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[2003] ZAWCHC 21
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Mcclain v H Mohamed & Associates (224/99) [2003] ZAWCHC 21; [2003] 3 All SA 707 (C) (5 June 2003)
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE OF
GOOD HOPE PROVINCIAL DIVISION)
CASE NO: 224/99
CHARLOTTE
VUYISWA McCLAIN
Plaintiff
and
H MOHAMED
& ASSOCIATES
Defendant
_______________________________________________________
JUDGMENT
DELIVERED ON 5 JUNE 2003
_______________________________________________________
BLIGNAULT
J
:
[1] Plaintiff is a lawyer by training and
occupation. On 15 January 1994 she was severely injured in a motor
vehicle accident. After
the accident plaintiff approached defendant,
a firm of attorneys that practised at Athlone in the Cape, for legal
advice and assistance.
She is now suing defendant for breach of
mandate.
The
Pleadings
[2] Plaintiff
claims damages in an amount of R4 249 436,00 plus interest and costs
from defendant. The claim arises from a collision
that occurred on
15 January 1994 on the national road between Bloemfontein and Winburg
between motor vehicle BE 831 A, referred to
as the first insured
vehicle, driven by one Aaron Mahlalela (âthe first insured
driverâ), and motor vehicle RXS 190 T, referred
to as the second
insured vehicle, driven by one Vladimir Rodney. Plaintiff was a
passenger in the second insured vehicle at the
time of the collision.
[3] Plaintiff
alleged in her particulars of claim that the collision was caused by
the negligence of Rodney. In and as a result of
the collision, she
alleged, she sustained bodily injuries consisting of:
a
fracture of the 11
th
and the 12
th
thoracic
vertebra with spinal cord damage at that level and complete motor
and sensory paraplegia below the 12
th
thoracic vertebral
level;
a
fracture of the left elbow;
an
injury to the first metacarpal of the left hand.
The
sequelae of her injuries, she alleged, were the following:
she
received medical treatment and incurred medical costs in the past
and will do so in the future;
she
has suffered a loss of earnings/earning capacity in the past and
will do so in the future;
she
has suffered a loss of amenities of life and experienced pain,
suffering, disfigurement and disability in the past and will
do so
in the future.
[4] Plaintiff
alleged that as a result of these injuries and their sequelae she
suffered the following damage:
(i) Estimated
past hospital
and
medical expenses R15 436,22
Estimated
future medical
and related expenses R1 983 000,00
Past
and future loss
of earnings/earning capacity R1 976 000,00
(iv) General
damage
R300 000,00
R4 274
436,22
[5] Plaintiff
alleged that the second insured vehicle was owned by and rented from
Avis Rent-a-Car (âAvisâ). She alleged further
that by virtue of
the provisions of the Multilateral Motor Vehicle Accidents Fund Act,
93 of 1989, she was entitled to recover from
the Multilateral Motor
Vehicle Accidents Fund (âthe MMFâ) and as from 1 May 1997, by
virtue of the provisions of the
Road Accident Fund Act, 56 of 1996
,
from the Road Accident Fund (âthe RAFâ), her full proven damages
in the event of her proving that the collision was caused by
the
negligence of the first insured driver. In the alternative she would
have been entitled to recover R25 000,00 from the MMF or
the RAF and
the balance of her proven damages from Rodney in the event that the
collision was caused by the negligence of Rodney.
Rodney, she
alleged, was indemnified in and by virtue of insurance policies held
by Avis, for the benefit of Avis car rental drivers,
against all
damages or costs that he might have been liable to pay to plaintiff.
[6] Plaintiff
alleged that she engaged the services of defendant on 3 May 1994 and
instructed defendant, with regard to her injuries
and damage suffered
as a result of the accident, to investigate all claims available to
plaintiff; to take all necessary steps to
prosecute all possible
claims; to ensure that all possible claims are instituted timeously ;
and to properly advise plaintiff.
Defendant, she alleged, accepted
her instructions.
[7] It was an
implied, alternatively tacit, term of their agreement, plaintiff
alleged, that defendant would exercise the reasonable
skill,
diligence and care to be expected of a practitioner in the field in
which defendant was carrying out professional services
on behalf of
plaintiff. In terms of this mandate defendant purported to give legal
assistance to plaintiff.
[8] Plaintiff
alleged that defendant failed to exercise reasonable skill and
diligence in the performance of professional services
pursuant to the
mandate. She alleged that defendant advised her of the legal
position with regard to possible claims arising out
of the collision
and advised her that it was of the view that the collision was caused
by the negligence of Rodney. Plaintiff thereupon
instructed defendant
not to pursue a common law claim against Rodney because she was
engaged to him at the time and did not wish
to expose him to such
liability.
[9] Plaintiff
alleged that defendant knew at the time that the Avis policies
provided third party liability cover but that it acted
negligently
and in breach of its mandate by failing to inform plaintiff that if
she prosecuted a common law claim against Rodney,
the Avis policies
would indemnify him in respect of his liability to her.
Alternatively, she alleged, defendant would have discovered
the
existence of the Avis policies and the cover provided by it, had it
undertaken reasonable investigations at the time. Plaintiff,
she
alleged, was unaware of the Avis policies and the indemnity coverage
granted thereunder. Had she known of the policies and the
cover
provided thereunder, she would have instructed defendant to pursue a
common law claim on her behalf against Rodney.
[10]
Plaintiff received payment of damages in the amount of R25
000,00 from the RAF. She is now unable, she alleged, to
recover any
amount from Rodney because he is not subject to, nor willing to
submit to, the jurisdiction of a South African court.
Should he
submit to the jurisdiction of a South African court he would probably
forfeit his indemnity cover under the Avis policies.
Any claim
against Rodney in New York, where he resides, she alleged, would have
become prescribed three years from the date of the
collision.
