THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case
No:
1147/2017

In the matter between:

PROPELL SPECIALISED FINANCE (PTY) LTD

APPELLANT
and

ATTORNEYS INSURANCE INDEMNITY FUND NPC

RESPONDENT

Neutral citation:
Propell Specialised Finance v Attorneys Insurance Indemnity
Fund NPC (1147/2017) [2018] ZASCA 142 (28 September 2018)

Coram:

Lewis, Saldulker, Zondi and Mathopo JJA and Mokgohloa AJA

Heard:

13 September 2018

Delivered:
28 September 2018
Summary:
Insurance contract – whether indemnification rights under the Policy
providing cover for a specific class of professionals, is cedable – agreement to cede
rights under the Policy without the consent of the insurer is invalid ─ the nature of

contractual relationship between the parties involves a delectus personae and the
adverse effect the cession will have on the insurer.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Dlodlo J
sitting as court of first instance): judgment reported sub nom Propell Specialised
Finance (Pty) Ltd v Attorneys Insurance Indemnity Fund & others NPC [2017] 3 All
SA 1005 (WCC).
The appeal is dismissed with costs.
__________________________________________________________________

JUDGMENT
___________________________________________________________________
Zondi JA (Lewis, Saldulker and Mathopo JJA and Mokgohloa AJA concurring)

[1] The issue in this appeal is whether the rights of indemnification held by
Buurman Stemela Lubbe Incorporated (BSL), a law firm, under the professional
indemnity insurance contract (the Policy) issued by the respondent, Attorneys
Insurance Indemnity Fund NPC (Attorneys Insurance) are cedable. The Western
Cape Division of the High Court, Cape Town (the high court) (Dlodlo J) held that they
are not. It dismissed the action brought by the appellant, Propell Specialised Finance
(Pty) Ltd, formerly Baedex (Propell), for lack of locus standi on the basis that a
cession on which it relied for its cause of action, was invalid, but granted Propell
leave to appeal to this court.

[2] During the period April 2010 and April 2011 Propell, a private company
carrying on a moneylending business instituted six separate actions in the
magistrate’s court against BSL, arising from a number of bridging finance
transactions. In terms of these bridging finance transactions, Propell lent and
advanced to certain clients of BSL monies against funds accruing to BSL’s clients

from certain property transactions. Propell paid the loan amounts into BSL’s trust
account. BSL undertook to repay to Propell such loans from the proceeds of the
property transactions. BSL failed to make payment as undertaken because Mr
Buurman and/or BSL’s employee, Ms van der Merwe misappropriated the proceeds
of the property transactions.

[3] BSL
notified
Attorneys
Insurance
of
Propell’s
claims
and
sought
indemnification from it under the Policy. Attorneys Insurance repudiated liability in
respect of Propell’s claims on the ground that the money that was paid into BSL’s
trust account was entrusted to it as contemplated by s 26 of the Attorneys Act 53 of
19791 and the loss that Propell suffered was a loss that is excluded in terms of clause
5.1.52 of the Policy.

[4] In the meantime BSL instituted an action in the North Gauteng High Court
against its auditors, Ashton CA SA Group (Ashtons) and its directors for damages
arising from Ashtons’ failure to detect and prevent misappropriation of trust moneys
by Mr Buurman and/or Van der Merwe.

[5] Following repudiation by Attorneys Insurance of Propell’s claims, BSL on 6
September 2012, instead of suing Attorneys Insurance for specific performance,

