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[1984] ZASCA 142
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Union National South British Insurance Co. Ltd. v Padayachee and Another (62/83) [1984] ZASCA 142; [1985] 1 All SA 405 (A) (27 November 1984)
N v H
UNI
ON NATIONAL SOUTH BRITISH INSURANCE CO LTD
and SIV
ANANDAN
ARUMUGAM PADAYACHEE and ANOTHER
MILLER, JA :-
62/83
N v H
IN
THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE
D
IVISION
)
In the matter between :-
UN
ION NATIONAL SOUTH BRITISH
IN
S
URANCE COMPANY
LIMITED
Appellant
and
SIVANANDAN ARUMUGAM PADAYACHEE
First
Respondent
UMHLALI SAW MILLS (PTY) LIMITED
Second Respondent
CORAM
: MILLER, CILLIé, VILJOEN, BOTHA, JJA,
et
VIVIER, AJA
HEARD
: 2 NOVEMBER 1984
DELIVERED
:
27 NOVEMBER 1984
JUDGMENT
MILLER, JA :-
On 16 September 1978, premises at Umhlali,
owned by the first respondent
and occupied for purposes
of /
2 of its business by the second respondent, were virtually
destroyed by fire, which also caused extensive damage to other items of
property
which need not be specified. Property of the kind thus destroyed or damaged was
insured against loss by fire in terms of
a policy issued by the appellant to the
respondents "for their respective rights and interests". At the time of the fire
and at all
relevant times, the policy was operative and of full force and
effect.
Clause (2) of the policy, under the heading "Conditions" and under
the sub-heading "Claims", reads as follows :
(2) (a) /
3
(2)(a) On the happening of any destruction or damage the Insured shall at his
own expense :-
(i) forthwith notify the Company in
writing of any
claim together with particulars of any other insurances on any property hereby
insured;
(ii) within 30 days after such de= struction or damage (or such further time
as the Company may in writing allow) submit to the Com=
pany full details in
writing of any claim;
(iii) give to the Company such proofs,
information and sworn declarations as the Company may require.
(b) No claim under this Policy shall be payable
:-
(i) unless the terms of this condition have been
complied with:
(ii) for any loss or damage after the expiry of 12 months from the happening
of such loss or damage unless the claim is the subject
of pending legal
action."
The /
4 The respondents promptly reported to the appellant that there
had been a fire with resultant damage and loss and they lodged claims
on 26
October, 1978. (Nothing turns on the circumstance that the claims were lodged a
few days late.) For a considerable period after
the occurrence which caused the
destruction and damage the parties, through their respective repre= sentatives
and advisers, from
time to time held dis= cussions, carried on negotiations and
corresponded with one another relative to the claims. On 5 December
1979, the
appellant's attorneys sent a letter to the respondents' attorneys in these
terms:-
"We /
5
"We have been instructed by our clients to communicate to yourselves the
following facts :
1. In terms of the provisions of Clause
2(b)(ii), the fire claim is no
longer
enforceable in that no action has been
instituted within the
requisite period
of 12 months and the claim is accordingly not 'the subject of pending legal
action', and
2. There is accordingly no liability in
terms of the loss of profits policy
by
virtue of the provisions of the preamble
thereto which link the loss of
profit
policy to the fire
policy.
Consideration is being given by our client to reclaiming the without prejudice
interim payment forwarded to Standard Bank Insurance
Brokers by way of letter
dated 27th September 1978."
On 8 September 1980,
very nearly two years after the fire and some nine months after appellant's
rejection of their claims, the respondents
issued summons against
the /
6 the appellant in the Durban and Coast Local Division of
the Supreme Court, in which they claimed (a) an order declaring that the
appellant was obliged to indemnify the respondents in terms of the policy of
insurance, and (b) payment of specified amounts to each
of the respondents,
together with ancillary relief. The pleadings filed cover about forty pages of
the record; fortunately it is
not necessary to reproduce them either fully or in
summa= rized form because before the commencement of the trial the parties
agreed
upon a "Statement of Issues" in terms of rule 33 (4) of the Uniform Rules
of Court and also defined, by agreement, what relief should
follow upon the
Court's findings in regard to the stated issues. The range of the conflict was
further reduced when concessions
were /
7 were made on behalf of the respondents which had the
practical effect of removing from the scene some of the stated issues.