[11] Had
defendant not breached its mandate or acted negligently, plaintiff
alleged, she would have recovered her full damages,
minus the amount
of R25 000,00 received from the RAF, from Rodney by virtue of the
cover provided under the Avis policies. She accordingly
suffered
damage in the amount of R4 249 436,20, for which defendant is liable.
[12]
Defendant raised a number of defences in its plea. It pleaded that
investigations undertaken by it at the time that it was
acting for
plaintiff, revealed that the collision was caused partly or solely by
the negligence of the first insured driver. If
the collision had
been caused partly or solely by the negligence of the first insured
driver, it pleaded, plaintiff would have been
entitled to recover her
full proven damages from the MMF or the RAF.
[13]
Defendant pleaded that it had no knowledge of plaintiffâs injuries,
its sequelae or the damage allegedly suffered by plaintiff.
[14]
Defendant did not dispute the existence or the terms of the mandate
relied upon by plaintiff. It pleaded that the mandate
was terminated
with effect from 10 November 1997. Defendant admitted that it
advised plaintiff that if the collision was caused
wholly or partly
by the negligence of Rodney, she would be entitled to claim R25
000,00 from the MMF and the balance of her full
proven damages from
Rodney. It pleaded that it also advised her that if the collision
was caused wholly or partly by the negligence
of the first insured
driver, she would be entitled to recover her full proven damages from
the MMF. Defendant admitted that plaintiff
instructed it not to
pursue the claim against Rodney. It denied that it acted negligently
or in breach of the terms of the mandate.
[15] Defendant denied that it had any knowledge
of the Avis policies or the terms thereof and pleaded that it has no
knowledge whether
plaintiff was aware of that policies or the terms
thereof. Defendant finally pleaded that after plaintiff had
terminated its mandate,
she instituted an action claiming her full
damages from the RAF in the Transvaal Provincial Division of the High
Court of South Africa.
On or about 19 November 1999 plaintiff
withdrew that action against the RAF thereby rendering it impossible
for her to obtain payment
of her full proven damages from that
source.
[16] Plaintiff
filed a replication in which she alleged that she took all reasonable
steps to mitigate her losses. Had she pursued
the action against the
MMF or the RAF the court would not have found that the accident had
been caused by the negligence of the first
insured driver. She
alleged furthermore that defendant advised her to withdraw the action
against the RAF and thereafter caused
or contributed to such
withdrawal. Defendant is accordingly prevented from or estopped from
relying on such withdrawal.
[17] Defendant
filed a rejoinder in response to the replication. It pleaded that
the institution of plaintiffâs claim against the
RAF and the
withdrawal thereof took place after plaintiff had terminated
defendantâs mandate.
[18] The
parties agreed at a pre-trial conference that the issues of the
merits of the claim and the quantum of damages would be determined
separately.
The
Evidence
[19] Plaintiff
testified that she is a lawyer by training. She obtained the degree,
Master of International and Administrative Law,
at the University of
Warsaw, Poland in 1988 and a LL.M. degree at Cornell Law School,
Ithaca, New York in 1990. She returned to
South Africa in 1993 and
held the position of Senior Researcher, Childrenâs Rights at the
Community Law Centre, University of the
Western Cape from 1993 to
1997. From 1997 to 1999 she was a Programme Officer at UNICEF (South
Africa) in Pretoria. Since 1999 she
has been a Human Rights
Commissioner with her office in Johannesburg. In late 1993 she was
engaged to Vladimir Rodney, a citizen
of the United States of
America. He was also a trained lawyer and about to commence
practising law in New York. He came to visit
her in South Africa
towards the end of 1993. She hired a motor vehicle from Avis at the
Cape Town airport for purposes of his visit.
She did not have a
driving licence and she accordingly advised Avis that Rodney and her
brother Temba would be driving the vehicle.
Her brother was in
Johannesburg at the time but it was envisaged that they would be
driving to Johannesburg to visit her family.
After the agreement
with Avis was concluded she was given a brown envelope by Avis that
contained three documents. The first was
the contract between her
and Avis, the second a card with information regarding the vehicle
and the third an Avis brochure. The contract
contains only one
driving licence number, which, she assumed, was Rodneyâs licence
number. The first vehicle developed problems
with its clutch and was
replaced by another Avis vehicle with registration RXS 190 T. The
date for the return of the vehicle was
extended twice, on the latter
occasion to 18 January 1994.
[20] Plaintiff
and Rodney drove to Johannesburg to visit her family. They returned
on 15 January 1994. The collision took place
on the National Road
between Winburg and Bloemfontein. It was approximately 21h00 and
already dark. The road was straight and there
was a single lane for
traffic in each direction. Rodney was driving. There was an
ordinary motorcar in front of them and a huge
truck in front of the
car, all driving in the same direction. They had been following the
truck for a while. The car in front of
them started to overtake the
truck and Rodney proceeded to follow close behind the car. When the
car in front of them had passed
the truck it returned to the left
lane. At that point she suddenly saw lights in front of her. She
screamed and raised her left
arm to shield her face. Then the
collision occurred. Their vehicle ended up on the right hand side of
the road. She did not lose
consciousness. She was taken to a
hospital in Bloemfontein where she spent about two weeks in the
intensive care unit. From there
she was flown back to the Conradie
Hospital in Cape Town.
[21] Plaintiff
testified that the defendant firm was recommended to her by the
director of the Community Law Centre where she was
working at the
time. Her first interview with a representative of the firm would
have been before 27 April 1994. At that stage she
was still in the
Conradie Hospital. On 25 April 1994 she signed an authorisation in
favour of the firm. The partner in the firm
that handled her case was
Mr Chohan. Her first meeting with him was in person at his Athlone
office. She told him what had happened
and they discussed possible
claims that might be available to her. The possibility of suing
Rodney was mentioned but she told Chohan
that she was not keen to do
so as she was engaged to him. She did provide him with a name of a
New York law firm where she herself
had previously worked. They also
discussed the possibility of action against Avis, but Chohan told her
that she did not have a claim
against them because she had declined
the insurances when she signed the contract with them. On 12
September 1994 she signed two
claim forms for claims against the
Aegis Insurance Company as agent of the MMF. The one claim was based
on the negligence of the
driver of the oncoming vehicle. The second
claim was based on Rodneyâs negligence.
