Truck and General Insurance Co Ltd v Verulam Fuel Distributors CC and Another (540/04) [2006] ZASCA 85; 2007 (2) SA 26 (SCA) (31 May 2006)

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[2006] ZASCA 85
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Truck and General Insurance Co Ltd v Verulam Fuel Distributors CC and Another (540/04) [2006] ZASCA 85; 2007 (2) SA 26 (SCA) (31 May 2006)

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REPUBLIC
OF SOUTH AFRICA
THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
REPORTABLE
Case
number:
540/04
In
the matter between:
TRUCK
AND GENERAL INSURANCE CO LTD
Appellant
and
VERULAM
FUEL DISTRIBUTORS CC
1
st
Respondent
AON
SOUTH AFRICA (PTY) LTD
2
nd
Respondent
CORAM
:
MPATI
DP, FARLAM, MTHIYANE, JAFTA JJA and
MAYA
AJA
HEARD
:
14
MARCH 2006
DELIVERED
:
31
MAY 2006
Summary:
Insurance
Law – Interpretation of policy – indemnity in respect of
liability to third parties – fuel conveyed by insured’s
vehicles
spilling and causing ecological damage which insured obliged to clean
up under environmental legislation – whether insured
entitled to
claim indemnity under policy for costs of clean-up without liability
to a third party having been established.
Neutral
citation:
This judgment may be cited as
Truck and General
Insurance Co Ltd v Verulam Fuel Distributors CC
[2006] SCA 84
RSA.
_____________________________________________________________________
JUDGMENT
_____________________________________________________________________
MPATI DP:
[1] This appeal concerns
the interpretation of a contract of insurance. The first respondent
(plaintiff
a quo
) is a close corporation which carries on
business from Verulam, Kwa Zulu Natal, as a distributor and
transporter of fuel. It successfully
sued the appellant (first
defendant
a quo
) in the Johannesburg High Court, for payment
of the sums of R96 359,64 and R997 667,64 respectively, under an
insurance policy
issued by the latter. The first respondent had, in
the alternative, and conditional upon its success or otherwise
against the appellant,
claimed damages in the same amounts against
the second respondent (second defendant
a quo
), an insurance
broker, which it had appointed to obtain a contract of insurance in
terms of which the insurer would indemnify it
against loss or damage
arising out of the use of its vehicles. The basis for the
conditional claim was that the second respondent
had failed to obtain
the required insurance from the appellant and thereby breached its
mandate. (I shall, for convenience, henceforth
refer to the parties
as in the court below.)
[2] Because the plaintiff
was successful against the first defendant, the court
a quo
(Boruchowitz J) dismissed the conditional claim against the second
defendant and ordered the first defendant to pay the second
defendant’s
costs. The court found it unnecessary to consider
other alternative claims against the first defendant based upon
estoppel and rectification.
Its judgment is reported
sub nom
Verulam Fuel Distributors CC v Truck & General Insurance Co Ltd
and Another
2005 (1) SA 70
(W). This appeal is with leave of the
court below. Leave was also granted to the plaintiff to cross-appeal
against the order dismissing
the conditional claim against the second
defendant. The cross-appeal is again conditional upon the success or
otherwise of the main
appeal.
[3] During the trial
before Boruchowitz J the first defendant applied for a separation of
issues in terms of Rule 33(4). The application
was not opposed and
an order was granted in terms of which the issues of liability and
quantum were separated: the trial proceeded
on the former issue
only. The court
a quo
, however, overlooked its earlier order
at the time of delivering its judgment and ordered the first
defendant to pay the sums claimed,
and ancillary relief. Counsel
were agreed that in the event of the appeal being dismissed, that
order should be corrected accordingly.
[4] The policy referred
to above was initially issued by Global Insurance Company Limited.
On 25 January 1999 Mr B D Ogden, the managing
director of the first
defendant, wrote to the plaintiff and advised that the first
defendant, as a new insurance company – it had
previously conducted
business as underwriters – ‘will commence underwriting on 1
st
February 1999’. The letter states further that:
‘
The
Global Insurance Company Ltd has decided not to participate in the
new insurance company’s re-insurance program and in order
to
transfer your insurance portfolio to Truck and General Insurance
Company Ltd, it is necessary in terms of the policy to give you
formal notice of cancellation of the existing policy, and unless we
hear from you, your policy will automatically be transferred
to the
new company and Global Insurance Company will be off risk by the 1
st
March 1999.
