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Last Updated: 4 September 2004
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO: 86/2003
In the matter between
:
UNITRANS FREIGHT (PTY)
LTD Appellant
and
SANTAM LIMITED Respondent
____________________________________________________________________
Before: HOWIE P, NUGENT, CLOETE, HEHER JJA & PONNAN AJA
Heard: 15 MARCH 2004
Delivered: 29 MARCH 2004
Summary: Extension clause in motor insurance policy – whether it obliges insurer to indemnify authorised user of insured vehicle as contemplated by s 156 of the Insolvency Act 24 of 1936
____________________________________________________________________
J U D G M E N T
____________________________________________________________________
NUGENT JA
NUGENT JA:
[1] Because this appeal concerns an
exception to the appellant’s particulars of claim I will refer to the
allegations in the
particulars of claim as if they were established
facts.
[2] The respondent (Santam) was the insurer of a motor vehicle that
collided with a vehicle in which the appellant (Unitrans) had
an interest thus
causing loss to Unitrans. Unitrans sued Santam in the Johannesburg High Court
for the recovery of the loss. Santam
excepted to the particulars of claim on the
grounds that they did not disclose a cause of action. The exception was upheld
by the
court a quo (Willis J) and Unitrans now appeals with leave granted
by this court.
[3] The insured under the policy was a firm known as JG
Olieverspreiders. In terms of the policy Santam undertook (subject to various
limitations and exceptions that are not now relevant) to indemnify the insured
against, amongst other things, liability incurred
by the insured towards third
parties for damage caused by a defined event. A defined event included any
accident caused by or through
or in connection with the insured
vehicle.
[4] A clause in the policy (I will refer to it as the extension
clause) extended that indemnity to ‘any person who is driving
or using
[the] vehicle on the insured’s order or with the insured's permission
[when a defined event occurs]’.
[5] At the time of the collision the
insured vehicle was being driven by a certain Mr Shai and it was his negligence
that caused the
loss to Unitrans. Shai was employed by a close corporation known
as De Kroon Brandstofverspreiders CC (De Kroon) and he was driving
the insured
vehicle in the course and within the scope of his employment. De Kroon thus
became vicariously liable to Unitrans for
the loss. When the collision ocurred
De Kroon was using the vehicle with the permission of the insured. De Kroon has
since been placed
under a winding up order.
[6] No doubt Unitrans thought it
was futile to attempt to recover its loss from an insolvent close corporation
and instead it sought
to recover it directly from Santam in reliance upon
s 156 of the Insolvency Act 24 of 1936. The section reads as
follows:
‘Whenever any person (hereinafter called the insurer) is
obliged to indemnify another person (the insured) in respect of any
liability
incurred by the insured towards a third party, the latter shall, on the
sequestration of the estate of the insured, be
entitled to recover from the
insurer the amount of the insured’s liability towards the third party [up
to the limit of the
indemnity].’
[7] The section does not add to the
contractual liability of an insurer. It merely allows a person who is not a
party to the policy
of insurance to recover directly from the insurer in
particular circumstances. It entitles a person who has a claim against someone
who is indemnified against such liability by an insurer to pursue the claim
directly against the insurer if the estate of the indemnified
person is
sequestrated. (The effect of s 66 of the Close Corporations Act 69 of 1984
read together with s 339 of the Companies
Act 61 of 1973 is to make
s 156 applicable where the indemnified person is a close corporation that
has been placed under a
winding up order : Supermarket Leaseback (Elsburg)
(Pty) Ltd v Santam Insurance Ltd 1991 (1) SA 410 (A) 411 I). Scott JA
explained the purpose and effect of the section as follows in Le Roux v
Standard General Versekeringsmaatskappy Bpk 2000 (4) SA 1035 (SCA) para
6:
‘Artikel 156 van die Wet verleen aan 'n eiser die reg om in bepaalde
omstandighede 'n bedrag direk van 'n versekeraar te vorder
wat deur die
versekerde aan die eiser verskuldig is. Soos uit die artikel blyk, ontstaan die
reg by die sekwestrasie van die boedel
van die versekerde. By ontstentenis van
so 'n wetsbepaling sou 'n eiser in daardie omstandighede verplig gewees het om
sy eis teen
die versekerde se insolvente boedel in te dien en sou sy verhaalsreg
beperk gewees het tot enige dividend wat die kurator aan konkurrente
skuldeisers
moes betaal. Die kurator sou op sy beurt verplig gewees het om ten gunste van al
die skuldeisers die versekerde se reg
op vrywaring uit hoofde van die
tersaaklike polis teen die versekeraar af te dwing. Die gevolg van art 156
is dus om die eiser
aansienlik te bevoordeel deurdat ander skuldeisers nie in
die opbrengs van die polis kan deel nie (kyk Woodley v Guardian Assurance Co
of SA Ltd 1976 (1) SA 758 (W) op 759E-G; Supermarket Haasenback (Pty) Ltd
v Santam Insurance Ltd 1989 (2) SA 790 (W) op 793C-G; Przybylak v Santam
Insurance Ltd 1992 (1) SA 588 (K) op 601J-602A).’
