Aucamp and Others v University of Stellenbosch (A19/01) [2002] ZAWCHC 14 (15 March 2002)

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[2002] ZAWCHC 14
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Aucamp and Others v University of Stellenbosch (A19/01) [2002] ZAWCHC 14; 2002 (4) SA 544 (C) (15 March 2002)

IN THE HIGH COURT
OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
Case No: A 19/01
In
the matter between:
ELAINE
NOREEN AUCAMP
First Appellant
ARMAND
EMILE AUCAMP
Second Appellant
MARC
DERIQUE AUCAMP
Third Appellant
EMILIE
JANE AUCAMP
Fourth Appellant
and
THE UNIVERSITY OF STELLENBOSCH
Respondent
_______________________________________________________________________
JUDGMENT: 15 MARCH 2002
________________________________________________________________________
VAN
ZYL J:
INTRODUCTION
[1] The first appellant is the widow of the late
Emile Aucamp (the “deceased”). The second, third and fourth
appellants are the
children of the deceased and the first appellant.
They are joint parties to the present proceedings in their respective
capacities
as nominated beneficiaries of the deceased, who had been
in the employ of the respondent as a theatre technician from 1 July
1966
until his death on 16 August 1995.
[2] In the belief that the deceased had been a
member of the respondent’s group life insurance scheme, and that
certain benefits
would, in terms thereof, accrue to his beneficiaries
upon his death, the first appellant made enquiries from the
respondent. She
was informed, and this is common cause, that the
deceased had not been a member of the scheme.
[3] The appellants subsequently instituted an
action against the respondent, claiming damages for pure economic
loss sustained by
them as so-called disappointed beneficiaries. In
this regard they relied on two alternate causes of action, namely, in
the first
place, the negligent breach of a contractual duty owed to
the deceased and, in the second place, a negligent misrepresentation
made
to the deceased. Either of them would give rise to a claim in
delict by the appellants against the respondent.
[4] The first cause of action related to the
respondent’s negligent failure to ensure, as it was obliged to in
terms of its contract
of employment with the deceased, that the
deceased was registered as a member of its group life insurance
scheme. The alternative
cause of action was based on the respondent’s
negligent misrepresentation to the deceased that he was in fact
registered as a member
of such scheme. As a result the appellants, as
beneficiaries of the deceased under the scheme, suffered damages in
the amount the
insurers would have paid them had the deceased been
registered as a member of the scheme.
[5] The claim of the appellants as beneficiaries
is, in short, that the respondent knew, or should have known, that
its aforesaid
conduct would inevitably cause them to suffer damages
as aforesaid. The total amount claimed by them was R382 820,00, later
amended
to R414 211,02, being the amount of the benefit that would
have accrued to them jointly had the deceased been a member of the
scheme.
The proportion of their shares in such benefit would be 70%
to the first appellant and 10% to each of the remaining three
appellants.
This was the proportion allocated to them as
beneficiaries in terms of the provisions of the respondent’s USAF
pension scheme,
which was established in 1994 and of which the
deceased became a member on 13 October 1994 (par 26 and 27 below). In
addition the
appellants claim
mora
interest on the said amount
at the rate of 15,5%
per annum
as from 13 December 1995, being
the date of a letter of demand from the attorneys of the appellants
to the principal of the respondent.
[6] The
respondent denied, on the merits, that it was liable to the
appellants on either of the alternate causes of action. In addition
it raised two special pleas. The first was that the appellants did
not have
locus standi
to bring a claim against the respondent,
in that they were not acting as heirs or trustees of the estate of
the deceased, nor were
they acting as dependants of the deceased. The
second was that their claim had prescribed. In this regard it was
alleged that the
cause of action had come into existence on the date
of death of the deceased, namely16 August 1995. Service of the
amended particulars
of claim, however, by which a new cause of action
was introduced, took place on 10 August 1999, more than three years
later. In
view of its finding on the facts, the court
a quo
did not deal with either of these special pleas. They were not
abandoned, however, and full argument was addressed to us in respect
thereof.
[7] The matter proceeded to trial. Both parties
presented evidence to the court. Much of it turned upon the
interpretation of certain
documentation, on which the alleged
misrepresentation by the respondent was based. Particularly material
was the evidence of one
Smal, a former employee of the respondent. He
testified (par 13 below) as to certain documentation which had
emanated from his office,
and on his recollection of a personal
discussion he had held with the deceased, more than seven years
before his death, in regard
to his membership of the scheme.
JUDGMENT OF THE COURT
A QUO
[8] In his judgment Motala J held, on the first
cause of action, that the respondent did not have an obligation to
ensure that the
deceased became a member of the scheme, in that
membership thereof was optional for the deceased. At best for the
appellants the
respondent might have had a “moral, and perhaps a
legal duty” to give the deceased “a clear option” to acquire
membership
thereof. The deceased had, however, unequivocally chosen
not to join the scheme.
[9] On the second cause of action Motala J held
that certain documentation and seminars relating to, and comparing
the benefits of,
the respondent’s old and new pension funds, had
indeed constituted a misrepresentation that such pension funds in
fact included
group life insurance (par 26 below). On the other hand
a letter of 12 June 1978, from Smal to the deceased, as backed by
Smal’s
evidence (par 13 and 23 below), indicated that the deceased
could not have been misled by such misrepresentation.
[10] In this regard the learned judge observed
that he had treated Smal's evidence with caution, and did not believe
that he was “deliberately
misleading the court” or “fabricating
his evidence” in regard to the discussion he had held with the
deceased (par 13 below).
In any event, the learned judge held, the
appellants failed to prove a causal
nexus
between the alleged
misrepresentation and their loss. The claim was accordingly dismissed
with costs. It is against this judgment
and order that the present
appeal is directed.
THE EVIDENCE
[11] In her evidence the first appellant, Mrs E N
Aucamp, testified that she had married the deceased in 1963 and
remained so married
until his death in 1995, a period of some thirty
two years. The second, third and fourth appellants were born of their
marriage.
She herself had been a theatre technician and part-time
lecturer in the employ of the respondent until her retirement, and
appears
to have been well informed as to the insurance and pension
benefits accruing to employees like the deceased. She and the
deceased,
at various times before his death, had discussed the topic
of their financial future. He had consistently assured her that, in
the
event of his death, she and the children would have no “financial
worries” because they were adequately covered by the respondent’s
insurance scheme. He referred to it as a “widow’s pension” or
“widow’s benefits”. In this regard he had impressed her
as
being knowledgeable in insurance matters and having an interest in
his financial affairs. It was her belief that the deceased
had
accepted that the respondent’s pension scheme included group life
insurance, in that it was compulsory for all permanent members
of
staff. There could be no other explanation for his having failed to
become a member of a scheme that provided excellent cover
at a
relatively small premium. He would not, she testified, intentionally
or deliberately have rejected so beneficial a scheme, particularly
in
view of his concern, throughout his life, with providing for his wife
and children. He had been, she testified, “an extremely
good
provider and a very concerned father”. If he had believed that he
did not have sufficient life cover for his family, he would
undoubtedly have made an attempt to remedy the situation by taking
out additional life insurance.
[12] Mr P A Viljoen, an insurance broker,
testified that he had acted as the financial adviser of the deceased
from approximately
1986. This had not included advice on life
insurance, since the deceased had brought him under the impression
that he was adequately
covered and well insured under the
respondent’s group life insurance scheme. In this regard he had had
insight into a booklet dealing
with the respondent’s pension scheme
(introduced in 1994) and had attended a seminar relating thereto (par
26 below). His personal
impression from the contents thereof was that
group life insurance was included in the pension scheme benefits.
This concluded the
evidence for the appellants.
[13] The key witness for the respondent was Mr J T
R Smal, the former head of personnel finance matters in the
administration of the
respondent. He had held such position for a
period of ten to twelve years, during which time he had been
acquainted with the deceased.
At the time of his testimony in the
present matter he had been retired for a period of some twelve years.
The gist of his evidence
was that the deceased, with whom he had had
a friendly relationship, had deliberately chosen not to acquire
membership of the respondent’s
group life insurance scheme, despite
Smal’s efforts to persuade him that it was in his interest to do
so. In this regard he referred
to a letter dated 12 June 1978 (par
23 below), in which the deceased was given a last opportunity to join
the scheme. When the deceased
failed to respond to the letter, Smal
invited him to his office to discuss the matter. He explained to him
the benefits of the scheme
and assured him that he was making a
mistake by not opting to join it. According to Smal the deceased was
the only one of some three
thousand staff members who had not joined
the scheme. Much to his surprise the deceased was, apparently, still
not persuaded to do
so and simply left his office without saying a
word. Smal was unable to give any explanation for this bizarre
behaviour.