Eventually
only three issues remained: the first (which was issue No 3 at the
trial) related to the question whether a term should be implied
in clause
(2)(b)(ii) of the policy, reproduced above; the second, (issue no 4 at the
trial) whether or not the appellant was estopped
from raising a defence founded
upon the failure to issue summons within 12 months of the fire and the third,
(issue no 5 at the trial),
whether the R10 000 referred to in the concluding
para= graph of the letter of 5 December, 1979, (reproduced above) would be
repayable
to the appellant in the event of a finding that the appellant was not
obliged to compensate
respondents /
8
respondents in terms of the policy. The Court
a quo
(BROOME, J) found
in favour of the respondents on the first of the issues; that is, it found that
clause(2)(b)(ii) was to be read
subject to an implied term such as was contended
for by the respondents. This finding rendered it unnecessary for the Court a quo
to make a finding on the estoppel issue, which was really an alternative to the
contention that a term was to be implied, but the
learned Judge considered the
estoppel issue and concluded that if he were in error in regard to the implied
term, the respondents
would be entitled to succeed on the estoppel issue. In the
light of those findings it was unnecessary for the Court a quo to consider
the
third issue relating to repayment of the R10 000.
The /
9
The appeal is against the whole of the
judgment and orders. (The judgment is reported but hot
in full at 1983(3) SA 246.)
It is necessary to reproduce in full the
stated
issue relating to the implication of a term in
clause(2)(b)(ii) of the
policy. It reads as follows:
"(a) Was the contract of insurance subject to an implied term that the
provisions of Condition 2(b)(ii) thereof would not come into
operation if:
(i ) the (First) Defendant had required
the Plaintiffs, before the expira= tion of the period of 12 months, to give
the(First)Defendant proofs, information or sworn declarations;
(ii) by the time the said period had
expired a reasonable time for the furnishing of such proofs, information or
sworn declarations had not yet elapsed?
(b) If so, /
10
(b) If so, had a reasonable time for the
furnishing of the audited financial statements, required by the First
Defendant, elapsed by the time the period of 12 months had expired?"
Paragraph (b) of this issue poses a purely factual question. If the answer to
it should be "yes", the question of the implied term
mentioned in (a) of the
stated issue would fall away. The Court
a quo
held that the answer to
paragraph (b) was "no". For purposes of this judgment I shall assume, but
without so deciding or expressing
any opinion thereon, that the trial Court's
answer to that question was correct.
When considering whether clause (2)
warrants and requires the implication of a term such as is men= tioned in the
statement of issues,
it is important to
understand /
11
understand precisely what the effects are of
the
clause as it stands. Clause (2)(b)(ii)
is a condition distinct from
and independent of the condition described in 2(a), read with (2)(b)(i). Failure
by the insured to comply
with any of the require= ments enumerated in (2)(a)(i),
(ii) and (iii) entitles the insurer in terms of (2)(b)(i) to refuse to make
pay=
ment of any claim under the policy. This is an indepen= dent defence - it is
available to the insurer if the insured fails to
do what clause (2)(a) requires
him to do. Clause (2)(b)(ii) constitutes another independent defence to a claim
under the policy.
All that is necessary to make such defence available to the
insurer is the failure of the insured to insti=
stute /
12
tute action within 12 months of the "happening". If the
insurer, by reason of the lateness of his request for information such as
he is
entitled to in terms of clause (2)(a), leaves the insured wholly insufficient
time within which to comply with the requirements
of the clause before the
institution of action, it stands to reason that he, the insurer, would not be
entitled to raise as a defence
to a claim the insured's noncompliance with
clause (2)(a). His own tardiness which frustrated the insured in regard to
compliance,
would serve to frustrate any attempt the insurer might make to
invoke non-compliance with (2)(a) as a defence. Mr Shaw, for the appellant,
conceded that in such cir= cumstances a term to that effect might be implied
in
regard /
13
regard to clause (2)(a). But such implication would not touch or affect
clause (2)(b)(ii); the defence provided by the latter, clause
would still be
available to the insurer if the insured failed to institute action within twelve
months, unless the policy otherwise
pro= vided, which it certainly does not
expressly do. The respondents' case is that it does so by implication. The
implied term contended
for by the respon=
dents is not of the kind "implied by law" but of the kind
v Transvaal Provincial Administration
described in
A McAlpine &
Son (Pty) Ltd
1974(3) SA 506
(AD) at p 532 as a "tacit term" which is founded upon
"the actual or imputed intention of the parties". In
regard to such a term (I shall continue to refer to it
as an "implied term", for it has been so called throughout
this /
14
this litigation) certain principles guide the Court when it is
asked to conclude that although the parties omitted to give direct
expression to
a particular term, it was their intention that such term should be part of the
agreement. Such principles have frequently
been stated; I shall briefly mention
those that are funda= mental. The Court will not lightly "imply a term in a
contract which is
not to be found there". It will therefore not be sufficient to
say that it would be reasonable to make the implication; the implication
must be
a necessary one - that is, "necessary in the business sense to give efficacy to
the contract". (
Mullin (Pty) Ltd v Benade L
td 1952(1) SA 211 (AD)
at
pp 214-5;
McAlpine's
case,
supra
, at p 532 H - p 533 B),
Further /
15
Further, since the implication of a term finds its justification in the
inferred or imputed intention of the parties, it follows that
the term which it
is said should be implied must be capable of clear and precise formulation.