[22] After
lodging the claims she received letters from defendant from time to
time. She was told that her claim against the MMF
by reason of
Rodneyâs negligent driving would be limited to R25 000,00 less
costs. On 5 March 1996 she attended a consultation
with Chohan. He
showed her a report of an assessor which she did not read. According
to him the report made it clear that there
was no prospect of proving
negligence on the part of the driver of the oncoming vehicle. Chohan
thereafter wrote a few letters to
her to which she did not reply. On
3 April 1998 he advised her that his taxed bill of costs in the
matter amounted to R19 088,36
and that he was no longer prepared to
act for her as she had not furnished him with further instructions.
When she received this
letter she consulted her present attorney, Mr
Malcolm Lyons. On 1 June 1998 Lyons advised Chohan that she would
take the R25 000,00
and that their costs could be deducted from that
sum. She signed the discharge form on 6 July 1998. Defendant
recovered taxed costs
in the amount of R10 812,56 from the RAF and
she ultimately received a nett amount of R16 016,19 from the
defendant. On 16 September
1998 Chohan handed his entire file to
Lyons. An action was then instituted on her behalf against the RAF
on the basis of the negligence
of the oncoming vehicle. That action
was however withdrawn in November 1999. Her understanding was that
the claim against the RAF
had no prospect of succeeding.
[23] Ms Usha
Rajcoomar testified that she had worked for Avis in Johannesburg from
1991 to 1998 as a claims technician. She worked
with six colleagues
in the same department. Ms Keri Bredenkamp was their manager. Their
office dealt with claims from all the Avis
stations in the country.
Upon receipt of an accident report form they would open a file and
allocate a number to it. They forwarded
all relevant documents to
their insurance brokers, PFV Insurance Brokers (Pty) Ltd, generally
known as Price Forbes. In this case
the accident report reflected
Rodney as the driver and plaintiff as the injured person. It was
submitted to Price Forbes under cover
of a memorandum dated 23
February 1994, written by Ms Bredenkamp. In a column headed
âremarksâ the following was noted:
âPossible Pass Liab
Claim. No PAI.â
âPAIâ, she testified, signifies âpersonal
accident insuranceâ. âPassenger liability insuranceâ, she
said, was automatically
included in all Avis car hire contracts. It
is not specifically mentioned in the contract which the car renter
signs. On 25 March
1994 Price Forbes advised Avis in writing that
they had registered this claim. On this letter is a note, dated 22
April 1994, in
her own handwriting. It reads as follows:
â
Attorneys called from Cape Town - Mr M Hesse. They are handling
MMF/MVA claim on behalf of Themba McClain who has been paralysed in
the accident. He wanted our claim form, told him I am not at liberty
to do so.â
She
explained that she would have written this note immediately after the
telephone conversation. It was their policy not to make
claim forms
available to third parties. On 30 May 1994 she made a note of a
further telephone conversation which she placed in this
file. It
reads as follows:
â
The attorneys called on behalf of injured person, wanted to
know if there is any insurance covering passenger in the Avis
vehicle.
Told her that there is passenger liability cover. She is to
submit a letter and medical reports.â
On 13
February 1995 Mr S le Roux, a colleague of her at Avis, wrote to
Price Forbes in regard to the claim in question. It reads
as
follows:
â
We refer to the above matter and your letter of 13/01/95 and
would advice that the last communication which we received from the
Third
Party was a telephonic discussion between our Mrs Rajcoomar and
Attorneys acting on behalf of the passenger.
It was
intimated in such telecon that a claim would be forthcoming in terms
of the passenger liability extension of the policy as
the passenger
was paralysed as a result of said accident. The attorneys were to
have submitted a formal claim together with the
necessary medical
report. We have to date not received any such communication from the
attorneys.
We confirm
that we will not be filing our papers for at least a further 12
months owing to the severity of the Passengerâs injuries.â
On 9 November
1996 Price Forbes advised Avis that they were closing their file as
no further approaches had been made by the claimant.
[24] Mr Grant
Small testified that he is the director of product services at
Alexander Forbes, a company that carries on business
as insurance
brokers. The name of the company changed from time to time. In 1994
it was generally known as Price Forbes. He had
been with Price
Forbes from 1984 to 1989 and again from 1994. From 1994 he was the
director of automotive services at Price Forbes.
He was the
servicing broker for Avis. The name of the company was Zeda Car
Rental (Pty) Ltd but it traded under the name of Avis
Rent-a-Car. He
identified the policy issued by the SA Eagle Insurance Company Ltd
(âSA Eagleâ) to Avis for the year 1 April
1996 to 31 April 1997.
During the years 1984 to 1989 there were similar policies in place.
This kind of insurance, he said, is
fairly common in the industry.
The SA Eagle policy for the year from 1 April 1993 to 31 March 1994
could not be found, despite specific
efforts to search for it. In
his view it is highly likely that a policy on terms similar to those
of the 1996/1997 policy, would
have been in place during the
1993/1994 year. He confirmed that the following Lloydâs policies
covering Avis were in force during
the year 1 April 1993 to 31 March
1994. They provided excess cover over and above that of the SA Eagle
policy:
A) Umbrella liability policy F3M0140 â R10 000 000,00 any one
occurrence/claim and in the aggregate: In excess of
R1
000 000,00 underlying insurance.
B) Umbrella
liability policy F3M0141 â R30 000 000,00 any one
occurrence/claim and in the aggregate: In excess of
R10 000
000,00 any one occurrence/claim and in the aggregate: Which in turn
in excess of R1 000 000,00 underlying insurance.
