Scottish Union & National Insurance Co Ltd v Native Recruiting Corporation Ltd

• Jurisdiction: South Africa
• Judgment Date: 10 April 1934
• Citation: 1934 AD 458

Scottish Union & National Insurance Co Ltd Appellant v Native Recruiting Corporation Ltd Respondent
1934 AD 458

1934 AD p458

Citation	1934 AD 458
Court	Appellate Division
Judge	Wessels CJ, Curlewis JA, Beyers JA and De Villiers JA
Heard	March 27, 1934
Judgment	April 10, 1934

Flynote : Sleutelwoorde

Insurance — Construction of policy — Policy covering loss by theft or fraud — Notice of loss to be given within certain time — Loss only discovered after lapse of time.

Headnote : Kopnota

Where a condition of a policy of insurance covering loss by theft of coin, embezzlement, pilfering or fraud provided that "the policy does not cover loss of which the company has not had notice within three days of the occurrence thereof."

Held, that a failure on the part of the insured to give notice within three days of the occurrence of a loss debarred a claim under the policy for such loss even though the insured had given notice within three days of his first becoming aware of the loss.

The principle to be applied in the construction of contracts more particularly contracts of insurance discussed.

The decision of the Witwatersrand Local Division in Native Recruiting Corporation Ltd. v Scottish and National Insurance Co. Ltd reversed.

Case Information

Appeal from a decision of the Witwatersrand Local Division (BARRY, J.)

The facts appear from the judgment of WESSELS, C.J.

J. V. Brink, K.C. (with him C.J. Blakeway), for the appellant: The first rule of construction is to take the literal meaning of the words used which is the ordinary and natural meaning of the parties to the agreement. See Halsbury's Laws of England (Hailsham ed.), Vol. VII, para. 448. The clause in question has a plain and unambiguous meaning. See Welford on Accident Insurance (2nd ed.), pp. 113, 186 and 359-360.

The literal meaning can only be rejected if it be shown that the parties must necessarily have intended some other meaning; such a meaning could only be arrived at in the present case by importing additional words. The principle on which a Court departs from the literal meaning of a contract is that it is obvious that both the parties could not have intended that meaning, but must necessarily have intended the other meaning which the Court adopts. See Halsbury's Laws of England (Vol. VIII), para. 451, p. 322. The same rules of construction apply to insurance as to other contracts. See Halsbury's Laws of. England (Vol. VII), para. 455.

As to the meaning of the condition, see North Eastern Railway

1934 AD p459

Co. v Lord Hastings (1900, A.C. 260). It is not enough for respondent to show that the literal construction may conceivably on occasion operate harshly on him. He must show absurdity or incongruity.

Cohen v Rapidol Ltd. (1933 AD 137), is authority for the proposition that if to imply a condition in a written contract would create a hardship on one party, then it cannot be implied.

The court below erred in applying the decision in Trippe v Provident Fund Society (22 American L.R.A. 432). It is distinguishable, as the policy was in somewhat different form and the class of risk insured against was quite different. It is difficult to reconcile the decision with cases in the British Courts - namely, Gamble v Accident Insurance Co. (4 I.R.C.L. 204); Cawley v National Employers Accident Assurance Co. (1 T.L.R. 255); and Cassel v Lancashire & Yorkshire Co. (1 T.L.R. 496), which were quoted in Trippe's case. See also Welford on Accident Insurance, pp. 111, 195 and the cases there cited.

If the meaning of the clause is ambiguous and reasonably capable of two meanings, then the construction which the parties themselves placed on it is evidence of the meaning intended.

The following are authorities on what is deemed to be ambiguous: Richter v Bloemfontein Town Council (1922, A.D at pp.59-60, 70); Halsbury's Laws of England (Hailsham ed.), vol. X, sec. 343, and Wireless Telegraph Co. of SA Ltd. v Dougall & Munro Ltd. (1927, C.P.D at p. 386).

