IN THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG

HIGH COURT)

Case Number: 71146/10

In the matter between:

KING'S PROPERTY DEVELPOMENT (PTY) LTD t/a PLAINTIFF KING'S PROP

vs

REGENT INSURANCE COMPANY LTD

DEFENDANT

Coram: HUGHES J

JUDGMENT

Delivered on: 20 September 2013

Heard on: 23 April 2013

HUGHES J

On 24 May 2010 the plaintiff's premises at 8 Press Avenue, Crown Mines,

1.

Johannesburg ("the premises") were destroyed by fire. This action deals with
the plaintiff's claim against the defendant for payment of rental lost and the
costs of repairs to the plaintiff's premises. The parties have settled the issue
of quantum and/ or the quantum amount and the only issue to be determined
related to the liability.

The plaintiff claims as follows:

2.

1.

"Payment of the agreed amount of R9 031 717.50 and interest thereon

at 15.5% per annum from date of demand to date of payment in full in
respect of damages suffered as being the reasonable cost of repairs of a
building at 8 Press Street (or avenue), Crown Mines ("the premises")
which was insured by the defendant in respect of a building combined
insurance policy;

2.

Payment of the agreed amount of R1 111 800.00 and the said interest
thereon in respect of loss of rentals whilst the premises were tenantable
which was also insured by the defendant in terms of the aforesaid
buildings combined section of the policy."

3.

It is common cause that on 16 March 2010 the plaintiff and the defendant
entered into an insurance contract in terms of which the defendant undertook
to insure the premises of the plaintiff against risks numerated in policy
number IM3016620POL ("the policy").

4.

When the insurance contract was concluded the plaintiff was represented by
a broker, Stuart Riley ("Riley"), of Paradigm Asset Management CC. One of
the risks undertaken to cover the premises, under the buildings combined
section, included destruction of the premises by fire and, in addition, for
rental lost whilst untenantable.

5.

On 25 May 2010 a claim was lodged by the plaintiff as a result of destruction

by fire at the premises on 24 May 2010. The defendant, the insurer, on 14
June 2010 repudiated the plaintiff's claim on 14 June 2010. The letter of
repudiation reads:

"During the processing of the claim it came to our attention that we were not
advised of the tenancy of Elite Fibre at your premises situated at 8 Press
Avenue, Crown Mines, Johannesburg. Had we been advised of this and the
nature of their business, we would not have accepted this risk. Accordingly we
are voiding the cover for this property as from inception, being 15 March
2010."

6.

The defendant's repudiation is accordingly premised on the plaintiff's nondisclosure that they in fact did not occupy the premises, but that the
premises were occupied by Elite Fibre Gauteng CC ("Elite Fibre"), a tenant,
who operated a fibreglass operating plant. The defendant contends that they
were under the impression that the premises were occupied by Kings' Prop
and utilized for administrative offices. The latter had been cited as
conducting the business of "property developers/suppliers of bedding goods".
The impression was created by Riley, who disclosed this information to the
defendant representative, Guy Lewis ("Lewis"), was that it was insuring
offices.

7.

The defendant's case is that this is a material non-disclosure on the part of

the plaintiff as Elite Fibre conducted the business of manufacturing fibreglass
load bodies for heavy duty vehicles and utilised resin and fibreglass in their
manufacturing process which was highly inflammable material. It contended
that in essences these facts "materially affect the risk and value in respect of
the plaintiff's premises and the contract of insurance" and as such it would
not have assumed the risk had it been aware.

8.

It is prudent that some background information be provided to illustrate

where exactly the dispute emanates from. The premises have been insured
with the defendant since 17 May 2009 under

the fire section of the policy. However, on 25 March 2009 the premises were
then added under the building's combined section of the policy and on 19
October 2009 the premises were removed from the building's combined
section.

9.

It is common cause that by e-mail on 9 February 2010 Riley sought sort a

quote from Lewis for three properties; two properties in Sandton and the
other was for "office/warehouse in Crown Mines", which had been on the
policy. The latter was the premises in question. On 15 March 2010 the
premises were insured. On 16 March 2010 by e-mail Riley requested Lewis to
urgently arrange for a survey of the premises. On the very same day Lewis
requested of the defendant to conduct the urgent survey for "determination
of the relevant insurance risks pertaining to the premises". By 24 March 2010
when the premises were burnt the survey had not been conducted. The
defendant contended that a survey at the premises on an urgent basis was
no longer warranted at the office premises which it only became aware of on
16 March 2010.

10.