C) Umbrella
liability policy F3M0142 â R50 000 000,00 any one
occurrence/claim and in the aggregate: In excess of
R40
000 000,00 any one occurrence and in the aggregate: Which in turn in
excess of R1 000 000,00 underlying insurance.
The Lloydâs
policies, he testified, broadly followed the terms and conditions of
the underlying SA Eagle policy. He pointed out
that the only
requirement in the S A Eagle Policy regarding the qualification of
the driver as an insured driver is that he drove
the vehicle with the
permission of the insured. He expressed the view that he has no
doubt that there was passenger liability cover
in respect of Avis
rental cars during the year 1993/1994. Under cross-examination he
confirmed that the premiums for the insurance
in the year in question
had been paid by Avis to the S A Eagle and Lloydâs.
[25] Smallâs
evidence was supplemented by the following written statement made by
him on 15 May 2003, which was admitted by defendant:
â
a) This
is to certify that, as requested from me during my evidence in Cape
Town, I have investigated the payment of premiums by Avis
in respect
of Motor Third Party Policy including Passenger Liability coverage
affected with SA Eagle and with Lloyds of London in
the total sum of
R91m as explained in my evidence.
As the Servicing Broker of Avis
I have verified:
that
Avis paid a total premium of R285 000 to SA Eagle Insurance Company
in compliance with its obligations under Policy No. SSMP
7796
(under which Passenger Liability Insurance) was effected for the
period 1 April 1993 to 31 March 1994 as aforesaid; and
(ii) that Servgro (including Avis) further paid a total premium of
R184 465,33 (net of VAT) to or for the account of Lloyds of London
and Specialised Risks Underwriters in compliance with its obligations
under the Excess Layer (follow on) Liability covers which it
held
under Policy Noâs F3M140, F3M141 and F3M142 in respect of the
period 1 April 1993 to 31 March 1994.â
[26] Plaintiff
called Mr Ronald Bobroff to give evidence as an expert.
He has been
practising as an attorney since 1973. He is at present the senior
partner of attorneys, Ronald Bobroff & Partners
Inc, a firm
practising in Rosebank, Johannesburg and specialising in personal
injury claims. He personally has extensive experience
of this kind
of work. He was the chairperson of the Gauteng Law Council from 1999
to 2002 and he served as the chairperson of the
motor vehicle
insurance (personal injury) committee of that council from 1996 to
2000. He testified that an attorney holding himself
out as having
extensive experience in the field of personal injury claims, should,
when faced with the situation that confronted
defendant in this case,
have investigated whether comprehensive insurance and particularly
passenger liability insurance was available
to the driver of the
vehicle in which plaintiff was a passenger. Such an attorney should
have advised the client of the existence
of the passenger liability
cover before a decision is taken to institute action against the
driver. If such cover existed the attorney
should have advised her
to institute a claim against the driver wherever he might be found.
In his view it would have been unreasonable
for the attorney not to
have taken such steps. He stated further that such an attorney
should have known, or discovered through
reasonable investigation,
that there was generally automatic passenger liability cover for the
driver of a rental car, such cover
being commonly provided by the
major car rental companies of which Avis is one. If the office of
such an attorney had been advised
by Avis that such cover existed in
respect of plaintiffâs rental car then it would have been
unreasonable for that attorney to
fail to investigate the nature and
extent of such cover.
[27] Mr
Eugene Tome has been employed by Avis for the last five years as its
national legal manager. His functions include the giving
of legal
advice on all kind of legal issues. His attention was drawn to the
fact that, in the car hire contract that was signed
by plaintiff,
Rodneyâs name appeared in a block with the heading âremarksâ
and not in the block where it should have appeared.
He testified
that this was an obvious error and that Avis would have accepted that
Rodney was an authorised driver. He referred
in his evidence to an
Avis brochure which contained the Avis rates for the period 1
November 1998 to 31 October 1999. He explained
that this document
would have been distributed internationally to tour operators. Under
the heading âInsurances â Passenger
liability and third party
motor coverâ there is a statement that âTotal Coverâ is R91 000
000,00. Below that in the brochure
appears the following statement:
â
The Avis Rental Agreement covers the renter and any other
authorized driver against any claims instituted by Third Parties
against
the renter or authorized driver for damages as a result of
accidental death, injury, or illness and/or loss or damage to their
property
(which includes their vehicle) caused by the renter or
driver.â
Mr Tome
explained that the rules of the European Economic Community require
the disclosure of this kind of information to travel
operators.
Before testifying Mr Tome had examined existing records of Avis
brochures that would have been readily available to members
of the
public in South Africa. The brochure that was in effect during
December 1993, contained the following clause:
â
Insurance
Rates
include limited coverage of passenger liability and third party motor
liability: Such cover being subject to the terms and
conditions of
the Avis policy and insurance as is customary in this country. Cover
for loss by fire is also included together with
cover for damage to
the Avis car but may not include loss or damage through civil
unrest.â
This clause
is similar to the clause in the brochure that was handed to plaintiff
when she hired the Avis car on December 1994 (that
brochure is now
part of exhibit âBâ). The Avis brochure that was effective from
March 1994 contained an identical clause. Mr
Tome said that the
attitude of Avis has always been that they would assist any claimant
pursuing a claim under this kind of insurance.
He confirmed that he
had looked for the S A Eagle policy for the period 1 April 1993 to 31
March 1994 but that it could not be found.
He testified that the
premiums in respect of the S A Eagle and Lloyds policies in question
would have been paid by Avis.
[28] Towards the end of plaintiffâs case she was
recalled in order to give evidence of certain statements made by
Rodney in the
course of a telephone conversation that took place on
Thursday 16 May 2003. One of her legal representatives spoke to
Rodney on
a loudspeaker telephone and she could hear his answers.
The following questions and answers were recorded by her:
â
1. Q Mr Rodney, will you or will you not submit in any
manner whatsoever to the jurisdiction of a South African court in
relation
to any claim against you by Charlotte McClain or anyone else
arising from the motor vehicle accident in South Africa on 15 January
1994? What is your response?