1 Section 26(1) provides:
‘Subject to the provisions of this Act, the fund shall be applied for the purpose of reimbursing persons
who may suffer pecuniary loss as a result of─
(a)
theft committed by a practising practitioner, his or her candidate attorney or his or her
employee, of any money or other property entrusted by or on behalf of such persons to him or
her or to his or her candidate attorney or employee in the course of his or her practice or while
acting as executor or administrator in the estate of a deceased person or as a trustee in an
insolvent estate or in any other similar capacity; and
(b)
theft of money or other property entrusted to an employee referred to in paragraph (cA) of the
definition of “estate agent” in section 1 of the Estate Agents Act, 1976 (Act No.112 of 1976), or
an attorney or candidate attorney referred to in paragraph (d) of the said definition, and which
has been committed by any such person under the circumstances contemplated in those
paragraphs, respectively, and in the course of the performance─
(i)
in the case of such an employee, of an act contemplated in the said paragraph (cA);
and
(ii)
in the case of such an attorney or candidate attorney, of an act contemplated, subject
to the proviso thereof, in the said paragraph (d).
2 ‘5.1
Unless specifically stated to the contrary this policy does not cover any loss, destruction or
damage whatsoever or any legal liability of whatever nature:
. . . .
5.1.5
arising from theft by any principal, partner, director, candidate attorney, employees or “in-
house” consultant of the insured or of the insured’s predecessors in practice of any money or
other property referred to in Section 26 of the Act.’

purportedly ceded to Propell its indemnification rights against Attorneys Insurance
under the Policy. The agreement embodying the cession was entered into without
Attorneys Insurance’s consent. The agreement in its relevant parts read:
‘PREAMBLE
WHEREAS Baedex  has instituted a number of claims against BSL, Lubbe, Stemela and one
EVERT GERRIT BUURMAN (“BUURMAN”) jointly and severally, the one paying the other to
be absolved, arising from a number of “bridging transactions” where;
[a]
Baedex lent and advanced to certain clients of BSL monies (“the loans”) against
funds accruing to such clients from certain property transactions; and
[b]
BSL had undertaken, in writing, to repay to Baedex such loans from the proceeds of
the property transactions; and
[c]
BSL failed to make payment in terms of the written undertakings; and
[d]
Buurman and/or BSL’s employee, van der Merwe, had misappropriated the proceeds
of the property transactions, or had stolen the loan amounts, or failed to make
payment to Baedex and
WHEREAS neither Baedex, Stemela and/nor Lubbe had been aware of the theft and
misappropriation, or the omission as referred to above and
WHEREAS BSL has suffered a loss caused by the aforesaid misappropriation or omission
referred to above and is liable to Baedex for such funds that Baedex had lost by the
aforesaid misappropriation and/or omission, and
WHEREAS BSL is in the process of instituting an action against its accountants ASHTON
CA SA GROUP and three of its partners (“ASHTONS”) for damages arising from the
inadequate auditing of BSL’s books of account which inadequate auditing BSL contends was
the direct cause or foreseeable cause of the loss suffered by BSL and consequently, the loss
suffered by Baedex.
. . . .
ABANDONMENT OF CLAIMS AND PENDING LITIGATION
11.
Baedex hereby irrevocably abandons all and every claim that it may have against
Lubbe and/or Stemela arising from any cause of action whatsoever, but in particular
arising from their joint and several liability with BSL in respect of the claims that
Baedex has instituted against BSL and referred to above.

12.
The pending litigation between Baedex and BSL will be suspended with all further
steps in the litigation suspended, until the litigation between BSL and Ashtons has
been finally resolved or if BSL abandons its claim against Ashtons or fails to pursue
the claim with diligence. It is agreed that each party will be liable for its own costs
caused by such suspension.
CESSION AND ASSIGNMENT
13.
In the event of BSL resolving to abandon its claim against Ashtons or failing to pursue
the claim with due diligence and care, BSL undertakes to forthwith cede its rights
under the claim to Baedex. Baedex may then pursue the claim for its own benefit and
at its own cost.
14.
BSL hereby cedes makes over and assigns to Baedex any claim that BSL may have
against Glen Rand Insurance Company or its successor in title [Attorneys Insurance]
on the following terms and conditions:
14.1
Baedex may not institute any action while the litigation between BSL and
Ashtons is in progress unless the action is instituted to prevent the claims
becoming prescribed.
14.2
BSL does not guarantee or warrant that it has any claim to cede and assign in
terms of this cession and the sole risk of instituting any such claim rests on
Baedex.
14.3
The cost of any proposed action to be instituted by Baedex in terms of cession
will be for the account of Baedex and Baedex hereby indemnifies BSL against
all claims that may arise from this cession.
15.
Lubbe and/or Stemela undertake not to take any steps to wind up or deregister BSL
while the litigation with Ashtons or Glen Rand is pending.’

