Court name
Bulawayo High Court
Case number
HC 2584 of 2013

Least Suppliers (Pvt) Ltd v T.I.B. Insurance Brokers & Anor (HC 2584 of 2013) [2015] ZWBHC 9 (14 January 2015);

Law report citations
Media neutral citation
[2015] ZWBHC 9
Case summary:

Insurance – broker – nature of relationship between broker and other parties to insurance contract – obligations and liability to insured – insured entitled to rely on broker’s skill and efficiency

Headnote and holding:

After its insurer refused to pay a claim submitted by the applicant for goods that were lost in transit, the applicant brought an action against the insurer for the amount of its loss. The applicant then sought to join the insurance broker as a second defendant, arguing that the broker had a direct or substantial interest in the result of the litigation and that the broker’s interests might be prejudicially affected and accordingly should be afforded an opportunity to be joined as a party. The broker argued that it had no interest in the matter, that it was not a party to the contract and that it was an agent only and thus not liable. It was a mere negotiator between the principals.

Held: a broker in a contract of sale is a middle man or intermediary whose office it is to negotiate between two parties until they are ad idem as regards the terms upon which they are prepared to buy and sell. A person described in a contract as a broker will normally be taken to be the agent of both parties, but his capacity as agent of both parties must not be pushed to extremes, as it cannot be presumed that he had the power to bind both parties to the contract. He is, in fact, an intermediary rather than a business plenipotentiary. The business of an insurance broker (who must be registered under s 35 of the Insurance Act [Chapter 24:07]) is to familiarize himself with the details of the policies offered and premiums charged by different insurers and obtain appropriate insurance cover for his clients at competitive rates. It must not be assumed that, because he is described as a broker, he is the agent of both parties and in fact he commits a breach of his duty to his principal, the insured, if without his consent he acts on instructions from the insurer. He owes a duty to his principal to obtain a policy in accordance with his instructions, and if he obtains one that is not in accordance with his instructions he will be liable for a breach of his contract of agency, even if he has sent the policy to the insured and the insured has not complained about its terms. The insured is under no obligation to read the policy, but is entitled to rely on the skill and efficiency of the broker. The broker must make the necessary inquiries of the insured to ascertain all material facts and must disclose them to the insurer. Failure to discharge this duty renders him liable to the insured or the insurer, which ever has suffered loss through his failure.

Here, the broker negotiated the terms and conditions of the contract which contained the rights and obligations of the parties. It was this contract whose interpretation and formation were now in dispute.  There was a serious allegation that the broker breached its duty to the applicant by failing to disclose material facts relating to the applicant’s rights and obligations under the contract. Finally, the insurer denied the broker’s averment that the broker was the insurer’s agent.

Accordingly, the presence of the broker in the proceedings was necessary to ensure that all matters in dispute in the cause might be effectually and completely determined and adjudicated upon.

Coram
Takuva J

                                                       

 

            Judgment No. HB 9/15

                                                                                                                        Case No. HC 2584/13

LEAST SUPPLIES (PVT) LTD

t/a L.S. CELLULAR & L.S. CAPITAL

 

versus

 

T.I.B. INSURANCE BROKERS

 

And

 

HERITAGE INSURANCE COMPANY

 

IN THE HIGH COURT OF ZIMBABWE

TAKUVA J

BULAWAYO 16 JUNE & 15 JANURY 2015

L. Mpofu for applicant

S.Chamunorwa, for respondents

 

Application for Joinder

 

            TAKUVA J:  This is an application for joinder of parties in terms of Order 13 Rules 87 (2) (b) of the High Court Rules, 1971.

            The facts are simple and largely undisputed.  They are:

            Applicant is involved in the business of buying and selling cell phones and cell phone accessories which it normally imports from Dubai.  Sometime in 2012 applicant approached 1st respondent who are 2nd respondent’s insurance brokers and requested insurance cover for possible losses that could arise during importation of cell phones from Dubai.  The 2nd respondent then undertook to indemnify the applicant.

