S Z Tooling Services CC v SA Eagle Insurance Co Ltd

• Jurisdiction: South Africa

S Z Tooling Services CC v SA Eagle Insurance Co Ltd
1993 (1) SA 274 (A)

1993 (1) SA p274

Citation	1993 (1) SA 274 (A)
Court	Appellate Division
Judge	Van Heerden JA, Nestadt JA, Eksteen JA, Nienaber JA and Kriegler AJA
Heard	September 8, 1992
Judgment	September 18, 1992

Flynote : Sleutelwoorde B

Insurance — Liability of insurer — Time bar for legal action — Condition of 'multi-peril' policy requiring 'legal action' to be instituted within three months of rejection of claim — Insured C instituting unsuccessful motion proceedings for declaratory order within three-month period — Subsequently, and after lapse of three-month period, insured instituting action for recovery of loss suffered — 'Legal action' contemplated in condition not necessarily referring to proceedings for D enforcement of claim sounding in money — Initiation of motion proceedings constituting commencement of legal action directed at enforcement of rejected claim as, in event of such proceedings being successful, liability of respondent no longer in issue — Condition ceasing to be of application once legal action commenced within three-month period and insured at liberty to institute fresh proceedings after lapse of said period. E

Headnote : Kopnota

The appellant, insured with the respondent in terms of a 'multi-peril' policy, suffered damage to certain equipment and submitted a claim which was rejected by the respondent on 24 November 1988. The appellant instituted motion proceedings for a declaratory order in a Local Division F during January 1989. It sought an order declaring that the respondent was obliged to indemnify it under the policy in respect of the damage to the equipment. The Court dismissed the application. During June 1989 the respondent instituted action in the same Division. It again sought a declaratory order but also claimed payment of R460 000, alleging that that amount represented the cost of repairing the damaged equipment and attendant expenditure. The respondent contended that the appellant had forfeited its benefits under the policy because it had failed to institute G 'legal action' within three months after the rejection of its claim, as required by condition 6(c) of the policy. The Local Division, in dismissing the action, held that the motion proceedings for declaratory relief (which were instituted well within the three-month period) did not constitute 'legal action' for the purposes of condition 6(c). The Court reasoned that the only claim that the appellant could have made under the policy in respect of damaged equipment was one for payment of compensation and that clause 6(c) envisaged only one action, an action for the enforcement of the claim lodged with the insurer in terms of the policy. H That being so, only a process by which compensation for the loss suffered by the insured was claimed, that is payment of a monetary amount, could be a 'legal action'. The appellant appealed to the Appellate Division.

Held, that the 'legal action' contemplated by s 6(c) did not necessarily mean proceedings for the enforcement of a claim sounding in money: despite the requirement that the insured must as soon as practicable after the I happening of an event which could result in a claim 'submit full details in writing of any claim', it was quite feasible that an insured could submit a claim for an unspecified amount because he was not at that stage in position to quantify the loss, which claim could then be rejected by the insurer because of, for example, material misrepresentations made by the insured in the proposal form.

Held, further, that the appellant had sought to enforce its alleged rights under the policy when it instituted the motion proceedings: even though it could not obtain an executable judgment in its favour, the liability of J the respondent under the policy - as

1993 (1) SA p275

A opposed to the extent thereof - would no longer have been in issue had the appellant obtained the relief sought.

Held, further, that the initiation of the motion proceedings had thus in a very real sense constituted the commencement of legal action directed at the enforcement of the rejected claim.

Held, further, that inasmuch as the language of condition 6(c) was open to two more or less equally plausible constructions, the one being that favoured by the Court a quo and the other that set out above, the Court B had to incline towards upholding the policy: this would also be in accordance with the rule verba fortius accipiuntur contra proferentem.

Held, further, as to the contention that condition 6(c) barred the appellant from bringing fresh proceedings after the dismissal of its application and the lapse of three months from the date of the rejection of its claim, that the condition did not peremptorily stipulate that any legal action against the respondent had to be commenced within the said C period, nor did it profess to deal with the situation brought about by the failure of such an action: it merely prescribed the consequence of a failure to bring such action timeously, and therefore ceased to be of application once legal action was commenced within that period.

Held, further, that, unless the failure of the action gave rise to a plea of res judicata, the insured was at liberty to institute fresh proceedings. Appeal allowed.

D The decision in the Witwatersrand Local Division in S Z Tooling Services CC v SA Eagle Insurance Co Ltd reversed.

Case Information

Appeal from a decision in the Witwatersrand Local Division (Spoelstra J). The facts appear from the judgment of Van Heerden JA.

J Browde SC (with him A R Gautschi) for the appellant referred to the E following authorities: As to the ordinary grammatical meaning of the word 'action', see The Oxford English Dictionary 2nd ed vol 1; The Shorter Oxford English Dictionary 3rd ed vol 1; Chambers Twentieth Century Dictionary (1983); Webster's New Twentieth Century Dictionary 2nd ed; Words and Phrases Legally Defined 3rd ed vol 1; Stroud's Judicial Dictionary of Words and Phrases 5th ed vol 1; Black's Law Dictionary 5th F ed; Collett v Priest 1931 AD 290 at 300; Steelpark Estate Co Ltd v Vereeniging Town Council 1963 (3) SA 657 (T) at 663A-C; Ramano v Johannesburg City Council; Ngobise v Johannesburg City Council 1966 (2) SA 527 (W) at 528C-529B; Danzas Trek (Pty) Ltd v Du Bourg and Another 1979 (4) SA 915 (W) at 918G-920B; Noah v Union National South British Insurance Co Ltd 1979 (1) SA 330 (T) at 33A-D. As to whether the requirement of G condition 6(c) was in the nature of a resolutive condition, see Joubert (ed) Law of South Africa vol 12 para 217. As to whether the proceedings were 'continued' after the application was dismissed, see Cape Town Municipality and Another v Allianz Insurance Co Ltd 1990 (1) SA 311 (C) at 334H-J; Djaperides v Federal Insurance Corporation of South Africa 1955 (2) SA 396 (W) H . As to the stipulation contained in s 6(c) being a condition, see Hardy Ivamy General Principles of Insurance Law 5th ed at 276. As to whether the condition was fulfilled by the original application for a declarator, see Churchill v Standard General Insurance Co Ltd 1977 (1) SA 506 (A). As to implied terms, see Techni-Pak Sales (Pty) Ltd v Hall 1968 (3) SA 231 (W) at 236D-237C; Van den Berg v Tenner 1975 (2) SA 268 (A) I at...