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[1995] ZASCA 20
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Fedgen Insurance Ltd. v Leyds (475/93) [1995] ZASCA 20; 1995 (3) SA 33 (AD); [1995] 2 All SA 357 (A) (27 March 1995)
475/93
NvH
FEDGEN INSURANCE LIMITED
Appellant
and
PETER RONALD LEYDS
Respondent
SMALBERGER, JA :
475/93 NvH
IN THE SUPREME COURT OF SOUTH
AFRICA
(APPELLATE DIVISION)
In the matter between:
FEDGEN INSURANCE LIMITED
Appellant
and
PETER RONALD LEYDS
Respondent
CORAM
: HEFER, SMALBERGER, FH GROSSKOPF,
NIENABER et VAN DEN HEEVER, JJA
HEARD
: 9 MARCH 1995
DELIVERED
: 27 MARCH 1995
JUDGMENT
SMALBERGER, JA :
The respondent ("Leyds") successfully sued the appellant ("Fedgen") in the
Transvaal Provincial Division for the loss he suffered
consequent upon the theft
of a vehicle owned by him and comprehensively insured by Fedgen under a policy
of insurance.
2
Leave to appeal was refused by the trial Court (HEYNS, J), but
was subsequently granted by this Court. The outcome of the appeal depends
upon
the proper interpretation of the policy in question.
On 14 December 1990 Leyds applied to Fedgen for insurance in
respect of a 1983 Mercedes Benz 280 EA sedan valued at R27 000,00 ("the
Mercedes"). At the request of Fedgen, Leyds completed a "Fedstatus - Application
Form" ("the application"). In section 7 of the application,
which deals
specifically with vehicles, Leyds was asked to "indicate the scope of cover"
required. He was given a choice of "Comprehensive",
"Third Party, Fire and
Theft" and "Third Party only". He opted for comprehensive cover. In a separate
sub-section Leyds was required
to indicate the "Class of Use" applicable to the
Mercedes. He selected class 1 out of three available classes. What class 1
comprehends
is not immediately apparent. About half a page further on, however,
under a subsection headed specifically "Class of Use" the following
is
found
3
under (b):
"[T]he individual Classes of Use otherwise cover use for social domestic and
pleasure purposes and in addition for
Class 1 - Journeys between
home and business provided no business calls are made and use for applicants
business as a farmer
Class 2 - Business and professional purposes other than insurance and
commercial travelling."
(There is no reference to a class 3.) In the original application
this particular sub-section has a line ruled through it (which would
prima facie
signify that it does not apply). At the foot of the
application there appears a "Declaration" which provides in (d):
"I have not withheld any material fact and I accept this application and
declaration form the basis of the contract between myself
and Fedgen Insurance
Limited."
The application was signed by Leyds.
On 17 December 1990 Fedgen issued a "Fedstatus Personal Insurance Policy"
("the policy") in favour of Leyds. Clauses 2 and
4
3 of the Preamble state:
"2. SCHEDULE
The Schedule - which must be signed on behalf of the
Company - indicates
the Sections and sub-Sections
under which the Policyholder is insured
3. PAYMENT OF PREMIUM AND OCCURRENCE OF INSURED EVENTS
In consideration of the Premium having been paid the Company will indemnify
the Policyholder against loss damage death injury or other
event giving rise to
a claim under any Insurance Section specified in the Schedule provided such
event shall occur during a Period
of Cover or renewal thereof."
Section 7 of the policy deals with motor vehicle insurance.
Under the heading "SCOPE OF COVER" the following appears:
"The Schedule indicates whether the cover by this Section is Comprehensive
which means that sub-Sections 1 to 3 apply and that sub-Section
1 covers loss or
damage other than (i) damage to tyres except as the result of an accident
causing other damage (ii) wear and tear or other depreciation or mechanical
or
electrical breakdowns failures or breakages (iii) consequential loss other
than loss of use if specifically
5
insured (iv) theft of motor cycle accessories and spare parts unless the motor
cycle is stolen at the same time including loss or
damage by Malicious Damage as
defined by paragraph 7 of the Preamble
Third Party Fire and Theft
Third Party only "
Sub-section 1, which appears on the next page
reads, to the extent
that it is relevant:
"Each vehicle described in the Schedule (including its accessories and any spare
parts in or on it) is insured against loss or damage
in accordance with the
indicated Scope of Cover."
