IN THE HIGH COURT OF SOUTH AFRICA /ES
(TRANSVAAL PROVINCIAL DIVISION)
CASE NO: 31369/2005
IN THE MATTER BETWEEN:
NKAKI SIDWELL MATLALA PLAINTIFF
MUTUAL & FEDERAL INSURANCE COMPANY LTD DEFENDANT
Introduction and background
 The plaintiff, as insured, claims indemnification from the defendant, as insurer, in
terms of a certain short term insurance policy issued by the latter in favour of the
 The claim flows from damage caused to the plaintiff's 1999 model Mercedes
Benz S320 motor vehicle in a collision with a stray animal which occurred on 28 May
 The quantum of the damages has been agreed between the parties in an amount of
 It is common cause that the defendant had been, from time to time, issuing short
term insurance policies to the plaintiff from about the year 2002.
 The insurance history of the plaintiff with the defendant had been a somewhat
turbulent one. Non-payment of premiums was not an uncommon occurrence. Policies
had been cancelled before and replaced with new policies.
 It is common cause that, at least immediately before May 2005 when the collision
occurred, the plaintiff's Mercedes Benz was insured by the defendant under a so-called
"Motor Alone" policy no 78062763MA ("the policy").
 The issue to be decided is whether or not the plaintiff enjoyed cover in terms of
the policy on 28 May 2005. It is common cause that the insurance premium for May
2005 was not paid by the plaintiff.
General Condition 7 of the Policy Wording
 At the root of the dispute lies the wording of General Condition 7, and the
question of how it should be interpreted.
 It is convenient, in my view, to quote the wording of General Condition 7 before
turning to the evidence and legal argument submitted by counsel.
Mr Geyser appeared for the plaintiff and Mr Mills SC appeared for the defendant.
 General Condition 7 reads as follows:
7.1.1 If the premium for this policy is payable annually this
policy or any section may be cancelled
126.96.36.199 by you at any time given in writing and we will be
entitled to retain the customary short term premium
or minimum premium
188.8.131.52 by us by thirty days notice given in writing to you at your last known address and
we will retain a pro rata premium.
7.1.2 If the premium for this policy is payable monthly this
policy or any section may be cancelled
184.108.40.206 by you at any time given in writing and we will be
entitled to retain the customary short-term premium
or minimum premium
220.127.116.11 by us by thirty days notice given in writing to you at your last known address and
we will retain a pro-rata premium.
7.2 PREMIUM PAYMENT
7.2.1 ANNUAL POLICY
18.104.22.168 premium is payable on or before inception date or
renewal date as the case may be. We shall not be
obliged to accept premium tendered to us after 15
days from inception date or renewal date as the case
7.2.2 MONTHLY POLICY
22.214.171.124 if the premium is not paid on the date that it was
due to be paid
126.96.36.199.2 for any reason other than as
described in 188.8.131.52.1 we will redebit
on the 15th of that month and should
the outstanding premium not be paid
when redebited, the policy will be
cancelled from the date the first
unpaid premium was due to be paid."
 It is common cause that the premium was payable, not only monthly, but also
monthly in advance.
 When completing the proposal form providing for the commencement date of
1 June 2004, the plaintiff elected the applicable method of premium payment to be
"monthly debit order". Another option offered was "annual policy" which was not
 Above his signature as proposer, the plaintiff certified the following:
"Herewith I confirm receipt of the POLICY WORDING and undertake
to study it carefully. I will adhere strictly to the underwriting criteria and
I agree that no cover will be in force until such time that I comply with all
the underwriting criteria as laid down by the Underwriters. Furthermore
I accept that in the event of a claim, the average of the sum insured and the
replacement value will apply to the claim value."
 Pursuant to the plaintiff's aforesaid proposal, the defendant issued the relevant
insurance schedule under the aforesaid policy number and displaying the personal
particulars, including the postal address, of the plaintiff. The Mercedes Benz was
included in the schedule. The following inscription as to the insurance period is,
in my view, of importance:
"Cover effective from 01/06/04 to 30/06/04 and any subsequent period for
which the applicable monthly premium has been paid."
This schedule was signed by the plaintiff on 10 June 2004.
