THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 300/08

ST PAUL INSURANCE CO SA LIMITED

Appellant

and

EAGLE INK SYSTEM (CAPE) (PTY) LTD

Respondent

Neutral citation: St Paul Insurance Co SA Ltd v Eagle Ink System (Pty) Ltd

(300/08) [2009] ZASCA 53 (27 May 2009).

Coram:        FARLAM, CLOETE, LEWIS, MHLANTLA JJA et TSHIQI AJA

Heard:         11 MAY 2009

Delivered:
27 MAY 2009

Summary:
Continuation of a trial when the judge has died; interpretation of
'contaminated' in a public liability insurance policy; effect of
exclusion in extension clause.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: the Cape High Court (Griesel J sitting as court of first
instance).
The appeal is upheld with costs, including the costs of two counsel.
The order of the Cape High Court is set aside and the following order
substituted:
'The plaintiff's claim is dismissed with costs, including the costs of the
proceedings before Knoll J and the costs of two counsel at both stages of the
proceedings.'
______________________________________________________________

JUDGMENT
______________________________________________________________

CLOETE JA (FARLAM, LEWIS, MHLANTLA JJA et TSHIQI AJA concurring):

[1] The appellant, St Paul Insurance Company SA Ltd, is, as its name
suggests, an insurance company and I shall refer to it as such. The
respondent, Eagle Ink System (Cape) (Pty) Ltd, to which I shall refer as Eagle
Ink, is a manufacturer, importer and distributor of printing inks and related
products. The insurance company issued a policy of insurance to Eagle Ink
which, as the plaintiff, sued the insurance company in the Cape High Court for
indemnity under the policy. Knoll J presided at the trial but died before she
could deliver judgment. By agreement between the parties a transcript of the
evidence together with the documentary exhibits were placed before Griesel J
who heard further argument. There is precedent for such a procedure, and it
is eminently sensible: Mhlanga v Mtenengari 1993 (4) SA 119 (ZS). Griesel J
found in favour of Eagle Ink but subsequently granted leave to appeal to this
court.

[2] I shall first deal briefly with the facts and thereafter with the relevant
terms of the insurance policy. One of Eagle Ink's customers to whom it
supplied ink was Nampak Products Ltd, which trades as Nampak Polyfoil

('Polyfoil'). Polyfoil concluded a contract with an American entity known as
Bunzl Distribution Southeast Inc ('Bunzl') for the supply of several million
plastic shopping bags destined for the supermarket chain WalMart in the
USA. It was a term of the contract between Bunzl and WalMart that the plastic
bags would be free of heavy metal, including lead. This requirement was
comunicated to Polyfoil and at the latter's request, Eagle Ink gave a written
assurance (which Polyfoil passed on to Bunzl) that 'all inks supplied for export
work are heavy metal free'.

[3] Due to the negligence of Mr Matthews, an employee of Eagle Ink who
worked at the Polyfoil plant, some of the ink supplied to Polyfoil contained
lead. What Matthews did was to take ink containing lead that had been
recovered from Polyfoil's printing presses after jobs for customers other than
Bunzl had been completed, and mix it with the lead free ink delivered to
Polyfoil's premises by Eagle Ink for the Bunzl contract. Matthews was
actuated by the best of intentions ─ he wanted to save Polyfoil money. The
consequence of his actions was that Bunzl rejected the bags manufactured by
Polyfoil because of the lead in the ink and claimed from the latter the return of
the purchase price it had paid, together with damages. Polyfoil in turn claimed
from Eagle Ink; and Eagle Ink claimed indemnity, up to the limit of the policy,
from the insurance company, which repudiated the claim.

[4] The insurance policy was a public liability (claims made) policy. It
comprised, in addition to a schedule and the definitions section, a section
which contained the operative clause; a section which contained exclusions
and another which contained conditions; and various extensions, including a
products liability extension. The operative clause read:
'The Company will indemnify the Insured against their legal liability to pay
compensation for claims first made against the Insured during the Period of
Insurance in respect of Injury and/or Damage arising out of the performance of the
Business within the Territorial Limits on or after the Retroactive Date stated in the
Schedule.'
'Damage' was defined as 'loss of or damage to tangible property' and the
'Business', according to the business description in the schedule, was that of

'Manufacturers, Importers & Distributors of Printing Inks and Related
Products'. Exclusions 7.5 and 10 read:
'The Company will not indemnify the Insured in respect of
. . .
7.
any liability caused by or arising from claims for
. . .
7.5
products sold or supplied by the Insured
. . .
10.
claims arising out of
10.1
liability directly or indirectly caused by seepage pollution or contamination
provided that this exclusion shall not apply where such seepage pollution or
contamination is caused by a sudden unintended and unexpected event
10.2
the cost of removing nullifying or cleaning up seeping polluting or
contaminating substances unless the seepage pollution or contamination is caused
by a sudden unintended and unexpected event'.
Product liability was therefore excluded by clause 7.5 of the exclusions in
absolute terms. But the products liability extension formed part of the policy. It
read:
'The following Extension is deemed to apply only if so stated in the Schedule and
unless specifically varied herein shall be subject to the terms exclusions and
conditions of this policy. . .
PRODUCTS LIABILITY EXTENSION
Notwithstanding anything to the contrary contained in exclusion 7.5 the Company will
indemnify the Insured in terms of this Policy anywhere in the Territorial Limits as
stated in the schedule and caused by products sold or supplied by the Insured
. . .
Exclusions
This extension does not cover liability:
. . .
iii)
arising from defective or faulty design formula plan or specification (unless
due to negligence in following same) treatment or advice by or on behalf of the
Insured
iv)
arising from inefficacy or failure to perform or conform to specification (unless
due to negligence in following same) or fulfil its intended function as specified or
guaranteed but this exclusion shall not apply to consequent injury or damage
. . .'.

