Cape Town Municipality and Another v Allianz Insurance Co Ltd

• Jurisdiction: South Africa
• Judge: Howie J
• Judgment Date: 02 December 1987
• Citation: 1990 (1) SA 311 (C)
• Court: Cape Provincial Division

Howie J:

This is a consolidated action in which the matter presently at issue is a special plea of prescription.

E First plaintiff, the Municipality of Cape Town, and second plaintiff, Land and Marine Salvage Contractors (Pty) Ltd, were jointly insured by defendant under a 'Contracts Works Insurance Policy', in terms of which defendant undertook to indemnify them in the sum of R6 100 000 against loss or damage to a sewage pipeline under construction by second plaintiff for first plaintiff at Green Point. Among the types of loss or F damage insured against was storm damage. The policy was issued in January 1982.

Damage to the pipeline was caused by two storms which occurred in May and July 1984 respectively, during the period for which the policy was intended to be in force. As a result, written communications followed between various spokesmen and agents of the parties concerning G re-instatement of the pipeline. In the course of those communications various references were made from time to time to a claim under the policy. No admission of liability by defendant having been forthcoming, the present litigation was commenced. Second plaintiff sued in March 1985 and first plaintiff in August 1985. The essential relief claimed by each plaintiff was confined to a declaratory order. That requested by H first plaintiff read:

'An order declaring defendant to be liable in law to indemnify plaintiff in terms of the policy in respect of all loss or damage to the works resulting from the said storm (sic).'

I Second plaintiff sought:

'An order declaring defendant to be legally liable in terms of the policy to pay to plaintiff all such loss or damage as it may have suffered as a result of the said storm (sic).'

Defendant pleaded on the merits in each action, denying liability under the policy. After further particulars to the plea were furnished all the pleadings were deemed closed in terms of Rule 29 of the Uniform J Rules of

Howie J

A Court. That was in 1986. First plaintiff's action was set down for trial hearing on 18 March 1987. Prior to that date, the legal representatives of first plaintiff and defendant agreed to a postponement of first plaintiff's action to an arranged date during the second half of 1987. Such arranged date was 20 October, when the consolidated action as set down for hearing on the present issue. During the time that proceedings B stood postponed defendant filed the following special pleas in each action on about 20 July 1987. I read them as subsequently amended at the hearing before me:

'1.

The events alleged to give rise to liability on the part of the defendant to indemnify the plaintiff in terms of the policy in respect of loss or damage to the works occurred on or about C 15/16 May and 1/2 July 1984.

2.

The plaintiff's right, if any, to an indemnity from the defendant under the policy in respect of the aforesaid loss or damage to the works constituted a debt in terms of the provisions of the Prescription Act of 1969.

3.

D By not later than 7 October 1984, the plaintiff had knowledge of the identity of the debtor, viz the defendant, and the facts from which such debt arose.

4.

Accordingly, prescription of the plaintiff's right to an indemnity under the policy in respect of the damage or loss.. E . commenced to run by no later than 7 October 1984.

5.

In the premises the plaintiff's right to an indemnity under the policy in respect of the aforesaid damage has prescribed.'

The amendent referred to substituted the date 7 October 1984 for the date 20 July 1984.

F In response to this special plea, plaintiffs filed replications during September 1987. But for the final ground of opposition contained in first plaintiff's replication, the replications are to all intents and purposes identical. As amended at the hearing, they read:

'1.

Ad Para 1 of the Special Plea.

(a)

G Plaintiff admits that the works insured in terms of the policy were damaged on 15/16 May and 1/2 July 1984.

(b)

Save as aforesaid, this paragraph is denied.

2.

Ad Para 2 :

(a)

This paragraph is denied.

(b)

H Plaintiff avers that defendant's obligation to indemnify plaintiff in terms of the policy in respect of the aforementioned damage to the said works constitutes a debt within the meaning of the Prescription Act, 1969.

3.

Ad Para 3 :

(a)

Plaintiff admits that as at 20 July 1984 it was aware of the identity of defendant.

(b)

I Save as aforesaid, this paragraph is denied.

4.

Ad Paras 4 and 5 :

These paragraphs are denied.

5.