[14] The last witness for the respondent was Mr B
J Geldenhuys, the deputy-director of human resources of the
respondent. His evidence
turned, for the most part, around the
meaning and interpretation of certain documentation, to which
reference will be made hereinafter.
For present purposes it is not
necessary to deal with his opinions in this regard, other than to
point out that they represented
his personal viewpoints. In addition
he testified that he was aware of the fact that the deceased had
previously been a member of
the old scheme. When this scheme
terminated, however, the deceased had, it would appear, deliberately
chosen not to acquire membership
of the new scheme, despite its
obvious benefits. Geldenhuys was likewise unable to tender any
explanation for the deceased's decision
in this regard.
THE RELEVANT DOCUMENTATION
[15] It appears from the relevant documentation
that, on 26 March 1970, the deceased became a member of an optional
group life insurance
scheme administered by the respondent. It was
underwritten by Sanlam and known as the Group Life Insurance Scheme
for Teachers (
Groepslewensversekeringskema vir Onderwysers
). I
shall refer to it as the "old scheme".
[16] With effect from 1 January 1971 the
respondent introduced a compulsory group life insurance scheme known
as the Group Life Insurance
Scheme for the Employees of the
University of Stellenbosch (
Groepslewensversekeringskema vir die
Werknemers van
die Universiteit van Stellenbosch
). It was
likewise underwritten by Sanlam, subject to partial reinsurance by
Old Mutual, and may be referred to as the "new scheme".
Although it was compulsory for all new employees, commencing
employment after that date, to become members of the new scheme, it
was not compulsory for persons like the deceased, whose employment
had commenced prior to such date.
[17] In a notice dated 11 February 1971, emanating
from the office of the respondent's financial registrar, persons such
as the deceased
were given four options:
to join the new scheme unconditionally and
without proof of insurability;
to remain with the old scheme but to acquire
additional cover under the new scheme;
to terminate membership of the old scheme and
to join the new scheme;
to have membership of both the old and the
new scheme.
This option had to be exercised by 15 February
1972, failing which the right to acquire membership of the new scheme
would be forfeited.
In addition proof of insurability would be
required should the new scheme not be joined prior to 15 May 1971. It
is common cause
that the deceased did not accept any of the aforesaid
four options and did not become a member of the new scheme.
[18] The cut-off date for joining the new scheme
without proof of insurability was extended, in a further notice from
the financial
registrar dated 11 June 1971, to 30 June 1971. Attached
to this notice was a form containing only two questions and requiring
persons
exercising an option to respond thereto by answering only
"yes" or "no" in the appropriate blocks. The
options
were:
to join the new scheme unconditionally and
without proof of insurability;
to retain membership of the existing (old)
scheme.
[19] The difficulty with the new form was that the
first option was made expressly applicable only to persons who were
not members
of the old scheme and the second only to persons who were
indeed members thereof. This means that a person such as the deceased
would
be expected to ignore the first question and answer only the
second, in terms of which a "yes" answer would indicate his
wish to retain his membership of the old scheme. This is exactly what
he did, as appears from the form completed and signed by him
on 25
June 1971. In the block next to the second question he inserted the
word "JA" (YES) in black, while leaving the block
next to
the first question empty.
[20] For some or other reason the empty block was
subsequently, on 22 July 1971, filled in with the word "NEE"
(NO) in red.
This appears to have been done in the respondent's
financial administration offices by a person who inserted his or her
initial and
the date in the left-hand margin. When Smal was asked to
explain this, he testified that his department had been under the
impression
that there was overwhelming support for the new scheme.
This form was directed at obtaining their final choice. He was unable
to
say, however, who had made the insertion in the empty block. In
his view the person who had made the insertion must have communicated
with the deceased before doing so. Otherwise the insertion would not
have been permissible. His interpretation of the form, as amended
by
the insertion, was that the deceased had wished to retain membership
of the old scheme and not to join the new scheme.
[21] In a letter dated 21 May 1975 and directed to
the financial registrar of the respondent, Smal recommended that the
old scheme
be terminated as from 1 June 1975. In this regard he
pointed out that the only employees who were members of the old
scheme alone
were persons who had retired on pension prior to the
introduction of the new scheme. Such persons, he suggested, should be
absorbed
into the new scheme with retention of their cover and
premiums. Significantly, no reference was made to employees like the
deceased,
who had not yet retired but were members of only the old
scheme. The impression is created that, to the best of Smal's
knowledge
at the time, there were no such employees in that they were
all members of both schemes or of only the new scheme. When he was
questioned
on this aspect, his response was that he could not
recollect why provision had not been made for a further category of
employees
such as the deceased. He appears to have conceded, however,
that such persons would have been dealt with in the same way as
pensioners
in their position were treated.
[22] In a notice dated 2 June 1975 to all members
of the old scheme, Smal indicated that the council of the respondent,
in consultation
with the executive committee of the senate, had
accepted his recommendation. The old scheme was hence terminated on 1
June 1975,
subject thereto that no further premiums would be paid in
respect thereof as from the end of May 1975. As from 1 June 1975
additional
cover, amounting to four times (later increased to five
times) the annual basic salary of the employee, would come into
operation
under the new scheme, thereby compensating those employees
who would lose their cover under the old scheme. The contribution of
the
employee to the premium payable in respect of the new scheme
would be limited to 50% thereof.
[23] The next
document of relevance in the present matter, on which Smal placed
great reliance during his testimony (par 13 above),
was the copy of a
letter dated 12 June 1978 from Smal to the deceased. Herein the
deceased was informed that Sanlam had decided to
give employees of
the respondent a further opportunity to join the new scheme, subject
thereto that proof of insurability would have
to be furnished at the
employee's expense. The deceased was requested to inform Smal, on an
attached "option form", whether
or not he wished to join
the scheme. He appears not to have responded thereto. This gave rise
to the aforesaid meeting in Smal's
office, on which occasion the
deceased apparently refused to be persuaded to join the new scheme
and made his exit without saying
a word.
[24] Further documentary evidence relied upon by
the respondent includes certain salary slips of the deceased, from
which it appears
that no monthly deductions for group life insurance
were being made from his monthly salary. It was suggested in this
regard that
the deceased should have been alerted by the absence of
such deductions, in that monthly deductions of R7,10 had previously
been
made, when the deceased was a member of the old scheme. On being
questioned about this, the first appellant's response was that it
was
difficult to notice something that was not there. She suggested that
it was easier to notice an insertion than an omission.
[25] The appellants in turn suggest that later
documentation indicated that the respondent was itself under the
impression that the
deceased was indeed a member of the new scheme.
An example of such documentation is a letter dated 11 October 1991
from one Mr A
J van Tonder, the respondent's director of finances and
services, to the manager of Alexander Forbes Consultants. In this
letter
Van Tonder gave the assurance that all its employees
(including the deceased), who were members of its existing Pension
Fund for
Associated Institutions (
Pensioenfonds vir Geassosieerde
Inrigtings
, abbreviated PGI), were also members of the
respondent's compulsory group life insurance scheme (the new scheme).
[26] Similar indications appear from certain
information booklets and computer-generated "benefit
certificates" (
voordeelsertifikate
) issued by the
respondent. These certificates particularised, in respect of each of
the respondent’s employees, a comparison of
his or her benefits
under the existing pension scheme (PGI), with the benefits he or she
would enjoy under the new pension scheme.
The latter scheme, which
was established during 1994, after the respondent had apparently
begun to lose confidence in the viability
of the PGI scheme, was
underwritten by Old Mutual and became known as the University of
Stellenbosch Retirement Fund (
Universiteit van Stellenbosch
Aftredefonds
, abbreviated USAF). In promoting the USAF pension
scheme, the Old Mutual organised a number of seminars during the
course of which
its benefits were set forth. The aforesaid documents
and seminars appear to have assumed and, indeed, created the
impression, that
members thereof would automatically have group life
benefits. This was confirmed by Viljoen in his evidence on behalf of
the appellants
(par 12 above).
[27] It is common cause that the deceased became a
member of the respondent’s PGI pension scheme from the date of
commencement of
his employment with the respondent on 1 July 1966
(par 1 above) until 13 October 1994, when he became a member of its
USAF pension
scheme. It is likewise common cause that he nominated
the appellants as his beneficiaries in a specified proportion in
terms of the
latter scheme (par 5 above). In his judgment, as
mentioned above (par 9), Motala J held that the aforesaid
documentation and seminars
created the impression that the benefits
under both the PGI and USAF pension schemes included group life
insurance.
FIRST SPECIAL PLEA: LACK OF
LOCUS
STANDI
[28] The basis of the first special plea, namely
that the appellants lack the
locus standi
required to bring a
claim against the respondent, is that they are not acting in the
capacity of trustees of the deceased’s estate,
nor as the heirs or
dependants of the deceased.
