Subrogation extended: Insurers’ right to sue in their own name

Considering the findings made in Rand Mutual Assurance Co Ltd v PAF AZSCA 114 2008 (6) 311 SCA, (hereinafter referred to as the “Rand Mutual-matter”), why do so little practitioners use these principles?

In this matter the SCA dealt with the following facts:

Mr Young an employee of Harmony Gold was injured in a motor vehicle accident under circumstances which suggested that the RAF could also be liable. At the same time Mr Young was entitled to Workman’s Compensation benefits, ultimately paid by Rand Mutual Assurance Company. Rand Mutual having paid the compensation sought to recover this amount from the RAF and sued in its own name. The RAF argued that subrogation has not developed to such an extent in our law that it could justify an insurer to sue in its own name. The court conducted an enquiry into the history of the law of subrogation, the nature of the rule that a subrogated claim must be brought in the name of the insured, and a reflection of whether these rules require adaptation or amendment.

Subrogation is in brief the “substitution of one party for another as creditor based on an insurance policy”. The court explained this definition and warned that in the context of insurance, however, the word is used in a metaphorical sense. Subrogation as a doctrine of insurance law embraces a set of rules providing for the reimbursement of an insurer which has indemnified its insured under a contract of indemnity insurance. It is important to note that we have adopted the English law of subrogation into our legal system and, to this day, still apply it.

The doctrine grants an insurer two rights:

  1. the right to recourse
  2. the right to take charge of legal proceedings which are conducted in the name of the insured. In this respect it is important to note that the insurer merely acts as dominis litis or master of proceedings.

The following requirements must be met before subrogation will become applicable:

  1. A valid insurance contract
  2. The insurer must have indemnified the insured
  3. The insured’s loss must have been fully compensated by the insurer
  4. Rights must be susceptible to subrogation, as an insurer can only apply subrogation to the insured’s available rights

The court further discussed the matter of Ackerman v Loubser 1918 OPD 31, the court case pioneering subrogation into our legal system. Ackerman, indemnified by his insurance and directed by his insurer in terms of his insurance policy, claimed damages from Loubser to reimburse his insurer. Loubser raised the defence that since Ackerman was already indemnified by his insurer, Ackerman had no further claim against Loubser. The court rejected this argument and referred to the English law of subrogation and applied it to this matter. The court held that the insurer could institute legal action in its own name, which right to do so did not require any consent from the insured.

However in the Rand Mutual-matter the court held that it is easily overlooked that the Ackerman-matter was dealt with in terms of insurance law applicable only in the Orange Free State, which was primarily based on English law. The Orange Free State English law was repealed by Section 1 of the Pre-Union Statute Revision Act stating that the South African insurance law is henceforth governed by Roman-Dutch law. The court in the Rand Mutual-matter was subsequently not bound by English law.

However, the court in the Rand Mutual-matter was not satisfied that the current insurance legislation and application of the subrogation doctrine was sufficient and in line with the legal reform that occurred over the years. Subsequently the court conducted an investigation into the Continental and American application of Subrogation. It found that in the USA they protect the consumer from harassment and avoid confusion regarding the Plaintiff’s identity and accordingly allow the insurer to institute any subrogated action in its own name. The court did say that when applying the law strictly the action ought to be brought in the name of the insured, however this is not in line with current developments in terms of consumer laws.

The SCA acknowledged that no cession took place in the Rand Mutual-matter, but went on to say that it does not mean that the procedural rule that the insurer has to sue in the name of the insured is in accordance with our law. The court held further that the current affairs regarding subrogation is also not in accordance with our constitutional values. To require a party to litigate in the name of another appears to fly in the face of transparency. The court felt that these rules serves no public interest in modern times, as appears from the position in the USA. That it’s formalistic and creates anomalies. It enables the insurer to litigate in the name of the insured without taking any risks as far as litigation costs are concerned.

In conclusion the court found that this judgment does not specifically directs insurers to litigate in their own name or in the name of the insured. What it does hold is that the English rule in its stark form cannot be justified and if the wrongdoer will be prejudiced in a procedural sense, courts may permit the insurer to proceed in its own name.

This judgment has been criticised by Prof Van Niekerk from Unisa who opines that the fact that both parties in the Rand Mutual-matter were governed by statute, there is no real insurance contract through which subrogation could be born after indemnity to the insured. Neither the RAF nor Rand Mutual insurance involve private insurance contracts. In the absence of insurance contracts it is difficult to see how the doctrine of subrogation can be evoked. The rights and obligations of the parties are governed by statute and not contract. This is specifically relevant when having regard to the requirements for subrogation.

