Coetzee v Attorney's Insurance Indemnity Fund

• Jurisdiction: South Africa

Coetzee v Attorney's Insurance Indemnity Fund
2003 (1) SA 1 (SCA)

2003 (1) SA p1

Citation	2003 (1) SA 1 (SCA)
Case No	126/2001
Court	Supreme Court of Appeal
Judge	Nienaber JA, Marais JA, Schutz JA, Navsa JA and Mthiyane JA
Heard	May 21, 2002
Judgment	September 2, 2002
Counsel	M J Lowe SC (with J D Huisamen) for the appellant.; T Plewman for the respondent.

Flynote : Sleutelwoorde B

Insolvency — Creditors — Liability of insurer in terms of s 156 of Insolvency Act 24 of 1936 — Obligation to pay out third party's claim against insolvent insured — Policy containing limitation on liability — Liability in terms of s 156 arising out of policy, including all its terms and conditions — Third party contending that, C even if claim restricted by policy, s 156 operating to allow him to recover his legal costs in excess of limit in policy, as costs not recoverable from insured, who was limited by policy, but from new defendant introduced by statute and not so limited — Consequence of argument succeeding would be that insurer's liability would be increased — No basis for such result in section — Section assiduous to assert that insurer's liability limited to amount stated in policy. D

Insurance — Indemnity policy against professional negligence — Policy limiting amount of claim — Third party suing insured for professional negligence — Insured insolvent — Third party claiming against E insurer — Third party claiming capital amount up to limit of policy, plus legal costs — Third party's costs part of insured's legal liability as liability for costs potentially flowing out of liability in delict — Whether or not claim when first made expressly mentioning costs, claim for costs implicitly included — Any opposite conclusion would be thoroughly unbusinesslike — Third party's costs claim covered by and limited by indemnity. F

Headnote : Kopnota

The appellant had engaged one B, an attorney, to act for him in an action for damages. Due to B's negligence the claim had become prescribed. The appellant sued B for R1,5m. Before the trial started B's estate was finally sequestrated. The respondent was substituted as the defendant, in terms of s 156 of the Insolvency Act 24 of 1936. The indemnity policy B had with G

2003 (1) SA p2

the respondent limited his claim to R1m. Upon the respondent being substituted as A defendant, C limited his claim to R1m, but claimed costs in addition. The respondent contended that the R1m indemnity included its liability for costs. The indemnity was described in clause 1 of the policy as being the insured's legal liability to any third party arising out of the conduct of the profession by the insured and approved costs, being all legal and similar costs and expenses which the insured incurred with insurer's written consent. Limit of the B indemnity was described in the policy as being the liability of insurers in respect of all claims and claimants' costs and expenses and approved costs arising out of one event or occurrence shall not exceed the limit of indemnity. The appellant argued that, even if his claim was restricted by the policy, s 156 operated to allow him to recover his costs in excess of the limit in the policy, as his costs C were not recoverable from B, who was limited by the policy, but from a new defendant who had been introduced by statute and who was not so limited.

Held (per Schutz JA; Nienaber JA, Navsa JA and Mthiyane JA concurring; Marais JA dissenting), that as far as the indemnity was concerned the appellant's costs were part of B's legal liability, even if not yet incurred or quantified, as a liability for costs potentially flowed out of a liability in delict. Whether or not the claim when first made expressly mentioned costs, a D claim for costs was implicitly included. Any opposite conclusion would be thoroughly unbusinesslike. It would have been astounding if an attorney in B's position were to have been indemnified against a damages claim but not against a claim for costs inevitably accompanying it. Accordingly, the appellants' costs claim was covered by the indemnity. (Paragraph [11] at 5G/H - I/J.) E

Held, further, that as regards the limit, the appellant's costs were plainly included in the words 'and claimant's costs and expenses'. (Paragraph [12] at 5J.)

Held, further, that the appellant's argument as regards s 156 was contrary to the terms of the section, which referred to 'the maximum amount for which the insurer has bound himself to indemnify the insured'. This liability arose out of the policy, including all its terms and conditions. Moreover, the consequence of F the argument's succeeding would have been that the insurer's liability would have been increased. There was no basis for such a result in the section. The section was assiduous to assert that the insurer's liability was limited to the amount stated in the policy. (Paragraphs [22] and [23] at 8C - E/F.)

The decision in the Orange Free State Provincial Division in Vrywaringsversekeringsfonds vir Prokureurs v Coetzee G 2001 (4) SA 1273 confirmed.