[6] Armed with the cession, Propell on 14 October 2013 instituted action against
Attorneys Insurance in the high court as cessionary of BSL’s claims against Attorneys
Insurance under the Policy.

[7] Attorneys Insurance defended the action and raised three special pleas. It
contended first, that two of Propell’s six claims had prescribed. This special plea was
subsequently withdrawn by Attorneys Insurance. Secondly, Attorneys Insurance

contended that Propell lacked locus standi to sue it on the ground that the cession on
which it was relying to assert its claims, was invalid. Attorneys Insurance relied on
clauses 6.6 and 6.8 of the Policy in support of this contention. Thirdly, Attorneys
Insurance contended that the proceedings had to be stayed pending the finalisation
of BSL’s claims against Ashtons.

[8] Attorneys Insurance argued that the purported cession on which Propell relied,
was invalid as BSL’s rights of recourse and/or claims against it arising out of the
Policy are not capable of being ceded and that, for that reason Propell lacked locus
standi to sue it. The grounds upon which that contention is based are pleaded as
follows:
‘2.1
Cession of the insured’s rights of recourse and/or claims in terms of the contract of
insurance is per se a contravention of the provisions of clause 6.6 of the contract of
insurance, inter alia because it appears ex facie the Memorandum of Agreement
relied upon by Plaintiff, that the insured, i.e. Second Defendant not only admitted
liability but also without the written consent of the insurer negotiated in connection
with the claim of the Plaintiff.
2.2
Due to the sui generis identity of the insurer, and insured involved inclusive of the sui
generis relationship between them and due to the sui generis origin, nature and
extent of the insurance contract and related legislation, the rights of recourse and/or
claims of the insured are not legally susceptible to and/or capable of being ceded
and/or intended to be capable of being ceded.
2.3
Cession of the insured’s rights of recourse and/or claims in terms of the insurance
contract create conflict of interest on the part of the insured that give rise to a breach
and/or contravention and/or a violation of the provisions of the contract of insurance,
for example inter alia the contravention and/or violation of the insurer’s rights in terms
of clause 6.6 of the contract.
2.4
It is implied from the sui generis nature of the contract of insurance and the
surrounding circumstances applicable to claims in terms of the particular contract of
insurance, that the insured’s rights of recourse and/or claims in terms of the insurance
contract cannot be ceded without the consent of the debtor, i.e. the insurer.

2.5
As a matter of principle, cession of the insured’s right of recourse and/or claims in
terms of the contract of insurance give rise to the weakening of the insurer’s position
and/or renders it more onerous.
3.
In addition to the content of paragraph 2 supra, clause 6.8 of the insurance contract entered
into between the Second Defendant and First Defendant stipulates that:
“Unless otherwise expressly stated nothing contained in this policy shall give any rights
against the insurer (a reference to First Defendant) to any person other than the insured (a
reference to Second Defendant).”
4.
Properly construed and specifically taking into consideration the identity of the parties to the
insurance contract, and the specific nature, aim and extent of the insurance policy, clause
6.8 thereof should be interpreted as an out and out prohibition against alienation and/or
cession.’

[9] At the commencement of the trial the parties asked the high court to order a
separation of issues. In terms of the separation order, the trial proceeded only in
respect of the two remaining special pleas. The remaining issues concerning
Propell’s damages claims stood over for later determination.

[10] For the purposes of determining the issue regarding Propell’s locus standi and
the validity of the cession agreement on which Propell relied, Attorneys Insurance
relied on the evidence of its General Manager, Mr Thomas Harban.

[11] The high court upheld Attorneys Insurance’s plea that the cession by BSL of
its rights to Propell was not valid in law and dismissed the action. It held that BSL’s
claims against Attorneys Insurance under the Policy were incapable of cession on the
grounds first, that the nature of the Policy is such that it involves a delectus personae,
secondly, that the parties to the Policy had expressly, alternatively tacitly agreed not
to cede rights and/or claims (pactum de non cedendo) and thirdly, the cession would
impair Attorneys Insurance’s position and negatively impact its rights.