 

Marguerite Kirchner
Associate

Rose… and other (company) names

“What’s in a name? that which we call a rose
By any other name would smell as sweet.”
–William Shakespeare, Romeo and Juliet

Although love birds might not attach much value to names, business owners spend hours contemplating possible names for their latest ventures. And with good reason! Marketing guru’s will tell you that your company name must be short enough to have impact, unique enough to be memorable, positive enough to touch people emotionally, informative enough to sell your products, and last but not least, visual enough to be trademarked.

Legal do’s…

All company names must be reserved and eventually registered with the Companies and Intellectual Property Commission (CIPC).

Common law principles of passing-off, Section 11 and Regulation 8 of the Companies Act 71 of 2008 provides specific criteria for company names.

Company names can consist of one or more words in any language, or combination of words and letters, numbers or punctuation marks such as “+”, “&”, “#”, “@”, “%”, “=”, “-“ and round brackets which may be used to isolate any part of the company’s name.

However, if the company name contains any word in a language that is not an official language of the Republic of South Africa, the application to reserve such a name must also include a certified translation of that word into an official language of South Africa. Additionally, if this word is also a registered trademark, or trademark in respect of which the application for registration has already been filed in South Africa, or a well-known mark as contemplated in Section 35 of the Trade Marks Act 194 of 1993, the person applying for its reservation must also file a declaration confirming that he/she is entitled to use the mark.

In addition to the above requirements a company name, irrespective of its form or language, must also end with one of the following expressions depending on the category of the particular company:

  1. Personal liability company “Incorporated” or “Inc.”
  2. Private company “Proprietary Limited” or “(Pty) Ltd.”
  3. Public company “Limited” or “Ltd.”
  4. State-owned company             “SOC Ltd.”
  5. Non-Profit company “NPC”

Section 11(1)(b) further provides that a profit company may use its registration number as its company name subject to Section 11(3)(a) which require such a company’s name to immediately be followed by the expression “South Africa”. Where a company’s name does not comply with the aforementioned criteria the CIPC commissioner may, in the interim, use the registration number of a company during the period in which the company is rectifying any compliance issues in this regard. However, Non-Profit companies are not allowed to use their registration numbers as company names.

If a company’s Memorandum of Incorporation (MoI) includes any provision, contemplated in Section 15(2)(b) or (c), restricting or prohibiting the amendment of any particular provision of the MoI, the company’s name must immediately be followed by the expression “(RF)”. The main aim of this indication is to alert third parties, wishing to contract with the company, to certain restrictions contained in its MoI to prevent the third party from being prejudiced by any hidden restrictions or prohibitions.

Contrary to any provisions contained in the 1973-Companies Act, the current Companies Act does not seem to require that the name of a company must indicate that it is under business rescue, which could obviously prejudice bona fide third parties wishing to contract with the company.

…and legal don’ts

A company may not contain any word, expression or symbol, either viewed in isolation or in context with the rest of the name, which may reasonably considered to be propaganda for war, incitement to imminent violence, advocacy of hatred based on race, ethnicity, gender, religion or incitement to cause harm. Should the CIPC commissioner deems a company’s proposed name to be potentially offensive, he may, in terms of Section 12(3)(b), refer the name reservation application to the South African Human Rights Commission which in turn may apply to the Companies Tribunal for a determination and order as contemplated in Section 160.

A company name must also not be the same as, or confusingly similar to the name of another company to the extent that a potential customer might think that the company is the same as, or affiliated with another company with the same or similar name, unless the company forms part of a group of companies. Similarly the company’s name may not be similar to defensive names registered in terms of Section 12(9), business names registered in terms of the Business Names Act 27 of 1960 or trademarks registered in terms of the Trade Marks Act 194 of 1993.

