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2024
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[2024] ZANCHC 73
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NJK Boerdery CC v Safire Insurance Company Ltd (2279/2021) [2024] ZANCHC 73; [2024] 4 All SA 218 (NCK) (2 August 2024)
FLYNOTES:
INSURANCE – Crops and hail cover –
Assessment
of damages
–
Insured
and insurer differing as to assessment procedure – Whether
“wash away” clause included – Policy
document
not containing taxation procedure – Document alone did not
suffice and not exclusive memorial of insurance
agreement –
Assessment procedure regulated by supplemented oral agreement –
Not precluded by integration rule
– Court persuaded that
plaintiff proved procedure as pleaded by it should form part of
insurance agreement –
Insurer to pay R9,629,640 and
interest.
IN THE HIGH COURT OF
SOUTH AFRICA
(NORTHERN CAPE
DIVISION, KIMBERLEY)
Case Number: 2279/2021
Heard: 27 and 28 February
2024
Argued:03 June 2024
Delivered: 02 August 2024
Reportable: YES /
NO
Circulate to Judges: YES
/ NO
Circulate to Regional
Magistrates: YES / NO
Circulate to Magistrates:
YES / NO
In
the matter between: -
NJK
BOERDERY
CC
PLAINTIFF
(REGISTRATION
NUMBER 2006/112561/23)
and
SAFIRE
INSURANCE COMPANY LTD
DEFENDANT
(REGISTRATION NUMBER
2000/027673/06)
JUDGMENT
Stanton
J
INTRODUCTION
:
-
[1]
In this matter, the plaintiff who farms with pecan nuts in the
Northern Cape, instituted
an action against the defendant, a
registered short term insurance company, for payment of the amount of
R9 626 640,00, together with interest
and costs.
THE PLEADINGS: -
[2]
According to the particulars of claim, the plaintiff’s cause of
action is: -
2.1
During November 2020 the plaintiff, as the insured, took out an
insurance policy with the defendant
with policy number 20-21-00231
and a written insurance agreement was concluded (“
the
insurance agreement”
) in terms of which the defendant was
inter alia
obliged to provide insurance cover to the plaintiff
and to indemnify the plaintiff against loss and damage to the
plaintiff’s
pecan nut crop on the farm Nuwejaarskraal, Prieska
(“
Nuwejaarskraal”
) in the event of such loss and
damage being caused by the mechanical action of a hail strike;
2.2
On 17 November 2020 and 17 March 2021 hailstorms occurred on
Nuwejaarskraal and the mechanical action
thereof caused serious and
extensive damage to the plaintiff’s pecan nut crop;
2.3
The defendant was notified of the hailstorm of 17 November 2020
whereafter the defendant appointed assessors
to determine the
plaintiff’s damage;
2.4
Although not stipulated in the insurance agreement, the assessment
process for the determination of
damage involves the following: -
2.4.1 The
assessor identifies sample trees and then counts the hail-damaged
nuts that were dislodged from the sample
trees. This process is
repeated over a number of weeks because more hail damages nuts fall
from the trees as time passes (“
the preliminary
assessment”)
; and
2.4.2 A week
prior to the crop being harvested, a final assessment is done by
shaking the trees to dislodge all the
nuts. The commercially
unmarketable nuts (for reasons other than hail damage) are separated
from the hail-damaged nuts and the
commercially saleable nuts. The
totality of the hail-damaged nuts is then divided by the insured
yield to determine the total percentage
of damage (“
the
final assessment
”);
2.5
The preliminary assessment commenced on 20 November 2020 and
continued on 02 December 2020, but was
interrupted by severe
rainstorms that occurred on 08 December 2020, which resulted in
almost all of the pecan nuts becoming dislodged
and washed away,
making it impossible to apply and complete the assessment process as
the nuts could not be linked to a specific
sample tree;
2.6
As a result, the defendant’s regional manager, Mr Ivan Myburgh,
and the defendant’s elected
assessors postponed the assessment
to a date one week prior to harvesting, which decision was
communicated and accepted by the
defendant’s technical manager;
2.7
The postponement of the final assessment was done in terms of clause
2E of the claims procedure of the
policy that reads: -
“
Die
Assessor mag, na goeddunke, die finale beoordeling van enige
beskadigde Vrugte uitstel tot sodanige tyd dat die verlies aan
die
opbrengs akkuraat bepaal kan word.”;
2.8
When the hailstorm of 17 March 2021 occurred, the defendant’s
assessors and regional manager once
again decided not to adopt the
normal assessment procedure, but to deal with the hail damage in
respect of that hailstorm together
with and on the same basis as was
elected in respect of the 17 November 2020 hailstorm, namely
postponing same to one week prior
to harvesting;
2.9
On 11 June 2021, approximately one week before the harvest, the
defendant’s assessors assessed
the percentage of the
plaintiff’s damage as follows: -
2.9.1
Block 2002: 59%
2.9.2
Block 2004: 82%;
2.9.3
Block 2006: 46%; and
2.9.4
Block 2013: 59%;
(“
the
damage report
”
)
2.10
Based on the defendant’s assessors’ assessment, the
plaintiff’s damage as a result of the
hailstorm amounted to
R9 626 640,00, (inclusive of VAT) calculated as follow: -
2.10.1 Block 2002: 59%
damage less 20% excess = 39%
39%
x R432 000,00 (insured value) = R1 684 800,00
Plus
2.10.2
Block 2004: 82% damage less 20% excess = 62%
62% x
R7 920 000,00 (insured value) = R4 910 400,00
Plus
2.10.3
Block 2006: 46% damage less 20% excess = 26%
26% x
R5 040 000,00 (insured value) = R1 310 400
Plus
2.10.4
Block 2013: 59% damage less 20% excess = 39 %
39% x
R1 200 000,00 (insured value) = R468 000,00; and
2.11
The defendant breached the insurance agreement in that it refused to
indemnify and pay the plaintiff the
amount of R9 626 640,00.
