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[2019] ZAWCHC 7
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Watson and Another v Renasa Insurance Company Limited (14664/2012) [2019] ZAWCHC 7; [2019] 2 All SA 280 (WCC); 2019 (3) SA 593 (WCC) (14 February 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 14664/2012
In
the matter between:
CHRISTOPHER
BRIAN
WATSON
First
Plaintiff
FLASHCOR
201
CC
Second
Plaintiff
and
RENASA
INSURANCE COMPANY
LIMITED
Defendant
Coram:
Justice J Cloete
Heard:
29, 30 and 31 October 2018; 1, 5, 6 and 7 November 2018; 6 December
2018
Delivered:
14 February 2019
JUDGMENT
CLOETE
J
:
Introduction
[1]
This case demonstrates the quite extraordinary lengths to which the
defendant insurance company has gone to avoid payment to
its insured,
the first plaintiff. For convenience, I refer to him as ‘
the
plaintiff’
, given that during 2017 the defendant eventually
settled the second plaintiff’s claim for damage to the factory
from which
the first plaintiff’s business operated.
[2]
The chapter of this saga before me pertains to the
quantum
of
the plaintiff’s claim in respect of machinery destroyed or
damaged beyond repair in a fire that occurred on 10 January
2011
at his print finishing business, Canterbury Coaters, in Elsies River.
[3]
The plaintiff claims the cost of replacing or reinstating his
machinery in accordance with the reinstatement provisions of a
certain policy of insurance issued by the defendant, as read with the
‘
alternative replacement conditions’
(ARC)
contained therein. He quantifies his claim at the date of the loss in
the amount of R15 743 405.25 plus VAT of
R2 204 076.74,
i.e. R17 947 481.99. In the alternative, he claims payment
of R28 093 207 plus VAT
of R3 933 048.98
calculated at 31 May 2017, being the date agreed upon by the
respective experts for purposes of
more recent valuation. Both
amounts exclude interest thereon which is also claimed.
[4]
During the trial the plaintiff testified and called two experts,
Mr Carel Smit (a specialist valuer of plant and machinery)
and
Mr Russel Whalley, a retired loss adjuster with some 58 years
experience in the field of adjusting claims on behalf of
insurance
companies both locally and abroad. The defendant ultimately only
called one witness, Mr Ivor Mumford, an industrial
engineer,
whose area of expertise lies predominantly in the design and
implementation of complex industrial production facilities.
He
testified on both factual and expert issues.
[5]
At the outset it must be stated that all three experts were credible,
objective, fair and of considerable assistance to the
Court. They
understood their function as experts and, where there were areas of
disagreement on value between Messrs Smit and Mumford,
they were
resolved between them or by Mr Mumford making appropriate concessions
during testimony. This ultimately resulted in the
experts being
ad
idem
on the alternative valuations upon which the plaintiff’s
claim is calculated.
[6]
The plaintiff himself was a good witness who, despite testifying for
4 days, was consistent in his evidence in all material
respects.
During argument there was rightly no suggestion to the contrary.
Accordingly issues of credibility do not arise.
[7]
The
background facts and findings on the merits are comprehensively set
out in the judgments of Savage AJ (as she then was) of 30 October
2014
[1]
and the Supreme Court of
Appeal of 11 March 2016
[2]
and are thus not repeated, save to the extent necessary. Savage AJ
found in the plaintiffs’ favour and her decision was upheld
on
appeal.
[8]
The main defence in the merits trial was that the plaintiff
deliberately set fire to his factory in order to make a fraudulent
claim under the policy. While it has always been undisputed that an
arsonist was responsible, the defendant’s approach to
the
plaintiffs’ claim at merits stage was aptly summarised by
Savage AJ as follows:
‘
[134] Given the
nature of the meticulously planned and executed fire scene, I accept
that the arsonist must have had knowledge of
the premises and was on
the probabilities a key holder, it was natural for the investigation
to focus on Mr Watson as a suspect.
However, what occurred was
that Renasa singled Mr Watson out from the first days of the
investigation as the prime suspect,
and in doing so appeared to have
lost focus on the fact that what the investigation required was a
careful consideration of the
facts to include a thorough
investigation of the fire scene and a detailed and careful
investigation of all possible perpetrators.
This required that one
culprit not be singled out early on in the life of the investigation
to the exclusion of all others, given
the lack of clear facts to
justify doing so…’
The
nature of the plaintiff’s claim
[9]
The plaintiff’s claim is one for damages based on the
defendant’s repudiation of the contract of insurance, and
not
one for specific performance.
[10]
It is common cause that the policy in question is for indemnity
insurance, the defendant agreeing ‘
to indemnify or
compensate the insured by payment or, at the option of the company,
by replacement, reinstatement or repair in respect
of the defined
event occurring during the period of insurance… up to the sums
insured, limits of indemnity, compensation
and other amounts
specified’.
[11]
By the time the
quantum
trial was concluded, nearly 8 years
had elapsed since the incident. It is not in dispute that in those 8
years:
11.1 The plaintiff spent
38 days in Court seeking to enforce his claim against the defendant:
before Davis J – 4 days on the
separated issue of
locus
standi;
before Savage AJ – 26 days on the defendant’s
liability; before the Supreme Court of Appeal – 1 day on
unsuccessful
appeal against Savage AJ’s judgment; and another 7
days on trial before this Court, excluding argument;
11.2 The plaintiff has
expended a total of approximately R3 million in legal fees in seeking
to enforce his claim against the defendant;
[3]
11.3 The plaintiff has
received no payment (other than in respect of costs awarded to him
for the earlier litigation) from the defendant,
nor has the defendant
given any unequivocal undertaking to make payment in terms of the
policy, whether on account and subject
to reinstatement, or
otherwise; and
11.4 The second
plaintiff’s claim (in respect of the damaged building) was only
settled by the defendant in 2017 (some 6 years
after the building had
been damaged).
The
relevant general principles of insurance law
[12]
For present purposes, I deal only with the common law provisions
relating to contracts of insurance. The various statutory
or
derivative insurances which are so much a feature of modern life are
not included.
[13]
In
Lake
v Reinsurance Corporation Ltd
,
[4]
following
Prudential
Insurance Co v Inland Revenue Commissioners
,
[5]
the Court defined a contract of insurance as a ‘
contract
between an insurer (or assurer) and an insured (or assured), whereby
the insurer undertakes in return for the payment of
a price or
premium to render to the insured a sum of money, or its equivalent,
on the happening of a specified uncertain event
in which the insured
has some interest
’.
[14]
This
definition has been criticised for failing to draw the fundamental
distinction between the two divergent forms of insurance,
namely
indemnity and non-indemnity insurance.
[6]
[15]
The General
Law Amendment Act 1879 (Cape), which was mirrored in the Orange Free
State by the General Law Amendment Ordinance of
1902, provided that
‘
in
every suit, action and cause having reference to fire, life and
marine insurance… the law administered by the High Court
of
Justice in England, for the time being… shall be the law to be
administered by the said Supreme Court or other competent
Court’
.
[7]
These enactments were repealed by the Pre-Union Statute Law Revision
Act 43 of 1977, the effect of which was held by the Appellate
Division per Joubert JA
[8]
to be
that the South African law of insurance is governed mainly by
Roman-Dutch law as our common law (while at the same time noting
that
both the Roman-Dutch and the English law of insurance derived from
the same common
lex
mercatoria
of the Middle Ages). Accordingly, and as submitted by Reinecke et al
in
Lawsa
[9]
,
‘
where
principles derived from English insurance law have been taken over
into our law, and where those principles operate satisfactorily
and
are not in conflict with the general principles of our law, they will
be retained and that English insurance law will in respect
of those
principles, even if no longer of binding authority, continue to carry
great persuasive force in our law… Judicial
decisions since
the passing of the legislation in question have accordingly followed
the beaten track and there is no indication
of any judicial rejection
of acceptable principles derived from English insurance law’.