The policy conditions
will remain the same as your existing policy and it is our aim to
cause you no inconvenience.’
[5] The agreed facts upon
which the plaintiff’s claims are based, are these:
‘
On
or about 16 March 2000, whilst the first defendant’s policy was of
full force and effect, diesel being conveyed by the plaintiff’s
vehicles, namely truck bearing registration number NJ 53530 and
tanker-trailer bearing registration number NJ 63282 leaked from the
tanker/trailer causing a spill which polluted, contaminated and
caused ecological damage to an area of land not belonging to the
plaintiff at Rossburgh, Durban, KwaZulu Natal.
On
or about 27 March 2000, whilst the 1
st
defendant’s
policy was in full force and effect, the plaintiff’s vehicles,
namely, truck bearing registration number NJ 53530
and tanker-trailer
bearing registration numbers NJ 29500 and NJ 8381 overturned outside
Heidelberg and as a result, the diesel conveyed
in the said
tanker-trailer leaked from them causing contamination and ecological
damage to an area of land not belonging to the plaintiff.’
Following
each of these incidents the plaintiff engaged a contractor to clean
up the spillage, incurring, in the process, costs in
the sums of R96
359,64 and R997 667,64 respectively.
[6] The first defendant
repudiated plaintiff’s claims for a refund of these amounts. In
response to a demand in respect of the
second incident the first
defendant made a tender (in an undated letter) of R25 000 in full and
final settlement of the claim. The
tender was based on the
provisions of an endorsement or addendum to the policy, which reads:
‘
SUBJECT OTHERWISE TO
ITS TERMS CONDITIONS AND LIMITATIONS THE POLICY IS ENDORSED AS
FOLLOWS:
“
THE
POLICY IS EXTENDED TO INCLUDE ADDITIONAL COSTS REASONABLY INCURRED BY
THE INSURED OR FOR WHICH HE IS HELD RESPONSIBLE RESULTING
DIRECTLY OR
INDIRECTLY FROM AN ACCIDENT TO THE INSURED VEHICLE AND WHICH RESULTS
IN THE LEAKAGE AND/OR SPILLAGE OF THE PRODUCT BEING
TRANSPORTED.
SUCH
ADDITIONAL COSTS INCLUDE:
1) EMERGENCY
SERVICES CALL OUT COSTS.
2) CLEANING AND [OF?]
ACCIDENT SITE OF DEBRIS AND PRODUCT.
3) REMOVING NULLIFYING OR
CLEARING UP SEEPING, POLLUTING OR CONTAMINATING SUBSTANCES CARRIED BY
THE INSURED VEHICLE.
4) FINES AND/OR PENALTIES
LEVIED BY THE AUTHORITIES AS A CONSEQUENCE OF THE POLLUTION CAUSED BY
THE ACCIDENT.
SUCH ADDITIONAL COSTS ARE
LIMITED TO THE AMOUNT OF R25 000 ANY ONE INCIDENT.”’
The addendum was inserted
or added to the policy with effect from 8 August 1998 although it was
signed on behalf of the first defendant
on 8 June 1999.
[7] In its particulars of
claim the plaintiff alleged that the incidents were ‘accidents’
which resulted in it becoming legally
liable to pay the sums claimed,
being expenses incurred by it as contemplated by subsection B of the
Motor Section of the policy.
That the incidents qualify as
‘accidents’ was not in issue in this court. In terms of the
policy the first defendant agreed
‘to indemnify or compensate the
insured by payment or, at the option of the [insurer], by
replacement, reinstatement or repair
in respect of the defined events
occurring during the period of insurance . . .’. The relevant part
of subsection B is in the
following terms:
‘
Sub-section
B Liability to third parties
Defined events
Any accident caused by or
through or in connection with any vehicle described in the schedule
or in connection with the loading and/or
unloading of such vehicle
against all sums including claimant’s costs and expenses which the
insured and/or any passenger shall
become legally liable to pay in
respect of
(i) . . .