[3]
According to the defendant’s plea: -
3.1
The defendant’s insurance agreement is constituted by: -
3.1.1 The
application for insurance;
3.1.2 The
quotation for insurance;
3.1.3 The
policy document;
3.1.4 The
schedule of insurance; and
3.1.5 The
defendant’s prescribed hail assessment procedure document for
pecan nuts, attached to the plea as annexure
P3 (“
the
defendant’s hail assessment procedure document
”);
3.2 The
material express terms of the insurance agreement were,
inter
alia,
that: -
3.2.1 The
defendant undertook to insure the plaintiff’s pecan nut crop on
the terms and conditions set out therein
against certain risks,
including the risk of hail damage;
3.2.2 The
plaintiff acknowledged that it was conversant with the terms and
conditions of the insurance agreement;
3.2.3 The
plaintiff acknowledged that the defendant’s liability to
indemnify the plaintiff for damage to its pecan
nut crop is to be
determined as provided for in the defendant’s hail procedure
document;
3.3
The damage report does not correctly reflect the plaintiff’s
hail damage as provided for in the
insurance agreement in that it
does not record a calculation of the applicable percentage damage as
provided for in the defendant’s
hail assessment procedure
document; but records a calculation of the applicable percentage
damage as the percentage difference
between the sum insured and the
yield derived from the tree at harvest time;
3.4
The correct assessment of the plaintiff’s hail damage assessed
in accordance with the provisions
of the defendant’s hail
assessment procedure is: -
3.4.1 Block
2002: 19,6% damage, with the resultant damage percentage for purposes
of indemnity of 0%;
3.4.2 Block
2004: 25,1% damage, with the resultant damage percentage for purposes
of indemnity of 5,1%;
3.4.3 Block
2006: 23,5% damage, with the resultant damage percentage for purposes
of indemnity of 3,5%; and
3.4.4
Block 2013: 0% damage, with the resultant damage percentage for
purposes of indemnity of 0%;
3.5
The plaintiff is accordingly only entitled to be indemnified in terms
of the insurance agreement in
the sum of R580 200,00, which
amount the defendant tendered in its plea.
[4]
In replication, the plaintiff denies that the defendant’s hail
assessment procedure document
formed part of the insurance agreement.
In amplification, the plaintiff pleads that: -
4.1
According to the schedule of insurance, the date of acceptance of the
policy is 21 October 2020 and
the date on which the insurance cover
commenced was at 08:00 on 28 October 2020; and
4.2
The defendant’s hail assessment procedure document is dated 19
November 2020, after the commencement
of the insurance agreement.
[5]
In its rejoinder, the defendant pleads that: -
5.1
The defendant’s hail assessment procedure document was
generated on 19 November 2020, but was
already in force at the
inception of the insurance agreement; and
5.2
Alternatively, and in the event that this Court finds that the
defendant’s hail assessment procedure
document does not form
part of the insurance agreement, that no enforceable insurance
agreement was concluded as an agreed assessment
procedure is a
sine
qua non
for an enforceable insurance agreement.
[6]
It is not in dispute between the parties that: -
6.1
Prior to the commencement of the insurance agreement, the plaintiff
had its insurance for hail damage
to its pecan nut crop with Old
Mutual Insure, which ceased its insurance for hail damage during the
middle of 2020;
6.2
The defendant commenced its insurance for hail damage on 01 October
2020;
6.3
The parties concluded the insurance agreement, which agreement
commenced on 28 October 2020;
6.4
The plaintiff complied with its obligations in respect of the policy
and timeously and had in full paid
the insurance premium to the
defendant;
6.5
The plaintiff notified the defendant of the hail events that took
place on 17 November 2020 and 17 March
2021 respectively; and
6.6
The defendant appointed Messrs DW Nel, JD Koegelenberg and GP Nel to
assess the plaintiff’s damage.
THE ISSUE FOR
DETERMINATION: -
[7]
The issue for determination is crisp,
namely whether
the hail assessment
procedure as pleaded and testified to by the plaintiff and its
witnesses formed part of the insurance agreement,
or whether the
defendant’s hail assessment procedure document as pleaded and
testified to by the defendant’s witnesses
formed part of the
insurance agreement.