Immediately below "SCOPE OF COVER"
there appears:
"Description of Use
1. use for social domestic and pleasure purposes including use by the Insured
for journeys between his home and his permanent place
of business provided that
business calls are not made on the journey but
excluding
use in connection with any business or profession the
6
carriage of goods or samples for trade purposes hiring carriage of passengers
for hire or carriage of fare-paying passengers commercial
travelling driving
instruction for reward racing speed or other contests rallies trials or use for
any purpose in connection with
the motor trade
2. use for social domestic pleasure business and professional purposes
excluding
hiring carriage of passengers for hire or carriage of fare paying passengers
commercial travelling driving instruction for reward
racing speed or other
contests rallies trials or use for any purpose in connection with the motor
trade."
The relevant Schedule ("the Schedule")
provides details of the Mercedes, indicates the "Scope of Cover" as
"Comprehensive", fixes
a maximum indemnity of R27 000,00 and provides for a
basic premium of R221-44. No reference is made in the Schedule to any applicable
"Description of Use". The only reference thereto is to be found in the "SPECIFIC
EXCLUSIONS TO SECTION
7
SEVEN AS A WHOLE" to which I shall revert.
Leyds is a
cabinet maker by trade. At the relevant time he owned his own carpentry
business. It is not in dispute that on 11 February
1991, during the currency of
the policy, Leyds handed over the Mercedes to one Steven Mohlala. Leyds claimed
in evidence that Mohlala
was a friend of his whom he occasionally employed to do
odd jobs. He testified that Mohlala asked to borrow the Mercedes to go to
a
funeral in Harare. Leyds agreed to lend him the Mercedes on condition that it
was returned within seven days and that Mohlala would,
while in Harare, collect
some samples of wood from a friend of Leyds and bring them back with him. It
appears from the evidence that
Mohlala never went to Harare, but to Swaziland
and then to Maputo. He never returned the Mercedes to Leyds, and it ultimately
became
common cause between the parties that he had stolen it. It was this theft
that gave rise to Leyds's claim under the policy. Fedgen
claims that the
Mercedes,
8
at the time it was stolen, was being used for business purposes contrary to
the provisions of the policy and that it is accordingly
entitled to avoid
liability for Leyds's loss.
A number of factual and legal issues were debated on appeal in relation to
Fedgen's defence. These included matters such as when did
Mohlala form the
intention of stealing the Mercedes; for what purpose was it being used, or to be
used, at the time; whose purpose
determined such use - that of Leyds or that of
Mohlala? However, it is not necessary to reach a conclusion on these issues. In
my
view the appeal can be decided on the basis that, on a proper interpretation
of the policy, liability on the part of Fedgen exists
for the loss resulting
from the theft of the Mercedes irrespective of the purpose for which it was
being used at the time it was
stolen.
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
9
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 & 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 354C-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 obligations, and the extent to which an insurer's liability
is
limited, must be plainly spelt out. In the event of a real ambiguity the
10
contra proferentem
rule, which requires a written
document to be construed against the person who drew it up, would operate
against Fedgen as 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).
Whether the effect of clause (d) of the "Declaration" (quoted above) is
automatically to incorporate the whole of the application
into the contract of
insurance between Leyds and Fedgen is a matter open to some doubt. However, I am
prepared to accept, for the
purposes of the present appeal, that clause (d) does
have that effect. I shall also accept that the sub-section "Class of Use",
despite
being ruled through, is part of the application. That being so, on a
proper interpretation of the application Leyds warranted that
the Mercedes was
to be used for social, domestic and pleasure purposes as well as journeys
between home and business, but not for
business calls or farming.
11
It was always open to Fedgen to decide what cover to grant and
what liability to exempt itself from. Nothing precluded it from granting
indemnity for loss occasioned by theft irrespective of the circumstances (for,
after all, there need not be any correlation between
use and theft, as the risk
of theft would not ordinarily depend upon the purpose for which a vehicle is
being used), while limiting
liability in the case of collision damage to a
particular class of use. The issue is therefore what did the policy cover, for
Leyds,
by paying the premium, accepted the cover offered by the policy. The
answer depends upon the proper interpretation of the relevant
provisions of the
policy, having regard to the principles enunciated above.
Clause 3 of the Preamble (quoted above) states in clear terms that Fedgen
will indemnify Leyds against loss giving rise to a claim
"under any Insurance
Section specified in the, Schedule ...." Turning to the Schedule, one finds that
it applies to motor vehicles
12
under section seven of the policy. In the Schedule the "Scope
of Cover" is given as "Comprehensive". On a proper reading of section
seven
"Scope of Cover" only relates to the three categories "Comprehensive", "Third
Party Fire and Theft" and "Third Party only".