[8] A person who
wishes to recover from an insurer in reliance upon the section must show not
only that he has a good claim in law
against the insolvent person but also that
the insurer is obliged in law to indemnify the insolvent person against the
claim (Le Roux’s case, supra, para 7; Coetzee v
Attorney’s Insurance Indemnity Fund 2003 (1) SA 1 (SCA) para
20).
[9] On the facts alleged in the present case Unitrans indeed has a good
claim in law against De Kroon for recovery of its loss. The
only remaining
question is whether those facts establish that Santam was obliged under the
policy to indemnify De Kroon against its
liability to Unitrans.
[10] The
exception that was taken by Santam was misconceived at the outset. In the
relevant portion of the notice of exception it
was alleged by Santam that the
particulars of claim do not disclose a cause of action
‘because no
allegations are made that a contractual relationship existed between [Unitrans]
and [Santam] in terms of which [Unitrans]
is entitled to rely on the contract of
insurance.’
That allegation rather misses the point. Section 156 does
not require there to be a contractual relationship between Unitrans and
Santam
– it is precisely because there is no such relationship that s 156
was enacted so as to enable the person who has
suffered the loss to pursue the
claim directly against the insurer. What the section requires is only that the
insurer is contractually
bound to indemnify the person who is liable to make
good the loss (in this case De Kroon). Moreover, the section does not apply
only where it is the insured (the person who contracted with the insurer) who
has incurred that liability to the plaintiff, for it
applies expressly whenever
the insurer is obliged to indemnify any person in respect of the liability that
is the subject of the
claim. Thus the question is not whether Santam was
obliged under the policy to indemnify Unitrans (clearly it was not) but rather
whether Santam was obliged by the policy to indemnify De Kroon against De
Kroon’s liability to Unitrans. If the policy did
oblige Santam to
indemnify De Kroon then s 156 entitles Unitrans to pursue its claim directly
against Santam now that De Kroon is
in liquidation.
[11] In support of its
submission that Santam was obliged by the policy to indemnify De Kroon against
its liability for the claim
Unitrans relied upon the terms of the extension
clause which I referred to earlier (for it is not in dispute that at the time
the
collision occurred the insured vehicle was being used by De Kroon with the
permission of the insured). It was submitted on behalf
of Unitrans, in this
court and in the court a quo, that the extension clause constitutes a
stipulation for the benefit of third parties (including an authorised user like
De Kroon)
– a stipulatio alteri – which conferred a right
upon De Kroon to enforce its terms. Santam’s reply was that if the clause
is a stipulation for the
benefit of De Kroon there is no allegation in the
particulars of claim that the benefit was accepted by De Kroon – a
necessary
precondition for Santam to incur contractual liability to De Kroon
(McCullogh v Fernwood Estate Ltd 1920 AD 204 at 205; Commissioner for
Inland Revenue v Estate Crewe and Another 1943 AD 656 at 674-5) and that
without that allegation the particulars of claim are
excipiable.
[12] Although that was not the ground upon which the exception
was taken (I referred earlier to the relevant ground for the exception)
I will
deal with it nevertheless because it was advanced and argued both in this court
and in the court a quo.
[13] The learned judge in the court a quo
held that the extension clause ‘does not apply to a person in the
position of [Unitrans]’ and for that reason he dismissed
the exception. No
doubt that finding was influenced by the form in which the exception was
presented but again, in my respectful
view, it rather misses the point: the
question is not whether the extension clause afforded an indemnity to Unitrans
(if the policy
had indemnified Unitrans it would have had no need to resort to
s 156) but rather whether it afforded an indemnity to De
Kroon.
[14] Although De Kroon was indeed an authorised user as contemplated
by the extension clause it does not follow that it acquired contractual
rights
against Santam as submitted by counsel for Unitrans. In order for such
contractual rights to have arisen it was not enough
that the clause purported to
confer a benefit on De Kroon: what was required in addition was an intention on
the part of the original
contracting parties (the insurer and the insured) that
the benefit, upon acceptance by De Kroon, would give rise to rights that were
enforceable at the instance of De Kroon, for that intention is ‘of the
very heart of the stipulatio alteri’ (Ellison Kahn:
‘Extension Clauses in Insurance Contracts’ (1952) 69 SALJ 53
at 56). In Total South Africa (Pty) Ltd v Bekker NO 1992 (1) SA 617 (A)
625D-G Smalberger JA expressed it as follows:
'As was pointed out by
Schreiner JA in Crookes NO and Another v Watson and Others 1956 (1) SA
277 (A) at 291B-C, "a contract for the benefit of a third person is not simply a
contract designed to enable a third person
to come in as a party to a contract
with one of the other two". The mere conferring of a benefit is therefore not
enough; what is
required is an intention on the part of the parties to a
contract that a third person can, by adopting the benefit, become a party
to the
contract. (Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel
Melamed and Hurwitz v Vorner Investments (Pty) Ltd 1984 (3) SA 155 (A) at
172D-E).'
