RMB Structured Insurance Ltd v Danresa Boerdery (Pty) Ltd
| Jurisdiction | South Africa |
| Judge | JW Louw J |
| Court | Gauteng Division, Pretoria |
| Docket Number | 72663/2012 |
J W Louw, J
During 2011, the defendant was the owner of a game farm in the Timbavati nature reserve which borders on a tributary of the Timbavati river and on which a five star lodge had been erected. The lodge was operated by Status Hotels (Pty) Ltd in terms of an agreement it had with the defendant. The property was insured with Santam Insurance Co Ltd in terms of a short term insurance policy which the defendant, represented by its director and only shareholder, Mr. Hennie de Beer, had obtained through Daan Schoeman Insurance Brokers in Polokwane, represented by Mr. Jannie Steyberg.
During May 2011, Mr. Frik Nel of Brilliant Brokers (Pty) Ltd (Brilliant) approached Mr. de Beer and inquired whether he could make a proposal to the defendant regarding short term insurance. Mr. de Beer had previously been introduced to Mr. Nel by Mr. Nel's brother, Mr. Jannie Nel, who had been interested in purchasing the defendant's farm. Mr. de Beer provided Mr. Frik Nel with a copy of the Santam policy and told him that the quotation should be for exactly the same cover as provided for in the Santam policy. The policy provided cover for damage to the property, including to the lodge.
The first quotation, which was from Risk Guard Alliance (Pty) Ltd (Risk Guard), was provided by Mr Nel during May 2011. Risk Guard were the underwriting managers for Saxum Insurance Ltd and acted as its agent.
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The quotation was for a better rate with more benefits than the Santam policy. Further quotations were provided as a result of further negotiations between Mr. de Beer and Mr. Nel. The commencement date of the policy which was issued pursuant to the final quotation, which was accepted by Mr de Beer on behalf of the defendant, was 1 July 2011. Mr. de Beer was not asked to complete any application form prior to the issue of the policy. The policy was subsequently taken over from Saxum by the plaintiff. Risk Guard also acted as underwriting managers and agents for the plaintiff.
On 17 January 2012, a flooding of the Timbavati river occurred as a result of heavy rains in the area. The flood caused extensive damage to the lodge. The defendant thereafter submitted a claim to Risk Guard for compensation for the damage. The assessors appointed by Risk Guard estimated the loss in an amount of R13 818 793.86. Risk Guard accepted liability for the loss on behalf of the defendant and made an interim payment of R2 980 030.00 to the defendant on 28 February 2012.
On 29 May 2012, Risk Guard wrote to the defendant and advised it that Risk Guard had elected to avoid the policy because the defendant had failed to disclose certain material facts, to which I will refer in more detail below, at the time of the conclusion of the insurance contract. It claimed repayment of the amount of R2 729 623.90, being the amount of
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the interim payment of R2 980 030.00 less the premiums of R250 406.19 which had been paid by Status Hotels on behalf of the defendant.
The amount claimed was not repaid by the defendant, and the plaintiff thereafter, during December 2012, issued summons against the defendant under case no. 72633/2012 for repayment thereof. During April 2014, the defendant instituted action against the plaintiff under case no. 29142/2014 for payment of the amount of R10 838 763.86, being the difference between the amount of the claim it submitted and the interim payment which was made. The two cases have been consolidated in terms of a court order.
The non-disclosures on which the plaintiff relied as being material as contemplated by s 53 of the Short Term Insurance Act, 53 of 1998 (the Act), and entitling it to avoid the policy, were pleaded as follows in its particulars of claim:
At the time of the conclusion of the policy, the defendant knew, but failed to disclose to the plaintiff, that:
its previous insurer, Santam, had cancelled its previous insurance policy in respect of the property that was the subject matter of the policy due to the non-payment of premiums;
It was indebted to Nedbank in the sum of R 30 million;
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It executed a mortgage bond over its immovable property in favour of Nedbank on 21 January 2008;
It was unable to discharge its indebtedness to Nedbank with the result that Nedbank instituted action against it for the recovery of the R30 million;
It concluded a settlement agreement with Nedbank on 12 June 2009 in terms of which it declared executable the immovable property at the instance of Nedbank and which settlement agreement was made an order of court on 7 July 2009;
It breached its obligations under the settlement agreement resulting in the immovable property being attached on 2 October 2010.
It was in financial difficulty, alternatively was unable to meet its debts as and when they fell due."
These allegations were denied by the defendant, but when the trial commenced I was informed that the defendant admitted that the facts alleged in paragraphs 7.1 to 7.6 were not disclosed by the defendant at the time of the conclusion of the insurance contract. In respect of the allegation in paragraph 7.7, the admission was a qualified one. I was informed by Adv. Geach SC, who appeared for the defendant, that the defendant's answer to the allegation was that it was not insolvent at the time. The parties were in agreement that the only issue to be decided at this stage of the proceedings was whether the non-disclosures were
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material. It was common cause that the plaintiff bore the onus to prove that they were. The quantum of the defendant's claim was by agreement postponed sine die for later determination.
The test for determining whether a non-disclosure is material, is an objective one. In Commercial Union Insurance Co of SA Ltd v Wallace NO; Santam Insurance Ltd v Affric Addressing (Pty) Ltd [1] , Nugent JA said the following [2] :
"In Oudtshoorn Municipality [3] (supra at 435F - I), it was held by this Court that the test of materiality is an objective one, to be determined by asking, upon a consideration of the relevant facts of the particular case, 'whether or not the...
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