P. Millin, K.C. (with him H. J. Clayden), for the respondent: Where to read a contract in its literal sense would lead to some absurdity or some repugnance or inconsistency with the rest of the contract or to something which from the instrument as a whole it can clearly be gathered the parties could not have intended, then a Court of law is justified in departing from the literal meaning of the words so as to give effect to the true intention of the parties. See Rex v Venter (1907 T.S. 910 at pp. 913-4, 919-21); Joffe v Friedman (1909 T.S. 775 at p. 785); Gravenor v Dunswart Iron Works (1929 AD 299 at p. 303); Halsbury's Laws of England (2nd ed.), vol. 10, sec. 318, pp. 253, 254. the rule applying to legislative provisions applies to contracts too. It is applied to insurance policies in order to avoid defeating their object and rendering them practically illusory. See Cornish v Accident Insurance Co. (23 Q.B.D at pp. 456, 457); Welford on Accident

1934 AD p460

Insurance (2nd ed.), pp. 67, 71, 195 Note u. The rule has been applied to conditions similar to those in the present case in Trippe v Provident Fund Society (supra); Wolverton v Fidelity & Casualty Co. of New York (16 L.R.A. N.S. 400 at p., 403); Annotation in 76 A.L.R at pp. 81, 82, 84-5); Haines v Canadian Railway Accident Insurance Co. (English and Empire Digest, vol. 29, No. 3182, p. 402); Gill v Yorkshire Insurance Co., a Canadian case the facts of which are given in Welford on Accident Insurance, p. 195, Note u.

There is no question here of implying terms or of ambiguity, but merely of construction.

The characteristic of the crimes, fraud, embezzlement and pilferage and all forms of theft is that they are secret and that time must necessarily elapse before their discovery. On appellants' construction of the policy the insurance would thus be for the most part illusory. Gamble v Accident Assurance Co. (supra), is criticised in May on Insurance (4th ed., sec. 465, p. 1098). Welford on Accident Insurance, p. 195, explains the basis of that decision. In Cawley v National Employers (supra), the construction of the condition was not argued; it was admitted that no notice had been given as required.

In Cassel v Lancashire & Yorkshire (supra), the decision turned on the meaning of "accident." It was clear that the insured knew of the accident at the time it happened. But, even if these cases are in point, the Court should take the wider view. The Court will follow American cases. See Littlejohn v Norwich Union Insurance Co. (1905, T.H at p. 383).

Brink, K.C., in reply: The Court will only import what the parties have not said if they obviously intended it. See Halsbury's Laws of England, Vol. III, secs. 448, 451.

Cur adv vult.

Postea (April 10th).

Judgment

Wessels, C.J.:

The appellant company entered into an insurance contract with the respondent corporation by which it undertook upon the payment of a yearly premium of £15 to insure the respondent corporation against loss arising from the theft of coin, embezzlement, etc., up to an amount of £3,000. During the currency of the policy one Harold Bowes, an employee of the

1934 AD p461

Wessels, C.J.

respondent company at Matatiele, stole or embezzled from the Native Recruiting Corporation a sum of £944 13s. 2d. of this amount £700 was stolen or embezzled between September 1st, 1931, and April 28th, 1932, and the sum of £244 13s. 2d. between 28th April, 1932, and June 16th, 1932. The latter amount is covered by an amended contract in which the respondent was given the right to give notice within three days after the occurrence of loss becomes known to the respondent. The Native Recruiting Corporation instituted action in the Witwatersrand Local Division for the whole amount of the loss. No plea was then filed, but the Court was petitioned by the appellant to decide a point of law which arose out of the declaration, viz, whether the defendant (appellant in this Court) is liable to pay the loss of £700 occurring before the 28th April, 1932, as notice of such loss was not given within three days of its actual occurrence. Respondent agreed to this procedure, and the point of law was argued before BARRY, J., who decided it in favour of the Native Recruiting Corporation. As parties were anxious to bring the decision of BARRY, J., before this Court on appeal but as doubts arose whether this could be done unless a final judgment had been pronounced, pleadings were filed and the matter set down before GRINDLEY-FERRIS, J., who followed the ruling of BARRY, J., and gave judgment in terms of the declaration for £944 13s. 2d. with interest at 6 per cent. a tempore morae and costs of action. It is this judgment which is brought before us on appeal as regards £700: liability for £244 13s. 2d. having been admitted. In fact, therefore, we have to enquire into the correctness of the judgment of BARRY, J.

The material facts upon which this judgment depends are as follows: -

1. The Native Recruiting Corporation asked the appellant to...