THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable

CASE  NO:  01/2002

In the matter between :

S SCHOEMAN
Appellant

and

CONSTANTIA INSURANCE CO LTD
Respondent
___________________________________________________________________________

Coram:
MARAIS, ZULMAN, STREICHER, CAMERON et LEWIS JJA
Heard:
20 February 2003

Delivered:
21 May 2003
Insurance – burglary – claim allegedly partly fraudulent – no express forfeiture clause
in policy – no such term implied ex lege or tacitly incorporated – when overvaluation of
loss amounts to fraud – whether fraud proved.

__________________________________________________________________________

J U D G M E N T
___________________________________________________________________________

MARAIS JA/

MARAIS JA:
[1] I refer to the parties to this appeal as they were referred to in the court a
quo. Appellant was the plaintiff and respondent was the defendant. The claim
was under an insurance policy for indemnification for loss suffered as a
consequence of a burglary. The question of liability was considered as a separate
issue. Plaintiff was held to have forfeited her claim because she had fraudulently
exaggerated her loss. With leave granted by the trial judge (Joffe J) she contests
the finding.
[2] Unlike many policies of this kind this policy has no express term
providing for a forfeiture in such circumstances. Joffe J upheld defendant’s
contention that a term to that effect was implied by law (as opposed to a tacit
term derived from the supposed unexpressed consensus of the parties). As to the
facts, he held that it had been established by defendant that plaintiff had
fraudulently inflated her claim. The judgment is reported in 2002 (3) SA 417

(W). Whether those findings were correct were the two issues debated before
us, one legal the other factual.
The legal issue
[3] Fraud in connection with insurance policies has many manifestations.1
This case is not concerned with pre-contractual fraud. Nor is it an instance of
post-contractual fraud such as that in which a claim is made when no loss at all
was actually suffered, or the loss-causing event was not covered by the policy,
or the loss was engineered by the insured. It is a case of alleged post-contractual
fraud in which a claimant with a valid and legitimate claim to be indemnified for
loss which had occurred and was covered by the policy, is alleged to have
knowingly and falsely increased what she thought to be the true quantum of the
claim by adding to it an arbitrary 10%.
[4] An implied term of the kind for which defendant contends would bring
about, on proof of fraud, a forfeiture of plaintiff’s entire claim including that

They are conveniently summarized in Professor J P van Niekerk’s article “Fraudulent Insurance
Claims” in 2000 SA Mercantile Law Journal, vol 12 at pages 71-74.

part of it which would otherwise have been a valid and enforceable claim
which defendant was contractually obliged to pay. That is no more than should
be expected says defendant for, given the special nature of the contract of
insurance and the vulnerability of insurers to fraud, the wages of fraud should be
forfeiture of all claims, even legitimate ones. Not so, says plaintiff, who grants
that the law prohibits anyone from profiting from fraud but argues that as long
as such a claimant is restricted to recovering only the amount which is truly
payable there is no infraction of that principle. To deny the claimant even that
which is truly payable and for which a premium has been paid, is to impose a
penalty upon the claimant – something quite disproportionate and against which
our law by and large sets its face. Shorn of elaboration and references to the case
law, text books and journals, those are the respective contentions of the parties.
[5] In the heads of argument filed by the plaintiff a concession was made that
fraud in the making of a claim resulted ex lege in forfeiture of the claim but it

was suggested that a more precise formulation of the rule was required.  At the
hearing the plaintiff’s counsel who had not drawn the plaintiff’s heads of
argument withdrew the concession as he was entitled to do, it being a matter of
law. Oral argument ensued directed to establishing that no such term should be
implied ex lege or be found to have been tacitly agreed upon by the parties.
While the pros and cons of the respective stances of the parties were fully
debated there was no more than passing reference to the writers on the Roman-
Dutch law. We were handed some references supplied by Professor Thomas of
the University of Pretoria and referred to Professor van Niekerk’s published
work on the topic but there it ended.
[6] The sole reference to any attempt to deal with this particular kind of
problem in Roman-Dutch law was said to be an opinion given by Grotius in
Hollandsche Consultatien.2 He opined that an insured who had submitted an
exorbitant (and suspected to be fraudulent) claim for expenses allegedly incurred

Vol (2) cons 175, p471 (Utrecht & Amsterdam ed. 1745). A translation of this opinion will be found in
D P de Bruyn, The Opinions of Grotius, p594

to save the insured property should have his claim reduced to the expenses
which would have been incurred by a reasonable person acting in good faith. In
my view, it is not entirely clear that this was an example of fraud not resulting in
forfeiture of the claim. There was only a suspicion of fraud and even in the
absence of fraud the insured would not have been entitled to recover more than
should reasonably have been expended. It is therefore dubious positive authority
for the proposition that fraud in respect of part of an otherwise valid claim does
not result in forfeiture of the entire claim.
[7] On the other hand, it seems reasonably clear that the sanctions against the
presentation of a fraudulent claim in Roman-Dutch law were first, a refusal to
allow an insured to profit (my emphasis) by the fraud, secondly, a rendering of
the insured liable for any loss or expenditure caused by the fraudulent conduct,

and thirdly, criminal sanctions entailing rigorous punishment.2 Forfeiture of the
entire claim does not appear clearly as one of the available sanctions.
[8] In Videtsky v Liberty Life Insurance Association of Africa Ltd3 the insured
had a legitimate claim but sought to reinforce it by fraudulently forging a
signature on a physiotherapist’s report.  The court (Flemming J) declined to
accept the proposition that forfeiture of the claim was the consequence because
of the existence of a term to that effect arising ex lege. He concluded that no
such term existed or should be held to exist in our law.
[9] There are thus two conflicting judgments in the High Courts and despite
my reluctance to do so in the circumstances in which the issue was argued, I am
persuaded that it is in the public interest that the conflict be resolved.  As the
English cases featured so strongly in the argument of the defendant’s counsel, I
shall commence there.