THE
PLAINTIFF’S EVIDENCE: -
Mr
L Louw: -
[8]
Mr Louw, the member of the plaintiff and the farmer, testified
during
his examination in chief that
:
-
8.1
Prior to the commencement of the insurance agreement, the plaintiff
was insured for hail damage to its pecan
nut crops with Old Mutual
Insurance (“Old Mutual”), but Old Mutual discontinued its
insurance of hail damage during
or about middle 2020;
8.2
The defendant commenced its insurance for hail damage on 01 October
2020;
8.3
Mr JM du Plooy, a broker at Hantie du Plooy Makelaars, contacted him
and proposed as a new insurer for hail
damage either the defendant or
Agrisure. On or about 20 October 2020, Mr Du Plooy explained the
defendant’s assessment procedure
to him and confirmed that in
the event of hailstorms, more than one preliminary assessment and a
final assessment, a week prior
to harvesting is conducted. Mr Du
Plooy also explained that the defendant’s insurance cover
includes a ‘wash away clause,
similar to the Old Mutual
insurance policies;
8.4
The ‘wash away clause’ comes into operation in the event
of heavy rainfall that washes the pecan
nuts away, making it
impossible to assess the damage, in which event the assessment is
postponed to the end of the season, about
a week prior to harvesting;
8.5
Mr Du Plooy contacted Mr I Myburgh telephonically in his presence and
Mr Myburgh confirmed that the defendant’s
assessment procedure
is identical to that of Old Mutual; and that it also includes a ‘wash
away clause’;
8.6
A different assessment procedure than the one explained by Mr Du
Plooy, and confirmed by Mr Myburgh, would
have been a “deal
breaker”; and for that reason, he decided to conclude the
insurance agreement with the defendant
and not with Agrisure;
8.7
He agreed to the excess of 20% and to pay the higher annual insurance
premium of R641 257,85 as a result
of the fact that the
assessment procedure included a ‘wash away clause’;
8.8
The insurance agreement: -
8.8.1
Commenced on 21 October 2020;
8.8.2
Provided insurance cover to the plaintiff from 28 October 2020;
8.8.3
The value of the pecan nuts insured was R18 480,000,00;
8.8.4
The plaintiff agreed that 20% excess would be subtracted in respect
of an insurance claim;
8.8.5
Consists of page 1 to 22 of Exhibit A; and
8.8.6
Does not contain the assessment procedure as explained to him by Mr
Du Plooy;
8.9
After the hailstorm of 17 November 2020, he contacted Mr Myburgh, who
with the other assessors appointed
by the defendant, attended
Nuwejaarskraal, marked the sample trees and conducted a preliminary
assessment. A second assessment
was conducted early in December 2020,
but after the heavy rainstorm of 08 December 2020, Mr Myburgh
confirmed that the assessment
would be postponed to a week prior to
harvest in accordance with the ‘wash away clause’;
8.10
A second severe hailstorm occurred on 17 March 2021, whereafter he
again contacted Mr Myburgh, who informed
him that the assessment
would be postponed to a week prior to harvest in accordance with the
‘wash away clause’;
8.11
On 06 November 2021, one week prior to the harvest, Messrs Myburgh,
DW Nel, GP Nel and JD Koegelenberg, the
appointed assessors, attended
to the assessment at Nuwejaarskraal.
8.12
The assessment entailed that the pecan nuts were separated after the
trees were shaken and that only hail-damaged
nuts were weighed.
Thereafter the data was fed into the tablets provided by the
defendant and the defendant’s software calculated
the
plaintiff’s damage;
8.13
According to the assessors’ assessment, they determined the
percentage of the plaintiff’s damage
as follows: -
8.13.1 Block 2002: 59%;
8.13.2 Block 2004: 82%;
8.13.3 Block 2006: 46%;
and
8.13.4 Block 2013: 59%;
8.14
The percentage of damage equated to a loss, and accordingly a claim,
of R9 626 640,00 (inclusive
of VAT);
8.15
The defendant rejected the plaintiff’s claim and offered to pay
the plaintiff an amount of R2 575 347.56
whereafter the
plaintiff filed an internal appeal. The outcome of the internal
appeal was that the defendant agreed to pay the
plaintiff an amount
of R2 060 278,05 on condition that the offer was accepted
before 18 October 2021, failing which the
offer would be reduced to
R580 200,00;
8.16
He received the insurance agreement that consisted of pages 1 to 22
from Mr Du Plooy; and
8.17
The document titled “Haeltaksasieprosedure: Pekanneute”,
attached to the defendant’s plea,
did not form part of the
insurance agreement; and that a copy thereof was never provided to
him. He added that this document was
“opgedateer 19 November
2020”, after the commencement of the insurance agreement and
after the first hailstorm occurred.
[9]
When cross-examined, Mr Louw conceded that the Old Mutual policy is
identical to the
defendant’s document titled
“Haeltaksasieprosedure: Pekanneute”, save for the
introduction thereto and that it
does not contain a ‘wash away
clause’. He nevertheless adamantly persisted that the summary
of the Old Mutual pecan
nut assessment procedure includes the ‘wash
away clause’; and that this policy was taken over by the
defendant.
Mr
JM du Plooy: -
[10]
Mr Du Plooy, the plaintiff’s broker, during his examination in
chief: -
10.1
Corroborated Mr Louw’s evidence that: -
10.1.1
Old Mutual Insurance stopped its hail damage cover during 2020;
10.1.2
He contacted Mr Myburgh telephonically and Mr Myburgh confirmed that
the defendant took over Old Mutual’s hail cover
procedure and
that the assessment would be dealt with in the same manner as done by
Old Mutual;
10.1.3
The plaintiff did not choose Agrisure as its policy did not include a
‘wash away clause’; and
10.1.4
The insurance agreement consisted of pages 1 to 22 and was provided
by him to the plaintiff;
10.2
Furthermore testified that: -
10.2.1
He has been a broker for 23 years and during that time he dealt with
Old Mutual on various occasions;
10.2.2
The defendant arranged a training session for brokers at his office
in Hopetown, during which training session, Messrs Myburgh
and P
Delport, the defendant’s head technical manager, thoroughly
explained the defendant’s assessment procedure to
the
attendees;
10.2.3
With reference to the Old Mutual summary document, both Old Mutual’s
and the defendant’s hail assessment procedure
included a ‘wash
away clause’;
10.2.4
Mr Myburgh informed the attendees that the defendant will conduct its
assessments in accordance with the Old Mutual summary
document; and
Mr Delport who was in attendance, did not interject or differed from
Mr Myburgh;
10.2.5
He completed the application for insurance cover on the plaintiff’s
farm, but the insurance document was finalised
and generated at his
office;
10.2.6
The defendant’s hail assessment document was not included in
the document provided to him by the defendant; and he
accordingly did
not provide the plaintiff with a copy thereof;
10.2.7
The defendant’s hail assessment procedure document reflects
that it was updated on 19 November 2020 and that it would
be a fair
assumption that it was not available during October 2020;
10.2.8
He only became aware of the defendant’s hail assessment
procedure document after the litigation between the parties
had
commenced; and
10.2.9
He has during his career dealt with many claims arising from washed
away pecan nuts, which claims have always been paid out.
