THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 389/2020
In the matter between:
DISCOVERY LIFE LIMITED APPELLANT
and
HOGAN, MICHAEL WILLIAM FIRST RESPONDENT
HOGAN, JOAN HAZEL SECOND RESPONDENT
Neutral citation: Discovery Life Limited v Hogan and Another (389/2020) [2021]
ZASCA 79 (11 June 2021)
Coram: PETSE DP , WALLIS JA , and POTTERILL, ROGERS and POYO -
DLWATI AJJA
Heard: 7 May 2020
Delivered: This judgment was handed down electronically by circulation to the
parties' representatives by email, publication on the Supreme Court of Appeal
website and release to SAFLII. The date and time for hand -down is deemed to be
09:45 am on 11 June 2021.
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Summary: Insurance policy – interpretation of term of policy by virtue of which
the insurer is required to grant the insured a period of 30 days within which to settle
unpaid premium – term not operative where non-payment of premium is pursuant to
the insured's repudiation of the contract.
__________________________________________________________________
ORDER
__________________________________________________________________
On appeal from : Gauteng Division of the High Court, Johannesburg
(Constantinides AJ sitting as court of first instance):
(a) The appeal is upheld with costs.
(b) The order of the high court is set aside and replaced with the following order:
‘The application is dismissed with costs.’
__________________________________________________________________
JUDGMENT
__________________________________________________________________
Poyo-Dlwati AJA (Petse DP, Wallis JA and Potterill and Rogers AJJA
concurring):
[1] When Mrs Susan Church decided to cancel her insurance policy with the
appellant, Discovery Life Limited (Discovery), she had no inkling of the events that
were to befall her six weeks later. While on holiday at the Sani Pass Lodge she was
overcome by carbon monoxide fumes from a faulty geyser in the showers, collapsed
and died. The present proceedings were brought by her parents, Mr and Mrs Hogan
(the respondents), as the nominated beneficiaries under the insurance policy. The
amount claimed was of the order of R4 million. Discovery defended the claim on
the basis that the policy had been cancelled and it had ceased to be on risk on
10 September 2018, 12 days before Mrs Church’s unfortunate death. Her parents’
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claim succeeded in the high court and the a ppeal is with leave granted by the high
court.
[2] On 4 December 2015 Mrs Church took out a Discovery classic life pla n
insurance policy contract (the policy) with Discovery. The policy insured her life for
R3 million, which was to escalate until the date of the occurrence of the insured
event, being her death. The policy commenced from 1 January 2016. In a telephone
conversation on 6 August 2018 with Mr Msutwana, an employee of Discovery, Mrs
Church advised him that she had decided to cancel the policy as she was moving
over to Liberty Life. She explained to Mr Msutwana that she liked what Liberty Life
had offered her, hence her cancellation of the policy.
[3] On 15 August 2018 , Mrs Church wrote to Discovery and said that she was
cancelling the policy with immediate effect. On 16 August 2018, Mr Mashele, acting
on behalf of Discovery, advised Mrs Church’s insurance broker by letter that the
policy would be cancelled as per Mrs Church’s request. He, however, advised the
broker that a notice period of 30 calendar days applied to cancellations. On
28 August 2018, Ms Mathabatha, on behalf of Discovery, wrote to Mrs Church’s
broker and advised that the policy would be cancelled with effect from 1 October
2018. She further advised that the last day of cover would be 30 September 2018 ,
with the final premium payable on 3 September 2018. She reiterated that the
cancellation was subject to 30 calendar days’ notice period.
[4] On 23 August 2018, and unbeknown to Discovery, Mrs Church instructed her
banker, First National Bank, to stop the payment of the debit order in respect of the
premium due under the policy for September 2018. As a result, on 3 September 2018,
when Discovery submitted the monthly debit order to the bank for payment, the debit
order was returned unpaid with the following remark: ‘payment stopped by account
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holder’. On 10 September 2018, Mr Makakane, on behalf of Discovery, advised Mrs
Church in writing that her policy had been cancelled with effect from 1 September
2018. Mrs Church was also advised as to the process to be followed if she wished to
reinstate her policy. On the same date, Discovery also sent Mrs Church a text
message on her cellular phone advising her that her policy had been cancelled.