See Grotius, Inleidinge III.24.2;  Van der Keessel, Praelectiones ad Inleidinge, III.24.20;  Van der
Linden, Koopmanshandboek, IV.6.10. The view of the jurists as to the effect of fraud is given and
discussed by Professor J P van Niekerk in his work, The Development of the Principles of Insurance
Law in the Netherlands from 1500 to 1800, Vol II, pp. 993-1012.
1990 (1) SA 386 (W).

The English law
[10] Understandably, defendant relied heavily upon cases decided in England.
They undoubtedly provide support for the general thrust of the proposition for
which defendant contends but it does not necessarily follow that South African
law is or should be the same. That is not to say that there is no value in looking
at the way in which English law deals with this kind of problem. Apart from the
fact that our courts have done so for generations in the field of insurance law
and that in some provinces the English law of insurance was specifically made
applicable by statute,4 it would be parochial indeed to treat with disdain
decisions of the courts in a highly developed and sophisticated mercantile nation
with a vast storehouse of such decisions accumulated over centuries. That
accumulated wisdom merits the fullest consideration but one must guard against
being mesmerized by it.

See generally Gordon and Getz on the South African Law of Insurance, 4 ed (D M Davis) at 1-7;

12 LAWSA 16-20.

[11] A fully comprehensive review of the English cases and journals is not
possible if this judgment is to be kept within the bounds of reasonable length.
Instead, I shall summarise what I understand the existing state of English law to
be concerning the kind of problem which this case raises. I confine myself to the
case where there is no express forfeiture clause in the policy.
[12] ‘Even when the policy does not contain such a clause, there is a rule that
the assured is penalised (emphasis supplied) for fraud in the making of a claim.’5
‘What is clear is that the assured who is detected in dishonestly making a false
statement as to part of his claim automatically forfeits the entire claim.’6 The
penalty is that the claim is forfeited even although it was in all other respects a
valid claim which, but for the fraudulent conduct, would have had to be paid.
The penalty may extend even further and entail the termination or avoidance of
the policy with prospective effect by the insurer. Whether the rule rests upon the
fraud amounting to a breach of a continuing duty to observe the utmost good

MacGillivray on Insurance Law, 10 ed, paras 19-54
MacGillivray, ibid, paras 19-56, 19-60

faith which characterises the entry into a contract of insurance in English law,
or whether it rests simply upon considerations of public policy and a special
need to provide a robust, if draconian, sanction to deter insurance fraud may still
remain a question. However, there is no doubt that the rule of law exists. The
most recent decision in the House of Lords affirms it.7
[13] There are powerful and persuasive reasons given by the English judges
for the existence of this admittedly penal rule. A selection:  ‘It would be most
dangerous to permit parties to practise such frauds, and then, notwithstanding
their falsehood and fraud, to recover the real value of the goods consumed. And
if there is wilful falsehood and fraud in the claim, the insured forfeits all claim
whatever upon the policy.’8  ‘The logic is simple. The fraudulent assured must
not be allowed to think:  if the fraud is successful, then I will gain;  if it is
unsuccessful, I will lose nothing.’9  ‘Just as the nature of the risk will usually be

Manifest Shipping Co Ltd v Uni-Polaris Co Ltd, The Star Sea [2001] 1 All E.R. 743, 764 para 62.
Willes J in Britton v Royal Insurance Company (1866) 4 F & F 905, 909.
Lord Hobhouse in The Star Sea, supra, 764 j-765 a.

within the peculiar knowledge of the insured, so will circumstances of the
casualty. It will rarely be within the knowledge of the insurance company. I
think that the insurance company should be able to trust the assured to put
forward a claim in good faith. Any fraud in making the claim goes to the root of
the contract and entitles the insurer to be discharged.’10  ‘(T)here is … an
incentive to honesty if the insured knows that, if he is fraudulent, at least to a
substantial extent, he will recover nothing, even if his claim is in part good.’11
‘The making of dishonest insurance claims has become all too common. There
seems to be a widespread belief that insurance companies are fair game, and that
defrauding them is not morally reprehensible. The rule … may appear to some
to be harsh, but it is in my opinion a necessary and salutary rule which deserves
to be better known by the public. I for my part would be most unwilling to dilute

Hoffmann LJ in Orakpo v Barclays Insurance Services and Another [1995] LRLR 443 (CA) 451.
Sir Roger Parker in Orakpo v Barclays Insurance Services and Another, supra, 452.

it in any way.’12  ‘(I)t is well accepted that the law has a disciplinary element
in order to discourage the making of false and fraudulent claims.’13
[14] The potential harshness of the rule was remarked upon by Lord
Phillimore14 over 75 years ago and English courts appear to have felt
constrained to ameliorate the rigour of the rule by a resort to qualifications the
boundaries of which are not easily determinable.  Thus, the rule does not apply
to ‘anything … so unsubstantial as to make the maxim de minimis applicable’.15
‘One should naturally not readily infer fraud from the fact that the insured has
made a doubtful or even exaggerated claim. In cases where nothing is
misrepresented or concealed and the loss adjuster is in as good a position to
form a view of the validity or value of the claim as the insured it will be a