The evidence is that as far back as April 2008 the plaintiff had only one
policy, IM3016620POL, with the defendant. The premises had been insured
under that policy under various sections. With the exception of the premises
being removed from the policy for the

period 15 September 2009 to 14 March 2010, the premises were noted as the
risk address and the business description on the various schedules was
reflected as "property developers/suppliers of bedding goods".

11.

Various witnesses were called but I do not propose to go into their evidence
at length. Only the salient aspects of specific witnesses that affect the
determination of the issue materially will be addressed succinctly.

12.

Riley testified that on 9 February 2009, by e-mail, he requested a quote from

Lewis for three properties. In the e-mail he stated that the three properties
were offices in Sandton to the value of R165 million, a shopping centre in
Sandton for R255 million and an "office/warehouse" in Crown Mines, which
had been on the policy, for R15 million. Riley testified that he negotiated for
a better rate having regard to the sum to be insured as King's Prop Square
which was insured on the same policy for R214 million had a rate of 0.100%.
The contents of the e-mail for illustrative purpose is set out below:

"Tuesday, February 09, 2010 9:28AM Hi

Guy
I need a rate on the following buildings.
R165 000 000 Office in Santon
255 000 000 Shopping centre in Sandton

R15 000 000 Offices/warehouse in Crown Mines (we had this on the policy)
We had a rate of .150% but in view of the SI I think we need to review the rate
bearing in mind Kings Square has a rate of .100% based on a SI of R214 000
000.
Thanks Stuart
Riley"
13.

Both Riley and Lewis testified that Lewis had responded that as the

sum to be insured was huge they might have to go collective when

insuring the properties. Lewis testified that he awaited Riley's

response on going collective but none was forthcoming. Both

testified that the request died a natural death. Lewis's response is

documented as follows:

"09 February 2010 10:22AM Hi

Stuart
You will have to go collective on the 2 large accounts based on eml as
discussed telephonically. We prepared to look at a maximum 50% collective
policy subject to the survey's eml being 50%. We will not be able to go on risk
until both buildings are surveyed and the eml falls within our treaty limit as
discussed telephonically. Please advise your outcome with regards to
collective insurer. Regards Guy Lewis"

place. On the other hand Riley does not give testimony of this discussion but
testifies that on 16 March 2010, by e-mail, he instructed Lewis to place the
premises on the policy and added therein that "it is their offices". He also
sought that an urgent survey be done by Lewis of the premises.

15.

Lewis testified that he placed the premises on the policy at the rate of
0.100%. He testified that at the time he drew no link between the premises
sought to be insured in Riley's email of 9 February 2010 and the existing one
related to the premises. He confirmed that Riley had requested an urgent
survey on the very same day and he passed this request on to his back up
Ziaad Kyriakides. It is common cause that the envisaged survey was not
conducted.

16.

Riley testified that when he put through the instruction at the specific rate
(0.100%) Lewis did not make enquiries as regards where he got the rate from
or why was the rate low; he therefore assumed that Lewis had "tied the two
up with the quote and my instructions".

17.

Clause 1 of the General Conditions of the policy document which deal with
the aspect of non-disclosure reads as follows:

"1. Misrepresentation, misdescription and non-disclosure.

Misrepresentation, misdescription or non-disclosure in any material particular

shall render voidable the particular item, section or subsection of the policy,
as the case may be, affected by such misrepresentation, misdescription or
non-disclosure."

18.

It is trite that an insurer has the right to avoid a contract of insurance not
only if the proposer has misrepresented a material fact but if he has failed to
disclose one. In addition the burden of proving materiality is on the party
alleging

the

misrepresentation

or

non-disclosure.

See

Clifford

Commercial Union Insurance Co of SA Ltd 1998(4) SA 150(SCA) at

156E.

19.

Section 53 of the Short Term Insurance Act 53 of 1998, is the legislation that
dictates what nature of misrepresentation or material information not
disclosed would constitute a material nondisclosure. For easy reference I set
out the relevant section: Section 53 - Misrepresentation and failure to
disclose material information

"(l)(a) Notwithstanding anything to the contrary contained in a short-term

policy, whether entered into before or after the commencement of
this Act, but subject to subsection (2) -

(i)

The policy shall not be invalidated;

(ii)

The obligation of the short-term insurer thereunder shall not be

excluded or limited; and

(iii)

The obligations of the policyholder shall not be increased, on

account of any representation made to the insurer which is not
true, or failure to disclose information, whether or not the
representation or disclosure has been warranted to be true and
correct, unless the representation or non-disclosure is such as to
be likely to have materially affected the assessment of the risk
under the policy concerned at the time of its issue or at the time
of any renewal or variation thereof.