(ii) damage to property
other than property belonging to the insured or held in trust by or
in the custody or control of the insured
or being conveyed by, loaded
into or unloaded from such vehicle.’
[8] The
first defendant pleaded that the plaintiff’s two claims ‘and the
facts surrounding them’, did not fall within the ambit
of the first
defendant’s liability in terms of the policy, ‘more particularly
the provisions of subsection B of the motor section
of the policy’.
In this court, and in the court below, counsel for the first
defendant accepted that the claims were covered by
the policy, but
contended that they were covered under the endorsement (quoted in
para 5 above), which limits the first defendant’s
liability to a
maximum of R25 000 in respect of each incident. The plaintiff,
however, did not claim under the endorsement.
[9] It seems
common cause that subsection B of the policy may be categorised as
indemnity insurance. It provides indemnity against
‘all sums’,
including a claimant’s costs and expenses, which the plaintiff
‘shall become legally liable to pay’, ie it
provides for
indemnity against loss. The measure of such loss is the measure of
the payment (
Medical Defence Union Ltd v Department of Trade
[1979] 2 All ER 421
at 424).
1
Counsel for the plaintiff submitted that the endorsement constitutes
contingency insurance, which provides no indemnity, but rather
a
payment on a contingent event, ie on the happening of an event,
similar to a life policy or a personal injury policy. The sum
to be
paid is not measured by the loss, but is stated in the policy.
2
The ‘trigger’ for the endorsement, counsel argued, is cleaning
up product which, while being transported by an insured vehicle,
causes spillage. Legal liability to pay, as required by subsection B
of the policy, is not a necessity for a claim under it. I
agree with
the submission that ‘legal liability to pay’ is not a necessity
for a claim under the endorsement. I am not convinced,
however, that
the endorsement constitutes contingency insurance in the sense
described above. The amount provided for in it is a
maximum amount
payable: a lesser amount may be paid, depending on the ‘costs
reasonably incurred’ by the plaintiff (insured)
or for which the
insured ‘is held responsible’. It does not provide for payment
of a specified amount on the happening of an
event. In essence, it
covers the insured for additional costs ‘reasonably incurred’ or
‘for which he is held responsible’,
to a maximum of R25 000. It
has been suggested, however, that in a sense all insurances are
related to a contingency and that in
liability insurance the
contingency is incurring the specified liability to a third party.
3
The endorsement, in my view, may best be described as pecuniary loss
insurance (see
Lawsa
(reissue) vol 25 para 780).
[10] Much
was said during argument on the question whether, because of the
heading ‘Liability to third parties’, subsection B
of the policy
provides for what is commonly referred to as third-party insurance.
As was said in
Digby v General Accident Fire and Life Assurance
Corporation Ltd
4
the insurance against third-party liability involves three parties,
‘the insurer, the insured and the third party who is making
a
claim’.
5
These observations were made with regard to s 2(1) of the policy at
issue in that case, which indemnified the policyholder against
‘all
sums which the policy holder shall become legally liable to pay in
respect of any claim by any person (including passengers
in the
automobile) for loss of life . . . or damage to property . . .
caused by, through, or in connection with such automobile
. . .’.
The case itself was concerned with s 2(3) of the policy, which is not
relevant for present purposes. In my view, it is
not necessary to
give an opinion on this aspect at this stage. Suffice it to mention,
however, that there is a difference between
the wording of the policy
in the
Digby
case and that in the instant case. It is
sufficient, for present purposes, merely to say that in the instant
case, for entitlement
to claim indemnity the plaintiff is required
to prove a loss
6
arising from a legal liability to pay money in respect of damage to
property other than his own.
[11] The policy decrees
that ‘specific exceptions, conditions and provisions shall override
general exceptions, conditions and provisions’.