 Finally, returning to the wording of General Condition 7, it was testified on behalf
of the defendant, and not disputed, that the situations described under
"7.1 CANCELLATION" and "7.2 PREMIUM PAYMENT" are entirely different:
in the first instance either party can simply elect to cancel. The cancellation need
not be inspired by, for example, failure to pay a premium. It was testified on
behalf of the defendant that such a "7.1 CANCELLATION" is normally decided
upon by the defendant insurer where the insured is a so-called "multi claimant"
and the insurance history reflects an unfavourable "loss ratio" which is a situation
where claims paid out exceed premiums collected by more than 70%. This is
different from the "7.2 CANCELLATION" where cancellation flows from failure
to pay a premium. The latter is the state of affairs falling to be interpreted and
decided in the context of this particular case.
 Most of the facts are common cause, as will be illustrated below, and the case
essentially involves an interpretation of the insurance agreement. Consequently,
I do not propose dealing with the evidence at length.
 The plaintiff was the only witness in support of his own case. By referring to the
dates of various insurance schedules for previous years, he said that he was under the
impression that the policy was "continuously in force". By this he meant that he enjoyed
covered "from signature for a year until another renewal". This evidence was
unconvincing and unsubstantiated. I did not understand it to be relied upon with any
force by the plaintiff's counsel.
 When referred to the policy document (running into some forty pages) the
plaintiff said that he "didn't recall" getting such a document before submitting the claim.
 He denied receiving a cancellation notice as intended by the provisions of General
Condition 184.108.40.206. I have already pointed out that condition 7.1 does not apply to this
 He denied receiving "a notice" as intended by General Condition 220.127.116.11.2.
0n my reading of this provision, no such notice is provided for. The wording has been
quoted. He also said that he never received notice that the premium would be redebited
or any other notice that the policy would be cancelled or had been cancelled. 0n my
reading of General Condition 7.2 such notices are not provided for.
 The plaintiff confirmed that he was advised, regarding his insurance affairs, by
Mr Borman of Diagonal Insurance Solutions ("Diagonal"). Mr Borman, as will
be noted, testified on behalf of the defendant.
 The plaintiff also referred to a document entitled "STATUTORY NOTICE TO
SHORT-TERM INSURANCE POLICYHOLDERS". The plaintiff referred to
paragraphs 3(f) and 3(g) of this document under the heading "0ther matters of
importance". These subparagraphs read as follows:
"(f) The insurer and not the intermediary must give reasons for
repudiating your claim.
(g) Your insurer may not cancel your insurance merely by informing your
intermediary. There is an obligation to make sure the notice has been sent to you."
The plaintiff complained that he did not receive notices of this kind.
This evidence appears to be incorrect because on 25 July 2005, after the plaintiff
had filed his claim, the defendant (through Mercy Poole, assistant manager,
personal motor claims), wrote as follows to the plaintiff at the postal address
mentioned in the insurance schedule, supra:
"We refer to the above and acknowledge receipt of your claim for the loss,
which occurred on 28/05/2005.
During the investigation of your claim, it was brought to our attention that the policy
premium for the month of May has not been received.
Based on the above, we are left with no alternative other than to decline liability for the
claim submitted. Reference is made to your Policy wording, General Section Paragraph
7, 7.2 Premium Payment, 18.104.22.168.2 Monthly Policy, which states inter alia, 'if the
premium is not paid on the date it was due to be paid … … for any reason other than as
described in 22.214.171.124.1 we will redebit on the 15th of that month and should the
outstanding premium not be paid when redebited, the policy will be cancelled from the
date the first unpaid premium was due to be paid.'
We refer you to the provisions of Paragraph 5.7 of the General Section of your policy
which reads: 'If we deny liability for any claim made under this policy we will be relieved
of liability unless summons is served on us within 90 days of repudiation.'
0ur rights in respect of the policy are reserved in the event of the cover in terms of the
policy itself becoming an issue. All other rights that we may have are hereby
 The plaintiff acknowledged that his premium in terms of the policy was not paid
for May 2005. It is common cause that the plaintiff tendered payment of the
premium, through his attorney, on 16 August 2005. The tender was not accepted.
This resulted in the action being instituted by the plaintiff.
 In cross-examination details of the plaintiff's poor payment record, when it came
to premiums over the years, were put to him and admitted. I will return briefly to these
 Details of the monthly insurance periods, and the advance premium payment by
debit order were put to the plaintiff and admitted.
