THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number: 243/06
Reportable

In the matter between:

MUTUAL & FEDERAL
INSURANCE CO LTD
APPELLANT

and

JAF DA COSTA
RESPONDENT

CORAM:
FARLAM, LEWIS et MLAMBO JJA

HEARD:
5 MAY 2007

DELIVERED: 6 JUNE 2007

SUMMARY:
Insurance – misdescription of year and model of motor vehicle –
whether material – whether best evidence led on quantum of indemnification.

Neutral citation: This judgment may be referred to as  Mutual & Federal v Da Costa
[2007] SCA 89 (RSA).

________________________________________________________

FARLAM JA

[1] The respondent in this matter, a Pretoria businessman, who is a
partner in a firm of panelbeaters, sued the appellant, an insurance company,
in the Pretoria magistrate’s court for indemnification in respect of damage
caused to a motor vehicle which, the respondent contended, was covered
under an insurance policy issued by the appellant. His action was successful,
the trial court granting judgment in his favour in an amount of R48 050, with
interest from 24 July 1996 (the date the appellant repudiated liability in
respect of the claim) and costs.

[2] The appellant’s appeal against this judgment was dismissed on 15
November 2005 by De Vos and Legodi JJ, sitting in the Pretoria High Court,
and it appeals to this court with the leave of the court a quo.

[3] In argument before us counsel for the appellant raised three points in
support of the appeal, viz:
(1)
the respondent had not proved what he called ‘the insured event’
(damage to a vehicle in an alleged collision);
(2)
the respondent had not proved that the vehicle in respect of which he
had claimed was in fact a vehicle insured in terms of the insurance policy
issued to him by the appellant; and
(3)
that, if he had proved ‘the insured event’ and that the claim was
brought in respect of a vehicle insured under the policy, the quantum of his
damages had not been proved.

[4] It was common cause at the trial that from about June 1991 an
agreement of insurance (which I shall call in what follows ‘the policy’) existed
between the appellant and the respondent in terms of which a number of
motor vehicles belonging to the respondent were insured. From time to time
this policy was amended by the addition or removal of motor vehicles as they
were acquired or disposed of by the respondent.

[5] In January 1996 the respondent acquired a further vehicle from the
brother of one of his employees by exchanging it for a Porsche. The
respondent was under the impression that this vehicle was a 1991 model

Mercedes Benz 230E. It was duly added to the list of vehicles covered by the
policy and was described as a 1991 model Mercedes Benz 230E. The
registration number was originally recorded by the appellant as TBA 111 but it
appeared from the evidence that this was what might be described as a
temporary description because the correct number was not at that stage
known. ‘TBA’ standing for ‘to be advised’.

[6] The respondent testified that at the relevant time he only owned one
Mercedes Benz, namely the vehicle in question. Its registration number was
PNH 609 T, which was the number found on the vehicle inspected by the
appellant’s assessor during his investigations pursuant to the respondent’s
claim. It was also indicated on the licence disc found by the assessor on the
vehicle.

[7] It was clear on the evidence that the parties intended the addition
relating to the Mercedes Benz to which I have referred to apply to the vehicle
which the respondent had recently acquired and which he wanted to have
added to the cover under the policy.

[8] Although the respondent was, as I have said, under the impression that
the vehicle he had acquired was as described in the list of vehicles covered
by the policy, it was in fact, as the magistrate found, a built-up vehicle, being a
combination of a 1988 200 and a 1990 230 Mercedes Benz. The appellant
contended that it was only liable under the policy in respect of a car answering
to the description contained therein and no other. It contended further that the
description of the vehicle amounted to a warranty which had been breached.
The difficulty I have with this contention is that the appellant never raised a
breach of warranty as a defence in its plea. It relied instead on denials, most
of which were not persisted in at the trial, and a series of defences based on
the fact that the vehicle in question was a built-up vehicle, combining a
Mercedes Benz 200 model body and a Mercedes Benz 230E model engine,
which it stated entitled it to avoid the agreement between the parties on the
basis of material misrepresentation, alternatively non-disclosure on the part of
the respondent. It specifically pleaded that the facts on which it relied were

material to its decision to insure the vehicle, alternatively to the terms on
which it was to be insured. In the circumstances I do not think that the
appellant should be permitted to raise the defence of breach of warranty. (On
this aspect of the case I do not think that the ‘indulgent approach’ to the
pleadings adopted in Labuschagne v Fedgen Insurance Ltd 1994 (2) SA 228
(W) at 237, on which reliance was placed, can be supported.)

