THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no. 734/2021

In the matter between:

ZURICH INSURANCE COMPANY SOUTH AFRICA LTD

Appellant

and

GAUTENG PROVINCIAL GOVERNMENT

Respondent

Neutral citation:
Zurich Insurance Company South Africa Ltd v Gauteng Provincial
Government (Case no. 734/2021) [2022] ZASCA 127 (28 September 2022)

Coram:
Ponnan and Plasket JJA and Basson, Weiner and Siwendu AJJA

Heard:
16 August 2022

Delivered:
28 September 2022

Summary:
Insurance contract – damage to rock mass when tunnels for Gautrain
Rapid Rail System constructed – whether insured’s claim had prescribed – whether
rock mass surrounding tunnel void part of property insured – whether order declaring
insured’s right to indemnification, and to be paid such amounts as are later proved, an
effective order.

ORDER

On appeal from: Gauteng Local Division of the High Court, Johannesburg (Wepener
J sitting as court of first instance).

The appeal is dismissed with costs including the costs of two counsel.

JUDGMENT

Plasket JA (Ponnan JA and Basson, Weiner and Siwendu AJJA concurring)

[1] This appeal, against an order made by Wepener J in the Gauteng Local Division
of the High Court, Johannesburg (the high court), concerns a claim for the enforcement
of a contract of insurance (the policy) concluded by the appellant, the Zurich Insurance
Company South Africa Ltd (Zurich) with, inter alia, the respondent, the Gauteng
Provincial Government (the province). After the province had discovered what it
believed to be damage to parts of the tunnel system in which the Gautrain Rapid Rail
System operates, and Zurich had repudiated a claim made in terms of the policy, the
province issued summons in which it claimed declaratory relief to the effect that Zurich
was obliged to indemnify it in respect of the repair, replacement or making good of the
damage to the tunnels, and that it was required to pay the province the amount that it
proved in due course in respect of its loss. It also sought costs of suit.

[2] After a lengthy trial, Wepener J issued an order essentially in the terms sought
by the province. His order reads as follows:
‘1
Subject to all the terms and conditions of the policy, it is declared that the defendant is
obliged to indemnify the plaintiff for the cost of replacing and/or repairing and/or making good
all damage (as defined in [paragraph 15] of the particulars of claim) to the tunnels from

Rosebank Station to Marlboro Portal as described in [paragraph 11] of the plaintiff’s particulars
of claim.1
It is declared that the defendant, on the basis of prayer 1 above, is required to pay to
the plaintiff such amount as is proved by the plaintiff as constituting the cost of replacing and/or
repairing and/or making good all damage to the tunnels as described in paragraph 15 of the
particulars of claim, subject to the limit of indemnity and deductibles as set out in the policy.
The defendant is to pay the plaintiff’s costs of suit, including the costs occasioned by
the employment of two counsel.’

[3] On the application of Zurich, he granted leave to appeal directly to this court. In
his judgment, he said that while a large number of grounds had been raised in the
notice of appeal, they were ‘reduced to three during argument’ and that he was of the
view that there were only prospects of success on appeal ‘on these three issues’. His
order reads as follows:
‘I consequently grant leave to appeal to the Supreme Court of Appeal on the following issues:
Whether the order issued by this court is capable of practical enforcement;
Whether the respondent’s claim has become prescribed;
Whether the rock surrounding the void formed part of the property insured.’

[4] It appeared, on the face of it, that Wepener J may have sought to grant leave
to appeal against three of his reasons for upholding the province’s claim. It is a
foundational procedural principle that an appeal lies against a substantive order of a
court rather than against the reasons for its judgment.2 If it had been Wepener J’s
intention to grant leave to appeal against his reasons, his order may have been
incompetent. The result would then have been that we would have had no jurisdiction
to entertain the appeal.3

1 I have, in the square brackets in paragraph 1 of the order, corrected two patent errors. In its original
form, the order transposed paragraphs 11 and 15 of the particulars of claim. Paragraph 11 defined the
tunnels that were the subject of the claim, while paragraph 15 set out the damage that the province
alleged it had suffered.
2 Administrator, Cape and Another v Ntshwaqela and Others [1989] ZASCA 167; 1990 (1) SA 705 (A)
at 715D; South African Reserve Bank v Khumalo and Another [2010] ZASCA 53; 2010 (5) SA 449
(SCA) para 4; Tecmed Africa (Pty) Ltd v Minister of Health and Another [2012] ZASCA 64; [2012] 4 All
SA 149 (SCA) paras 16-17.
3 Molteno Bros v South African Railways 1936 AD 408 at 413.

[5] Both Mr Loxton, for Zurich, and Mr Subel, for the province, submitted that this
had not been Wepener J’s intention and that, even if he had not expressed himself as
clearly as he might have, he had intended to grant leave to appeal against his order
but to limit the grounds of appeal. Court orders, like other written instruments, must be
interpreted in a unitary, holistic process having regard to the words used, the
contextual setting and the apparent intended purpose.4 This order is to be interpreted
within the context of it being trite law that ‘leave to appeal may be limited so as to allow
only particular grounds of appeal to be advanced’5 and of the clear indication in
paragraphs 1 and 2 of the judgment that Wepener J had applied his mind to the
grounds of appeal that had, in his view, reasonable prospects of success.