[16]
This
approach is also of application in construing the terms of a policy.
Although the construction of an insurance contract is
a matter of
law
[10]
and is, accordingly,
governed in accordance with Roman-Dutch principles, the insurance
industry should be able to rely on the interpretation
of particular
words or provisions in a policy, even though it has been many years
since a court first decided their meaning.
[11]
It is stated in McGillivray on
Insurance
Law
[12]
that:
‘
Consequently,
as with all questions of law, the ordinary rules of the doctrine of
precedent apply, and the tribunal interpreting
the words in question
will either be bound to follow the previous court’s
interpretation or strongly persuaded to do so…’.
[17]
Accordingly,
pre-1977 decisions of the English courts interpreting policy
provisions couched in identical wording, or wording which
is to the
same effect, remain authoritative; and post-1977 decisions on the
same or similar provisions have considerable persuasive
authority.
[13]
[18]
Furthermore in cases of ambiguity, not only does the
contra
proferentem
rule frequently operate against the insurer as the
drafter of the policy wording, but a further principle also operates
to favour
the insured:
‘
The
construction of a warranty is generally taken in favour of the
assured and against the insurer; and this is particularly the
case
when the warranty is expressed in doubtful or ambiguous language. It
is laid down that, as assurance is a contract of indemnity,
it is to
be construed reasonably and fairly to that end. Hence conditions and
provisos will be strictly construed against the insurers
because they
have for their object the limitation of the scope and purpose of the
contract.
”
[14]
Indemnity
Insurance
[19]
In
Malcher
& Malcomess v King Williams Town Fire & Marine Insurance &
Trust Co
[15]
Buchanan J held that:
‘
The very
essence of the contract of insurance is that it is a contract of
indemnity; its sole and exclusive object is to procure
for the
insured indemnity, in the strictest sense of that word, for any
losses he may sustain, through the agency of the risks
against the
effect of which the underwriter, by the terms of his policy, stands
pledged to protect him. (
Arnould
on Marine Insurance
,
sec. 8;
Dalby
v India and London Assurance Company
15 CB 387
;
Chapman
v Pote
22 L.T. NS, 306).’
[16]
[20]
Accordingly,
the insured would usually
[17]
be entitled to recover the “real and actual” value of
what he has lost through the happening of the event insured
against.
[18]
In the context of
indemnity insurance two important fundamental principles apply. The
first is that the event giving rise to the
claim under the policy
constitutes a fictional breach of the contract (a legal fiction). The
second is compensation for damages
as a consequence of that legal
fiction (this is not to be conflated with any subsequent repudiation
by the insurer under the policy).
With the passage of time there have
been variations, modifications and sophistications to these
contracts, but the underlying principles
themselves have not changed.
[21]
These modifications and the like have given rise to certain
possibilities. One is that instead of only payment of money,
performance
can be made in other ways as well; for example, a clause
to the effect that in case of damage the insurer can elect to
reinstate
or repair itself. Another, of more recent evolution, is a
clause which allows the insurer himself to elect to be insured on the
basis of a reinstatement value.
Reinstatement
[22]
As alluded
to above, the term “reinstatement” may be employed, and
operate in consequence, in two quite distinct ways.
First, and as in
this case, insurance policies frequently give the insurer the option
of reinstating the property insured instead
of paying a money
indemnity to the insured. This “usual reinstatement clause”
renders the insurer’s obligation
in terms of the insurance
contract a facultative obligation.
[19]
‘
The
clause is intended to benefit the insurers and to protect them from
liability to pay the full pecuniary value of the loss, if
the loss
can be more cheaply made good otherwise.
[20]
Hence, the assured cannot take advantage of the clause and insist on
reinstatement if the insurers do not elect to reinstate; nor
on the
other hand, can he prevent them from reinstating if they have elected
to do so’.
[21]
Their purpose is to protect insurers against excessive demands and
fraudulent claims.
[22]
[23]
Should the
insurers so elect, they thereby substitute a different mode of
discharging their obligation under the policy. Their contract
is no
longer a contract to pay a sum of money, but a contract to reinstate
the property insured.
[23]
Once
having elected, they cannot withdraw from such election and are
obliged to reinstate the property adequately regardless of
the cost,
and they are further liable for the consequences of a failure to
perform such reinstatement adequately.
[24]
The terminology of these usual clauses frequently distinguishes
between “replacing” or “rebuilding” (in
the
case of total destruction of the insured property) and “reinstating”
or “repairing”, in case of damage
which is capable of
reinstatement or repair.
[25]
[24]
In the
instant matter, it is not suggested that the defendant insurer at any
stage elected to exercise this option under the policy
and itself
reinstate the damaged property.
[26]
Replacement
value
[25]
The other
manner in which the term reinstatement is sometimes encountered in
indemnity policies is in the context of the
basis
upon which a claim is to be valued
.
As stated above, the usual basis of indemnity would be strictly that
the actual loss or diminution of value of the property insured
at the
date of the insured event is covered. However, as noted by Birds,
‘
(p)olicies
containing express undertakings to pay replacement value are
increasingly common, and there can be no doubt that, subject
to the
sum insured, the insured is entitled to what it actually costs to
replace
the lost property by equivalent new property
.
These “new for old” policies were no doubt a major inroad
into the traditional principle of indemnity, but it goes
without
saying that insurers demand higher premiums for such cover
”
[27]
(emphasis supplied). Put differently, the insured is entitled to
receive the value of the loss based on replacement value of
equivalent
new property, not the actual value of the property insured
at date of the loss, but subject to the maximum of the insured value
under the policy.
[26]
In the
policy under consideration, the basis of valuation of a claim is
contained in a “Reinstatement value conditions clause”
(“RVC clause”),
[28]
which provides that, in the event of property other than stock being
damaged, the amount payable ‘
shall
be the cost of replacing or reinstating on the same site
property
of the same kind or type but not superior to nor more extensive than
the insured property when new
’
(emphasis supplied).
[27]
This constitutes provision for the full costs of repair of the
property; alternatively, in respect of property not capable
of
repair, replacement by “like-for-like’ property (in the
instant matter, machinery) where the same (or closely similar)
property exists in the market. (The use of the term “reinstatement”
in this context should not be confused with the
more commonly-found
reinstatement at the option of the insurer, dealt with above; it is
perhaps more usefully called a “replacement
value clause”,
to make that distinction plain. However, in the context of this
policy I use the term employed in the document,
with the caveat that
this distinction needs to be kept in mind.)
[28]
The application of the RVC clause is subject to certain conditions:
28.1 The ‘
work
of replacement or reinstatement’
must be commenced and
carried out with reasonable dispatch, otherwise no payment beyond the
indemnity value will be paid (proviso
1);
28.2 Until such time as
expenditure has been incurred by the plaintiff, the defendant is not
liable for any amount in excess of
that amount which would have been
payable, had the replacement value conditions not been incorporated
into the policy, (i.e. the
continuing and underlying indemnity
liability) (proviso 2);
[29]
28.3 ‘
If, at the
time of replacement or reinstatement, the sum representing the cost
which would have been incurred in replacement or
reinstatement if the
whole of the insured property had been damaged, exceeds the sum
insured thereon at the commencement of any
damage to such property by
a defined event, then the insured shall be considered as being their
own insurer for the excess and
shall bear a rateable proportion of
the loss accordingly. Each item of this section (if more than one) to
which these conditions
apply shall be separately subject to this
provision’
:(proviso 3); and
28.4 The RVC conditions
shall be without force and effect should: (a) the plaintiff fail to
‘
intimate’
to the defendant within 6 months of the
date of damage, or such further time as the defendant may in writing
allow, his intention
to replace or reinstate the property; and/or (b)
the plaintiff is unable or unwilling to replace or reinstate the
property on the
same or another site (proviso 4).