[29] Mr Trengove, for the respondent, submitted in
this regard that there was no proof that the appellants would have
been the beneficiaries
of any insurance that the deceased might have
attempted to obtain had he realised that he was not covered by the
new scheme. The
fact that they were nominated as beneficiaries in
specified proportions, in terms of the USAF pension scheme, did not
mean that they
would similarly have been nominated in any new
insurance policy he might have decided to take. In any event the
respondent could
not have become aware of the identity of the
appellants, as beneficiaries of the deceased, prior to their
nomination as such when
the deceased became a member of the USAF
pension scheme. For the rest, he argued, the appellants did not
purport to enforce their
interests as heirs or as dependants of the
deceased. There was in fact no proof that they would have qualified
as dependants of the
deceased under the rules of the new scheme.
[30] Mr Fagan, for the appellants, submitted that
it was very probable that the appellants would indeed have been the
beneficiaries
of the deceased in terms of the new scheme had he
become a member thereof. This was confirmed by their nomination as
beneficiaries
in terms of the USAF pension scheme. The respondent’s
contention that the claimant in the court below should have been the
executor
in the estate of the deceased was based on the assumption
that the proceeds of the deceased’s group life insurance benefits
would
have been paid into his estate. This was not, however, the case
with life insurance policies, the proceeds of which are normally
paid
out directly to the nominated beneficiaries. In this regard, Mr Fagan
submitted, the relevant documentation indicated that Sanlam,
the
underwriters of the new scheme, preferred to make direct payments to
beneficiaries and only in exceptional cases to the estate.
In any
event, he argued, the appellants were the disappointed beneficiaries
to whom the benefits would have been paid had the respondent
not
negligently breached its contractual obligation to the deceased or
not made the aforesaid negligent misrepresentation.
[31] It is correct that the executor in the estate
of the deceased would have been perfectly entitled, in his or her
official capacity,
to bring the present action against the
respondent. There is, however, no indication from the papers that the
executor was ever requested,
or even considered, doing so. It is also
quite correct, as submitted by Mr Fagan, that the proceeds of
policies such as that under
consideration in the present matter, are
usually paid directly by the insurer to beneficiaries and not into
the deceased estate.
It was not suggested by the respondent that this
was not so, nor was it argued that this is, on the applicable facts
and circumstances,
an exceptional case requiring the insurer to make
payment into the estate.
[32] It may well be so that the respondent might
not have become aware of the identity of all the appellants as
beneficiaries at the
time of the alleged misrepresentation. The
second, third and fourth appellants must, at that time, have been
young children who were
not necessarily identifiable as potential
beneficiaries. The respondent could, however, by the exercise of
reasonable care (see par
70(e) below), readily have established the
identity of at least the first appellant as a beneficiary of the
deceased. At the relevant
time she was not only the legal spouse of
the deceased, but was, herself, also in the employ of the respondent
(par 11 above). The
respondent could simply have directed an enquiry
to the deceased or had reference to the documentation recording his
membership of
the PGI pension scheme and the old group life insurance
scheme.
[33] What is clear from the evidence of the first
appellant (par 11 above) is that the deceased consistently assured
her that she
and the children would be adequately covered by the
respondent’s insurance scheme. It is hence, in my view, highly
improbable that
he would not have identified at least the first
appellant as his beneficiary in terms of the PGI pension scheme or
the old group
life insurance scheme. As his main dependant, she
naturally and logically fell into a class or category of persons who
would, under
normal circumstances, benefit from such schemes. There
is, indeed, no indication from the relevant evidence or documentation
that,
during the intervening period prior to his becoming a member of
the USAF pension scheme, his care and concern for her and the
children
had changed or fluctuated in any way. This was demonstrated
unequivocally by his nominating them expressly, in specified shares,
as beneficiaries in terms of the USAF scheme.
[34] It must hence be accepted that the deceased
intended, at all relevant times, to nominate at least the first
appellant as his
beneficiary. She was not as such required to bring
the present action in the name of the deceased estate. Nor did she
have to do
so in her capacity as an heir or dependant intent on
enforcing her rights. It follows that she had the necessary
locus
standi
to institute the present proceedings against the
respondent. Inasmuch, however, as the second, third and fourth
appellants might
not, because of their youthfulness, likewise have
been intended beneficiaries at the time of the respondent’s alleged
misrepresentation,
it may well be that they do not have the required
locus standi
to pursue the present action. The first special
plea must hence succeed in respect of the second, third and fourth
appellants, but
fail in respect of the first appellant.
SECOND SPECIAL PLEA: PRESCRIPTION
[35] The second special plea raised by the
respondent is that the claim of the appellants has prescribed. The
averment in this regard
is that the alternate causes of action came
into existence on the date of death of the deceased (16 August 1995).
The amended particulars
of claim, however, which contain allegations
not appearing in the original particulars of claim and which have the
effect of introducing
a new cause of action, were served on the
respondent more than three years later (10 August 1999).
[36] In his argument on prescription, Mr Trengove
submitted that, in the original particulars of claim, the appellants
merely alleged
that the respondent had, by its conduct, breached a
duty owed to the deceased. No allegation of causation was made. In
the amended
particulars of claim, however, they alleged that the
respondent, by such conduct, had breached a duty owed to them, as
beneficiaries
of the deceased. In addition they raised the
prerequisite of causation by alleging that the deceased had, in the
planning of his
estate, relied on misrepresentations made by the
respondent.
[37] Mr Fagan conceded that the original
particulars of claim were defective in a number of respects
pertaining to factual allegations.
The correct facts, particularly
regarding the events of 1971 and 1975, came to light only after the
respondent had made discovery.
Indeed, these facts were supplemented
by documents emerging for the first time during the course of the
trial. There was no suggestion,
Mr Fagan submitted, that the first
appellant did not attempt, during the three years subsequent to the
deceased’s death and prior
to the institution of the present
action, to elicit all the relevant facts from the respondent. In any
event the original particulars
were properly directed at pursuing a
claim for pure economic loss on the basis of a negligent
misrepresentation made by the respondent
and of the breach of a duty
owed by the respondent to the appellants. Such particulars included
the allegations required to found
a claim in delict. At no stage did
the respondent except thereto.
[38] Our
courts have, as correctly submitted by Mr Fagan, adopted a generous
approach to the amendment of pleadings. They have allowed
amendments
to cure defects in pleadings, even to the extent of allowing one
cause of action to be substituted by another and even
in cases where
prescription might otherwise have intervened. See in this regard:
Trans-Africa Insurance Co Ltd v Maluleka
1956 (2) SA 273
(A)
at 279C-E;
Alfred McAlpine & Son (Pty) Ltd v Transvaal
Provincial Administration
1977 (4) SA 310
(T) at 343B-D;
Mabaso
and Others v Minister of Police and Another
1980 (4) SA 319
(W)
at 323D-325A;
Imprefed (Pty) Ltd v National Transport Commission
1990 (3) SA 324
(T) at 329C-D;
Wavecrest Sea Enterprises (Pty) Ltd
v Elliot
1995 (4) SA 596
(SEC) 600I-J;
Vorster v Havemann
1996 (4) SA 308
(T) at 312A-I.
[39] It is true that, in the present case, the
amendments to the particulars of claim had the effect of curing
certain defects and
lacunae
in the alternative causes of
action. This was doubtless prompted by the acquisition of new sources
of information, and by a reconsideration
of the basis of the claim by
the legal representatives of the appellants. It is quite clear that
certain highly relevant information
was not available to them at the
time their claim was initiated. They could not have been aware of the
full nature and ambit of the
alleged misrepresentations attributed to
the respondent from as early as 1971 and continuing until 1994, when
the USAF pension scheme
came into operation. Nor could they have
known of the significant role played by Smal in this process. There
is no indication that
they or their legal representatives were lax in
seeking to acquire further relevant information prior to discovery by
the respondent.
When such information came to hand, they duly amended
their particulars of claim. The amendments, as far as can be
ascertained from
the papers, could not have prejudiced, and were not
opposed by, the respondent.
[40] In my view the amended particulars of claim,
while curing certain defects in the original particulars of claim,
had the effect
of supplementing and clarifying the existing causes of
action. The respondent knew full well, from the outset, that it had
to meet
a case in delict, arising from the breach of a duty it
allegedly owed the deceased and from a misrepresentation it had
allegedly
made to the deceased. It likewise knew that the
beneficiaries of the deceased alleged that they had been prejudiced
by this breach
of duty and misrepresentation. The allegations to this
effect were supplemented and elucidated by the amendments introduced
at a
later stage. It was never suggested that such amendments should
be regarded as an attempt to introduce a new or an already prescribed
cause of action. It follows that there can be no question that any
part of the claim, instituted by the appellants against the
respondent,
has prescribed. The second special plea must, therefore,
fail.
