CIVIL PRACTICE – SPECIAL PLEA IN THE FORM OF STATED CASE IN TERMS OF RULE 63 – LOCUS STANDI INSURANCE LAW – RIGHT OF SUBROGATION

CIVIL PRACTICE – SPECIAL PLEA IN THE FORM OF STATED CASE IN TERMS OF RULE 63 – LOCUS STANDI

INSURANCE LAW – RIGHT OF SUBROGATION

In this consolidated action, the plaintiff’s instituted action against the defendant for damages suffered in consequence of a rotten consignment of fish received. The claim arises from a breach of contract by failing to apply the necessary duty of care in packing the fish and maintaining the refrigeration unit to specified standards. Plaintiff were indemnified by their respective insurers in terms of a Marine Cargo Insurance Policy. The action was instituted and pursued by the respective insurers acting as dominis litis and using the name of the plaintiffs, by reason of the right of subrogation. The defendant raised special pleas of lack of locus standi in respect of both claims and parties agreed that the court adjudicate them in the form of a stated case in terms of rule 63.

In terms of an agreement concluded between the plaintiffs and I & J (whether as principal or agent), I & J would supply fish to the plaintiff in terms of Incoterm CIF Lisbon or Genoa. The consignment of fish would be transported from the port of origin, Walvis Bay to the ports of Lisbon and Genoa via sea carriage. I & J therefore issued commercial invoices to the plaintiffs incorporating the CIF Incoterm 2010 which implied that the ownership and risk in the fish passed to the plaintiffs upon shipment. Upon discharge of the containers in the ports of final destination it was found that fish was rotten. The parties agreed for purposes of the stated case that the risk in respect of the consignment of fish occurred whilst the refrigeration containers were under care and supervision of the defendant.

I & J had concluded an Insurance Agreement with Zurich Insurance Company South Africa Limited, in terms of which it insured, amongst other things, frozen fish. As a result of the loss of the fish, the insurer indemnified and paid the loss to the plaintiff, Iglo and instituted this action in the name of the Plaintiff. Upon closer inspection of the Marine Cargo Insurance Policy Iglo was not the insured party as its name does not appear in the policy document apart from a Form of Subrogation, which is irrelevant for the proceedings.  The defendant pleaded that the insurer could not rely on its rights to subrogation as it had no obligation to indemnify Iglo by virtue of the Marine Cargo Insurance Policy as it was not a party thereto and therefor the insurer has no locus standi to proceed with action against the defendant.

I & J also concluded an Insurance Agreement with Mutual and Federal Insurance Company in respect of the plaintiff, Atlas.  This agreement does not suffer the same deficiencies as the insurance agreement in respect of Iglo. The defendant pleaded that as it is agreed that the peril insured against occurred before shipping whilst the consignment of fish was in the custody of the defendant. In terms of the agreement between the parties, regulated by CIF Incoterms the risk did not yet pass to the plaintiff, Atlas at the time, as the risk would only pass over to the plaintiff upon loading the container of fish on the vessel. The defendant averred that as a result Atlas had no ‘insurable interest’ at the time damages and if Atlas did not have an ‘insurable interest’ it had no locus standi. PRINSLOO J considered the matter and held that:

1. A valid insurance agreement is the foundation of the right of subrogation because it is in terms of the said insurance agreement that the insurer indemnifies the insured. If a valid insurance agreement is not in existence between the parties, then the insurer has no right to subrogation. This then further implies that the authority to use the name of the insured that would be available to the insurer by reason of subrogation to advance an action against a third party, does not exist, which further implies that there can be no locus standi to advance the claim of the insurer.
2. A party instituting the proceedings has the onus to establish legal standing and that is not only concerning establishing the sufficiency and directness of interest but also that it is the rights-bearing entity or acting on the authority of that entity or has acquired the rights.
3. The special plea raised in respect of the first plaintiff (Iglo) must be upheld, and the first plaintiff’s claim was accordingly dismissed with costs.
4. From the definition of ‘insurable interest’ as per Refrigerated Trucking Pty Ltd v Zive NO (Aegis Insurance Co Ltd, Third Party) the court is satisfied that the second plaintiff (Atlas) had an ‘insurable interest’ in the consignment of fish which became spoiled whilst in the custody of the defendant.
5. As a result of the finding that the second plaintiff (Atlas) had an ‘insurable interest’ in the consignment of fish, the insurer would be entitled to subrogate its claim. Even if Atlas had no ‘insurable interest’ but the insurer made payment reasonably and in good faith then the insurer would still be entitled to subrogate that claim.
6. Held further that the special plea raised in respect of the second plaintiff, Atlas, stands to be dismissed, and it was accordingly dismissed with costs.

Iglo Portugal Comercializacao v Hangana Seafood NAHCMD 2 November 2022