[11]
Mr Du Plooy, when confronted with the defendant’s version
during cross-examination: -
11.1
Persisted that the defendant’s hail assessment procedure
document did not form part of the insurance
agreement and that the
date of 19 November 2020 confirms that same was not available during
October 2020;
11.2
Confirmed that the brokers who attended the training session in
Hopetown were trained in accordance with
the Old Mutual summary.
During the training seminar, he specifically asked if the defendant
would conduct its assessment in accordance
with the Old Mutual
summary and it was confirmed by Mr Myburgh, with reference to the Old
Mutual summary document, that “this
summary is what we are
going to do.”; and
11.3
Testified that the insurance agreement confirmed that the
primary
risk insured against is defined in the insurance agreement as “
Die
sigbare en takseerbare skade aan Versekerde Oeste veroorsaak deur die
direkte meganiese aksie van hael.”;
and that the visible
nuts were taken into consideration in the assessment of the
plaintiff’s damage.
Mr
GP Nel: -
[12]
Mr Nel, the defendant’s head assessor for the past 3 years,
testified during his examination in chief
that: -
12.1
He has been an assessor for 20 years;
12.2
He and Messrs DW Nel, K Botha and Myburgh attended Nuwejaarskraal on
20 November 2020 and 02 December 2020,
but the assessment could not
be completed as a result of the rainstorm that occurred on 08
December 2020, washing the pecan nuts
away. The assessment was
accordingly postponed to one week prior to harvest;
12.3
If nuts are not washed away, a third and fourth pickup is done;
12.4
He conducted the same wash away assessment procedure at Agricola,
Mutual and Federal, Old Mutual and while
he was employed by the
defendant;
12.5
On 11 June 2021, the defendant’s appointed assessors, Messrs GP
Nel, DW Nel and JD Koegelenberg attended
to the final assessment at
Nuwejaarskraal in the company of Messrs Myburgh and Louw;
12.6
The postponement of the plaintiff’s assessment was done in
accordance with the insurance agreement
that stipulates that “
Die
Assessor kan, na goeddunke, die finale beoordeling van enige
beskadigde Vrugte uitstel tot sodanige tyd dat die verlies aan
die
opbrengs akkuraat bepaal kan word.”
as the pecan nuts could
not be counted;
12.7
The relevant figures and weight of the pecan nuts were fed into the
defendant’s tablets and the software
installed thereon
calculated the plaintiff’s percentage of damage per orchard as
follows: -
12.7.1 Block 2002: 59%;
12.7.2 Block 2004: 82%;
12.7.3 Block 2006: 46%;
and
12.7.4 Block 2013: 59%;
12.8
The Old Mutual ‘wash away clause’, as set out in the Old
Mutual summary document, was applied
by the defendant in two previous
instances where he attended to the assessment of pecan nuts that had
been washed away;
12.9
The Old Mutual summary document contains a ‘wash away clause’
whereas the Old Mutual hail damage
assessment document does not;
12.10
He compiled the document that was used for the training of the
defendant’s 24 assessors in the Northern Cape Province
and the
Free State Province in Douglas. This document sets out the procedure
used in the assessment of hail damage to pecan nuts
and includes the
procedure when nuts have been washed away. The defendant used Old
Mutual’s assessment procedure as the insurance
agreement did
not contain an assessment procedure;
12.11
Messrs Myburgh, B Kruger and DW Nel were present at the training
session;
12.12
He trained the assessors in the assessment of hail damage, which
training included the assessment in the event of the
wash away of
pecan nuts. None of the defendant’s employees present at the
training session corrected him when he explained
the ‘wash away
clause’;
12.13
He used the defendant’s software programme to calculate the
percentage of damage as set out in the damage report
and the
particulars of claim.
[13]
When cross-examined, Mr Nel: -
13.1
Confirmed that the Old Mutual summary document was attached to the
Old Mutual assessment procedure document;
and that this process was
always followed;
13.2
Conceded that the Old Mutual assessment procedure document does not
contain a ‘wash away clause’,
but insisted that the ‘wash
away clause’, as set out in the Old Mutual Summary document, is
used when pecan nuts are
washed away by rain and that it was never a
problem in the past;
13.3
It came to his knowledge for the first time during June 2022 that
washed away nuts would no longer be assessed
or insurable; and
13.4
He is aware of a claim of R8 000 000,00 that was paid by
the defendant to a farmer in Hartswater
whose pecan nuts were washed
away.
Mr
I Myburgh: -
[14]
Mr Myburgh testified during his examination in chief that: -
14.1
During 2020 he was employed by the defendant as its technical manager
for the Northern Cape Province; and
on 01 August 2020 he was the
defendant’s most senior official in the Northern Cape Province;
14.2
Before 2020 he was employed by Old Mutual as its regional technical
manager;
14.3
He was the manager of 20 of the defendant’s assessors whom he
trained in the assessment of hail damage.
