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[2007] ZASCA 13
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Imperial Group (Pty) Ltd. v NCS Resins (Pty) Ltd. (197/06) [2007] ZASCA 13; [2007] SCA 13 (RSA) ; [2007] 2 All SA 483 (SCA) (20 March 2007)
Links to summary
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case no: 197/06
In the matter between:
IMPERIAL GROUP (PTY) LIMITED
........................................
APPELLANT
and
NCS RESINS (PTY) LIMITED
........................................
RESPONDENT
________________________________________________________________
CORAM
: SCOTT, CAMERON, CLOETE, PONNAN
et
MLAMBO JJA
DATE
OF HEARING
: 15 February 2007
DATE
OF DELIVERY
: 20 March 2007
Summary
:
Interpretation of warehousing contract – Obligation to insure
against fire not giving rise to inference that risk of loss
lay with
the insured.
Neutral citation:
This judgment may be referred to as
Imperial Group (Pty)
Ltd v NCS Resins (Pty) Ltd
[2007] SCA 13 (RSA).
________________________________________________________________
JUDGMENT
________________________________________________________________
SCOTT JA/…..
SCOTT JA:
[1] The appellant carries on business as a supplier of transport and
warehousing services. In August 2000 it entered into a written
contract, styled a ‘Logistic Services Agreement’, with
Sentrachem Limited in terms of which it undertook for reward to
provide
inter alia
warehousing and transport services to a
division of Sentrachem called NCS Resins. Subsequently, Sentrachem,
with the written consent
of the appellant, assigned its rights and
obligations under the contract to the respondent, NCS Resins (Pty)
Ltd. I shall refer to
the appellant as Imperial and to the respondent
as NCS. On about 22 March 2002 there was a fire at Imperial’s
warehouse in
Wadeville, Gauteng, resulting in destruction of and
damage to NCS’s property. NCS sued Imperial for its loss in the
Johannesburg
High Court alleging that the loss was due to Imperial’s
negligence and breach of contract. One of the defences raised in
Imperial’s
plea was that on a proper construction of the
contract, NCS, and not Imperial, bore the risk of loss by fire and
that accordingly
the claim had to fail even if it were established
that the fire was caused by a breach of contract on the part of
Imperial. By agreement
between the parties it was ordered in terms of
Rule 33(4) that this issue was to be disposed of first and that the
other issues,
including the question of Imperial’s negligence,
would stand over for later determination. Goldstein J, who heard the
matter,
found for NCS but granted Imperial leave to appeal.
[2] Both parties rely upon the express terms of the contract in
support of their competing interpretations, NCS principally on clause
9.6 and Imperial on clause 11.6. Before referring to these provisions
it is necessary to make certain general observations regarding
the
contract and its structure so that the provisions in issue may be
understood in their contextual setting.
[3] The contract is a bulky document with many annexures and
contemplates further ‘service agreements’ which, it is
recorded,
are to form ‘part of this agreement’. The
contract itself is divided into chapters which deal with a complex
business
relationship between the parties covering a wide range of
activities including transport, warehouse stock rotation, inventory
management,
decanting and the use of computer programmes. The
language used appears to be that of businessmen rather than lawyers.
It is not
particularly well drafted. Clauses are frequently out of
place and the impression created is that an initial draft was
subsequently
altered by the insertion of additional provisions. The
words ‘damage’ and ‘damages’ are used
interchangeably
and often incorrectly. Imperial was represented by
one of its divisions, IWL Warehousing and Logistics, and the
abbreviation ‘IWL’
used in the contract is in reality a
reference to Imperial.
[4] Chapter 9 is headed ‘Liabilities’. Clauses 9.1 and
9.3 contain warranties which are not relevant to the present case.
Clause 9.2 is similarly not relevant and appears to be out of place.
Clause 9.4 deals with ‘damage to and/or loss of goods
during
transport, including loading and unloading’. Clause 9.5 deals
with ‘damages (sic) to third parties, such as but
not limited
to movable or immovable goods, personal injuries, environmental
damages’. Clause 9.6, being the clause relied upon
by NCS,
reads:
‘
In
case of damages (sic) other than covered hereabove, and caused by IWL
[‘s] breach of this Agreement and corresponding Service
Agreements, IWL will assume full liability except if IWL provides the
proof that this damage has been caused by NCS’ fault.
IWL will
assume same liability in case its activities and services are carried
out by Sub-contractors.’
It is common cause that the ordinary meaning of this clause is wide
enough to include damage by fire and, subject to any other provision
to the contrary, the clause would therefore have the effect of
rendering Imperial liable for the damage suffered by NCS in the
instant
case. In passing, it should also be noted that the reference
to damage ‘other than covered hereabove’ is a reference
to the damage referred to in clauses 9.4 and 9.5, being the only
damage dealt with ‘hereabove’.