A My
response will be no.
2.
Q Does that refusal apply only now, or does it stand for the
future?
A It does stand as well for the
future.
3.
Q Do you agree to physically come to South Africa and be subject
here to service of process, or do you refuse to do so?
A I do not agree.
4. Q Does that refusal apply only
now, or does it too
stand
for the future?
A It also stands for the future.
5. Q Do you own any tangible
or intangible assets in
South Africa?
A No, I do not.â
An affidavit deposed to by Rodney was
subsequently telefaxed to plaintiffâs attorney in which he
confirmed these responses in writing.
[29] Mr Jamie, representing defendant, objected to
the admissibility of this evidence on the basis that it is hearsay.
After hearing
argument I admitted the evidence in question and
informed the parties that I would provide my reasons for that
decision at a later
stage.
[30] The following admissions by defendant were
also recorded:
â
1. Any claim by the Plaintiff against Mr Rodney personally
arising from the collision on 15 January 1994 would, if pursued in
the
United States of America (where Rodney resumed residence as from
February 1994 to date), became time-barred by March 1997.
2. At all
material times Mr Mark Hess (with whom Mrs Usha Rajcoomar of Avis
spoke on 22 April 1994) was a candidate attorney of the
Defendant
firm, and Mr M Mulligan (to whom reference is made in the Defendantâs
letters) was also an employee of defendant.
3. The
cover afforded by the South African Eagle Insurance Company policy
referred to in evidence of Mr Small was in place during
the period 1
April 1993 to 30 March 1994.â
[31] Finally a letter written by Mr L van der Meer
on behalf of SA Eagle, was admitted by defendant. It reads as
follows:
â
Re
Charlotte McClain/H Mohamed & Associates
I am duly
authorised to state the following on behalf of SA Eagle Insurance
Company Ltd [SA Eagle]:
A valid
insurance policy [policy number SS MP 7796] providing passenger
liability coverage on the same terms and conditions as SA
Eagle
policy no SS MP 96529 for the period 1 April 1996 to 31 March 1997,
existed as between SA Eagle Insurance Company and Zeda
Car Rental
(Pty) Ltd trading as Avis Rent-A-Car (Pty) Ltd for the period 1 April
1993 to 31 March 1994.
a. All premiums relating to the above described policy for the
period 1 April 1993 to 31 March 1994 were duly paid by Avis to SA
Eagle
and such policy was of full force and effect in respect of the
said period.
In
the event of:
A
claim having been submitted to SA Eagle, under the abovenumbered
policy;
By
the insured being Zeda Car Rental Pty Ltd;
On
behalf of the driver/hirer of an insured vehicle in respect of a
passenger in an Avis rental car that was hired in the period
December 1993 to January 1994, with regard to personal injuries
caused by the negligent driving of a driver who was operating
the
car with Avisâ permission (and whose liability was not excluded
by the policy);
And
all the terms and conditions of the policy having been complied
with;
And
liability on the part of the driver/hirer having been established
by a Court of law [or to SA Eagleâs satisfaction) then;
SA Eagle
would have met the claim subject to the terms and conditions of the
aforesaid SA Eagle policy.â
[32] Defendant closed its case without adducing
any evidence.
Breach of
Mandate
[33] The
terms of defendantâs mandate are not in issue. On the pleadings it
is in issue whether defendant acted in breach of these
terms. In my
view it clearly did. On 30 May 1994 Ms Rajcoomar spoke to a person
representing defendant on the telephone and informed
that person that
Avis had passenger liability insurance in place. That information
was apparently not taken any further by defendant.
Defendant was in
any event handed the Avis brochure by plaintiff where passenger
liability insurance was specifically referred to.
Mr Bobroff
expressed the view that an attorney in defendantâs position would
have been negligent if he did not pursue the question
of possible
insurance cover under the Avis contract. I have no reason to doubt
his opinion on this aspect of the matter. Defendant
elected not to
call any witnesses. In these circumstances I have no hesitation in
finding that defendant indeed breached the terms
of its mandate in
the respects alleged by plaintiff.
Was Rodney
covered by Insurance?
[34] Mr
Mitchell, who appeared with Mr Jamie on behalf of defendant, did not
in argument dispute that Rodney drove the vehicle in
a negligent
manner or that such negligence contributed to the cause of the
collision in which plaintiff was injured. He did call
into question,
however, the existence and extent of the insurance cover that would
have covered Rodneyâs liability to third parties.
Turning to the
SA Eagle policy first, the relevant part of the clause in question
reads as follows:
â
The company will also, in addition to the limit of indemnity
stated herein
1 pay all costs and expenses incurred with their consent (which
shall not be unreasonably withheld) and shall be entitled at their
discretion to arrange for representation at any inquest or enquiry in
respect of any death which may be the subject of indemnity
under this
Section or for defending in any magistrateâs court any criminal
proceedings in respect of any act causing or relating
to any event
which may be the subject of indemnity under this Section.
2 Indemnify
(in terms of and subject to the limitations of and for the purposes
of this Section) any person who is driving or using
such Vehicle on
the Insuredâs order or with the Insuredâs permission.â
[35] This
type of clause, Mr Mitchell submitted, is found in many comprehensive
motor insurance policies. It does not, however, he
submitted, create
any legal liability on the part of the insurance company. It is
binding in honour only. Mr Mitchell referred in
this regard to
Gordon and Getz The South African Law of Insurance 4
th
edition
by
Davis
at 443 â 446. This author suggests
that there are two reasons why the standard clause is not legally
valid. The first is that
there is no direct contractual relationship
between the insurer and the driver and the wording of the standard
policy negatives any
intention on the part of the driver to enter
into a contract with the driver. The second reason is that the
insured has no insurable
interest in the driverâs contingent
liabilities for whose negligence he could not be made liable. The
author concludes as follows:
â
For both the above reasons the clause does not confer any
enforceable rights on the authorized driver. It is binding in
âhonourâ
only. But as Lord Wright has observed âhonour
policiesâ are common in insurance business, and any insurer which
failed to fulfil
its âhonourable obligationsâ would be liable to
pay in business reputation. In practice insurers do meet these
obligations provided
that, as a matter of construction, a claim falls
within the terms of the clause.â
In the light
of the authorâs statement of what happens in
âpracticeâ
,
Mr Mitchell conceded that, as a matter of fact, the S A Eagle
would probably, as an
âhonourable obligationâ
, have met a
claim by Rodney for an indemnity under its policy. Mr L van der
Meerâs letter indeed makes it plain that the S A Eagle
would have
met such a claim.