He also trained the agents
who brokered the insurance agreements;
14.4
He attended the training seminar in October 2020, but could not
present the training as he was ill. Mr GP
Nel conducted the training
on his behalf after Mr GP Nel made the handwritten notes in his
presence and they discussed the procedure;
14.5
He confirmed that the ‘wash away clause’ was an Old
Mutual product, not followed by other insurance
companies, but which
gave Old Mutual an advantage in the insurance market. He added that
farmers were willing to pay double the
insurance premium for this
insurance;
14.6
The Old Mutual summary document was attached and formed part of the
Old Mutual insurance agreement; and that
the defendant took over Old
Mutual’s assessment procedure;
14.7
He conceded that the Old Mutual insurance agreement does not contain
a ‘wash away clause’, but
insisted that it had to be
included and he does not know why it was excluded, save to state that
he handed his whole taxation
file, including the Old Mutual
insurance agreement and the Old Mutual Summary document, to Mr B
Kruger;
14.8
Messrs Kruger, DF Nel and P Douglas were present at the training
seminar where he explained the ‘wash
away clause’ and
none of them corrected him or objected thereto;
14.9
He informed Messrs Kruger and Douglas after the severe rainstorm of
08 December 2020 and the hailstorm of
17 March 2021 that the
assessment would be postponed to 2 weeks before the harvest; and he
also provided them with a video footage.
Neither objected to the
postponement of the assessment, which he also confirmed was in
accordance with the insurance agreement;
[15]
When cross-examined, Mr Myburgh: -
15.1
Explained that the defendant used the Old Mutual assessment
procedure, including the summary containing the
‘wash away
clause’, as it did not yet have an assessment procedure;
15.2
Reiterated that the defendant’s insurance policy was more
expensive as a result of the inclusion of
the wash away procedure;
15.3
Could not explain why the ‘wash away clause’ is not
stipulated in the defendant’s insurance
agreement, but insisted
that it was done in practice, as instructed by Mr B Kruger;
15.4
Conceded that neither the defendant’s nor Old Mutual’s
insurance agreement contains a ‘wash
away clause’, but he
insisted that the Old Mutual Summary document was included in the Old
Mutual agreement; and also sold
to the farmers as part of their
insurance cover; and
15.5
The defendant’s insurance policy was not yet in existence
during October 2020 and when the training
sessions took place on 09
and 10 November 2020.
THE
DEFENDANT’S EVIDENCE: -
Mr
G Smallbones: -
[16]
Mr Smallbones, employed as the defendant’s technical support
specialist during 2020, testified that:
-
16.1
A part of his role was to attend to re-insurance, which is critical
as the risk is then transferred to larger
insurance companies;
16.2
He was also involved in the compilation of the insurance documents,
which included the production of the
documents, scanning and saving
same and putting them on the internal server. These documents are
stored as ‘PDF documents’
and can therefore not be
altered;
16.3
The Old Mutual insurance agreement, given by Mr Myburgh to Mr Kruger,
formed the principal source document
for the defendant’s
insurance agreement; and the wording of the Old Mutual insurance
agreement was not amended; and
16.4
As at 01 October 2020, the wording of the defendant’s insurance
pro forma insurance agreements had
been finalised, but the assessment
procedure was not yet finalised;
16.5
The defendant provided the assessors with the tablets on which the
defendant’s software was installed;
and
16.6
The defendant calculated the damage of R580 200,00 by using the
sum of the hail-damaged nuts over the
insured yield.
[17]
When cross-examined, Mr Smallbones: -
17.1
Testified that he only became aware of the ‘wash away clause’
during July 2021;
17.2
Explained that the date of 19 November 2020 on the defendant’s
hail assessment procedure document reflects
that the document was
updated for the last time on 19 November 2020;
17.3
Testified that the defendant’s hail assessment procedure
document was only available for distribution
in its final format
during November 2020;
17.4
Could not confirm how many previous versions of the defendant’s
hail assessment procedure document
existed before 19 November 2020;
and that the ‘wash away clause’ could have been contained
in a previous version;
17.5
Confirmed that the defendant’s insurance agreement consists of
“
Hierdie polis en die ingevulde en Ondertekende Aansoek om
Vrugteversekering, Ondertekende kwotasie vir Vrugteversekering,
Polisskedule,
Skuldooreenkoms en GPS-plaaskaart met koördinate
moet as een kontrak saamgelees word”
; and that the
assessment policy is not included in the definition. He conceded that
the defendant’s written insurance agreement
is reflected on
pages 1 to 22;
17.6
Agreed that clients could accept what Mr Myburgh informed them of as
he was the “defendant’s
face in the Northern Cape”;
17.7
Testified that Mr Myburgh was found guilty at a disciplinary enquiry
and dismissed as a result of the fact
that he failed to follow the
defendant’s hail assessment procedure;
17.8
Confirmed that the defendant did not re-insure claims, but would have
done so in the event that the ‘wash
away clause’ was
included in its insurance agreement; and
17.9
Conceded that it could be expected that Messrs Kruger and Douglas
should have corrected Mr Myburgh and explained
to him that the ‘wash
out clause’ is not contained in the defendant’s insurance
agreement.
Mr
B Kruger: -
[18]
Mr Kruger testified during his examination in chief that: -
18.1
The defendant’s crop insurance business was initiated by Old
Mutual closing its crop insurance;
18.2
The Old Mutual insurance agreement was the source document for the
defendant’s insurance agreement,
which was provided to him by
Mr Myburgh in hard copy;
18.3
The defendant’s hail assessment procedure document was uploaded
on the system before 19 November 2020;
18.4
He only became aware of the Old Mutual summary document that included
the ‘wash away clause’
on 21 June 2021, whereafter he
communicated to Messrs Myburgh and Delport that the ‘wash away
clause’ is not in accordance
with the defendant’s hail
assessment procedure; and that the defendant is not re-insured and
therefore would have to stand
in for the full amount of any claims;
and
18.5
He could not recall whether the ‘wash away clause’ was
discussed at the training session as he
was not there for the whole
time, but if it was discussed in his presence, he would not have left
it there. He could also not recall
whether the ‘wash away
clause’ was discussed at the meeting in Douglas.