            In September 2012 applicant lost a consignment of cell phones valued at US$57 285,00 (fifty seven thousand two hundred and eighty-nine United State dollars) whilst being transported from Dubai to Bulawayo.  Applicant then duly completed claim forms and submitted them to the 2nd respondent.  Subsequently applicant’s lawyers wrote to the 1st respondent pointing out that applicant did not at any time sign any policy document and that none was ever availed to applicant by 1st respondent.  This letter was written after 1st respondent submitted a report from New Generation Loss Assurers which indicated that applicant was not entitled to be indemnified because it allegedly breached some conditions relating to the declaration conditions, terms and conditions relating to packaging and warranties, and clauses therein.

            After 2nd respondent refused to compensate applicant the latter issued summons under case number HC 364/13 claiming payment of US$57 285,00 being the value of the cell phones.  The parties have closed pleadings and a round table conference was held wherein it emerged that most of the triable issues centre around the role played by the 1st respondent as an insurance broker in the contract.

The applicant then applied for joinder of 1st respondent as a 2nd defendant under case number HC 364/13.  The 1st respondent has opposed the application.  Consequently, the broad issue is whether or not 1st respondent should be joined as a defendant under case number HC 364/13.

            Applicant relies on R 87 (2) (b) of the High Court Rules, 1971 which provides as follows:

“(2)      At any stage of the proceedings in any cause or matter the court may on such     terms as it thinks just and either of its own motion or on application –

  1. order any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or mater may be effectually and completely determined and adjudicated upon, to be added as a party;

but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as maybe authorized.

(3)        A court application by any person for an order under sub-rule (2) adding him as a defendant shall, except with the leave of the court, be supported by an affidavit showing his interest in the matters in dispute in the cause or matter.”

            Applicant also relied on the following cases:-

  1. Henri Viljoen (Pvt) Ltd v Awerbuch Bros 1953 (2) SA 151 and
  2. Anabas Services (Pvt) Ltd v Ministry of Health and 2 Ors HB-21-03.  The principle in these cases is that a party who has a direct or substantial interest in the result of any litigation and whose interests might be prejudicially affected thereby must be afforded an opportunity to be joined as a party thereto.  It was also submitted by applicant quoting M F B Reinecre and S W J Van Der Merwe General Principles of Insurance at 135 that “An agent who is guilty of a misrepresentation is personally liable for the damage caused by him.”

On the facts applicant submitted that the fact that 2nd respondent denies in case number HC 364/13 that 1st respondent was its agent in the insurance contract means that there is a real chance that a decision prejudicial to 1st respondent might be made especially if a finding of misrepresentation on its part is made.  Also, it was submitted that the fact that the principal is known is not a bar to joining an agent to proceedings in that what should be considered is whether the party which is sought to be joined has a direct or substantial interest.  Finally, it was submitted that the presence of 1st respondent before the court is necessary to ensure that all matters in dispute in the cause may be effectively an completely determined and adjudicated upon.

The first respondent opposed the application on the following grounds:

  1. the 1st respondent has no interest in the matter under case number HC 364/13 because the cause of action arises from a contract to which it is not a party.
  2. the 1st respondent being an agent cannot be liable based on the insurance contract per se where no relief is sought against it.

In its heads of argument, 1st respondent insisted that an agent cannot be sued and submitted that the 1st respondent is 2nd respondent’s agent and not applicant’s agent.  Therefore, applicant cannot sue 1st respondent in line with the decision in Smith v Len’s Agencies (Pvt) Ltd S-117-92 and Fowler v Hollings (1872) LR 7 & B 6.6 at 623 where a broker was defined as “an agent employed to make bargains and contracts between persons in matters of trade, commerce and navigation.  Properly speaking, a broker is a mere negotiator between other parties …”

Finally, 1st respondent submitted that the Anabas case is distinguishable from the one in casu in that the 1st respondent will not be affected by the order that the court will make as it has no direct and substantial interest in that order.

