THE SUPREME COURT OF APPEAL OF SOUTH
AFRICA

REPORTABLE

CASE NO:   58/2005

In the matter between

ANDREAS PAPAGAPIOU

APPELLANT

and

SANTAM LIMITED                                                       RESPONDENT

CORAM:
HOWIE P, SCOTT, MTHIYANE, NUGENT and
MLAMBO JJA

HEARD:
16 NOVEMBER 2005
DELIVERED:
30 NOVEMBER 2005

Summary: Insurance Contract – Interpretation of an exclusion
clause – plaintiff’s attempted fraud covered by the exclusion clause.

JUDGMENT

MTHIYANE JA:

MTHIYANE JA:

[1] This appeal turns on the interpretation of an exclusion clause in a
contract of insurance concluded between the appellant (the plaintiff) and
the respondent (Santam) on 1 June 2002. In terms of the contract the
defendant undertook to cover the plaintiff’s property, described as Erf
909, Onderlingstraat, Virginia, (‘the property’), against loss or damage by
fire. The clause reads:
‘If any claim under this policy be in any respect fraudulent, or if any fraudulent means
or devices be used by the insured or anyone acting on his behalf or with his
knowledge or consent to obtain any benefit under this policy, or if any event be
occasioned by the wilful act or with the connivance of the insured, the benefit
afforded under this policy in respect of such claim shall be forfeited.’ [English
version]

[2] In October 2002 the plaintiff’s property was extensively damaged
by a fire and the damage was assessed at R164 149,00. The plaintiff
claimed indemnification from Santam under the policy but liability was
repudiated on the ground that the plaintiff had attempted to obtain a
benefit under the policy by fraudulent means.

[3] The plaintiff instituted action in the High Court at Bloemfontein
claiming indemnification under the policy but this also failed. Cillie J,
before whom the matter served, upheld Santam’s defence based on the
exclusion clause, dismissed the claim with costs and granted leave to
appeal to this court.

[4] The attempted fraud relied on by Santam for its invocation of the
exclusion clause emerged from the evidence of an assessor, Mr André
Carstens, who was engaged by the company to assess the damage caused
by the fire. Carstens testified that the plaintiff had approached him on two
occasions with the request that he inflate the damage to the property. On
the first occasion the plaintiff offered Carstens R50 000 if he assessed the
damage at R500 000 and on the second occasion R10 000 if he assessed
the damage at R165 000. On both occasions he refused. Subsequently
Carstens assessed the damage at R164 149,00, which was the correct
assessment of the damage. In due course Carstens submitted to Santam
his assessment note which included a report concerning the two attempts
by the plaintiff to improperly influence him in his assessment of the
damage. The company duly repudiated the claim, citing the exclusion
clause in its letter of repudiation sent to the plaintiff.

[5] On appeal Carstens’ evidence concerning the plaintiff’s fraudulent
attempts to obtain a benefit under the policy was not challenged but his
counsel argued that, since attempts were made before the claim was
lodged, the plaintiff’s conduct was not covered by the exclusion clause.
For the clause to apply, argued counsel, the claim had first to have been
lodged (‘ingedien’).

[6] Before dealing with the plaintiff’s argument it would be as well to
restate the main principles governing the interpretation of a policy of
insurance, and to do so with reference to the decision in Fedgen
Insurance Ltd v Leyds1, where it was said:
‘The ordinary rules relating to the interpretation of contracts must be applied in
construing a policy of insurance. A court must therefore endeavour to ascertain the
intention of the parties. Such intention is, in the first instance, to be gathered from the
language used which, if clear, must be given effect to. This involves giving the words
used their plain, ordinary and popular meaning unless the context indicates otherwise
(Scottish Union & National Insurance Co Ltd v Native Recruiting Corporation Ltd
1934 AD 458 at 464-5). Any provision which purports to place a limitation upon a
clearly expressed obligation to indemnify must be restrictively interpreted (Auto
Protection Insurance Co Ltd v Hanmer-Strudwick 1964 (1) SA 349 (A) at 354C-D);
for it is the insurer’s duty to make clear what particular risks it wishes to exclude
(French Hairdressing Saloons Ltd v National Employers Mutual General Insurance

1 1995 (3) SA 33 (A) at 38B-E.