Millet LJ in Galloway v Guardian Royal Exchange (UK) Ltd, [1999] Lloyd’s Rep I.R. 209 (CA) 214.
Longmore LJ in K/S Merc-Scandia XXXXII v Certain Lloyd’s Underwriters:   The “Mercardian
Continent”, [2001] 2 Lloyd’s LR 563 (CA) 575.
Lek v Mathews (1927) L.C.L.R. 141 (HL) 164.
Lord Sumner in Lek v Mathews, supra, 145.

legitimate reason that the assured was merely putting forward a starting figure
for negotiation.’16
[15] ‘If a claim is fraudulently inflated so that the claim is made in an amount
which the plaintiff clearly knows he has not suffered, that will amount to a
fraudulent claim and will have the same effect.  . . . .  However, it is important to
stress that in connection with this way of putting the claim it is my view that
very clear evidence of fraud would be required because one has to accept as a
matter of commercial reality that people will often put forward a claim that is
more than they believe that they will recover.  That is because they expect to
engage in some form of “horse trading” or other negotiation.  It would not
generally in those circumstances be right to conclude readily that someone had
behaved fraudulently merely because he put forward an amount greater than that
which he reasonably believed he would recover.  He would have to put forward

Lord Hoffmann in Orakpo v Barclays Insurance Services and Another, supra, 451.

a claim that was so far exaggerated that he knew that in respect of a material
part of it, there was no basis whatsoever for the claim.’17
[16] However there is a lone voice raised in dissent.  In the case of Orakpo v
Barclays Insurance Services and Another18 Staughton LJ had this to say in a
minority judgment on this aspect of the case:
‘Of course, some people put forward inflated claims for the purposes of negotiation knowing
that they will be cut down by an adjuster.  If one examined a sample of insurance claims on
household contents, I doubt if one would find many which stated the loss with absolute truth.
From time to time claims are patently exaggerated;  for example, by claiming the replacement
cost of chattels, when only the depreciated value is insured. In such a case it may perhaps be
said that there is in truth no false representation, since the falsity of what is stated is readily
apparent. I would not condone falsehood of any kind in an insurance claim. But in any event I
consider  that  the  gross exaggeration  in  this  case  went  beyond  what   can be  condoned or
overlooked.  Nor was it so obviously false on its face as not to amount to a misrepresentation.
. . . .  . There is, however, one aspect of this second defence [fraud in the making of the claim]

Thomas J in Nsubuga v Commercial Union [1998] 2 Lloyd’s LR 682 (QB) 686.
Supra, 450-451.

which gives me pause.  For a long time it has been very common for insurance policies to
state expressly that, if any claim is made which is false or fraudulent, all benefit under the
policy will be forfeited. There is no such provision in the insurance contract in this case.  . . . .
. Why did the draftsman omit the provision which had previously been so common? . . . .  . I
do not know of any other corner of the law where the plaintiff who has made a fraudulent
claim is deprived even of that which he is lawfully entitled to, be it a large or small amount. I
certainly would not imply such a term in order to give business efficacy to the contract, or
because it is so obvious it goes without saying. But Mr Phillips says that it is to be implied as
a matter of law;  in other words, it is a term which the law imposes unless the parties contract
out of it.
The argument is that a contract of insurance is one of the utmost good faith.  So it is in the
formation of the contract.  The customer must disclose every material circumstance in his
knowledge, even if, or rather especially if it increases the risk.  If he does not do so the insurer
may avoid the contract. It is said that the same duty of good faith applies in making claims,
and that the same consequence follows if it is not observed. I can readily accept that there is a
duty not to make fraudulent claims;  but I have doubts about the suggested punishment for
breach of that duty. [After referring to cases and the text books which support the doctrine of

forfeiture, Staughton LJ continued.] But we were not told of any authority which binds us
to reach that conclusion. I would hesitate to do so, so I am not convinced that a claim which is
knowingly exaggerated in some degree should, as a matter of law, disqualify the insured from
any recovery. If the contract says so, well and good – subject always to the Unfair Contract
Terms Act. But I would not lend the authority of this Court to the doctrine that such a term is
imposed by law’.
The United States of America
[17] In at least two states the courts refuse to acknowledge the existence of a
forfeiture rule unless an express term to the same effect has been incorporated in
the policy.19
The South African law
[18] The use in insurance policies of express terms which provide for a
forfeiture of the entire claim even if only a part of it is fraudulent is of course
common.  It has never been suggested either here or in England that such a

Phoenix Insurance Co v Moog (1884) 78 Ala 284;  Tempelis v Aetna Casualty & Surety Co (1991, App)
164 Wis 2d 17.

provision is entirely unenforceable20 because of its penal nature but it does not
follow that where such a term has not been expressly agreed upon by the parties,
it should be regarded as either having been tacitly incorporated in the policy by
the parties or as having been so incorporated by operation of law.
[19] Even in a case (Lehmbecker’s Earthmoving & Excavators (Pty) Ltd v
Incorporated General Insurances Ltd21) in which such a term had been
expressly incorporated this court declined to give it its wide literal meaning
because of the “grossly and intolerably disproportionate” penal effect which
doing so could have.22 That was a case in which a valid claim had arisen under a
policy but before it was paid a further claim was made in respect of another
incident. The latter claim was fraudulent. Relying upon a clause in the policy
which provided that if a claim was fraudulently made “all benefit under this
policy shall be forfeited”, the insurer terminated the policy and refused to pay

