Dealernet (Pty) Ltd v Mamahlodi (A3/2007) [2009] ZAGPPHC 177 (12 March 2009)

NOT

REPORTABLE

IN

THE HIGH COURT OF SOUTH AFRICA

(NORTH AND SOUTH GAUTENG HIGH COURT, PRETORIA)

CASE NO: A3/2007

DATE: 12/03/2009

In the matter between:

DEALERNET (PTY) LTD.....................................................................Appellant

And

MAMAHLODI MASHOLE JEREMIA …........................................Respondent

JUDGMENT

HARTZENBERG J et HASSIM AJ

[1] This appeal concerns the interpretation of section 7.4(a) and (b) of the Policy Holder Protection Rules (Short-Term Insurance) (referred to hereinafter as the “Protection Rules”) 20041, promulgated in terms of section 55 of the Short-Term Insurance Act, No. 53 of 19982. The Rules came into effect on 30 September 20043. The appellant maintains that the respondent was time barred by the time. 3 May 2006, when he issued summons. The General Terms and Conditions of the policy provide as follows in relation to the prescription of claims: “If we reject your claim, and you wish tot challenge our decision you must institute legal action and serve summons on us, within 90 days from the date we informed you that we are not entertaining your claim. If this is not done we are no longer liable in respect of the claim.” The appellant raised this defence by way of a special plea. The special plea was argued before the magistrate for a day. He dismissed the special plea and ordered that the costs thereof be costs in the cause. The unsuccessful appellant appeals against the dismissal of the special plea. The respondent noted a cross-appeal against the costs order.

[2] The relevant events that gave rise to the decision appealed against are as follows:

(a) The appellant indemnified the respondent in terms of an insurance policy against certain risks in respect of the respondent’s

motor vehicle.

(b) The policy provided that should the appellant reject a claim by the respondent and the respondent wishing to challenge the decision it had to institute legal action and serve the summons on the appellant within 90 days from the date on which the appellant informed the respondent that it was not prepared to entertain the claim.

(c) The relevant motor vehicle was involved in an accident on 14 January 2005 and was damaged.

(d) In a letter dated 5 December 2005 the appellant rejected the respondent’s claim for the damages it had suffered. The letter

stated that the claim details related to an incident that occurred on 13 October 20034 and that it came to the attention of the appellant that the respondent was probably under the influence of liquor at the relevant

time. It was alleged that the appellant was not obliged to entertain the respondent’s claim under those circumstances. It was then specifically stated that “the aforementioned reasons for rejecting your claim may not necessarily be exhaustive.”

(e) In response to that letter the respondent’s attorneys directed an e-mail to the appellant on 13 December 2005. They referred to an attached accident report and indicated that the Metro Police officer who attended at the scene confirmed that alcohol use by the respondent was not suspected. The message ends with a threat that unless it is confirmed within 10 days that the respondent’s

claim will be entertained a summons will be issued.

(f) On 9 January 2006 receipt of the e-mail message was acknowledged and the respondent was promised a detailed response.

(g) The detailed response was a letter dated 21 January 2006 in which it was stated that the appellant had two independent witnesses who would be able to testify that the respondent smelled strongly of alcohol and that a court could find on this issue on the probabilities. The respondent was invited to serve the summons on the appellant’s attorneys. The letterhead has on the top left hand side the letters ECA in big bold letters and directly beneath it in smaller letters “Electronic Claims Administration”. Further below it there is what presumably is, the registration number of a company. It reads “2002/021983/07 (PTY) Ltd” On the right hand side is written “DEAL SURE”. There is also an inscription “Administrators for”. The address is the post box in Randjiesfontein.

(h) On 26 January 2006 the respondent’s attorneys acknowledged receipt of the letter of 21 January and requested a copy of the Deal Sure policy and the respondent’s schedule of insurance.

(i) In a letter dated 2 February 2006 the respondent’s attorneys advised that they had instructions to proceed with summons. They enquired what entity “Deal Sure” was, and asked for a full description and the registration number. They indicated that there was no registered entity “Deal Sure” and indicated that there were three entities with the name “DealerNet. The penultimate paragraph consisted of an argument that the impact with the airbag may have over emphasized the smell on the plaintiffs

breath and expressed scepticism on the existence of two independent witnesses who had not been mentioned in the police report.

(j) On 10 April 2006 the respondent’s attorneys wrote “in a last attempt to settle this matter without the need to institute

legal action”. They refered to the hospital records and the fact that they made no mention of alcohol and argued that the

probabilities favoured the respondent's case.

(k) In a letter of 11 April 2006 the appellants’ attorneys restated their previous view and invited a summons.

