C59
Contract – breach of mandate – entitlement to damages
Background
According to complainant and the broker:
• an investment with the insurer was solicited by an employee who was a broker consultant of the insurer;
• a written quotation signed by the complainant reflecting an investment lump sum of R180 000, a voluntary purchase annuity cost of R170 489,24 and a monthly annuity of R3 650 over an investment term of 5 years. On the quotation was a handwritten note signed by the employee and dated 26 April 2004, stating: “Hierdie kwotasie is nie nagekom nie”;
• an application form was signed by the complainant but not completed in full, in particular the columns for “Unit trusts, interest bearing and financial instruments” and for “Voluntary purchase annuity section” were both left blank;
• the complainant alleged that the mandate given to the employee was to ensure that the application form would be completed in accordance with the signed quotation;
• the intended investment was to be an annuity for five years yielding a monthly income of R3650;
• the application form considered by the insurer was completed by someone else and differed from what was agreed in the quotation in that it did not provide for a voluntary annuity purchase but for a 100% investment in a unit trust;
• in actual fact, it appeared the complainant was invested in a bond administered by a linked investment company.
The insurer’s employee supported the above version.
The insurer responded to the above complaint stating that there was an application signed by the complainant and identifying the portfolio as the chosen investment vehicle, on the basis of which the actual investment was placed. It argued that this was the true mandate to it, it was properly executed and accordingly that there was no lack of consensus between the parties.
Discussion
This approach ignored :
a) the role of the broker consultant who was an employee of the insurer with the authority to solicit investments, to accept mandates from potential clients and to undertake to execute them;
b) who knew what was intended by the complainant;
c) who undertook to ensure that the application form be completed in accordance with the signed quotation.
On those facts it seemed to us that a practical approach to the problem should be followed i.e. the employee’s mandate was to ensure that the investment be placed in accordance with the complainant’s instructions. That did not happen. Breach of the mandate is tantamount to breach of contract. Breach of contract entitled the complainant to damages. The damages would have to be calculated so as to place the complainant in the position he would have been in had there been no breach i.e. a five year annuity. In effect the insurer would therefore have to place the complainant in such a position by paying him an annuity from the time the income from the unit trust investment ceased until the expiry of the 5 year period.
Result
After some further submissions from the insurer we made a final determination to this effect and the insurer complied.
JP
October 2005