Relying on this
stipulation counsel for the first defendant submitted that the
plaintiff’s claims are in respect of costs that
it incurred in
cleaning up the ‘accident’ sites of product that was being
transported by its insured vehicles. It is the endorsement,
so
counsel argued, that specifically indemnifies the plaintiff against
these costs rather than subsection B which, although also
indemnifying the plaintiff against costs and expenses, provides that
such costs and expenses are those that the plaintiff becomes
legally
liable to pay to a claimant. Counsel’s further contentions were:
that a claim under subsection B must be for payment
of ‘all sums
including [a] claimant’s costs and expenses’ which the plaintiff
became legally liable to pay in respect of damage
to property other
than the plaintiff’s; that there is no suggestion in the present
matter of indemnity being sought against costs
and expenses incurred
by a claimant; and, that although the first defendant admitted that
there was ‘damage to an area of land’
not belonging to the
plaintiff in both incidents, it was only ecological damage, which,
according to counsel, does not equate to
damage to property. With
regard to the first incident the evidence was that diesel from the
plaintiff’s tanker spilled onto the
tarmac. Counsel consequently
argued that there was no evidence that the tarmac was ‘damaged’
as a result of the spill. He said
that the term ‘pollution’ –
it was admitted that the diesel spill in the first incident polluted
an area of land – appears
in the endorsement and not in subsection
B. All this, counsel submitted, ineluctably leads to the conclusion
that the plaintiff’s
claim should have been brought under the
endorsement. No claimant, nor damage to property, he said, correctly
in my view, is required
for an indemnity of the insured (plaintiff)
under the endorsement.
[12] In its particulars
of claim the plaintiff alleged that in terms of s 20 of the National
Water Act, 1998 (the Water Act) and s
30 of the National
Environmental Management Act, 1998 (the Environmental Act) it became
legally liable ‘to pay the costs relating
to all reasonable
measures to contain and minimise the effects of the spill, to
undertake clean-up procedures and to remedy the effects
of the
spill’. Section 20(1) of the Water Act defines ‘incident’ as
including ‘any incident or accident in which a substance
(a)
pollutes or has the potential to pollute a water resource; or (b)
has, or is likely to have, a detrimental effect on a water
resource’.
Subsection 4 provides that a responsible person, ie a person who is
responsible for the incident or owns the substance
involved in the
incident or was in control of such substance must, inter alia, take
reasonable measures to contain or minimise the
effects of the
incident. In my view, the Water Act has no application in the
present case. There is no suggestion of the substance
(diesel)
having polluted or having had the potential to pollute a water
resource, or that it had, or was likely to have had, a detrimental
effect on a water resource.
[13] Section 30 of the
Environmental Act is more to the point. Subsection 1 defines
‘incident’ as ‘an unexpected sudden occurrence
. . . leading to
serious danger to the public or potentially serious pollution of or
detriment to the environment, whether immediate
or delayed’. The
other relevant subsections read:
‘
(4) The responsible
person . . . must, as soon as reasonably practicable after knowledge
of the incident –
(a) take reasonable
measures to contain and minimise the effects of the incident,
including its effects on the environment and any
risks posed by the
incident to the health, safety and property of persons;
(b) undertake
clean-up procedures;
(c) remedy
the effects of the incident;
(d) . . .
(5) . . .
(6) A relevant authority
may direct the responsible person to undertake specific measures
within a specific time to fulfil his or
her obligations under
subsections (4) and (5): Provided that the relevant authority must,
when considering any such measure or time
period, have regard to the
following:
(a) . . .
(b) the severity of any
impact on the environment as a result of the incident and the costs
of the measures being considered;
(c) .
. .
(d) the desirability of
the state fulfilling its role as custodian holding the environment in
public trust for the people;
(e) any
other relevant factor.
(7) . . .
(8) Should
–
(a) the
responsible person fail to comply, or adequately comply with a
directive under subsection (6);
(b) .
. .
(c) there
be an immediate risk of serious danger to the public or potentially
serious detriment to the environment,
a
relevant authority may take the measures it considers necessary to –
(i) contain
and minimise the effects of the incident;
(ii) undertake
clean-up procedures; and
(iii) remedy
the effects of the incident.
(9) A relevant authority
may claim reimbursement of all reasonable costs incurred by it in
terms of subsection (8) from every responsible
person jointly and
severally.’
