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[2021] ZAWCHC 32
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Ma-Afrika Hotels (Pty) Ltd and Another v Santam Limited (6499/2020) [2021] ZAWCHC 32 (22 February 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No: 6499/2020
In
the matter between:
MA-AFRIKA HOTELS (PTY) LTD
First
Applicant
THE
STELLENBOSCH KITCHEN (PTY) LTD
Second Applicant
and
SANTAM LIMITED, a division of which is
HOSPITALITY
AND LEISURE INSURANCE
Respondent
Coram:
Goliath DJP
et
Cloete
J
et
Mantame
J
Heard:
16 February 2021
Delivered
electronically:
22 February 2021
JUDGMENT
IN RESPONDENT’S APPLICATION FOR LEAVE TO APPEAL
THE
COURT
:
[1]
For convenience, the parties are referred
to as they were in the court
a quo
.
This is an application by the respondent for leave to appeal (to the
Supreme Court of Appeal) which is now only directed at that
portion
of the judgment and order which pertain to the duration of the
indemnity period, which was held by this Court to be 18
and not 3
months. The respondent has made a tender in respect of wasted costs
which has been accepted by the applicants, and it
is incorporated in
the order hereunder.
[2]
The case made out in
the applicants’ founding affidavit with regard to the indemnity
period is encapsulated in paragraph 67
as read with Annexure
“FA18”
[1]
.
Paragraph 67 reads as follows:
‘
Paragraph 5 of the letter
[from the applicants’ attorney]
informed the indemnity period for
business interruption cover is 18 months and not 3 months. It was
drawn to the respondent’s
attention to the indemnity period of
18 months that appears in the policy documents, as well as the fact
that infectious disease
cover is not listed in the policy documents
as an extension where the indemnity period shall not exceed three
months. It was further
pointed out that the applicants selected
business interruption cover under Item 3, which is headed “Revenue”.
The description
of the insurance cover under this heading expressly
contemplates the indemnity period exceeding 12 months.’
[3]
In paragraphs 72 and
74
[2]
of the founding affidavit the applicants referred to a letter from
the respondent’s attorney dated 25 May 2020
[3]
in which the following was stated:
‘
The policy wording and
schedule make it clear that any claim under an extension to the
business interruption policy (which the infectious
diseases extension
clearly is) is limited to three months…’
[4]
The respondents’
case in relation to the indemnity period was set out at paragraphs 72
to 78 of the answering affidavit
[4]
as follows:
‘
72
The indemnity period is defined in the business interruption wording
(
record
:
p 53). It begins with the commencement of the damage and ends not
later than the number of months stated in the schedule during
which
the result of the business shall be affected in consequence of the
damage.
73 It
follows that the requirement of proximate causation determines not
only whether
there is an indemnity, but also the duration over which
such indemnity will operate (subject to a maximum period stated in
the
schedule).
74
The maximum period of the indemnity is three months, and not 18 as
contended
by the applicants. A “memorandum” to the
business interruption section contained in the policy schedules
provides as
follows (
record
: p 29):
“
NOTE: Extensions
under this Section are limited to an Indemnity Period of 3 months”.
75
There is an identical recordal in the business interruption schedule
(
record
: p 45):
“
NOTE: Extensions
under this Section are limited to an Indemnity Period of 3 months”.
76
The infectious diseases extension is an extension to the business
interruption
cover. It is therefore subject to the memorandum and the
further recordal which clearly provides for a three-month indemnity
period.
77
The applicants argue that the infectious diseases extension is not
specifically
listed in the schedule under the business interruption
cover, and is therefore not subject to the memorandum. That is
incorrect.
There is no requirement in the policy that the
infectious diseases extension need be specifically stated in the
schedule to be included
in the cover or be subject to the memorandum.
The fact that it is not stated in the schedule does not mean that the
policy does
not contain the extension, and, equally, that the
extension is not subject to the memorandum
.