[12] In light of the dismissal of the action for lack of locus standi by the high court it
was unnecessary for it to consider the stay of proceedings plea as there were no
proceedings to be stayed following the dismissal of the action. Nothing further need
be said about this special plea.

[13] Propell’s answers to the high court’s line of reasoning were manifold. It
contended that the high court erred and misdirected itself by finding that the claims
under the Policy were incapable of being ceded to it on the ground that BSL was a
delectus personae. Propell contended that the relationship between Attorneys
Insurance and BSL cannot be said to be personal and sui generis in nature. It argued
that at all material times the relationship between these two parties was regulated by
the Policy and that the rights and obligations flowing from it have to be determined
according to ordinary contractual principles.

[14] As regards the finding of the high court that on a proper interpretation of the
Policy, the parties had agreed not to cede the rights under it, Propell contended that
the preamble and clauses 1, 2.5, 6.6 and 6.8 of the Policy on which the high court’s
conclusion was based, cannot be construed as constituting a pactum de non
cedendo.

[15] I agree with Propell’s contention that neither clause 6.6 nor clause 6.8 of the
Policy contains or constitutes a pactum de non cedendo. Clause 6.6 is irrelevant to
the enquiry as it does not deal with the transfer of rights under the Policy. This clause
stipulates that the insured shall not without the written consent of the insurer
repudiate liability, negotiate or make admissions, offers, promises or payments in
connection with any claim. Clause 6.6 embodies the terms regulating the
enforcement of an insurance claim. The clause merely reminds the insured (BSL)
that it is the insurer, and not the insured, who must regulate and control the institution
and enforcement of a claim under the Policy. This makes sense because it is the
insurer who bears the risk.

[16] The relevant clause that deals with claims against Attorneys Insurance other
than by the insured (BSL) personally, is clause 6.8. But clause 6.8 does not prohibit
cession of rights to indemnification under the Policy. Clause 6.8 stipulates that

‘[u]nless otherwise expressly stated nothing contained in this Policy shall give any
rights against the insurer to any person other than the insured’. It merely means that
the Policy does not give rights of indemnity to anyone else but the insured; in other
words, it covers or indemnifies the insured solely or exclusively. Clause 6.8 properly
construed merely emphasises the inherent right of the insurer, Attorneys Insurance,
to insist upon the insured being in the class of persons insurable under the Policy.3

[17] I accordingly hold that this matter concerns a delectus personae not a pactum
de non cedendo and must therefore be approached on that basis. The question is
whether the nature of contractual rights flowing from the Policy is such that it
excludes the transfer of the personal rights created. In general, all contractual rights
can be transmitted unless their nature involves a delectus personae or the contract
itself shows that they were not intended to be ceded.4

[18] In Scott on Cession A Treatise on the Law in South Africa 1 ed (2018) at 185
Professor Susan Scott explains:
‘A person’s entitlement to dispose freely of his/her personal rights (assets) is restricted in
circumstances where we are dealing with a delectus personae. This means that the nature of
a particular juristic act (mostly a contract) is such that it excludes the transfer of the personal
right created by it. This would be the position where the nature of the legal relationship
between the parties is such that, legally, it will only be recognised as such if it binds the
determined specific creditor and debtor. Under these circumstances, the identity of the
parties becomes part of the substantive content of the juristic act.’ (Footnotes omitted).

[19] This court in Densam5 at 112A-D held that:
‘The question whether a claim (that is, a right flowing from a contract) is not cedable because
the contract involves a delectus personae falls to be answered with reference, not to the
nature of the cedent’s obligation vis-à-vis the debtor, which remains unaffected by the
cession, but to the nature of the debtor’s obligation vis-à-vis the cedent, which is the
counterpart of the cedent’s right, the subject-matter of the transfer comprising the cession.
The point can be demonstrated by means of the lecture-room example of a contract between

3 Northern Assurance Company Ltd v Methuen 1937 SR 103 at 112.
4 Friedlander v De Aar Municipality 1944 AD 79 at 93; Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A)
31G-H. Quoted with approval in Densam (Pty) Ltd v Cywilnat (Pty) Ltd 1991 (1) SA 100 (A) (Densam)
at 113D.
5 Id.

master and servant which involves the rendering of personal services by the servant to his
master: the master may not cede his right (or claim) to receive the services from the servant
to a third party without the servant’s consent because of the nature of the latter’s obligation to
render the services; but at common law the servant may freely cede to a third party his right
(or claim) to be remunerated for his services, because of the nature of the master’s
corresponding obligation to pay for them, and despite the nature of the servant’s obligation to
render them.’