[6] It is clear in these circumstances that Wepener J intended to grant leave to
appeal against the entire order that he had made but that he considered only three of
the various grounds advanced by Zurich to have any prospects of success.
Understood thus, the order granting leave to appeal is not irregular, with the result that
we have jurisdiction to consider and determine this appeal.

The background
[7] The Gautrain is a joint venture between the province and a private entity. In
terms of a concession agreement, the province granted to Bombela Concession
Company (Pty) Ltd (Bombela) a concession to design, construct, partially finance,
operate, maintain and generate income from the Gautrain for the duration of the
concession.

[8] The Gautrain runs from Park Station in the central business district of
Johannesburg, past a number of stations including Rosebank and the Marlboro Portal,
to the Oliver Tambo International Airport, on one line, and to Hatfield in Pretoria, on
another. Parts of the rail network are below ground in tunnels, while others are above
ground. This matter concerns the construction of tunnels between the stations of

4 Firestone South Africa (Pty) Ltd v Gentiruco AG 1977 (4) SA 298 (A) at 304D-F; Natal Joint Municipal
Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593 (SCA) para 18; Capitec
Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others [2021] ZASCA
99; 2022 (1) SA 100 (SCA) para 25.
5 Douglas v Douglas [1995] ZASCA 147; [1996] 2 All SA 1 (A) at 8i-j.

Rosebank and Sandton, on the one hand, and Sandton and the Marlboro Portal, on
the other.

[9] The construction that was envisaged was defined in the concession agreement
as ‘the works’, a term that meant all work that was to be undertaken to achieve the
objects of the agreement, including the construction of tunnels. In terms of a schedule
to the concession agreement, tunnels were to be constructed so that they would
comply with specified permissible water-flow limits and were to be sufficiently water-
tight to ensure that the long term ambient hydrological conditions around any of the
tunnels would not be disturbed.

[10] The parties who were insured in terms of the policy included the province;
Bombela (described as the principal); Bombela TKC (Pty) Ltd (described as the
contractor) and ‘all contractors and sub-contractors of any tier in connection with THE
PROJECT’; the ‘Material Contractor and Sub contractors of the Material Contractor’;
‘Lenders Agent, the Lenders and Security Company’; and consultants, designers,
suppliers and advisers ‘of any tier’, as well as the ‘Independent Certifier and others
providing goods or services in connection with THE PROJECT’. These broad
categories of bodies were defined as ‘the insured’. Various aspects of the project were
performed by different Bombela-related entities such as Bombela TKC (Pty) Ltd,
mentioned above, and Bombela Civils Joint Venture (Pty) Ltd. For the sake of
convenience, I shall, in what follows, refer to all of the Bombela entities simply as
Bombela, without distinguishing between them.

[11] The purpose of the policy was to indemnify the insured against any damage
contemplated by it, and to pay to or indemnify the insured for the full cost of the
replacement, repair or making good of the damage. In broad terms, it covered ‘the
project’ which was defined to mean the ‘financing, pre-fabrication, design, engineering,
procurement, construction, erection, hot testing, commissioning, operation and
maintenance’ of the Gautrain, ‘all associated and ancillary works in connection
therewith’ and ‘any Contract or Agreement written or implied entered into by the
INSURED in connection therewith’.6

6 I have added punctuation to enhance readability. I shall do so below whenever I cite the policy.

[12] The ingress of water, when tunnels are constructed below the water table, is
always a serious engineering concern. The reason is obvious: the excavation process,
especially the drill and blast method used in the construction of the tunnels in question,
disturbs the rock mass around the void that is created and renders that rock more
permeable. As was explained by Dr Nick Barton, an engineer with significant expertise
in rock mechanics and whose evidence was accepted by the high court, damage is
caused by an ‘increase and extension of the excavation disturbed zone’ with the result
that ‘joint deformation is increased, blast gasses penetrate deeper, over-break may
occur, and inflow is enhanced due to a general increase in joint apertures, in addition
to less well controlled blast-induced fracturing’. Professor Steinar Roald, an eminent
civil engineering expert in the field of grouting, whose evidence was also accepted by
the high court, explained that a ‘tunnel below the ground water table will serve as a
large drainage pipe that lowers the ground water level’.

[13] It is no longer in dispute in this appeal, in the light of the limited leave to appeal
that was granted by the high court, that what was described by Dr Barton and professor
Roald is precisely what occurred in the tunnels in issue in this matter. Dr Barton
explained the problem thus:
‘A tunnel releasing about 250 Olympic swimming pools of water per year (>600 000 000
litres/year) from 20 litres/second out-of-the-tunnels flow over approximately 10 km, therefore
drawing down the water table, is obviously an undesirable and environmentally damaging
construction. Of particular concern to Gautrain/Province is that the internal environment of
their rail tunnel, being much wetter and more humid than intended, has prejudiced the life-time
and need for maintenance. Unfortunately, the tunnel cannot be “fixed” without great expense
and long-term alternative service measures. All this is because the desirable high-pressure
pre-injection was not performed, even though it was designed. It now can no longer be
performed. The “pre” (ahead of the tunnel face) is lost forever.’

