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[2011] ZAGPJHC 129
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Daltron Forge (Pty) Ltd v Etana Insurance Company Ltd (2011/35677) [2011] ZAGPJHC 129 (3 October 2011)
REPORTABLE
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
Case No. 2011/35677
DATE:03/10/2011
In the matter between:
DALTRON FORGE (PTY) LTD
….......................................................................
Applicant
and
ETANA INSURANCE COMPANY
LTD
...........................................................
Respondent
JUDGMENT
MEYER, J
[1] The applicant by way of
these urgent proceedings seeks an order that, pending the outcome of
an action to be instituted, the
respondent either pays to it several
millions of rand on account in terms of an insurance policy or that
it be directed to make
a determination within three days of the
amount to be paid to the respondent on account.
[2] The applicant is said to
be the second biggest producer of bolts in South Africa. It produces
bolts and conical bits for various
industries, particularly the coal
mining industry. The only local producer of the quality and type of
steel required by the applicant
is ArcelorMittal (‘AM’),
which steel is produced at the Newcastle plant of AM.
[3] What is referred to as the
‘Specified Suppliers Extension’, was added with effect
from 3 August 2011 to the insurance
cover which the applicant enjoyed
under an existing insurance policy issued to it by the respondent.
The Specified Suppliers Extension
entitles the applicant to indemnity
from the respondent for loss following interruption of or
interference with its business in
consequence of a defined event
occurring also on the premises of one of its selected suppliers. AM
was specified as such a selected
supplier of the applicant.
[4] On 5 August 2011, an
incident occurred at the premises of the Newcastle plant of AM, which
has rendered its blast furnace inoperable
and this resulted in an
inability on its part to supply the grade of steel required by the
applicant for months to come. There
is, according to the applicant,
no other local steel supplier that is able to supply suitable steel
to it and its only other option
is to source it from overseas at a
considerable premium.
[5] The applicant contends
that the event that occurred at the Newcastle plant of AM is a
defined event within the meaning of the
policy and a specified risk
that had been undertaken by the respondent. The applicant also avers
that it will be unable to continue
with its business operations if it
is not immediately given interim funding. The stance adopted by the
respondent is that it requires
time to investigate the matter before
it could accept or reject liability under the policy and before it
could consider the making
of any payment to the applicant.
[6] The respondent is
unquestionably entitled and obliged to consider the applicant’s
claim within a reasonable period of
time after it has received it.
What is a reasonable period depends upon the facts and circumstances
of any given case. The complexity
of the investigations into the
incident appears from the expert evidence and opinions presented by
both parties in these proceedings
and such investigations undeniably
require special expertise and an examination of the furnace in
question, which, for safety reasons,
could not as yet be conducted.
It can accordingly not be said that a reasonable period of time
within which the respondent must
accept or reject liability for the
applicant’s claim under the policy has in the circumstances of
this matter already expired.
This, in my view, was also been
correctly conceded by Adv S van Nieuwenhuizen SC, who appeared with
Adv JM Heher for the applicant.
[7] The applicant, however,
contends that its right to claim an interim
payment from
the respondent at this stage arises from the following general
provision of the policy, which provision has the heading
‘Payments
on account’ and it reads:
‘
In respect of
any section where amounts recoverable from the company are delayed
pending finalisation of any claim, payments on
account may be made to
the insured, if required, at the discretion of the company.’
The respondent contends that
it is not obliged to exercise the discretion to make a payment on
account under this general provision,
because such a discretion could
only arise once it has admitted liability.
