Napier v Barkhuizen

• Jurisdiction: South Africa
• Judge: Mpati DP, Cameron JA, Van Heerden JA, Mlambo JA and Cachalia AJA
• Judgment Date: 30 November 2005
• Citation: 2006 (4) SA 1 (SCA)
• Docket Number: 569/04
• Hearing Date: 03 November 2005
• Counsel: A C le Roux SC (with P G Cilliers) for the appellant. L S de Klerk for the respondent.
• Court: Supreme Court of Appeal

Cameron JA:

[1] Are time-bar clauses in short-term insurance contracts unconstitutional? In the Pretoria High Court, De Villiers J ruled that B they are. The respondent (plaintiff) insured his 1999 BMW 328i motor vehicle for R181 000 with a syndicate of Lloyd's underwriters of London, represented in South Africa by the appellant (defendant). [1] The policy provided: C

'Claims procedure and requirements

5.2.5 If we reject liability for any claim made under this policy we will be released from liability unless summons is served . . . within 90 days of repudiation.'

On 24 November 1999, the vehicle was involved in an accident. The plaintiff informed the insurer of the incident timeously, but on D 7 January 2000, it rejected liability. The plaintiff served summons on the defendant more than two years later, on 8 January 2002.

[2] The defendant's plea relied on the time-bar clause. The plaintiff's replication invoked the Constitution. He pleaded that the E time-bar constituted a limitation period which was contrary to public interest on the grounds that it afforded the insured an unreasonably short period after repudiation to institute action; it was a drastic provision which infringed the common law right of an insured to invoke the courts; it served no useful or legitimate purpose; and, in breach F of s 34 of the Bill of Rights, it deprived the insured of his right to have a justiciable dispute decided in a court of law.

[3] These facts are easy to state since the parties set them out in an agreed statement of case to enable the High Court, in a separation of issues, to rule on the validity of the defendant's G reliance on the 90-day time-bar. De Villiers J upheld the plaintiff's contentions. He found the time-bar unenforceable because it conflicted with s 34 of the Constitution:

'Access to courts

Everyone has the right to have any dispute that can be resolved by H the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.'

[4] The learned Judge found that the rights in s 34 applied not only against the State, but horizontally in contractual relations I between

Cameron JA

private persons. [2] He reasoned that without the clause the plaintiff would have had three years under the A prescription legislation to institute his action. [3] He considered that any limitation of this period of itself required constitutional justification. In his view, s 34 grants a contracting party a right of access to court in respect of any dispute arising from the contract. By corollary, he ruled, the provision imposes on the other party a duty not to obstruct B access to court. Applying Mohlomi v Minister of Defence 1997 (1) SA 124 (CC) (1996 (12) BCLR 1559); and Moise v Greater Germiston Transitional Local Council: Minister of Justice and Constitutional Development Intervening (Women's Legal Centre as Amicus Curiae) 2001 (4) SA 491 (CC) (2001 (8) BCLR 765), he held that the right of access to court is foundational to our society, and that C (applying a limitations analysis) the insurer had failed to justify the 90-day time-bar on instituting action.

[5] This reasoning raises two questions. The first is the extent to which Bill of Rights provisions apply between contracting parties. The second is whether, if they do apply, s 34 renders the time-bar unconstitutional. D

Constitutional supervision of the creation and enforcement of contractual rights

[6] The High Court's approach entailed the significant presupposition that contractual terms are subject to constitutional rights. It is important to emphasise that this general premise is E correct. In Brisley v Drotsky 2002 (4) SA 1 (SCA) at paras [88] - [95], the essential principles of which were endorsed in Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA), this Court affirmed that the common law of contract is subject to the Constitution. This means that courts are obliged to take fundamental F constitutional values into account while performing their duty to develop the law of contract in accordance with the Constitution.

[7] Brisley rejected the notion that the Constitution and its value system confer on Judges a general jurisdiction to declare contracts invalid because of what they perceive as unjust, or power to G decide that contractual terms cannot be enforced on the basis of imprecise notions

Cameron JA

of good faith (at para [93]). Yet it reasserted that (in addition to proscribing fraud) the courts will invalidate A agreements offensive to public policy, and will refuse to enforce agreements that seek to achieve objects offensive to public policy. Crucially, in this calculus 'public policy' now derives from the founding constitutional values of human dignity, the achievement of equality and the advancement of human rights and freedoms, B non-racialism and non-sexism.

[8] Though this Court in Afrox rejected a constitutional challenge to a clause excluding liability for negligently caused injury in a private hospital's contract of admission (to the dismay of many commentators), [4] it affirmed that inequality of bargaining power could be a factor in C striking down a contract on public policy and constitutional grounds. The problem the Court found was that 'there was no evidence whatsoever to indicate that when the contract was concluded [the plaintiff] was in fact in a weaker bargaining position' than the hospital (at para [12]; my translation). In Johannesburg Country Club v Stott and Another 2004 (5) SA 511 (SCA) at para [12], the majority D considered that contractual exclusion of liability for negligently caused death could be unconstitutional.

[9] Afrox turned on the evidence presented there, and here too we are obliged to decide the constitutional challenge on the facts before us. Those the parties' lawyers captured for the purposes E of the proceedings in a terse statement of case (conveyed in para [2] above). That is the sole evidence before us. This has a twofold impact on the proceedings. First, the evidential basis from which we can infer whether constitutional values have been impeached is extremely slim.

[10] Thus, though the learned Judge found that the contract's F time-bar was unfair, this conclusion does not present as self-evident, and on the evidence I cannot find any warrant for it. An insurer has an undeniable interest in knowing within a reasonable time after repudiating a claim whether it must face litigation about it. Whether 90 days is reasonable for this purpose the evidence is simply too G meagre to allow us to assess. Although the period is much shorter than the statutory prescription period of...