 He admitted that he acknowledged the following above his signature on 12 May
2004 when he accepted the insurance quotation:
"Your insurance premium is payable monthly in advance via debit order.
All premiums will be collected on the first working day of every month.
The onus rests upon the insured to ensure that the monthly premium due is
paid. In Terms of the Policy Protection Rules, you are permitted 15 days
from the date on which the premium become due to effect payment.
Declaration By Insured
I, the Undersigned, declare that I have read and understand the above information with
regards to my Insurance cover. 0n acceptance of this quotation I undertake to supply all
relevant information as requested in order to effect my insurance cover. I undertake to
diligently study all notices, correspondence and requirements received and to
unconditionally comply strictly and promptly with these requirements."
I pause to record that the fifteen day "grace period", also referred to in General
Condition 126.96.36.199.2, flows from a provision to be found under the regulations of
the Short-term Insurance Act 53 of 1998 (regulation 10.5).
 The plaintiff acknowledged that he had agreed to pay the premiums in advance
and that by signing the documents, he knew that the premiums would be collected
on the first working day of the particular month.
 It was put to him that the particular computer system employed by the defendant
and/or Diagonal automatically dispatches appropriate notices to the insured when the
debit order is not honored by the bank, either on the first of the month or the fifteenth of
the month. The plaintiff testified that he did not receive such notices. More
particularly, on a general reading of his testimony, he preferred to say that he "did not
recall" receiving the notices rather than that he disputed such receipt. He testified that he
had an arrangement with Mr Borman, who acted as his agent, and advised him on his
insurance matters, that "double debits" would be arranged with the bank in the event of
premiums not being paid punctually. He said that this was because his income flow was
erratic and it happened from time to time that he could not meet his monthly
commitments. He said that he had similar arrangements with other creditors. This
Borman denied when he testified on behalf of the defendant.
 By way of comparison, he acknowledged that an earlier policy had been cancelled
because of non-payment (in 2004) and in that case Borman advised him to re-apply
afresh for new cover. He could not explain why this had to be done in the light of the
alleged agreement that "double debits" would solve the problem.
 He acknowledged the wording of the insurance schedule, supra, that cover would
be effective for a calendar month and any subsequent period for which the applicable
monthly premium had been paid.
 The plaintiff was also confronted with the typical wording of a notice which the
system, supra, would dispatch in the event of non-payment of a premium. Part of this
notice reads as follows:
"We regret to advise that your premium debit for … in the amount shown
below was returned by your bank for the reason shown below:
In terms of Short Term Insurance legislation, you are permitted fifteen (15) days grace
from the date on which your premium became due to effect payment. The
abovementioned premium will therefore be re-debited to your account on the fifteenth
(15th) of this month. Please note that there will be no cover for the month(s) should the
outstanding premium not be collected successfully within this grace period.
In addition to the premium amount referred to above, an administration fee of one
hundred rand (R100) shall be deducted from your account on the fifteenth (15th) of this
month. Diagonal however do reserve the right to automatically re-debit your account
with a single premium on the first (1st) of the following month in order to restore cover
for the following month. A policy may be cancelled by Diagonal after three (3)
The plaintiff responded that in the particular instance forming the subject of this
dispute, there were not "three consecutive unpaids" because the payment for
1 June 2005 was made when the debit order was presented for payment.
In my view, it is clear from the wording of the example letter that the "three consecutive
unpaids" approach can be adopted in the discretion of Diagonal and does not have any
bearing on the wording of General Condition 7.2. Moreover, it clearly prescribes that
the third debit, if met, will "restore cover for the following month". It will,
consequently, not remedy the fact that cover for the month in question had lapsed in the
spirit of General Condition 7.2.
 The first witness called on behalf of the defendant was Ms Ingrid Elaine Beetge.
She works for Diagonal. At the relevant time she was the claims and
underwriting director. Presently she is the operations director and assistant to the
 It was clear, in my view, that this witness had a very impressive working
knowledge of the subject at hand. She explained that Diagonal accepts new business,
collects premiums and administers claims on behalf of the defendant.