[9] In regard to the issue as to whether the defence based on
misrepresentation or non-disclosure can be upheld, the question to be
considered at the outset is whether the appellant proved the allegation in its
plea that the facts it relied on were material. It led no evidence in support of
this allegation and, as the magistrate found, it did not prove it. Counsel for the
appellant contended, however, that evidence on this point was unnecessary.
He relied on Labuschagne v Fedgen Insurance Ltd, supra, at 238D-G. That
case concerned a 1986 Mercedes Benz motor car which was represented to
an insurer in 1989 as being a new motor car. It appears from the reported
judgment (at 238D) that in that case the insurer undertook to replace the
insured vehicle with a brand new vehicle. The court found (at 238F-G) (and
counsel for the appellant in this case relied on this finding), that ‘the
description of the year of manufacture or model year and the age of a motor
vehicle are material aspects of the description of the risk which the insurer is
assuming’. It referred to an English case decided in 1924, Santer v Poland
[1924] 19 Ll LR 29 KB, where the year of manufacture of the vehicle in
question was given as 1918 whereas the correct date was 1916. In that case
no reasoned judgment was given. It appears from the report that after some
evidence had been led (the nature of which does not appear) the judge said to
the plaintiff’s counsel that he could not do anything for him, whereupon he
gave judgment for the defendant underwriters, having said that he was sorry
that the plaintiff had not accepted the amount offered to him, which the
underwriters might still give him, which they did. The case cannot on the facts
reported be regarded as authority for the proposition that without any
evidence on materiality a court can assume that a misstatement as to the year
of manufacture of a motor vehicle is per se to be regarded as material.

[10] It is true that in some cases a conceded or misstated fact will be held to
be material without any evidence having been led on the point. But this is
where, as it was put in Fire v The General Accident, Fire and Life Assurance
Corporation Ltd 1915 AD 213 at 220, ‘the fact speaks for itself’. That case
concerned the failure by an applicant for fire insurance to inform the insurer
that a policy on the same property had been cancelled by another insurer
before the expiration of the term on return of the rateable proportion of the
premium for the unexpired term. Solomon JA said (at 221) that the true test
for materiality appeared to be: ‘would a reasonable man consider that the fact
was one material to be known by the insurer or a fact that in the words of Lord
Blackburn “might influence the underwriter’s opinion as to the risk he is
incurring”.’ He continued: ‘And if that be the test, can there be any doubt that
a reasonable man would consider the fact, that there had been a cancellation
of a previous contract, material, unless at the same time a satisfactory
explanation had been given of that fact.’

[11] I do not think that one can say, without any evidence having been led
on the point, that the fact with which we are presently concerned ‘speaks for
itself’. I see in this regard that according to John Alan Appleman and Jean
Appleman, Insurance Law and Practice, revised volume 4A, 1969, section
2630, it was held in what were described as ‘older cases’ that
‘a misrepresentation as to the year of manufacture of the insured automobile or the model is
material to the risk and will relieve the insurer of all liability, even though the insured may
have acted in the highest good faith, and the representation was innocently made.’
Appleman points out, however, that other states ‘have refused to regard such
a matter as material particularly where no inquiry as to model year had been
made, no intent to deceive was shown, or the value of the vehicle was
approximately that represented.’

He refers (in footnote 43) to a Texan decision St Paul Fire & Marine Ins. Co v
Huff. Tex Civ App 1915, 172 SW 755 at 756, where the following was said:
‘If the fact untruly represented was something not found to be material to the risk, then the
policy should not be avoided. Generally stated, a fact would be material to the insurance risk
which would induce the insurance company to decline the insurance altogether, or not to
accept it unless at a higher premium. Taking this as a fair test, in a general way, of the

materiality of a fact in regard to insurance, it is believed that reasonably careful and intelligent
men might have regarded the answers complained of as facts not materially affecting the
insurance contract.’

Appleman continues:
‘The strict result was undoubtedly justified in the early development of automobile insurance
law, when the rate fluctuated violently depending on the age of the car both as to liability and
property coverages, and valued form policies were in vogue. Now, when the liability rate is
constant regardless of the make or age of the car, that can be no factor. And since actual
value policies have superseded valued form contracts almost without exception, the only
effect of representing the car to be newer than it is would be to require the insured to pay a
higher premium than he would otherwise have to pay. In the event of loss, he would receive
no more than had the year been correctly stated. Since the insured could never profit by such
a misrepresentation, and might actually penalize himself by so doing, there is no longer any
sound reason for the courts to add additional penalties.’

It is not necessary to decide whether this passage of Appleman correctly
states our law on the point. What it does do is to provide support for the view
that evidence of materiality is required in a case such as this.