[8] Whether or not the
applicant has established a
prima
facie
right
to the relief it presently seeks requires an interpretation of that
general provision of the policy. The rules relating to
the
interpretation of a policy of insurance were thus concisely stated by
Smalberger JA, in
Fedgen
Insurance Ltd v Leyds
1995 (3) SA 33
(AD), at p 38B-E:
‘
The ordinary
rules relating to the interpretation of contracts must be applied in
construing a policy of insurance. A court must
therefore endeavour
to ascertain the intention of the parties. Such intention is, in the
first instance, to be gathered from the
language used which, if
clear, must be given effect to. This involves giving the words used
their plain, ordinary and popular
meaning unless the context
indicates otherwise (
Scottish
Union & National Insurance Co ltd v Native Recruiting Corporation
Ltd
1934
AD 458
at 464 – 5). Any provision which purports to place a
limitation upon a clearly expressed obligation to indemnify must be
restrictively interpreted (
Auto
Protection Insurance Co Ltd v Hanmer-Strudwick
1964
(1) SA 349
(A) at 354C – D); for it is the insurer’s duty
to make clear what particular risks it wishes to exclude (
French
Hairdressing Saloons Ltd v National Employers Mutual General
Insurance Association Ltd
1931
AD 60
at 65);
Auto
Protection Insurance Co Ltd v Hanmer-Strudwick
(s
upra
at
354D – E). A policy normally evidences the contract and an
insured’s obligation, and the extent to which an insurer’s
liability is limited, must be plainly spelt out. In the event of a
real ambiguity the
contra
proferentem
rule,
which requires a written document to be construed against the person
who drew it up, would operate against Fedgen as drafter
of the policy
(
Kliptown
Clothing Industries (Pty) Ltd v marine and Trade Insurance Co of SA
Ltd
1961
(1) SA 103
(A) at 108C).
[9] Payments made to an
insured in terms of the clause under consideration are ‘on
account’. The dictionary meaning
of the words ‘on
account’ (
The
New Shorter Oxford Dictionary on Historical Principles
–
Clarendon Press, Oxford – 1993 Vol II) is ‘to be
accounted for at the final settlement; not to be paid for
immediately; as interim payment.’ What is of importance is
the use of the words ‘amounts recoverable from the company
are
delayed pending finalisation of any claim’. The dictionary
meaning of the word ‘recoverable’ (
The
New Shorter Oxford Dictionary on Historical Principles (supra)
Vol I) is ‘able to be recovered or regained; retrievable;
able to be reclaimed or reused.’
[10] The language used is
clear and unambiguous and must accordingly be given effect to. An
ability to recover an amount from the
respondent insurer can at the
earliest arise when the respondent accepts its liability for the
applicant’s claim or part
thereof under the policy. Any
payments made to an insured under this clause are interim payments
that are to be accounted for
at the final settlement of the claim.
This interpretation, in my view, also accords with the obvious
purpose of the general provision,
namely to facilitate the payment of
admitted or undisputed amounts that will in due course be paid to an
insured in circumstances
where the immediate payment thereof is
delayed pending the finalisation of the claim.
[11] The context also does not
indicate that the words used should not be given their plain and
ordinary meaning. The clause is
a general provision of the policy
and its application is not limited to the Business Interruption
section of the policy. The policy
also has no specific provision for
repayment in the event that the respondent does not accept liability,
and if the applicant’s
contention is correct, such a provision
would have to be implied, and the terms thereof are matters for mere
speculation. By contrast,
the specific conditions of the Business
Interruption section of the policy provide for the repayment to the
respondent in other
circumstances of payments that have been made on
account of a claim.
[12] The applicant has failed
to establish a
prima
facie
right
or even one that is open to some doubt. This finding is fatal to the
application and it accordingly falls to be dismissed.
[13] Finally, the matter of
the scale of costs that should be awarded to the respondent. An
order is asked for the applicant to
pay the respondent’s costs
on the scale as between attorney and own client. Adv JF Mullins SC,
who appeared for the respondent,
submitted that the applicant ‘…had
no right to bring, and then in the face of good objection, to persist
in this application
…’. I do not consider this
application as unnecessary. I also consider the briefing of senior
counsel on both sides
to have been a reasonable precaution and
necessary.
[14] In the result, the
following order is made:
The applicant’s
application is dismissed with costs, including the fees consequent
upon the employment of senior counsel.
P.A.
MEYER
JUDGE
OF THE HIGH COURT
3
October 2011
Date
of hearing: 28 September 2011
Date
of Judgment: 3 October 2011
Counsel
for the Applicant: Adv S van Nieuwenhuizen SC
Adv.
JM Heher
Counsel
for the Respondent: Adv JF Mullins SC
Attorneys
for the Applicant: Rossouws Leslie Inc.
8
Sherborne Road
Parktown
Johannesburg
Ref:
Mr N Roets
Attorneys
for the Respondent: Everingham, Rogers, Nel & Partners
Office
103, First Floor, South Block
Thrupps
Centre
204
Oxford Road
Illovo
Johannesburg
Ref.
Mr D Rogers