DISTRIBUTABLE (28)

Judgment No. SC 29/04

Civil Application No. 155/02

UDC LIMITED v ZIMBABWE INSURANCE BROKERS

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, CHEDA JA & GWAUNZA JA

HARARE, JANUARY 22 & 24, MAY 2004

O Mutero, for the appellant

L Mazonde, for the respondent

GWAUNZA JA: The appellant appeals against a judgment of the High Court, in terms of which it was ordered to pay to the respondent $406 906, interest at the prescribed rate from 31 March 1999 until the date of payment, and costs of suit.

The following facts are common cause:-

The appellant is a financial institution while the respondent is an insurance broker. As part of its business, the appellant provides premium finance to companies needing insurance, including insurance for vehicles whose purchase the appellant would have financed. As an insurance broker, the respondent introduced certain such companies to the appellant. The appellant would then enter into contracts with these companies, for the provision of the premium finance required. Thereafter the appellant would pay the premiums due by its clients to the insurance companies concerned. The premiums were paid to the respondent, as the broker, for onward transmission to the relevant insurance companies. It would appear that the arrangement between the appellant and its clients was that the former would pay the insurance premiums for the latter, as a lump sum. The client would then pay back the premiums according to agreed terms.

Two such clients of the appellant, who were introduced to it by the respondent were a company called Sato Car Hire, and another one called Zimchem. The money claimed by the respondent from the appellant constitutes premiums due by Zimchem to a company called National Insurance Company of Zimbabwe (NICOZ). The evidence before the Court suggests that the insurance agreement between Sato Car Hire and Solid Insurance was cancelled, a circumstance that led to the amount of $406 906 in-prepaid premiums being due and refundable to the appellant. In a letter to the respondent, dated 17 February 1999, the appellant made it clear that it expected the money to be repaid through the same medium it had used to pay it, that is the respondent. The latter was then to recover the money from Solid Insurance Company. When the appellant did not receive the payment by the deadline given, it addressed a letter to the respondent on 26 March 1999, which read as follows:

“Dear Douglas,

RE : SATO CAR HIRE & TOURS (PRIVATE) LIMITED

We refer to previous correspondence in the above regard and regret to advise that to date no payment has been forthcoming. As Solid Insurance Company have not submitted the cancellation fund, as well as payment of outstanding claims as stated in our cancellation letter of 5 January 1999 (copies attached), we have effectively adjusted bordereaux payments due to yourselves. We confirm that we have deducted an amount of $406 906,40 which your offices are to recover from Solid Insurance Company’s bordereaux.

We do regret having to resort to this action, but as you will appreciate, we are left with no alternative.

Yours sincerely,

TENDAYI GWATIRINGA

DIVISIONAL DIRECTOR”

The amount of $406 906,40 was duly deducted from premiums that the appellant was to pay to NICOZ on behalf of Zimchem, through the respondent as the broker. The respondent took exception to the action taken by the appellant, and launched these proceedings in the court a quo.

The appellant’s defence to the claim was two-pronged, firstly, that the respondent had no locus standi to bring the action against it when its role had in effect been that of an agent and secondly that in any case the respondent had not established a cause of action in respect of the claim. In particular, it is submitted that the learned judge erred in finding that there was an agreement between the appellant and the respondent, which obliged the former to make, and the latter to receive, payment for the premiums in question.

The respondent’s rebuttal of this contention is set out in paragraph 12 and 13 of its heads of argument:

“12. However, it is respectfully submitted that the relationship between Appellant and Respondent, though not specifically governed by a written contract, had the following terms:

1. Respondent would direct clients to Appellant for Insurance Finance;

2. Appellant was obliged to pay the premiums for these clients over to the Respondent; [Record 75].

3. Respondent would, where a policy is cancelled, receive the unabsorbed portion of the premiums from the Insurance Company and pay these amounts over to Appellant; [Record 71 – 2]

4. This relationship required the parties to act in utmost good faith [Record 75].

13. It is submitted that it is clear from the evidence of both parties, (that) these terms are implied by trade usage as well as agreed by the parties to be the framework of their business relationship. Appellant, in its evidence referred to an “understanding” and “standard practice”. It is respectfully submitted that this is in essence an agreement. Further, it is out of this agreement that Appellant’s liability arises. It is submitted that the court a quo rightly decided this to be the case.”

The learned trial judge was persuaded by these submissions and was satisfied, having determined that it was not open to the appellant to unilaterally deduct $406 960 from Zimchem’s premiums, that the respondent had the requisite locus standi. He also determined that through its particulars of claim, as amplified by the further and better particulars requested by the appellant, a cause of action had been properly established. As already indicated, he found that there was in existence an agreement, albeit unwritten, between the appellant and the respondent, which obliged the former to remit to the latter, premiums on behalf of the clients introduced to the appellant by the respondent. The respondent would then deduct from such premiums what was due to it in terms of its fee or commission as a broker and then transmit the rest to the insurance company concerned. The learned judge also accepted that the respondent was an agent for both the appellant’s clients and their insurers.

I do not find any fault in the learned trial judge’s reasoning and conclusions.

The appellant not only paid premiums on behalf of its clients, to the respondent, it expected, where a policy was cancelled, that the respondent would prevail upon both such client and its insurer, to refund to it, any outstanding or “unused”, prepaid premiums. The relationship between the parties that is suggested by this arrangement to my mind translates to something stronger than just an understanding.

An appreciation of this fact by the appellant, must have provided the necessary motivation for it to deduct, albeit wrongly, the amount in question from what it was supposed to pay to the respondent. Against this background, it appears to me to be contrary for the appellant to acknowledge the existence of an agreement only when to do so serves its purposes, yet dispute its existence where it would suit the respondent’s purposes.

The premiums that were to be paid on behalf of Zimchem had no relationship to those already paid on behalf of Sato Car Hire nor were the premiums bound for the same insurance company. As the learned trial judge correctly found, it was not open to the appellant to “unilaterally” deduct $406,960 from premiums they would have then charged Zimchem as part of the financing they had undertaken to provide. By doing so, the appellant interfered with the performance not only of its agreement with Zimchem, but also that between Zimchem and NICOZ. This was in addition to its breach of the agreement between it and the respondent. It is in my view inconceivable that Zimchem, in its agreement with the appellant, would have agreed that some of the premiums due to be paid on its behalf, through the respondent, could be diverted and applied towards settling premium refunds outstanding from another client’s insurers.

Both Zimchem and the respondent, in my view were equally entitled to claim the amount in question, from the respondent, either separately or jointly. The respondent chose to do so on its own. I am satisfied the court a quo correctly found that the appellant had wrongfully deducted the amount in question and must pay it back. The appeal must therefore fail. It is in the premises ordered as follows:

“The appeal is dismissed with costs.”

CHIDYAUSIKU CJ: I agree.

CHEDA JA: I agree.

Sawyer & Mkushi, appellant’s legal practitioners

Dube, Manikai & Hwacha, respondent’s legal practitioners.