 She testified about the "three consecutive unpaids" option and emphasised that
cover may be restored for the following month, but not for the month in which the debit
orders were not met, as intended by the provisions of General Condition 7.
 With reference to General Condition 7 she confirmed that the cover lapses for the
month during which payments were not met on the 1st and the 15th.
 She confirmed the difference between a "7.1 cancellation" and a
"7.2 cancellation" as analysed above.
 She loosely referred to the policy either being "automatically cancelled" after the
grace period when the second debit on the 15th is not met or the "cover lapsing".
In this regard it should be recorded that in cross-examination she said that the
policy was "never cancelled" as a result of the two non-payments in May 2005. She did,
however, emphatically state that where payments were not received for that month, the
cover lapses for that month.
It was put to her that the policy wording does not provide, even in General
Condition 7.2, for an "automatic" cancellation in the event of non-payment on the 1st and
the 15th of the month.
In view of this evidence, Mr Geyser, in his closing address, argued that the policy
had not been cancelled by 28 May 2005 when the collision occurred. It was argued that
the policy was therefore still in existence and the cover provided intact.
Mr Geyser then further developed this argument by submitting that the payment
or non-payment of the premium was at most a suspensive condition so that the liability of
the defendant would only arise if the premium was paid. For this reason, so it was
argued, the defendant was not entitled to refuse the tender, in August 2005, to pay the
premium for May.
It was argued that the defendant's refusal to accept this tender brings the matter
into the ambit of the principles applicable to fictitional fulfilment of agreements which,
reduced to its essence, means that a party to a contract may not rely on the other party's
failure to fulfil an obligation where that performance is tendered without there being a
justifiable reason for such refusal.
Such a case was not pleaded by the plaintiff. In any event, I cannot accept the
argument of Mr Geyser. In my view the wording of General Condition 7.2 is clear and
unambiguous: if payment of the premium is not forthcoming after the grace period (on
the 15th of the month) the policy is cancelled from the date the first unpaid premium was
due to be paid (1 May in this instance). Whether it is "revived" or "reinstated" if the
debit order is presented and met on 1 June is immaterial with regard to the fact that the
cover for May was non-existent. The "reinstatement" can only apply for the next month
(June in this case) as clearly testified by Ms Beetge.
 The witness testified about the letters dispatched by the system in the event of
non-payment of the premium and confirmed that they were sent to the plaintiff's recorded
address, PO Box 11013, The Tramshed 0126. In his evidence, the plaintiff confirmed
that this was his address.
 The witness was also confronted with computer entries (exhibit "A59") which
illustrate that there were two entries in respect of the policy on 25 May 2005. It turns
out that the one entry had to do with the inclusion of a new motor vehicle in the policy
schedule and the other related to the production of a new schedule.
Mr Geyser argued that if the new schedule was produced on 25 May (before the
collision and after the grace period had expired on 15 May) it supports his argument that
the policy was never cancelled. Mr Geyser argued that it cannot be argued that the new
schedule was created because of the premium received on 1 June, because it predates that
payment. The witness countered by stating that when the new schedule (exhibit "A56")
was created, it was done by someone in another department (the CRM department) which
is not the same as the claims department and the creator of the schedule would not have
known about the non-payment of the premium.
 In the case of A J Shepherd (Edms) Bpk v Santam Versekeringsmaatskappy Bpk
1985 1 SA 399 (A) a similar situation arose. In terms of a "Farmers Multiplex"
insurance policy issued by the respondent to the appellant, the premiums were payable by
means of a stop order by the appellant's bank, "provided that if the bank should fail to pay
on demand the insurance in terms of this policy shall be deemed … to have lapsed on the
last day of the uninterrupted period for which the insured has paid premiums to the
insurer …" In that case, the last uninterrupted period in respect of which the appellant
had paid a premium expired on 12 March 1981. The collision occurred on 22 July of
that year. 0n 7 July an endorsement was made on the policy, at the request of the
appellant, "for cover for my motor car" whereby the motor vehicle in question was added
to the items insured by the policy. The clerk who made the endorsement was not aware
of the stop order not having been paid.
