The High Court in Johannesburg recently granted an order permitting Santam to put up security for the costs of storing a motor vehicle, so the short-term insurer can have the vehicle released from a panel-beating company.
Law firm Norton Rose Fulbright said the action was “clearly and usefully” pursued by the insurer to create a precedent that prevents towing companies or repairers from impounding vehicles until their disputed claim for storage charges is paid.
A dispute arose between Santam and Selby Panel & Paint (Pty) Ltd over the amount the Johannesburg-based panel-beater billed for storing a Volkswagen Polo Vivo.
According to the High Court’s judgment, the parties were on the brink of concluding a settlement when it was scuppered by a disagreement over whether Selby Panel & Paint was owed R5 244.
Santam approached the High Court for an order for the release of the vehicle.
The order would allow Santam to pay the outstanding balance, plus additional costs incurred by Selby until the date of the order, into its attorneys’ trust account.
The amounts would be retained as security pending the resolution of any legal proceedings that Selby may institute to claim its alleged storage charges. If Selby did not take legal action, the amounts paid into the trust account would be released to Santam.
Background to the dispute
Here is a summary of the background to the proceedings, as contained in the judgment.
In September 2021, the Polo Vivo was seriously damaged in an incident in Kabokweni in Mpumalanga. At the insured’s request, representatives of Selby towed the vehicle to its premises in Johannesburg.
Selby Panel & Paint is not one of Santam’s authorised towers or repairers.
The insured reported the incident to Santam, which asked Selby to release the vehicle to its designated representative, but this did not happen.
On 17 January 2022, an agreement of loss was concluded, in terms of which Santam paid R131 575 to the insured and assumed ownership of the salvaged vehicle.
On 27 January, Selby emailed an invoice to Santam, claiming payment of R95 220. The invoice levied storage charges of R600 a day from 14 September 2021 to 28 January 2022.
Santam disputed the sum invoiced.
Selby sent a second invoice claiming a reduced payment of R43 700. The storage charges were levied at R250 a day from 14 September 2021 to 11 February 2022.
Santam also disputed this amount and referred the matter to its attorneys.
On 11 February, Santam’s attorneys paid a settlement of R26 220 to Selby. The attorneys also informed Selby that their client believed the invoiced charges were excessive. They said the balance of the claim, R17 480, was held on trust as security and demanded that the vehicle be repatriated.
In response, Selby’s attorneys said the contract between its client and the insured was still in effect, and R43 700 was a reasonable charge.
A few days later, the parties reached a putative settlement in terms of which Santam would pay an additional R5 244, bringing the total payment for the release of the vehicle to R36 708.
Santam’s attorneys paid R5 244 to Selby on 15 February 2022. But a fortnight later, a dispute arose over whether a further R5 244 was outstanding.
Court exercises its discretion
The High Court’s judgment stated it was not disputed that a salvage lien allows a party to claim repayment of necessary and reasonable expenses incurred by it in preventing property from perishing.
Where a lien (a right of retention of possession) is exercised, the court has a discretion to substitute security for payment as a temporary measure while considering any objection to an offer.
Counsel for Selby contended that the court should not exercise its discretion in favour of Santam because doing so would prejudice Selby.
“The substitute security of the nature and order tendered the applicant would be inadequate and indeed illusory since the costs and delays of litigation would render it financially unviable for the respondent to sue for payment of the storage charges.”
In other words, granting the application would inevitably result in the release of the entrusted funds.
Acting Judge Robin Pearse said Selby’s submission was not without force, but it did not address the “flipside” concern. If the court dismissed the application, Santam would either have to pay Selby’s disputed claim or reconcile itself to an ever-escalating claim for storage charges, coupled with reciprocal litigation burdens, while its property remained in Selby’s possession in perpetuity or until the litigation was concluded.
“In the exercise of my discretion, I am not minded to dismiss the application and precipitate such an election,” Acting Judge Pearse said.
He also found that the security tendered by Santam was adequate. It included the balance of Selby’s claim and further daily storage charges from February 2022 until the date of the court order.
Punitive costs order
Acting Judge Pearse said it was regrettable that “a narrow dispute over a modest amount escalated into full-blown opposed litigation. The papers disclose a degree of recalcitrance on both sides.”
However, the submission that Santam had to litigate to avoid a precedent that could “embolden unscrupulous towers and/or repairers” to impound vehicles unless and until their charges are paid by insurers or owners “does not ring hollow”, he said.
By contrast, Selby’s opposition to the application, including delays in giving notice of opposition and filing answering papers and submissions, was “consistent with an unreasonable attempt to bring about grudging payment of disputed storage charges”.
The judge therefore ordered Selby to pay costs on the attorney and client scale.
Substitute security order
Acting Judge Pearse ordered Selby to release the Polo Vivo to Santam’s nominated representative within 24 hours of service of the order. If Selby failed to do so, the sheriff could seize the vehicle and hand it over to Santam.
The order recorded that Santam has paid R31 464 to Selby, and the balance of the invoiced sum (R12 236) into its attorneys’ trust account. (The total of these amounts is R43 700.)
He ordered Santam to pay further storage charges (calculated at R250 a day from 11 February 2022 until the date on which the order was granted) into its attorneys’ trust account, within five court days of the service of the order, to be retained as security pending the resolution of any legal proceedings that may be instituted by Selby within 30 calendar days of service of the order to claim its alleged storage charges.
If Selby failed to institute legal proceedings, the amounts paid into the trust account must be released to Santam.
