Engelbrecht NO and Another v Senwes Ltd. (631/05) [2006] ZASCA 138; 2007 (3) SA 29 (SCA) (30 November 2006)

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[2006] ZASCA 138
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Engelbrecht NO and Another v Senwes Ltd. (631/05) [2006] ZASCA 138; 2007 (3) SA 29 (SCA) (30 November 2006)

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THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
Case no:
631/2005
In the matter between:
PIET
CHRISTIAAN ENGELBRECHT NO
AND PAULA
JACOBA VAN DER WALT NO APPELLANTS
and
SENWES
LIMITED RESPONDENT
________________________________________________________________
Coram:
MPATI DP, STREICHER, CLOETE, MLAMBO JJA
et
MALAN AJA
Date of hearing: 21 NOVEMBER 2006
Date of
delivery: 30 NOVEMBER 2006
Summary: cession of life policy in securitatem debiti – claim
for recession – settlement agreement made order of court -
interpretation
Citation: Engelbrecht and Van der Walt NNO v Senwes 2006 SCA 166
(RSA)
JUDGMENT
________________________________________________________________
Malan
AJA
:
[1] This is an appeal with leave of the court a quo against a
judgment and an order of Van Coppenhagen J dismissing the appellants’
claim for a declarator that the estate of the deceased, Mr PV de Wet,
is entitled to recession of an insurance policy on his life
which he
had ceded in 1989 as security for his indebtedness to the respondent,
Senwes, and upholding a counterclaim by the latter
for payment of the
proceeds of the policy. The appellants are the executors in the
estate of the deceased who passed away after institution
of the
action.
[2] These proceedings arise from an action Senwes instituted against
the deceased for payment of R 397 152,78 plus interest and costs
in
respect of goods sold and delivered and credit provided. The action
was settled on 5 September 2000. It is common cause between
the
parties that the deceased had been a shareholder in Senwes and a
member of its predecessor, Sentraalwes Koöp, and that as
security for his indebtedness to Senwes a mortgage bond for an amount
of R 130 000 was registered over his immovable property in
addition
to the cession of the policy referred to. At the time of settlement
the policy was expected to yield approximately R 197
000 (the
covering amount or ‘dekkingsbedrag’).
[3] The terms of the settlement were recorded by the court and made
an order on the same day. It reads as follows:
‘
[1] Die verweerder onderneem om aan eiser die bedrag
van R73 000 voor of op 28 Februarie 2001 te betaal.
[2] Die
verweerder onderneem om aan eiser die bedrag van R130 000 voor of op
5 September 2001 te betaal.
Teen betaling van laasgenoemde bedrag, sal die eiser
toestem dat die verband no 11213 van 1984 wat oor ‘n onroerende
eiendom van
die verweerder geregistreer is, gekanselleer word.
[3] Die verweerder onderneem om polis no 10998671X1 op
sy lewe die opbrengs waarvan eiser die sessionaris is, in stand te
hou.
[4] Die
verweerder aan eiser die bedrag van R20 000 te betaal as bydrae tot
regskostes voor of op 5 Oktober 2000.
[5] Indien
die verweerder in verstek sou wees met betaling van enige van die
bedrae soos voormeld stem hy toe dat eiser vonnis kan
neem soos
gevorder in die dagvaarding.’
[4] On the same day the action was settled Mr GW
de Wet, the son of the deceased, who was present at court, entered
into an agreement
with Senwes undertaking to maintain and pay
regularly all premiums in respect of the policy until it paid out. In
addition, he undertook,
in the event of his failure to maintain the
policy, liability to Senwes for the amount the policy would have
yielded had the premiums
been maintained.
1
At the time of settlement the deceased was of an advanced age and in
bad health. He passed away on 26 July 2005.
[5] Van Coppenhagen J, construing the terms of the settlement
agreement, held that the confirmation of the cession and the recordal
that Senwes is the cessionary of the proceeds of the policy meant
that Senwes was entitled to the proceeds. He thus rejected the
contention, also advanced in this court, that, because the cession
was in securitatem debiti, the policy had to be returned to the
deceased on payment of the debts reflected in paragraphs 1, 2 and 4
of the settlement agreement.
[6] The
court order in this case records an agreement of settlement and the
basic principles of the interpretation of contracts need
therefore be
applied to ascertain the meaning of the agreement. The approach to be
followed was summarized in
Coopers & Lybrand and others v
Bryant
2
:
‘
I
proceed to ascertain the common intention of the parties from the
language used in the instrument. Various canons of construction
are
available to ascertain their common intention at the time of
concluding the [contract]. According to the “golden rule” of
interpretation the language in the document is to be given its
grammatical and ordinary meaning, unless this would result in some
absurdity, some repugnancy or inconsistency with the rest of the
instrument …
The
mode of construction should never be to interpret the particular word
or phrase in isolation (
in vacuo
) by itself …
The
correct approach to the application of the ‘golden rule’ of
interpretation after having ascertained the literal meaning of
the
word or phrase in question is, broadly speaking, to have regard:
to
the context in which the word or phrase is used with its
interrelation to the contract as a whole, including the nature and