[12] In the circumstances of the present case, in the absence of evidence
indicating that a reasonable insurer in the position of the appellant, if it had
known the true facts, would have refused to extend the cover of the
respondent’s policy to the vehicle presently under consideration or would
have only accepted it at a higher premium, I do not think we can hold that the
misrepresentation relied on was material. It follows that the first point argued
on behalf of the appellant cannot be upheld.

[13] I am also of the view that there is nothing in the second appellant’s
second point, that the respondent had not proved what it referred to as the
insured event. On this aspect of the case the appellant’s counsel submitted
that the respondent had not proved the collision which allegedly gave rise to
the loss. He pointed out that the respondent only testified that he had heard
from his partner, José Ferreira (who had taken his car home on the evening of
15 February 1996 and was to bring it back the next morning), that he had
been involved in a collision and that Ferreira himself had not been called as a

witness, although he was available. Counsel submitted further that the
respondent had failed to prove the time, place and manner in which the
damage arose so as to put himself within the four corners of the policy.

[14] The cover provided by the policy was in respect of loss of or damage to
the vehicles covered thereby: it was not limited to damage caused in a
collision. Although respondent did not have to prove that the vehicle was
involved in a collision, in my opinion he succeeded in doing so, at least on a
prima facie basis. The expert whom he called, Mr van Rooyen, who had
examined the vehicle at the appellant’s request, stated that it appeared to him
that the vehicle had been involved in a collision.

[15] Counsel for the appellant advanced two further submissions on this
part of the case. The first was that the respondent had to prove that the
vehicle was damaged within the territory referred to in clause 3.1.1 of the
policy, which provided that the insurer would not be liable for loss sustained or
damage caused beyond the territorial boundaries of the Republic, Namibia,
Botswana, Lesotho, Zimbabwe and Swaziland. The evidence was that
Ferreira took the vehicle from the workshop of the partnership in Pretoria
West. The next day the respondent had the vehicle fetched from the police
pound and taken back to the partnership’s workshop where he looked at it
and concluded that it was not financially viable to repair it. It is accordingly
clear that it must have been damaged in or near Pretoria, in the territory
covered by clause 3.1.1 of the policy.

[16] The appellant’s counsel’s second submission on this part of the case
was that the respondent had to fail because he failed to prove that the
damage to the vehicle was not caused by political unrest. Clause 13.4, the
provision excluding liability on the part of the insurer if the insured property
was destroyed or damaged and such destruction or damage was caused by
or occurred in connection with various forms of political unrest listed in the
policy, was described as an exclusion and followed immediately on exclusions
of liability in respect of any claim which was in any respect fraudulent or in
respect of loss, damage or physical injury which was deliberately caused by

the policy holder or anyone acting in collusion with him. At the end of clause
13.4 it was specifically provided that if the insurer alleged on the basis of the
exclusions set out in the sub-clause that the destruction or damage or
physical injury was not covered by the policy then the onus would rest on the
policyholder to prove the contrary. It is clear in my opinion that until the insurer
pleaded that the circumstances giving rise to the claim were covered by one
or other of the forms of disturbance set out in the sub-clause it was not
incumbent on the insured to prove that they did not exist.

[17] In the circumstances I am satisfied that a proper construction of the
relevant clause in the policy exclusion must first be raised as a defence by the
insurer in its plea before it becomes incumbent on the insured  to prove that
on the facts of the particular case it does not apply.

[18] I turn now to consider the appellant’s contention that the respondent
did not prove the quantum of the indemnification to which he was entitled. In
this regard the appellant’s counsel argued that the respondent did not present
any evidence to the effect that the vehicle had been damaged beyond
economic repair. I do not think that this argument can be accepted. The
respondent’s witness, Mr Scrimgeour, who saw the vehicle both before and
after it was damaged stated in his expert’s report, which he confirmed in his
evidence, that he was of the opinion that as a result of the damage sustained
by the vehicle it was uneconomical to repair the vehicle. This evidence was
not challenged in cross-examination.

[19] Counsel for the appellant also argued that the pre-collision value of the
vehicle had not been established and the magistrate had erred in adopting the
robust approach to the assessment of quantum set out in such cases as
Hersman v Shapiro & Co 1926 TPD 367 and approved by this court on
numerous occasions: see, eg, Esso Standard SA (Pty) Ltd v Katz 1981 (1) SA
964 (A) and Southern Insurance Association Ltd v Bailey NO 1984 (1) SA 98
(A).