(
Rapp and Maister
v
Aronovsky
1943 WLD 68
at p 75; Des
ai and
Others v Greyridge Investments (Pty) Ltd
1974(1) SA 509 (AD) at pp 522 - 3.)
If the answer to the casual bystander's question (see Mul
lin's
case,
supra
, at 215 A.) were to be vague, or ambiguous, there would be no room
for an implied term for it would not be possible, with the requisite
degree of
confidence, to infer or to impute to the parties any clear intention.
On the face of it, clause (2)(b)(ii) has no need of a special interpretative
approach or an implied
term /
16
term to give it meaning or efficacy. It is clear and un=
ambiguous; it entitles the insurer to refuse to pay any claim after expiration
of the 12-month period if no action is then pending. If, as the end of the
12-month period approaches, the insured finds it impossible
within such period
to furnish all the required information in terms of clause (2)(a), due to the
insurer's own untoward delay in
requesting such information, there would to my
mind be nothing to bar the insured from issuing summons within the 12-month
period.
The Court
a quo
found it= self unable to accept that the parties
could have intended that in such a case the insured, in order to preserve his
claim,
would be obliged to issue summons before the information required by the
insurer had been furnished.
The /
17
The reasoning of the Court a quo appears to have
been, in effect, that the purpose of clause (2)(a) being to enable the insurer
to
have all necessary information before it for the purpose of "assessing the
claim", it "offended" one's sense of fairness to hold
that the intention of the
parties was that the insured could be required to institute action before the
required infor= mation was
made available to the insurer. This consi= deration
is, I think, deprived of whatever moral force it might otherwise have had when
the unavailability of the required information is of the insurers own making;
when he has so long delayed that the insured could
not furnish the information
within the 12-month period. And it must be remembered that the implied term
contended
for /
18
for by the respondents predicates precisely that -namely, that
the insurer allowed insufficient time for the furnishing of the required
information. It appears to me to be not only not certain, but very unlikely,
that if the parties had been asked at the time what
was to happen if a situation
such as I have described should arise, they would have answered with one voice
that in such event "the
provisions of condition (2)(b)(ii) would not come into
operation". If they had thought of such a solution it is, I think, inevitable
that they would have discussed the implications of a term to the effect that
clause (2)(b)(ii) "would not come into operation". They
would no doubt have
considered whether the 12-month term should be entirely eliminated,
thus /
19
thus allowing the insured to take action at any time
before the claim became prescribed in terms of the
Prescription Act, or
whether the 12-month period should
merely be extended. And from those
considerations
others would no doubt arise - for example, for what
period
of time should it be extended? It is not
possible to infer from the policy of
insurance, con=
sidered with other factors proper to be taken into
account, what precisely
the parties intended in the event
of there arising a situation such as we are
now concerned
with, nor is it possible to impute to them, with
the
requisite degree of conviction, any clear intention.
Mr Gordon, for the respondents, suggested both
in
the Court
a quo
and in this Court an implied term
different /
20
different in certain respects from that defined in the stated
issue. He contended that it would be proper to infer that the parties
intended
that the provisions of clause (2)(b)(ii) would be suspended during the period
that the insured was engaged in obtaining
and furnishing the insurer with the
required information. But apart from other difficulties in the way of drawing
such an inference,
this contention also leaves in the air problems which
necessarily arise from the notion of a temporary suspension of a duration which
is not only not precisely defined but is within the capacity of one of the
parties to determine unilate= rally.
I come /
21
I come to the conclusion, therefore, that the Court
a quo
erred in
upholding the contention that clause (2)(b)(ii) was subject to an implied term
which precluded the appellant from invoking
its provisions.
