REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO:  A5052/2010
DATE:08/05/2012

In the matter between:

THE HOLLARD INSURANCE COMPANY LIMITED                           Appellant

and

UNITRANS FUEL AND CHEMICAL (PTY) LIMITED              First Respondent

KLIPSTONE TRANSPORT (PTY) LIMITED                       Second Respondent
______________________________________________________________ 

J U D G M E N T
______________________________________________________________ 

VICTOR J

[1] 	The appellant is the insurer of a Mercedes Benz truck tractor with registration number HJB 422 GP, “the truck tractor”. A collision occurred between it and the first respondent’s vehicle. 
[2]	The matter first came before Gildenhys J in May 2006.  The parties in those proceedings were Snyman Vervoer (represented in that trial by the liquidator) and Unitrans Fuel and Chemicals Pty Ltd, the first respondent in these proceedings. The only issue for determination was the question of negligence.
 
[3]	On 18 May 2006 the respondents were successful in asserting that Snyman Vervoer’s driver was negligent.  The appellant was not a party to those proceedings. Of importance is the agreement noted by Gildehuys J in his judgement that the parties agreed the vicarious liability of their respective drivers and only the question of negligence had to be determined.  In the result,  the question of vicarious liability was not a justiciable issue in that trial.

[4]	Based on that victory the respondents instituted an action against the appellant on the basis that the appellant was the insurer of the truck tractor and was therefore obliged to indemnify them as third parties arising out the negligence of the entity in liquidation being Snymans Vervoer. The trial came before the court a quo. The respondents’ assertion that the appellant was liable to indemnify them as a third party arising out of Snyman Vervoer’s insolvency was successful. 

 [5]	The appellant appeals that decision. The issues raised in the appeal can be crystallized into four issues: firstly whether the truck tractor was being driven by the driver of Snyman Vervoer on the order of the insured, Omnipact SA Investments 91 Pty Ltd “Omnipact” as required by the contract of insurance and secondly whether the contractual provisions of the insurance agreement had been complied with. Thirdly whether the appellant’s liability had been determined in the trial before Gildenhys J and thus the appellant was estopped on the question of vicarious liability by virtue of issue Estoppel or res judicata. Fourthly whether the provisions of Section 156 of the Insolvency Act No. 24 of 1936 (“the Act”) apply. 

[6]	On behalf of the appellant it was submitted that the evidence unequivocally demonstrated that the vehicle was not been driven on the order of Omnipact and that there had not been compliance with the terms of the insurance contract. 

INDEMNIFICATION BY INSURER IN CIRCUMSTANCES WHERE THE INSURED IS SEQUESTARTED

 [7]	It is trite law that an insurer can be held liable to a third party if the insured has been liquidated or sequestrated as the case may be. S 156 of the Insolvency Act provides that:

Whenever any person is obliged to indemnify another person in respect of any liability incurred by the insured towards a third party, the latter shall on the sequestration of the estate of the insured, be entitled to recover from the insured the amount of the insured’s liability towards the third party but not exceeding the maximum amount for which the insurer has bound himself to indemnify the insured. ’

 [8]	As stated in Unitrans Freight (Pty) Ltd v Santam Ltd 2004 (6) SA 21 (SCA) at para 7 
“[7] The section does not add to the contractual liability of an insurer. It merely allows a person who is not a party to the policy of insurance to recover directly from the insurer in particular circumstances. It entitles a person who has a claim against someone who is indemnified against such liability by an insurer to pursue the claim directly against the insurer if the estate of the indemnified person is sequestrated.”

 [9]	 Upon a proper application of s 156 of the Insolvency Act it is still necessary to show that there is a good claim in law against the insolvent and that the insurer is obliged in law to indemnify the insolvent entity against the claim. See Le Roux v Standard General Versekeringsmaatskappy BPK 2000 (4) SA 1035 (SCA) at para [7]. The sole benefit enacted by s156 of the Insolvency Act is to give a third party a direct right of action against the insurer. That is where the benefit ceases. 

 [10]	In Coetzee v Attorney's Insurance Indemnity Fund 2003 (1) SA 1 (SCA) para [20]), it was clearly held that the claimant would have to prove that the insured would have succeeded against the insurer in his claim for an indemnity.