[19]
When cross-examined, Mr Kruger stated that he cannot dispute, as a
result of him not being in full attendance,
that Mr Myburgh discussed
the ‘wash away clause’ at the training sessions. He
conceded that he received the photographs
and video footage of the
rainstorm on the plaintiff’s farm and that Mr Myburgh informed
him that the assessment would be
postponed until harvest time. He
only learnt that the ‘wash away clause’ was also used at
Bullhill Pecans during 2020
and June 2021. He conceded that the
defendant’s previous versions of the assessment procedure could
have contained a ‘wash
away clause’, but that he is
unaware of the content of the previous versions. He accepted that the
plaintiff was entitled
to assume that if Mr Myburgh informed Mr Louw
that the defendant also had a ‘wash away clause’, it
would indeed be
in the defendant’s insurance agreement.
Mr
P Delport: -
[20]
Mr Delport testified during his examination in chief that: -
20.1
During 2020 he was the defendant’s head technical manager who
oversaw the defendant’s hail assessment
procedure and the
training of assessors in respect of the defendant’s assessment
procedures;
20.2
Farmers do not have insurance cover for washed-away nuts as it cannot
be assessed;
20.3
The Old Mutual summary document that includes the ‘wash away
clause’ came to his attention during
July 2021; and did not
form part of the defendant’s insurance agreement; and
20.4
He was not present at all times and could therefore not recall
whether the ‘wash away clause’
was discussed at the
training sessions.
[21]
When cross-examined, Mr Delport confirmed that he was contacted by Mr
Myburgh who informed him that the plaintiff’s
pecan nuts had
washed away and that the assessment would be postponed until harvest
time. He could not dispute that Mr Myburgh
informed the assessors and
agents of the ‘wash away clause’ as he was not present at
all times. The Bullhill Pecan
claim was paid out after the ‘wash
away clause’ was applied in the assessment process. He was
adamant that the postponement
of the assessment did not entail that
the ‘wash away clause’ would be applicable.
SUBMISSIONS BY
COUNSEL: -
[22] Mr
LLR Pohl SC, on behalf of the plaintiff, submitted that the plaintiff
proved that the
hail assessment / taxation
procedure as pleaded and testified by the plaintiff’s witnesses
formed part of the insurance agreement.
[23]
Mr Pohl SC argued that, at the very least, the insurance agreement
is ambiguous as it does not contain a definition of the taxation
procedure and as a result, the insurance agreement should be
construed against the defendant in favour of the plaintiff in terms
of the
contra proferentem
rule; with the effect that the
insurance agreement should be interpreted to include a ‘wash
away clause’ as pleaded
by the plaintiff and testified to by
its witnesses.
[24] Mr
AJ Trotski SC, on behalf of the defendant, submitted that I should
dismiss the plaintiff’s claim
for the following reasons,
namely: -
24.1
The plaintiff failed to prove the necessary facts to bring its claim
within the terms of the insurance agreement,
more particularly, as
the primary risk insured against is defined in the insurance
agreement as “
Die sigbare en takseerbare skade aan
Versekerde Oeste veroorsaak deur die direkte meganiese aksie van
hael.”,
which therefore excludes the risk of washaway nuts.
Mr Trotski contends that the procedure as advocated by the plaintiff
is thus
irreconcilable with the specific cover provided by the
insurance agreement;
24.2
The plaintiff failed to prove that the defendant’s hail
assessment procedure document does not form
part of the insurance
agreement.
24.3
The insurance agreement is the sole recordal of what the parties had
agreed to, and as a result, no extrinsic
evidence and/or document,
namely the Old Mutual summary document, can add to or change the
terms of the insurance agreement between
the parties; and
24.4
The plaintiff failed to comply with the provisions of Uniform Rule
18(6) in that it did not attach the Old
Mutual summary document to
its particulars of claim; and
24.5
The plaintiff failed to present any evidence pertaining to the
quantum of its claim.
APPLICABLE
LEGAL PRINCIPLES: -
Onus
of proof: -
[25]
It
is trite that a plaintiff bears the overall onus to prove its case,
on a balance of probabilities.
[1]
The ordinary rule is that
the insured must prove himself to fall within the primary risk
insured against, whilst the onus is on
the insurer to prove the
application of an exception.
[2]
Rule
18 (6): -
[26]
Rule 18(6) stipulates that: -
“
A party who in
his or her pleading relies upon a contract shall state whether the
contract is written or oral and when, where and
by whom it was
concluded, and if the contract is written a true copy thereof or of
the part relied on in the pleading shall be
annexed to the pleading.
”
Interpretation
of contracts:
-
[27]
The Supreme Court of Appeal in
KPMG
Chartered Accountants (SA) v Securefin Limited and Another
[3]
reaffirmed the rules applicable to the interpretation of contracts as
follows: -
“
First,
the integration (or parol evidence) rule remains part of our
law
.
However,
it is frequently ignored by practitioners and seldom enforced by
trial courts. If a document was intended to provide a
complete
memorial of a jural act, extrinsic evidence may not contradict, add
to or modify its meaning (
Johnson
v Leal
1980
(3) SA 927
(A)
at 943B).
Second,
interpretation is a matter of law and not of fact and, accordingly,
interpretation is a matter for the court and not for
witnesses (or,
as said in common-law jurisprudence, it is not a jury question: Hodge
M Malek (ed)
Phipson
on Evidence (16 ed 2005) para 33-64
).
Third, the rules about admissibility of evidence in this regard do
not depend on the nature of the document, whether statute,
contract
or patent (
Johnson
& Johnson (Pty) Ltd v Kimberly-Clark Corporation and
Kimberly-Clark of South Africa (Pty) Ltd 1985 BP 126
(A);
[1985]
ZASCA 132
(at
www.saflii.org.za
).
