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Last Updated: 11 August 2004
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No 96/2003
METCASH TRADING LIMITED
APPELLANT
and
CREDIT GUARANTEE INSURANCE
CORPORATION OF AFRICA LIMITED
RESPONDENT
Before: Howie P, Brand, Lewis JJA, Jones and
Southwood AJJA
Heard: 9 March 2004
Delivered: 25 March
2004
Interpretation of insurance contract. Condition excluding
liability of insurer not void for vagueness. ‘Claim’ means demand
for indemnity in a particular amount. Failure to lodge claim timeously results
in insurer being free of liability.
JUDGMENT
SOUTHWOOD AJA
[1] The issue in this appeal is whether
the appellant (the plaintiff in the court a quo) failed to lodge its
claim in terms of the investment insurance policy (‘the policy’)
issued by the respondent (the defendant
in the court a quo)
timeously, and accordingly cannot hold the respondent liable under the
policy.
[2] During 1991 the appellant was conducting business in
Zaïre by means of an undertaking called Metro Zaïre SPRL. The
appellant
held an interest in Metro Zaïre and had granted medium-term and
long-terms loans to the undertaking to enable it to carry on
business. On
1 February 1991 the appellant arranged for insurance to cover this interest
and the loans (‘the insured investment’).
The policy was issued on
21 February 1992 and was in force at all material times.
[3] In the
policy the respondent agreed that in the event of the appellant sustaining
monetary loss in respect of the insured investment
due to a ‘cause of
loss’, the respondent would indemnify the appellant in the manner
stipulated in the policy. Causes
of loss were defined in the policy to include
expropriation, war and transfer restrictions.
[4] Although the parties
called witnesses it is not necessary to consider their evidence. The facts are
well documented in the correspondence
which passed between the parties and their
agents and are not in dispute. The only contentious issue in the court a quo was
whether
in August or September 1992 the appellant delivered to the respondent a
balance sheet containing details of the appellant’s
claim. In the court a
quo the appellant’s counsel conceded that this had not been proved and in
this court he repeated the
concession.
[5] On 21 September 1991 the store
where Metro Zaïre conducted its business was burned down and looted in
circumstances falling
within the policy definition of war. On 23 September 1991
the appellant’s agent, Tradegro Shipping Ltd, faxed a letter to the
respondent informing the respondent that the Metro Zaïre store had been
severely damaged and looted and recording ‘our
official notification of a
pending claim, which will be raised as soon as details are
received’.
[6] Thereafter a number of meetings were held between
representatives of the parties and their agents and there was an extensive
exchange
of correspondence regarding the formulation and lodging of the claim.
In this correspondence the respondent repeatedly referred the
appellant to the
necessity of lodging a claim timeously and the appellant repeatedly advised the
respondent that the appellant was
in the process of formulating its claim.
Eventually on 1 October 1993 the appellant’s agent, Dewar Rand Marine
Services (Pty)
Ltd (‘Dewar Rand’), delivered to the respondent a
letter dated 28 September 1993 in which the appellant claimed R72 000
for the
loss of ‘share capital’ (in terms of definition 1.1.2 of the policy
the appellant’s shareholding in Metro
Zaïre) and R3 467 492 25 for
the long-term loan. The letter also informed the respondent that the appellant
was still waiting
for information relating to its medium-term loan and would
finalise that part of the claim as soon as that information had been received.
The respondent took receipt of the letter and again there were meetings between
the representatives of the parties at which various
documents were handed to the
respondent’s representatives. There was also a further exchange of
correspondence. On 9 February
1994, at one of the meetings held for the purpose
of delivering documents to the respondent, the respondent’s
representatives
handed to the appellant’s representatives a letter in
which the respondent pointed out that taking delivery of the documents
would not
constitute acceptance of the appellant’s claim by the respondent, and the
appellant was referred to Operating Condition
12.2 and definition 1.1.2 of the
policy. Finally, on 3 October 1994 the respondent addressed a letter to the
appellant informing
the appellant that the respondent did not accept liability
for the claim ‘due to prescription’ and referring the appellant
to
Operating Condition 12.2 read with definition 1.1.2.