[36] Different
questions, however, arise under the Lloydâs policy as its wording
differs from that of the S A Eagle policy and
there is no suggestion
that Lloydâs would have met any
âhonourable obligationâ
.
It is therefore necessary to look more closely at the reasons given
by
Davis
loc cit
for his statement that the
standard motor policy does not create legal rights in the hands of
the authorized driver. The relevant
clause in the S A Eagle policy
differs somewhat from the standard clause discussed by
Davis
.
It is clause 9 of the general conditions and reads as follows:
â
9 Rights to other persons
unless
otherwise provided, nothing in this policy shall give any rights to
any person other than the Insured. Any extension providing
indemnity
to any person other than the insured shall not give any rights of
claim to such person, the intention being that the Insured
shall
claim on behalf of such person. The receipt of the Insured shall in
every case be a full discharge to the company.â
The
stipulatio alteri
(contract for the benefit of a third person)
is an established legal concept. It is a contract whereby one person
agrees with another
to perform something for the benefit of a third
person. See the following passage quoted with approval in
JOEL
MELAMED AND HURWITZ v CLEVELAND ESTATES (PTY) LTD; JOEL MELAMED AND
HURWITZ v VORNER INVESTMENTS (PTY) LTD
[1984] ZASCA 4
;
1984 (3) SA 155
(A) at 172
B-C:
"... in the legal sense, which alone is here relevant, what
is not very appropriately styled a contract for the benefit of a
third person is not simply a contract designed to benefit a third
person; it is a contract between two persons that is designed to
enable a third person to come in as a party to a contract with one of
the other two (cf Jankelow v Binder, Gering and Co
1927 TPD 364)...
the typical contract for the benefit of a third person is one where A
and B make a contract in order that C may be enabled, by notifying
A,
to become a party to a contract between himself and A.â
On the face
of it clause 9 of the SA Eagle general conditions indeed evidences an
intention to create a right for the benefit a third
party namely the
authorised driver. The only qualification of the driverâs right in
this clause is that the insured must put the
claim forward on the
driverâs behalf. In the present case that requirement would not
have created any legal or practical difficulty.
[39] In his
doctoral thesis entitled
Die Regte van Derdes Ingevolge
Versekeringskontrakte
(1990) , Dr P J Bouwer
analyses, at
289 â 293, the legal nature of the typical extension clause in a
standard South African motor policy whereby liability
cover is
extended to an authorised driver of the vehicle. He concludes,
convincingly in my view, that it fits the construction of
an
enforceable
stipulatio alteri
(contract for the benefit of a
third party). The insurer undertakes to the insured that it will
indemnify the authorised driver
in certain defined circumstances.
The driver can then accept this indemnification, either expressly or
by implication when he enforces
his rights against the insurer. The
qualification in the standard clause that the insured must institute
the claim on behalf of
the driver is a procedural provision that does
not affect the partiesâ substantive rights. ( The views expressed
by
W G Schulze
in
SA Merc LJ (1997) Vol 9
64 at 74-75,
I may add, are to the same effect.)
Bouwer,
op cit
,
deals at 293 -295 with the second reason mentioned by
Davis
,
namely the lack of an insurable interest. He points out, correctly
in my view, that once the construction of a
stipulatio alteri
is
accepted, the question is not whether the insured has an insurable
interest in the contingent liabilities of the driver. The only
question then is whether the driver himself has such an interest.
The answer to that question is obviously in the affirmative.
[38] It
is my view therefore that the SA Eagle would in any event have been
legally bound to indemnify Rodney. Mr Mitchell submitted,
however,
that it has not been shown that Lloydâs would have indemnified
Rodney in terms of any of the relevant policies. The Lloydâs
policy, he pointed out, does not have an extension clause that is
similar to that of the S A Eagle policy.
[39] The
wording of the Lloydâs policy is indeed different. (In this regard
the three policies appear to be similarly worded.)
The schedule to
the policy contains a description of âthe assuredâ. It includes
a number of subsidiaries of Servgro International
Limited including
Zeda Holdings operating as Zeda Car Rental (Pty) Limited. The
insuring clause in the policy reads as follows:
â
1.1 The
assured is indemnified up to the Indemnity Limit against the legally
enforceable consequences of causing Injury, Damage or
Malice or
providing Negligent Advice (all as defined in Clause 2) in the course
of carrying out the Business, but only in respect
of resultant claims
made by others for compensation, damages and costs, fees and
expenses.