[5] Chapter 11 is headed ‘Insurance’. The relevant part
of the introductory clause provides:
‘
IWL,
its subsidiaries and potential sub-contractors
shall
maintain in effect the
following insurance, at their own expense, with reputable and solvent
insurance Companies, . . . .’ (Emphasis
added.)
Clauses 11.1, 11.2 and 11.3 make provision respectively for
‘corporate Third Party/Operations insurance’, ‘insurance
against accidental pollution’ and ‘motor third party
liability insurance’. Clause 11.4 deals with excess clauses.
Clause 11.5 deals with subrogation in relation to insurance policies
taken out by Imperial. It reads:
‘
All
IWL insurance policies must contain clauses whereby IWL and the
insurance companies waive their subrogation rights against NCS
and
the latter’s insurers throughout the duration of the Agreement
with regard to any damage or loss submitted by equipment
and plant
whether these are or not owned by IWL. All IWL insurance policies
will name NCS as an additional insured.’
Clause 11.6, being the clause relied upon by Imperial reads:
‘
NCS
will insure its stock against fire and natural disasters at their
cost whilst in the IWL warehouse.’
Clause 11.7 reads:
‘
IWL
will at its own cost insure the NCS stock against stock losses and
theft.’
It will at once be observed that clause 11.6 is out of place in
relation to the introductory clause; it deals with insurance at the
instance of NCS and not Imperial. In clause 11.7 the word ‘will’
is used, as opposed to ‘shall’ in the introductory
clause, without any apparent reason.
[6] Imperial’s case, in a nutshell, is that clause 11.6 by
necessary implication imposes the risk of damage by fire on NCS
and
to this extent qualifies clause 9.6. In other words, it is contended
that clause 9.6, when read with clause 11.6, must be construed
as
meaning that if the damage is caused by fire, NCS is to bear the loss
even if it is occasioned by Imperial’s negligence
and breach of
contract. This construction did not find favour with the court
a
quo
which held that by applying the
eiusdem generis
rule
the word ‘fire’ had to be restrictively interpreted so as
to cover only a fire which Imperial could not have controlled
or
prevented. Accordingly, so the court reasoned, a fire caused by a
breach of contract on the part of Imperial was not covered by
clause
11.6 and the defence raised by Imperial had to fail.
[7] In this court counsel for Imperial criticised the court
a quo
for its reliance on the
eiusdem generis
rule. He submitted
that it was well-established that where specific words were followed
by general words the rule could be invoked,
when appropriate, to
confine the general words to things of the same kind as those
specified; however, the rule could not be invoked
to give a
restricted meaning to a specific word which preceded the general
words. Counsel is undoubtedly correct. See eg
Rex v Nolte
1928
AD 377
at 382. Indeed, counsel for NCS did not attempt to argue the
contrary but supported the order granted by the court
a quo
for different reasons. In short, counsel for NCS submit that the
express provision dealing with liability for damage, ie clause 9.6,
precludes an inference arising from clause 11.6 that NCS is to bear
the risk of loss by fire and that there is no room for the
qualification
of clause 9.6 contended for by Imperial.
[8] In advancing the interpretation of clause 11.6 for which he
contends, counsel for Imperial placed much reliance on
Mensky v
ABSA Bank Ltd t/a Trust Bank
[1997] 4 All SA 280
(W). In that
case the plaintiff had hired a safety deposit locker in terms of a
written agreement which provided (at 282f):
‘
While
the Bank will exercise every reasonable care for the security of the
Locker Area, it is a special term and condition of the
acceptance
thereof that no responsibility for loss or damage of the contents of
the Locker whether partial or total, from whatever
cause, whether by
theft, fire, water, explosion, war, riot or otherwise, is accepted
and that the client
himself shall be responsible to insure the contents of the locker
.’
(Emphasis added.)
The locker went missing when the Bank relocated to different
premises. The court found it unnecessary to decide whether the loss
following the removal of the safety locker to other premises fell
within the scope of the disclaimer as ‘in the context of
the
defendant’s disclaimer clause the stipulation that the
plaintiff was to insure her goods amounted to an allocation to her
of
all risks or loss or damage which could be insured against’ (at
299d). Counsel argued that the same meaning had to be given
to clause
11.6 in the present case. In my view, the
Mensky
case is
distinguishable. Clause 11.6 is not to be read in the context of a
disclaimer of liability by Imperial. On the contrary,
the very
opposite is true. Clause 9.6 in express terms imposes liability on
Imperial. The implication sought would therefore require
a
qualification to that clause. But there is nothing in the clause
itself which is indicative of such a qualification, for example,
a
phrase commencing with ‘subject to . . .’ or similar
words. On the contrary, as noted in para 4 above, clause 9.6 places
full liability for damage upon Imperial save for damage ‘covered
hereabove’. The clause therefore expressly precludes
any other
limit to its application.