[14] When the excavation of a tunnel is planned and designed, mitigation measures
are required to prevent the sorts of mishaps described by Dr Barton. He referred to
the usual method as high pressure pre-injection, or pre-grouting. This method involves
the high pressure spraying of grout as the tunnel is excavated, with the purpose of
sealing fissures in the surrounding rock mass created by the stresses placed on it by

the excavation process, particularly the drilling and blasting. Pre-grouting was planned
for the construction of the tunnels in question but, in the words of Dr Barton, was
‘inexplicably dropped by the contractor’.

[15] If a tunnel has been constructed without pre-grouting having been done, an
immense remedial problem is created. Post-grouting is a poor alternative for pre-
grouting because it is far less effective, is more difficult to apply and is both more time-
consuming and costly. Lining the affected tunnels with cast concrete and membranes
would, on the face of it, appear to be a more effective method of repair but practical
problems stand in the way of its application. Dr Barton explained that ‘as the tunnel is
“live”, such major remedial work would lead to a massive disruption of passenger
services’. In these circumstances, he said, the only feasible remedy may be the
construction of new tunnels. But this is a debate for another day.

[16] A number of material facts are common cause. They are, first, that the tunnels
did not meet the specifications that had been set as to the maximum permissible levels
of water ingress. The second is that the construction of the tunnels is covered by the
policy, although what is meant by the term ‘tunnel’ remains in dispute. The third is that
no pre-grouting work was performed in the construction of the tunnels in question.
Fourthly, it was accepted by all that the damage in respect of which the province
sought to be indemnified occurred as a result of the construction of the tunnels.

[17] It is also not in dispute that payment of the premiums stipulated in the policy
were up-to-date. It can also be accepted as settled that proper notice of the claim was
given to Zurich by the province.

The issues
[18] I now turn to a consideration of the three issues that require determination in
this appeal. The first is whether the province’s claim against Zurich had prescribed.
The second is whether the rock mass that surrounds the void of the tunnels is part of
the property insured. The third is the propriety and effectiveness of the high court’s
order.

Prescription
[19] In terms of s 11(d) of the Prescription Act 68 of 1969, the prescription period in
respect of the debt in this case is three years. Section 12(1) provides that, as a general
rule, ‘prescription shall commence to run as soon as the debt is due’. Section 12(3)
states that the debt ‘shall not be deemed to be due until the creditor has knowledge of
the identity of the debtor and of the facts from which the debt arises’ but includes a
proviso that ‘a creditor shall be deemed to have such knowledge if he could have
acquired it by exercising reasonable care’. Prescription may be interrupted in various
ways including, in terms of s 15(1), ‘by the service on the debtor of any process
whereby the creditor claims payment of the debt’.

[20] The onus of establishing that a claim has prescribed rests on the party raising
prescription – in this case, Zurich. In order to discharge that onus, the onus-bearing
party is required to prove the date when prescription began to run and that the other
party had the requisite knowledge of the material facts from which the debt arose at
that time.7

[21] The nature of the knowledge that a party is required to have in order for
prescription to start running was set out thus by this court in Truter and Another v
Deysel:8
‘For the purposes of the Act, the term “debt due” means a debt, including a delictual debt,
which is owing and payable. A debt is due in this sense when the creditor acquires a complete
cause of action for the recovery of the debt, that is, when the entire set of facts which the
creditor must prove in order to succeed with his or her claim against the debtor is in place or,
in other words, when everything has happened which would entitle the creditor to institute
action and to pursue his or her claim.’
The position was summarized by Cameron and Brand JJA in Minister of Finance and
Others v Gore NO9 when they stated that, for purposes of prescription, ‘time begins to

7 Gericke v Sack 1978 (1) SA 821 (A) at 827H-828C; Links v Department of Health, Northern Province
[2016] ZACC 10; 2016 (4) SA 414 (CC) paras 24 and 44.
8 Truter and Another v Deysel [2006] ZASCA 16; 2006 (4) SA 168 (SCA) para 16. See too Evins v
Shield Insurance Co Ltd 1980 (2) SA 814 (A) at 838D-H; MacKenzie v Farmers Co-operative Meat
Industries Ltd 1922 AD 16 at 23; Abrahamse & Sons v SA Railways and Harbours 1933 CPD 626 at
637.
9 Minister of Finance and Others v Gore NO [2006] ZASCA 98; 2007 (1) SA 111 (SCA) para 17.

run against the creditor when it has the minimum facts that are necessary to institute
action’.

[22] Gore also dealt with what was meant by knowledge, on the part of a creditor,
of the facts constituting their cause of action. Cameron and Brand JJA held in this
respect:10
‘[18] Rabie certainly did cry fraud soon after 3D-ID lost the tender. But what did he know when
he did so? The defendants' argument seems to us to mistake the nature of “knowledge” that
is required to trigger the running of prescriptive time. Mere opinion or supposition is not
enough: there must be justified, true belief. Belief, on its own, is insufficient. Belief that
happens to be true (as Rabie had) is also insufficient. For there to be knowledge, the belief
must be justified.
[19] It is well established in our law that:

(a)
Knowledge is not confined to the mental state of awareness of facts that is
produced by personally witnessing or participating in events, or by being the direct recipient
of first-hand evidence about them.