In order to resolve the above issue it is necessary to examine the status and role of a broker in an insurance contract.  R. H. Christie Business Law in Zimbabwe at page 33 defines a broker as “a middle man or intermediary whose office it is to negotiate between two parties until they are ad idem as regards the terms upon which they are prepared to buy and sell.”  In Glass v Hendrie & Co (Pvt) Ltd 1957 R & N 44 48 it was held that “a person described in a contract as a broker will normally be taken to be the agent of both parties, …  But his capacity as agent of both parties must not be pushed to extremes, as it cannot be presumed that he had the power to bind both parties to the contract.  He is in fact, an intermediary rather than a business plenipotentiary.” (my emphasis)

At pages 232 – 233 the same author in the same work states: “The business of an insurance broker (who must be registered under the Insurance Act [Chapter 196] s 27) is to familiarize himself with the details of the policies offered and premiums charged by different insurers and obtain appropriate insurance cover for his clients at competitive rates.  It must not be assumed that because he is described as a broker he is the agent of both parties and in fact he commits a breach of his duty to his principal, the insured, if without his consent he acts on instructions from the insurer.  He owes a duty to his principal to obtain a policy in accordance with his instructions, and if he obtains one that is not in accordance with his instructions he will be liable for a breach of his contract of agency, even if he has sent the policy to the insured and the insured has not complained about its terms.  The insured is under no obligation to read the policy, but is entitled to rely on the skill and efficiency of the broker.  The broker must make the necessary inquiries of the insured to ascertain all material facts and must disclose them to the insurer.  Failure to discharge this duty renders him liable to the insured or the insurer, which ever has suffered loss through his failure.” (my emphasis).

In Syfin Holdings Ld v Pickering 1982 (1) ZLR 10 (S), 1982 SA 255, it was held that “the insured’s cause of action in such a case does not arise until he suffers damage …”

Applying these principles to the case in casu, I find that it is outright mischievous for the 1st respondent to claim that it has not interest in the matter.  The notice of opposition constitutes a devious act in my view.  Contracts of insurance from their very nature require utmost good faith (uberrima fides) on each side.  Failure to disclose material facts entitles a party to avoid the policy.  It is for this reason that 1st respondent’s role in the formation of the contract must be exposed fully.

On the facts of this matter, it is accepted by 1st respondent that it negotiated the terms and conditions of the policy in its capacity as an insurance broker.  It is this insurance contract which contains the rights and obligations of the parties.  It is the same contract whose interpretation and formation are now in dispute.  Further, there is a serious allegation that 1st respondent breached its duty to the applicant (the insured) by failing to disclose material facts relating to the applicant’s rights and obligations under the contract.

Also, it appears from the papers that while 1st respondent admits that it acted as agent of the 2nd respondent, the latter denies this fact casting doubt on whose mandate 1st respondent was fulfilling.  It is surprising that 1st respondent has chosen not to deal with this aspect in its opposition, choosing instead to just generalize its role as an agent, without specifically indicating whose agent it is.

It is baffling to note that the written contract the 1st respondent harps on is not even attached to its opposing papers.  All that the 1st respondent did was to give a broad and unsubstantiated averment in para 7.2 of its opposing affidavit to the effect that the policy was reduced into writing and forwarded to the applicant who then paid premiums.  It does not say how this was done or why the contract was not signed by the parties.

For these reasons, I am of the view that the presence of 1st respondent in proceedings under case number HC 364/13 is necessary to ensure that all matters in dispute in the cause may be effectually and completely determined and adjudicated upon.

Accordingly, it is ordered that:-

  1. the 1st respondent be and is hereby joined as 2nd defendant in the proceedings under case number HC 364/13.
  2. the 1st respondent be and is hereby ordered to file its defence to the claim under case number HC 364/13 in terms of the Rules of this court with the claim calculated from the date of granting of this order.
  3. costs shall be in the cause.

 

 

 

R. Ndlovu & Company for applicant

Calderwood, Bryce Hendries & Partners, respondents’ legal practitioners