In this High Court judgment, the respondent underwriting manager (CIMA), had a binder agreement with the applicant insurer. The binder agreement set out the terms of the mandate given to the UMA, to enter into and administer policies. The UMA was obliged to transact insurance business only within South Africa. The insurer is licensed for South African business only.
The insurer was called by a client of the UMA, who complained about payment under a guarantee, relating to a loan agreement concluded in Europe. The insurer referred the matter to the UMA, since it was unaware of this guarantee (it had not been listed in the UMA’s policy list) and noted that it exceeded the insurer’s licence conditions and treaty limits. Thus, the UMA was in breach of its binder agreement. The binder agreement was terminated.
When questioned by the insurer, the UMA confirmed that no other foreign guarantees had been issued. However, the insurer subsequently discovered another foreign guarantee.
The insurer then began a protracted correspondence with the UMA, demanding immediate access to information relating to all guarantees issued. The UMA failed to accede to these demands. The insurer then approached the court for urgent access to the relevant information.
The UMA argued that the binder agreement had not been validly terminated (but rather that the insurer had repudiated the agreement) and that it had until the end of the 90 day termination period to hand over documents and data. The UMA alleged that the insurer actually sought an Anton Piller order and had abused the court process to embark on a pre-litigation fishing expedition alleging that there was no risk of harm in completing the process over 90 days and the matter was not urgent.
The insurer responded that it sought specific performance of its contractual rights under the binder agreement which allowed it “full and unfettered” access to books of account and records relating to policies, and that the UMA was obliged, under the agreement, to provide access to all the information requested. The matter was urgent because the insurer needed to know whether the UMA had concluded any other guarantees in its name and beyond its authority and because the insurer had taken over the UMA’s business under the binder agreement and needed information to continue running it.
The court agreed with the insurer. While the relief sought was intrusive, it is not the same as an Anton Piller order (those orders are for situations where there is a concern that evidence will be destroyed and are brought without notice to preserve the element of surprise). The risk created by the issue of unauthorised guarantees was substantial and warranted the intrusion.
The court found the cancellation of the binder agreement to be valid. The court agreed that this cancellation was justifiably based on the material breach of the agreement by the UMA in transacting business outside South Africa. In any event, he binder agreement could be cancelled on 90 days’ notice regardless of a breach. The insurer had a right to the information it sought, under the binder agreement. Because the order requested by the insurer amounted to a type of raid, similar to the type of inspection conducted in an Anton Piller order, the court sought to balance the interests of both parties and minimise the invasive nature of the “raid”. Thus, the court issued an order which was suspended for a period of 15 days to give the UMA a chance to comply and for the parties to cooperate, before the more ‘nuclear’ option would become effective.