(b)
It extends to a conviction or belief that is engendered by or inferred from
attendant circumstances.

(c)
On the other hand, mere suspicion not amounting to conviction or belief
justifiably inferred from attendant circumstances does not amount to knowledge.
It follows that belief that is without apparent warrant is not knowledge; nor is assertion and
unjustified suspicion, however passionately harboured; still less, is vehemently controverted
allegation or subjective conviction.’

[23] Zurich pleaded that the province’s claim against it had prescribed. Construction
of one of the tunnels was completed by 4 January 2009, and of the second tunnel by
2 July 2009. If there had been damage caused to them, no further damage could have
been caused by the contractors after these dates. The province was, at all times,
aware of the identity of the defendant. It was also aware of the facts giving rise to the
debt from these dates on, or it ought reasonably to have had this knowledge from
these dates on. As a result, Zurich alleged, prescription began to run on 4 January
2009, in the case of the first tunnel, and on 2 July 2009 in the case of the second

10 Paras 18-19.

tunnel. The claims prescribed three years later, not having been interrupted by the
service of summons, which only occurred on 26 February 2015.

[24] The province replicated to the plea of prescription. It simply denied that the
claim had prescribed.

[25] Zurich led no evidence in order to establish its defence of prescription. Instead,
it relied on an inference that, if damage had been caused, it was the result of the drilling
and blasting method of excavation. It also argued that the province must have been
aware of the damage that it alleged because it had a support team in place to monitor
the construction of the tunnels, and that this team, made up of suitably qualified
people, must have observed the damage at the time of the construction.

[26] The province’s answer to this was that matters were not that simple. It led the
evidence of one witness on the prescription issue. He was Mr David Marx. He was
employed to render commercial and dispute management to the Gautrain
Management Agency. He is a civil engineer and holds, in addition to a master’s degree
in civil engineering, a Master of Business Administration degree. He testified about the
process that unfolded from when the construction of the tunnels commenced until the
service of summons on Zurich. Strong credibility findings in his favour were made by
Wepener J and, it seems to me, justifiably so.

[27] As to the first point raised by Zurich, Mr Marx testified that the support team did
its work principally by way of desk-top monitoring. There was consequently no
specialist on-site oversight by the support team. It is so, however, that the support
team had been informed that no pre-grouting had been done. It also understood that
the water ingress tolerance specifications that had been agreed to were the 10x10
water inflow specification – a ‘local’ tolerance not exceeding 10 litres of water per
minute per any 10 metres of tunnel – and the 1x1 water inflow specification – a
seepage rate for the entire tunnel not exceeding one litre of water per square metre
per day.

[28] The problem of excessive water ingress into the tunnels arose at an early stage.
The province was aware of the problem, but not of its cause, and had engaged with

Bombela in relation thereto. It adopted a cautious approach and also notified Zurich
on a number of occasions that it believed that it may have had a claim in terms of the
policy. It was, however, faced with a problem: while the excessive ingress of water
could have been caused by any number of factors, it was not able to identify any
damage. On each occasion, Zurich’s assessors investigated and reported that they
had found no sign of damage.

[29] The province had been assured by Bombela that the problem would be
remedied. Instead, however, a dispute developed between the province and Bombela
about the applicable specifications and whether the tunnels were compliant with the
specifications. The dispute was referred for resolution in terms of the concession
agreement. The tribunal of first instance, the Dispute Resolution Board (DRB), found
on 10 June 2011 that, for the most part, the tunnels were compliant with the 10x10
specification, which was the agreed specification. One section of the tunnels was not
compliant with this specification, and it ordered Bombela to perform remedial work on
this section.

[30] Once this finding was made, the province was bound by it. Clause 6.4 of
Schedule 10 of the concession agreement provided that ‘[u]nless and until any
decision issued by the DRB is overturned in Arbitration in terms of clause 8 of
Schedule 10, it shall be binding on the parties’. The result was that if the water ingress
was the manifestation of damage, the province had to accept that no damage had
occurred because, subject to the remedial work that had been ordered by the DRB,
the tunnels had been found to be compliant with the specifications.

[31] The province referred the DRB’s decision to arbitration. An arbitration award
was made on 23 November 2013. The arbitration panel (retired judges Streicher and
Combrinck JJA and Joffe J) found that both the 10x10 and 1x1 specifications were
contemplated by the concession agreement and that:
‘1.2
The sections of the tunnel Park to E2, Rosebank to Sandton and Sandton to Marlboro
fail to comply with the Concession Specifications in that the rate of water infiltration into these
sections exceeds the maximum infiltration rate of 1 litre/m2/day.

1.3
The section of the tunnel Park to E2 fails to comply with the Concession Specifications
in that the rate of water infiltration into this section exceeds the maximum infiltration rate
permitted at any isolated section of 10 metres namely 10 litres/min/10 metres.’