 [11]	Heher JA  in Coetzee supra referred to the well established principles by Schutz JA in Woodley v Guardian Assurance Co of SA Ltd 1976 (1) SA 758 (W) at 759E - H and Van Schalkwyk  J in Canadian Superior Oil Ltd v Concord Insurance Co Ltd (formerly INA Insurance Co Ltd) 1992 (4) SA 263 (W) at 273H - 274B :
'What the third party can recover, however, and whether the third party's claim is of such a kind as is covered by the indemnity conferred upon the insured, are matters which have to be determined by reference to the contract of insurance. If the liability is not of the kind covered by the indemnity provided by the insurer, then, it stands to reason, there will be no liability upon the insurer to the third party. So also, if the liability is of a kind for which the contract of insurance makes provision subject to a condition, the insurer will only be obliged to pay if the condition has been fulfilled.'

[12]	The court a quo found that the truck tractor was being driven for and on behalf of an entity known as Snyman Vervoer CC (in liquidation) on the order of or with the permission of another entity known as Omnipact. This finding included on an acceptance of the judgement of Gildenhys J where the question of vicarious liability was not traversed as a justiciable issue. 

[13]	On a close analysis of the evidence in the court a quo I find that the evidence led in the trial in the court a quo was contrary to the finding that the insured vehicle was driven on the order of Omnipact. The evidence in this regard was neither vague nor unclear. 

[14]	Having stated the legal principles above one of the dispositive issues in this appeal is whether the lack of compliance with the provisions of the Contract of Insurance brings the Appellant’s liability within the provisions of S156 of the Insolvency Act.
 
COMPLIANCE WITH THE POLICY OF INSURANCE 

The Application of Section II Clause 2 of the Policy

[15] 	The relevant clause of the policy of insurance is to be found in clause 2 under section II and provides for payment for certain defined events as follows:

 	‘Liability to Third Parties

	Defined events

Any accident caused by or through or in connection with any vehicle described in the Schedule … shall become legally liable to pay in respect of

 …
 
(ii)	damage to property other than property belonging to the Insured or held in trust by or in the custody or control of the Insured …

The Insurer will also

…

2 	Indemnify (in terms of and subject to the limitations of and for the purposes of this section) any person who is driving or using such vehicle on the Insured’s order or with the Insured’s permission provided that

(a)	such person shall as though he were the Insured observe fulfil and be subject to the terms exceptions and conditions of this insurance insofar as they can apply.

(b)	such person driving such vehicle has not been refused any motor insurance or continuance thereof by any insurer.

(c)	indemnity shall not apply in respect of claims made by any member of the same household as such person.

(d)	such person is not entitled to indemnity under any other policy except in respect of any amount not recoverable thereunder. ’

	

The application of clause 13 of the Insurance Policy

[16]	 Of importance is the import of Clause 13 of the policy which provides:
 	‘No rights to other persons
	
Unless otherwise provided, nothing in this policy shall give rise to any person other than the insured. Any extension providing indemnity to any other person other than the Insured shall not give any rights of claim to such person, the intention being that the Insured shall claim on behalf of such person. The receipt of the Insured shall in every case be a full discharge to the Insurer.’

[17]	 In this case Omnipact was the insured and it is common cause that Omnipact did not lodge the claim on behalf of the respondents. The court a quo found that because Snyman Vervoer CC was placed under a winding-up order on 18 January 2001 that is before the date of the collision of 28 May 2003 and in view of the judgment obtained on 18 May 2006 by the first and second respondents against the liquidator of Snyman Vervoer CC the appellant in terms of section 156 of the Act was liable to indemnify the respondents in respect of the judgment and costs awarded in their favour.

[18] 	It is however clear from the evidence led in the court a quo that the truck tractor was not driven for and on behalf of Omnipact or its order. The respondents bore the onus to prove their case. It was unnecessary for the appellant to call any more witnesses than it did. Mr Pierre Cronje who was the transport manager of Omnipact testified. He stated that at all times he was the transport manager of Omnipact. As at the time of the collision the truck tractor was being rented by Omnipact who was insured by the appellant. At no time did Snyman Vervoer CC in liquidation drive the vehicle on the order of or with the permission of Omnipact.  The appellant was criticised for not calling the owner of Omnipact. There was nothing preventing the respondents from calling the owner. Cronje the transport manager’s evidence was not undermined on the above facts in any way. 

[19]	Snyman had been in liquidation some two years before the accident occurred. The vehicle was used for the delivery of bricks and to his knowledge none of the employees of Omnipact worked for Snyman Vervoer CC (in liquidation).  He was in charge of the truck tractor whilst employed as transport manager at Omnipact and had not been called to testify in the previous trial before Gildenhys J. He denied that Mr Nqiba was employed by Snyman Vervoer CC at the time of the collision.