[29]
Clauses of this nature can give rise to difficulty and are open to
potential abuse by an insurer who is less than
bona fide
. If
no payment is made by an insurer at all, it places an impecunious (or
relatively impecunious) claimant at a severe disadvantage
when
compared to similarly-placed insured parties, who are possessed of
greater means. Such an impecunious insured would be required
not
merely to evidence a sincere intention to replace or reinstate the
destroyed or damaged property, but would further be required
to do
so, absent any firm commitment by the insurer that it accepts
liability for the resultant costs.
[30]
This
conundrum has received consideration. In McGillivray,
[30]
the authors submit:
‘
It has been
held in the United States that these clauses must be interpreted
according to their terms but it is rather hard
that an insured,
who needs the money with which to repair his property, should be
expected to incur the cost of reinstatement from
his own funds. This
is particularly so if the insurers, in breach of the contract, deny
liability under the policy or assert that
the insured should be
compensated on a basis other than that of reinstatement. It is,
therefore, submitted that the requirement
that the insured should
commence and carry out the work of reinstatement with reasonable
despatch should only operate if the insurers,
in accordance with the
contractual obligations, accept that reinstatement is the appropriate
measure of indemnity.’
[31]
[31]
The issue
came before the English court in
McLean
Enterprises v Ecclesiastical Insurance Co.
[32]
Staughton J declined to decide the point on the basis that the
insured had already formed the intention to sell the damaged property
prior to the fire. Therefore, on the facts, he did not have the
necessary intention to reinstate and would not have done so, even
had
the insurer paid the claim promptly. In so doing, the learned judge
stated:
‘
Counsel for the
insurers maintained that the owners’ intentions at the time of
the fire are irrelevant. They have not in fact
incurred any costs of
reinstatement….
The owners’ only
answer to this point is that they could not reinstate the property
until the insurers had paid their claim,
as they did not have the
resources; accordingly to give effect to par. (3) of the
reinstatement clause would be to allow the insurers
to take advantage
of their own breach of contract. It was, said Mr. Davies on the
owners’ behalf, Catch 22.
I do not decide
whether this argument would have succeeded in other circumstances. In
this case it fails, because it is not proved
that the owners would
have reinstated the premises if they had had the resources to do so,
or if the insurers had paid the claim
promptly.
”
[33]
[32]
In
Grand
Central Airport (Pty) Ltd v AIG South Africa Ltd
[34]
Boruchowitz J considered an RVC clause virtually identical to the one
in the instant case save that provisos 3 and 4 above were
seemingly
absent. It is nonetheless instructive to quote the following passages
from that judgment, with which I am in full agreement:
‘
[12] On the
defendant’s construction of the clause the insured’s
obligation to commence and complete the reinstatement
with reasonable
expedition under the reinstatement clause becomes operative even
where the insurer repudiates liability. There
is nothing in the
language of the policy to support such a construction. The
reinstatement clause, on its plain wording presupposes
that the
insurer is to indemnify or compensate the insured by payment and that
the insurer has not elected to replace or reinstate
the damaged
property. The manifest purpose of the clause is to determine the
extent of the indemnity payable by the insurer to
the insured and
that question only arises for consideration if the obligation to
indemnify is admitted by the insurer or fixed
by a court. It does not
arise where the insurer repudiates liability.
[13] The construction
contended for by the defendant is an improbable one and in conflict
with a businesslike construction of the
policy. Where the insurer
repudiates liability the insured is obliged to institute action in
order to enforce its claim. If the
defendant’s construction of
the clause is correct, the insured would have the additional burden
of commencing and completing
the work of replacing or reinstating the
damaged property at its own cost without any certainty that it would
be indemnified in
respect thereof. This is the very eventuality that
an insured would seek to avoid by procuring a policy of insurance,
that is the
risk of itself having to fund the replacement or
reinstatement.
[14] To interpret the
policy in the manner contended for by the defendant would impact
negatively upon an impecunious insured. Such
an insured would
probably not have the means to commence and effect the reinstatement
and will be deprived of the benefit of the
insurance for which it has
effected payment of premiums. On the other hand, where the insurer
has accepted liability or liability
has been fixed by a court, it
would not be difficult for an impecunious insured to raise the
finance necessary to commence and
complete reinstatement of the
damaged property as the insurer’s liability would amount to a
guarantee of payment.’
[33]
In the
policy under consideration the RVC provisions are moderated by
further provisions contained in what is termed the ‘
Alternative
replacement conditions (design capacity) clause’
(“ARC clause”), which reads as follows:
[35]
‘
In the event of
property insured which has a measurable function, capacity or output
being damaged by a defined event and it not
being possible to replace
or reinstate such property in terms of the reinstatement value
conditions, then the company will pay
the cost of replacing such
property with property the quality, function or output of which is
as
near as possible but not inferior
to that of the original
property.’
(emphasis
supplied)
[34]
The provisos that qualify the RVC clause apply also to the ARC
clause. Most significantly, a further condition in the ARC clause
expressly stipulates that:
‘
2. in applying
the provisions of proviso 3 of the reinstatement value conditions,
the cost (as provided for in proviso 3) “which
would have been
incurred in replacement or reinstatement if the whole of the insured
property had been damaged” will be increased
by such amount
payable under the alternative replacement clause which is in excess
of that which would have been payable under
the reinstatement value
conditions clause, had it been possible to reinstate or replace the
property in terms thereof.’
[36]
[35]
Accordingly
the parties expressly acknowledged that the implementation of the ARC
provisions might lead to the amount payable by
the insurer exceeding
(by an indeterminate sum) the actual maximum amount insured, which in
terms of the policy is R17 545 871.
[37]
The
pleadings
[36]
I turn to deal with certain material aspects of the defendant’s
case at the commencement of the
quantum
trial, having regard
to the defendant’s amended plea.
[37]
First,
despite accepting
[38]
that the
defendant is bound by the judgment of the Supreme Court of Appeal
dated 11 March 2016, there is no tender of payment in
the plea and,
as a fact, the defendant has not made any payment to the plaintiff
nor tendered any payment on an interim basis,
or on account.
[38]
Second, the defendant persisted with the attitude that the plaintiff
is not entitled to reinstatement under the policy because:
38.1 He did not carry out
work in respect of such reinstatement with reasonable dispatch after
the fire;
[39]
38.2 Alternatively, he
failed to do so after the Supreme Court of Appeal judgment;
[40]
38.3 He did not incur
expenditure in reinstating the property and ‘
forfeited’
the right to rely on the reinstatement clause;
[41]
and
38.4 He was at all
material times unable and unwilling to reinstate the property and the
reinstatement clause is thus ‘
of
no force and effect’
.
[42]
[39]
The
defendant pleaded in the alternative that, if the reinstatement
provisions are found to be applicable, then it is entitled ‘
in
accordance with the word and spirit of the RVC clause’
to insist that the plaintiff shall not be indemnified unless and
until the reinstatement is actually carried out by him.
[43]
The defendant pleaded as follows:
‘…
the
defendant
insists
that in such event the parties
should agree (failing which, the court should rule) on a mechanism
whereby the defendant can guarantee
that payment will be made …
as and when such cost is incurred by the first plaintiff and proof
thereof is furnished to the
reasonable satisfaction of the defendant
…’
(emphasis supplied)
[40]
Despite this “insistence” no relief was claimed by the
defendant to this effect. Moreover the defendant made no
tender in
this regard, whether during the trial or in argument. In any event,
the ‘
mechanism’
is not provided for in the policy
wording and is certainly not part of the RVC clause.