Fourth,
to the extent that evidence may be admissible to contextualise the
document (since ‘context is everything’)
to establish its
factual matrix or purpose or for purposes of identification, ‘one
must use it as conservatively as possible’
(
Delmas
Milling Co Ltd v Du Plessis
1955
(3) SA 447
(A)
at 455B-C).
The
time has arrived for us to accept that there is no merit in trying to
distinguish between ‘background circumstances’
and
‘surrounding circumstances’. The distinction is
artificial and, in addition, both terms are vague and confusing.
Consequently, everything tends to be admitted. The terms ‘context’
or ‘factual matrix’ ought to suffice.
(See Van der
Westhuizen v Arnold
2002
(6) SA 453
(SCA);
[2002] 4 All SA 331)
paras 22 and 23, and Masstores (Pty) Ltd v
Murray & Roberts Construction (Pty) Ltd and Another ;
[2008] ZASCA 94
;
2008
(6) SA 654
(SCA)
para 7.)”
[28]
This denial of recourse to evidence of an oral
consensus
was
explained by the Appellate Division in
Johnston
v Leal
(“Johnston”)
[4]
as follows: -
“…
In many
instances recourse to evidence of an earlier or contemporaneous oral
agreement would, in any event, be precluded by the
so-called
"parol evidence rule" (see Van Wyk v Rottcher's Saw Mills
(Pty) Ltd, supra, at p 996) or, more correctly,
that branch of the
"rule" which prescribes that, subject to certain
qualifications (to which some reference will be made
later), when a
contract has been reduced to writing, the writing is regarded as the
exclusive embodiment or memorial of the transaction
and no extrinsic
evidence may be given of other utterances or jural acts by the
parties which would have the effect of contradicting,
altering,
adding to or varying the written contract (see National Board
(Pretoria) Pty. Ltd. v Estate Swanepoel,
1975 (3) SA 16
(AD), at p 26
A-D and the cases there cited). The extrinsic evidence is excluded
because it relates to matters which, by reason
of the reduction of
the contract to writing and its integration in a single memorial,
have become legally immaterial or irrelevant
(National Board case,
supra, at p 26 C).”
ANALYSIS
OF THE EVIDENCE AND LEGAL ARGUMENTS: -
[29]
Clause
2 of the insurance agreement
[5]
states
that “
Die
Assessor wat deur die Versekeraar aangestel is sal die gemiddelde
bruto verliespersentasie volgens the voorsgeskrewe taksasie
prosedure
bepaal.”
The
defendant’s policy document, however, does not contain a
prescribed taxation procedure.
[30] In
Johnston
,
the Appellate Division, nonetheless, confirmed that the parol
evidence rule or "integration rule" does not preclude
evidence of a subsequent oral agreement contradicting, altering,
adding to or varying a written contract in cases not governed
by the
now repealed section 1(1) of the Formalities in Respect of Contracts
of Sale of Land Act, Act 71 of 1969. The Appellate
Division held:
-
[6]
“
Furthermore, in
my view, an instructive and relevant analogy is provided by cases of
what is termed a "partial integration".
Where a written
contract is not intended by the parties to be the exclusive memorial
of the whole of their agreement but merely
to record portion of the
agreed transaction, leaving the remainder as an oral agreement, then
the integration rule merely prevents
the admission of extrinsic
evidence to contradict or vary the written portion;
it
does not preclude proof of the additional or supplemental oral
agreement
(see
Avis v Verseput,
1943 AD 331
, at p 380; De Jager and Others v Capital
Building Society,
1963 (3) SA 381
(T), at p 382 B-E; also Wigmore on
Evidence, 3rd ed, par 2430; Corbin on Contracts, par 581). The
question as to whether a written
contract constitutes an integration
of the whole agreement or merely a partial integration is one which
depends on the intention
of the parties. This raises the problem as
to what evidential material may be looked at in order to determine
the intention of
the parties in this regard. In De Jager's case
(supra) this was the very problem which confronted the Full Bench of
the Transvaal
Provincial Division
and
it was held that in order to ascertain this intention it was
necessary for the court to look not merely at the document itself,
but also at evidence of the surrounding circumstances, including the
negotiations between the parties leading up to and accompanying
the
conclusion of the written agreement.
In this
connection TROLLIP J (as he then was), who delivered the judgment of
the Court (LUDORF and STEYN JJ concurring), said the
following (at pp
382 F-383 A):
"The question
'depends wholly upon the intent of the parties' (Wigmore, ibid) and
in order to ascertain that intention it is
necessary to look not only
at the document but also at the 'surrounding circumstances', evidence
of which is therefore admissible.
Phipson, ibid, says:
'The inference that the writing was, or was not, intended to contain
the full agreement may be drawn not only
from the document itself,
but from extrinsic circumstances.' Wigmore further says: 'This intent
must be sought where always intent
must be sought, namely in the
conduct and language of the parties and the surrounding
circumstances. The document alone will not
suffice. What it was
intended to cover cannot be known till we know what there was to
cover. The question being whether certain
subjects of negotiations
were intended to be covered, we must compare the writing and the
negotiations before we can determine
whether they were in fact
covered.” My emphasis.
[31]
To my mind, an assessment procedure is an integral and
material term of an insurance agreement as it accurately prescribes
the manner
in which an assessment is to be conducted in order to
determine the damage suffered by an insured party. Without a properly
described
assessment procedure, insurance policies would likely
result in disputes, and litigation, between the insurer and the
insured.
[32] I
can reach no other conclusion than that the document alone did not
suffice and was therefore not the exclusive
memorial of the whole of
the insurance agreement. The prescribed assessment procedure was
therefore regulated by a supplemented
oral agreement, not precluded
by the integration rule.
