the witnesses.
Relying on the decision in
Manderson
v Standard General Insurance Co Ltd
1996 (3) SA 434
(D)
it was submitted on behalf of the defendant that plaintiff could not
be compensated in respect of goods which did not belong to
him. The
facts in the Manderson case are distinguishable in that the court
held that there was a duty to disclose to the insurer
that the
purpose of the insurance was to benefit a third party and that the
insurance so taken out was for that specific purpose.
In
Refrigerated
Trucking (Pty) Ltd v Zive NO (Aegis Insurance Co Ltd, third party)
1996 (2) SA 361
(T) at 372 F- G
the
following was said:
"...
It seems then that in our law of
Indemnity insurance an insurable interest is an economic interest
which relates to the risk which
a person runs in respect of a thing
which, if damaged or destroyed, will cause him to suffer an economic
loss or, in respect of
an event, which if it happens will likewise
cause him to suffer an economic loss. It does not matter whether he
personally has
rights in respect of that article, or whether the
event happens to him personally, or whether the rights are those of
someone to
whom he stands in such a relationship that, despite the
fact that he has no personal fight in respect of the article, or'
that
the event does not affect him personally, he will nevertheless
be worse off if the object is damaged or destroyed or the event
happens.”
At 373 G
"The rights which accrue,
accrue to him but he has no locus standi in judicio to enforce them.
He is left in the hands of the
insured. If the insured elects to
exercise those rights he is fully covered, but if the insured fails
to do so there is nothing
he can do to enforce the rights”
The fact that Gideon owned the
items was not sufficient a reason to refuse the appellant’s
claim because he was still dependant
on his parents since the first
insurance policy was taken out during 1996, the goods were on their
premises and his father, the
plaintiff had been responsible for
payment of the monthly premiums. Plaintiff’s wife engaged the
defendant for the purpose
of insuring the. contents of her house
which included those items which were in Gideon’s room. In the
circumstances the plaintiff
is entitled to payment