 [20]	In the particulars of claim the respondents did not allege that Snyman Vervoer CC or any person driving or using the truck tractor at the time of the collision observed and fulfilled the terms, exceptions and conditions of the policy or that such person driving the vehicle in the truck tractor had not been refused any motor insurance or continuing thereof by any insurer or that such a person is not entitled to indemnity under any other policy. It is correct that the appellant admitted the terms of the contract and did not raise the non compliance with clause 2 of section 11 or non compliance with clause 13 of the contract.  Upon a proper construction of the plea it was not necessary for the appellant to raise the respondent’s lack of compliance with the procedure in the contract. The respondents had not asserted that they had complied with clause 2. In admitting the agreement which is but a segment of the respondent’s cause of action does not mean that the respondents don’t have to prove their compliance with the provisions of the contract see Le Roux and Coetzee supra. 

ISSUE ESTOPPEL

[21]	The respondents closed their case without leading any evidence in support of the allegations contained in their particulars of claim and relied instead on the judgment in the action before Gildenhys J  to prove that Snyman Vervoer CC was negligent and liable.

 [22]	The respondents relied on the argument that vicarious liability was established before Gildenhys J and therefore the question of liability could not be raised again. The issue had been determined and the appellant was estopped on the basis of issue Estoppel. Reliance for this proposition on Janse Van Resnburg NNO v Steenkamp 2010(1) SA 649 SCA is misplaced. The application of the principles of res judicata in the form of issue estoppel was discussed by Botha JA in Kommissaris van Binnelandse Inkomste v Absa Bank Bpk 1995 (1) SA 653 (A) ([1995] 1 All SA 517) at 666D - 670C as having its genesis in Boshoff v Union Government 1932 TPD 345. Greenberg J held that in order to uphold a defence of res judicata the cause of action need not be precisely the same in both actions.  The respondent sought to use the extension of the res judicata principle.

 [23]	Issue of Estoppel was also traversed in National Sorghum Breweries Ltd (t/a Vivo African Breweries) v International Liquor Distributors (Pty) Ltd 2001 (2) SA 232 (SCA) ([2001] 1 All SA 417). Olivier JA formulated the question as follows:	

'[3] The fundamental question in the appeal is whether the same issue is involved in the two actions: in other words, is the same thing demanded on the same ground, or, which comes to the same, is the same relief claimed on the same cause, or, to put it more succinctly, has the same issue now before the Court been finally disposed of in the first action? ' compare the  relevant facts of the two cases upon which reliance is placed for the contention that the cause of action (in the extended sense of an essential element) is the same in both actions.  

 [24]	The issue in the trial before Gildenhys J was limited to negligence and liability, the latter by agreement and in the second trial the issue of indemnity by the appellant arising out of the liquidation of Snyman’s Vervoer. These issues do not arise out of the same cause of action. In fact the issue of indemnity arises out of the terms of s 156 of the Insolvency Act and is completely disparate from the issue of negligence and vicarious liability. Heher JA in Janse Van Resnburg NNO was clear to outline line the basic requirements issue Estoppel:

'logic and equity will justify its application in appropriate cases'. While   that may be so, I think that any such application must depend on an understanding of its true foundations.”

[25]	The foundational facts relied upon by the respondents to support the question of issue Estoppel in these circumstances must fail. Vicarious Liability and indemnification are different causes of action and require different sets of facts for their proof. Nether logic nor equity dictate that this is an appropriate case for the application of issue estoppel.

CONTRADICTION BETWEEN THE PLEA AND REQUEST FOR FURTHER PARTICULARS 

[26] 	In the appellant’s plea it was denied that Snyman Vervoer CC was driving or using the vehicle on the order of Omnipact. The respondents did not file a replication. A confounding factor is the denial in the plea and the contradictory assertion in the appellant’s reply to a request for further particulars for trial where the driving of the truck tractor on the order of Omnipact was admitted.  This obviously contradictory stance should have alerted the parties to a problem. The problem could have been argued by way of special plea prior to the commencement of the trial but the parties must have been of the view that the trial could proceed and this would be cleared up later. The respondents are not justified in claiming prejudice in circumstances where they had an opportunity to consider their position.  It was never cleared up and the appellants’ case as presented in evidence was consistent with its plea namely that the truck tractor was not driven on the order of Omnipact. 

CONCLUSION 

[27] 	It is clear therefore that in order for the respondents to fall within the ambit of clause 2 of Section II of the policy they would have had to comply with the terms of the conditions of the policy and prove that the vehicle was driven on the order or with the consent of Omnipact. In addition it had to prove the other aspects of the contract, such as not having been refused motor insurance or continuance thereof and that Snyman Vervoer CC was not entitled to indemnity in terms of any other policy.  Finally, Omnipact would have had to institute the action.