It has been suggested that such a provision may be governed by the Conventional Penalties Act 15 of
1962 and that s 59 of the Long-term Insurance Act 52 of 1998 and s 53 of the Short-term Insurance Act
53 of 1998 may be applicable. See J P van Niekerk,  2002 SA Mercantile L J  575, 578, 584. I express
no opinion on these matters.
1984 (3) SA 513 (A).
At 522 E-F.

either of the claims.  There was no connection between the claims. The
insured sued to recover only the first claim. The claim was upheld. The court
was not prepared to interpret the admittedly wide language of the provision as
extending to a previously accrued valid claim which was not tainted by fraud.
[20] The implications of that judgment upon a case where there is only one
incident giving rise to a claim and that claim is partly, but not wholly, fraudulent
are not entirely clear. By parity of reasoning it can be argued that the right to
claim the indemnity accrued before the making of the partly fraudulent claim
and that the subsequent fraud cannot preclude the insured from claiming what
was truly due under the policy. Such an argument could not succeed in the face
of an express clause such as there was in Lehmbecker’s case23 for it would
render the clause entirely nugatory. But where there is no such clause it is
difficult to see why the reasoning based upon the accrual of the liability to
indemnify prior to the fraud should not lead to the same conclusion.

Supra.

[21] Our common civil law is basically anti-penal.24 Until statutory
intervention took place25 penalty provisions in contracts (with the exception of a
forfeiture clause accompanying a lex commissoria in a contract of sale26
sanctioned in Voet 18.3.3) were unenforceable. In the law of delict punitive
damages are not claimable. Fraudulent attempts to exact greater payment under
other kinds of contract, even though they all also require good faith, do not
result in the innocent party being relieved of the obligation to pay even that
which is in fact due. Lies told by a plaintiff when giving evidence in support of a
claim will not debar the plaintiff from obtaining a judgment for that which is
otherwise satisfactorily proved to be owing. There would therefore have to be
either a clearly recognised doctrine of forfeiture in our law or a compelling
present need for its adoption before this court would be justified in lending its
imprimatur to such a fundamentally penal doctrine.

Pearl Assurance Co v Union Government 1934 AD 560 (PC).
Conventional Penalties Act 15 of 1962.
Baines Motors v Piek 1955 (1) SA 534 (AD).

[22] As to judicial precedent or the authority of the jurists who wrote on the
Roman-Dutch law, as we have seen, there is little to be found concerning the
narrow question of what effect upon a claim fraud has when it is confined to
only a part of an otherwise legitimate claim or when it relates only to the proof
of what is in fact found to be a legitimate claim. I have already alluded to the
conflict which exists between the decision in the case of Videtsky27 and the
decision in the present case.
[23] It appears that there is no authority in the Roman-Dutch law for the
implication ex lege of what is in essence a penal term. Nor, in my opinion, is
there a compelling social need for the adoption of such a doctrine as an incident
of the common law. That its adoption would serve the ends identified in the
English cases is of course so but if the cost of doing so would be that cases
would arise in which great inequity would be the consequence, that is good
reason to hesitate.

Supra.

[24] When there is added to that the fact that insurance companies are
masters of their own policies in the sense that they are free to unilaterally devise
them, the insured has no say in the process, and that it is a simple matter to
include an appropriate clause to protect the insurer against fraudulent claims by
providing for forfeiture, there does not appear to be any pressing need for the
law to provide such protection.
[25] There is also the consideration that the onus of proof of loss and value
burdens the insured. Where fraud is shown to be present in the making of a
claim the insured is likely to experience problems first, in having his or her
evidence regarding even the ostensibly valid parts of the claim accepted and
secondly, in satisfying the court that the tainted aspect of the claim can and
should be separated from the untainted aspects of the claim. If he or she fails to
satisfy the court on that score the entire claim will of course fail.

[26] There are also other sanctions which are available:  prosecution for
fraud, the potential inability to obtain insurance cover in future, punitive costs
orders made by the court, and delictual liability for expense incurred in
investigation by the insurer. It is not as if there is nothing else in an insurer’s
arsenal which can be used to deter insurance fraud.
[27] As for implying a tacit forfeiture term, the traditional test to be applied
cannot, in my opinion, be satisfied. I am not confident that if the question had
been raised both parties would have agreed that forfeiture of even a valid claim
should occur. Indeed, one may ask, if such a tacit term is to be implied in an
insurance contract, why not in other contracts? All contracts require good faith
in our law.
[28] I conclude therefore that the court a quo erred in recognising the implied
term which it did. That conclusion might be thought to render it unnecessary to
consider whether the plaintiff’s claim was partly fraudulent but in as much as

she was found to have acted fraudulently and the trial will now have to
continue it is necessary to deal with that finding.
The factual issue
[29] In October 1997 the relevant policy was issued. The cover provided for
the loss of household contents was R250 000. That sum had been arrived at by
the plaintiff, her personal assistant, Mrs Graham, and an experienced insurance
broker, Mr Roedman, systematically completing a written inventory of the
contents of the household room by room and assigning values to the contents of
each room. Included in the list of items in the main bedroom were “clothing &
footwear – R120 000”.
[30] On 9 May 1998 while the plaintiff was away for the weekend her house
was burgled. She returned on Sunday 10 May to find that numerous articles had
been stolen. On Monday 11 May, and with the assistance of Mr Roedman and
Mrs Graham, the plaintiff completed a claim form supplied by the insurer.  It

was tabular in form and consisted of six columns headed from left to right:
number; description of property;  date acquired;  from whom purchased or
acquired;  deduction for wear and tear or depreciation or value of salvage;
amount claimed.
[31] The manner in which it was completed is of considerable significance.
There were 38 entries in all. In 25 instances the number of items, a description
of the items, from whom they were purchased or acquired (in some instances
only the city was given), and the amount claimed were reflected. In 12 instances
it was not stated from whom (or where) they were purchased or acquired. In four
instances no amount claimed was entered. In none of the instances was the date
acquired given or any deduction made for wear and tear or depreciation or value
of salvage. In all of the instances where an amount was claimed a round sum in
rands was entered. In one instance the entries were simply:

