THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No: 5/2014

Reportable

In the matter between:

Regent Insurance Company Ltd

Appellant

and

King’s Property Development (Pty) Ltd t/a King’s Prop
Respondent

Neutral Citation: Regent Insurance v King’s Property (5/2014) [2014] ZASCA
(176) 21November 2014

Coram: Lewis, Wallis and Pillay JJA and Fourie and Meyer AJJA

Heard: 3 November 2014

Delivered: 21 November 2014

Summary:  Failure to disclose that a building was occupied by a tenant which
manufactured truck and trailer bodies using flammable materials when insurance
cover was requested for the premises amounted to a material non-disclosure under
s 51(1) of the Short-Term Insurance Act 53 of 1998: the non-disclosure induced the
insurer to enter into the insurance contract: defence of estoppel raised on ground
that insurer had led insured to believe that insurance was effective not established.

___________________________________________________________________

ORDER

On appeal from:  North Gauteng High Court, Pretoria (Hughes J sitting as court of
first instance)
(a) The appeal is upheld with costs including those of two counsel.
(b) The order of the high court is set aside and replaced with:
„The plaintiff‟s claim is dismissed with costs, save for those occasioned by the
defendant‟s applications for leave to amend its rejoinder.‟
__________________________________________________________________
JUDGMENT

Lewis JA (Pillay JA and Fourie and Meyer AJJA concurring)
[1] This appeal turns on whether an insurance claim was properly rejected and
the policy treated as void by the insurer because of the insured‟s failure to disclose
the nature of a business carried on by a tenant in a building damaged by a fire. On
24 May 2010 premises at 8 Press Avenue, Crown Mines, Johannesburg (the
premises) burned down. The owner, King‟s Property Development (Pty) Ltd (King‟s
Property), the respondent in this matter, claimed the cost of repairs and payment in
respect of rental income lost, from its insurer, Regent Insurance Company Ltd
(Regent), the appellant.

[2] Regent rejected the claim, alleging a material non-disclosure by King‟s
Property when applying for the insurance policy in respect of the premises. The non-
disclosure lay in failing to advise Regent that the premises were occupied by a
tenant, Elite Fibre Gauteng CC (Elite Fibre), which manufactured truck and trailer
bodies using resin and fibreglass, highly flammable materials, a risk that Regent said
it would not have undertaken had it known of the nature of the business. The fire was
caused by employees of Elite Fibre in the course of manufacturing.

[3] King‟s Property accordingly instituted action in the North Gauteng High Court
against Regent for R9 031 717 plus interest, as the reasonable cost of repairs, and
R1 111 800 in respect of loss of rental. (These sums represent the quantum of the
loss agreed by the parties.) The high court (Hughes J) found that Regent was liable
to pay the sum claimed on the basis that it was estopped from relying on the defence
of non-disclosure because, when the insurance broker for King‟s Property, Mr Stuart
Riley, had requested the insurance, he had asked Regent‟s representative, Mr Guy
Lewis, to do an urgent survey of the premises. Although Lewis had in turn requested
an assessor at Regent to do the survey, it was in fact not done before the fire.

[4] The high court held that King‟s Property had been misled into believing that
the survey had been done, and had accordingly paid the premiums on the
assumption that the insurance covered the premises. Hughes J ordered Regent to
pay the full amount claimed. Regent appeals against that order with the leave of the
high court.

[5] On appeal the issues to be determined are, first, what was in fact disclosed to
Regent about the premises; second, whether Regent established a material non-
disclosure in terms of s 53(1) of the Short-Term Insurance Act 53 of 1998 which
induced Regent to enter into the contract; and third, if there was a material non-
disclosure, whether King‟s Park established either estoppel or waiver of reliance on
non-disclosures.

[6] It was common cause on the pleadings that on 16 March 2010 the parties
concluded a contract of insurance in respect of the premises, Regent insuring
against risks set out in the policy, which included fire damage under the „Buildings
Combined‟ section of what was known as a Multimark policy. Regent also admitted
that it was liable to indemnify King‟s Property for loss of rent should the premises
become „untenantable‟.  However, Regent alleged that it was not bound by the policy
because it was not advised by King‟s Property that the premises were occupied by
Elite Fibre.