[41]
The
plaintiff filed a replication to the plea in which it was pointed
out,
inter
alia
,
that during the merits trial, the defendant’s case (put to the
plaintiff in cross-examination) was expressly that the conditions
for
the application of the RVC clause
had
been
complied with by the plaintiff after the fire; and accordingly the
defendant was not entitled to take the stance which it had in
its
plea.
[44]
[42]
The
plaintiff again pointed this out in his request for trial particulars
and asked the defendant whether it nevertheless persisted
with the
defence,
[45]
to which the
defendant replied in the affirmative.
[46]
When asked whether the defendant accepted that its own repudiation of
the plaintiff’s claim contributed to the plaintiff
not having
been able to reinstate, the defendant answered in the negative.
[47]
[43]
In the application for a further separation of issues brought by the
defendant at the commencement of the
quantum
trial (which was
refused), counsel for the defendant stated that the ‘
nub’
of its defence was that the plaintiff did not incur expenditure or
commence reinstatement. This he contended was the central
issue
in dispute.
The
curtailment of the defences in the course of the trial
[44]
On the
fourth day of the trial I ruled that the defendant’s case put
to the plaintiff during cross-examination at merits stage
constituted
an admission against interest, and it was thus precluded from
challenging the fact that the plaintiff commenced reinstatement
and
showed a continuing intention to reinstate in the period between the
fire and the judgment of the Supreme Court of Appeal.
[48]
[45]
Almost a
year after the latter judgment, the defendant’s attorneys,
expressly writing on the instructions of their client,
addressed an
open letter to the plaintiff’s attorneys on 14 February 2017 in
which it was stated that if the plaintiff ‘
did
not have the financial wherewithal (to reinstate), then our client
will not rely on the plaintiff’s failure to have commenced
the
process of reinstatement of the property and the business despite the
lapse of time’.
[49]
This was the case, it was stated, because the defendant was ‘
not
unreasonable’
.
[46]
Despite this, the defendant did a
volte face
and the plaintiff
thus had to testify at some length on the steps taken by him
subsequent to March 2016. As it turned out, his
evidence in this
regard was virtually unchallenged in cross-examination; and during
argument at the end of the trial
Mr Oosthuizen SC
(who had
taken over as counsel for the defendant when his predecessor was
unavailable after the plaintiff’s testimony) properly
informed
the Court that the plaintiff’s
intention
to reinstate
post-March 2016 was no longer an issue. I will however refer to
salient aspects of the plaintiff’s evidence
later, given their
relevance to his
ability
to reinstate.
[47]
In summary, the issues that remain to be determined by this Court
are:
47.1 Whether the
plaintiff has demonstrated an inability, despite his best efforts, to
reinstate;
47.2 If so, whether the
plaintiff’s inability precludes him, as a matter of law, from
relying on the RVC provisions of the
policy; and
47.3 If the plaintiff is
entitled to reinstatement, the value of his claim and in this regard,
whether it ought to be quantified
tunc
at 2011 or
subsequently, and what compensation (in the form of interest) ought
to be applied to take into account the passage of
time.
Inability
to reinstate
[48]
The evidence in regard to the first issue is clear and almost
entirely uncontested. The defendant’s concession in the
merits
trial that the plaintiff had complied with the reinstatement
conditions was well made. The plaintiff’s evidence indicates
that he immediately started taking steps to get his factory back on
its feet. These included:
48.1 The incurring of
some R896 354.81 in expenses
[50]
over a period of seven months, including retaining all his staff,
repairing the electricity, alarm, roofing, doors and windows,
cleaning the factory and complying with his statutory obligations to
keep a functioning business operational;
[51]
48.2 The incurring of
significant expenditure in trying to repair the Billhofer machine in
order to generate an income for the business
while waiting for the
defendant to make a decision;
48.3 Obtaining quotations
for replacement machinery within days of the fire;
[52]
and
48.4 Attempting to
generate an income by taking on work even though the factory was not
really in a position to complete these jobs
properly.
[53]
[49]
The months
following the fire were characterised by the plaintiff attempting to
get the defendant to commit to a decision on the
claim and the
defendant focussing exclusively on the plaintiff as the only suspect
of the arson. At an early stage, the plaintiff’s
attorneys had
to call upon the defendant to investigate all avenues in the
arson
[54]
but to little avail.
The correspondence usefully illustrates the plaintiff’s
increasingly desperate situation in these months:
49.1 The plaintiff’s
attorney (perhaps hopefully in retrospect) called on the defendant
from 21 January 2011 to finalise the
claim as the plaintiff was
suffering losses from not being able to continue the business; an
explicit request for an interim payment
was made at this point.
[55]
49.2 Two months later,
the plaintiff’s attorney was still pleading with the defendant
to expedite the investigation and pointed
out that the plaintiff
could not generate an income from the business as a result of the
damage.
[56]
49.3 At that stage, the
defendant would not even commit to paying towards the repair of the
building itself.
[57]
49.4 On 5 May 2011 the
plaintiff’s attorneys again pointed out that the delay on the
defendant’s part in making any
decision was severely
prejudicing the plaintiff.
[58]
49.5 As the plaintiff’s
insurance broker Mr Knoetze rather aptly put it: ‘
Come
on say now: ‘Mr Watson we are paying your claim but there
are still outstanding questions’ …or ‘No
Mr W have
a nice day in court.
’
[59]
49.6 On 2 June 2011 the
plaintiff’s attorneys again referred to his ‘
dire
financial position
’
as a result of the failure to reinstate the factory and stated that
he was unable to conduct his business and was ‘
staring
bankruptcy in the face’
.
[60]
49.7 On 15 June 2011 it
was pointed out that the plaintiff was being ‘
held
ransom’
by the defendant’s refusal to make a decision.
[61]
49.8 On 15 July 2011 the
plaintiff’s attorneys advised that the position was untenable
and that should a decision not be made,
it would be regarded as a
repudiation of the claim.
[62]
The response was simply that defendant will ‘
not
be forced into making a decision’
(some 6 months after the incident).
[63]
49.9 On 10 August 2011,
the plaintiff personally informed the defendant that, with much
reluctance, he had no option but to close
the factory down.
[64]
[50]
The
plaintiff was asked in evidence whether, looking back on the events
after the fire, there was anything he could have done differently
to
keep the business going for longer. His answer was persuasive and
credible: there was no communication from the defendant who
simply
refused to make any decision, and although he remained hopeful for
months, ultimately he ran out of capital and could not
continue.
[65]
[51]
The position subsequent to the Supreme Court of Appeal decision is
much the same: by that stage the plaintiff had spent 31
court days in
litigation against the defendant, had taken his mortgage bond to its
maximum, had sold his motor car and had loaned
money from his mother
to keep going. His factory had been closed for over five years and
the premises had been sold. The defendant
had still not paid anything
towards the plaintiff’s claim, and had given no clear
indication that it would do so.
[52]
Despite this, the plaintiff’s attempts to revive his business
are clear:
52.1 Shortly after the
judgment had been received, the plaintiff obtained quotations on
replacement machinery.
[66]
52.2 The plaintiff
attempted to secure financing from Standard Bank but without
success.
[67]
In this regard it
should be repeated that in
Grand
Central Airport
(
supra
)
Boruchowitz J reasoned that, once the insurer has accepted liability,
or liability has been fixed by a court, it would not be
difficult for
an impecunious insured to raise the necessary finance since this
would amount to a guarantee of payment. While this
may well be the
case in many instances, the plaintiff had no such luck. In July 2016
he applied to Standard Bank for a loan but
was informed months later
in November 2016 that it was declined since ‘
we
do not finance legal costs
(sic)
in
relation to court rulings… this falls out of our
[lending
criteria]
policy’
.