[5] Mrs Church died on 22 September 2018. On 27 September 2018 , the
respondents, on advice from Mr Coetzer , who was Mrs Church’s erstwhile broker,
paid the September premium to Discovery and thereafter notified Discovery of this
payment. Discovery responded by sending Mrs Church a letter dated 28 September
2018 titled ‘Reinstatement requirements’. The gist of the letter was that Discovery
required a fully completed and signed declaration of ‘health by all lives assured ’
form. There was no response to Discovery’s letter. Instead, on 19 November 2018,
the respondents submitted a claim under the policy with Discovery. On
22 November 2018, Mr Carls, on behalf of Discovery, advised the respondents that
the claim had been declined as the policy had been cancelled with effect from
1 August 2018. This date, however, must have been due to an error on the part of
Discovery's representative as it had previously advised Mrs Church that the policy
had been cancelled with effect from 1 September 2018. There is no suggestion that
Mrs Church had not duly paid the August 2018 premium.
[6] On 25 July 2019 , the respondents launched an application in the Gauteng
Division of the High Court, Johannesburg (the high court) , for payment of the
proceeds of the policy with interest. They asserted that as Discovery had elected to
hold Mrs Church to the terms of the policy in its cor respondence of
16 and 28 August 2018 , when she had sought to cancel the policy with immediate
16 and 28 August 2018 , when she had sought to cancel the policy with immediate
effect, the policy remained in force, both parties having to honour their respective
obligations under the contract. Moreover, the respondents contended that Discovery
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failed to notify Mrs Church of the unpaid September premium as required by the
terms of the policy, in terms of which Discovery, before cancelling the policy ,ought
to have afforded Mrs Church a thirty -day grace period to pay the outstanding
premium. Therefore, as the premium was paid, albeit by the first respondent as the
executor of Mrs Church’s estate, within the thirty-day grace period, Discovery was
obliged to honour the claim and pay out the sum assured.
[7] Discovery opposed the application on the basis that the policy was validly and
effectively cancelled on 10 September 2018 , with effect from 1 September 2018.
Therefore, it contended that at the date of the death of Mrs Church , the policy was
no longer in force. Discovery admitted the terms of the policy and those applicable
to the grace period for payment of premiums , but contended that those provisions
only applied when the insured had defaulted in their obligations by failing to pay the
premium timeously. Furthermore, it asserted that those provisions did not serve to
extend the policy against the wishes of the insured after the policy had been
cancelled, and also did not preclude Discovery from cancelling a policy forthwith in
the event of its repudiation. When Discovery received a message from the bank that
Mrs Church had stopped payment of her debit order , it was clear to Discovery that
Mrs Church did not intend to comply with her contractual obligations under the
policy. Therefore, as Mrs Church had repudiated her contract, Discovery had elected
to cancel it as per its letter of 10 September 2018, hence its decision to repudiate the
claim.
[8] The high court, per Constantinides AJ, found in favour of the respondents. On
the issue as to whether the policy was still valid on the date of death of Mrs Church,
Constantinides AJ held that:
‘The fact that Discovery accepted the payment of the premium albeit from the executor or Susan’s
broker and the fact that there was no indication or proof provided to either the Applicants or to the
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court that the final premium paid was held in a suspense account is an indication that the premium
was accepted and that the policy was still in existence in line with the emails addressed to Susan
informing her that the policy would be effective until 30 September 2018.’ 1
[9] With respect to the non -payment of the premium on 3 September 2018 and
Discovery’s failure to grant Mrs Church a thirty-day period of grace in accordance
with the terms of the policy, Constantinides AJ held as follows:
‘[I]t is evident that Discovery by having omitted to afford Susan the grace period, to make payment
of the returned debit order it has failed to comply with the terms of the agreement. Discovery by
stating that it cancelled the contract with effect from 1 September 2018, does not absolve
Discovery from the election it made in the two letters addressed to Susan on 16 August 2018 and
28 August 2018, wherein Discovery had indicated that the final debit order was to be paid on 3
September 2018.’2
[10] The central issue in this appeal is whether Mrs Church’s instructions to her
bank to stop payment of the September premium amounted to repudiation in the light
of her previous communication to Discovery purporting to cancel her policy. If so,
do the terms of the policy governing non -payment of premiums find application in
instances of repudiation, and do the provisions governing unpaid premiums override
Discovery’s right to cancel the policy for repudiation?
