Getting subrogation wrong

The Western Cape High Court judgment of Le Bonheur Wine Estate (Pty) Ltd v Stellenbosch Vineyards (Pty) Ltd and Others of 20 June 2025 is wrong in many ways.

Primarily it errs in its understanding and application of the principles, both at common law and contractual, of subrogation and errs in the court’s extraordinary remedy of creating the insured and insurer as competing plaintiffs.  

In the circumstances of this case the insurer had fully indemnified the insured for its claim and commenced subrogated recovery action against the defendant third parties, but the insured belatedly sought to withdraw the insurer’s appointed attorney’s mandate to conduct the case and substituted attorneys of its own choice with instruction to withdraw the action against the defendants.  

The insurer unsuccessfully challenged the substitution with the effect that the court’s order deprived the insurer of control of the insured’s claim against the defendant.  The court also ordered that the insurer be joined as another plaintiff in the action.  

The crux of the issue for resolution was really whether an insurer is entitled to control the conduct of the insured’s case in a subrogated action.  

In reaching its conclusion, the court unfortunately misunderstood or misapplied many judgments, which are not authority for its conclusions and incorrectly applied judgments irrelevant to the real issue. 

The court, for example, quoted extensively with approval from Nkosi v Mbatha [2010] ZAKZPHC 38 for authority that a subrogation claim is something that must be clearly proved and specifically pleaded.  The court ignored the fact that in Smith v Banjo 2011(2) SA 518 (KZP) a two judge bench of the same division expressly went out of its way to say that a subrogated right is not a fact that sustains a cause of action and it is not necessary to plead and prove such a fact, and “in that respect, the Nkosi judgment is clearly wrong, and is not binding on future courts”.  

Even if the court were correct that subrogation must be pleaded and proved that is not a reason for depriving the insurer of control of the action nor a basis for joining the insurer as a plaintiff in the action in addition to the insured as named plaintiff. 

In Rand Mutual Assurance Co v Road Accident Fund 2008(6) SA 511 (SCA) the Supreme Court of Appeal in a judgment (which is in itself subject to some criticism including by Professor JP van Niekerk) on the facts of the particular case permitted the insurer to proceed with the subrogated recovery in its own name but also said expressly that “this judgment does not hold that the insurer must litigate in its own name and may not litigate in the name of the insured”.  The court expressly acknowledge and affirmed the right of the insurer to litigate in the name of the insured. 

The policy under consideration in the Western Cape decision expressly authorised the insurer to take control of and direct proceedings for recovery of any claims for indemnity or damages as might vest in the insured where the insurer had indemnified the insured.  The policy provided that the insurer “…shall have full discretion in the conduct of any proceedings…”.  That in essence is a reflection of the common law entitling an insurer who has indemnified its insured to take control on behalf of the insured its rights of recourse against others. 

The insurer does not acquire the insured’s claim against a third party, which claim remains vested in the insured.  But the insurer acquires the rights to control as “dominus litis” (owner of the case) enforcement of the insured’s right of recourse against a third party.  That does not affect a third party’s rights against the insured.  Our courts, including the Supreme Court of Appeal, has consistently said that subrogation is a matter between the insurer and insured and does not affect the position of the defendant in one way or the other.  

The position under our common law of subrogation, as well as the express provisions of the policy, were that the insurer was entitled to control the insured’s recovery claim against the defendant.  In those circumstances, the insured was not entitled to exclude the insurer from control of the action and to direct control thereof through its own attorneys.  

While it is correct that any recovery claim remains vested in the insured, it is incorrect to conclude that the insured retains control over the enforcement of the claim. 

The court’s remedy of joining the insurer to the action is inconsistent with the primary rule of subrogation that it makes the insurer the controller of the litigation.  The insurer does not have a separate cause of action which it can enforce.  There is no basis for two plaintiffs’ pursuing in parallel the same cause of action as plaintiffs in the proceedings, or even separate proceedings.   The court’s recognition of the insured’s right to control its claim and even withdraw it, is entirely inconsistent and it is worthless to suggest that in those circumstances the insurer still has a claim to pursue.  

A notice to appeal the judgment has been delivered.  The errors should be corrected on appeal.

 The judgment can be read here.