[68]
This did not however deter the defendant from latching onto this in
cross-examination of the plaintiff in an effort to demonstrate
that
he failed to take any meaningful steps.
[53]
The
plaintiff testified how excited he was when he was shown the letter
of 14 February 2017
[69]
from the defendant, as he genuinely believed that he could now enter
into negotiations with it for the reinstatement of the business.
[70]
His evidence was unchallenged in this regard. The letter is important
not just because the defendant undertook not to argue that
the
plaintiff’s financial inability to restart the business would
be used as a defence against him, but it also suggested
a willingness
to enter into discussions around reinstating the business.
[54]
However, it
is apparent that the defendant then stepped back from the position
reflected in the open letter and when the plaintiff’s
attorney
queried whether the offer still reflected the defendant’s
position, the reply was unhelpful and simply a reference
to
implementing the policy.
[71]
[55]
The suggestion put to the plaintiff in cross-examination that he
ought to have pursued discussions with the defendant more
assertively
is a little startling. After years of litigation and accusation, and
a dogged refusal to make any payment whatsoever,
it could hardly be
expected by the defendant that the impecunious plaintiff –
whilst still being obliged to incur ongoing
legal costs in pursuit of
an actual payment – should be trying to negotiate for some sort
of conciliatory makeweight settlement.
[56]
When asked
in evidence if he still had a genuine desire and intention to
recommence the business, the plaintiff’s reply was
unequivocal
and credible.
[72]
He testified
that he just needed a commitment from the defendant and he could then
find premises and secure funding. None of this
evidence was seriously
challenged in cross-examination.
[57]
Most importantly, bearing in mind the evidence of Mr Whalley, it is
notable that the defendant has until today still not actually
paid,
or even tendered to pay, what
it
regards as being its
uncontested liability in respect of the indemnity value of the
machinery in question.
Whether
the plaintiff is precluded from relying on the RVC clause as a result
[58]
Against this background, the evidence of Mr Whalley becomes
particularly significant on the second issue:
58.1 He testified that,
in accordance with common industry practice, he would expect an
insurer in these circumstances to make a
payment on account so as to
enable the insured to commence the process of reinstatement.
58.2 In any event, and at
the very least, the insurer ought to pay (or tender to pay) the
unquestionable liability of the indemnity
value of the damaged
machinery, which would provide the insured with the means to pay
deposits and secure replacement machinery.
[73]
(It should be pointed out that Mr Mumford (the defendant’s own
expert) calculated this amount to be R4 384 481
including
VAT at January 2011, and R9 712 461 including VAT at May
2017, over a year after the Supreme Court of Appeal
judgment).
[74]
58.3 It is unreasonable
to expect the average insured to have the financial wherewithal to
finance, or even obtain the necessary
financial backing, for the
replacement or reinstatement of damaged property and the start-up of
the interrupted business, without
the co-operation and assistance of
the insurer; and without such co-operation, in many cases it would
simply not be feasible.
[59]
For the reasons that follow, and as argued by
Mr Irish SC
(who
appeared together with
Mr Brown
and
Mr Mauritz
for the
plaintiff), payment of the indemnity value provides the very
“
mechanism
” that is available to an insurer in
terms of such a policy to ensure compliance with the requirements of
the RVC clause.
[60]
Where there is such a clause in a policy, the insurer should make
payment of the indemnity value; if the insured fails to expend
it on
reinstatement within any time period contemplated in the policy, then
the insurer is absolved from making further payment.
This provides
the insurer with the comfort of knowing that, unless the insured
utilises this money, it has no obligation beyond
that.
[61]
Moreover,
as soon as the defendant elects not to exercise its option to
reinstate itself, but to perform its obligation to pay money,
it no
longer has any entitlement to such reinstatement by itself and is
limited to making payment under the policy, whether of
an indemnity
or of the replacement or reinstatement value. This proposition
appears to be fortified by the so called
once
and for all rule.
[75]
There is certainly nothing providing otherwise in the policy
wording,
[76]
save possibly for proviso 4 to the effect that ‘
these
conditions shall be without force or effect if the insured is unable
or unwilling to replace or reinstate the property on
the same or
another site’
.
[62]
To interpret these words as sanctioning the defendant’s conduct
is a bridge too far. To my mind, it would offend against
the legal
convictions of the community to find that, in the present case, the
defendant insurer should nonetheless be permitted
to effectively
slash the extent of its payment liability after having withheld the
performance of its own indemnity payment obligation
under the policy.
[63]
The plaintiff’s evidence that he was genuinely desirous of
restarting his business and remains so, cannot be doubted.
The fact
that he is unable to do so is a direct consequence of the defendant’s
actions. In the circumstances, the defendant’s
attempt to
undermine the plaintiff’s reliance on the reinstatement
provisions of the policy after the Supreme Court of Appeal’s
decision must fail.
Valuation
of the plaintiff’s claim
2017
reinstatement value
[64]
Prior to the hearing, Messrs. Mumford and Smit concluded the joint
minute handed up as Exhibit “F”. This minute,
insofar as
the 2017 values were concerned, was refined into the minute handed up
as Exhibit “G” which included input
from a third
machinery expert, Mr Bobby Van Zyl from Heltronics.
[65]
The experts
agreed to a total reinstatement value as at May 2017
[77]
of R28 093 207 plus VAT of R3 933 048.98 as
follows:
65.1 Based on an exchange
rate of R13.62 to the USD and R17.06 to the Pound Sterling:
65.1.1
R6 956 071 for the Steinmann;
65.1.2
R2 628 660 plus an agency fee of R262 866 for the
Colordry;
65.1.3
R2 200 000 plus an agency fee of R220 000 for the
Roland;
65.1.4
R2 807 316 for the Sakurai;
65.1.5
R762 720 plus an agency fee of R204 300 for the Canter;
and
65.1.6
A combined R6 482 800 plus an agency fee of R648 280
for the Billhofer
and Dixon;
[78]
65.2 R1 400 000
would be a reasonable provision for services (the electrical
infrastructure and mechanical services, i.e.
air compressors and
dryer);
[79]
and
65.3 R450 000 would
be a reasonable provision for installation support being all the
ancillary costs associated with setting
up the new factory.
[80]
2011
reinstatement value
[66]
In relation
to the 2011 costs, Mr Smit considered the invoices actually obtained
by the plaintiff, which he had independently verified
with the
relevant suppliers,
[81]
as
being a reasonable representation of the value of the claim at the
time of the fire and immediately thereafter. Under cross-examination,
Mr Mumford made the following concessions:
66.1 It would be
reasonable for the Court (faced with those differing figures
presented by Mr Smit and himself as reflected on exhibit
“F”)
to simply take an average of the two;
[82]
66.2 If a 10% agency fee
was being charged for the specified machines to which agency was
applicable on the 2017 figures, there
was no logical reason why this
factor should not also be applied to the 2011 figures;
[83]
66.3 He had not factored
the compressors and dryer into his 2011 calculation at all (as Mr
Smit did), given that he assumed the
existing infrastructure at the
premises would be utilised. However, since there are in fact no
longer extant premises, it is reasonable
to factor this into the 2011
costs in the sum of R925 000 as suggested by Mr Smit;
[84]
66.4 Installation fees of
R266 540 are a reasonable mean between his estimated costs and
those of Mr Smit;
[85]
and
66.5 He had not believed
that the material handling charges formed part of the claim and
therefore did not cost them, but the cost
appeared reasonable.