[7] The failure to advise of Elite Fibre‟s tenancy and of the nature of its business
(manufacturing truck and trailer bodies with material including resin and fibreglass

which are highly flammable), Regent pleaded, amounted to a material and wrongful
non-disclosure, which affected the risk. Regent would not have assumed the risk, it
pleaded, had it been aware of the material facts and the nature of Elite Fibre‟s
business.

[8] King‟s Property replicated to this plea alleging both that there had been a
disclosure of the existence of a warehouse on the premises, and that Riley had
requested Lewis to arrange as a matter of urgency for a survey to be done on the
premises to determine the relevant insurance risks. The disclosure was alleged to
have been made in an email written by Riley and sent to Lewis on 9 February 2010
in which Riley asked for a quotation for insurance in respect of the premises, which
were identified as „offices/warehouse in Crown Mines‟. On 10 March 2010, said
King‟s Property, Lewis informed Riley orally that the premises would be insured at a
rate of 0.1 per cent.

[9] On 16 March 2010 Riley requested Lewis to have a survey done in respect of
the premises. The survey was admittedly not done. Thus, pleaded King‟s Property,
Regent was aware when the policy was issued that the premises comprised offices
and a warehouse and that the risks pertaining to a warehouse included that of
having flammable material on the premises: there was thus no failure to disclose that
risk. The survey requested would have revealed the precise nature of the risk.
Despite not having done the survey the insurance policy in respect of the premises
was issued unconditionally. The result, pleaded King‟s Property, was that Regent
had waived its rights to rely on any non-disclosure; alternatively Regent had
represented to King‟s Property that it had accepted the risk and, relying on this
representation, the latter had paid the premiums, and had not made alternative
arrangements to insure the premises – Regent was accordingly estopped from
relying on any non-disclosure.

[10] Regent‟s rejoinder (amended after Lewis had given evidence, withdrawing an
admission as to the subject of the discussion between Riley and Lewis on 10 March
2010) was that Lewis‟s response in quoting for the insurance of the premises was
not related to the email of 9 February 2010; it was in response to a second email
which Riley had sent on 16 March 2010 requesting the addition of the premises to

the policy with effect from 15 March. The terms of the emails are argued by King‟s
Property to be important and I shall return to them. The gravamen of this defence
was that Lewis had not related the emails to each other and had not realized that
they both referred to the same premises. It was also denied that Lewis knew that the
reason for the survey requested was to ascertain the risks in respect of the
premises. In any event, the reason for the request, Riley testified, was to ensure that
all the King‟s Property premises were surveyed.  Regent also alleged that since the
premises were believed to be offices only, such that the risk of fire was considerably
less, the survey was regarded as unnecessary or, at the least, less urgent.

The background to the request for insurance for the premises
[11]  It is useful to consider, in so far as relevant, the history of the insurance
arrangements between King‟s Property and Regent. The Multimark policy was first
issued by Regent to King‟s Property in April 2008. On 21 April 2008 Riley,
representing his brokerage, Paradime Asset Management CC, wrote to Lewis
requesting cover on a building, stating that „Client does property development and
supplies bedding covers etc‟. He also asked for a quotation for insurance on a
vehicle. Regent issued a policy with effect from 17 April 2008, reflecting the insured
as „King Prop‟ and describing its business as „Property Developer/suppliers Of
Bedding Goods‟. The premises were listed under the „Fire‟ section of the policy, and
included plant, machinery and landlord‟s fixtures and fittings for which the insured
was responsible.

[12] On 1 October 2008 Riley requested Lewis, by email, to remove the plant and
machinery from the fire cover, and asked that additional properties and another
vehicle be added to the policy. On 20 August 2008 Regent included the premises in
the fire section but a value of R92 275 000 was ascribed to them. This value was
incorrect: it related not to the premises, but to other property in the King‟s Property
portfolio, Kings Square, also in Crown Mines. But on 9 September 2008 the fire
insurance in respect of the premises was deleted. On 6 October 2008 the risk
address was changed to Section 3 Kings Square, and erven 51 and 52 Prelude
Avenue, Crown Mines. Stock to the value of R10 million was also added. And on 3
November 2008 Riley asked Lewis to add three residential properties in

Johannesburg to the policy under the „combined‟ section (presumably the buildings
combined section).