[20] To determine whether the nature of indemnification rights under the Policy
involves a delectus personae and whether the Policy itself shows that the rights are
not capable of being ceded, it is necessary to interpret the terms of the Policy in
accordance with the principles enunciated in the recent cases of this court such as
KPMG,6 Endumeni,7 Bothma-Batho8 and Novartis.9 The approach to the
interpretation of written instruments is usefully summarised in Novartis by Lewis JA in
paras 26 and 27.

[21] In argument before us counsel for Propell relied on two grounds in support of
the appeal. He contended, first, that after the repudiation of BSL’s claims by
Attorneys Insurance the rights under the Policy became cedable as at that stage BSL
was, as he put it, ‘on its own’. Secondly, he contended that there is no evidence that
a cession will prejudice Attorneys Insurance and render its position weaker.

[22] With regard to the first point, counsel for Propell submitted that after Attorneys
Insurance had repudiated the claims submitted to it by BSL, the latter had no option
but to deal with the actions instituted against it by Propell and, in the exercise of its
discretion, BSL concluded the cession agreement with Propell. He emphasised that
the effect of the cession agreement was not to substitute Propell as the insured in
terms of the Policy. Propell, counsel argued, only acquired the claims and stepped
into the shoes of BSL.

6 KPMG Chartered Accountants (SA) v Securefin Ltd & another [2009] ZASCA 7; 2009 (4) SA 399
(SCA) paras 39-40.
7 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593
(SCA) para 18.
8 Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494
(SCA) para 12.
9 Novartis SA (Pty) Ltd v Maphil Trading (Pty) Ltd [2015] ZASCA 111; 2016 (1) SA 518 (SCA).

[23] That argument can be disposed of by having regard to the terms of the Policy,
in particular clause 1 describing the nature of indemnification afforded by the Policy;
clause 2.5 defining ‘the insured’ and the relevant provision of  the Attorneys Act
which established Attorneys Insurance.

[24] Attorneys Insurance is a non-profit, short term insurance company,
established in 1993 by the Attorneys Fidelity Fund Board of Control in terms of s
40A(a)(i) of the Attorneys Act and subject to the Short-Term Insurance Act 53 of
1998. Its primary purpose is to provide insurance cover to attorneys who are obliged
to be in possession of a Fidelity Fund Certificate in respect of claims which may
proceed from their professional conduct. Attorneys Insurance also provides bonds of
security to attorneys appointed as executors of deceased estates.

[25] Mr Harban, explaining the nature of Attorneys Insurance and its primary
purpose, testified that Attorneys Insurance was established in order to provide
specific services to a specific group or class of people. As a creature of statute,
Attorneys Insurance can only carry out the functions as set out in the Attorneys Act,
the empowering legislation. Unlike any other insurance company, Attorneys
Insurance cannot branch into other areas of business. Its duties are restricted to legal
practitioners and to provide specific services.

[26] Because of the nature of Attorneys Insurance’s funding ─ funded by way of a
single annual premium that is paid by the Attorneys Fidelity Fund on behalf of all
practising attorneys ─ the individual attorney is not expected to pay any premium.
Due to its restricted nature Attorneys Insurance has one Policy applicable to all
practitioners insured by it.