[86]
[67]
For sake of completeness, it must be mentioned that during March 2011
the plaintiff’s erstwhile attorney, Mr Odendaal,
advised the
defendant that the Dixon and Canter were ‘
surplus to
requirements’
and that the plaintiff would accept indemnity
value in respect of these two machines. The plaintiff explained in
his evidence the
erroneous basis for this decision and why, eight
years later, he felt that it would be unfair to hold him to that
election, given
that he was now to try and resurrect his business.
During argument
Mr Oosthuizen
informed me that this is no
longer in issue.
[68]
For
convenience, a table containing a breakdown of the 2011 claim is set
out hereunder, having a total excluding VAT of R15 743 405.25
and including VAT of R17 947 481.99:
NO
REPLACEMENT MACHINE
AGREED COST
CALCULATION
AGENCY ON MACHINE
1.
Colordry UV varnish
R1 195 226.00
CS R1 310 945 +
IM R1 079 507 ÷
2
Yes at 10%
R119 522.60
2.
Roland Press
R1 548 140.00
Mumford concession
under cross-examination that when new, Wen Chyuang machine
suggested by Carel Smit is a functional replacement
Yes at 10%
R154 814.00
3.
Sakurai
R1 441 628.00
CS R1 690 820
+
IM R1 192 436
÷ 2
NO
4.
Canter
R1 002 253.50
CS R925 000.00
+
IM R1 079 507
÷ 2
Yes at 10%
R100 225.35
5.
Dixon
R1 593 000.00
Mumford concession
under cross-examination that absent the Autobond in 2011, the Wen
Wen Chyuang machine suggested by Carel
Smit at £150 000.00
was reasonable (exchange rate of R10.62 to the £)
Yes at 10%
R159 300.00
6.
Pioneer
R1 237 917.00
CS R1 282 691
+
IM R1 193 143
÷ 2
NO
7.
Steinemann
R4 124 524.50
CS R3 982 500
+
IM R4 266 549
÷ 2
NO
8.
Billhofer
R1 663 013.00
CS R1 996 211
+
IM R1 329 815
÷ 2
Yes at 10%
R166 301.30
SUB TOTAL
MACHINES
R13 805 702
9.
Services
R925 000.00
Mumford concession
under cross-examination that he did not factor the compressors and
dryer as Smit did and that given the
reinstatement into a new
building Smit’s figure including same is reasonable
NO
10.
Material handling
R46 000.00
Mumford concession
under cross-examination that he did not believe these items formed
part of the claim and therefore did
not cost them but the cost
appeared reasonable
NO
11.
Installation
R266 540.00
CS R290 000 +
IM R243 080 ÷
2
NO
12.
Agency (10%)
R700 163.25
R119 522.60 +
R154 814.00 + R100 225.35 + R159 300.00 +
R166 301.30
SUB TOTAL
SERVICE
R1 937 703.25
TOTAL
R15 743 405.25
VAT
(AT 14%)
R2 204 076.74
GRAND TOTAL
R17 947 481.99
[69]
I am satisfied that the experts applied
themselves to the valuation of the replacement claim appropriately
within the RVC and ARC
clauses of the policy and that these are
values upon which this Court may rely.
[70]
I have the comfort of knowing that the final amount (excluding VAT)
is below the maximum insured value reflected in the policy
of
R17 545 871, and with VAT it is a marginal 2.20% excess
variance on the sum insured. I also have the comfort of knowing
that,
if interest as claimed is applied to this sum, the result is a figure
that is not far removed from the 2017 value for reinstatement
agreed
between the experts.
Interest
[71]
In
Drake
Flemmer & Orsmond Inc and Another v Gajjar NO
[87]
Rogers AJA dealt with the calculation of interest on unliquidated
claims (more particularly in circumstances of significant delay
in
settling a claim) and the impact of section 2A(5) of the
Prescribed Rate of Interest Act (No 55 of 1975). It was held
as
follows:
‘
[66] …In
terms of s 2A(2)(
a
) of the Interest Act, interest usually
runs on unliquidated claims from the date of demand or summons. The
plaintiff’s earliest
demand or summons against LRI
was
the service of the joinder application in June 2012. However, it
would be manifestly unjust for the plaintiff to receive no
more than
the value of his claim as at December 2002 together with interest as
from June 2012. The delay from December 2002 until
June 2012 was
attributable to LRI, not him.
[67]
Section
2A(5) of the Interest Act provides that, notwithstanding the other
provisions of that Act, a court may make such order as
appears just
in respect of the payment of interest on an unliquidated debt, the
rate at which interest shall accrue and the date
from which interest
shall run. I have no doubt that in the present case justice required
that interest should run from 21 December
2002, the date on which
LRI
became indebted to the plaintiff by virtue of having allowed his
claim against
DFO
to prescribe. This conclusion is
fortified by the consideration that, but for
LRI’s
negligence, the plaintiff’s summons against
DFO
would have been issued by 1 December 2002 and such summons would
have claimed interest at the prescribed rate of 15,5% from that
date
until payment; and a similar rate would have applied to the
subsequent judgment against
DFO
.
[68] In summary, the
correct approach in the present case would have been for the
plaintiff to prove the nominal value of his damages
as at the
notional trial date of 1 December 2002. That would have been the
value of the claim against DFO
which LRI
allowed to
prescribe on 21 December 2002. The time value of money would have
been dealt with by an order for interest in terms of
s 2A(5),
such interest to run from 21 December 2002. Put differently,
s 2A(5) provides the means by which a court
in this country can
apply the interest-rate solution…
[80] The court a quo
did not have occasion to consider s 2A(5) because it expressed
damages in December 2015 terms. I am entirely
satisfied, however,
that if the court a quo had instead expressed damages in December
2002 terms, the only just order would have
been to apply s 2A(5)
so as to shield the plaintiff from the corroding effects of delay for
which LRI, not he, was responsible.
There is no question of onus in
relation to s 2A(5). The court, having regard to all the facts of the
case, gives effect to its
own view as to what would be just (
Adel
Builders (Pty) Ltd v Thompson
2000 (4) SA 1027
(SCA) ([2000]
4 All
SA 341)
para 15)…
The in duplum rule
[83] The correct
analysis of the position does, however, raise the potential
application of the in duplum rule, since the interest
needed to
sustain the full amount assessed by the court a quo exceeds the
capital…
[85] In the present
case the interest the court a quo could have imposed in terms of s
2A(5) would not have been arrear interest.
Until the court invoked
its power in terms of s 2A(5), the only interest that would run on
the unliquidated debt would, at most,
be interest in terms of s
2A(2)(
a
), ie interest from date of demand or summons. Upon the
court’s exercising its power in terms of s 2A(5), additional
interest
in respect of the earlier period would there and then become
owing. Stated differently, the in duplum rule is concerned with the
running of interest, the effect of the rule being to cause interest
to stop running once the unpaid interest equals the capital.
In a
case such as the present, the interest which the court can award in
terms of s 2A(5) in respect of the period prior to demand
or summons
is not interest which was running at that earlier time.
[86] The practical
effect of this is that, by way of s 2A(5), the court can – if
this is just – order interest to be
paid which exceeds the
amount of the unliquidated debt. Because this accords with the
general principle of the common-law rule
as expounded in
Ethekwini
Municipality
, it is unnecessary to decide whether s 2A(5) does not
in any event confer a power on the court to override the in duplum
rule.’
[72]
Mr Oosthuizen
submitted that interest should only run from 11
March 2016 (the date of the Supreme Court of Appeal decision) at the
rate applicable
at that time of 10.25% per annum, since it is only
from that date that the defendant can be said to have been
in
mora
.
