Samancor Ltd v Mutual & Federal Insurance Co Ltd and Others

• Jurisdiction: South Africa
• Judge: Mpati AP, Streicher JA, Conradie JA, Cloete JA and Comrie AJA
• Judgment Date: 30 November 2004
• Citation: 2005 (4) SA 40 (SCA)
• Docket Number: 565/03
• Hearing Date: 01 November 2004
• Counsel: J J Gauntlett SC (with C E Watt-Pringle SC, J P van Niekerk and N J Graves) for the appellant. J R Gautschi SC (with B Berridge) for the respondents.
• Court: Supreme Court of Appeal

Conradie JA:

[1] Seven years ago, an emergency pump that was to deliver oil to the bearings of an alternator failed. Both had been supplied by IMS Engineering (Pty) Ltd. The alternator was damaged. It was insured under F two policies. One was called a 'Principal Controlled Construction Risks and Public Liability Insurance Policy', underwritten by the respondents ('the works policy'). The other was an 'Assets Insurance Policy', underwritten by Westchester Insurance Company (Pty) G Ltd ('the assets policy'). Under the assets policy, Westchester fully indemnified the appellant for the losses it had suffered as a result of the disablement of the alternator.

[2] The appellant's claim, the stated case tells us, is a claim pursued by Westchester by way of a subrogation action in the name of the appellant. The respondents' special plea to the claim avers that, having been fully indemnified under the assets policy, the H appellant cannot seek another indemnity from them for the same loss; nor can Westchester, by invoking a right of subrogation, recover from them what it has paid to the appellant: the only permissible claim, they maintain, would be one for a contribution by Westchester in its own name against the respondents as a co-insurer. I

[3] The respondents' point of view was upheld by the Court a quo (Malan J), who, after a scholarly review of English and Commonwealth decisions, concluded, on the facts of the stated case before him, that the obligations of Westchester and the respondents were secondary and J

Conradie JA

co-ordinate, and that the payment by Westchester discharged the respondents. [1] He upheld the A respondents' special plea to the locus standi [2] of the appellant, and consequently dismissed its claim with costs. It is with his leave that the appeal is before us.

[4] It is often said that payment by an insurer to his insured cannot be relied upon by a wrongdoer because it is res inter alios acta, which of course it is, but that does not seem to be B the best way of looking at it. A better way of looking at it is that proposed by Lord Hoffman in Caledonia North Sea Ltd v British Telecommunications Plc (Scotland) and Others [2002] 1 All ER (Com) 321 (HL) at para [92]:

'Mr Keene deduces from this and other similar statements the general rule that when two or more persons have separately agreed to C indemnify someone against the same risk, payment by one discharges the others. . . . It is certainly a general principle, as he says, that a person who has more than one claim to indemnity is not entitled to be paid more than once. But there are different ways of giving effect to this principle. One is to say that the person who has paid is entitled to be subrogated to the rights against the other person liable. The other is to say that one payment discharges the liability. The D authorities show that the law ordinarily adopts the first solution when the liability of the person who paid is secondary to the liability of the other party liable. It adopts the second solution when the liability of the party who paid was primary or the liabilities are equal and co-ordinate.' E

[5] As a typical secondary debtor, an insurer may be in a position to reclaim what it has paid. [3] Where it can and does exercise a right of subrogation, insurance law demands that it does so in the name of the insured. A right of subrogation can be exercised against a primary debtor, whether the latter is a delictual wrongdoer or a contractual defaulter. [4] But it cannot be exercised by one secondary debtor against another because F payment by the one discharges the other. A subrogated claim against a co-insurer would only be competent if the latter had undertaken primary responsibility for a debt. [5] Of course, the person whose wrongdoing brought the debt into existence would also bear primary responsibility, but nothing prevents one debtor from undertaking primary liability with another. Thus, a contractual indemnifier may competently undertake primary liability for a debt G created by another. Where such a (primary) indemnifier happens to be an underwriter it is in the same position as any other primary debtor. The insurer and the wrongdoer become co-principal debtors each primarily liable for the whole debt. In such a situation, a secondary insurer who pays an H

Conradie JA

insured's claim acquires a subrogated claim against the wrongdoer as well as against the insurer primarily liable. A A secondary insurer may also have a subrogated claim against an indemnifier where the liability of the indemnifier is not primary in the sense discussed above, provided that the liability of the indemnifier is not equal and co-ordinate with that of the secondary insurer. That was the position in the Caledonia North Sea case. The insurer of the operator of an oil platform that had been B extensively damaged in an explosion sought to be indemnified by contractors working for the operator on the oil platform for payments made in the settlement of death and injury claims in respect of these contractors' employees killed or injured in the disaster. These claims were made on the basis of indemnity provisions in the contracts entered C into between the operator and the contractors. As between the insurer which had undertaken secondary liability, and the contractor-indemnifier, the latter was primarily liable, although as between the indemnifier and the person responsible for causing the explosion, the latter was primarily liable. It is instructive to have regard to the English authorities that deal with when a claim based on D subrogation is competent and when a claim for...