The issue
relating to estoppel may be briefly disposed of. The respondent's case in that
regard rests upon what is alleged to have
been done and said by the appellant's
representatives during the period between the occurrence of the fire and the
rejection of the
respondents' claims after the expiry of the 12-month period. It
is alleged, in effect, that by express re= presentations, by certain
acts and
omissions and by its conduct in general and in specific respects, the appellant
represented that it intended to indemnify
the respondents
in /
22
in terms of the policy and that it did not intend to
avail
itself of the provisions of clause (2)(b)(ii) of
the policy. It was pleaded
that respondents relied on
such representations to their prejudice since on
the
strength of them, they refrained from instituting legal
action within
the 12-month period. The respondents
found themselves in some difficulty in regard to this
issue when it appeared at the trial that neither the
respondents nor their
representatives were at any
relevant time aware of the provisions of clause
(2)(b)(ii)
of the policy. The learned Judge
a quo
made the
obser=
vation in his judgment that
" incredible as it may sound, none of the
plaintiff's representatives who were involved in the matter in 1979 was
consciously aware of the provisions of condition
(2)(b)(ii)",
and he /
23.
and he recognized that this was an "obvious difficulty" in
the
respondents' case on this issue. But the Court found, in effect,
that
if the conduct and utterances of the appellant's representatives
had not, as
it were, "lulled the (plaintiffs) into a false sense of
security" it was
probable that the respondents would have commenced
action within the 12-month
period and that the appellant was
therefore estopped from relying on clause
(2)(b)(ii).
Quite apart from the question whether it was established
that the appellant's representatives held out or represented that the
appellant accepted liability under the policy and intended to pay the
respondents out when the value of the claims had been agreed, (which
was strongly disputed on behalf of the appellant whose counsel pointed
out that the evidence showed that some doubts were entertained by the
appellant concerning not only the
quantum
but also the validity of
the respondents' claims), I cannot in the circumstances of this case
accept /
24
accept as correct the approach of the Court
a quo
to
the issue of estoppel. As Mr Shaw correctly contended, the respondents* lack of
knowledge of the existence of clause (2)(b)(ii)
excludes a finding that they
were led to believe that the appellant would not rely upon that clause. There is
nothing to show or
even to suggest that the representatives of the appellant
induced in the respondents a belief that the policy contained no condition
relative to the time within which action had to be instituted. If that were
established, different considerations would apply. The
respondents' ignorance
was self-induced; whether they were ignorant by reason of lack of interest or
inquiry, or by reason of any
other cause stemming from themselves, is of no
consequence /
25
consequence in so far as the question of estoppel is
concerned. Nor is there anything to show that the appellant or its
representatives
were aware that the respondents or their representatives were
ignorant of important provisions in the policy, including clause (2)(b)(ii).
An
essential element of estoppel is that the conduct or representation must be "of
such a nature that it could reasonably have been
expected to mislead" or to
induce in the representee a belief in the existence of a particular state of
facts. (See
Monzali v Smi
th
1929 AD 382
at p 386;
Poort Sugar Planters
(Pty) Ltd v Minister of Lands
1963(3) SA 352 (AD) at p 364 per OGILVIE
THOMPSON, JA.) In this respect too, the respon= dents' case for an estoppel
falls short.
In my judgment,
therefore /
26
therefore, the respondents fail both in regard to
the issue
relating to an implied term and the issue of
estoppel.
What remains to be dealt with is the
issue
concerning the amount of R10 000 paid to the
respondents.
This payment was made on 27 September 1978 by cheque.
The
letter which accompanied the cheque is self-explanatory.
It reads as follows:
"As discussed this morning we enclose our cheque for R10 000 in favour of the
insured being the agreed interim payment, without waiver
of any rights we may
wish to exercise in terms of the policy."
The stance
of the appellant was, initially, that if the
respondents were not entitled to recover on the policy
by reason of their failure to institute action within the
stipulated /
27
stipulated period, the R10 000 would be repayable to the
appellant. In the course of argument on appeal, however, Mr Shaw correctly,
I
think, and very fairly, conceded that because clause (2)(b)(ii) relieved the
appellant from the obligation of making payment of
claims after expiration of
the 12-month period and if no action was pending, and did not provide for the
repay= ment of money already
paid in respect of a claim, the respondents were
entitled to retain the amount paid. The appellant will be liable for the costs
occasioned
in regard to that issue.
The appeal is allowed and the following order is made:-
(1) The order /
28
(1) The order of the Court
a quo
is set
aside and there is
substituted therefor
an order dismissing the plaintiffs'
claims.
(2) The plaintiffs are declared to be entitled
to retain the amount of R10
000 paid to
them.
(3) The costs in the Court
a quo
are to be
paid by the plaintiffs,
save only such
costs as were incurred in respect of the
defendant's claim
for payment of R10 000,
which costs will be paid by the defendant.
(4) The costs of appeal are to be paid by the
respondents, save only such
costs as are
attributable to the claim of R10 000,
which costs will be
paid by the appellant.
(5) The above orders relating to costs in
favour of the appellant
(defendant in
the Court below) shall include costs in
respect of two
counsel.
S MILLER JUDGE OF APPEAL CILLIé, JA )
VILJOEN,JA) CONCUR
BOTHA VIVIER, AJA )