[28]	In my view the respondents have failed to prove compliance with the terms of the policy.

[29] 	There was no evidence to demonstrate that the  truck tractor was being driven with the permission of Omnipact that the appellant was therefore liable to indemnify the respondents in respect of the judgment granted against Snyman Vervoer CC. The respondents could not overcome the undisputed evidence that Mr Nqiba was working and driving the vehicle for Omnipact and for no one else. 

 [30]	The respondents failed to plead and prove that the vehicle was being driven by ‘any person who is driving or using such vehicle on the Insured’s                order or with the Insured’s permission’.

 [31]	Omnipact did not institute the action for indemnification against the appellant as required by the contract of insurance. In Unitrans Freight (Pty) Ltd v Santam Ltd 2004 (6) SA 21 (SCA) it was  held that s 156 of the Act is clear that there did not have to be a contractual nexus between the third party and the insurer. The clause in Unitrans supra had a clause in exactly the same terms Clause 11 reads as follows: 
'Unless otherwise provided, nothing in this policy shall give any rights to any person other than the insured. Any extension providing indemnity to any person other than the insured shall not give any rights of claim to such person, the intention being that the insured shall claim on behalf of such person. The receipt of the insured shall in every case be a full discharge to the company.'

[32]	The Supreme Court of Appeal accepted the reasoning of the author of an article by A Chaskalson (later Chief Justice of South Africa) in the 1963 Annual Survey 382 in relation to a similar clause in a contract of insurance:
	
'There seems to be no reason in principle to prevent parties to a contract from prescribing a specific procedure to be adopted in regard to the form of action.  
Nor, if the clause can be construed in this way,  is there any reason for a court to decline to enforce the indemnity simply because it has been sued for in accordance with the prescribed procedure, which is different from the procedure normally adopted.'

 [33]	 Nugent JA IN Unitrans supra accepted that the clause could be interpreted in accordance with the express wording of the contract. 
‘But it does not follow from the fact that De Kroon acquired no rights that it could enforce against Santam that Santam was not 'obliged to indemnify' De Kroon as that expression is used in s 156. For clause 11 also makes it clear that Santam intended the indemnity contained in the extension clause to be capable of being enforced: its reservation was only that it should not be enforced by anyone but the insured’.

[34]	It is necessary for the court to determine that the claim can fail the policy that a claim might yet be defeated for want of compliance by the insured with the conditions of the policy.
 In Le Roux supra:
‘Daar is egter niks in die artikel om aan te dui dat daardie aanspreeklikheid slegs tydens die toestaan van die sekwestrasiebevel moet bestaan of dat die versekeraar nie daarna op sy kontraktuele regte kragtens die polis staat kan maak nie. Indien die appellant se vertolking van die artikel korrek is, sou dit beteken dat 'n eiser onder die artikel 'n beter reg teen die versekeraar verkry as wat die versekerde self geniet het. Dit sou ook beteken dat die versekeraar verhoed word om op sy kontraktuele regte te steun indien dit blyk dat die versekerde kontrakbreuk gepleeg het. So 'n vertolking is onhoudbaar en kon nooit die bedoeling van die Wetgewer gewees het nie.’

[35]	Based on the proper interpretation of s 156 of the Insolvency Act read together with the proper application of clauses 2 and 13 of the policy of insurance the appeal must succeed. 

[36]	The respondents have raised the question of the costs of the trial before Gildenhys J. A letter emanating from the appellants attorneys tendered to the costs of that trial. Those costs have now been taxed. It was submitted on behalf of the appellant that the tender was for settlement purposes only. The matter was clearly not settled. I agree with this interpretation. In the light of the result of this appeal there is no need to deal with those costs separately. The appellant was not a party to those proceedings and has succeeded in this appeal. I find that the appellants are not liable to pay those costs. 

The order I would make is:

The appeal is upheld with costs. The order of the Court a quo is set aside and the following is substituted: 
“The action is dismissed with costs.”  

_________________ 
CJ CLAASSEN 
JUDGE OF THE SOUTH GAUTENG HIGH COURT

I concur

__________________ 
H SULDULKER
JUDGE OF THE SOUTH GAUTENG HIGH COURT

I
_________________ 
M VICTOR
JUDGE OF THE SOUTH GAUTENG HIGH COURT.

Appearances

For Appellant 
Advocate E Wessels
Botha Sutherland Attorneys

For Respondents

Adv A Crutchfield
Du Randt Du Toit Pelser Attorneys