All
costs reasonably and necessarily incurred in defending or settling
such claims will also be paid by Underwriters, as will
costs of
legal or similar representation at any inquest or other official
enquiry into any incident which Underwriters agree
might give rise
to a valid claim under this Policy, subject to Clause 4.7 (âDefence
Costsâ).â
Clause 4 of the Lloydâs policy reads as follows:
â
In respect of any claim which (during the Period of this
Policy) is partially indemnified by any Scheduled Underlying
Insurance, this
Policy operates to the extent that the claim is not
met by such Underlying Insurance because of the inadequacy of the
underlying
indemnity limit. Underwriters agree to follow the
interpretation of such Underlying Insurer subject always to the
Insuring Clause
and the terms, Conditions and Exclusions of this
Policy.â
Clause 7.2 of
the Lloydâs policy provides as follows:
â
The indemnity given to the Assured is also extended to any
person or party to the extent that any contract entered into by the
Assured
requires that such indemnity is given.â
[40] A
first point of interest is that, unlike the position under the SA
Eagle policy, the car renter is not included under the definition
of
âassuredâ under the Lloydâs policy. The assured is Avis itself
(and certain other companies). Protection to other parties
is
extended under clause 7.2. It seems to me that it can hardly be
disputed that the car renter would be covered by clause 7.2,
nor can
it be disputed that its position would be that of a beneficiary under
a contract for the benefit of a third party. Once
that is accepted
the only question then in this regard is whether there is a contract
whereby Avis undertook to provide the same
kind of indemnity to the
driver. The evidence put forward by plaintiff in this case
established in my view that there was. The
content of the Avis
brochure handed to plaintiff made it clear that passenger liability
insurance was included in the rates charged
by Avis. Avis agreed
that drivers other than the car renter might drive the vehicle.
There is no suggestion that lower rates would
have applied in the
event of another person driving the vehicle. There is furthermore no
suggestion in the brochure or in the evidence
given by the Avis
witnesses that the authorised driver would not have enjoyed the same
cover as the car renter.
[41] It seems
to me therefore that the Lloydâs policy also contained a contract
for the benefit of the driver as a third party which
Rodney could
have accepted, for example, by claiming to be indemnified under the
policy.
Jurisdiction
in respect of the Claim against Rodney
[42] Mr
Mitchell submitted next that plaintiff has failed to prove that she
is unable to recover compensation from the insurers by
means of an
action against Rodney. Although defendant accepted that any claim
against Rodney in a New York court would have prescribed
by now, a
claim in South Africa would not yet have prescribed as Rodney has
been absent from South Africa since February 1994. All
that is
required is for Rodney to submit to the jurisdiction of a South
African court. There is no reason, he submitted, why he
should not
submit to jurisdiction provided plaintiff provides an indemnity to
him in order to make it clear that she is merely suing
him in order
to be able to benefit from the indemnities provided by the insurance
companies.
[43] Plaintiff
relied in this regard on Rodneyâs own assertions for the submission
that he is not likely to come to South Africa
or to submit to the
jurisdiction of a South African court. I admitted the evidence of
these assertions in terms of
section 3(1)(c)
of the
Law of Evidence
Amendment Act 45 of 1988
which reads as follows:
â
3. Hearsay evidence.â(1) Subject
to the provisions of any other law, hearsay evidence shall not be
admitted
as evidence at criminal or civil proceedings, unlessâ
⦠⦠â¦
the
court, having regard toâ
(i) the
nature of the proceedings;
(ii) the
nature of the evidence;
(iii) the
purpose for which the evidence is tendered;
(iv) the
probative value of the evidence;
(v) the reason why the evidence is not given by the person upon
whose credibility the probative value of such evidence depends;
(vi) any prejudice to a party which the admission of such evidence
might entail; and
(vii) any other factor which should in the opinion of the court be
taken into account,
is of the
opinion that such evidence should be admitted in the interests of
justice.â
Mr Gauntlett, who appeared, with Mr J Trengove, on
behalf of plaintiff, submitted that the assertions in question must
be seen against
the background of a number of facts that are in any
event not in dispute. Rodney is a citizen of the United States of
America with
no known connection with South Africa other than a
relationship with Plaintiff which ended eight years ago. Rodney has
been practising
in New York as an attorney and still does so. He was
on a visit to South Africa when the accident occurred on 15 January
1994;
he returned to New York a few weeks later and he has never
returned to South Africa. Before the accident Plaintiff and Rodney
were
engaged to be married. Rodneyâs relationship with Plaintiff
terminated early in 1995 and they have not communicated since then.
Rodney has no assets in South Africa. Defendant has formally
admitted that Rodney resumed his residence in New York from February
1994 to date (and that the claim against him became time-barred in
New York by March 1999). In the light of these facts, he submitted,
the accuracy, veracity and reliability of Rodneyâs assertions can
hardly be doubted. Defendantâs principal objection to the
admission of the assertions was that it deprived its counsel of the
opportunity to cross-examine Rodney in order to illustrate the
potential benefit of the proposed submission to jurisdiction, namely
that plaintiff could sue him in that event and the insurers
be called
upon to honour their respective indemnities.
[44] It seems
to me that it is necessary in this regard to distinguish between two
different questions. The first is the factual
question whether,
independently of any possible insurance cover, Rodney is likely to
visit South Africa or to submit to the jurisdiction
of a South
African court. The second question is whether he could be persuaded
to submit to jurisdiction or come to South Africa
for that purpose.
The first question depends entirely upon the facts and the
probabilities. In this regard Rodneyâs assertions
fit in perfectly
with the probabilities. It seems highly unlikely that he would of
his own accord ever visit South Africa or submit
to its jurisdiction.
For that reason I was prepared to admit his assertions as evidence.
[45] Defendantâs
counselâs argument that defendant might be persuaded to travel to
South Africa or to submit to the jurisdiction
of a South African
court, is superficially attractive. It seems to me, however, that
this argument overlooks the nature of the duties
that are owed by
Rodney to the insurers. In terms of the policies the insurers would
be entitled to conduct the defence of any claim
brought against
Rodney. Clause 5(a)(ii) of the general conditions of the SA Eagle
policy provides as follows:
ââ¦
take over and conduct in the name of the insured the
defence or settlement of any claim and prosecute in the name of the
insured for
their own benefit any claim for indemnity or damages or
otherwise and shall have full discretion in the conduct of any
proceedings
and in the settlement of any claim. No admission,
statement, offer, promise, payment or indemnity shall be made by the
Insured without
the written consent of the company.â
Clause 11.3 of the Lloydâs policy provides as
follows:
â
In respect of any claim not covered at least in part by the
Underlying Insurances Underwriters may take over and conduct in the
name
of the Assured the defence or settlement of any claim or
prosecute in the name of the Assured for their own benefit and will
have
full discretion in the conduct of any proceedings and in the
settlement of any claim. The Assured will give all necessary
information
and assistance.â
[46] The rights and obligations of the parties in
terms of this kind of clause are akin to those under the doctrine of
subrogation.