[20] The robust approach set out in Hersman v Shapiro by Stratford J, with

whom Tindall J concurred, (at 379-380) is this:
‘Monetary damage having been suffered, it is necessary for the Court to assess the amount
and make the best use it can of the evidence before it. There are cases where the
assessment by the Court is very little more than an estimate; but even so, if it is certain that
pecuniary damage has been suffered, the Court is bound to award damages. It is not so
bound in the case where evidence is available to the plaintiff which he has not produced; in
those circumstances the Court is justified in giving, and does give, absolution from the
instance. But where the best evidence available has been produced, though it is not entirely
of a conclusive character and does not permit of a mathematical calculation of the damages
suffered, still, if it is the best evidence available, the Court must use it and arrive at a
conclusion based upon it. (The emphasis is mine.)

[21] Counsel submitted that the robust approach should not have been
adopted because, as he put it, ‘good evidence to prove the actual damages
was readily available but not adduced’.
[22] Counsel’s main point in this regard was that the pre-collision value of
the vehicle could have been established by proving the market value of a
1988 200 Mercedes Benz at the relevant time by reference to an information
system used by the motor industry. The system indicates the trade and retail
prices of second hand vehicles of specified models and years of manufacture.
It was argued that from the market value indicated by the system there had to
be deducted an amount estimated by expert evidence because the vehicle
was rebuilt.

[23] I do not think that this submission is correct. The vehicle in question
consisted of the engine from a 1988 200 model Mercedes Benz, the body
from a 1990 230E model Mercedes Benz and what was described as an AMG
kit comprising non-standard bumpers, grilles, interior trim, door panels, seats
and a steering wheel. The AMG kit which had been fitted to the vehicle was
worth at least R62 000. Mr Scrimgeour said that a purchaser who purchased
a rebuilt vehicle would reduce the price he was prepared to pay by
approximately R20 000 to take into account the fact that the vehicle was a
rebuilt model. He stated that when he saw the vehicle before it was damaged
he formed the impression that it was a 1991 model with an AMG kit. (The
body of a 1988 model is the same shape as that of a 1991 model, the only

difference between the two models being the outside trimmings and interior
appointments.) He took the value of a 1991 model from the trade publication
to which I have referred, deducted R20 000 from it because the vehicle was
rebuilt and arrived at a figure of R69 000. He was criticised in cross-
examination because, as it was put to him, he was dealing with a 1988 200
model, fitted with an AMG kit and a 230 E engine and he agreed with the
proposition that his estimation of the vehicle’s value was, as it was put, ‘in
pieces’.

[24] In my opinion the magistrate was correct in adopting a robust approach
to the assessment of the value of the vehicle. Counsel for the appellant
contended that she should not have done so because the best evidence
available had not been adduced. In this connection it was argued that the
market value of a 1988 200 model Mercedes Benz at the relevant time should
have been proved by reference to the publication to which I have referred. I
do not agree that that would have been the ‘best evidence’. What had to be
valued was a vehicle built up in the way set out above. The value of such a
vehicle was not dealt with in the publication referred to. Indeed when it was
pertinently put to Mr Scrimgeour in re-examination that the vehicle comprised
the components which went into the rebuilt vehicle and he was asked to put a
value on it he said he could not.

[25] In the circumstances the magistrate in my view was entitled to adopt
the approach that the best estimate of the value of the vehicle on the material
before her be accepted. That estimate took into account the fact that the
vehicle was rebuilt, and that it was less than the amount for which the vehicle
was insured.

The following order is made:
The appeal is dismissed with costs.

……………..
IG FARLAM
JUDGE OF APPEAL

CONCURRING
LEWIS
JA
MLAMBO
JA
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM:
The Registrar, Supreme Court of Appeal

DATE:
6 JUNE 2007

STATUS:
Immediate

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

The Supreme Court of Appeal today dismissed an appeal brought by Mutual and
Federal Insurance Co Ltd against a judgment given in the Pretoria Magistrate’s Court
(and affirmed on appeal in the Pretoria High Court) upholding an insurance claim
brought by a Gauteng businessman, Mr JAF da Costa.

Mr Da Costa’s claim related to a Mercedes Benz vehicle which had been rebuilt using
the body of a 1988 200 Mercedes Benz, the engine of a 1990 230 Mercedes Benz and
an AMG kit comprising non-standard bumpers, grilles, interior trim door panels, seats
and a steering wheel. This kit was on the evidence worth at least R62 000. The
Supreme Court of Appeal held that in the circumstances the magistrate’s finding that
the vehicle which was damaged beyond economic repair, was worth at least R69 000
could not be interfered with.

The appellant’s contention that there had been a material misrepresentation of fact
because the vehicle had been described as a 1991 Mercedes Benz 230 E was rejected
because no evidence had been led to show that the misrepresentation, which was
innocently made, was material.