[13] On 27 February 2009 Riley requested Regent to amend the policy so as to
cover the premises again, at a sum insured of R15 million. The amendment was
effected on 25 March 2009. But the premises were again removed from the buildings
combined cover on 15 October 2009, although the office contents of the premises
remained insured. (This revision appeared only on the schedule dated 25 January
2010.)

[14] On 9 February 2010 Riley sent the first email in issue requesting cover for the
premises. The email read:
„Hi Guy [Lewis]
I need a rate on the following buildings.
R165 000 000 Offices in Sandton
R255 000 000 Shopping center in Sandton
R15 000 000 Offices/warehouse in crown mines (we had this on the policy)
We had a rate of .150% but in view of the SI [sum insured] I think we need to review the rate
bearing in mind Kings Square has a rate of .100% based on a SI of R214 000 000.‟

[15] Lewis responded by email an hour later, saying that King‟s Property would
„have to go collective on the 2 larger accounts‟ based on „eml‟ (the estimated
maximum loss), „as discussed telephonically‟. He added: „We will not be able to go
on risk until both buildings are surveyed and the eml falls within our treaty limit‟, also
as discussed telephonically. Regent was not able (or willing) to cover the sums
insured on its own.

[16] There was no further correspondence in respect of the Sandton buildings. But
there were other emails in respect of the policy, one written by Riley on 15 February
which asked for cover for another vehicle, changed the risk address to the premises,
deleted stock at Kings Square and asked for a reduction in the rates for three other
vehicles. And then on 16 March Riley wrote another email to Lewis stating:
„Please add the following building to the policy wef [with effect from] 15/3/2010
Risk address to 8 Press Ave Crown Mines JHB. This is their offices.

R15 000 000
Rate .100%
Add Sasria‟
The policy was revised to add the premises under the „buildings combined‟ section of
the policy at the rate requested, which was favourable to King‟s Property.

[17] As I have said, Hughes J held that Regent was estopped from relying on any
defence of non-disclosure of the risk of fire in premises used for construction of
trucks and trailers with flammable materials. She made no finding, however, as to
whether there had been a material non-disclosure as to tenancy of the premises.

[18] On appeal, Regent argued that there was a material non-disclosure that
entitled it to reject the claim and regard the insurance contract as void, and that the
defence of estoppel had not been established as it was not shown that King‟s
Property had been induced to act to its prejudice by Regent‟s failure to carry out the
survey. The cause of prejudice, argued Regent on the other hand, was the failure to
disclose that the premises were occupied by a tenant which manufactured goods
using highly flammable materials such as fibreglass and resin.

[19] I shall deal first with the legal principles governing material non-disclosure and
then turn to whether there was in fact a failure to disclose a fact material to the risk
on the part of King‟s Property, represented by Riley, that induced Regent to conclude
the contract of insurance.

The legal principles covering material non-disclosure
[20] It is trite that, at common law, an insured, when requesting insurance cover,
must make a full and complete disclosure of all matters material to the insurer‟s
assessment of the risk. Failure to do so will entitle the insured to reject a claim under
a policy and to treat it as void. Legislation has been enacted, however, to preclude
insurers from treating misrepresentations that are trivial, and more recently non-
disclosures that are trivial, as grounds for avoiding insurance contracts and rejecting
claims.

[21] Section 53(1) of the Short-Term Insurance Act provides:
„Misrepresentation and failure to disclose material information
(1)(a) Notwithstanding anything to the contrary contained in a short-term policy, whether
entered into before or after the commencement of this Act, but subject to subsection (2) –
(i) the policy shall not be invalidated;
(ii) the obligation of the short-term insurer thereunder shall not be excluded or limited; and
(iii) the obligations of the policyholder shall not be increased,
on account of any representation made to the insurer which is not true, or failure to disclose
information, whether or not the representation or disclosure has been warranted to be true
and correct, unless that representation or non-disclosure is such as to be likely to have
materially affected the assessment of the risk under the policy concerned at the time of its
issue or at the time of any renewal or variation thereof.
(b) The representation or non-disclosure shall be regarded as material if a reasonable,
prudent person would consider that the particular information constituting the representation
or which was not disclosed, as the case may be, should have been correctly disclosed to the
short-term insurer so that the insurer could form its own view as to the effect of such
information on the assessment of the relevant risk.‟