[7] In March
1995 the appellant, relying on the policy, issued summons against the respondent
in the High Court. The appellant claimed
a declarator that the respondent was
liable to indemnify the appellant in respect of the appellant’s losses and
payment of
the sum of R3 483 701 15 together with ancillary relief. As
foreshadowed in its letter dated 3 October 1994 the respondent pleaded
that
it was not liable for the appellant’s claim because it had not been lodged
timeously as required by Operating Condition
12.2 read with Operating Condition
8 of the policy. In its replication the appellant averred that Operating
Condition 12.2 was void
for vagueness and that in any event the appellant had
lodged its claim timeously. At the commencement of the trial the court a
quo made an order in terms of rule 33 (4) that these issues (and others not
presently relevant) be decided first. The court a quo rejected the
appellant’s contentions, upheld the defence raised in the
respondent’s plea and dismissed the appellant’s
claims with costs.
The appellant appeals against that judgment with the leave of the court a
quo.
[8] Operating Conditions 8 and 12 read as follows –
‘8. LODGING OF CLAIMS
Upon the occurrence of a Loss the
Insured shall be entitled to make a claim under the Policy in respect of the
Insured Investment
and the Corporation shall pay to the Insured the Insured
Percentage of the Amount of Loss within 30 days after the Insured has accepted
the basis of settlement proposed by the Corporation. Provided, however, that the
Corporation must first have received payment of
the amount of the indemnity from
the Government of the Republic of South Africa in terms of the Reinsurance
Agreement entered into
between the Corporation and the Minister of Economic
Affairs in pursuance of Section 2 of the Export Credit Reinsurance Act no 78
of
1957 (as amended). Such claim shall be considered for settlement:
8.1 Where the Loss is due to expropriation or war 12 months after the occurrence of a Cause of Loss;
8.2 Where the Loss is due to transfer restrictions immediately after the occurrence of the Cause of Loss.
12. REPUDIATION OF
CLAIMS
12.1 The Insured shall be advised by registered letter of any
claim lodged by the Insured for which the Corporation does not admit
liability.
Should the Insured fail to institute proceedings disputing the
Corporation’s repudiation of such claim as aforementioned
in a South
African Court of Law within a period of six months after the date of the
Corporation’s relevant advice, the Insured’s
rights to any further
action in connection with the claim will be forfeited and the Corporation will
be absolved from all liability
in respect of the claim repudiated by
it.
12.2 Nor shall the Corporation be liable for any claim which is not
lodged within a period of one year after the dates specified
in Operating
Condition 8.’
[9] On appeal the appellant’s counsel
contended, first, that Operating Condition 12.2 is meaningless as ‘the
dates specified
in Operating Condition 8’ cannot be related to
identifiable dates in Operating Condition 8 and accordingly that Operating
Condition
12.2 is void for vagueness; and secondly, that in any event the
appellant had lodged a claim timeously within the proper meaning
of clause 12.2.
Both contentions necessitate the interpretation of the relevant Operating
Conditions.
[10] ‘According to our law ... a policy of insurance
must be construed like any other written contract so as to give effect
to the
intention of the parties as expressed in the terms of the policy, considered as
a whole. The terms are to be understood in
their plain, ordinary and popular
sense unless it is evident from the context that the parties intended them to
have a different
meaning, or unless they have by known usage of trade, or the
like, acquired a peculiar sense distinct from their popular meaning’
(Blackshaws (Pty) Ltd v Constantia Insurance Co Ltd 1983 (1) SA 120 (A)
at 126H-127A). If the ordinary sense of the words necessarily leads to some
absurdity or to some repugnance or
inconsistency with the rest of the contract,
then the court may modify the words just so much as to avoid that absurdity or
inconsistency
but no more (Scottish Union & National Insurance Co Ltd v
Native Recruiting Corporation Ltd 1934 AD 458 at 464-466; Fedgen
Insurance Ltd v Leyds 1995 (3) SA 33 (A) at 38B-E). It must also be borne in
mind that –
‘Very few words ... bear a single meaning, and the
‘ordinary’ meaning of words appearing in a contract will necessarily
depend upon the context in which they are used, their interrelation and the
nature of the transaction as it appears from the entire
contract’
(Sassoon Confirming and Acceptance Co (Pty) Ltd v Barclays National Bank
Ltd 1974 (1) SA 641 (A) at 646B). It is essential to have regard to the
context in which the word or phrase is used with its interrelation
to the
contract as a whole, including the nature and purpose of the contract
(Coopers & Lybrand and Others v Bryant 1995 (3) SA 761 (A) at 768A-B;
Aktiebolaget Hässle and Another v Triomed (Pty) Ltd 2003 (1) SA 155
(SCA) para 1).