Issues resulting from these similarities is governed by the common law principle known as “passing-off”. In Williams v Janse van Rensurg (3) 1989 (4) SA 884 (C) it was held that for a name to be the same as another name as contemplated in Section 11(2)(a), it must be identical rather than “similar to”. In Bata Ltd v Face Fashions CC 2001 (1) SA 844 (SCA) a broader interpretation of the word “similar” as contemplated in Section 11(2) was favored to mean to have “a marked resemblance or likeness” and that the offending mark (or name) should immediately bring to mind the well-known trade mark (or name). Accordingly a mere similarity will not be sufficient. A name must be confusingly similar, as is the test in respect of passing-off, dealt with in the matter of Adidas AG and another v Pepkor Retail Limited (187/12) [2013] ZACSA 3 (28 February 2012) as follows:

“…a reasonable likelihood that ordinary members of the public, or a substantial section thereof, may be confused or deceived into believing that the goods or merchandise of the former are the goods or merchandise of the latter or are connected therewith. Whether there is such a reasonable likelihood of confusion or deception is a question of fact to be determined in the light of the particular circumstances of the case.”

A company name should further also not falsely suggest that the company is part of an association, is an organ of state, owned by a person with a specific educational designation, who is a regulated entity or is owned by a foreign state, government or international organization.

Thus, dear Mr Shakespeare, a rose by any other name might NOT always smell as sweet, but sometimes confusingly similar.

Marietjie Botes

CARsumer protection

Have you ever found yourself inspecting a second-hand motor vehicle and end up kicking one of the tyres? Perhaps in the hope that something falls off or breaks, to allow some room for negotiation on the price and yet to your disappointment nothing happens.

There is some underlying explanation why consumers tend to do this. Explanation being that the transaction is governed by the Consumer Protection Act and include an implied guarantee against any latent defects. Parties to agreements, especially involving second-hand goods, have developed the need to explicitly exclude any implied guarantees against latent defects through the inclusion of the so called “voetstoots-clause”. An explicit exclusion of the latent defect guarantee by way of the voetstoots-clause is only beneficial to the seller as purchasers are then (and often unknowingly) burdened with the risks and consequences of latent defects. The legislator intervened through the creation of the Consumer Protection Act (herein after referred to as the “CPA”), to once again attempt to achieve equality within the consumer market.

The CPA makes provision for unique terms that are implied by statute, and if applicable, will void the presence of the voetstoots-clause in its totality. Therefore, should the consumer purchase a second-hand motor vehicle and the CPA is applicable, there would have been no need to kick either of the tyres as the consumer would be entitled to request the dealership (within six months from date of purchase) to be refunded, to repair or replace the motor vehicle, at no expense or risk to the consumer, should the vehicle prove to be defective.

Unfortunately this is not always the process followed by the involved parties. Naturally, parties attempt to resolve their disputes through making alternative arrangements, which to some extent is cost effective as it avoids initial legal expenses, but are nevertheless time consuming and often fruitless.

It is advised that a consumer compiles a chronological and organised record of the facts of the dispute, the reasons proffered by the involved parties and all documentation applicable thereto, including all correspondence with the motor dealership or its representatives. If the parties fail to resolve the dispute amongst themselves, it is advised to escalate the matter to the dealer principal and, if needs be, directly to the motor vehicle manufacturer thereafter.

Should the parties persist with their points of view and the dispute still remains unresolved, the consumer may lodge a complaint with the Motor Industry Ombudsman of South Africa (MIOSA) in writing through the completion of the prescribed Assistance Request Form which is available on MIOSA’s website at www.miosa.co.za. MIOSA will attempt to mediate the dispute by providing the so-called respondent with full particulars of the lodged complaint and copies of the complete set of documentation received from the complaining party. The respondent then has 14 (fourteen) days to respond to the MIOSA with regards to the said complaint. Should the need arise for a hearing to be held, parties shall consent thereto 21 (twenty one) days in advance. After the finalisation of any hearing proceedings, MIOSA will present its decision within 30 (thirty) days to the respective parties.

An appeal against the MIOSA’s decision is possible and must the appealing party lodge the appeal, including the appellant’s detailed argument and grounds for appeal against the final decision, within 10 (ten) days from the date on which the MIOSA’s final decision was handed down. In such instances the MIOSA will advise the appealing party to either lodge the appeal with the National Consumer Tribunal (NCT) or Provincial Consumer Court (PCC).

The available alternative dispute resolution methods within the motor industry of South Africa is clearly consumer orientated and has been simplified to the extent that a consumer can easily make use of it in his or her personal capacity. The problem, however, lies in the fact that this alternative dispute resolution method is not being utilised to its greatest potential. Consumer education is needed to enlighten consumers, not only of their rights under these circumstances, but also guide them in the most effective routes to follow.

The next time you kick that tyre do not only check that the motor vehicle is in good condition, but also rest assured that the CPA is applicable.

Albert Arnold
Associate