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Posted in Case reports, Market developments, Regulatory and legislative updates, South Africa

South Africa: Purpose and simple language take precedence

On 14 March 2019, the Supreme Court of Appeal (SCA) dismissed an appeal by Centriq Insurance Company Ltd (Centriq) against a ruling of the Free State High Court holding liable a financial advisor under a professional indemnity insurance policy. The SCA held that Centriq could not rely on an exclusion in the policy that was at odds with its purpose, which was to indemnify a financial advisor for breach in connection with negligent financial advice.

The financial advisor, Mr Jose Francisco Castro (the insured), had advised a widow, Mrs Marisa Vogel Oosthuizen (Oosthuizen), to invest the proceeds of her deceased husband’s policy in an amount of ZAR2 million in Sharemax Investments (Pty) Ltd (Sharemax) in a property development scheme known as “The Villa Retail Parks Holding 2”. The villa was a yet to be completed shopping complex, a fact that the insured did not draw to Oosthuizen’s attention. The development failed following a Reserve Bank investigation, which found that Sharemax was contravening the Banks Act 94 of 1990 by taking deposits illegally.

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