[11] In support of the appellant’s first contention
the appellant’s counsel argued that Operating Condition 12.2 determines
the period within which a claim must be lodged with reference to Operating
Condition 8, but that the periods prescribed in clauses
8.1 and 8.2 are
unrelated to the time within which the insured is required to make a claim under
the policy. Operating Condition
8 contemplates a claim being made well before
the dates specified in clause 8.1 and 8.2 in order for it to be considered and
thereafter
settled. But Operating Condition 12.2 contemplates that the period
for the lodging of a claim is after the date stipulated in Operating
Condition 8
for the consideration of the claim. According to the argument this results in an
absurdity. The claim cannot be lodged
after the time when it has to be
considered. This argument presupposes a literal meaning being given to clauses
8.1 and 8.2: namely,
that a claim will be considered once only, on the date
specified in the clauses, irrespective of whether the insured has lodged a
claim
or not. Clearly that would be absurd.
[12] The purposes of Operating
Condition 8 and Operating Conditions 12.1 and 12.2 are clearly different.
Operating Condition 8 determines
a timetable for the lodging of claims
(‘upon the occurrence of a loss’), payment to the insured of the
insured amount
(‘within 30 days after the insured has accepted the basis
of the settlement proposed by the corporation provided the corporation
has
received payment of that amount from the Government of the Republic of South
Africa’) and when a claim shall be considered
for settlement (where the
loss is due to expropriation or war, 12 months after the occurrence of a cause
of loss; where the loss
is due to transfer restrictions, immediately after the
occurrence of the cause of loss). Operating Condition 12 sets time limits
for
the institution for proceedings and the lodging of a claim failing which the
corporation shall not be liable for such claim.
Operating Condition 12.1
stipulates that the insured must institute proceedings within six months of the
date of being notified that
the insurer repudiates the claim. Operating
Condition 12.2 stipulates that a claim must be lodged within one year after the
dates
specified in Operating Condition 8. It is clear that Operating Condition 8
specifies two dates by reference to two events –
the dates of
consideration of claims under the policy. In terms of clause 8.1, where the loss
is due to expropriation or war, the
date is 12 months after the occurrence of
the cause of loss and in terms of clause 8.2, where the loss is due to transfer
restrictions,
the date of the occurrence of the cause of loss. There is
therefore no difficulty about determining the dates specified in Operating
Condition 8.
[13] When the two Operating Conditions are read together
it is also clear that the relevant dates determined in clauses 8.1 and 8.2
are
the dates from which a claim will be considered for settlement by the
respondent. Operating Condition 8 gives the insured the right to make or lodge a
claim upon the occurrence of a cause of loss (ie immediately) but the insured is
not obliged to do so. Operating Condition 12.2 gives
the insured a period of 12
months from when the insurer becomes obliged to consider a claim, to lodge a
claim. Where the loss is
due to expropriation or war this period of 12 months
runs from a date 12 months after the occurrence of the cause of loss (ie the
insured has a period of 24 months within which to lodge a claim). Where the loss
is due to transfer restrictions, this period of
12 months runs from the date of
the occurrence of the cause of loss (ie the insured has a period of 12 months
within which to lodge
a claim). Clearly the insurer can consider a claim only
after it has been lodged. A claim falling under clause 8.1 may be lodged
at any
time within 12 months after the occurrence causing loss but the insurer will not
be obliged to consider the claim until 12
months after the date of the
occurrence causing loss. If such a claim is lodged after 12 months have
elapsed the insurer will
be obliged to consider the claim immediately. A claim
falling under clause 8.2 must be considered as soon as it is lodged. This
interpretation
makes the policy workable in practice and avoids the absurd
result contended for by the appellant’s counsel. The appellant’s
first contention therefore cannot be upheld.