Cases Considered

Annotations

Reported cases

Canadian Superior Oil Ltd v Concord Insurance Co Ltd (formerly INA Insurance Co Ltd) 1992 (4) SA 263 (W): dictum at 273H - 274B applied H

Coetzee v Vrywaringsversekeringsfonds vir Prokureurs 2000 (2) SA 262 (O): reversal of confirmed

Le Roux v Standard General Versekeringsmaatskappy Bpk 2000 (4) SA 1035 (SCA): dictum at 1046J - 1047G applied

M Zahn Investments (Pty) Ltd v General Accident Insurance of South Africa Ltd 1981 (4) SA 143 (SE): compared I

Nairn v South East Lancashire Insurance Co 1930 SC 606: considered

S v Mhlungu and Others 1995 (3) SA 867 (CC) (1995 (2) SACR 277; 1995 (7) BCLR 793): dictum at 883H and 899A - C (SA) and 294c and 309d (SACR) applied

Vrywaringsversekeringsfonds vir Prokureurs v Coetzee 2001 (4) SA 1273 (O): confirmed on appeal J

2003 (1) SA p3

Woodley v Guardian Assurance Co of SA Ltd 1976 (1) SA 758 (W): A dictum at 759E - H applied.

Statutes Considered

Statutes

The Insolvency Act 24 of 1936, s 156: see Juta's Statutes of South Africa 2001 vol 2 at 1-485. B

Case Information

Appeal from a decision in the Orange Free State Provincial Division (Malherbe J, Wright J and Wessels AJA), reported at 2001 (4) SA 1273. The facts appear from the judgment of Schutz JA.

M J Lowe SC (with J D Huisamen) for the appellant.

T Plewman for the respondent. C

In addition to the authorities cited by the Court, counsel for the parties referred to the following:

Aetna Insurance Co v Minister of Justice 1960 (3) SA 273 (A)

David Trust and Others v Aegis Insurance Co Ltd and Others 2000 (3) SA 289 (SCA) at 293 D

Giovanni Dapueto v James Wiley & Co (1874) LR 5 PC 482 at 492

Goddard v Registrar of Deeds, King Williams Town and Colonial Government (1908) 25 SC 207

Gypsum Industries Ltd v Standard General Insurance Co Ltd 1991 (1) SA 718 (W) at 722 E

Hawkins v Gathercole (1855) LJ 24 CH 332

Hira v Booysen 1992 (4) SA 69 (A) at 79

Locke v Centracom Property Investments (Pty) Ltd 1985 (2) SA 116 (N) at 118

Mphosi v Central Board for Co-operative Insurance 1974 (4) SA 633 (A) at 645 F

Pryzbylak v Santam Insurance Ltd 1992 (1) SA 588 (C) at 602

Supermarket Haasenback (Pty) Ltd v Santam Insurance Co Ltd 1989 (2) SA 790 (W) at 793 - 4

Supermarket Leaseback (Elsberg) (Pty) Ltd v Santam Insurance Co Ltd 1991 (1) SA 410 (A) G

Van Blerk v African Guarantee Indemnity Co Ltd 1964 (1) SA 336 (O).

Cur adv vult.

Postea (September 2). H

Judgment

Schutz JA:

[1] This appeal is concerned with the operation of the limitation of liability clause in an indemnity policy, in circumstances where the estate of the insured has been sequestrated, so that s 156 of the Insolvency Act 24 of 1936 (the Act) functions. The section I confers a direct action against an indemnifying insurer upon a third party who has a claim against the insured.

[2] That third party is one Coetzee, who suffered serious injuries when he slipped on a wet floor at the house of one Schmidt in Welkom. This J

2003 (1) SA p4

Schutz JA

led to a claim against Schmidt of about one and a half million rands. Coetzee appointed an attorney, one Botha, to bring A action on his behalf. Acting negligently, Botha allowed Coetzee's claim to become prescribed. Coetzee then sued Botha for the sum abovementioned, together with costs. It is this action that has led to the dispute which has come before us. The claim for the capital amount, together with the costs later incurred, far exceeds the limit of R1m B contained in Botha's indemnity policy with the respondent, the Attorneys Insurance Indemnity Fund (the Fund). As will be explained below, the Fund was later substituted for Botha as the defendant (under s 156 of the Act). Coetzee, as plaintiff, accepts that the capital amount of his claim is limited to R1m, but contends that his recoverable costs are not subject to the...