At 418F the learned chief justice says the following:
"Dit is waar dat op die endossement staan dat dit ingevolge die polis
uitgereik is, en dit is natuurlik ook waar dat 'n endossement normaalweg
nie uitgereik word ten opsigte van 'n polis wat verval het nie. Die
getuienis toon egter dat me Laups die endossement uitgereik het in die
geloof dat die polis bestaan en, verder, dat die appellant haar laat aanneem
het dat die polis bestaan. Hy het gemeen dat die polis van krag was: dit is
nie sy wat hom onder die verkeerde indruk gebring het en laat glo het dat
die polis nog bestaan nie. In hierdie omstandighede kan daar nie grond
vir 'n pleit van estoppel wees nie."
 I mention this, because the plaintiff, in this case, in his replication, pleaded that,
where the defendant "renewed the agreement" on 1 June 2005, and collected the
premium on 1 June 2005, "due for the month of June 2005 by presenting for
payment a debit order issued in its favour which was duly met upon presentation
for payment" the defendant is estopped from relying on an alleged automatic
cancellation of the policy.
 In my view the dicta in Shepherd can be properly applied to the present case.
Mr Mills, correctly in my view, argued that there was no evidence of a representation
made by the defendant to the plaintiff as intended by the doctrine of estoppel, so that such
an argument cannot avail the plaintiff in the present case.
 Moreover, in Shepherd it was also held that there was no cover in the relevant
time. It was held that, when it was provided in the policy that, should the appellant not
pay in terms of the stop order, "the insurance in terms of this policy shall be deemed to
have lapsed on the last day of the uninterrupted period for which the insured paid
premiums", it was clearly not meant that the respondent could terminate the insurance
should he elect to do so, but rather that there would be no insurance after the expiry of the
last period in respect of which a premium had been paid (in the present case, April 2005,
given the wording of General Condition 7.2).
 This also, in my view, takes care of any argument that the insurance policy
remained in force until the defendant elected to cancel because of the non-payment and
duly notified the plaintiff of such cancellation. Such a state of affairs was simply not
applicable in view of what is stated in Shepherd and in view of the wording of General
 The second (and last) witness called by the defendant was Stephanus Johannes
Jakobus Borman. He is a broker by profession and was attached to Wescol Brokers in
Pretoria at the relevant time. He knew the plaintiff who was a client of his.
 Borman disputed the plaintiff's evidence that there was an arrangement in terms
of which a "double debit" would always save the day in the event of a premium not being
 Borman also emphatically testified that he gave the plaintiff a copy of the policy
 Borman also testified that he assisted the plaintiff, in 2004, to apply for
reinstatement of the insurance which had lapsed because of non-payment of premiums.
 This concluded the evidence.
 I have already referred to the arguments advanced by Mr Geyser in his closing
address and, to an extent, to some of the submissions made by Mr Mills.
 Mr Mills also referred me, generally, to the discussion on the subject of the
payment of the premium to be found in Joubert The Law of South Africa, 1st reissue,
volume 12, at paragraphs 323-338. Mr Mills, correctly in my view, argued that the
situation created by General Condition 7(2) is akin to that where non-payment of the
premium is a resolutive condition attached to the duty of the insurer. It is put as follows
by the learned author in paragraph 329:
"The resolutive condition does not affect the enforceability of an
obligation, but it dissolves the obligation upon the happening of an
uncertain event. In the case of continuing contracts of insurance it is
useful, by way of a resolutive condition, to make the continued existence
of the insurer's duty dependent on the payment of the premium. This
means that if the insured fails to pay the premium by a specified time, the
obligation will be terminated automatically."
 In all these circumstances, I have come to the conclusion that the plaintiff did not
enjoy insurance cover, given the wording of General Condition 7.2, when the
collision occurred on 28 May 2005. This was after the grace period expired on
15 May. There was no cover from the date the first unpaid premium was due to
be paid (from 1 May 2005 to the end of that month). In the result, the claim falls
to be dismissed.
 I make the following order:
1. the plaintiff's claim is dismissed;
2. the plaintiff is ordered to pay the defendant's costs, including the costs of
W R C PRINSLOO
JUDGE OF THE HIGH COURT
HEARD ON: 8/8/2007
FOR THE PLAINTIFF: W W GEYSER
INSTRUCTED BY: POTGIETER MARAIS
FOR THE DEFENDANT: D MILLS SC
INSTRUCTED BY: GILDENHUYS LESSINA & MALATJI