[14] With regard to
the appellant’s second contention, that the appellant lodged a claim
timeously, the appellant’s counsel
argued that to qualify as a claim in
terms of the policy a demand did not need to require payment of any particular
amount. All that
is required is that there be a communication of the
insured’s assertion of its right to indemnity under the policy. That,
according
to the argument, took place on 23 September 1991 when the
appellant’s agent notified the respondent of the occurrence
of a cause of
loss and informed the respondent that a claim would be made in terms of the
policy.
[15] It is clear, as was conceded by the appellant’s
counsel, that the word ‘claim’ has the same meaning in Operating
Conditions 8 and 12.1 and 12.2. Appellant’s counsel contended, with
reference to the dictionary meanings of the words ‘lodge’
and
‘claim’, that there is nothing in the grammatical meaning of the
words, nor at common law, nor in the remainder of
the contract that warrants
that the ordinary meaning of Operating Condition 12.2 be extended to
require any more than notification
by the insured to the insurer that a claim
was being made and that all that was required was that the insurer be notified
that the
appellant was asserting a claim for indemnification under the policy.
Appellant’s counsel also contended that although the
phrase ‘any
claim’ had been subject to judicial interpretation the cases deal with
distinguishable provisions.
[16] I do not agree with these contentions.
While it is true that the provisions considered in the cases were not identical
to the
present Operating Condition 12.1, they were similarly worded and had the
same effect. In each case the court had to decide whether
a claim had been
lodged in order to decide whether the plaintiff had instituted action timeously
after the claim had been repudiated.
In a number of cases (all referred to by
the appellant’s counsel) it was decided that a claim is a demand for an
indemnity
in a particular amount (Le Voy v New Zealand Insurance Co Ltd
1930 CPD 427 at 431-2; Sinovitch v General Accident, Fire and Life Assurance
Corporation Ltd 1946 TPD 692 at 700-701; Boshoff v South British
Insurance Co Ltd 1951 (3) SA 481 (T) at 487B-G; Van der Westhuizen v
‘De Zeven Provincien’ Assuransie Maatskappy Bpk 1959 (3) SA 690
(C) at 696A-698C). These decisions were considered by this court in Pereira v
Marine and Trade Insurance Co Ltd 1975 (4) SA 745 (A) at 757F-758E and the
court agreed that the words ‘any claim’ referred to a claim for
indemnification
by the insured in terms of the policy, and that such claim for
indemnification must be for a fixed or specific amount. This court
also
expressed its broad agreement with the relevant reasons in the judgments in the
Boshoff and Van der Westhuizen cases. In my view the reasoning is
equally applicable to Operating Condition 12.1 and the same meaning must be
given to the word
‘claim’ in Operating Conditions 12.2 and
8.
[17] In the present case the appellant failed to lodge with the
respondent a demand for an indemnity in a particular amount before
21 September
1993. The first demand for an indemnity in a particular amount was contained in
the letter addressed to the respondent
by Dewar Rand on 28 September 1993 and
was received by the respondent on 1 October 1993. Accordingly, the
appellant’s second
contention cannot be upheld.
[18] In the
result, the appeal must be dismissed with costs, such costs to include the costs
consequent upon the employment of two
counsel.
________________
B R SOUTHWOOD
ACTING
JUDGE OF APPEAL
CONCUR:
HOWIE P
BRAND JA
LEWIS
JA
JONES AJA
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