[22] The section was preceded by s 63(3) of the Insurance Act 27 of 1943, but that
was limited to representations and did not cover non-disclosures. That resulted in an
inconsistency that was not rational. The history of the case law dealing with the
distinction between material positive misrepresentations and material non-
disclosures is set out with great clarity by Schutz JA in Clifford v Commercial Union
Insurance Co of SA Ltd 1998 (4) SA 150 (SCA). This court endorsed the view that
the test for whether a non-disclosure is material to the assessment of the risk is
objective. In this regard the court in Clifford confirmed the principles adopted in
Mutual and Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419 (A)
at 435G-I in finding that the test was whether the reasonable person would have
considered that the risk should have been disclosed to the insurer. But, in
interpreting s 63(1) of the former Insurance Act, this court held that the test for
determining whether a misrepresentation was material was a subjective one:
Qilingele v South African Mutual Life Assurance Society 1993 (1) SA 69 (A). In
Clifford Schutz JA (delivering the majority judgment) considered, but did not decide,
that that aspect of Qilingele was wrongly decided. (The minority considered that it

was not necessary for the decision to pronounce on the correctness or otherwise of
Qilingele and refrained from doing so.)

[23] It is clear now, however, that since the introduction of s 53(1) of the Short-
Term Insurance Act (and pursuant to its amendment in 2003) the test in respect of
both misrepresentations and non-disclosures is an objective one, thus bringing the
legislation in line with the common law. Two principles enunciated in Clifford remain
applicable. First, the onus rests on the insurer to prove materiality (at 155E-G), this
in accordance with the decision in Qilingele; and second, the insurer must prove that
the non-disclosure or representation induced it to conclude the contract. Thus the
insurer must show that the representation or non-disclosure caused it to issue the
policy and assume the risk. As Schutz JA pointed out (at 156E-I), however, once
materiality has been proved it would be difficult for the insured to overcome the
hurdle of showing no causation, a matter to which I shall return.

[24] In Mahadeo v Direct Insurance Ltd 2008 (4) SA 80 (W) paras 17 and 18 the
court confirmed that the test in s 53(1) of the Short-Term Insurance Act is objective:
whether information should have been disclosed is judged not from the point of view
of the insurer but from that of the notional reasonable and prudent person. The
question is thus whether the reasonable person would have considered the fact not
disclosed as relevant to the risk and its assessment by an insurer.

[25] Regent argued on appeal that the test for inducement remains subjective (see
Clifford at 157G-H), and that the court in Mahadeo failed to appreciate this. It relied
in this regard on the judgment in this court in Representative of Lloyds & others v
Classic Sailing Adventures (Pty) Ltd 2010 (5) SA 90 (SCA) para 24. As I see it, no
such finding was made by this court. It dealt not with the question of inducement but
with whether an insured can waive the benefits conferred by the statute in s 53. And
Mahadeo dealt only with the test for materiality, and not the question of inducement.

[26] There is, however, a dictum in Mutual & Federal Insurance Co Ltd v Da Costa
2008 (3) SA 439 (SCA) para 12, relied on by King‟s Property, that suggests that the
test for whether an insurer was induced to issue a policy, or one at a lesser rate, is
objective: would the reasonable insurer have refused to extend the cover had it

known the truth? But in fact this court in Da Costa was dealing with the question
whether the misrepresentation was material and did not consider the question of
inducement.

[27] I consider that the test for inducement remains subjective – was the particular
insurer induced by the failure to disclose a material fact to issue the policy? In
making the enquiry, „evidence that the insurer had a particular approach to risks of
the kind in question would be relevant and could be cogent‟ (Qilingele at 75C-D).
But, as Schutz JA said in Clifford (at 156G-I), referring to Pan Atlantic Insurance Co
Ltd v Pine Top Insurance Co Ltd  [1995] 1 AC 501 (HL), „once materiality has been
established, the insured is likely to face an uphill struggle in trying to demonstrate
that his non-disclosure or misrepresentation bearing this stamp had no effect‟.