In my view it neither expressly
nor by necessary implication incorporates "Description of Use" which follows
immediately upon it.
Confirmation of this, if required, is to be found in the
application where "Scope of Cover" clearly relates only to the three categories
in question. In terms of section seven "Comprehensive" means that sub-sections 1
to 3 apply and that subsection 1 covers "loss or
damage" other than that
excepted (none of which exceptions is of application in the present matter).
Subsection 1 confirms that the
vehicle (the Mercedes) is insured against "loss
or damage". No qualification attaches to those words in subsection 1 so they
must
mean (in the context of the present matter)
all
loss or damage
(including theft) subject to the stated exceptions.
13
Such loss or damage is not coupled to any description or limitation
of
use. Nor does the Schedule in any way qualify or limit liability
with
reference to any description of use. On a proper interpretation
of the policy, and subject only to any restriction on liability
expressed elsewhere in the policy, Fedgen would thus be liable to
compensate Leyds for the loss of the Mercedes, if stolen,
irrespective of the purpose for which it was being used immediately
before or at the time of the theft.
The position in the present matter should be contrasted with
that in
Samuelson v National Insurance and Guarantee Corp Ltd
[1986] 3 ALL ER 417(CA).
The limitation of use in the policy
there under consideration was:
"Use only for social, domestic and pleasure purposes EXCLUDING use for hiring
or in connection with any trade, business or profession."
Paragraph l(a)(i) of that policy provided:
"The Corporation shall not be liable in respect of 1. any
14
accident injury loss or damage occurring whilst any motor vehicle in connection
with which insurance is granted under this Policy
is (a) being used otherwise
than in accordance with the 'Limitations as to use' described in the Schedule
..."
In
Samuelson's
case the "Limitations as to use" were
apparently described in the Schedule, and liability for loss (which would
include theft) was
specifically coupled to them. That, as I have pointed out, is
not the case here.
Faced with this situation Mr Mullins, who appeared for
Fedgen,
was obliged to resort to the exclusionary provision
contained in sub-section 3, where the only qualification of liability
in relation to description of use is to be found. It is headed
"SPECIAL EXCLUSIONS TO SECTION SEVEN AS A WHOLE"
and provides as follows:
"This Section does not insure any loss damage liability medical expenses or
compensation
resulting from an accident
occurring
(i) outside the territorial limits of the Republic of South
Africa or Lesotho Botswana Swaziland
15
Namibia Zimbabwe or any homeland or state formerly within the border of the
Republic of South Africa that has been or may in the
future be granted
independence by the Republic of South Africa except while the Insured vehicle is
in transit between any of these
territories
(ii) as the result of the Policyholder being under the influence of intoxicating
liquor or drugs
(iii) in connection with the use of any vehicle by the Policyholder or of an
insured vehicle by anyone else with the Policyholders
permission if not properly
licensed to drive such vehicle in accordance with the laws of the territory
concerned but this exclusion
shall not apply if any law or regulation applicable
to learner drivers is being observed or if the licence is not valid at the time
purely because of a failure to renew it provided that the driver concerned has
held a valid renewable licence and is not disqualified
from renewing
it
(iv)
in connection with the use of an insured vehicle by
the Policyholder or by any one else with his or her permission otherwise than
in
accordance with the description of use
16
(v) while the vehicle involved is being used with the Policyholders permission
by anyone known by him/her to be under the influence
of intoxicating liquor or
drugs." (My emphasis.)
This
exclusionary provision only applies to loss, damage, etc resulting from "an
accident". No reference is made to theft. In order
to bring the present matter
within the exclusionary provision Mr Mullins was compelled to argue that an
"accident", in the context
in which that word is used, includes theft. There are
cogent arguments against this being so.
As a perusal of Stroud's Judicial Dictionary : 5th Ed : pages 18-22 will
show, the word "accident" is one of very wide definition.
Its meaning depends to
a large extent upon the precise context in which it is used. The Concise Oxford
Dictionary : 6th Ed, defines
"accident",
inter alia
, as "1. Event that is
without apparent cause or unexpected .... 2. Unintentional act, chance,
misfortune; unlucky event, esp. one
causing injury or damage". Black's Law
17
Dictionary :5th Ed, at 14 defines "accident", in relation to accident
insurance policies, as "a more comprehensive term than 'negligence',
and in its
common signification the word means an unexpected happening without intention or
design" (cf
Fenton v J Thorley & Co Limited
1903 AC 443
(HL) at 453).