BREACH OF DUTY BY THE RESPONDENT
[41] On consideration of the aforesaid facts and
circumstances, I am in respectful agreement with Motala J (par 8
above) that the
respondent had no contractual obligation to ensure
that the deceased become a member of the compulsory group life
insurance scheme.
The contract of employment between the respondent
and the deceased, as far as I have been able to ascertain, makes no
mention at
all of membership, optional or otherwise, of any group
life insurance scheme. Nor does there appear to have been any later
amendment
to the contract of employment to make provision for such a
duty.
[42] This does not, however, mean that the
respondent had no duty to the deceased in regard to group life
insurance benefits that
might become available to him. On the
contrary, the respondent was, in my view, obliged to ensure, firstly,
that the deceased was
fully and properly apprised of the availability
of such benefits and, secondly, that he was given an adequate
opportunity to subscribe
to the group life insurance policy in
question. It seems to me that such a duty must necessarily have
arisen from the fiduciary nature
of the employer-employee
relationship between the respondent and the deceased, even if no
provision had been made for it, expressly
or by implication, in their
contract of employment. Not only would this be just, fair and
reasonable, but it would also accord with
the dictates of good faith
and public policy.
[43] The decision of the deceased to join the
respondent’s optional group life insurance scheme (the old scheme -
par 15 above)
on 26 March 1970, some four years after commencing
employment with the respondent on 1 July 1966, appears to have been
quite voluntary.
It may be accepted that he took such decision after
considering the benefits, rights and obligations arising from
membership of the
scheme.
[44] The introduction of a compulsory group life
insurance scheme by the respondent on 1 January 1971 (the new scheme
- par 16 above)
did not place the deceased under any obligation to
join it. He appears to have been satisfied with his insurance
coverage under the
old scheme and, therefore, acted voluntarily and
entirely within his rights when he refused to exercise any of the
four options appearing
from the notice of 11 February 1971 (par 17
above).
[45] The deceased appears once again to have
indicated voluntarily, in response to the notice of 11 June 1971 (par
18 above), the
desire to retain his membership of the old scheme. As
pointed out earlier in this judgment (par 19 above), however, the
said notice
did not give the deceased any option to join the new
scheme, in that the option to do so, as formulated in the notice, was
restricted
to persons who were
not
members of the old scheme.
[46] It seems clear, in retrospect, that this
could not have been the intention of the drafter of the notice. Both
the first option,
to join the new scheme, and the second option, to
retain membership of the old scheme, must have been directed at
members of the
old scheme who had not, as yet, joined the new scheme.
The notice was, however, drafted in a clumsy and confusing way, in
that it
created the impression that employees such as the deceased,
who were members of the old scheme only, were entitled to retain
their
membership of the old scheme, but were not permitted to join
the new scheme.
[47] It follows that the notice effectively
deprived the deceased of the opportunity to join the new scheme. This
means that he was
not empowered to exercise any option, let alone do
so voluntarily. It must inevitably be concluded that the respondent
failed to
comply with its duty (par 42 above) to apprise the deceased
fully and properly of his right to become a member of the new scheme,
and likewise failed to give him an adequate opportunity to acquire
such membership. I shall return to this in the discussion of
wrongfulness
of the respondent’s conduct (par 89-95 below).
[48] The attempt, by some or other administrative
official who was never called to the witness stand or even
identified, to remedy
the aforesaid situation, was extremely
questionable (par 20 above). His or her insertion of a negative
response in the block next
to the first option, deliberately left
blank by the deceased, simply had the effect of compounding the
confusion and perpetuating
the respondent’s breach of duty. Smal’s
attempt to explain this conduct cannot be accepted. Not only was the
insertion in conflict
with the purportedly overwhelming support for
the new scheme, but the suggestion that the anonymous official must
have communicated
with the deceased before making the insertion, was
based on pure speculation.
MISREPRESENTATION BY THE RESPONDENT
[49] The decision of the respondent, on the
recommendation of Smal, to terminate the old scheme was founded on
the assumption that
only retired employees of the respondent were
members of the old scheme alone (par 21 and 22 above). The only
reasonable inference
that can be drawn from this assumption is that
it was accepted that employees like the deceased were members of both
the old and
the new schemes or of the new scheme only. This accords
with Smal’s concession that employees who were members of only the
old
scheme, and had not yet retired, should have been dealt with in
the same way as employees who, on retirement, had been members of
the
old scheme alone.
[50] This means that persons such as the deceased
should have automatically become members of the new scheme when the
old scheme terminated
on 1 June 1975. This is certainly the clear
impression created by the notice dated 2 June 1975 to all members of
the old scheme:
such members would be compensated for their loss of
cover under the old scheme by receiving additional cover under the
new scheme
and paying only half the premium.
[51] It follows that the deceased must,
reasonably, have been under the justified (but mistaken) impression
that he became a member
of the new scheme on 1 June 1975. Inasmuch as
the respondent failed to correct this mistaken impression, it
misrepresented unequivocally
that persons like the deceased were
indeed members of the new scheme and would receive additional cover
at lower premiums.
[52] Not only did the respondent fail to correct
this misrepresentation, but it further compounded it, many years
later, in the aforesaid
documentation relating to the introduction of
the new USAF pension scheme (par 25 and 26 above). There is little
doubt that the respondent
was itself under the impression that all
its employees, including the deceased, who were members of its PGI
and USAF pension schemes,
were also members of its compulsory group
life insurance scheme (the new scheme). Inasmuch as the deceased had
been a member of the
PGI pension scheme, and subsequently joined the
USAF pension scheme (par 27 above), the respondent must have
accepted, and hence
misrepresented, that the deceased was indeed a
member of the new scheme.
WAS THE DECEASED MISLED?
[53] On whether or not the deceased was indeed
misled by this misrepresentation, I must respectfully differ from
Motala J (par 9 above).
It cannot be accepted that, on receipt of the
letter of 12 June 1978 (par 23 above), the deceased must have
realised that he was
in fact not a member of the new scheme and was
now being invited to become a member. For several reasons I have
grave reservations
as to the evidentiary value of the letter, as will
appear from the following.
[54] Apart from the fact that there is no evidence
that the deceased ever received the letter, it is quite inexplicable
why he should
have been given a second opportunity to become a member
of the new scheme more than three years after the old scheme had
terminated.
If he was indeed the only employee out of three thousand
who had deliberately chosen not to join the new scheme on termination
of
the old, it is strange that so formal a letter was addressed to
him. One would have expected Smal to approach him personally,
particularly
in view of his evidence that they had had a friendly
relationship. It is furthermore incomprehensible that the deceased
would not
have completed the annexed option form or otherwise reacted
to the letter. This would have been his obvious response, especially
after having been brought under the impression, more than three years
earlier, that he had automatically become a member of the new
scheme
on termination of the old.
[55] Smal’s evidence as to the inexplicably
bizarre behaviour of the deceased, on being accosted about his
failure to respond to
the letter and to join the new scheme, must, in
my view, be rejected as highly improbable. It cannot be accepted that
a person like
the deceased, who appears to have been knowledgeable in
insurance matters and cautious in his personal financial affairs,
would have
rejected membership of so beneficial a new scheme once he
had lost the cover provided by the old scheme. Such conduct would
have
been quite out of character, in that it would inevitably have
been to the detriment of his wife and family, who stood to benefit
substantially from the new scheme. There was not the slightest
suggestion, by Smal or anyone else, that the deceased was unbalanced
or unpredictable. Nor is there any indication that he was an
incorrigible individualist who would be comfortable with the idea
that
he was the only employee out of three thousand who had
deliberately chosen to forfeit the obviously beneficial provisions of
the
new scheme.
[56] It is highly significant that Smal, despite
his purported concern for the deceased, at no stage followed up on
the failure by
the deceased to respond to the letter and on his
conduct at the subsequent meeting. At the very least one would have
expected him
to confirm the preceding events in writing and, more
specifically, to place on record that the deceased had deliberately
foregone
a further opportunity to remedy the situation by becoming a
member of the new scheme. This would have served to protect his own,
and the respondent’s, interests, should there at any future stage
be a query as to why the deceased, to the prejudice of his
beneficiaries,
had never acquired membership of the new scheme.
[57] It is difficult to escape the conclusion that
the letter of 12 June 1978 was a clumsy attempt to remedy the
respondent’s aforesaid
breach of duty and subsequent
misrepresentation. It served only to compound and aggravate, rather
than improve, the situation.
[58] The fact that the monthly salary slips of the
deceased did not, as from the end of May 1975, indicate that
deductions were being
made for group life insurance, does not, in my
view, assist the respondent. Inasmuch as the deceased appears to have
believed that
group life insurance benefits were included among those
provided by his pension scheme, he would not have expected any
deductions
in this regard to be reflected on his monthly salary slip.