Was there a failure to disclose the nature of the risk?
[28] It is clear that Riley, representing King‟s Property, did not disclose the actual
risk. He did not himself know who occupied the premises and what business was
conducted there. He thus did not disclose that Elite Fibre occupied the premises and
manufactured truck and trailer bodies using fibreglass and resin. The question that
then arises is whether the argument that there was sufficient disclosure of a similar
risk, advanced by King‟s Property, bears scrutiny. It argued that the many requests
for quotations in respect of cover in respect of the premises over the period from
April 2008 to March 2010, and the various revisions to the policy pursuant to those
requests, were sufficient to disclose to Regent that the premises were occupied by a
business using flammable materials.

[29] Regent argued that the only basis on which it could be said that the risk was
in some way disclosed to it was if Lewis should have „tied‟ the emails of 9 February
2010 and 16 March 2010 or that in the discussion between Lewis and Riley on 10
March 2010 the request for a quotation for the premises was considered. It should
not be required of Lewis that he put all the pieces of the puzzle together and make
sense of the respective requests, Regent argued.

[30] Lewis testified that he did not in fact realize that the second email, which
referred only to the premises, and stated that the building was „their offices‟, related

to the same premises as those in the earlier email. He claimed that on reading the
first email, which referred to three buildings, he focused on the larger ones for which
collective insurance would have been necessary. He conceded that if he had
considered the request for cover for the premises he could have ascertained what
the building was simply by looking at his own records.

[31] The premises, argued King‟s Property, had been covered for fire insurance on
and off, on the same policy, since April 2008. Had Lewis looked at the schedules to
the policy he would have realized that the premises had previously been described
as being occupied by „Property Developers/suppliers of Bedding Goods‟. And had he
looked at the email sent but five weeks earlier on 9 February he would have seen
that it referred to the premises as offices/warehouse.

[32] Mr David Fry, called as an expert in the insurance industry by King‟s Property,
testified that Regent, had it looked at its records, would have established that the
premises referred to in the email of 16 March were the same as those previously on
the schedules to the policy, and had been variously described as a warehouse, as
the premises of a bedding supplier and as offices.

[33] Despite this, Regent argued that Riley was responsible for non-disclosure: he
„contented‟ himself with assuming that Lewis would recall his email of 9 February
2010 when the second email was received on 16 March 2010. King‟s Property on the
other hand, argued that Riley did not content himself at all; he asked for an urgent
survey to be done of the premises. The only purpose of that could have been so that
Regent could ascertain the risk. I shall return to the question of the survey.

[34] In my view, while Lewis possibly could have ascertained information about the
premises from the records available to him, what he would not have discovered was
that the premises were occupied by a tenant which manufactured truck bodies and
trailers, using flammable materials. The presence of Elite Fibre in the building, and
the fact that it occupied a substantial portion of the building, made a material
difference to the risk. I consider that the reasonable person would have regarded
that fact as material and disclosed it to Regent.

The request for a survey
[35] King‟s Property contended, however, that Regent was able to ascertain the
risk by doing the survey that was requested by Riley. The evidence established that
within minutes after sending the email on 16 March 2010 requesting cover on the
premises at a rate of 0.1 per cent, Riley phoned Lewis and asked him to conduct an
urgent survey in respect of the premises. While there was some dispute as to the
content of the discussion and the reason for the request, what cannot be disputed is
that Lewis, only 20 minutes after receiving the email, gave instructions to his
assistant, Mr Ziaad Kyriakidis, to arrange an urgent survey.

[36] The instruction was not followed up. Only on 26 April, when Lewis realized
that the survey had not yet been done, did he give Kyriakidis Riley‟s contact number.
Riley in turn referred Kyriakidis to the shareholder of King‟s Property, Mr D Zhang.
On 30 April, Kyriakidis completed a request for a survey for the purpose of giving it to
Regent‟s surveyor, Mr Shaun Harper.

[37] Harper had previously done a survey of the premises when working for
another insurer. He knew that a supplier of bedding goods had previously been
situated in the premises. Had he been told by Regent that a bedding supply concern
was still in the premises and been asked to do the survey timeously, he said, he
would have prioritized the work and gone to the premises when asked to do so. The
survey request said that the premises were occupied by property developers, and
was thus inaccurate in any event.