78
The extension is expressly relied upon by the applicants, and it
clearly constitutes
an extension. It is accordingly subject to the
three-month limitation period set out in the memorandum and the
further recordal.’
[emphasis
supplied]
[5]
These averments were
dealt with in the applicants’ replying affidavit at paragraphs
85 and 86 as follows:
[5]
‘
85
I admit the allegations in these paragraphs to the extent that Santam
correctly quotes
from the policies.
86
I deny that the applicants’ claim is limited to an indemnity
period of
three months.
This is,
I stress, a significant issue between the parties, having as it does
a very large effect on what compensation the applicants
are set to
receive
, given that Covid-19 is
widely projected to endure well beyond this year. The applicants are
entitled to declaratory relief on
the length of the indemnity period.
There is a live dispute between the parties. Declaratory relief will
settle this dispute, leaving
only the calculation of the applicants’
losses for a set period.’
[emphasis
supplied]
[6]
In the applicants’ heads of argument
filed in the main application it was submitted that the respondent
was adopting an impermissibly
narrow interpretation, essentially
because it “skipped over” the indemnity period in the
business interruption schedule
which is listed as 18 months;
instead it focussed on a memorandum at the end of that schedule that
extensions under the section
are limited to a 3 month indemnity
period. It was also submitted that the 3 month indemnity period does
not apply to the infectious
diseases extension, because it is a
standard feature of the business interruption section; but in any
event, on the most generous
reading of the schedule in the
respondent’s favour, there is obvious ambiguity which fell to
be resolved against the respondent
on the basis of the
contra
preferentem
rule.
[7]
In the respondent’s heads of argument
filed in the main application its submissions were limited to the
following single paragraph:
‘
234
Finally, the applicants contend that the indemnity period in terms of
the policies for the loss
is a period of 18 months, and they seek
declaratory relief to that effect. It is clear from the policies, and
in particular the
schedule thereto, that extensions under the
section, which would include the extension relied upon by the
applicants, are limited
to an indemnity period of
3
months
. The schedule to the
business interruption section records the following:
“
MEMORANDUM NOTE:
Extensions under the Section
are limited to an Indemnity Period of 3 months”.
’
[8]
In oral argument in the main application
the dispute pertaining to the indemnity period was fully canvassed by
Mr Van der Nest SC
,
who made submissions on this part of the case on behalf of the
applicants. Numerous references were made to other clauses or
sections in the policy under scrutiny for purposes of advancing the
interpretation upon which the applicants relied. It was not
suggested
by the applicants that it was patently obvious that on any reasonable
interpretation the indemnity period was 18 months.
Mr
Van der Nest
himself submitted:
‘
And then the question
arises, whether the memorandum at the foot applies to that which
precedes it, to the menu, where each one
is listed as having a
three-month indemnity, and the notifiable disease extension does not
say it is limited to three months. So,
now one says does that
memorandum note apply to what precedes it, or does it apply in
addition to a clause, which does not on its
own say it is limited to
three months, and which is embedded in the cover, whether paying for
a premium or not. So, now to resolve
that ambiguity at the very
lowest…’
[6]
[9]
The same approach was
followed by
Mr Fine
SC
who argued on
behalf of the respondent. He too dealt with the issue as an
interpretive exercise with reference to other clauses
and sections of
the policy. In essence the interpretation advanced was that the
business interruption cover referred to in the
first “block”
of the schedule
[7]
is limited to that caused by physical damage to the premises; whereas
the infectious diseases extension, even though it appears
elsewhere
in the policy, is nevertheless an extension and must thus be
interpreted as limited to the 3 month residual indemnity
period in
the third “block” of that schedule. It was similarly
never suggested that it was patently obvious the indemnity
period for
business interruption due to infectious disease is 3 months and no
more.
[10]
One of the grounds in
the respondent’s notice of application for leave to appeal is
the Court’s finding that there was
ambiguity in the wording of
the policy in respect of the indemnity period.