A relevant authority
means a municipality with jurisdiction over the area in which the
incident occurs; a provincial head of department
or any other
provincial official designated for that purpose by the Member of the
Executive Council in a province in which an incident
occurs; the
Director-General of the Department of Environmental Affairs and any
other Director-General of a national department
(s 30(1)(c)). The
plaintiff accordingly averred that it ‘was obliged to pay such
costs by carrying out the measures’ referred
to in s 30(4) of the
Environmental Act or ‘to pay the Government of the Republic of
South Africa to do so’. It thus carried
out the measures in
accordance with its legal liability to do so.
[14] Counsel for the
first defendant accepted, correctly so in my view, that statutory
liability to pay may qualify as the ‘legal
liability’ required by
subsection B of the policy, but he submitted that the subsection
requires that there should also be damage
to property. He argued,
however, that the endorsement also covers statutory liability because
it speaks of ‘fines and/or other
penalties levied by the
authorities as a consequence of the pollution caused by the
accident’. Counsel also accepted, again correctly
so in my view,
that the State may be a claimant as envisaged by subsection B of the
policy (see s 30(9) of the Environmental Act),
but contended that in
the present matter it is not; the claimant is Ecosorb, the company
that undertook the cleaning-up procedures.
There is thus no
claimant, so the argument continued, for whose loss, costs or
expenses, in respect of damage to property, the plaintiff
became
legally liable to pay.
[15] On the question of
the existence or otherwise of a claimant, counsel for the plaintiff
informed us that because the trial court
was pressed for time and it
had become evident that the trial would have had to be postponed if
further evidence were to be led,
the parties, to obviate the calling
of witnesses from government departments, agreed that the relevant
authority would have exercised
their rights against the plaintiff had
the latter failed to fulfil the obligations imposed upon it by the
two statutes (the Water
Act and Environmental Act). The question,
however, as posed by counsel for the first defendant, is: (1) what
is the nature of the
steps that would have been taken by the relevant
authority in the exercise of their rights and (2) would the costs
thereof have been
as extensive as the amounts claimed by the
plaintiff? The answer to the first question, I venture to say, is to
be found in s 30(6),
(8) and (9) of the Environmental Act (quoted in
para 13 above). As to the second question, it seems to me that it
can only be answered
at the second stage of the trial, ie the
quantum
stage, were the plaintiff to be successful on the merits.
[16] As has
already been mentioned, for the plaintiff to sustain a claim under
subsection B of the policy it must have become legally
liable to pay
the sums claimed. Counsel for the first defendant contended that
under subsection B the plaintiff could only acquire
a right to sue
the first defendant for the moneys claimed when its liability to ‘the
injured’ person has been established, for
it is only then that a
right to indemnity arises. For this proposition counsel relied on
Post Office v Norwich Union Fire Insurance Society Ltd
7
.
In that case certain contractors, Potters & Company Ltd, while
digging a hole in the street so as to find a water main, struck
and
damaged an underground telegraph cable. The Post Office, which had
laid the cable, demanded from Potters payment of the costs
of repairs
to the cable. Potters refused to pay and before the Post Office
could institute action against them, they went into liquidation.
The
Post Office then discovered that Potters were insured under a public
liability policy covering their liability to third parties.
It
instituted action against Potters’ insurers, claiming a right to do
so under the Third Parties (Rights against Insurers) Act,
1930.
8
The insurers denied that the Post Office could claim
against them direct. The policy contained a ‘no admission’
clause, ie a
clause barring the insured from making any admissions
without the insurer’s written consent. Lord Denning MR said the
following:
‘
It
seems to me that the insured only acquires a right to sue for the
money when his liability to the injured person has been established
so as to give rise to a right of indemnity. His liability to the
injured person must be ascertained and determined to exist, either
by
judgment of the court or by an award in arbitration or by agreement.
Until that is done, the right to an indemnity does not arise.’
9
And further:
‘
The
right procedure is for the injured person to sue the wrongdoer, and
having got judgment against the wrongdoer, then make his claim
against the insurance company. This attempt to sue the insurance
company direct (before liability is established) is not correct.’
10
The
following statement by Devlin J in the
West Wake
case
11
was quoted with approval by both Lord Denning and Salmon LJ:
‘
The
assured cannot recover anything under the main indemnity clause or
make any claim against the underwriter until they have been
found
liable and so sustained a loss.’
