Ries v Boland Bank PKS Ltd and Another

• Jurisdiction: South Africa
• Citation: 2000 (4) SA 955 (C)

Ries v Boland Bank PKS Ltd and Another
2000 (4) SA 955 (C)

2000 (4) SA p955

Citation	2000 (4) SA 955 (C)
Case No	6435/98
Court	Cape Provincial Division
Judge	H J Erasmus AJ
Heard	November 17, 1999; November 18, 1999
Judgment	January 14, 2000
Counsel	E Fagan for the plaintiff.; T D Potgieter for the defendants.

Flynote : Sleutelwoorde

Negligence — Liability for — Claim by 'disappointed beneficiary' — Typically, no contractual nexus between plaintiff and B defendant, yet essence of plaintiff's claim being that defendant failing to carry out contractual obligation owed to another, thereby causing plaintiff loss — In absence of contractual nexus between parties, plaintiff restricted to delictual claim — All elements of Aquilian liability to be satisfied — Element of C wrongfulness assuming particular significance as claim one for loss of expectation rather than out of pocket loss — Where insurance broker failing to complete execution of instructions to change beneficiary appointed under life insurance policy, Court finding in circumstances of case that broker having legal duty to take care that beneficiary's expectations not frustrated — Amount payable under policy awarded to D beneficiary.

Insurance — Beneficiary — Change of — Insurance broker failing to complete execution of instructions to change beneficiary appointed under life insurance policy — In circumstances broker having legal duty to take care that beneficiary's expectations not frustrated — Broker negligently failing to do so — Broker employed by insurer — Insurer liable to beneficiary — Amount payable under policy awarded to beneficiary.

Headnote : Kopnota

The plaintiff was the widow of one R, who had been a regular customer of the first defendant bank, utilising its banking and insurance broking services and its estates department. The second defendant had been in the employ of the first defendant as an insurance broker during 1994. R had insured his life for R300 000. During E December 1994 he had instructed the second defendant to substitute the plaintiff as beneficiary in the policy. While there was some dispute about what exactly had happened, it appeared that R had been absent when the second defendant had called at his office; that the plaintiff had assisted with the completion of the requisite beneficiary appointment form; and that the second defendant had left a message with F the plaintiff that R should call on the second defendant's office to sign the form. The second defendant had not followed up on this, the form had never been signed and, upon R's death, the insurer had therefore paid the originally-nominated beneficiary. The plaintiff claimed from the first and second defendants payment of the sum of R300 000 with interest on the grounds of the second defendant's negligence in failing to ensure that R had signed the beneficiary G appointment form and in failing to lodge such signed form with the insurer before R's death.

Held, that, typically, in the case of a claim by a 'disappointed beneficiary' there was no contractual nexus between the plaintiff and defendant, yet the essence of the plaintiff's complaint was that the defendant had negligently failed to carry out a contractual obligation owed to another, thereby causing H loss to the plaintiff. (At 963D - E.)

Held, further, that where there was no contractual nexus between the parties the plaintiff was restricted to a delictual claim, even if the relationship between the plaintiff and defendant had its 'origins in contract'. (At 966F/G - H.)

Held, further, that in order for a claim by a disappointed beneficiary to succeed all the elements of Aquilian liability would have to be satisfied. The element of wrongfulness assumed particular I significance, viewed against the background of the fact that the claim was one for pure economic loss; in fact, the loss was a loss of an expectation rather than an out of pocket loss. (At 967I/J - 968A/B.)

Held, further, as to wrongfulness, that in South African law there was no objection in principle to the recovery in delict of pure economic loss, the J

2000 (4) SA p956

unlawfulness of the act causing pure economic loss lying in the non-compliance with a legal duty to prevent such loss A occurring. (At 968B - C.)

Held, further, that in determining whether or not such a legal duty existed, a value judgment had to be made, embracing all relevant factors and involving considerations of policy. (At 968E - E/F.)

Held, further, that factors determining the existence of such duty included the community's ideas of morals and justice, its B social ideas as to where the loss should fall and the convenience of administering the rule. It followed that duties of this nature did not stagnate but were liable to adjustments in the light of shifts in community attitudes. (At 968G - H.)

In this particular instance the relevant considerations to the determination of whether the defendants' conduct in relation to the plaintiff should be regarded as unlawful were set out as follows at C 969D - 970H:

The second defendant had known of the plaintiff's entitlement and had known that the entitlement would fail if the insurer were not informed of the change of beneficiary.