[32] It was only after the arbitration award was handed down that the province
began, once again, to investigate whether there was damage to the tunnels, as
contemplated by the policy. In March 2014, it consulted with professor Roald on the
issue. He was not able to provide an answer but suggested that the province consult
with an expert in rock mechanics, such as Dr Barton. He was duly approached and
came to South Africa in April 2014. He attended joint meetings of the province and
Bombela. In the words of Mr Marx, he ‘shared his damages proposition . . . with
Bombela’. The province made Dr Barton available to Bombela because it took the view
that Bombela, as one of the insured in terms of the policy and the concessionaire,
should initiate the claim if damage could be identified. As it happened, Bombela was
reluctant to make a claim, so the province did so itself.

[33] It was only after Dr Barton had explained the concept of excavation disturbance
zones (EDZs) that the province realized that indemnifiable damage may have been
caused to the tunnels. He explained the effects of tunneling, especially by means of
drilling and blasting, in terms of four EDZs. The first, EDZ1, involves the disturbance
due to the stress redistribution in the rock mass as a result of the excavation of the
void. The second, EDZ2, is the disturbance arising from the deformation of rock joints
following the stress redistribution in the rock mass. The third, EDZ3, is the cracking,
loosening and enhanced permeability in the rock mass as a result of the penetration
of blast gases and shock-loading. The fourth, EDZ4, is the unnecessary deeper
damage in the form of deepened joint deformation caused by a failure to pre-grout
when this is required. He explained the connection between the EDZs as follows:
‘Within and beyond the unavoidable disturbances caused by excavation . . . is damage caused
by defective design and/or omission of pre-injection. Deformation is inevitably increased, blast
gasses are bound to penetrate deeper, more over-break may occur and inflow is unavoidably
enhanced, all due to a failure to pre-grout. We can collectively refer to these unwanted and
unplanned disturbances as the damage EDZ.’

[34] In May 2014, Dr Barton investigated whether damage in the form of EDZ4 was
present in the tunnels. He concluded and expressed the opinion that the failure to pre-
grout when blasting had caused EDZ4 damage to the rock mass surrounding the void
of the tunnel. And, as Wepener J observed in his judgment, ‘EDZ4 is a specialist matter
and not, as far as the evidence before me showed, physically detectable during an
inspection’.

[35] By letter dated 5 February 2015, the province made a claim against Zurich in
terms of the policy. On 25 February 2015, summons was served on Zurich.

[36] In order to have a complete cause of action, the province had to have
knowledge that damage to the tunnels had occurred. It is clear from the chronology of
events that I have outlined that the province may have suspected for some time that
damage to the tunnels had been caused. It could, however, not quite identify the
damage or its cause and neither could the assessors when they investigated on the
strength of the province’s concerns. It was only when Dr Barton alerted them to the
possibility of EDZ4 damage, and then confirmed this to be the case, that the requisite
knowledge of damage could be attributed to the province. That occurred in about May
2014.

[37] It is necessary to stress the following two points. First, the province acquired
actual knowledge of damage in 2014 but it was not possible for it to have had
knowledge attributed to it any earlier because of the specialized knowledge and
expertise necessary to establish that damage had occurred. Secondly, when Dr Barton
deduced that EDZ4 damage had been caused, he established a fact, rather than an
inference of negligence or a conclusion of law. Only then could it be said that the
province had a ‘complete cause of action’.

[38] In the result, prescription began to run in May 2014 and was interrupted by the
service of summons in February 2015, some nine months later. Consequently, as far
less than three years separated these two events, the province’s claim had not
prescribed and the court below was correct when it held that the plea of prescription
had to fail.

Is the rock mass surrounding the tunnels part of the property insured?
[39] Paragraph 15 of the province’s particulars of claim deal with the damage to the
property insured. It pleaded that: (a) Bombela, its contractors and sub-contractors
‘undertook the design and construction of the tunnels and provided the materials for
purposes of doing so’; (b) as a result of ‘defective design, plan, specification, material
and/or workmanship’ they damaged the property insured, ‘more particularly the
tunnels’; and (c) the damage was caused by ‘failing to pre-grout’ in order to meet the
agreed specifications and consisted of ‘an increased and extended “excavation
disturbed zone”’ that resulted in ‘more deeply penetrating joint adjustments and
generally increased joint deformation, and thus unnecessarily increased permeability
and resulting water inflow, due to an increase in joint apertures’.

[40] The damage was said to be ’in excess of what would normally have been
expected if good industry practices’ had been adopted in the design and construction
of the tunnels; and was attributable to ‘a combination of defective design, plan,
specification and poor workmanship due, predominantly, to the absence of an
adequately planned and executed pre-grouting strategy’.

[41] Zurich’s plea to paragraph 15 anticipated its plea of prescription and also
denied that ‘there was any damage occasioned to any Property Insured as alleged or
at all’. It also denied that whatever damage may have been occasioned ‘amounts to
damage as envisaged in the policy and it denies that any damage was occasioned to
PROPERTY INSURED’. In this way, the question whether the rock mass surrounding
the tunnels was property insured, as defined in the policy, was raised.