“Various” (under number), “Various other items of clothing” (under description of
property), and “R20 000” (under amount claimed).
The amounts claimed were totalled and came to R107 230 of which R62 630
represented clothing and footwear. Included in the amount of R62 630 was the
R20 000 claimed for “various other items of clothing”.
[32] What is patently clear is that this was no more than a provisional estimate
of the plaintiff’s loss and a partial and incomplete furnishing of information
which would be relevant to a consideration of the claim. The warranty printed
on the claim form which recites inter alia that the amount claimed represents the
plaintiff’s loss cannot derogate from that intractable fact.
[33] It is not surprising that the claim was made in that tentative and
provisional manner. As is graphically illustrated by the photographs taken when
Mr Koekemoer, an insurance assessor appointed by the insurer, visited the
plaintiff’s house to assess the loss, the burglars had not confined their activities
to any one room and the plaintiff’s dressing room in the main bedroom in which

there were 25 capacious open shelves for clothing and also provision for the
hanging of clothes had been stripped virtually bare. To expect from the plaintiff
instant and perfect recall of everything that had been in those rooms and of
every item of clothing which had been in the dressing room and elsewhere
shortly after having been exposed to the trauma of learning of a criminal
intrusion into her home would be unreasonable.
[34] The fraud which the defendant sought to attribute to the plaintiff was
evidenced, so the argument ran, by what the plaintiff herself said in two
facsimiles sent to the defendant after she had undergone a polygraph test at the
defendant’s instance. In that of 10 July 1998 she referred to “the honest mistake,
if such a thing exists” of building in “a slightly inflated figure” “because (Mr
Roedman had said) it was standard practice for the insurance company to lower
the settlement amount”. In that of 29 July 1998 she said:

‘(I)f they do not accept my explanation for the 10% inflation on the claim they need to do a
prompt investigation to satisfy themselves that this is a bona fide claim. Equigen [the broker]
has not even bothered to contact Mrs Wendy Graham of Production Partners who was at the
meeting with the broker when he suggested the adjustment on the claim to try and limit the
inevitable loss by his client. And as he predicted and tried to mitigate against with 10%
recommendation, I have in the course of the last three months discovered a number of other
valuable items which I was not aware of at the time and therefore were not included in my
claim. If I had been settled promptly in full and final settlement as SA Eagle have done with
the business claim (Production Partners), I would have had to carry the loss of additional
missing items uncovered over time, i.e. binoculars, clothing, etc. I considered my broker’s
advice to have been prudent, and followed it accordingly as a contingency measure rather than
fraud.’
[35] It was fundamentally these two facsimiles upon which the trial judge’s
finding that the plaintiff had been guilty of fraud in the making of the claim
rested. He considered that they raised an inference of fraud which was not
neutralised by the evidence given by the plaintiff and on her behalf.

[36] The onus of proving that the claim was fraudulent was of course upon
the defendant.  It had to be discharged upon a balance of probability but in
considering the probabilities a court’s point of departure is that fraud is not to be
imputed lightly to anyone.  Before considering the evidence in greater detail
some preliminary observations are necessary.
[37] In cases where estimates of value have been made by the insured the mere
fact that an estimate has been found to have been exaggerated is not proof of
fraud. It must appear at least that it was knowingly exaggerated which implies
that it was not made in good faith.  Furthermore, even where there has been
some conscious exaggeration of a claim, if it appears that the amount claimed
was recognisably put forward as an opening gambit in what was intended to be a
debate with the insurer as to the true value of the claim, and that the insured did
not intend or expect the amount stated to be taken at face value, there can be no

finding of fraud.  Both the necessary intention to deceive and the necessary
intention to defraud would be lacking.28
[38] In Ewer v National Employers’ Mutual General Insurance Association,
Ltd30 the court refused to stamp as fraudulent a “preposterously extravagant”
claim because it was so manifest that the prices  which had been inserted in the
claim form by the plaintiff were the prices of new things.  He was only entitled
to the second-hand value of the lost goods.  Nonetheless, MacKinnon J said:
“The plaintiff here has put down the cost price of new things. I do not think he was doing that
as in any way a fraudulent claim, but as a possible figure to start off with, as a bargaining
figure. The plaintiff knew the claim would be discussed, and probably drastically criticised by
the assessors, he had been asked for invoices, and he started the bargaining with them by
putting down the cost price of these articles as if they were new. Though I admit the resulting
figure is preposterously extravagant, I do not think there was any fraud in putting it forward.”

As to the distinction between these two concepts, see S v Bell 1963 (2) SA 335 (N) 337 c;  S v Isaacs
1969 (2) SA 187 (D&CL) 191H-192A.
[1937] 2 All ER 193 (KB). See too Nafte v Atlas Assurance Co Ltd WLD 339, 241-2;  Papas v The
General Accident, Fire & Life Assurance Corporation, Ltd 1916 CPD 619, 635-7.