(l) The summons was issued on 3 May 2006 and served upon the appellant on 8 May 2006.

[3] The respondent’s counsel maintains that the following dates are material for a understanding of the issues in this matter:

5 December 2005 - repudiation based on alleged intoxication.

21 January 2006 - repudiation of the representation of 13 December 2005

10 March 2006- 90 days after 5 December. (The correct date is 5 March)

21 April 2006- 90 days after the letter of 21 January.

8 May 2006- service of summons.

3 June 2006- 180 days after the letter of 5 December 2005.

10 March 2006

21 April 2006

[4] It is the appellant’s case that when the appellant rejected the representations of 13 December 2005 on 21 January' 2006 the purpose for which Regulation 7.4(a) and (b) has been promulgated was fulfilled and although it only happened 44 days after the letter of 13 December 2005, the further 46 days to make representations disappeared. The argument boils down to this: that representations had been made and had been rejected, and that there was accordingly no right to further representations. Mr. Clavier on behalf of the appellant had a further argument to the effect that the respondent’s conduct indicates a clear waiver of the respondent’s entitlement to a period of grace until 5 March 2006.

[5] It is evident that the Protection Rules were promulgated for the protection of policy holders. The heading to section 55 of Act 53 of 1998 reads “Protection of Policyholders”. It is clear that the section provides for the restriction of onerous clauses aimed at curtailing the rights of policy holders. Moreover section 7.4 of the protection rules clearly creates defences in favour of policy holders, against the time barring clauses in insurance contracts which defences they would not have had but for the promulgation of the Protection Rules. The section demands that inter alia the policy holder must be told that representations must be made to the insurer. The respondent was not alerted to this.

[6] Rule 7.4(a) is as clear as daylight that the period of 90 days may not be included in any time-barring period in the policy. No exception or shortening of the period is provided for. The intention of the provisions seems to be to protect policy holders from being caught by surprise with a claim by the insurer that they (the policy holders) have agreed to reduce the ordinary time period in respect of prescription of ordinary debts. In order to achieve that object, the Rules provide that not only must the insurer give clear reasons to the policy holder for repudiating the claim but in addition thereto it must alert the policy holder of its right to investigate the matter and submit representations to the insurer. Section 7.4(b) is cast in obligatory terms, it compels a broker or other representative to inform the policy holder exactly who the insurer is and what the insurer’s contact details are. The policy holder must be alerted to the fact that any recourse or enquiries must be directed directly to the insurer. This section must be read with section 7.4(a). In order for the policy holder to be able to exercise its right to make representations to the insurer, the identity of the insurer must be given to it.

[7] If a claim is rejected by an insurer but the notification to the policy holder does not comply with the provisions of section 7.4 of the Protection Rules we do not think that the insurer will ever be able to rely on the provisions of the time-barring clause before it rectifies its failure to comply therewith. It cannot be argued that the policy holder will be time barred after the period in the time-barring clause plus 90 days have expired because the policy holder was not properly informed of his right to make representations

directly to the insurer. That is an opportunity which section 7.4 guarantees to the policy holder. It seems to follow' that in such a case the ordinary time periods for the prescription of claims in terms of the Prescription Act will apply.

[8] Mr. Clavier’s argument is premised thereon that the notification complies with the provisions of section 7.4. Assuming that there was compliance with section 7.4 the argument places an onus on the policy holder to get all possible relevant information and arguments together and submit it to the insurer. Once the insurer rejects the representations the remainder of the 90 day period lapses and the time-barring period resumes. The flaw with the argument is that that is not what the Rule provides. The Rule emphatically allows the policy holder to make “representations” and there is nothing in the Rule which prohibits a policy holder from making further representations during the 90 day period after his first representations have been rejected. In our view the Rule is clear that a 90 day period is to be added to the time-barring period. There is no room for reducing that period

[9] The appellant's argument that the respondent waived its right to insist on the benefit of the 90 day period was not proceeded with in argument before us. Apart from the question whether the time period of 90 days in Rule 7.4 to make representations is susceptible to being reduced or abandoned by the policy holder factually there is not a single act by the respondent indicating an intention not to avail himself of the rights conferred upon him by the Rule. There are many pointers to the contrary. It is understandable therefore that the waiver argument was not proceeded with.

[10] The appellant’s fundamental problem is that the letter of 5 December 2005 did not comply with the requirements of Rule 7.4: In the first place it wrongly refers to an incident that occurred on 13 October 2003. The incident on which the respondent relies occurred on 14 January 2005. Secondly it is completely silent about the respondent’s right to make representations. As we read the Rule it is peremptory for an insurer to inform the policy holder of that right. Thirdly it is clear that the correspondence was not between the insurer and the policy holder. The respondent did not know who the insurer was. The letter of 2 February 2006 clearly shows the respondent’s predicament. In fact the respondent could not, before that letter, make representations to the insurer. There was therefore also in this respect no compliance with the requirements of the relevant Rule. The appeal cannot succeed.