It follows that an accident does not encompass a deliberate act causing loss or
damage (cf
Griessel NO v SA Myn en Algemene Assuransie Edms Bpk
1952(4)
SA 473(1) at 477H). Given that theft is an intentional act it would not fall
within the ordinary and popular meaning of "accident".
The context within which the word "accident" appears also militates against
an interpretation which includes theft. The terms of the
exclusionary provision
(especially (ii), (iii), (iv) and (v)) strongly suggest that the word "accident"
refers to a collision or
an event arising from, or directly related to, the
driving of a motor vehicle.
18
In any event, at best for Fedgen the word is ambiguous. In keeping with the
relevant principles of interpretation, it falls to be
interpreted against
Fedgen, within whose power it lay, as drafter of the policy, to make its meaning
clear. It must therefore be
construed not to apply to theft. This renders it
unnecessary to consider whether the Mercedes, when it was stolen, was being used
"otherwise than in accordance with the description of use" in terms of (iv) of
the exclusionary provision. Fedgen's liability to
indemnify Leyds for the theft
of the Mercedes was not linked to any limitation of use or otherwise excluded
under the provisions
of the policy. Leyds was accordingly legally entitled to be
indemnified by Fedgen for his loss arising from the theft of the Mercedes.
At the commencement of the trial the parties agreed that the value of the
Mercedes at the time it was stolen was R25 500,00 and that,
if held liable under
the policy, Fedgen would compensate Leyds in that amount subject to any amounts
which fell to be
19
deducted in terms of the "Table of Deductibles" ("the Table")
which forms
part of the policy. Leyds conceded that an amount of
R300,00 fell to be
deducted. The only remaining issue was
whether there should be a further deduction in terms of clause 2(vi)
of
the Table. The learned trial judge held that Fedgen was not
entitled to any further deduction. He accordingly awarded Leyds
the sum of R25 200,00.
Clause 2(vi) of the Table provides for a deduction equal to
"10%
of the gross claim with a minimum of R400" in respect of
"loss or damage caused by or resulting from theft or attempted theft
of the insured vehicle unless fitted with an anti-theft device
approved by the Company ...." At the time of the theft the
Mercedes was not fitted with an anti-theft device of any description.
This emerges clearly from the following passage in the evidence of
Leyds under cross-examination:
"Dalk kan u dan behulpsaam wees om te se, was hierdie Mercedes Benz met 'n
teendiefstalmiddel voorsien?
20
Nee, nie op daardie stadium nie.
En op 11 Februarie 1991, toe mnr Mohlala uit die erf uitry met die Mercedes, net
dit op daardie stadium 'n teendiefstalmeganisme
opgehad? —
Nee."
The preconditions for the application of clause 2(vi) are
therefore present - loss resulting from theft and the absence of an anti-theft
device. On the clear wording of clause 2(vi) Fedgen was entitled to the
deduction of a further R2 550,00 i.e. 10% of the agreed value
of the Mercedes,
which constituted the gross claim. The amount awarded to Leyds therefore falls
to be reduced to R22 650,00, and
the appeal succeeds to that extent.
The only remaining issue relates to the costs of appeal. In view of the
reduction in the amount to be paid by it Fedgen has enjoyed
some (albeit very
limited) success on appeal. However, such success can hardly be termed
substantial. Fedgen failed on the main issue
to which most of the time on
appeal, and virtually the whole trial, was devoted. In fact, the only evidence
relevant
21
to the further deduction issue was that of Leyds quoted above;
and
no more than about ten minutes in all was spent on appeal debating
the
matter. It may well be that had Fedgen confined its appeal to
the deduction
issue, Leyds would have conceded the point. Be that
as it may, the measure of
Fedgen's success does not justify it being
awarded any of its costs of appeal. Indeed it was Leyds who, by
successfully contesting what was by far the major issue on appeal,
enjoyed substantial success. This entitles him to at least the bulk
of his costs. The costs order, however, should reflect some
recognition of Fedgen's limited success, so that it should not be
ordered to pay all Leyds's costs of appeal. In all the circumstances
it would be appropriate to order Fedgen to pay 90% of such costs.
In the result the following order is made:
1. The appeal succeeds to the limited extent that the amount awarded by the
trial Court is reduced from R25 200,00 to R22 650,00.
The remaining orders of
that Court stand.
22
2. The appellant is ordered to pay 90% of the respondent's costs of
appeal.
J W SMALBERGER JUDGE OF
APPEAL
Hefer, JA) FH Grosskopf, JA) Nienaber, JA) concur Van den Heever, JA )