[42] As a result of the limitation of the grounds of appeal by Wepener J, two
important issues are no longer in dispute. They are that damage occurred and that the
damage was caused to the rock mass that surrounds the tunnels. The correctness or
otherwise of Zurich argument that the rock mass is not part of the property insured
depends, ultimately, on an interpretation of the policy, and an answer to the question
‘what is a tunnel?’.

[43] In Centriq Insurance Company Ltd v Oosthuizen and Another,11 Cachalia JA
made the point that while insurance contracts must be interpreted like any other written
instrument – having regard to language, context and purpose in a unitary exercise
aimed at achieving a commercially sensible result12 -- their specific purpose activates
other considerations too. He stated in this regard:13
‘But because insurance contracts have a risk-transferring purpose containing particular
provisions, regard must be had to how the courts approach their interpretation specifically.
Thus, any provision that places a limitation upon an obligation to indemnify is usually
restrictively interpreted, for it is the insurer's duty to spell out clearly the specific risks it wishes
to exclude. In the event of real ambiguity the doctrine of interpretation, contra proferentem,
applies and the policy is also generally construed against the insurer who frames the policy
and inserts the exclusion. But, like other aids to the interpretation of contracts of this nature,
the doctrine must not be applied mechanically, for exclusion clauses, like other contractual
clauses, must be construed in accordance with their language, context and purpose with a
view to achieving a commercially sensible result.’
He also sounded a word of caution – that ‘courts are not entitled, simply because the
policy appears to drive a hard bargain, to lean to a construction more favourable to an
insured than the language of the contract, properly construed, permits’.14

[44] I turn to the policy and its terms. In the preamble to the policy, the insurers, in
return for the payment of premiums by the insured, agreed to indemnify them ‘against
all such DAMAGE or liability as herein provided’. The term ‘damage’ is defined in the
definition clause to mean ‘physical DAMAGE’, including ‘physical loss or physical
destruction’.

[45] In the summary that follows the preamble, the project that is the subject of the
policy is described as the ‘financing, pre-fabrication, design, engineering,
procurement, construction, erection, hot-testing, commissioning, operation and
maintenance of the Gautrain Rapid Rail Link in the Republic of South Africa and all
associated and ancillary works in connection therewith’. In the definitions clause it is

11 Centriq Insurance Company Ltd v Oosthuizen and Another [2019] ZASCA 11; 2019 (3) SA 387 (SCA).
12 Para 17.
13 Para 18.
14 Para 21.

stated that the project ‘shall be as stated in the Summary and any Contract or
Agreement, written or implied, entered into by the INSURED in connection therewith’.

[46] The term ‘PROPERTY INSURED’ has two components. It is defined, in the first
place, to mean ‘the permanent and TEMPORARY WORKS including Rolling Stock
and materials contained therein and other property used or for use in connection with
THE PROJECT including site camps and installations of any kind and free issue
materials’, and secondly, to mean tunnel boring machinery. The term ‘TEMPORARY
WORKS’ is defined as ‘all things, including access scaffolding erected or constructed
for the purpose of making possible the erection or installation of the permanent works
and which it is intended shall not pass to the ownership of the Principal’. Although
‘permanent works’ is not defined, it appears to be all works other than temporary
works.

[47] The term ‘TUNNEL WORKS’ is also defined. It means ‘works intended to create
any sub ground surface, passage, cavern or tunnel, including shafts, however
constructed, including cut and cover and station boxes below ground’, but the
definition shall not apply ‘to foundation works nor basement levels for above ground
surface structures, or fitting out or other similar works’.

[48] The definition of ‘CIVIL WORKS’ is also relevant. This term is defined to mean
‘Tunnel Works (but not their contents), Station Box structures (but not their contents),
Buildings (but not their contents), Bridges, Embankments, Cuttings, Foundations and
Roads’.

[49] In section 1 of the policy, under a heading ‘MATERIAL DAMAGE’, what was
termed an ‘Operative Clause’ reads as follows:
‘Except as hereinbefore excluded, the Insurers will pay to or indemnify the INSURED under
this Policy for the full cost of replacing and/or repairing and/or making good DAMAGE to the
PROPERTY INSURED howsoever caused occurring during the Period of Insurance.’

[50] Four clauses refer specifically to the tunnel works. One of the deductibles in
Section 1 relates to a deductible of R7 100 000 for ‘any one EVENT in respect of
DAMAGE to TUNNEL WORKS’. And in the exclusions to Section 1, clause 8 is

devoted in its entirety to exclusions in respect of tunnel works. A final sub-clause of
clause 8 makes it clear that tunnel works are part of the property insured. This sub-
clause reads:
‘In the event of indemnifiable loss or damage the maximum amount payable under this Policy
shall be limited to the expenses incurred to reinstate PROPERTY INSURED A to a standard
or condition technically equivalent to that which existed immediately before the occurrence of
loss or damage but not in excess of the percentage stated below of the original average per-
metre construction cost of the immediate damaged area.’

[51] In the memoranda to Section 1, the insurers undertook to pay the ‘costs and
expenses necessarily and reasonably incurred by THE INSURED in the removal and
disposal of debris, detritus and material foreign to THE PROJECT’ in respect of tunnel
works, subject to an indemnity limit. Similar provisions apply to extra charges such as
overtime and night work in respect of tunnel works.