He would, indeed, have accepted that his relatively small
contribution
to group life insurance was included in the monthly
pension fund deduction. No additional or separate deduction would,
therefore,
have appeared necessary or justified. And even if a
separate deduction should have been made, it is highly unlikely that
the deceased
would have noticed the omission thereof.
[59] It follows that the deceased must be held
to have been misled by the respondent’s misrepresentation and to
have believed
that, as from 1 June 1975, he had group life insurance
cover, under the new scheme, as a benefit arising from his membership
of the
respondent’s USAF pension scheme. On the strength of this
misrepresentation he failed to take any steps to acquire membership
of
the new scheme, as might reasonably have been expected of him.
ACTION OF DISAPPOINTED BENEFICIARIES FOR PURE
ECONOMIC LOSS
[60] Mr Fagan, on behalf of the appellants,
submitted that this is a case where the legal convictions of the
community cry out for
the payment of compensation to the widow and
children of the deceased. He relied particularly on two recent cases
of this division,
in which claims by disappointed beneficiaries
appear to have been recognised.
[61] Mr Trengove, for the respondent, submitted
that the claim of the appellants should be rejected. To avoid the
danger of indeterminate
liability in actions for pure economic loss,
he argued, strict limitations should be placed on such liability. In
this regard he
suggested, following the “proximity test” as
applied in English law, that liability should be restricted to
plaintiffs whose
identity was certain at the relevant time. The South
African cases relied on by the appellants, Mr Trengove submitted,
were distinguishable
from the present case in that the disappointed
beneficiaries in those cases had been clearly identified at the
relevant time. This
argument has already been fully canvassed and
considered in the discussion of the
locus standi
special plea
(par 29 and 32 above).
[62] A further argument raised by Mr Trengove was
that the respondent had at no stage held itself out as having special
skills or
knowledge in the field of group life insurance. For this
purpose it had engaged the services of a professional and duly
specialised
insurer. Imposing liability on the respondent under these
circumstances would have serious social consequences in that it would
open
the floodgates of litigation by indeterminate beneficiaries
against any employer who had offered employees optional life
insurance
benefits at some time in the past. This could not, Mr
Trengove submitted, be consonant with the aims and needs of public
policy,
as represented by the legal convictions of the community.
[63] The question whether or not a disappointed
beneficiary has a legal right to claim damages for the loss of an
envisaged benefit
as a result of the wrongful and culpable conduct of
another, has been vexed and controversial. It relates to a
problematic field
of delictual liability that has exercised the
minds, and provoked the creativity, of lawyers in a number of common
law, and even
civil law, jurisdictions. Not only does it involve
damages in the form of pure economic loss, but it also requires
liability to be
imposed in respect of “indirectly” caused damages
arising from the conduct of a party with whom the victim ostensibly
has no
legal relationship. See in general Owen Rogers "The
Action of the Disappointed Beneficiary" in
SALJ
103
(1986) 583-614; G A M Radesich "Negligent Attorneys and
Disappointed Beneficiaries" in
THRHR
50 (1987) 276-289; B
S Markesinis “An Expanding Tort Law – The Price of a Rigid
Contract Law” in
Law Quarterly Review
103 (1987) 354-397;
Dale Hutchison “Relational Economic Loss in the Supreme Court of
Canada” in
SALJ
111(1994) 240-257; J Neethling
"Professionele Aanspreeklikheid teenoor Derdes" in
THRHR
59 (1996) 191-208; Basil Wunsh “The Disappointed Beneficiary
Revisited: The Decision of the House of Lords in
White v Jones
”
in
SALJ
113 (1996) 46-70; Dale Hutchison “Relational
Economic Loss (or Interference with Contractual Relations): The Last
Hurdle” in
Acta Juridica
(2000) 133-157; Dale Hutchison
“When Rigs do Roam: Relational Economic Loss in Table Bay
Harbour” in
SALJ
118 (2001) 651-658.
[64] The relevant issue may be simply illustrated.
In the usual case the perpetrator of the conduct in question (A) has
a contractual
relationship with another party (B), such as that
between an attorney and client. As a result of the negligent
non-compliance by
A with a duty or obligation arising from such
contractual relationship, a third party (C) suffers damage. Under
normal circumstances
A would be contractually liable to B for breach
of contract. Any action C might have against A, however, would have
to be delictual
and based on the breach of a legal duty A has towards
C. This presupposes that A must, in fact, have a legal relationship
with C,
in the sense that A must owe C a duty not to cause him or her
any injury, loss or damage. It may justifiably be said that this
duty,
and resultant legal relationship between A and C, must flow
from the contractual relationship between A and B.
[65] It may, of course, be that the damage
suffered by C does not arise from any negligent breach of the
contract between A and B,
but is the result of wrongful and culpable
conduct by A towards B. Under normal circumstances A would be
delictually liable to B
on the basis of A’s breach of a legal duty
he owes B. The existence of this duty would create an
extra-contractual legal relationship
between A and B. Any action C
may have against A would likewise have to be delictual, on the basis
of the breach of a legal duty
A owes C. In this case the duty, and
the resultant legal relationship between A and C, would flow from the
extra-contractual legal
relationship between A and B.
[66] It is irrelevant whether the damage caused to
C arises from the negligent breach of a contractual duty owed by A to
B, or from
a delict (wrongful and culpable conduct) committed by A
against B. In both cases C’s cause of action against A would be
delictual
and based on the breach of a legal duty owed by A to C. In
both cases C’s action would be directed at recovery of the “pure
economic loss” he or she has suffered as a result of A’s wrongful
and culpable conduct. South African law has long since recognised
an
action of this nature. See
Suid-Afrikaanse Bantoetrust v Ross en
Jacobsz
1977 (3) SA 184
(T);
Greenfield Engineering Works
(Pty) Ltd v NKR Construction (Pty) Ltd
1978 (4) SA 901
(N);
Administrateur, Natal v Trust Bank van Afrika Bpk
1979 (3) SA
824
(A);
Hefer v Van Greuning
1979 (4) SA 952
(A);
Franschhoekse Wynkelder (Ko-operatief) Bpk v SAR&H
1981
(3) SA 36
(C);
Coronation Brick (Pty) Ltd v Strachan Construction
Co (Pty) Ltd
1982 (4) SA 371
(D);
Arthur E Abrahams and Gross
v Cohen and Others
1991 (2) SA 301
(C);
McLelland v Hulett and
Others
1992 (1) SA 456
(D);
Jowell v Bramwell-Jones and Others
1998 (1) SA 836
(W);
The Oil Rig
South Seas Driller
Sheriff
of Cape Town v Pride Foramer SA and Others
2001 (3) SA 841
(C) at
843E-F.
[67] It
is equally irrelevant what the nature of the delictual conduct of A
against B may be. It is not restricted to physical damage
of property
or bodily injury to a person, as implied by the concept
damnum
iniuria datum
appearing in the Roman
Lex
Aquilia
of 287BC (one
of the corner stones of the South African law of delict). It includes
delicts such as negligent misrepresentation or
negligent
misstatement. This has also been accepted in South African law. See
Administrateur, Natal v
Trust Bank van Afrika Bpk
1979 (3) SA 824
(A);
Siman
and Co (Pty) Ltd v Barclays National Bank Ltd
1984
(2) SA 888
(A);
Credé
v Standard Bank of SA Ltd
1988 (4) SA 786
(E);
Bayer
South Africa (Pty) Ltd v Frost
[1991] ZASCA 85
;
1991 (4) SA 559
(A);
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994 (4) SA 747
(A);
McCann
v Goodall Group Operations (Pty) Ltd
1995
(2) SA 718
(C). See also the informative discussion in J Neethling, J
M Potgieter and P J Visser
Law
of Delict
(4
th
ed 2001) (hereinafter referred to as “Neethling”) 8-13 and
295-310.
[68] It is trite that the conduct causing pure
economic loss must be wrongful in the sense that it infringes upon a
subjective right
of the plaintiff, or breaches a legal duty owed to
the plaintiff (Neethling 297). The legal duty as such must be
directed at preventing
reasonably foreseeable damage being caused to
the plaintiff (
Arthur E Abrahams and Gross v Cohen and Others
1991 (2) SA 301
(C) at 309D). Every case must, however, be approached
on its own merits. In considering whether or not the conduct in
question is
wrongful the court is required to make a value judgment.