[15] The intention of the contracting parties is to be determined
upon a consideration of the policy as a whole. Attached to the particulars
of
claim was an extract from the policy containing the extension clause itself but
we were provided by the parties with the remaining
terms of the policy and it
was agreed that they should be regarded as having been incorporated in the
particulars of claim. That
Santam did not intend to confer enforceable rights
upon De Kroon is clear from Clause 11 of the General Exceptions Conditions and
Provisions and the question whether Unitrans was obliged to allege that the
benefit had been accepted simply does not arise. Clause
11 reads as
follows:
‘Unless otherwise provided, nothing in this policy shall give
any rights to any person other than the insured. Any extension providing
indemnity to any person other than the insured shall not give any rights of
claim to such person, the intention being that the insured shall claim on
behalf of such person. The receipt of the insured shall in every case be a full
discharge to the company.’ (My emphasis).
[16] But it does not follow
from the fact that De Kroon acquired no rights that it could enforce against
Santam that Santam was not
‘obliged to indemnify’ De Kroon as that
expression is used in s 156. For clause 11 also makes it clear that Santam
intended
the indemnity contained in the extension clause to be capable of being
enforced: its reservation was only that it should not be
enforced by anyone but
the insured. As pointed out by A. Chaskalson 1963 Annual Survey 382 in
relation to a similar clause in another contract:
‘There seems to be no
reason in principle to prevent parties to a contract from prescribing a specific
procedure to be adopted
in regard to the form of action. Nor, if the clause can
be construed in this way, is there any reason for a court to decline to enforce
the indemnity simply because it has been sued for in accordance with the
prescribed procedure, which is different from the procedure
normally
adopted.’
In my view that is indeed the proper construction to place
upon the clause. To construe the clause otherwise would be in conflict
with
Santam’s expressed intention and would deprive it of effect.
[17] It
has been suggested that an indemnity given in that form might be void for lack
of an insurable interest on the part of the
insured[1] – and that has been
held to be the case in other
jurisdictions[2] – but that is
not a ground upon which the particulars of claim were attacked and it has not
been argued before us. Indeed,
it would be surprising if an insurer who has
given an earnest undertaking to indemnify a person in what is clearly a policy
of insurance
and not a gambling contract (as pointed out by Chaskalson, loc
cit, the requirement of insurable interest is designed to ensure that
insurance policies are not used as a basis of gambling) were to
repudiate its
obligations on those grounds.
[18] In my view Santam was indeed obliged to
indemnify De Kroon against its liability for the loss as contemplated by s 156
(albeit
that the indemnity was enforceable only by the insured) and Unitrans is
entitled to enforce its claim directly against Santam now
that De Kroon is in
liquidation. Naturally that does not mean that Unitrans will necessarily
succeed if the facts alleged in the
particulars of claim are established for it
is clear from the policy that a claim might yet be defeated for want of
compliance by
the insured with the conditions of the policy (the claim in Le
Roux’s case failed on those grounds). But the particulars of claim
are not excipiable (see First National Bank of Southern Africa Ltd v Perry NO
& Others 2001 (3) SA 960 (SCA) 965D) and the exception ought to have
been dismissed.
[19] The appeal is upheld with costs. The order of the court
a quo is set aside and the following is substituted:
‘The
exception is dismissed with costs’.
_______________
NUGENT JA
HOWIE P)
CLOETE JA)
HEHER JA) CONCUR
PONNAN AJA)
[1] Ellison Kahn: ‘Extension
Clauses in Insurance Contracts’ (1952) 69 SALJ 53; Gordon and
Getz on The South African Law of Insurance 4ed by DM Davis 445. But see the
contrary views of A. Chaskalson 1963 Annual Survey 381-2; MFB Reinecke:
‘Versekering sonder versekerbare belang?’ 1971 CILSA
193 218-20.
[2] Vandepitte
v Preferred Accident Insurance Corporation of New York [1933] AC 70 (PC)
80-81; Old Mutual Fire & General Insurance Company of Rhodesia (Pvt) Ltd
v Springer 1963 (2) SA 324 (SR) 329C-G.
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