(b) The representation or non-disclosure shall be regarded as material if

a reasonable, prudent person would consider that the particular
information constituting the representation or which was not
disclosed, as the case may be, should have been correctly
disclosed to the short-term insurer so that the insurer could form
its own view as to the effect of such information on the
assessment of the relevant risk."

Boruchowitz J in Mahadeo v Direct Insurance Ltd 2008 (4) SA 80 at

para [17]and[18] on pages 86 and 87 sets out eloquently what the test is
to be applied to establish whether particular information ought to have been
disclosed.

"[17] The effect of the most recent amendment is to bring the law with
regard to positive representations into line with the law on nondisclosures. The statutory definition of materiality in s53 (1) (b) is
effectively

identical

to

that

adopted

in

the

President

Versekeringsmaatskappy Bpk v Trust Bank van Afrika Bpk en 7?

Ander 1989 (1) SA 208 (A) case (supra) in relation to the
common-law position. The test remains objective: The question
whether the particular information ought to have been disclosed
is judged not from the point of view of the insurer, or the insured,
but from the point of view of the notional, reasonable and
prudent person. The subjective test propounded in the Qilingeie v
South African Mutual Life Assurance Society 1993 (1) SA 69 (A)
case would appear to no longer apply. See in this regard the
discussion by Prof Sutherland in Annual Survey of South African
Law (2003) at 629-3-0.

[18]

Thus,

the

test

in

respect

of

both

positive

and

negative

misrepresentations is not whether the reasonable person would

have disclosed the fact in question, but whether the reasonable
person would have considered that fact reasonably relevant to
the risk and its assessment by an insurer."

21.

In this case it was correctly submitted by the defendant's counsel that the
disclosure of "offices/warehouse" made by the plaintiff was largely dependent
upon whether this court finds that Riley's e-mails of 9 February 2010 and 16
March 2010 can be read together and when Lewis received the e-mail of 16
March 2010 he should have realised that it referred to the same building
referred to in the e-mail of 9 February 2010.

22.

The defendant's counsel submitted that if one has regard to the plaintiff's
case on their own version they had not disclosed that a fibreglass
manufacturing warehouse or a warehouse containing inflammable goods was
sought to be insured at the premises. Thus on its own version the plaintiff did
not make the required disclosure for the defendant to form a proper view
concerning the assessment of the relevant risk.

23. The defendant contends that even if they linked up the two quotations the
fact that the plaintiff referred to an office/warehouse it would have assumed
that the warehouse contained bedding material as per the prior history on file
for these premises. On the other hand the plaintiff argues that the fire risk in
bedding supply warehouse is similar to a fibreglass

manufacturing warehouse. In other words the defendant would have insured

the fibreglass manufacturing warehouse had it known of the occupancy of
the warehouse and, consequently, such an omission is not material to the
assessment of the risk.

24.

The defendant submits that it was not afforded an opportunity of forming its
own view concerning the assessment of the risk and forming a view on
whether to insure or not and at what premium, as the true facts were not
disclosed. Further, that it was not afforded an opportunity of asking further
questions about the risk as they had not been informed that the premises
sought to be insured was a warehouse.

25.

The plaintiff contended that it had established, by virtue of the lower rate
that the premises were insured at, that it was clear that the determination
was made as a result of prior discussions between Riley and Lewis hence the
0.100% rate is indicative of the risk address and the building.

26.

The plaintiff argued that the disclosure of occupancy as set out in the email
of 9 February 2010 should have been linked by the defendant to the premises
and the email of 16 March 2010. It further argued, that Lewis had conceded
that had he gone into prior insurance schedules of the premises he could
have linked this up with the e-mail of 9 February 2010, without any difficulty.

Lewis also could not refute that he had had telephonic discussions with Riley
about the rate but persisted that he did not link the disclosure in the e-mail
of 9 February 2010 to the premises. The plaintiff contend that Lewis'
evidence is suspect.

The plaintiff argues that based on Lewis' evidence dealt with below, the

27.

estoppel plea has been established and as such the defendant should be
estopped from raising non-disclosure:

1.

That Lewis assured Riley that an urgent survey would be done at the
premises;

2.

Lewis did not revert to inform Riley that the survey would no longer be
conducted;

3.

Riley was lulled into the false sense of security that cover over the
premises was in place and paid the premiums for April and May;

4.

The truth being that the assurances were in fact false; had Riley been
advised that the survey would not be conducted urgently or at all he
could have taken his business elsewhere before the fire took place.