In doing so it must weigh up the interests of the parties and of the
community
at large against the background of the relevant facts and
circumstances. In addition it must strive, impartially and
objectively,
to apply the values of justice, fairness and
reasonableness, while taking into account considerations of good
faith (
bona fides
) and good morals (
boni mores
),
otherwise known as public policy reflecting the legal convictions of
the community. This has been said in a variety of ways by
various
courts over the years. It is exemplified in cases such as
Coronation
Brick (Pty) Ltd v Strachan Construction C (Pty) Ltd
1982 (4) SA
371
(D) at 384B-D;
Siman and Co (Pty) Ltd v Barclays National Bank
Ltd
1984 (2) SA 888
(A) at 913-914;
Lillicrap, Wassenaar and
Partners v Pilkington Brothers (SA) (Pty) Ltd
1985 (1) SA 475(A)
at 498;
Compass Motors Industries (Pty) Ltd v Callguard (Pty) Ltd
1990 (2) SA 520
(W) at 529G-530C;
Arthur E Abrahams and Gross v
Cohen and Others
1991 (2) SA 301
(C) at 309D-F;
McLelland v
Hulett and Others
1992 (1) SA 456
(D) at 464B-D;
Indac
Electronics (Pty) Ltd v Volkskas Bank Ltd
[1991] ZASCA 190
;
1992 (1) SA 783
(A) at
797F;
Minister of Law and Order v Kadir
[1994] ZASCA 138
;
1995 (1) SA 303
(A) at
318E-319A;
Knop v Johannesburg City Council
1995 (2) SA 1
(A)
at 27F-I;
McCann v Goodall Group Operations (Pty) Ltd
1995 (2)
SA 718
(C) at 722-723;
Jowell v Bramwell-Jones and Others
1998
(1) SA 836
(W) at 877J-878H;
Sea Harvest Corporation (Pty) Ltd and
Another v Duncan Dock Cold Storage (Pty) Ltd and Another
2000 (1)
SA 827
(SCA) at 837-838;
S M Goldstein and Co (Pty) Ltd v Cathkin
Park Hotel (Pty) Ltd and Another
2000 (4) SA 1019
(SCA) at 1024..
[69] There is no
numerus clausus
of factors
to be taken into consideration in assessing whether or not the
defendant was able to avoid reasonably foreseeable damage
by taking
reasonable steps to avoid it. Neethling 290-302 suggests,
inter
alia
:
(a) whether
the defendant knew or subjectively foresaw that his negligent conduct
would cause damage to the plaintiff;
(b) whether reasonably practical steps could have
been taken by the defendant to prevent such damage;
(c) whether the defendant possessed, or professed
to possess, special skill, competence and knowledge;
(d) whether special protection against economic
loss was required;
(e) whether a finding in favour of the plaintiff
would open the floodgates and lead to a multiplicity of actions or
indeterminate
liability which would have severe social consequences;
(f) whether a statutory provision requires the
prevention of economic loss;
(g) whether the plaintiff is able to protect
himself against potential economic loss;
(h) whether the defendant can protect himself
against such loss, for example by acquiring adequate insurance cover.
[70] In the context of negligent
misrepresentation, wrongfulness is determined by establishing whether
or not the defendant breached
a legal duty to furnish the correct
information to the person entitled to such information. The same
principles then apply as in
regard to wrongfulness in a general
delictual context (par 68 above). Similar guidelines exist as to
whether or not a legal duty
rests upon the defendant in a particular
case (par 69 above; Neethling 302-307; see also
Standard Chartered
Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994 (4) SA 747
(A) at
770A-771A). For present purposes the following additional guidelines
may be useful:
(a) whether
the parties have a contractual or fiduciary relationship requiring
them to furnish the correct information concerning
any matter arising
from such relationship;
(b) whether the defendant has certain exclusive
information which is not readily accessible to the plaintiff or other
parties;
(c) whether a defendant furnishes information by
dint of his or her professional knowledge and competence;
(d) whether the defendant was aware, or ought by
the exercise of reasonable care to have been aware, of the existence
and identity
of persons who would rely on his negligent
misrepresentation;
(e) whether the defendant was aware, or ought by
the exercise of reasonable care to have been aware, of the existence
and identity
of persons who would suffer damage should the
misrepresentation not be corrected, and would benefit should it be
corrected (see
Jowell v Bramwell-Jones and Others
1998 (1) SA
836
(W) at 877I).
[71] It goes without saying that, if the plaintiff
relies on a negligent misrepresentation by the defendant, it is not
sufficient
to prove wrongfulness alone. The other prerequisites for
delictual liability, namely fault or culpability, in the form of
negligence,
and causation must also be proved. This means, in a
nutshell, that the court must be satisfied that the defendant did not
act as
a reasonable person would have acted in the particular
circumstances. See
Herschel v Mrupe
1954 (3) SA 464
(A) at
490F;
Kruger v Coetzee
1966 (2) SA 428
(A) at 430E-G;
S v
Burger
1975 (4) SA 877
(A) at 879D-E; Neethling 128-156. In
addition it must be persuaded that there was a causal link, both
factually and legally, between
the misrepresentation, the response to
it and the damage arising from it. See
International Shipping Co
(Pty) Ltd v Bentley
1990 (1) SA 680
(A) at 700E-701G;
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994 (4) SA 747
(A)
at 764I-765B; Neethling 308-310. For present purposes it is not
necessary to deal further with these prerequisites. Their relevance
will appear from the discussion hereinafter (par 96-97) of the
applicability of the law to the facts of the case.
[72] The action of disappointed beneficiaries for
pure economic loss appears to have been recognised for the first time
in South African
jurisprudence in the recently published judgment of
Conradie J in
Pretorius en Andere v McCallum
2002 (2) SA 423
(C). The defendant in this case was an attorney who was alleged to
have been negligent in drawing up and executing the will of the
deceased, his erstwhile client, in that he failed to ensure that the
will complied with the relevant statutory prerequisites. The
will was
accordingly declared invalid and the deceased was regarded as having
died intestate. The plaintiffs, being the daughter
and two
granddaughters of the deceased, who had been named as beneficiaries
in the will, suffered substantial loss as a result of
the invalidity
of the will. They subsequently claimed damages from the defendant on
the basis of his aforesaid negligence. An exception
was raised to the
particulars of claim, averring that no cause of action had been
disclosed. In an opposed application for amendment
of the particulars
of claim, the court was called upon to decide whether or not the
defendant had a duty to ensure that the nominated
beneficiaries
receive what the deceased had intended they should inherit. Conradie
J gave careful consideration to a number of common
law authorities
and legal literature in point. He concluded (at 430F-G) that there
was no objection in principle to the recognition
of a claim founded
on the legal duty of an attorney to ensure that the expectations of a
nominated beneficiary were met.
[73] The next South African case to deal with a
claim by a disappointed beneficiary was
Ries v Boland Bank PKS Ltd
and Another
2000 (4) SA 955
(C). The plaintiff’s late husband
was a regular customer of the first defendant bank. At the relevant
time the second defendant
was employed by it as an insurance broker.
While making use of the insurance broking services rendered by the
second defendant, the
deceased requested him to substitute the
plaintiff as beneficiary in an existing life insurance policy. The
second defendant failed
to do so. As a result the plaintiff suffered
damages in the amount of R300 000,00, being the benefit she would
have received had
the substitution aforesaid been duly effected. She
subsequently claimed this amount from the first and second defendants
jointly
and severally. In doing so she averred that the aforesaid
failure of the second defendant, who had at all relevant times acted
in
the course and scope of his employment with the first defendant,
had been wrongful and negligent.
[74] Erasmus AJ was called upon to decide whether
or not a disappointed beneficiary such as the plaintiff had any legal
right to recover
damages for the loss of a benefit which would have
accrued to her had it not been for the wrongful and negligent conduct
of the second
defendant. In considering this issue the learned judge
had reference to wide-ranging foreign and other authorities, some of
which,
in general, tend to support the claim by a disappointed
beneficiary. He observed in this regard (at 963D-E) that, although
there
was no contractual
nexus
between the plaintiff and
defendants, the essence of her complaint was that the defendants had
failed to carry out a contractual
obligation owed to the deceased,
thereby causing the plaintiff loss. Such loss, he held (at 968A) was
“of a purely economic nature”
and was in fact “the loss of an
expectation rather than an out of pocket loss”.
[75] The learned judge thereupon considered
whether or not the conduct of the defendants was, in the
circumstances, wrongful. After
applying certain relevant guidelines
to the facts of the case, he was satisfied (at 971A) that the
defendants had a legal duty, to
“take care that the intended
beneficiary’s expectations were not frustrated”. In regard to the
requirement of negligence he
was likewise satisfied (at 971H) that
the defendants had rendered specialised services as insurance brokers
who “should have and
did in fact foresee the likelihood of harm
being caused to someone in the position of the plaintiff”. Inasmuch
as the second defendant
was acting within the course and scope of his
employment with the first defendant, his negligence was vicariously
attributable to
the first defendant. In the event the claim
succeeded.