[11] The material terms of the policy provide that:
‘Premiums are payable monthly in advance by debit order only.
. . .
Month 1: Discovery Life will grant a period of 30 calendar days for you to settle unpaid premiums.
Month 2: If premiums are still not settled, Discovery Life will grant an additional 30 calendar days
for you to settle unpaid premiums and cover will be suspended.
1 Judgment Vol 1 p 162 para 39.
2 Judgment Vol 1 p 169,para 57.
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Month 3: Discovery Life will cancel your contract if the unpaid premiums are not paid within 20
days from the last recorded debit order date.’3
Another relevant term of the policy reads as follows:
‘All payment instructions issued by Discovery Life will be treated by your bank as if the instruction
had been issued by you personally. Although this authority may be cancelled by you, such
cancellation will not cancel the agreement.’4
[12] I now turn to consider the respective contentions of the parties in this appeal.
Counsel on behalf of Discovery submitted that as of 10 September 2018, the contract
between the parties was at an end. This was so, argued counsel, because Mrs Church
had made it clear on 6 and 15 August 2018 that she wanted the policy cancelled.
Furthermore, despite the fact that Discovery had initially sought to enforce the
contract as indicated in its letters of 16 and 28 August 2018, Mrs Church ’s
instruction to her bank to stop payment of the premium payable on 3 September 2018
was an unequivocal indication that she had no intention of continuing with the
contract and wanted it cancelled immediately. Therefore, a reasonable person in the
position of Discovery would have interpreted Mrs Church’s conduct as evincing an
intention no longer to be bound by the terms of the contract. This was also made
clear by the fact that Mrs Church did not respond to Discovery’s letter and text
message of 10 September 2018, advising her that the policy had been cancelled with
effect from 1 September 2018.
[13] For their part the respondents, argued that the policy could not have been at
an end or cancelled on 10 September 2018 as such cancellation was premature. This
was so because the terms of the policy explicitly provided that Mrs Church had a
thirty-day grace period within which to pay the September premium. It was further
3 Vol 1 p 27 lines 56-60.
4 Vol 1 p 28 lines 16-17.
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submitted that the policy terms mirrored the provisions of s 52 5 of the Long-Term
Insurance Act 52 of 1998 prior to its repeal , whose object was to protec t the
policyholder in the event of non-payment of premiums.6
[14] As I see it, one must have regard to the entire factual matrix of the case leading
up to 10 September 2018 in order to ascertain what the status of the policy was on
that day. In the telephone conversation between Mrs Church and Mr Msutwana on
6 August 2018, she made it clear that she wanted to move her policy to Liberty as
they had offered her something better. It did not end there. On 15 August 2018 she
wrote to Discovery cancelling the policy. To ensure that the policy would be
cancelled, she instructed her bank on 23 August 2018 not to pay the premium that
was due on 3 September 2018. This was after Discovery wrote and reminded her of
the thirty-day notice period. And the bank in turn gave effect to her instruction by
not honouring the debit order request from Discovery and advising Discovery that
she had stopped payment. It was therefore ap parent to Discovery that the non -
payment of the premium was deliberate.