In my opinion, for the reasons which follow, the facts of the present case lead
to the same conclusion.
[39] In this case the insurer’s burden of proof is not lightened by the fact that
the loss adjuster (Mr Koekemoer) appointed by it to investigate the claim and
assess the loss ultimately assessed it as being R139 353,84 of which R68 790,84
was in respect of clothing and footwear. It will be recalled that the plaintiff’s
provisional claim was for R107 203 of which R62 630 (which included the R20
000 for “various other items of clothing”) was for “clothing and footwear”.
Moreover, he testified that a revised claim form which he assisted the insured to
complete on 21 May 1998, and in which the total claim was R117 578 (of which
R62 630 was for clothing and footwear), was intended to supersede the earlier
claim.
[40] After he had made further enquiries regarding the value of the items for
which claims had been made, he not only increased some of the amounts

claimed because they had been grossly understated by the plaintiff but
ultimately made no downward adjustment of those increased claims. For
example (I give first the sum claimed by the plaintiff, secondly, the sum
substituted by Mr Koekemoer, and thirdly, the difference between them):

Claim             Substituted
Amount

Claim
Underclaimed
Samsonite 3 piece suitcase set         R10 000        R10 140             R    140
Choker pearl necklace                      R 3 600        R17 000              R13 400
Bear graphite golf clubs                   R 3 500         R 6 270              R 2 770
Silver Christoffle cutlery set            R 3 100         R14 012             R10 912
Limoge fruit cutlery set                    R 2 500         R 4 900              R 2 400
Theo Fennell gold earring                R 1 000         R 2 000              R 1 000
Clothing and footwear                      R62 630         R68 790,84      R 6 160,84

These  items  amount  collectively  to  an  underclaiming  by  the  plaintiff  of
R35 882,84 if Mr Koekemoer’s assessment was correct. However, whether or
not his assessment was in fact correct is not the point;  the point is that he was
plainly bona fide in his valuation and, by comparison, the modesty of the

plaintiff’s original provisional claims simply does not chime with any
intention of defrauding the insurer.
[41] The revised claims totalled R152 875,84 in all and after Mr Koekemoer
had  adjusted  some  of  the claims downwards he  recommended a payment of
R139 353,84 of which R68 790,84 (which included R20 000 claimed for
“various other items of clothing”) was for clothing and footwear. Both those
amounts were of course far higher than the total amount of R107 230 and the
amount of R62 630 for clothing and footwear which the plaintiff had originally
claimed in the claim form which the insurer alleges was fraudulent.
[42] The relevance of this evidence of Mr Koekemoer is simply that an
independent third party with professional experience of assessing loss and value,
after investigation, and acting in good faith, assessed the plaintiff’s loss as being
far higher than the plaintiff had said she estimated it to be when making her first
and provisional claim. The estimates which the plaintiff made were thus

certainly estimates which could have been made in the honest belief that her
loss was at least what she claimed it to be at that stage. The large discrepancy
which exists between her estimate of the value of the items I have listed in para
[40] and that of Mr Koekemoer is difficult to reconcile with the plaintiff having
been intent upon defrauding the insurer.
[43] That the plaintiff had no such honest belief and that she did intend to
defraud the insurer is evidenced by the facsimiles the plaintiff sent to the insurer
and the inadequate explanations given by her and her witnesses of what she
meant by saying that the claim had been “inflated”. So ran the argument for the
insurer. I turn to those explanations.
Mrs Graham
[44] She identified the problems they encountered in completing the first claim
form. Some missing items had been bought overseas and their value could not
be established then and there. There was an “enormous amount” of clothing that

was missing but it was not possible to recall each and every item that had been
in the dressing room but was no longer there. Where they could identify a
particular item as having been taken they estimated a value as best they could.
They then “lumped a sum” meaning “an estimated value of the items we thought
had gone missing”. She made it clear that she could not recall exactly how they
arrived at R 20 000 but it was a figure which represented what had been in the
dressing room but was no longer there. What had been there could be recollected
in a general sense but the precise details of what had been taken could not be
recollected.  For example, they knew track suits had been taken but could not
remember how many there had been. The same applied to things like t-shirts,
jerseys, socks, underwear, scarves, stockings, gloves and “all the rest that were
in the wardrobe”. They could not itemise these things and they simply reflected
them “generically” in the claim form as “various other items of clothing” and
estimated them globularly as having a value of R20 000.

[45] She was cross-examined with a view to extracting from her an
admission that the claim was inflated, in the sense of being deliberately pitched
at a higher amount than they believed to be the real value of the loss, to guard
against the danger of the defendant “lowering the amount of her claim”. A fair
reading of her evidence fails, in my opinion, to yield any such admission. It is
quite clear that what she regarded as the antidote to the insurer lowering the
claim was an estimate of loss which was as realistic as the difficult
circumstances allowed and which did not err on the side of understatement and
thereby play into the hands of an insurer intent upon beating the claim down.
She was often subjected to questions the nuances of which she had difficulty in
understanding but she steadfastly refused to acknowledge that after their
estimates had been arrived at they arbitrarily and for no legitimate reason
inflated their estimates to a yet higher amount.

