CR247 Mandate Misrepresentation by insurer that its financial adviser was independent



Misrepresentation by insurer that its financial adviser was independent—cancellation of contract of mandate


The complainant took an early retirement package from his employer. His pension money was invested with insurer X. An employee of insurer X referred him to an “independent” financial adviser, Ms B, for advice on where to invest his money. On her advice he invested his retirement money with X. The investment did fairly well.

The complainant later discovered that he had been misled by X’s employee into believing that the adviser was independent, whereas she was in fact employed by X. Not only did Ms B herself bring him under this impression but X openly allowed her to represent herself as an independent adviser. The complainant claimed that he would not have entered into a contract with an adviser employed by X involving not only an initial fee of 1.5% but also an annual fee of 1%. He explained that if he had been aware of Ms B’s true status he would have obtained, and paid for, independent advice elsewhere.

The insurer made certain offers to resolve the complaint but the complainant did not accept any of them.


We had no doubt that the requirements for liability based on mis- representation inducing a contract were met. Ms B had after all been held out by X as an independent adviser while she was not. The contract in question was a contract of mandate in terms of which certain services had to be rendered in exchange for commission.

The usual remedies for a misrepresentation inducing a contract are rescission and/or damages. For purposes of rescission it was imperative to determine whether the contract of mandate was between the complainant and Ms B or between the complainant and X because if the contract had been between the complainant and Ms B in her personal capacity, rescission on the grounds of misrepresentation would have to be sought from Ms B and not from X.

We took into consideration that Ms B was employed by X and rendered her services within the course of her employment with X. Furthermore, the rate of commission in terms of the contract of mandate was recorded in the application form issued by X. It therefore seemed probable that the contract was intended to be between the complainant and X. Ms B was in other words not only instrumental as far as the conclusion of the contract of mandate between the complainant and X was concerned, but she also acted on behalf of X for purposes of executing the contract. We therefore took the view that the contract of mandate was indeed between the complainant and the insurer, which X accepted.

In consequence of the rescission of a contract the performances rendered by both parties in terms of the contract must be returned. A claim for a return of what has been performed is in pursuance of restitution and is therefore not a claim for damages. The possibility that it would have been at a price that the complainant might have engaged another adviser was accordingly of no relevance, and could be of no benefit to X for the purposes of restitution. The complainant’s performance was the commission he paid for the services. That is the amount that by way of restitution had to be repaid by X in the event of a cancellation of the contract. On the other hand, X had not paid the complainant anything by way of performance, so there was nothing which the complainant could be required to return to X.

The complainant did not allege or prove any damages.


We decided that the contract of mandate between the complainant and X had to be set aside, and therefore that the commission he had paid had to be returned. The insurer complied.