[73]
Having
regard to my findings and what was held in
Drake
(
supra)
,
it is my view that the correct and appropriate manner in which to
compensate the plaintiff is to value the claim at 2011. Interest
ought to be calculated at the rate of 15.5% per annum
[88]
on the basis that it runs from the date of the incident (which is the
same date as the notification to the defendant of the claim),
namely
10 January 2011 or, at the very latest, interest should run from the
date of service of summons, being 14 September 2011.
I intend to be
cautious and fix the date at 14 September 2011.
Interest
on VAT component
[74]
Mr
Oosthuizen
submitted during argument that the
plaintiff cannot seek an award of interest on the VAT component of
the plaintiff’s claim,
as he “
will only, when and if
the machinery is acquired, pay the VAT component over to SARS
”.
[75]
This was
neither pleaded nor addressed in evidence, despite the VAT component
always forming part of the plaintiff’s claim.
[89]
To my mind the inclusion of the VAT component as an element of the
claim is correct. The plaintiff as the end-user would be liable
to
pay VAT on the purchase/replacement price of any of the machines, and
on the services provided in respect of any reinstatement,
as a
legally enforceable obligation. Any indemnification must accordingly
of necessity place him in sufficient funds to do so.
[76]
In addition, VAT always was and accordingly remains payable in
respect of the machinery forming the subject matter of the
plaintiff’s claim and, in precisely the same way that provision
has to be made for the costs of the actual mechanical installation
of
the machines, so too must provision be made for the incurrence of
VAT, particularly as the plaintiff is not currently a VAT
vendor.
[77]
The VAT which would have been charged on the machines has been
included as same would, but for the defendant’s breach,
have
been payable by the defendant to the plaintiff
tunc
. This
provision for VAT, which is an element of the claim for damages,
should not be confused with an obligation to pay VAT arising
from a
future purchase. Its inclusion in the sum claimed is aimed at
awarding the plaintiff, as damages, that amount that would
have been
required to be expended by the defendant in order to indemnify the
plaintiff against the loss suffered by him, on the
basis agreed in
the policy.
[78]
It therefore follows that, if interest is to be applied to the
plaintiff’s damages as contemplated by section 2A(5) of
the
Prescribed Rate of Interest Act, as Rogers AJA put it ‘
so as
to shield the plaintiff from the corroding effects of delay
for
which LRI, not he, was responsible’,
there can be no reason
why the VAT provision should not be similarly adjusted, seeing that
the VAT percentage will at present be
applied to a higher invoice
cost and result, accordingly, in a larger VAT payment.
[79]
The following order is made:
1. The defendant shall
pay to the plaintiff:
1.1
The sum of R17 947 481.99, being the value of the claim for
reinstatement as at January 2011 including VAT;
1.2
Interest on the aforesaid sum at the rate of 15.5% per annum from
14 September 2011, being the date of service of summons,
until
date of payment in full.
2. The defendant shall
pay the plaintiff’s costs on the scale as between party and
party as taxed or agreed, including the
costs of 2 of the 3 counsel
employed, the qualifying fees of Mr Smit and Mr Whalley, the
costs of transcribing the record,
and any reserved costs orders.
_____________________
J
I CLOETE
[1]
Unreported case number 14664/2012 (WCHC).
[2]
Reported on SAFLII
sub
nom Renasa Insurance Company Ltd v Watson and Another
[2016] ZASCA 13
(11 March 2016).
[3]
Exhibit “C” refers in this regard.
[4]
[1967] 3 All SA 225
(W); see also Lee & Honore:
South
African Law of Obligations
p149.
[5]
[1904] 2 KB 658.
[6]
Non-indemnity insurances include life, sickness or disability; see
Lawsa
2nd Ed Vol 12 Pt 1 para 84; Davis p83.
[7]
See the discussion in Davis: Gordon & Getz,
The
South African Law of Insurance
,
4
th
Ed., pp2 – 3.
[8]
Mutual
& Federal Insurance Co Ltd v Oudtshoorn Municipality
1985 (1) SA 419
(A) at 430G – 431D.
[9]
Op cit, para 22.
[10]
General
Life Assurance Co v Moyle
1919 AD 1
at 9;
Norris
v Legal & General Assurance Society Ltd & Another
1962
(4) SA 743
(C) at 744.
[11]
Andersen
v Martin
1908 AC 334
at 340, per the Earl of Halsbury.
[12]
13
th
Edition, para 11-002.
[13]
Orenstein
Arthur Koppel Ltd v Salamander Fire Insurance Co Ltd
1915 TPD 497
at 501.
[14]
Per Kotzé JA in
Norwich
Union Fire Insurance Society Ltd v SA Toilet Requisite Co Ltd
1924 AD at 22; cited with approval and followed in
Kliptown
Clothing Industries (Pty) Ltd v Marine & Trade Insurance Co
of SA Ltd
1961 (1) SA 103
AD at 106.
[15]
(1883) 3 EDC 271.
[16]
Ibid
.,
at p284.
[17]
I
.
e
.,
in the
absence of any express provisions in the policy to the contrary.
[18]
Nafe v
Atlas Assurance Co Ltd
1924 WLD 239
at 243. 246: ‘
The
policy in this case is what is termed an “unvalued” or
“open” policy, i.e., the insured is only entitled
to
recover the value of the subject-matter, as proved by him, subject
to the limitation imposed by the amount specified in the
policy…”.
[19]
Davis,
op
cit
, p
253.
[20]
Anderson
v Commercial Union Assurance Co
(1885) 55 IJQB 146 CA.
[21]
Ivamy:
General
Principles of Insurance Law
6
th
Ed p 484; Birds:
Modern
Insurance Law
10
th
Ed p320; Davis
op
cit
p254.
[22]
Birds
op
cit
para 16.1 p319.
[23]
Ivamy
op
cit
p
485;
Brown
v Royal Insurance Co
(1859) 1 E & E 853.
[24]
Ivamy
op
cit.,
p485;
Davidson
v Guardian Royal Exchange Assurance
[1979]
1 Lloyd’s Rep 406.
[25]
Anderson
v Commercial Union Assurance Co Ltd
(
supra
)
at 146.
[26]
Although as a fact the defendant did exercise such an election by
itself attending to the repair of the roof which had been broken
through by vandals, subsequent to the occurrence of fire and before
the defendant’s repudiation of the claim.
[27]
Birds,
op
cit.,
para
15.4.2 p309.
[28]
Pleadings p66.
[29]
This was also the evidence of Mr Whalley: namely that, at the very
least, as soon as an insurer accepted its liability under
the
policy, it became legally obliged to make payment of at least its
own determination of the indemnity value payable in terms
thereof;
which in the instant matter required the defendant insurer to pay to
the plaintiff not less than the cost of purchasing
second hand
machinery of the type or nearest equivalent, the price being
determined at the date of the fire. Transcript
Vol 6, p572,
lines 19 – 25 to p537, line 5.
[30]
Op
cit
.,
para 21-022 p610.
[31]
Carlyle
v Elite Insurance Co
(1984) 56 BCLR 331.
[32]
(1984) 2 Lloyds Rep 416.
[33]
Ibid., pa 426.
[34]
2004 (5) SA 284 (WLD).
[35]
Pleadings, page 66.
[36]
Proviso 2 of the ARC clause.
[37]
Pleadings, p17.
[38]
Pleadings, p41.
[39]
Pleadings, p47 para 9.2.2(a)(i).
[40]
Pleadings, p47 para 9.2.2(a)(ii).
[41]
Pleadings, p48 para 9.2.2(b).
[42]
Pleadings, p49 para 9.2.2(c) and p50 para 9.3.
[43]
Pleadings, p50 para 9.4.
[44]
Pleadings p70 para 6.
[45]
Pleadings p140 para 9.4.
[46]
Pleadings p161 para 9.4.
[47]
Pleadings p140 para 9.5 read with p161 para 9.5.