[38] Regent argued that the purpose of the survey was to ascertain how well run
and managed the risk at the premises was. It should have been advised what the
risk was in the first place: King‟s Property should have told Regent that Elite Fibre
occupied the premises, and, if the risk had been accepted which, for the reasons that
follow, was unlikely, the surveyor would then have determined how the risk was
being managed.  In the end, though, even if the purpose were to ascertain the risk,
the survey was not requested before the policy was revised to include the premises,
and the insurance was not made conditional on the survey being completed. The
request for the survey did not relieve King‟s Property of the duty to make a full
disclosure as to the use of the premises.

Did the failure to disclose the business of Elite Fibre induce Regent to insure
the premises?
[39] If Riley had disclosed that Elite Fibre was a tenant in the premises, would
Regent have declined to assume the risk or accepted it on different terms? Was
disclosure of the presence of a warehouse sufficient in the circumstances? Regent
argued that, on the assumption that Lewis knew, or at least should have known, that
there was a warehouse at the premises, this would not have alerted him to the risk of
flammable materials being used in the premises. That risk is quite different, it was
argued, from the risk attendant on a warehouse where goods are stored, or even the
risk attendant on a business supplying bed covers. Regent‟s assessment of the risk
would have been different, it argued.

[40] Lewis referred in this regard to the Regent Rating Guideline which classified
fibreglass goods manufacturers, retailers or wholesalers as a „Z‟, which meant that
the risk would not be accepted without the technical management‟s assessment and
the decision of the general manager. The risk, he said, would have to be surveyed
before insurance cover was issued. And even if those hurdles had been overcome,
Regent would still not have insured the premises against fire under the building
combined section of the policy. That section expressly precluded cover in respect of
buildings used for manufacturing. The policy also stated that:
„A category has been introduced into the rating guide, known as „Z‟ which means “Decline”.
Due to high hazard of this category, we, nor our treaty reinsurers wish to underwrite this
business.‟
Thus had Regent known that the premises were used for manufacturing it would
have declined to extend insurance under the buildings combined section; and a
fortiori, had it known that fibreglass was being used it would have declined to extend
the cover at all. Lewis was not authorized to extend cover for this risk and would
have jeopardized his job had he done so. His evidence that he did not know that
there was any fire risk at the premises is supported by this factor.

[41] King‟s Property, on the other hand, argued that the risk in respect of premises
occupied by fibreglass manufacturers was no greater than in respect of premises
used for a warehouse where goods are stored or premises occupied by a supplier of
bedding materials. This was the view of Fry and Harper. And it will be recalled that

Harper had previously surveyed the premises (when the bedding supply business
was in occupation) and had considered the risk well-managed.

[42] Moreover, King‟s Property argued, Mr Paul Moremi, its first witness, had
surveyed the premises for the purpose of insuring Elite Fibre‟s business, and
considered that the risk was well-run. On the strength of that view, Mutual and
Federal had issued a policy in October 2009 to Elite Fibre.

[43] In my view, that is of no consequence. As shown, Regent would not have
extended cover under the buildings combined section had it known that there was a
manufacturing business in occupation, and it would have declined the risk altogether
had it been advised that Elite Fibre was manufacturing goods using fibreglass and
resin. Regent was clearly induced to enter into the contract by the non-disclosure of
the tenant‟s business. It would have accepted the risk only in special circumstances
and after further investigation. Had Lewis known the facts that were not disclosed he
would not have issued cover at all – or at least, not on the terms that he did.

Waiver
[44] King‟s Property, as indicated earlier, in response to Regent‟s plea of non-
disclosure, replicated that it had requested an urgent survey as soon as it asked for
insurance cover for the premises; Regent had issued the policy without stating that it
was subject to a survey; and in so doing it had waived its right to rely on the non-
disclosure. The argument was not pressed on appeal since it was clear that Regent
had not knowingly abandoned its right to rely on something of which it was ignorant.
Waiver of a right entails knowledge of it: where there has been a non-disclosure
there clearly cannot be an intention to give up the right to rely on it.

Estoppel
[45] In the alternative, King‟s Property argued that when Regent issued the policy
despite not having done the survey requested by Riley, and accepted payment of the
premiums, Regent lulled it into a false sense of security. Had it known that the
survey had not been done, and that cover would not have been issued, it would have
attempted to obtain insurance from another company, instead of which it had been

misled and acted to its detriment. The high court found that Regent was estopped
from relying on the non-disclosure in the circumstances.