[15] It is beyond question that when Discovery wrote to Mrs Church on
28 August 2018 , advising her that the policy would come to an end on 1 October
2018 and that her last premium would be payable on 3 September 2018, it was
oblivious to the fact that Mrs Church had instructed her bank not to pay this
5 Before its repeal s 52, which was headed 'Failure to pay premiums', read as follows:
’52. Failure to pay premiums –
(1) If a premium under a long-term policy . . . has not been paid on its due date, the long-term insurer shall notify the
policyholder of the non-payment, and the policy shall, notwithstanding anything therein to the contrary, in the case of
a long-term policy under which there are to be two or more premium payments at intervals of –
a long-term policy under which there are to be two or more premium payments at intervals of –
(a) one month or less, remain in force for a period of 15 days after that due date; or
(b) longer than one month, remain in force for a period of one month after that due date;
or for such longer period as may be determined by agreement between the parties, and if the overdue premium is not
paid by the end of any such period, the policy shall be dealt with in accordance with subsection (2).’
6 Section 52 was repealed with effect from 28 September 2018 and was thus operative at all material times. With effect
from 28 September 2018, the same provision was inserted into the Policyholder Protection Rules (Long -term
Insurance) as rule 15A.
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premium. Mrs Church's conduct in so doing, could be interpreted in no other way
than that she no longer wished to remain bound by the terms of the policy. Come
what may, she had no intention of honouring the terms of the policy which required
her to give a month’s notice and thus to pay the premium for September 2018. Thus,
one can accept that she had deliberately repudiated her policy.
[16] As Corbett JA stated in Nash v Golden Dumps (Pty) Ltd:7
‘Where one party to a contract, without lawful grounds, indicates to the other party in words or by
conduct a deliberate and unequivocal intention no longer to be bound by the contract, he is said to
“repudiate” the contract . . . Where that happens, the other party to the contract may elect to accept
the repudiation and rescind the contract. If he does so, the contract comes t o end upon
communication of his acceptance of repudiation and rescission to the party who has repudiated.’
[17] This Court has consistently said that the test for repudiation is not subjective
but objective.8 The emphasis is not on the repudiating party’s state of mind, on what
she subjectively intended, but on what someone in the position of the innocent party
would think she intended to do; repudiation is accordingly not a matter of intention,
it is a matter of perception. The perception is that of a rea sonable person placed in
the position of the aggrieved party. The test is whether such a notional reasonable
person would conclude that proper performance (in accordance with a t rue
interpretation of the agreement) will not be forthcoming. The inferred intention as
manifested by objective external conduct accordingly serves as the criterion for
determining the nature of the threatened actual breach.9
7 Nash v Golden Dumps (Pty) Ltd [1985] 2 All SA 161 (A) at 176; 1985 (3) SA 1 A at 22D -F; Comwezi Security
Services v Cape Empowerment Trust [2014] ZASCA 22 paras 11 and 12; Braun Medical (Pty) Ltd v Ambasaam CC
[2014] ZASCA 199; 2015 (3) SA 22 SCA paras 8 and 9; Du Preez v Tornel Props (Pty) Ltd [2015] ZASCA 134 para
17; Micaren Exel Petroleum Wholesaler (Pty) Ltd v Stella Quick Shop (Pty) Ltd and Another [2020] ZASCA 66 para
11.
8 See Ponisammy and Another v Versailles Estates (Pty) Ltd 1973 (1) SA 372 A at 387A-C; [1973] 1 All SA 540 (A)
Stewart Wrightson (Pty) Ltd v Thorpe 1977 (2) SA 943 A at 953E-F.
9 See Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd [2001] 1 All SA 581 (A).
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[18] The insuperable hurdle confronting the respondents is that Mrs Church had
been informed by Discovery, at least twice, that she was contractually bound to give
30 days' notice if she wished to cancel her policy. I also have no doubt, taking into
account that she was a professional woman, assisted by a financial broker, that she
knew of the terms of her policy. She also must have known what the consequences
of instructing her bank to stop payment of the premium would be. In fact, she made
it clear that she needed to move over to Liberty as they offered her something better.