This finding is
bolstered by the fact that both parties insist that a prescribed
hail assessment procedure had to form part of the insurance
agreement. I was thus permitted to hear evidence of surrounding
circumstances,
including the relevant negotiations of the parties, in
order to determine whether the parties intended a written contract to
be
an integration of their whole transaction or merely a partial
integration.
[33]
The question remains whether the assessment procedure as pleaded and
testified by the plaintiff should form
part of the insurance
agreement or whether the defendant’s hail assessment document
should form part thereof.
[34] On
a proper evaluation of the evidence, I am persuaded that
the plaintiff proved that the procedure as pleaded by it and
testified to by its witnesses should form part of the insurance
agreement;
and that the defendant’s assessment procedure
document did not form part of the insurance agreement. I reach this
conclusion
in view of the following: -
34.1
Mr Louw’s undisputed evidence that it was a “deal
breaker” if a ‘wash away clause’ was
not included
in the insurance agreement;
34.2
Mr Louw agreed to pay a higher annual insurance premium of
R641 257,85 for this specific insurance cover;
34.3
The undisputed fact that an excess of 20% would be applicable to any
claim;
34.4
The uncontroverted evidence of the plaintiff’s witnesses that
the insurance agreement would provide for a preliminary
and a final
assessment a week before harvesting, which is similar to the Old
Mutual summary document that contains a ‘wash
away clause’;
34.5
The plaintiff’s undisputed evidence that: -
34.5.1
The ‘wash away clause’ was included in the training,
without any objection from the defendant’s employees;
and
34.5.2
Assessments of washed away nuts are conducted in terms of the Old
Mutual summary document;
34.6 The
plaintiff’s and the defendant’s evidence that the
defendant’s hail assessment procedure document
did not form
part of the insurance agreement; and that it was not in place as at
28 October 2020;
34.7
The concession by the defendant’s witnesses that the insurance
agreement consisted of only 22 pages. By necessary
implication it
therefore did not include the defendant’s hail assessment
procedure document;
34.8
The defendant witnesses’ concession that previous versions of
the defendant’s hail assessment procedure document
could have
included a ‘wash away clause’;
34.9 The
defendant’s hail assessment procedure document which states
that it was “updated” on 19 November
2020. No evidence
was presented by the defendant that the defendant’s hail
assessment procedure document existed when the
insurance agreement
was accepted on 21 October 2020 or on the date on which the cover
commenced on 28 October 2020; and
34.10 The inclusion
of a term in the insurance agreement that an assessor has the
discretion to postpone the final assessment
of any damaged fruit to
such a time when the damage can be accurately determined.
[35] As
a result of the above finding: -
35.1
The alternative plea that no enforceable insurance agreement was
concluded as an agreed assessment procedure
is a
sine qua non
,
does not withstand scrutiny; and
35.2
I do not deem it necessary to deal with Mr Pohl SC’s
alternative argument pertaining to the
contra proferentem
rule.
[36] I
furthermore do not agree with Mr Trotski’s argument that the
plaintiff had to attach the Old Mutual
summary document to its
particulars of claim, and that its consequent failure to do so,
precludes it from relying on same. I reach
this conclusion on the
basis of the manner in which the plaintiff’s claim is pleaded
in its particulars of claim. The plaintiff
did not plead that the Old
Mutual summary document formed part of the insurance agreement. It
did, however, specifically plead
that the assessment process involved
the preliminary and final assessments, which was confirmed by the
evidence of the plaintiff’s
witnesses.
[37]
The plaintiff’s witnesses testified that the plaintiff paid a
much higher premium for the inclusion
of insurance cover for
washed-away pecan nuts. In addition, Mr Du Plooy testified that the
visible nuts were taken into consideration
in the assessment of the
plaintiff’s damage.
No evidence
was presented by the defendant to the contrary. I accordingly find no
merit in the argument that the procedure as advocated
by the
plaintiff is irreconcilable with the insurance agreement.
[38]
Messrs Louw, Myburgh and Nel testified as to how the quantum was
calculated, which evidence was not disputed
by the defendant’s
witnesses. The plaintiff accordingly proved the quantum of the
damages.
COSTS:
-
[39]
The
convention is that costs are awarded against the unsuccessful party
and no contrary submissions were made. Mr Pohl SC submitted
that the
complexity of the matter and the quantum justified the employment of
a senior and a junior counsel. I agree.
ORDER:
Wherefore
the following order is made: -
1.
The defendant is to pay to the plaintiff the amount of R9 629 640,00;
2.
The defendant is to pay interest
a
tempore morae
on the amount of
R9 629 640,00;
and
3.
The defendant is ordered to pay the plaintiff’s taxed costs on
scale C,
including the costs of two counsel.
STANTON,
A
JUDGE
On
behalf of the plaintiff
:
Adv.
LLR Pohl SC
Adv.
PDP Greyling
(on
instruction of Marius van Zyl Inc.
care
of Haarhoffs Inc.)
On
behalf of the defendant
:
Adv.
AJ Trotskie SC
(on
instruction of Hay & Scott Attorneys
care
of Van de Wall Inc.
[1]
Govan
v
Skidmore
[1952]
1 All SA 54
(N) page 57.
[2]
Eagle
Star Insurance Co Ltd v Willey
1956
(1) SA 330
(A) at 334A - 335F.
[3]
2009
(4) SA 399
(SCA) at para 39.
[4]
[1980]
2 All SA 366
(A) at 371-2.
[5]
Pleadings
bundle: page 36.
[6]
Johnston
v Leal
(Supra)
n. 4 at 378-9..