[46] When she was asked whether Mr Roedman had said at the time that it
was not inappropriate to build in a slightly inflated figure because it was
standard practice for the insurer to lower the settlement amount she said that he
had. When asked whether they had acted on that advice she said they had “on
the contingency of the R20 000”. She understood building in a slightly inflated
figure to mean that “you increase the amount of the figure that you put onto the
claim form”. On being asked if that meant increasing the amount that would
otherwise have been claimed she replied in the affirmative.  However, further
questions showed that what she regarded as the slight inflation of the claim was
their decision, when attempting to place a value on the stolen “various other
items of clothing”, to allow for the fact that they could not “readily identify”
everything that had been stolen from the dressing room and that they knew that
more had been taken than they were able then to identify.  Built into the R20

000 which they estimated to be the value of the “various other items of
(stolen) clothing” was an amount to cater for that contingency.
[47] Mr Roedman
He explained that he assisted the plaintiff and Mrs Graham in the completion of
the initial claim form. It was completed by him and signed by the plaintiff. He
said that the R20 000 claimed for various other items of clothing was an
allowance for items that were stolen but could not be identified at the time.  He
said “At the time of the loss it was obvious that a large portion of her clothing
was stolen and she didn’t claim for the whole lot item by item. What I advised
her is to, we came to a figure to allow for items that we couldn’t identify at the
time as being stolen but that were obviously gone and that’s what that R20 000
is”.
[48] He said that he told them that the sum would be reflected in the claim
form but that a loss adjuster would be appointed and that he would probably

adjust the claim down as insurers generally did so because they can source
various items at a cheaper price than the general public can. He denied that he
had advised that the claim be inflated but said “I would advise them not to
underclaim so if they can’t identify all the items that are stolen at the time item
by item I would say put a general sum in for an amount not claimed for but she
will ultimately have to prove that amount to the loss adjuster”.  He also said in
answer to a suggestion that one way of inflating a claim would be to add 10% to
it:  “Okay in this case it wasn’t inflating the claim;  it was trying to get the
correct claim, amount claimed”. He denied that the claim was inflated in any
way.
[49] He explained that they knew from the inventory that had been taken at the
inception of the policy that the plaintiff had clothing and footwear to the value
of R120 000. They could identify specifically certain items of clothing and
footwear which were missing and they could put a value to those items. (The

value given to those items was R42 630.) The plaintiff then had to try and
place a fair value on the rest of the contents of the dressing room without being
able to itemise each and every item which had been there but knowing that a
dressing room which had been fully stocked with clothing was virtually bare.
She provided the estimate of R20 000. He regarded it as a fair estimate but told
her that the amount “would be adjusted by the loss adjuster because the onus is
on the insured to prove the claim”. He said it was obvious to anyone that it was a
“generic claim, not properly specified” relating to “miscellaneous clothing”.
[50] He was asked again whether he had or would have advised anybody to
inflate a claim to provide for the danger that the insurer might lower the amount
claimed. He said he would not but that he would advise the client to put an
amount in for items they could not identify at the time. On being confronted
with what the plaintiff had said in the facsimiles referred to earlier, he denied

having advised her to inflate the claim and said that she could have
misunderstood what he had said to her.
The plaintiff
[51] She said that the dressing room was a particular problem. It was obvious
that it had been ransacked. All the shelves and the hanging rails had been full of
clothes. Certain items of clothing stolen she was able to describe and list
individually.  She was also aware in a general sense of what had been in the
dressing room but could not possibly recall everything item by item. Amongst
other things there were scarves, gloves, stockings, t-shirts, sporting gear, tennis
kit, golf kit, tracksuits, jerseys, nightwear, pyjamas and belts. She did her best to
place a value on the particular items which she could recollect but for the rest of
what had been in the dressing room she had to find some way of estimating their
value without being able to list what had been there item by item.

[52] What she said she did was this. She knew that she had had
approximately 20 shirts which she valued at R6 000. She estimated the contents
of the shelves each of which had been full (the photograph shows them to be
very capacious) as having a value of approximately R500 to R600. In arriving at
that average value she was conscious of the fact that her inability to identify then
precisely what had been taken could result in her estimate of R500 to R600 a
shelf being too low so she rounded the final figure up to R20 000 to cater for
that contingency.
[53] She was cross-examined at length on her modus operandi and her
arithmetic. It is quite evident from a perusal of the record that the questioner and
the plaintiff were often at cross purposes in dealing with particular topics. It is
also obvious that the plaintiff was having difficulty recalling the details of how
the exercise which resulted in the claim for R20 000 was done. She was
testifying nearly 2½ years after the exercise was done. Thus, she said in

evidence that there were “probably about 20” shelves in the dressing room. In
fact, as appears plainly from the photograph, there were 25. No one corrected
her and it was not surprising that ensuing calculations put to her in the course of
questioning failed to square with the “inflation” factor of 10% that she alluded
to in one of the facsimiles. As a fact, 25 shelves of clothing at an average value
of R500 per shelf yield an amount of R12 500. If 10% be added to that a figure
of R13 750 results. If shirts at a value of R6 000 be added the resultant figure is
R19 750 which, if rounded up to the nearest thousand, gives a total figure of
R20 000 which was what the plaintiff’s estimate was.
[54] The plaintiff’s state of mind when these estimates were made is of course
critical to the defendant’s case. There is no good reason to doubt the truthfulness
of the following excerpt from her evidence relating to the problem of the
contents of the dressing room.