[76] On appeal, in
BOE Bank Ltd v Ries
2002
(2) SA 39
(SCA), the Supreme Court of Appeal rejected Erasmus AJ's
finding that wrongfulness had been proved. In this regard Schutz JA
expressed
the view (par 10 at 46B-C) that "when an appropriate
case, such that a duty of care is owed to the plaintiff, arises, this
Court
will accept that a disappointed beneficiary has a delictual
action for his loss". For purposes of establishing wrongfulness,
however, the legal convictions of the community required that the
defendant should owe the plaintiff a legal, and not merely a moral,
duty (par 13 at 46H-47A).
[77] On the facts of the case the court was not
persuaded that there had been a professional relationship between the
deceased and
the second defendant, in terms of which the deceased
relied upon the second defendant's "special skills". The
latter had
simply rendered the deceased a service or courtesy by
furnishing him with a form relating to the change of beneficiary
under a life
policy in which neither of the defendants had any
interest. Doing a favour in such circumstances did not give rise to a
contract
with the deceased. This was very different from engaging an
attorney to draw a will (par 14 at 47B-F). In any event there was no
skill involved in rendering the said service. The deceased could have
done it himself, but found it more convenient to make use of
a person
who had access to the necessary form and was in regular contact with
the insurer. This case was hence not analogous with
the disappointed
beneficiary cases (par 17-18 at 47J-48F and par 20 at 49A-B). In the
event the appeal was upheld and the claim dismissed.
[78] In the
Pretorius
and
Ries
judgments
(par 72 and 73 above) the applicable foreign law is set forth in some
detail, with reference to a number of common law authorities.
Much of
the literature on the subject (see par 63 above) deals with analogous
cases in foreign jurisdictions. I do not propose to
conduct an
exhaustive comparative survey of the relevant foreign law. It would,
however, be appropriate to refer briefly to the relevant
English law,
which has strongly influenced South African law on the subject.
[79] The starting point is usually regarded as
Hedley Byrne & Co Ltd v Heller & Partners Ltd
[1963] UKHL 4
;
[1963] 2
All ER 575
{HL). In this case the House of Lords recognised that a
legal duty of care may, under certain circumstances, arise from a
negligent
misstatement. The relevant portion of the head note reads:
If,
in the ordinary course of business or professional affairs, a person
seeks information or advice from another, who is not under
contractual or fiduciary obligation to give the information or
advice, in circumstances in which a reasonable man so asked would
know that he was being trusted, or that his skill or judgment was
being relied on, and the person asked chooses to give the information
or advice without clearly so qualifying his answer as to show that he
does not accept responsibility, then the person replying accepts
a
legal duty to exercise such care as the circumstances require in
making his reply; and for a failure to exercise that care an action
for negligence will lie if damage results…
[80] In
Ross v Caunters (a firm)
[1979] 3
All ER 580
(ChD), an action in negligence was recognised, under such
circumstances, in the case of a disappointed beneficiary. After
considering
a number of English and "transatlantic"
sources, Sir Robert Megarry V-C stated (at 590
d-e
):
Whatever
may be the position about describing the relevant considerations as
matters of 'policy', I find it hard to envisage a fair
and reasonable
man, seeking to do what is fair and just, who would reach the
conclusion that it was right to hold that solicitors
whose
carelessness deprives an intended beneficiary of the share of a
testator's estate that was destined for that beneficiary should
be
immune from any action by that beneficiary, and should have no
liability save for nominal damages due to the testator's estate.
[81] Specific criteria for the imposition of a
duty of care in such cases were set forth in
Caparo Industries
plc v Dickman and Others
[1990] UKHL 2
;
[1990] 1 All ER 568
(HL), namely
foreseeability of damage, proximity of relationship and the
reasonableness or otherwise of imposing a duty. The House
of Lords
warned, however, against attempting to extract general principles of
liability in this regard. It suggested, rather, a pragmatic
approach
with reference to all the relevant facts and circumstances of each
case. This appears from the following statement in the
speech of Lord
Bridge of Harwich (at 573
j
-574
b
):
What
emerges is that, in addition to the foreseeability of damage,
necessary ingredients in any situation giving rise to a duty of
care
are that there should exist between the party owing the duty and the
party to whom it is owed a relationship characterised by
the law as
one of 'proximity' or 'neighbourhood' and that the situation should
be one in which the court considers it fair, just
and reasonable that
the law should impose a duty of a given scope on the one party for
the benefit of the other. But it is implicit
in the passages referred
to that the concepts of proximity and fairness embodied in these
additional ingredients are not susceptible
of any such precise
definition as would be necessary to give them utility as practical
tests, but amount in effect to little more
than convenient labels to
attach to the features of different specific situations which, on a
detailed examination of all the circumstances,
the law recognises
pragmatically as giving rise to a duty of care of a given scope.
[82] An important step forward was the decision in
White and Another v Jones and Others
[1995] UKHL 5
;
[1995] 1 All ER 691
(HL).
A testator had given instructions to his solicitors, the defendants,
to prepare a new will, in which the plaintiffs would be
mentioned as
beneficiaries of legacies in the amount of £9,000 each. The
defendants were tardy in doing so, allowing a period of
some two
months to elapse before arranging to meet with the testator. The
testator died three days before the date set for the visit.
The
plaintiffs brought an action against the defendants for damages
arising from the negligence of the defendants. The court of first
instance held that the defendants did not owe the plaintiffs any duty
of care and dismissed the action. The Court of Appeal, however,
allowed an appeal on the basis that the defendants indeed owed the
plaintiffs a duty of care and were liable to pay them the amount
claimed, namely the £9,000 each would have inherited had the
defendants duly carried out the instructions of the testator. The
defendants
thereupon lodged an appeal with the House of Lords. By a
majority decision the appeal was dismissed and the decision of the
Court
of Appeal affirmed.
[83] In his majority speech Lord Goff of Chieveley
emphasised (at 702
c
-703
c
) the “impulse to do
practical justice” as a basis for recognising that a duty should be
owed by the testator’s solicitor to
a disappointed beneficiary.
This was prompted, principally, by “the extraordinary fact that, if
such a duty is not recognised,
the only persons who might have a
valid claim (ie the testator and his estate) have suffered no loss,
and the only person who has
suffered a loss (ie the disappointed
beneficiary) has no claim”. This has led to “a lacuna in the law
which needs to be filled”
(702
d-e
). Lord Goff suggested (at
710
f-g
) that the lacuna could be filled by extending “to the
intended beneficiary a remedy
under the
Hedley Byrne
principle by holding
that the assumption of responsibility by the solicitor towards his
client should be held in law to extend to
the intended beneficiary
who (as the solicitor can reasonably foresee) may, as a result of the
solicitor’s negligence, be deprived
of his intended legacy in
circumstances in which neither the testator nor his estate will have
a remedy against the solicitor”.
[84] In his speech Lord
Browne-Wilkinson observed (at 717
d-g
) that the relationship
between the solicitor and intended beneficiary is neither fiduciary
nor based on a voluntary assumption of
liability by involvement in
the affairs of the beneficiary. The particular circumstances of the
case, however, justified finding
a “special relationship"
giving rise to duty of care. In addition, he stated (at 718
c
)
that "there are more general factors which indicate that it is
fair, just and reasonable to impose liability on the solicitor".
It followed (at 718
d
) that it "is only just that the
intended beneficiary should be able to recover the benefits which he
would otherwise have received".
[85] In other common law jurisdictions the
principles set forth above have, to a greater or lesser extent, been
accepted and further
developed. In the United States three California
decisions have taken the lead, namely
Biakanja v Irving
(1958)
49 Cal 2d 647
,
Lucas v Hamm
(1961) 56 Cal 2d 583
and
Heyer
v Flaig
(1970) 74 Cal 2d 233.
In Canada British Columbia has been
prominent with cases such as
Whittingham v Crease and Company
[1978] 5 WWR 45
,
Peake v Vernon and Thompson
(1990) 49 BCLR
(2d) 245 and
Heath v Ivens
(1991) 57 BCLR (2d) 391. After
initial resistance in
Seale v Perry
[1982] VR 193
, Australia
adopted a similar approach in
Watts v Public Trustee for Western
Australia
[1980] WAR 97
,
Finlay v Rowlands Anderson and Hine
[1987] Tas R 60
and
Hawkins v Clayton
[1988] HCA 15
;
(1988) 164 CLR 539.
In
New Zealand a legal duty in favour of intended beneficiaries was
rejected in
Sutherland v Public Trustee
[1980] NZLR 536
, but
accepted, on appeal, in
Gartside v Sheffield Young and Ellis
[1983] NZLR 37.