[5] One of the defences raised by the insurance company was based on
exclusion 10.1, the insurance company contending that Polyfoil's claim
against Eagle Ink  was one 'arising out of liability directly or indirectly caused
by . . . contamination' of the ink with lead. The Oxford English Dictionary (2
ed) gives 'contaminate' the meaning 'To render impure by . . . mixture; to . . .
pollute' and 'pollute', the meaning 'To make physically impure . . . To
contaminate (the environment, atmosphere etc) with harmful or objectionable
substances'. On these definitions, the ink supplied by Eagle Ink to Polyfoil
could undoubtedly be said to have been 'contaminated' with lead. Indeed,
Eagle Ink could hardly contend the contrary as the claim form prepared by Mr
Groenewald, its group financial director, said that the loss to Eagle Ink had
been caused by 'mixing of contaminated ink with heavy metal free ink for
export work'; and Eagle Ink's pleadings repeatedly used the word
'contaminate' and 'contamination' to describe the presence of lead.

[6] Eagle Ink's counsel nevertheless argued, and the court a quo upheld
the argument, that what exclusion 10.1 envisaged was contamination of
something else by the ink, not contamination of the ink itself. The court a quo
reached this conclusion by invoking the eiusdem generis rule in regard to the
phrase 'seepage pollution and contamination' in exclusion 10.1 and also by
having regard to exclusion 10.2 which, Eagle Ink's counsel argued, meant that
'a "mess" of some sort is envisaged, not a mere incorrect mixing of a formula'.
The court a quo accordingly concluded that the parties did not intend the word
'contamination' to be understood in the sense set out in the previous
paragraph above.

[7] I am unable to support this conclusion. Although 'pollution' and
'contamination' have similar meanings, 'seepage' does not. 'Seepage'
connotes a gradual leak. It may or may not produce pollution or
contamination. None of the three words necessarily denotes a mess. Nor
does exclusion 10.2: that clause excludes inter alia 'claims arising out of the
cost of removing . . .  contaminating substances', which would cover the cost
of removing the lead from the ink, and the ink from Polyfoil's presses, both of

which could result in delay and a claim for damages. In my view there is no
warrant for confining exclusion 10.1 to claims arising out of contamination by,
and excluding contamination to, inks supplied to Polyfoil by Eagle Ink. The
exclusion covers both.

[8] The court a quo, again following the argument advanced by counsel for
Eagle Ink, found that exclusion 10.1 did not apply for another reason. The
court had regard in particular to exclusions (iii) and (iv) of the products liability
extension and reasoned as follows:
'On the evidence as a whole, there can be little doubt that the mixing of pigments
containing heavy metals with the plaintiff's carbon-based black ink was contrary to
the specification of heavy metal-free inks for the export market, and that the mixing
was an act of negligence on the part of Matthews in following such specification.
Similarly, the inefficacy or failure to conform to specification was due to the same
negligence. Finally, the damage did not cause the plaintiff damage to its property or
plant itself, but was clearly consequential damage as envisaged in the expression
"consequent injury or damage" in exclusion (iv).

The express inclusion within the products liability extension of liability arising
from defective specification or a failure to conform to specification where due to
negligence can only be taken to be a specific variation of other general terms and
exclusions where such might otherwise have been applicable, such as clause 10.1 of
the general exclusions.'

[9] Again, I am unable to support this conclusion. Ink which does not
conform to specification is not necessarily contaminated. Exclusions (iii) and
(iv) cover the former possibility and exclusion 10.1, the latter. Effect must be
given to all provisions of the policy particularly as the introductory words of the
products liability extension specifically provide that: 'The following Extension .
. . unless specifically varied herein shall be subject to the . . . exclusions . . . of
this policy'. Exclusion 10.1 is not 'specifically varied' by exclusions (iii) or (iv) ─
they deal with different situations; and the fact that Eagle Ink escapes the
provisions of exclusions (iii) and (iv) does not mean that exclusion 10.1 is
rendered inapplicable.

[10] I therefore conclude that the court a quo should have dismissed Eagle
Ink's claim as it arose out of liability directly or indirectly caused by
contamination as envisaged in exclusion 10.1 of the policy.

[11] The following order is made:
The appeal is upheld with costs, including the costs of two counsel.
The order of the Cape High Court is set aside and the following order
substituted:
'The plaintiff's claim is dismissed with costs, including the costs of the
proceedings before Knoll J and the costs of two counsel at both stages of the
proceedings.'

_______________
T D CLOETE
JUDGE OF APPEAL

Appearances:
Counsel for Appellant:
J C Butler SC

A J van Vuuren

Ms S van Vuuren

Instructed by
Everinghams Attorneys, Cape Town
Webbers Attorneys, Bloemfontein

Counsel for Respondent: R G Goodman SC

S Miller

Instructed by
Bernard Vukic Potash & Getz, Cape Town
Lovius Block, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal
Date: 27 May 2009
Status: Immediate
Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

ST PAUL INSURANCE CO SA LTD v EAGLE INK SYSTEMS (CAPE) (PTY) LTD

The respondent, Eagle Ink, supplied ink to Nampak Polyfoil for printing on plastic bags
destined for WalMart in the USA. It was a term of the contract that the ink should be free
from heavy metals, including lead. An employee of Eagle Ink negligently mixed ink
containing lead with the lead-free ink supplied for the plastic bags, and the plastic bags were
rejected. Eagle Ink claimed against the appellant, St Paul Insurance Company, under the
insurance policy issued to it by the appellant. The claim succeeded in the Cape High Court.
But the Supreme Court of Appeal upheld the insurance company's appeal and found that the
ink was 'contaminated' as contemplated in a clause of the policy which excluded liability in
such an event.
--ends--