[48]
Transcript:
Vol 5, page 448, lines 12 - 25
[49]
Bundle
B.2 p604.
[50]
Exhibit “A” – the schedule of expenses.
[51]
It should further be noted that at an early stage the defendant
informed the plaintiff that this expenditure would be for his
own
account until such time as liability was accepted: Bundle B.1 p214.
[52]
See for example: Bundle B.1 pp200 – 212.
[53]
Exhibit “B” refers in this regard.
[54]
See
Bundle B.1 p238.
[55]
Bundle
B.1 p217.
[56]
Bundle
B.1 p 268.
[57]
Bundle
B.1 p 269.
[58]
Bundle
B.1 p 293.
[59]
Bundle
B.1 p 307.
[60]
Bundle
B.1 p 322.
[61]
Bundle
B.1 p 332.
[62]
Bundle
B.1 p 338.
[63]
Bundle
B.1 p 340.
[64]
Bundle
B.1 p 348.
[65]
Transcript:
Vol 1, p139, lines 5 – 13.
[66]
Bundle
B.2 pp493 – 576.
[67]
Bundle
B.2 p577 – 584; pp597 – 603.
[68]
Bundle B.2 p601.
[69]
Bundle
B.2 p604.
[70]
Transcript Vol 2, p252, lines 2 – 10.
[71]
Bundle B.2 p614.
[72]
Transcript Vol 2, p257, line 1 to p258, line 14.
[73]
Transcript:
Vol 6, p591- p593.
[74]
Expert Bundle p29.
[75]
See
Signature
Design Workshop CC v Eskom Pension and Provident Fund and Others
2002
(2) SA 488
(C) at pp492 to 497 for a discussion on the principles of
res
judicata
and
the “once and for all” rule. In particular, the
reference to
Evins
v Shield Insurance Company Ltd
1980 (2) SA 814
(A) at 835 where Corbett JA (as he then was) said:
‘
The “once
and for all” rule applies especially to common law action for
damages in delict, though it has also been
applied in claims for
damages for breach of contract.
Expressed in relation
to delictual claims, the rule is to the effect that in general a
plaintiff must claim in one action all
damages, both already claimed
and prospective, flowing from one cause of action.’
Its introduction and
the manner of its applications by this Court have been subjected to
criticism...but it is a well entrenched
rule. Its purpose is to
prevent a multiplicity of actions based upon a single cause of
action and to
ensure that there is an end to litigations
.
[emphasis added]
Closely allied to the
“once and for all” rule is the principle of
res
judicata
which establishes that, where a final action has been
given in a matter by a competent Court, then subsequent litigation
between
the same parties, or their privies, in regard to the same
subject-matter and based upon the same cause of action is not
permissible,
and if attempted by one of them, can be met by the
exceptio rei judicatae vel litis finitae
. The object of this
principle is to prevent the repetition of law suits, the harassment
of the defendant by a multiplicity of
actions and the possibility of
conflicting decisions” (at 835C–G). Mr Muller
referred however to the minority
judgment of Jansen JA who stated:
“It may even be desirable to re-examine the so-called ‘once
and for all’
rule and enquire whether in our law its
application should not, in appropriate circumstances, be
restricted
”’.
[76]
See
Bruwer
v Nova Risk Partners Limited
2011 (1) SA 234
(GSJ) a full bench appeal of the North Gauteng High
Court where the Court said: ‘
Finally,
the courts have also formulated a rule that a contract of insurance
should be construed in favour of the insured rather
than the insurer
where an ambiguity arises on the face of the policy. This rule has
been justified simply by saying that an insured's
claim for
indemnity should not be defeated and that a policy should be upheld
in favour of the insured and not be forfeited.
This
rule is often used in conjunction with the rule that limitations on
or exceptions to the insurer's obligation must be interpreted
strictly and therefore in favour of the insured
.
This rule will also be of assistance in the present case
.’
[emphasis added]
[77]
Evidence of Mr Smit Transcript Vol 7, p732, line 24 to p733, line 9.
[78]
The agreement was that because the Billhofer, a precision German
made machine would, at the time of the loss, have been the
plaintiff’s primary laminator given that a new Billhofer was
available in 2011, but was not available due to the company’s
winding-up in 2017, instead of giving the plaintiff two Taiwanese
Wen Chyang machines which are superior to the Dixon but inferior
to
the Billhofer, the plaintiff should receive one superior British
made Autobond laminating machine for the Billhofer and Dixon;
Transcript: Vol 7, p718, lines 17 – 25.
[79]
Evidence of Mr Smit Transcript: Vol 6, p647, lines 9 – 13.
[80]
Evidence of Mr Smit Transcript: Vol 6, p647, lines 9 – 13.
[81]
Evidence of Mr Smit Transcript: Vol 5, p514, lines 10 – 11.
[82]
Evidence of Mr Mumford record Transcript: Vol 7, p711, line 25 to
p712, line 18; Vol 7, p718, lines 1 – 4
[83]
Evidence of Mr Mumford Transcript: Vol 7, p728, line 18 to p729.
[84]
Evidence of Mr Mumford Transcript: Vol 7, p731-743.
[85]
Evidence of Mr Mumford Transcript: Vol 7, p732, lines 16 – 18
[86]
Evidence of Mr Mumford Transcript Vol 7, p731, lines 15 – 18.
[87]
2018 (3) SA 353 (SCA).
[88]
Davehill
(Pty) Ltd and Others v Community Development Board
1988 (1) SA 290
(A) which was recently reiterated by the SCA in
Crookes
Brothers Limited v Regional Land Claims Commission for the Province
of Mpumalanga and Others
2013 (2) All SA (1) SCA - the interest rate that is applicable is
the rate that was applicable at the date the action was instituted
notwithstanding the date of amendment to the prescribed rate.
Ponnan
JA in
Crookes
(
supra)
stated as follows with reference
to
Davehill
:
‘
[22] In
Davehill (at 300J–301E), Smalberger JA stated:
“
Section 1(1)
is couched in peremptory terms, and its application is obligatory,
not discretionary (
Katzenellenbogen Ltd v Mullin
1977 (4) SA 855
(A) at 885G). To give effect to the intention of the Legislature the
words ‘shall be calculated
at the rate prescribed under s (2)
as at the time when such interest begins to run’ must be given
their ordinary and literal
meaning. Such meaning is clear.
The
rate prescribed under ss (2) at the time when interest begins to run
governs the calculation of interest. The rate is fixed
at that time
and remains constant. Subsection (1) does not provide for the rate
to vary from time to time in accordance with
adjustments made to the
prescribed rate by the Minister of Justice in terms of ss (2). The
fact that the Minister may from time
to time prescribe different
rates of interest therefore has no effect on the rate applicable to
interest which has already begun
to run. The plain meaning of the
words in question must be
adopted as they do not lead to
‘some absurdity, inconsistency, hardship or anomaly which from
a consideration of the enactment
as a whole a court of law is
satisfied the Legislature could not have intended’ (per
Stratford JA in
Bhyat v Commissioner for Immigration
1932 AD
125
at 129).
The only exception to
the above method of calculation is where “a court of law, on
the ground of special circumstances relating
to that debt, orders
otherwise”. “Special circumstances” are not
defined in the Act. It is not necessary for
the purposes of the
present appeal to consider what circumstances are envisaged under
that term. The existence or otherwise of
special circumstances in
any given case must needs depend upon the facts and circumstances of
that case. What is clear is that
the special circumstances must
relate to a particular debt, not to debts in general.’
[emphasis supplied].
[89]
I accordingly do not intend to deal with Mr Mumford’s written
opinion on this aspect which was provided by the defendant’s
attorney subsequent to the conclusion of argument.