Association Ltd 1931 AD 60 at 65; Auto Protection Insurance Co Ltd v Hanmer-
Strudwick (supra at 354D-E)). A policy normally evidences the contract and an
insured’s obligation, and the extent to which an insurer’s liability is limited, must be
plainly spelt out. In the event of a real ambiguity the contra proferentem rule, which
requires a written document to be construed against the person who drew it up, would
operate against Fedgen as drafter of the policy (Kliptown Clothing Industries (Pty) Ltd
v Marine and Trade Insurance Co of SA Ltd 1961 (1) SA 103 (A) at 108C).’
(See also Van Zyl NO v Kiln Non-Marine Syndicate No 510 of Lloyds of
London2).

[7] The language of the clause is clear and unambiguous. There is
therefore no reason not to give the words their ordinary meaning. Giving
the clause its ordinary meaning, three situations are in my view covered
by it. The first deals with where a claim under the policy is in any respect
fraudulent; the second is concerned with where fraudulent means or
devices are used by the insured to obtain any benefit under the policy; the
third covers a situation where any event is occasioned by the wilful act or
with the connivance of the insured. In all these situations the benefit
afforded under the policy is to be forfeited.

[8] It is therefore clear that the argument that the exclusion clause
cannot be invoked where fraud is committed before the claim is lodged,

2 2003 (2) SA 440 (SCA) at para 6.

loses sight of the fact that the clause deals with three different situations.
The first situation does indeed deal with the case where a fraudulent
claim has been lodged. But the second, relating to the prohibition of the
use of fraudulent means or devices to obtain any benefit under the policy,
presupposes that a claim has not been submitted (‘ingedien’). The second
situation cannot refer to a fraudulent claim that has already been lodged
as this is covered by the first situation contemplated in the clause and
would therefore render the second one tautologous. Accordingly, in their
context the words ‘to obtain’ mean ‘in order to obtain’. The third
situation referred to in the clause deals with a fraudulent event that has
been caused by the wilful act of the insured and has no application in the
present matter. During argument counsel was unable to give examples of
when in the absence of a claim being lodged the second situation referred
to in the clause (dealing with the attempted fraudulent means) would
apply, if it were not to cover a situation such as the present. Even if one,
therefore, gives the clause an interpretation most favourable to the
plaintiff, the interpretation contended for on the plaintiff’s behalf cannot
be sustained and must accordingly be rejected.

[9] Counsel’s second argument, which was related to the first, was that
since Carstens had not acceded to the request to inflate the damage and
Santam had not paid or would in any event not have paid more than the

true value of the damage, the plaintiff had not obtained any benefit under
the policy. Consequently, so the argument went, the exclusion clause had
not been breached. For this argument, counsel relied on Strydom v
Certain Underwriting Members3, where Labe J was called upon to
interpret and apply an identically worded clause.4 In that case the insured
had knowingly made a fraudulent statement aimed at showing that he had
not been negligent in relation to the motor collision which had resulted in
damage to his car. The fraudulent statement was, however, of no
consequence, in that it did not affect the insurer’s position to its prejudice
and was therefore not material. It was not necessary for the insured to
have made a fraudulent statement in the first place because he was
covered against his own negligence.

[10] The position is, however, different in this case. The exclusion
clause covers the very situation which occurred here, namely use by the
plaintiff of fraudulent means or devices in order to obtain an undue
benefit under the policy. None of the contentions raised have any merit
and the appeal must therefore fail.

3 2000 (2) SA 482 (W).
4 Op cit at 484F.

[11] I turn briefly to the question of costs. Santam asked for costs of
two counsel. On appeal it was represented by a silk and a junior who
were not called upon to argue. The plaintiff was, on the other hand,
represented by junior counsel. In my view the matter is simple and
straightforward even if it does involve an interpretation of a policy clause
in widespread use. I do not think this case warranted the briefing of two
counsel and an order allowing costs of two counsel would therefore not
be justified.

[12] In the result the appeal is dismissed with costs.

___________________

KK MTHIYANE

JUDGE OF APPEAL

CONCUR:

HOWIE P
SCOTT JA
NUGENT JA
MLAMBO JA