[86] In the hybrid legal system of Scotland, the
issue was considered in
Weir v J M Hodge and Son
1990 SLT 266.
It was rejected, however, because the court held, somewhat
reluctantly, that it was bound by an early decision of the House of
Lords
in
Robertson v Fleming
(1861) 4 Macq 167
(HL). This
situation was brought in line with English and common law development
in the unreported case of
Margaret Imrie Gourlay or Robertson v
Watt & Co
(Court of Session: Inner House (Second Division) 4
July 1995). In this case, which was kindly brought to my attention by
Professor
Hector MacQueen of the University of Edinburgh, the Lord
Justice Clerk, Lord Ross, together with the Lords McClusley and
Morison,
upheld an appeal against a decision of a sheriff who had
denied relief to disappointed beneficiaries. The Court of Session
held that
the sheriff's reliance on
Robertson v Fleming
(
supra
) had been "overtaken by events", more
particularly the decision in
White v Jones
(par 81 above).
Scots law has hence followed English law in this regard.
[87] Civil law jurisdictions, such as Germany,
France and the Netherlands, have adopted varying approaches to the
issue of disappointed
beneficiaries, as appears from the speech of
Lord Goff in
White v Jones
(par 81 above) at 698
b-d
and 705
b
-707
a
. Particularly interesting are the German
doctrines of the "contract with protective operation for third
persons" (
Vertrag mit Schutzwirkung für Dritte
) and the
"redress of damage caused to third persons"
(
Drittschadensliquidation
) in cases of "transferred loss"
(
Schadensverlagerung
). For present purposes it is not
necessary to deal with these, or other civil law, doctrines directed
at resolving the said issue.
APPLICATION OF THE
RELEVANT LAW TO THE FACTS
[88] It is clear from
the South African and common law authorities cited above that
disappointed beneficiaries have a claim in delict
against a person
who has wrongfully and negligently caused them loss or damage,
despite there being no privity of contract or any
other direct legal
relationship between them. Although the defendant in many of the
cases dealt with was an attorney or solicitor,
liability in
disappointed beneficiary cases is certainly not restricted to legal
representatives of deceased testators whose instructions
to them were
not duly carried out.
WRONGFULNESS
[89] On the basis of
the relevant testimony and documentation, I am satisfied that the
respondent, despite having clearly assumed
an obligation to do so,
failed to apprise the deceased fully and properly of his right to
subscribe to the new group life insurance
scheme. It likewise failed
to give him an adequate opportunity to subscribe thereto. The options
it purported to give him, in its
notice of 11 June 1971, were so
confusing that he could not reasonably have been expected to
understand what his rights were. In
effect he was, therefore,
deprived of his right to join the new scheme (par 47 above).
[90] Given his knowledge and experience in
insurance matters (par 11 above) and his response to previous options
tendered by the respondent
(par 43-45 above), it is highly unlikely
that the deceased would have deliberately chosen not to join the new
scheme on termination
of the old. Not only would such conduct have
been out of character, but it would also have had the effect of
depriving his wife of
a substantial death benefit that would accrue
to her at a minimal cost for himself.
[91] The aforesaid confusion was compounded by the
misrepresentation arising from the notice of 2 June 1975 (par 22
above). As mentioned
earlier in this judgment (par 51 above), the
deceased must reasonably have been under the justified, albeit
mistaken, impression
that he automatically became a member of the new
scheme on 1 June 1975. The documentation and seminars promoting the
respondent’s
new USAF pension scheme (par 26 and 52 above) in all
probability confirmed this impression. I have little doubt that the
deceased
was misled by the respondent’s misrepresentation and, on
the strength thereof, failed to take steps to acquire membership of
the
new scheme, as would reasonably have been expected of him (par 59
above). In the event the first appellant was deprived of the benefits
that would have accrued to her had the deceased subscribed to the new
scheme.
[92] As pointed above (par 32 and 33) the
respondent was at all relevant times aware, or ought by the exercise
of reasonable care
to have been aware, of the fact that at least the
first appellant would benefit from the deceased’s membership of the
new group
life insurance scheme. As an intended beneficiary she may
hence justifiably be held to have depended and relied upon the
respondent's
giving the deceased appropriate advice and guidance in
this regard. The fiduciary relationship between the respondent and
the deceased
should, therefore, be extended to the relationship
between the respondent and the first appellant. In this way a
"special relationship",
as envisaged in
White v Jones
(par 82 and 84 above), would be created, giving rise to a duty of
care.
[93] The respondent must have reasonably foreseen
that the first appellant would suffer substantial financial loss
should the deceased,
as a result of its conduct, fail to become a
member of the new scheme. If it had given reasonably careful
consideration to the misleading
notices and documentation aforesaid,
it could certainly have prevented such a situation from developing.
Mr Smal, as financial representative
of the respondent, clearly
possessed exclusive information that could not have fallen within the
knowledge of the deceased, who must
have relied on Smal’s special
skills in this regard. Smal certainly had sufficient skill,
competence and specialised knowledge
to have avoided or remedied such
negligent and wrongful conduct, thereby preventing the first
appellant from suffering the said loss.
[94] It follows that the respondent had a legal
duty towards the first appellant to have fully and properly advised
the deceased of,
and given him an adequate opportunity to subscribe
to, its new group life insurance scheme. Inasmuch as the deceased
would reasonably
and probably have become a member of such scheme had
the respondent not failed to comply with this duty, it likewise had a
legal
duty towards the first appellant to prevent her suffering loss
or damage as a result of such conduct. In the event the respondent
must be held to have acted wrongfully.
[95] I do not believe that this extension of the
Aquilian action will "open the floodgates" and give rise to
a multiplicity
of purportedly analogous claims or to uncertain and
indeterminate liability with dire socio-economic consequences. On the
contrary
it is perfectly consonant, I believe, with the values of
justice, fairness and reasonableness. It likewise accords with the
considerations
of good faith and good morals constituting the
all-important public policy that reflects the ever changing and
adapting legal convictions
of the community.
NEGLIGENCE AND CAUSATION
[96] That the
respondent, duly represented by Smal, was negligent speaks for itself
from the facts and circumstances set forth above.
Smal’s conduct,
in issuing ambiguous and confusing notices and making a serious
misrepresentation as to the deceased’s membership
of the new
scheme, did not accord with what one would have expected of a
reasonable man under the circumstances. I have no doubt
that he
himself realised that he had acted negligently, as illustrated by the
unacceptable way in which he attempted to remedy the
situation. I
speak in this regard, firstly, of his speculative testimony relating
to the administrative insertion appearing in the
form attached to the
notice of 11 June 1971 and completed by the deceased (par 18-20
above). In the second place I refer to his evidence
concerning the
letter of 12 June 1978, directed to the deceased as the only one of
some three thousand employees who had not joined
the new scheme (par
13, 23 and 53-57 above).
[97] I likewise have no difficulty with the
element of causation. The respondent’s wrongful and negligent
conduct was the indisputable
cause of the loss suffered by the first
appellant. Such conduct clearly brought the deceased under a
misapprehension relating to
his membership of the new scheme, of
which he would in all probability, if not inevitably, have become a
member. His failure to
do so, and the consequent loss suffered by
the first appellant as the intended and disappointed beneficiary,
must hence be attributed
to the respondent.
CONCLUSION
[98] The quantum of the
claim has not been placed in issue and stands at R414 211,02. Mr
Fagan submitted, with reference to the order
granted in the
Ries
matter (par 73 above), that this amount should bear interest at the
rate of 15,5%
per annum
as from the date of death of the
deceased, namely 17 August 1995. In the amended particulars of claim,
however, interest is claimed
a tempore morae
and not
a
tempore mortis
. It is therefore due from 13 December 1995, being
the date of demand (par 5 above).
[99] On the question of costs it is correct that
the respondent successfully raised the
locus standi
special
plea against the second, third and fourth appellants. They were,
however, no more than joint claimants who did not depose
to any
affidavits nor testify in the trial. Their citation as co-plaintiffs
in the action against the respondent as defendant did
not lead to any
additional costs in the court below or in this court. There is hence
no need to consider any special costs order.
[100] In the event I would make the following
order:
The appeal is
upheld with costs.
The order of the
court
a quo
is set aside and substituted by the following:
The
defendant is ordered to pay the first plaintiff the amount of R414
211,02, together with interest thereon at the rate of 15,5%
per
annum
from 13 December 1995 to date of payment;
The
defendant is ordered to pay the costs of suit.
D H VAN ZYL
Judge of the
High Court of South Africa
I agree.
R B CLEAVER
Judge of the High Court
of South Africa
I agree.
M J FITZGERALD
Acting Judge of the
High Court of South Africa
It is so ordered.
D H VAN ZYL
Judge of the High Court of South Africa