Alternatively, and only in the event of it being held that prescription did begin to run on or before 20 July 1984 as J alleged,

Howie J

A plaintiff avers that service of the summons in the instant case interrupted prescription in accordance with the provisions of the Prescription Act, 1969.

In the alternative to the aforegoing, and in any event, plaintiff pleads as follows:

'6 (a)

Clauses 6 and 7 of the conditions of the policy provide as B follows:

'(6)

If any difference shall arise as to the amount to be paid under this policy, (liability being otherwise admitted) such difference may be referred to an arbitrator (or arbitrators) to be appointed by the parties concerned in accordance with the applicable statutory provisions in force. The C making of an award shall be a condition precedent to any right of action against the insurers to recover such amount in dispute.

(7)

If the insurer shall disclaim any liability for any claim for indemnity made by the insured, and the insured does not institute proceedings for an action or suit at law within 12 months of the date of such disclaimer the insurer shall be entitled to D assume that the claim has been abandoned and shall not thereafter be liable to make any payment whatsoever in connection therewith.'

(b)

It was an express, alternatively implied, alternatively tacit, term of the policy that in the event of plaintiff instituting proceedings for an action or suit at law for the E determination of the issue of defendant's liability under the said policy within 12 months of defendant disclaiming liability, the defendant's obligation, if any, to pay plaintiff any amount under the policy would not become due until such time as the Court had determined the issue of liability, or defendant had acknowledged its liability under the policy or, alternatively, the running of prescription in F respect of defendant's aforesaid obligation, if any, would be suspended pending the determination of the issue of liability.

(c)

Defendant has disclaimed liability for any claim for indemnity, as contemplated in clause 7 of the conditions of G the policy.

(d)

Plaintiff has, by the institution of the present proceedings, timeously instituted 'proceedings for an action or suit at law' within the meaning of clause 7 of the conditions of the policy.

(e)

Alternatively to subparas (c) and (d) above:

(i)

H It was a further express, alternatively implied, alternatively tacit, term of the policy that in the event of defendant disclaiming liability subsequent to... plaintiff instituting proceedings for the I determination of the issue of defendant's liability under the said policy (defendant having neither admitted nor denied liability prior to the institution of such proceedings) the defendant's obligation, if any, to pay... plaintiff any amount under the policy would not become due until such time as the Court had determined the issue of liability or defendant had acknowledged its J liability under the policy or, alternatively,

Howie J

A the running of prescription in respect of defendant's aforesaid obligation, if any, would be suspended pending the determination of the issue of liability.

(ii)

Defendant disclaimed liability in the plea dated 8 July 1986.

(f)

B In the premises:

(i)

defendant's obligation to pay any amount to plaintiff under the policy is not yet due;

(ii)

prescription has not begun to run in respect of defendant's aforesaid obligation to pay.'

From what I have said already it will be apparent that in view of the C amendment to the special plea, changing the date therein from 20 July 1984 to 7 October 1984, a similar change in date must be read into the replication.

The further ground relied on by first plaintiff, but not sought to be relied upon by second plaintiff, was as follows.

'In the further alternative, and in any event, plaintiff pleads as follows:

7.

Plaintiff avers that:

(a)

The action between the parties was duly enrolled on 18 March 1987.

(b)

Prior to the aforementioned date, the parties agreed:

(i)

E that the matter would be removed from the roll and that the hearing of the action would not proceed on the said date;

(ii)

that the matter would be enrolled on a date to be agreed between the parties;

(iii)

F that the date to be agreed upon as aforesaid would be a date after 20 July 1987.

(c)

On a date prior to 20 July 1987, the parties agreed that the hearing of the action would commence on 20 October 1987.

(d)

On 16 April 1987 the matter was duly enrolled for hearing on 20 October 1987.

8 (a)

G It was an implied term of the agreements pleaded in subparas 6(b) and 6(c) (sic) above that following the postponement of the hearing neither party would be entitled to make any claim or to raise any defence which it could not in law have made or raised prior to 18 March 1987.

(b)

H In the premises, defendant is precluded from raising the defence of prescription when it could not in law have done so prior to 18 March 1987.'

On 7 October 1987 an order was granted at second plaintiff's instance, pursuant to which its claim for a declaration was abandoned and replaced by a claim for the full sum insured, it being alleged that the fair...