Counsel
for the first defendant accordingly submitted that in the absence of
a judgment, an arbitration award or an agreement in terms
of which
the plaintiff’s liability to a claimant (injured person) has been
ascertained and determined to exist, the plaintiff has
not acquired a
right to sue the first defendant.
[17] In
countering this submission counsel for the plaintiff argued that the
Post Office
case dealt with the particular provisions of the
Third Parties Act, 1930, which related to insolvency and that it is
therefore not
applicable here. In my view the
Post Office
case (confirmed by the House of Lords in
Bradley v Eagle Star
Insurance Company
[1989] AC 957)
, while interpreting the Third
Parties Act, laid down a general rule (the Post Office rule) relating
to when an insured may claim
indemnity from an insurer for liability
incurred by it to an injured party. Sir Jonathan (now Lord) Mance
observes that the principle
that a contractual right to indemnity
only arises on proof of ‘loss’ ‘well pre-dates the
1930 Act’.
12
[18] But the
Post Office
case is not without criticism.
13
In my view, the criticisms are not without foundation. In
MacGillivray and Parkington on Insurance Law
(footnote 13) the
authors submit that the Post Office rule is too narrow and that the
assured suffers a loss when all the events
have occurred which give
rise to the liability of the assured to the third party, even though
the amount of the liability is not
quantified; that ‘the assured’s
cause of action arises at this time for the purposes of limitation
and he can presumably sue
the insurers for a declaration that they
are liable under the policy and that on payment by the assured, they
will be obliged to
indemnify the assured for a similar amount’.
(Footnotes omitted.) This submission has not been repeated in
subsequent editions
of
Mac Gillivray and
Parkington, but its
correctness was accepted by the Ontario Court of Appeal in
Re St
Paul Fire and Marine Insurance Co and Guardian Insurance Co of
Canada
14
,
and I agree with it. In his work
The Law of Insurance Contracts,
Professor Clarke (see reference at footnote 13) refers
15
to a decision of the House of Lords in
Daff v Midland Colliery
Owners’ Mutual Indemnity Co
16
,
a decision under s 5 of the Workmen’s Compensation Act, 1906 (6 Edw
7, c 58), where Lord Shaw said
17
that at the date when an accident occurred in which the appellant
workman was injured, ‘the rights of all parties were settled in
the
following sense: First, there arose to the workman a right to
compensation which was of the nature of a debt due by the employer.

Secondly, there rested on the employer as from that date, and so long
as compensation was due, a liability as debtor to the workman
as
creditor. Thirdly, under the contract of insurance, that liability
was
in toto
transferred to the insuring company’. In the
same case Lord Moulton said
18
:
‘
On the occurrence of
the accident during the protected period a right to indemnity against
the pecuniary consequences of that accident
becomes vested in the
member [ie the insured under the contract of insurance between the
employer and the company].’
Thus until the
Post
Office
case, Professor Clarke submits, ‘loss in the context of
liability insurance included the case of the insured who had incurred
liability
– although its existence and amount had yet to be
formally or definitively established’.
[19] In
Reinecke v Incorporated General Insurances Ltd
19
the insured was sued for damages sustained by the claimants in an
accident in which the insured’s vehicle was involved. The insurer
denied that it was liable to indemnify the insured, who then
instituted action against the insurer seeking a declarator that the
insurer was liable in terms of the insurance policy. The latter
action was instituted before the liability of the insured to the
claimants had been established. In confirming the court
a quo
’s
decision to grant the declarator, this court said
20
:
‘
[A]t the stage the
proceedings were instituted by appellant, his interest did not relate
to any ultimate right to claim, but to the
existence of a contingent
right to claim under the policy upon the future occurrence of certain
specified events, namely a legal
liability to compensate his
passengers in a quantified amount.’
A difficulty that may
arise from a strict application of the Post Office rule is well
illustrated by the facts of the instant case.