In view of the continuing relationship between R and the first defendant, R had been entitled to rely upon the first defendant to render such services as it offered in a manner that gave effect to his D intentions. The boni mores of the community required that persons or bodies in the position of the defendants should exercise their skill and knowledge responsibly so as not adversely to affect persons whose rights and interests were certain and foreseeable.

The recognition of a legal duty, in the circumstances of this case, to inform the insurer of the change of beneficiary would not expose the E defendants to the risk of being held liable 'in an indeterminate amount for an indeterminate time to an indeterminate class'.

If the duty were not recognised there would be a serious lacuna in the law. A negligent act or omission which precluded the receipt of a benefit in a case such as the present would F clearly call for a remedy.

The recognition of a legal duty towards an intended beneficiary did not entail the imposition of an additional burden upon person in the position of the defendants: no more was required than the proper performance of their obligations towards others, in this case the insured.

Held, further, that the aforesaid considerations had given rise to a legal duty on the part of the defendants to take care that G the beneficiary's expectations were not frustrated. (At 971A - A/B.)

Held, further, as to negligence, that the defendants, who rendered specialised services as insurance brokers, should have and had in fact foreseen the likelihood of harm being caused to someone in the position of the plaintiff. The second defendant had known that if he failed to convey R's instructions to change the beneficiary to the H insurer by way of a properly signed beneficiary appointment form his failure to do so would result in the benefit under the policy not being paid to the plaintiff. The harm which had resulted to the plaintiff could easily have been prevented by very simple and practical measures. (At 971H - I/J.)

Held, further, that the second defendant had been negligent and, in view of the concession that at all material times he had acted I in the course and scope of his employment with the first defendant, his negligence was vicariously attributable to the first defendant. (At 971J - 972A/B.)

Held, further, as to interest, that, although the claim was one for damages, the quantum had readily been ascertainable and had never been in issue. In the exercise of the discretion conferred by s 2A(5) of the Prescribed Rate of J

2000 (4) SA p957

Interest Act 55 of 1975, it should be ordered that interest be paid on the amount of A R300 000 from 5 May 1996, R having died on 4 May 1996. (At 972F/G - 973C, summarised.)

Cases Considered

Annotations:

Reported cases

Administrateur, Natal v Trust Bank van Afrika Bpk1979 (3) SA 824 (A): applied B

Anns and Others v London Borough of Merton[1977] 2 All ER 492 (HL): referred to

Arthur E Abrahams & Gross v Cohen and Others1991 (2) SA 301 (C): dicta at 309D - E and 312B - D applied

Bedford en Andere v Suid-Kaapse Voogdy Bpk1968 (1) SA 226 (C): considered C

Biakanja v Irving (1958) 320 P 2nd 16: considered

Bowley Steels (Pty) Ltd v Dalian Engineering (Pty) Ltd1996 (2) SA 393 (T): dictum at 398F - 400A applied

Carr-Glynn v Frearsons (a firm)[1999] Ch 326 (CA) ([1998] 4 All ER 225): considered D

Cathkin Park Hotel and Others v J D Makesch Architects and Others1993 (2) SA 98 (W): considered

Combrinck Chiropraktiese Kliniek (Edms) Bpk v Datsun Motor Vehicle Distributors (Pty) Ltd1972 (4) SA 185 (T): referred to

Compass Motors Industries (Pty) Ltd v Callguard (Pty) Ltd1990 (2) SA 520 (W): referred to E

Coronation Brick (Pty) Ltd v Strachan Construction Co (Pty) Ltd1982 (4) SA 371 (D): dictum at 384D - E applied

Fedgen Insurance Ltd v Bankorp Ltd1994 (2) SA 399 (W): considered

Finlay v Rowlands Anderson & Hine 1987 Tas R 60: referred to

Gartside v Sheffield Young & Ellis[1983] NZLR 37: referred to

Hawkins v Clayton(1988) 164 CLR 539: referred to F

Heath v Ivens (1991) 57 BCLR (2nd) 391: referred to

Hedley Byrne & Co Ltd v Heller & Partners Ltd[1963] 2 All ER 575 (HL): considered

Heyer v Flaig (1970) 449 P 2nd 161: compared and approved

Indac Electronics (Pty) Ltd v Volkskas Bank Ltd1992 (1) SA 783 (A): dictum at 797E - F applied G

Joubert v Impala Platinum Ltd 1998 (1) SA 463 (B): dictum at 473C - 474H applied

Jowell v Bramwell-Jones and Others1998 (1) SA 836 (W): dictum at 878A - F applied

Knop v Johannesburg City Council1995 (2) SA 1 (A)...