[11] After the appellant had noted the appeal the respondent noted a cross-appeal against the magistratefs decision ordering the costs of the hearing of the special plea to be costs in the cause. It is the appellantfs attitude that a decision on costs is a matter within the discretion of the presiding officer and that he exercised his discretion judicially. The argument is that the cross-appeal is to be dismissed with costs

[12] The magistrate motivated his decision to make the costs, costs in the cause, as follows:

“However, the court ruled that costs he cost [sic] in the cause because an arguable point was raised by Defendant and this argument and judgment did in fact resolve one of the disputes in the action between the parties, furthering the action. ”

[13] It is of some importance that this case is not an out and out appeal only against an order of costs. The appeal was only brought as a cross-appeal, as Mr. Erasmus correctly points out, after the appellant had noted its appeal against the judgment. It was not

necessary for the appellant to appeal at this stage. Because it was of the view that the respondent’s claim cannot succeed, it could on the special plea being dismissed have proceeded immediately thereafter with the action and sought its dismissal. In such event it would have been entitled to the whole day’s costs. Mr. Clavier indicated that it is important for the appellant to have this point, raised in the special plea, decided on appeal and that that was the motivation for appealing and not finalizing the action.

[14] In our view the magistrate was wrong when he decided that as the point argued before him was argued for a day, that it was an “arguable point”. The appellant lost. Its argument was rejected. The result of his order will be that the respondent if it may lose the action would be liable to pay the appellant's costs for the special plea even though he successfully opposed it. This would mean that the appellant litigated a test case, lost it completely, yet gets from the successful respondent it’s costs for the abortive exercise. In our view the cross-appeal must succeed.

The following order is made:

1. The appeal against the dismissal of the defendant’s special plea is dismissed with costs.

2. The cross-appeal against the magistrate’s order that the costs in respect of the special plea are to be costs in the cause is upheld and the magistrate’s order is substituted with the following: "The defendant is ordered to pay the plaintiff's costs in respect of the special plea"

W J hartzenberg

JUDGE

OF THE HIGH COURT

I agree

S

K HASSIM

HEARD ON : 26 February 2009

ON

BEHALF OF THE APPELLANT

Counsel : E B CLAVIER

Instructed by : VFV MSELEKU ATTORNEYS

ON

BEHALF OF THE RESPONDENT

Counsel : F J ERASMUS

Instructed by : ADAM PRINSLOO ATTORNEYS

1 Published in Regulation Gazette No. 8069 of 30 September 2004 as Government Notice R1128 and in Gazette No.26853 "

2It reads: (a) An insurance party involved shall ensure that where any decision has been made as to the rejection of any claim under a policy or as regards the quantum of a claim which is in dispute, the policyholder concerned is in writing informed of the reasons for the decision and that the policyholder may within a period of not less than 90 (ninety) days after the date of the relevant decision make representations to the relevant insurer in respect of such decision. The 90 days referred to may not be included in any time barring-period contained in the policy for institution of legal action. (b) If a claim is rejected or a quantum, is disputed as contemplated in paragraph (a) on behalf of a short­term insurer by a person other than the short-term insurer, such other person must provide the rejection notice contemplated in that paragraph, provided that, that rejection notice must also contain the name and contact details of the insurer and states that any recourse or enquiries must be directed directly to that insurer. (My accentuation)

2It reads:

(a) An insurance party involved shall ensure that where any decision has been made as to the rejection of any claim under a policy or as regards the quantum of a claim which is in dispute, the policyholder concerned is in writing informed of the reasons for the decision and that the policyholder may within a period of not less than 90 (ninety) days after the date of the relevant decision make representations to the relevant insurer in respect of such decision. The 90 days referred to may not be included in any time barring-period contained in the policy for institution of legal action.

(b) If a claim is rejected or a quantum, is disputed as contemplated in paragraph (a) on behalf of a short­term insurer by a person other than the short-term insurer, such other person must provide the rejection notice contemplated in that paragraph, provided that, that rejection notice must also contain the name and contact details of the insurer and states that any recourse or enquiries must be directed directly to that insurer.

(My accentuation)

3 See the definition of “commencement date in section I and the fact that section 7.4 forms part of Part V “General Rules”, the operation of which has not been restricted, and the fact that previous Rules have been repealed in terms of section 10.1

4This date is clearly wrong.