As has been seen, s
30(4) of the Environmental Act requires the responsible person, as
soon as reasonably practicable after knowledge
of the incident, to,
inter alia, take reasonable measures to contain and minimise the
effects of the incident and to undertake clean-up
procedures. Where,
for example, the diesel spillage (the incident) causes damage to
property and there is a potential that more
damage may be caused, the
responsible person (in this case the plaintiff) is required by law to
contain and minimise the effect of
the incident, ie to avoid further
damage. And if such damage was to the property of a third party, it
would hardly lie in the mouth
of the insurer to argue that the
insured should not have contained or minimised the damage.
[20] Counsel for the
first defendant, however, submitted that for liability to be
established in the instant case an organ of State
must first have
given direction to the plaintiff to act, or it must have submitted an
account (s 30(6) and (9) of the Environmental
Act quoted in para 14
above). I fail to appreciate counsel’s contention when s 30(4)
specifically enjoins the insured (as the
responsible person) to act
‘as soon as reasonably practicable
after knowledge of the
incident
’. (Emphasis added.) For the plaintiff to have waited
for a direction from an organ of State or for the organ of State
itself
to take the measures (s 30(8)) and then submit an account to
it (s 30(9)) might have defeated the very purpose of subsection
(4), viz to ensure that the effects of the incident are contained and
minimised as soon as reasonably practicable after knowledge
of the
incident. To suggest that an insured in the plaintiff’s position
should stand by and not act in terms of his/her obligations
under the
Environmental Act is not only contrary to the spirit of that Act, but
could result in much more serious consequences which
that Act strives
to avoid. A strict application of the Post Office rule to the facts
of this case would result in an absurdity.
[21] Clearly
then, s 30(4) of the Environmental Act imposes a legal obligation on
the responsible person (the plaintiff in the instant
case) to contain
and minimise the effect of an incident. Such legal obligation
constitutes, in my view, a legal liability covered
by subsection B of
the policy,
21
provided there is damage to property other than the insured’s
and the legal liability is in respect of such damage. As to the
expression ‘in respect of’ the court
a quo
held that it is
used in the policy in its narrow sense, ie a direct relationship or
causal connection must exist between the costs
and expenses for which
the plaintiff, as insured, is legally liable and the damage to the
property concerned.
22
This conclusion was not challenged in this court and I can find no
fault with it.
[22] I have
mentioned that damage to the area of land where the diesel spillage
occurred in both incidents was admitted (para [5]
above). But
counsel for the first defendant submitted that the spillage only
caused ecological damage, which did not equate to damage
to property.
With regard to the first incident, it was agreed that the spill
‘polluted, contaminated and caused ecological damage
to an area of
land not belonging to the plaintiff’. Counsel for the plaintiff
accordingly argued
23
that ‘pollution’ of land is by itself actual damage to property.
That proposition is, in my view, not necessarily correct.
For
pollution to be actionable one must show that one has suffered
damages as a result of such pollution.
24
[23] I find
it unnecessary, however, to embark upon a major enquiry on whether
ecological damage equates to damage to property. Section
B of the
policy makes no distinction between ecological damage and other kinds
of damage to property. In
Fedgen Insurance Ltd v Leyds
25
this court said (at 38 B-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 v 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 354 C-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
(supra 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 [the insurer] as
the 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).’
If it wished to exclude
ecological damage from other kinds of damage to property the insurer,
as the party responsible for the policy
document, should have done
so.
[24] I accordingly agree
with the court
a quo
that the plaintiff’s claims are covered
under subsection B of the policy. It follows that the appeal, in so
far as that finding
is concerned, must fail. This conclusion renders
a consideration of the plaintiff’s cross-appeal against the
dismissal of its
claim against the second defendant unnecessary; and
so also the plaintiff’s alternative claims.
[25] There remains the
question of costs. Contrary to the submission of counsel for the
first defendant that the latter should not
be saddled with the second
defendant’s costs of the appeal, I am satisfied that it was
necessary for the plaintiff to cross-appeal
against the dismissal of
its claim against the second defendant. It was indeed prudent to do
so because if the first defendant’s
appeal had been successful and
the second appellant was not before this court the plaintiff would
have lost its opportunity to have
its claim against the second
defendant considered. It had to bring the second defendant to this
court and thus cannot be punished
for doing so by being mulcted with
the second defendant’s costs of the appeal. In my view, it is only
fair that the first defendant
bear those costs.