[46] As Regent argued, however, what actually caused prejudice to King‟s
Property was its failure to disclose Elite Fibre‟s tenancy and the nature of its
business. Had it made a proper disclosure Regent would have given priority to the
survey. Moreover, Riley had asked Lewis to extend the cover with effect from 15
March 2010, the day before he requested that the survey be done. The policy was
revised to cover the premises before the survey was even requested. And when
Kyriakidis contacted Riley on 26 April 2010 to ask for a contact number so that the
survey could be done, Riley became aware that Regent had not complied with his
request to do the survey urgently. No misrepresentation was proved and no estoppel
was established.

[47] I conclude, therefore, that King‟s Property‟s non-disclosure of the fact that
there was a manufacturing business that used highly flammable materials in the
process of manufacturing to Regent was material, in that the reasonable, prudent
person would consider that it should have been disclosed so that Regent could have
formed its own view as to the effect of the information on the assessment of the risk
(s 53(1)(b) of the Short-Term Insurance Act). The non-disclosure quite obviously
induced Regent to extend the cover.  And thus Regent was entitled to reject the
claim and to regard the policy as void.

[48] In the result:

(a) The appeal is upheld with costs including those of two counsel.

(b) The order of the high court is set aside and replaced with:
„The plaintiff‟s claim is dismissed with costs, save for those occasioned by the
defendant‟s applications for leave to amend its rejoinder.‟

___________________
C H Lewis
Judge of Appeal

Wallis JA (concurring)
[49] I arrive at the same conclusion as Lewis JA, but by a slightly different route.
Regent repudiated liability under the policy on the grounds of a material non-
disclosure inducing it to provide cover. It was not told that Elite Fibre, a tenant that
was manufacturing vehicle bodies on the premises out of fibreglass and resin and
associated chemicals, occupied the premises that burned down. Mr Riley, the broker
representing King‟s Property, was unaware of that fact and could not disclose it. He
said that had he known he would have informed Mr Lewis, the underwriter
representing Regent, of that fact. Mr Fry, the expert witness called on behalf of
King‟s Property, testified that a full disclosure of the nature of the business
conducted at the premises must be made by the insured.

[50] King‟s Property sought to overcome this non-disclosure by invoking the
principle that the insured need not disclose information in the possession of the
insured (Malcher & Malcolmess v Kingwilliamstown Fire & Marine Insurance & Trust
Co (1883) 3 EDC 271 at 288). It contended that if Regent had examined its records
and prior correspondence it would have discovered that the business of King‟s
Property had been described as „Property Developer/suppliers Of Bedding Goods‟
and that, in one earlier email, the building on the property had been described as
both offices and a warehouse. That, taken together with the request that the property
be surveyed, albeit only so that all the properties in the portfolio had been surveyed,
was alleged to have disclosed a risk at least equivalent in nature to the actual risk
and accordingly there had been sufficient disclosure of the nature of the risk being
underwritten. The contention was that Mr Lewis should have inferred that the
premises were being used to manufacture bedding and that this was an equivalent
fire risk to the risk posed by manufacturing fibreglass vehicle bodies in the premises.
I disagree with both legs of this argument.

[51] As to the first leg King‟s Property sought to place a duty upon the insurer to
make enquiries that it did not in law bear and that was inconsistent with its own duty
of disclosure. It required that Mr Lewis fossick around Regent‟s records unearthing
little bits of information that had been disclosed to it in the past and assemble them
into a picture that would enable him to determine the nature of the risk and assess
whether Regent wished to grant cover and, if so, on what terms. There may be some

uncertainty regarding the extent to which an insurer must consult its own records or
search its own or some other data base in search of information before going on risk
(12, Part 1 LAWSA 2 ed, para 217, fn2). But the suggestion that in this case Mr
Lewis needed to read the entire file and put together a picture of the risk from an
email written over a month earlier, read in the light of some previous schedules to
the policy and a general description of the nature of the insured‟s business, in my
view goes too far. He was being asked to provide cover in respect of a building
described to him as offices. The cover was sought under the buildings combined
section of the policy, which was not available to cover a manufacturing facility. He
was entitled without more to accept that he was being asked to provide cover for that
risk. He was not alerted to the fact that he needed to explore further.