[52] From the above, it seems to me that the policy is intended to give extremely
wide cover to the insured. That cover operates in respect of damage to ‘the
PROPERTY INSURED howsoever caused’, subject to various limitations and
exclusions. In this scheme, a number of terms that have been defined in the policy,
such as ‘property insured’, ‘tunnel works’ and ‘civil works’, tend to overlap: what
emerges clearly enough, however, is that tunnel works, being permanent works, fall
within the definition of the property insured, and tunnels works specifically include
tunnels. Tunnel works are also the subject of specific exclusions and limitations. They
would only be subject to those exclusions and limitations if they were part of the
property insured.

[53] What the policy does not do, however, is define what is meant by a tunnel. The
dictionary definition of a tunnel is ‘an artificial underground passage, as built through
a hill or under a building . . .’.15 It can, I believe, be inferred that an underground
passage has, of necessity, a floor, a roof and sides and that they comprise the
surrounding rock mass through which the passage was excavated.

15 Concise Oxford English Dictionary (12 ed) (2011).

[54] I turn to the evidence of Dr Barton and professor Roald as to what, in civil
engineering terms, a tunnel is. I do so because the context within which the policy,
and the word ‘tunnel’ that appears in it, must be interpreted is a massive civil
engineering project involving, centrally, the excavation of tunnels through rock. When
the word ‘tunnel’ was used in the policy, it must have been used as a technical, civil
engineering term. In circumstances such as this, expert evidence is admissible, and
does not offend the parol evidence rule. In Wides v Davidson16 Claasen J held that ‘it
is a clear principle that oral evidence may be given to prove that a word used in a
contract has a special meaning in a particular locality, trade or usage if it was intended
that the word was to be used in that special sense’. So too, an expert may explain the
meaning of technical terms, but they may not venture their opinion of what they believe
the document being interpreted means.17

[55] In the executive summary of Dr Barton’s expert report he said that, in the light
of Zurich’s argument, he had to devote ‘considerable space’ to a ‘rock mechanics
explanation that the rock mass surrounding the actual cylindrical excavation is very
much part of, indeed by far the most essential component, of any and all tunnels in
rock masses’. He described Zurich’s contrary contention as ‘extra-ordinary’ and one
which he had never encountered before ‘during a long career and hundreds of projects
in more than three-dozen countries’.

[56] The reason why the rock mass is such an essential component of a tunnel is
because of its load-bearing capacity. The concept that it is a fundamental component
of the tunnel is a universally accepted one among tunnel designers throughout the
world. The surrounding rock mass is crucial to the stability of tunnels, whether man-
made or naturally formed. The rock mass has, Dr Barton said, even been described
as the ‘principal structural material’ involved in the construction of a tunnel, being far
stronger than concrete or steel. These materials simply cannot withstand the
tremendous loads involved, and which are instead ‘distributed through as much as
tens of metres of rock mass’.18

16 Wides v Davidson 1959 (4) SA 678 (W) at 681D-E.
17 Gentiruco AG v Firestone (SA) (Pty) Ltd 1972 (1) SA 589 (A) at 617F-618C; KPMG Chartered
Accountants (SA) v Securefin Ltd and Another [2009] ZASCA 7; 2009 (4) SA 399 (SCA) para 40.
18 Dr Barton said that at a depth of 40 metres below surface, ‘there are already 100 tons/square meter
of vertical rock stress’.

[57] Simply put, without the surrounding rock mass ‘with typically a “cylinder
thickness” of at least one tunnel diameter, and without its multiple-component
response to excavation, thereby allowing the newly excavated tunnel to exist, there
can be no tunnel, by simple definition’. As a result, the entire ‘tunnel-forming cylinder
. . . is the tunnel by default’. This exposition was summarized by Dr Barton as follows:
‘A “rock” tunnel cannot exist unless it is surrounded by its own load-bearing “cylinder” of rock,
estimated to be at least one tunnel diameter thickness for convenience. This “cylinder” would
also be the appropriate volume into which the micro-cements could have penetrated, (say 0
to 10m from the tunnel periphery), if pre-grouting had been performed. The rock blocks and
rock joints in this nearest “10m thick cylinder” take an active and necessary part in the stress
redistribution, which compensates for removal of the stressed rock from within the newly
created tunnel void. The load that immediately builds up in the surrounding rock “cylinder” (in
fact it starts to build up also about one diameter ahead of any given tunnel face) allows the
formation of the more or less stable tunnel structure. Clearly the surrounding rock is the main
element of the insured property.’

[58] I have quoted from Dr Barton’s expert report but what he has written therein is
consistent with his evidence, which Wepener J accepted without qualification. His
opinion that the surrounding rock mass is an indispensable component of a tunnel was
supported by professor Roald, whose evidence was also accepted without
qualification by Wepener J. Professor Roald made the point that ‘[t]unnelers around
the world have long recognized that the rock mass surrounding a tunnel forms the
principal component of the tunnel structure’ and that they recognize that even if a
tunnel requires a lining, ‘the most important component of the structure is the
ground/rock surrounding the tunnel’. From this he concluded that ‘what constitutes a
tunnel is far more than just the (final) tunnel lining’.