“Mr Roedeman was at pains to point out to me that the final figure would be the insurance
company’s figure, they would be appointing a loss adjuster who would come and take a full
inventory and work out what that final figure was. So my figure, even if it was a guesstimate
and even if that guesstimate was slightly more or less, it didn’t really matter because theirs
would be the final figure, they weren’t going to pay out on what was on my claim form.”
[55] It is reasonably clear that the plaintiff did not attach to the word “inflate”
the pejorative meaning which it might ordinarily convey. She accepted that it
meant to make bigger but denied that it meant claiming more than what she
thought to be her loss. With reference to one of her facsimiles she was asked:
“This is the explanation Equigen must rely upon finally, namely that you built in
a  slightly  inflated  figure,  a  figure  greater  than  it  should  have  been,  do
you agree? . . . . A figure greater than it should have been given the what, the
knowledge that I had with certainty (my emphasis) of what was missing.”
[56] Her evidence is replete with repeated and consistent explanations that
what she meant by the slight inflation of the claim was the rounding up to R20

000 of her estimate to cater for the likelihood of underestimation of the value
of what was in the dressing room due to her inability to remember everything
that had been taken. That is the contingency to which she referred. She had been
made aware by Mr Roedman that the inability to specify item by item what was
in the dressing room would probably result in the reduction of her claim and
that, if that were going to happen, she would be unwise to leave out of account
altogether the likelihood that in the days ahead she would become aware of yet
further items which had been stolen from the dressing room. Catering for that
contingency would also “guard against” the lowering of her claim by the insurer.
Indeed, that is what happened. Months later when the plaintiff was about to go
skiing she discovered that two Eles ski suits and her ski boots, a camel cashmere
coat, a Lorden Muntel coat, and a pair of binoculars had also been taken.
[57] No credibility findings as such were made by the learned judge in the
court a quo. It may be inferred that he did not accept plaintiff’s explanation of

what she meant by “inflating” the claim but no reasons were given for
reaching that conclusion. This court is therefore at large to make its own
assessment of the evidence. The onus of proving fraud rests upon defendant and
it must therefore satisfy this court that the evidence of plaintiff and her witnesses
should be rejected.
[58] When the facsimiles are considered in the context of what had happened,
the nature of the problem which confronted the plaintiff in ascertaining and
quantifying her loss, the manifestly provisional nature of the first claim form,
the plaintiff’s candour throughout her dealings with both her own broker, the
defendant’s loss adjuster and the defendant’s staff, and the gross understatement
of many claims which were assessed as being very much higher by the insurer’s
own loss adjuster, I find it to be most improbable that there was any fraudulent
intent on the plaintiff’s part. There was nothing in the evidence given by the
witnesses called by the defendant which detracts from that conclusion. When all

was said and done the defendant’s case was built upon a particular
interpretation of the facsimiles, namely, that they were confessions (or at least
conclusive evidence) of fraud. Once they are found not to bear that meaning
there is really nothing left which would justify a finding of fraud.
[59] It follows that the plaintiff’s claim should not have been dismissed and
that the trial should have continued to enable the plaintiff to prove her loss and
the sum for which judgment should be given.
It is hereby ordered that:
1.
the appeal is upheld with costs including the costs of senior counsel;
2.
the order of the court a quo dismissing the claim with costs is set aside
and substituted by the following order:  The defendant is declared to be
liable to indemnify the plaintiff for the loss sustained by her as a
consequence of the burglary at the insured premises on 9 May 1998 and is
ordered to pay the costs of the hearing on the question of liability.

3.
the case is remitted to the court a quo for further hearing.

__________________________

R M MARAIS

JUDGE OF APPEAL

LEWIS JA   )   CONCURS

STREICHER JA:
[1] I agree with the findings and reasoning of my colleague Marais JA in
respect of the legal issue, being whether, in the absence of a provision to that
effect in the insurance policy, fraud confined to part of a claim by an insured
against an insurer results in the whole claim being forfeited, (paras 3 to 28 of his
judgment). However, I do not agree with his factual findings (paras 29-59).
In my view the appellant, in the two facsimiles referred to by Marais JA,
admitted that she, on the advice of her broker, inflated, not a particular item of
her claim, but her claim, by 10%. In her evidence she did not explain that
statement. Instead of doing so she testified how it came about that she claimed
R20 000 in respect of various items of clothing. According to her she arrived at
that figure on the basis of an estimation that she lost 50 shelves of clothing at a
value of R50 per shelf i.e. R10 000 and 15 to 20 shirts valued at R6 000 to
which amount she added a contingency figure of R4 000 in respect of goods she

probably lost but was unable to specify. Both the appellant’s broker and Mrs
Graham denied that she was advised to inflate her claim.
[2] The court a quo held that the evidence adduced by the plaintiff and her
witnesses did not have the effect of neutralizing the inference created in her
facsimiles that she committed fraud when submitting the claim form. In so far as
the court a quo held that the admission contained in the facsimiles remained
unexplained, I agree.
[3] I am, nevertheless, doubtful that those admissions, in the light of all the
circumstances, particularly those set out in para 32 of Marais JA’s judgment,
established that the appellant in fact submitted a fraudulent claim. However, in
the light of the finding of this court that the appellant did not forfeit her claim in
so far as it was not fraudulent, it is unnecessary to decide this issue. Whether or
not she committed a fraud, she still has to prove her loss. To the extent that she

may succeed in proving her loss such loss would be unaffected by any fraud
she may have committed in the submission of her claim.
[4] I agree that the order set out in Marais JA’s judgment should be made.

______________

P E STREICHER

Judge of Appeal

Zulman    JA)
Cameron  JA)    concur