[8]
In heads of argument subsequently filed on the respondent’s
behalf it was submitted that the extensions are ‘
plainly
not subject to the physical damage 18 months indemnity period’
.
[11]
This was the same argument advanced by
Mr
Plewman QC
, who replaced
Mr Fine
SC
, during the hearing of the
application for leave to appeal. He made clear that the respondent’s
case is that the policy wording
in relation to the indemnity period
is ‘
squarely non-ambiguous’
.
We were unable to extract a clear answer from him as to whether this
was a new case being made out on appeal.
[12]
Be that as it may, we understood the
respondent’s argument in the main application to be directed at
an interpretation which
would resolve an apparent ambiguity, which
understanding is reinforced by the case made out by the applicants as
well as the arguments
advanced on their behalf, and which, after all,
was the one the respondent was called upon to meet. At no point was
it the respondent’s
argument that the indemnity period is, as
Mr Plewman
later put it, “
terribly clear”
.
[13]
Despite the absence of
a straight answer from the respondent on this score, we are of the
view that this is a new point raised on
appeal. Perusal of the
relevant portions of the affidavits in the main application indicate
that the point now raised can nonetheless
be canvassed on appeal
without the applicants having to file any further affidavits.
Accordingly prejudice should not arise.
[9]
[14]
It is also our view
that the submissions made by
Mr
Plewman
provide a
‘…
sound,
rational basis for the conclusion that there are prospects of success
on appeal’.
[10]
We are therefore unable to conclude that the appeal would have no
reasonable prospect of success. In any event the Supreme Court
of
Appeal has made clear that the nature of proceedings before it are
such that it is at large to make findings in relation to
any matter
flowing fairly from the record
[11]
without being limited to any grounds contained in a notice of appeal.
By necessary implication this would include this Court’s
findings on the interpretive exercise argued before us.
[15]
It was contended on
behalf of the applicants that since the respondent itself has
recently informed the public ‘
this
case has become a once-off dispute about the interpretation of this
particular policy’
[12]
the single remaining dispute must be considered of limited importance
to it. This overlooks what the applicants themselves stated
in their
founding affidavit,
[13]
which makes clear how important it is to them. We also note the
respondent’s undertaking conveyed during oral argument that
it
will co-operate fully with the applicant in securing an expedited
date for the appeal (subject of course to the parties deferring
to
the Supreme Court of Appeal in this regard).
[16]
The following order is made:
1.
The respondent’s application
for leave to appeal to the Supreme Court of Appeal on the limited
issue of the indemnity period
is granted;
2.
In accordance with its tender the
respondent shall, in addition to the costs of the main application
(reflected in paragraph 93
of this Court’s judgment) also pay
the applicants’ costs in the application for leave to appeal,
but excluding those
pertaining to the hearing on 16 February
2021, on the scale as between party and party as taxed or agreed and
including the
costs of three counsel; and
3.
The costs of the hearing on 16
February 2021 shall be costs in the appeal.
________________
GOLIATH
DJP
________________
CLOETE
J
________________
MANTAME
J
[1]
Record pp16 and
228.
[2]
Record p18.
[3]
Annexure “FA20”,
Record p234.
[4]
Record pp286 –
288.
[5]
Record pp452 –
453.
[6]
Transcript
argument pp166-167.
[7]
On the example
used, Record p29.
[8]
Paragraph 38 of
the notice of application for leave to appeal.
[9]
Road Accident
Fund v Mothupi
2000 (4) SA 38
(SCA) at paragraph [30].
[10]
S v Smith
2012 (1) SACR 567
(SCA) paragraph [7].
[11]
Leeuw v First
National Bank Limited
2010 (3) SA 410
(SCA) paragraph [5].
[12]
Applicants’
heads of argument in the application for leave to appeal paragraph
23.
[13]
To which we refer at
paragraph [5] above.