[52] An underwriter such as Mr Lewis will in the course of a day receive many
requests for cover or amendments to existing policies, either telephonically or by
email. His evidence was that he received around 100 emails a day. King‟s Property
suggests that he was obliged, before responding to Mr Riley‟s request for cover for
an office building, under the buildings combined section of the policy, to go back to
the file in respect of this client, and peruse its contents over a two year period. There
he would have discovered a single email written in February referring to an
unidentified property in Crown Mines, but saying that the property had previously
been „on the policy‟. That email described the building on the property as
„Offices/warehouse‟. Exploration would have revealed that the property had to be 8
Press Avenue, Crown Mines. Taking that together with the description of King‟s
Property as a „Property Developer/supplier Of Bedding Goods‟ it was argued that Mr
Lewis would have realised that there was a manufacturing operation on the premises
using flammable materials.

[53] That this argument involved a number of leaps of logic is plain. The following
two are glaring. A supplier of bedding goods is not necessarily engaged in the
manufacture of those goods and a warehouse is ordinarily used for storage not
manufacturing purposes. And even had Mr Lewis followed this tortuous course he
would not have known that a tenant was in occupation of 80 per cent of the premises
and using it to manufacture bodies for vehicles out of fibreglass and resin and
associated chemicals. Nor would he necessarily have equated the risk of flammable

bedding materials with the risk of working with fibreglass. That brings me to the
fallacy underpinning the second leg of the argument.

[54] The contention that there was adequate disclosure of a comparable risk is
incompatible with the basic principle stated in para 20 of Lewis JA‟s judgment, that
the insured seeking cover is obliged to disclose to the insurer all matters material to
an assessment of the risk. This, as King‟s Property‟s own witnesses accepted,
necessarily included, in the present case, the occupancy of the premises and the
nature of the manufacturing operations being conducted on the premises. That was
not disclosed. The proposition that disclosure of some other risk, that was not in fact
the risk in respect of which cover was being sought, discharged the insured‟s
obligations, is utterly inconsistent with that basic principle. It is a proposition for
which no authority in the long history of insurance was produced and I have found
none. The reason why an insured must make a proper disclosure is to enable the
insurer to make a proper assessment of the risk it is being asked to cover. It cannot
do that if it is not told what that risk is. This is not a case of a slightly inaccurate or
insufficient description of the actual risk being covered, which may raise issues of
materiality. It is a case where there was no disclosure at all of the particular risk. It is
hard to see how a complete non-disclosure of the risk could not be material.

[55] The evidence of Messrs Riley and Fry on behalf of King‟s Property that the
nature of the manufacturing activities in the premises should have been disclosed as
material is of itself decisive on the issue of materiality. In any event it is plain that had
the risk been disclosed, in accordance with Regent‟s underwriting policy, it was not
one that would have been covered under the buildings combined section of the
policy. Indeed it would have been classed as a Z risk that could only be covered after
a survey, reference to the Broker Division Technical and on the authority of the
General Manager of Regent. There could hardly be a clearer case of the insurer‟s
approach to risk being relevant and cogent on the issue of materiality.

[56] Regent was accordingly entitled to repudiate liability on the policy. The
estoppel that found favour with the court below was based on the proposition that
King‟s Property was lulled into a sense of false security and thought that it had
insurance cover, with the result that it did not seek cover elsewhere. The answer is

that the only representation made to it was that cover had been extended on the
terms of the policy and those terms included the right of the insurer to avoid liability if
the insured was guilty of a material non-disclosure inducing the contract. There was
no representation that the insurer would not rely on this right if such a non-disclosure
came to light as it did when the premises were destroyed by fire and it discovered
the true nature of the manufacturing activities being carried on in the premises.

[57] I accordingly concur in the order proposed by Lewis JA.

_____________________
M J D Wallis
Judge of Appeal

APPEARANCES
For Appellant:

G Kairinos SC, A Schluep
Instructed by:

Couzyns Inc, Rosebank

Hugo & Bruwer Attorneys, Bloemfontein

For Respondent:

E C Labuschagne SC

Instructed by:

Savage Jooste and Adams, Pretoria

Webbers Attorneys, Bloemfontein