[27] In relation to the present matter the applicable Policy is one that was issued
for the period of insurance commencing on 1 July 2008 and terminating on 30 June
2009. Consistent with the objectives of the Attorneys Act, the Policy provided
indemnity to the insured in respect of ‘the insured’s legal liability to any third party
arising out of the conduct of the profession by the insured’.10 The indemnity granted

10 Clause 1 of the Policy.

covered also approved costs. The term ‘insured’ in the Policy is defined as ‘every
individual practitioner and every firm, partnership or incorporated practice consisting
of one or more practitioners who . . . is practising as such in the Republic of South
Africa, and is in possession of or would have been obliged to apply for a Fidelity Fund
Certificate’11

[28] Clause 5 of the Policy deals with exceptions. In terms of clause 5.1.5 of the
Policy the following event is excluded from cover:
‘any loss, destruction or damage whatsoever or any legal liability of whatever nature . . .
arising from theft by any principal, partner, director, candidate attorney, employees or “in-
house” consultant of the insured . . . of any money or other property referred to in Section 26
of the Act’.

[29] Clause 6, which sets out conditions of indemnity, provides inter alia for further
circumstances other than those set out in clause 5, in which Attorneys Insurance may
repudiate liability. These conditions are set out in clause 6.1, which requires the
insured to give immediate written notice to the insurer of any claim or intimation of a
claim; clause 6.7.2 which provides that all benefits afforded under the Policy may be
withdrawn by the insurer should the insured fail or refuse to provide assistance.
Clause 6.9 stipulates that the insured shall forfeit benefits should the insured use
fraudulent means to obtain benefits in respect of the claim under the Policy.

[30] The preceding analysis makes it clear that the rights flowing from the Policy
are not cedable. The specific group or class of people for whose benefit the
insurance was established is specifically defined in clause 2.5 of the Policy. The
insured is defined as every individual practitioner who, on the date on which the claim
was made, is practising as such in the Republic and is in possession of or would
have been obliged to apply for a current Fidelity Fund Certificate. Clause 6.8 is
another clause which indicates that the Policy applies to the restricted group of
people. These factors viewed cumulatively show that the nature of the contractual
rights under the Policy indicate that the insured is a delectus personae. The contract
gives no rights of indemnity to anyone but a legal practitioner. These contractual
provisions ensure that Attorneys Insurance will not be exposed to the risk of

11 Clause 2.5 of the Policy.

defending actions at the suit of unknown claimants.

[31] The nature of the legal relationship between Attorneys Insurance and BSL is
such that it binds the determined specific creditor and debtor.12 Attorneys Insurance’s
obligation to BSL is to indemnify it against legal liability arising from its professional
conduct. In turn BSL must be in possession of a Fidelity Fund Certificate for the
relevant period to enjoy cover. From the point of view of Attorneys Insurance the
identity of the insured matters to it. The present matter thus falls squarely within the
ambit of the lecture room example referred to by Botha JA in Densam,13 of a contract
between master and servant which involves the rendering of personal services by the
servant to the master which the master cannot cede to a third party without the
servant’s consent. BSL may not cede its right to obtain indemnification under the
Policy from Attorneys Insurance to a third party without Attorneys Insurance’s
consent because of the personal, restricted and statutorily regulated nature of
Attorneys Insurance’s obligation to BSL.

[32] As regards Propell’s argument that after repudiation of BSL’s claims by
Attorneys Insurance, BSL’s rights under the Policy became cedable, a simple answer
to that proposition is that repudiation did not terminate the Policy. BSL remained
bound by the Policy and was obliged to comply with its terms including the restriction
on the transfer of its rights. BSL could contest the repudiation of liability in court and if
the court were to find that the repudiation was unlawful, then Attorneys Insurance
would need to step into the shoes of BSL in defending Propell’s claims. The
repudiation of a claim by the insurer does not afford the insured the right to cede the
rights under the Policy.

[33] The effect of the purported cession is that not only does Propell become the
third party who is making the claim, but it would also be the insured who is applying
for indemnity under the Policy. In other words, Propell, a victim of fraudulent conduct,
steps into the shoes of the fraudster. That would bring about an untenable situation
which will undermine the significance of the unique nature of the legal relationship
between the parties on which the Attorneys Act places a premium.