She obviously had no intention of paying two insurance premiums in September ,
hence she instructed her bank to stop the one in favour of Discovery. Discovery was
therefore, perfectly entitled to accept the repudiation and cancel the polic y
immediately.
[19] This leads me to the issue of whether Discovery ought to have afforded Mrs
Church a thirty-day grace period in order to pay her outstanding premium. I think
not. But i t was submitted on behalf of the respondents that Discovery had an
obligation to advise Mrs Church of the unpaid debit order prior to cancelling the
policy and afford her 30 days within which to pay the arrear premium. This,
however, would be nonsensical for Discovery if one takes into account Mrs Church’s
communication with Mr Msutwana on 6 August 2018, her letter to Discovery on
15 August 2018 and her instructio n to the bank to stop payment of her debit order.
This was not a situation where there were insufficient funds in her account, or the
bank had made an error in the non-payment of her debit order. In my view, the thirty-
day grace period for an unpaid premium in the policy does not apply in cases where
the cancellation is as a result of repudiation by the insured herself of the policy. The
grace period only applies where the no n-payment of the premium is not in all the
circumstances a repudiation of the policy. In the present case, Mrs Church did not
circumstances a repudiation of the policy. In the present case, Mrs Church did not
need reminding that her premium was unpaid. That it should not be paid, and that it
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should remain unpaid, was plainly her inferred intention as evinced by the conduct
to which I have referred.
[20] The argument based on the grace period found favour with the high court
when it held that ‘[t]herefore, an express term in the contract concluded between the
parties stated that the conduct of Susan to cancel her debit order would not result in
the cancellation of the agreement’.10 In the view I take of the matter one ought not
to take the instruction to stop payment in isolation. One has to consider the
cumulative effect of the events from 6 August 2018 up to and including
10 September 2018. The argument might perhaps have had some force if Mrs
Church's instruction to her bank were considered in isolation without regard to what
had occurred prior to this instruction being given. But it cannot prevail for the
reasons mentioned in paragraph 19 above. Discovery, therefore, was not obliged to
give notice to Mrs Church to remedy the breach before exercising its right to cancel
the policy .11 It elected , rightfully so, to cancel the contract after Mrs Church
repudiated.
[21] To sum up, Mrs Church’s policy was cancelled not for the non -payment of
the premium per se but because Discovery elected to accept Mrs Church ’s
repudiation of the contract. As correctly conceded by the respondents ’ counsel
during argument, the grace period provision cannot exclude reliance on repudiation
or even a mutual agreement by the parties to cancel the po licy. It was submitted ,
during the course of the argument, that Discovery could not be said to have elected
to accept the repudiation and cancel the policy as almost all the letters addressed to
Mrs Church were automated responses generated by a computer . Discovery’s
10 Judgment Vol 1 p 163 para 42.
11 See Taggart v Green 1991 (4) SA 121 (W) at 126A-B; Metalmil (Pty) Ltd v AECI Explosives & Chemicals Ltd 1994
(3) SA 673 (A) at 683H.
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answering affidavit demystified this when it explained that the various letters were
sent out by its credit department. Furthermore, each letter responded to a certain set
of facts, and was under a signature by different personnel. It can therefore hardly be
said that there was no human intervention in the various letters addressed to Mrs
Church.
[22] Accordingly, the appeal must succeed and the following order will issue:
(a) The appeal is upheld with costs.
(b) The order of the high court is set aside and replaced with the following order:
‘The application is dismissed with costs.’
_________________________
T P POYO-DLWATI
ACTING JUDGE OF APPEAL
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APPEARANCES
For Appellant: A J Lamplough SC
Instructed by: Keith Sutcliffe & Associates Inc, Randburg
Rossouws Attorneys, Bloemfontein
For Respondents: D Vetten
Instructed by: Edward S Classen & Kaka, Randburg
Pieter Skein Attorneys, Bloemfontein