[9] Counsel for Imperial readily conceded that fire can be caused in
any number of ways not involving a breach of contract on the
part of
Imperial and that it accordingly made good commercial sense for NCS
to insure its property against fire while stored in Imperial’s
warehouses. He acknowledged, too, that had clause 11.6 contained
merely a recommendation that NCS insure against fire, the clause
would have been a neutral factor and would not have justified the
inference that NCS was to bear the risk of loss by fire. He referred
in this regard to
First National Bank of SA Ltd v Rosenblum and
another
2001 (4) SA 189
(SCA) where a clause to the effect that a
client of a bank ‘should arrange suitable insurance cover’
for the contents
of a safety deposit box (para 3 at 144D) was held to
be a neutral factor and not to give rise to an inference of a
transfer of risk
to the client (para 24). Counsel emphasized the use
of the word ‘will’ in clause 11.6 in the present case and
the obligation
it imposed on NCS to insure. It was this obligation,
he submitted, that distinguished the present case from the
Rosenblum
case and it was this that justified the inference that NCS was to
bear the risk of fire.
[10] As previously observed, the contract in question is essentially
a businessman’s rather than a lawyer’s contract.
Clauses
frequently appear to be out of place and there is often a lack of
consistency in the manner in which the contract is drafted.
Chapter
11 is itself a good example of this. In such circumstances it is
important for a court to adopt a common sense approach to
the matter
of interpretation and to recognise that the parties through lack of
experience or skill in draftsmanship may use a word
or language which
is not always the most appropriate. A court should therefore not be
astute to draw an inference from the use of
language in one clause if
that inference would be contrary to a meaning unequivocally expressed
in another.
[11] No doubt in appropriate circumstances an obligation to insure
may give rise to an inference that the party so obliged is to
bear
the risk. But there can be no hard and fast rule to this effect. In
each case the clause in question must be examined in its
contractual
setting to determine whether such an inference is to be drawn. In the
present case clause 11.6 does not stand alone.
Clause 9.6 in express
terms imposes liability on Imperial for loss, including loss by fire.
Imperial, therefore, seeks not only to
draw an inference of a
transfer of risk from clause 11.6 but also to infer a far-reaching
qualification of the express terms of clause
9.6. In my view, the use
of the word ‘will’ in clause 11.6 is insufficient to
justify such a construction.
[12] A final argument advanced on behalf of Imperial was that the
insurance contemplated in clause 11.6 had to be construed as being
for the benefit of both parties in the sense that each intended that
both would be protected against the loss and that accordingly
NCS’s
insurers who had indemnified NCS were precluded from proceeding
against Imperial by subrogation in the name of NCS. The
insurable
interest which Imperial had in the loss, counsel submitted, arose by
reason of clause 9.6 which in the absence of the insurance
would
render Imperial liable for the loss suffered. In support of this
submission counsel relied largely on
Commercial Union Assurance Co
of South Africa Ltd v Golden Era Printers and Stationers
(Bophuthatswana) (Pty) Ltd
1998 (2) SA 718
(BPD), being a case
concerning a lease which contained both a provision requiring the
lessor to insure against fire and a provision
requiring the lessee to
return the premises in the same good condition as when they were
received. There is much that distinguishes
the
Commercial Union
case from the present one but it is unnecessary to embark upon an
analysis of the former. It is enough to refer to clause 11.5 of
the
contract in the present case (reproduced in para 5 above). This
clause, it will be observed, requires the insurance policies
taken
out by Imperial to contain provisions in which the insurers waive
their rights of subrogation against NCS and nominate NCS
as an
additional insured. It is clear, therefore, that both NCS and
Imperial were alive to the benefits of insurance and the right
of an
insurer to proceed by subrogation against a party responsible for the
loss covered by the insurance. Nonetheless, there is
no clause in the
contract requiring similar provisions in the policies taken out by
NCS. This to my mind is the clearest indication
that the parties
contemplated that NCS’s insurers would have the right to
recover by subrogation any loss for which Imperial
was liable and
which was covered by a policy issued to NCS. Counsel’s
contention must therefore fail.
[13] It follows that in my view clause 9.6 is not to be construed as
being qualified by clause 11.6, nor is the latter clause to
be
construed
as protecting Imperial as well as NCS against the loss covered by a
policy contemplated in that clause.
[14] The appeal is dismissed with costs, including the costs of two
counsel.
__________
D G SCOTT
JUDGE OF APPEAL
CONCUR:
CAMERON JA
CLOETE JA
PONNAN JA
MLAMBO JA