12 Scott on Cession page 185.
13 Densam Fn 4 at 112.

[34] As regards prejudice, counsel for Propell in argument before us, rejected the
suggestion that the cession impairs the position of Attorneys Insurance and
negatively impacts its rights. He argued that the objection to the transfer of
indemnification rights by cession, in the absence of proof of actual prejudice to
Attorneys Insurance, is unfounded.

[35] In para 71 of his heads of argument counsel for Propell formulated the
contention regarding prejudice as follows:
‘[Buurman Stemela Lubbe Inc] did not breach clause 6.6 of the Policy by entering into the
Cession Agreement, and even if it did so, it was clearly entitled to do because of the
repudiation of the Claims. As such, even if the respondent suffered any prejudice because of
the cession of the Claims to the appellant, which is denied, it clearly was the author of its
misfortune in that regard.’

[36] I do not agree with this contention for the following reasons. In general, the
change in creditor resulting from a cession must not impose greater burdens on the
debtor than those with which he would otherwise have been faced.14 The debtor does
not have to show that a cession will occasion it actual prejudice. It must only show
that a cession will impose greater burdens on it.

[37] Counsel for Attorneys Insurance, with reference to various clauses of the
Policy and the purpose of the insurance, demonstrated how the cession of rights
under the Policy will compromise Attorneys Insurance’s position. The legislative
mandate ─ providing insurance cover to attorneys ─ would be violated by the cession
because the effect of the cession would be to allow an entity which is not a firm or
incorporated practice consisting of one or more practitioners, to become an insured.
Mr Harban specifically testified that BSL in the cession agreement, and in violation of
the provisions of clause 6.6 of the insurance policy, admitted liability in respect of the
six claims that the Propell has instituted against BSL. The admission of liability
appears from the cession agreement where it is stated that BSL has suffered a loss
caused by misappropriation of money and is liable to Propell for such funds that
Propell has lost. Prejudice to Attorneys Insurance is self-evident in this case.

14 Goodwin Stable Trust v Duohex (Pty) Ltd 1998 (4) SA 606 (C) at 616G-H.

[38] The evidence of Mr Harban is that in addition to this admission being in
contravention of the provisions of clause 6.6 of the Policy, it also renders the position
of Attorneys Insurance more grievous and it in fact impacts on its rights as it would be
bound by the admission of its insured (BSL) if it is held that it is liable in terms of the
insurance policy to indemnify the insured. The same applies to the right of Attorneys
Insurance to insist upon assistance from BSL in defending Propell’s claims made
against BSL, as envisaged in clause 6.6 of the Policy in the event of it being held that
Attorneys Insurance is liable to indemnify BSL. The effect of the cession of BSL’s
rights is thus to deprive Attorneys Insurance of the opportunity to invoke the provision
of clause 6.6 of the Policy, which affords it a right to insist upon the assistance from
BSL in defending Propell’s claims, a third party.

[39] Propell’s suggestion that because of the repudiation, the right to step into the
shoes of the insured, ie BSL, and to defend the six underlying claims in the name of
BSL as well as the right to insist upon assistance from BSL, can never be claimed or
relied upon after repudiation, cannot be correct. This argument ignores entirely the
fact that the Policy did not in fact or in law terminate as a result of the repudiation.
The Policy endured for the entire period of insurance and continued to exist for as
long as BSL remained a legal firm and was in possession of a Fidelity Fund
Certificate or was obliged to apply for one for the relevant period.

[40] I conclude therefore that the high court was correct in holding that the rights of
indemnification under the Policy are not capable of being ceded on the grounds that
first, the nature of the contractual relationship flowing from the Policy involves a
delectus personae and secondly, the cession has the effect of burdening Attorneys
Insurance’s position. The purported agreement of cession concluded by BSL and
Propell is therefore invalid and that being the case, it was incapable of conferring
locus standi on Propell.

[41] The appeal is dismissed with costs.

___________________
D H Zondi

Judge of Appeal

APPEARANCES
For the Appellant:
D Van der Merwe
Instructed by:
Marais Müller Hendricks Inc, Tygervalley

Symington & De Kok Attorneys, Bloemfontein

For the Respondent:
G F Heyns
Instructed by:
VDT Attorneys, Pretoria

Honey Attorneys, Bloemfontein