28.

The plaintiff submitted that in the alternative there was a waiver of the need
for further disclosures as the plaintiff had provided the defendant with

prior insurances of the premises, to place it (Regent) on enquiry. Thus the

defendant cannot now raise non-disclosure of facts which could have been
obtained had a survey been conducted after accepting a request for a survey
and the assurance that it would be done.

The e-mail of 9 February 2010 linked to the instruction given in the e-mail of
16 March 2010 .

The premises appears in both e-mails. In the email of 9 February 2010 it is

reflected as "R15 000.00 Offices/warehouse in Crown Mines (we had this on
the policy)" and the rate of 0.100% is reflected. In the e-mail of 16 March
2010 the plaintiff gives the details of the premises as "Risk address to 8
Press Ave Crown Mines JHB. This is their offices. R15 000.00 Rate .100%".

The enquiry is on an examination of both e-mails how can the defendant

contend that he did not link the two emails? It is evident that there are far
too many similarities in both e-mails of references to the premises sought to
be insured. For example the value of the property, the location and the rate
proposed. Any reasonable person would have made the necessary link. Thus
Lewis' evidence that he did not make the link must be rejected as not being
reasonable.

Would the information not disclosed, as alleged bv the defendant, materially

affected the defendant's assessment of the risk?

The defendant had previously insured the premises and had information
regarding the premises on file. The information on file was that of an
"offices/warehouse" and "property developers/suppliers of bedding goods".
The fact that the premises were now being used for the purpose of a
fibreglass manufacturing warehouse, to me, is material information that the
defendant would have required to assess the risk. However, the defendant's
conduct when it chose to cover the plaintiff needs to be examined to
determine if indeed the defendant did enough before providing cover to the
plaintiff, in light of the facts and the knowledge that the defendant had at its
disposal. The parties had been engaged in negotiation as regards cover over
the said premises and other premises from as far back as 9 February 2010.
The premises in question appeared on the e-mail of 9 February 2010. On 16
March 2010, when the plaintiff sought cover, the plaintiff requested that the
defendant conduct an urgent survey of the premises.

To my mind the defendant at that stage already had the prior history of the
premises on its records. The defendant's Lewis gave evidence that it was not
difficult for the defendant to have accessed that information. The warning
bells should have been ringing because of the information "warehouse and
suppliers of bedding goods". These two aspects would have confirmed the

plaintiff's request for an urgent survey and it would have alluded to the risk
likely to be assessed.

31.

In the circumstances , the plaintiff rightly submitted that the defendant should
be estopped from raising non-disclosure because:

1.

Lewis assured Riley, on 16 March 2010, that an urgent survey would be

done at the premises;

2.

Lewis did not revert nor inform Riley that the urgent survey would no
longer be conducted;

3.

Riley was justified in accepting that the survey had been done and was
lulled into a false sense of security that insurance cover over the
premises was in place and paid the premiums for April and May;

4.

The assurances were in fact misleadingas the survey had never been
done by the time the fire took place;

5.

Had the plaintiff been advised that the survey would not be conducted
urgently or at all he could have taken his business elsewhere before the
fire disaster struck.

32.

I agree with the plaintiff that the aforesaid concessions establish estoppel,
which was pleaded in the plaintiff replication. The defendant is resultantly

non-disclosure in respect of such matters that the survey would have

revealed.

The order I make is as follows:

1.

The defendant is held liable to the plaintiff in terms of the policy;

2.

The defendant is ordered to pay the plaintiff the amount of R9 031

317,50 in respect of costs of repair of the building at 8 Press
Avenue, Crown Mines, together with interest thereon at the rate of
15,5% per annum from 14 June 2010 to date of final payment;

3.

The defendant is ordered to pay the plaintiff the amount of R1 111

800,00 in respect of loss of rental, together with interest thereon at
the rate of 15,5% per annum from date of summons to date of final
payment;

4.

Costs of suit, which costs shall include:

a)

The costs of the hearing during September 2012

b)

The costs of transcription of such proceedings;

c)

The costs of the hearing in this Court.

W. Hughes Judge of the High Court

Delivered on: 20 September 2013

Heard on: 23 April 2013

Attorney for the Plaintiff:

SAVAGE JOOSTE & ADAMS 141 Boshoff

Street Docex 58 Pretoria

Tel: 012 452 8200

Ref: M Haasbroek/gk/MHC57

Attorney for the Defendant:

COUZYNS INC c/o Sanet de Lange 1 Ox

Street Pretoria

Tel: 012 362 3970 Ref: SA 5165