This is the doctrine whereby an insurer which has
indemnified its insured under a contract of indemnity insurance, is
entitled to
reimburse itself out of the proceeds of any claims that
the insured may have against third parties in respect of the loss.
Apart
from the specific content of particular clauses it is a general
principle of subrogation that the insured is obliged to refrain from
acting in a manner that would prejudice the insurerâs rights
against the third party. See
MacGillivray and Parkington on
Insurance Law 8
th
edition para 1200:
ââ¦
the assured may not actively deal with rights against third
parties to the prejudice of the insurer. Consequently he will be
liable
to the insurer in damages for the value of any right
wrongfully renounced or any claim wrongfully settled.â
See also
LAWSA First Reissue Vol 12
sv
Insurance para
391.
In my view a
similar principle would apply to the insurersâ rights in this case
who are entitled to have a
âfull discretion in the conduct of
any proceedingsâ
against Rodney
.
The position at
present is that Rodney would be able to rely upon a defence of
prescription if sued by plaintiff in New York. Any
submission by
Rodney to the jurisdiction of a South African court (either directly
or indirectly by visiting South Africa for the
sole purpose of
allowing plaintiff to establish jurisdiction) would be tantamount to
the waiver of a valuable defence (probably his
only defence) to such
an action. In my view such a waiver would clearly prejudice the
insurers. It would entitle them to refuse
to indemnify Rodney under
their respective policies. The proposed submission to jurisdiction
would accordingly, from plaintiffâs
point of view, be
self-defeating.
[47] Mitchell,
I should mention, sought to rely in this regard on the judgment of
Lord Hewart C J in
DICKINSON v DEL SOLAR, MOBILE AND GENERAL
INSURANCE COMPANY LIMITED (Third Parties)
[1930] 1 KB 376.
The
motor policy in that case provided that the insurer would indemnify
the insured against legal liability to members of the public
arising
from the driving of the insured vehicle. The insured was an employee
of the Peruvian Delegation in London. The car which
he was driving
was involved in an accident and a third party was injured. The
insurer refused to indemnify the insured on the ground
that he was
immune from civil process. Lord Hewart C J held that the insured had
submitted to the jurisdiction of the court on the
instructions of his
Minister whom he was bound to obey as the diplomatic privilege vested
in the Sovereign by whom the diplomatic
agent is accredited. The
reason for the Ministerâs decision was that at the time of the
accident the vehicle had been used not
for official but for private
purposes. The insurance company was accordingly held to be obliged
to indemnify the insured. It seems
to me, however, that the
DICKINSON
is clearly distinguishable. The Peruvian agent was
forbidden by his Minister to rely upon diplomatic immunity because
his vehicle
had been used for private purposes. The position of
Rodney in the present case is considered on the hypothesis that he
voluntarily
submits to the jurisdiction of a South African court for
no other purpose than to allow plaintiff to sue him so that she can
enjoy
the benefit of the indemnities provided by the insurance
companies.
The
Claim against the RAF
[48] Mr
Mitchell submitted finally that plaintiff did not suffer any loss as
she would have been entitled to claim the full amount
of her loss
from the RAF on the grounds of the negligence of the driver of the
oncoming vehicle (referred to in the pleadings as
the first insured
driver). This claim, he submitted, had not become prescribed prior
to the termination of the mandate of the defendant
firm. Plaintiff
had in fact instituted such a claim but it was withdrawn in November
1999.
[49] There
are in my view two obstacles in the path of this submission.
Firstly, there is no direct or indirect evidence before the
court to
suggest that the first insured driver was indeed negligent.
Plaintiff was the only person to give direct evidence in regard
to
this aspect of the matter. On the strength of her evidence I cannot
find that the first insured driver was negligent at all.
There is
also indirect evidence. Plaintiff testified that she was advised by
defendant that she had no prospect of proving negligence
on the part
of that driver.
[50] The
second difficulty facing defendantâs submission is a legal one. In
NEDCOR BANK LTD t/a NEDBANK v LLOYD-GRAY LITHOGRAPHERS (PTY) LTD
2000 (4) SA 915
(SCA) the Supreme Court of Appeal confirmed that a
claimant in delict is entitled to recover the full amount of its loss
from any
one concurrent wrongdoer for purposes of calculating the
quantum of that loss. The right of action against the other joint
wrongdoer
must be disregarded. In calculating plaintiffâs loss in
the present case any possible right of action of plaintiff against
the
RAF by reason of the negligence of the first insured driver, must
accordingly be disregarded.
[51] I am
accordingly of the view that plaintiff is entitled to the relief
sought by it in this action.
[52] The
defendant firm notified plaintiffâs attorneys in terms of the
provisions of
rule 14
that the following persons were partners in the
firm at the relevant date: Hoosain Mohamed, Ahmed Ayoob Chohan,
Jerome Ramages and
Sulaiman Chotia.
[53] In the
result I make the following orders:
(1) It is declared that defendant is liable to plaintiff for her
damages (less the amount of R25 000,00 recovered from the RAF).
(2) It is
directed that the quantum of damages is to be determined in
subsequent proceedings.
(3) Defendant is ordered to pay plaintiffâs costs, including the
cost of two counsel. In this regard it is declared that plaintiff,
Small, Bobroff, Rajcoomar and Tome were necessary witnesses.
It
is declared, for purposes of applying the provisions of
rule 14
,
that the following persons were partners in the defendant firm at
the relevant date: Hoosain Mohamed, Ahmed Ayoob Chohan, Jerome
Ramages and Sulaiman
Chotia.
____________________
A P
BLIGNAULT