purpose of the contract …
to
the background circumstances which explain the genesis and purpose
of the contract, ie to matters probably present to the minds
of the
parties when they contracted …
to
apply extrinsic evidence regarding the surrounding circumstances
when the language of the document is on the face of it ambiguous,
by
considering previous negotiations and correspondence between the
parties, subsequent conduct of the parties showing the sense
in
which they acted on the document, save direct evidence of their own
intentions …’
[7] The
intention of the parties is ascertained from the language used read
in its contextual setting and in the light of admissible
evidence.
3
There are three classes of admissible evidence. Evidence of
background facts is always admissible. These facts, matters probably
present in the mind of the parties when they contracted, are part of
the context and explain the ‘genesis of the transaction’
or its
‘factual matrix’. Its aim is to put the Court ‘in the armchair
of the author(s)’ of the document.
4
Evidence of ‘surrounding circumstances’ is admissible only if a
contextual interpretation fails to clear up an ambiguity or
uncertainty.
5
Evidence of what passed between the parties during the negotiations
that preceded the conclusion of the agreement is admissible
only in
the case where evidence of the surrounding circumstances does not
provide ‘sufficient certainty’.
6
[8] The
language of the settlement agreement in this case is not ambiguous.
Evidence of surrounding circumstances is therefore neither
necessary
nor admissible to determine the intention of the parties. The
background facts referred to above, which are not contentious,
were
‘matters probably present in the minds of the parties when they
contracted’ and of which the parties were both aware.
7
[9] In clause 5 of the settlement agreement the deceased accepted
that should he not perform in terms of the settlement, judgment
as
claimed in the summons might be taken against him. The amount claimed
by Senwes in the summons approximates to the total of the
amounts of
R 73 000 and R 130 000 referred to in clauses 1 and 2 added to the
expected value of the policy, ie R 197 000. Clause
5 makes it clear
that should the deceased default Senwes would be entitled to claim
the amount set out in the summons. The deceased
would be in default
if any of the amounts referred to in paragraphs 1, 2, 3 and 4 is not
paid.
[10] The amounts in paragraphs 1, 2 and 4 are specific. Paragraph 3
does not refer to specific amounts but to the proceeds (‘opbrengs’)
and premiums of the policy. The proceeds and the premiums can only
relate to amounts of money to be paid. It follows that the provisions
of clause 5 also apply to non-payment of either the proceeds or the
premiums envisaged by clause 3. Should there be default in payment
of
any of these amounts Senwes becomes entitled to the whole of the
amount claimed in the summons, the capital of which approximates
to
the total of R 73 000, R 130 000 and the expected proceeds of the
policy. Significantly, clause 2 provides for cancellation of
the
mortgage bond over the deceased’s immovable property on payment of
the R 130 000 but clause 3 does not provide for a cancellation
of the
cession should any of the amounts stipulated not be paid. The
implication is clear: clause 3 makes provision for a third instalment
to discharge the debt claimed.
[11] An important background consideration is the undertaking by Mr
GW de Wet, an uncontentious fact of which the parties were both
aware, to maintain the policy until it is paid out and to pay, if in
default, to Senwes the amount the policy would have yielded
had the
premiums been maintained. The inference can only be that clause 3
entitles Senwes to the proceeds. I come to this conclusion
whether or
not the policy was ceded entirely or ceded merely in securitatem
debiti. The words of clause 3 that Senwes is the cessionary
of the
proceeds
in the context of the settlement agreement make this
conclusion unavoidable. Clause 3 does not provide security for
payment of the
amounts set out in clauses 1, 2 and 4 but entitles
Senwes to the proceeds of the policy.
[12] It follows that the appeal should be dismissed. In view of the
dismissal of the appeal no order need be made on the conditional
counter appeal.
The appeal is dismissed with costs.
F R
MALAN
Acting Judge of Appeal
CONCUR:
MPATI DP
STREICHER JA
CLOETE JA
MLAMBO JA
1
The
undertaking reads as follows:
‘
1. AANGESIEN
SENWES BEPERK
die sessionaris is ten aansien van die opbrengs
van ‘n polis by SANLAM met nr 10998671X1 op die lewe van PAUL V DE
WET, welke
polis lewensdekking bied.
2. ONDERNEEM voormelde WILLEM GIDEON DE WET om alle
premies tav die polis tydig in stand te hou en gereeld te betaal,
totdat die
polis uitkeer of uitbetaal.
3. Sou
voormelde WILLEM GIDEON DE WET versuim om die polis in stand te hou
soos voormeld, sal hy teenoor SENWES BEPERK aanspreeklik
wees vir
die betaling van die bedrag wat die polis sou uitkeer of uitbetaal
het, indien die premies in stand gehou was.’
2
[1995] ZASCA 64
;
1995
(3) SA 761
(A) 767E-768E.
3
Sun
Packaging (Pty) Ltd v Vreulink
[1996] ZASCA 73
;
1996
(4) SA 176
(A) at 184A-C.
4
Sun Packaging v Vreulink
above
184 A-C. See
Total SA (Pty) Limited v Bekker NO
[1991] ZASCA 183
;
1992 (1) SA
617
(A) at 624F-H;
Van der Westhuizen v Arnold
2002 (6) SA
453
(SCA) 464J-465C.
5
Delmas Milling Company Limited
v Du Plessis
1955 3 SA 447
(A)
at 454G-455A;
Sun Packaging v Vreulink
above 184C-D;
Total
SA (Pty) Limited v Bekker NO
above 624I-J.
6
Delmas Milling v Du Plessis
abov
e
455A-B;
Sun Packaging v Vreulink
above at 184B-C.
7
Van
der Westhuizen v Arnold
2002
(6) SA 453
(SCA) 459G-460B.