[26] With regards to the
costs relating to the trial before the court
a quo
, I think it
would be advisable to set aside the order of the court
a quo
,
for it to consider that question afresh after it has dealt with the
issue of
quantum
. I say this because the court
a quo
might find that the sum in respect of which the plaintiff is entitled
to indemnity, because of the extent of the actual damage to
property,
is such that a different costs order, if any, should be made.
[27] In the result the
following order is made:
1. Paragraph 1 of the
order of the court
a quo
is set aside and for it is
substituted the following:
‘
1. The first defendant
is liable to indemnify the plaintiff in terms of Subsection B of the
Motor Section of the policy of insurance
issued in respect of the
plaintiff’s vehicles, for such loss that the plaintiff is able to
prove to have suffered as a result of
damage to property occasioned
by the accidents of 16 and 27 March 2000.’
2. The appeal is
otherwise dismissed with costs.
3. The matter is remitted
to the court
a quo
for consideration of the issue of
quantum
.
4. The cross-appeal is
dismissed.
5. The appellant is
ordered to pay the second respondent’s costs of the cross-appeal.
L MPATI DP
CONCUR:
FARLAM
JA)
MTHIYANE
JA)
JAFTA
JA)
MAYA
AJA)
1
See
too
West Wake Price & Co v Ching
[1956] 3 All ER 821
at
825D-E.
2
See
Medical
Defence
Union Ltd v Department of Trade
[1979]
2 All ER 421
at 424.
3
Joubert
(ed)
The Law of South Africa
(reissue) vol 25 para 780.
4
[1943]
AC 121.
5
See
Lord Wright’s speech at 139. See also the speeches of Viscount
Simon LC at 127 and Viscount Maugham at 132.
6
Compare
West Wake Price & Co v Ching
(footnote 1) at 825D.
7
[1967]
2 QB 363
, particularly the judgments of Lord Denning MR and Salmon
LJ in the Court of Appeal.
8
Section
1 provided that where a person has a claim against an insured who is
covered against liabilities to third parties, which
he may incur and
such insured becomes bankrupt, the insured’s rights against the
insurer under the contract shall be transferred
to and vest in the
third party to whom the liability was so insured.
9
At
373-4.
10
At
375.
11
See
footnote 5.
12
Sir
Jonathan Mance ‘Insolvency at Sea’ [1995]
Lloyd’s Maritime
and Commercial Law Quarterly,
p 34 at 38.
13
See
Malcolm Clarke ‘Liability Insurance on Pollution Damage: Market
Meltdown or Grist to the Mill?’ [1994]
Journal of Business Law
p 545; Nicholas Legh-Jones and Andrew Longmore
MacGillivray &
Parkington on Insurance Law
7ed p 824; Sir Jonathan Mance (see
footnote 12); Malcolm Clarke
The Law of Insurance Contracts
4ed pp 197-203 and pp 494-499.
14
(1984)
1 DLR (4
th
) 342 at 359.
15
At
p 202.
16
(1913)
82 LJKB 1340 (HL).
17
At
1345, col 1.
18
At
1351, col 1.
19
1974
(2) SA 84
(A).
20
At
99G-H.
21
Compare
Smit Tak Offshore Services v Youell
[1992] 1 Lloyd’s Rep.
154 at 159.
22
Verulam Fuel
Distributors CC v Truck & General Insurance Co Ltd
2005 (1) SA 70
(W) para 11; compare also
Sekretaris van
Binnelandse Inkomste v Raubenheimer
1969 (4) SA 314
(A) at
319H-320
in fin
;
Barnard NO v Regspersoon van Aminie
2001 (3) SA 973
(SCA) paras 11-12.
23
Referring
to Joubert (ed)
The Law of South Africa
vol 18 para 241
where the example is given of rain-water dissolving deleterious
matter from slimes from mine dams which then percolates
onto
adjoining land and into streams thus polluting the land and water;
and the decision of the House of Lords in
Hunter and Others v
Canary Wharf Ltd
;
Hunter and Others v London Docklands
Development Corp
[1997] UKHL 14
;
[1997] AC 655
dealing with damages for
nuisance.
24
See
references at footnote 19.
25
1995
(3) SA 33
(A).