[59] In civil engineering terms, then, a tunnel is more than the void left after the
excavation process. It includes the natural support for the void, without which there
would be no tunnel. A tunnel such as those with which this case is concerned, is
therefore a void surrounded by its own load-bearing cylinder of rock of about one
tunnel diameter in thickness. The parties, in agreeing to the terms of the policy in
relation to a civil engineering project involving, inter alia, the construction of tunnels in

rock, must have had the above concept of a tunnel in mind when they included tunnels
as part of ‘tunnel works’ within the property insured. The contextual evidence of Dr
Barton and professor Roald points decisively to this meaning of the term. This too, is
a commercially sensible interpretation as it avoids a patent absurdity – the contrary
interpretation of only a void being part of the property insured would make no sense
at all because, by definition, no damage could ever be caused to a void; and the
inclusion of it in the policy, subject to exclusions and limitations, would have been an
elaborate act of futility.

[60] I conclude, therefore, that the property insured by the policy includes the rock
mass that surrounds the void created by the process of excavation. The result is that
the EDZ4 damage caused by the failure to pre-grout the tunnels is indemnifiable in
terms of the policy.

The enforceability of the order
[61] I have quoted the order made by Wepener J in paragraph [2] above. It has,
apart from costs, two operative parts. Paragraph 1 fixed Zurich’s liability by declaring
that it was obliged to indemnify the province for the cost of replacing, repairing or
making good the damage to the tunnels. The damage referred to was that alleged in
paragraph 15 of the particulars of claim, and the tunnels were those referred to in
paragraph 11 of the particulars of claim. This declaration of Zurich’s liability was made
subject to ‘all the terms and conditions of the policy’.

[62] In paragraph 2, it was declared ‘on the basis of prayer 1 above’, that Zurich was
obliged to pay the province the amount that it proved to be the cost of remedying the
damage to the tunnels but this obligation was made ‘subject to the limit of liability and
deductibles as set out in the policy’.

[63] Orders like the one made by Wepener J are not unusual in claims of this nature.
In Cape Town Municipality and Another v Allianz Insurance Co Ltd19 Howie J explained
the rationale and effect of the two-stage process as follows:

19 Cape Town Municipality and Another v Allianz Insurance Co Ltd 1990 (1) SA 313 (C) at 332H-333B.

‘Plaintiffs are quite patently not seeking to obtain payment of part of the indemnity now and
part later. They are seeking to enforce their rights to the indemnity. If further proceedings are
instituted by plaintiffs in due course to exact payment from defendant pursuant to judgment in
the present case, such further action will be necessary by reason of the fact that the present
action is only concerned with the issue of liability, and the further action will cover elements of
plaintiffs' claim not canvassed in the current action. Conversely, those elements of the claim
covered in the present matter will be res judicata hereafter. But the two actions together will
still deal only with one cause of action. Although the relief sought in the present case differs
from the relief which will, on the above supposition, be sought in the second action, the precise
form of the relief and, if it is monetary relief, the quantum thereof, are not elements of the
cause of action. For example, if D commits continuing wrongful acts accompanied by fault and
thereby causes damages to P's property with consequent patrimonial loss, P's cause of action
is fixed irrespective of whether he sues for damages or applies for an interdict.’

[64] And, in Cadac (Pty) Ltd v Weber-Stephen Products Co and Others20 Harms DP
held that, from a procedural point of view, this two-stage process was acceptable:
‘I cannot see any objection why, as a matter of principle and in a particular case, a plaintiff
who wishes to have the issue of liability decided before embarking on quantification, may not
claim a declaratory order to the effect that the defendant is liable, and pray for an order that
the quantification stand over for later adjudication. It works in intellectual property cases, albeit
because of specific legislation, but in the light of a court's inherent jurisdiction to regulate its
own process in the interests of justice — a power derived from common law and now
entrenched in the Constitution (s 173) — I can see no justification for refusing to extend the
practice to other cases. The plaintiff may run a risk if it decides to follow this route because of
the court's discretion in relation to interest orders. It might find that interest is only to run from
the date when the debtor was able to assess the quantum of the claim. Another risk is that a
court may conclude that the issues of liability and quantum are so interlinked that it is unable
to decide the one without the other.’
In this matter, given the complexity of the issues not only on the merits but also, I
would imagine, on the quantification of the damage, it was eminently reasonable for
the province to proceed by way of the two stage process.

[65] Zurich’s complaint about the order is that, to quote from its heads of argument,
it ‘does not bring finality to the dispute as it does not leave only the issue of quantum

20 Cadac (Pty) Ltd v Weber-Stephen Products Co and Others [2010] ZASCA 105; 2011 (3) SA 570
(SCA) para 13.

to be determined’. It was argued on this basis that the order was the result of an
improper exercise of a discretion on the part of Wepener J, was unenforceable as a
result and ought to be set aside.

[66] Zurich’s attack on the order is premised on the argument that it did not draw a
clear distinction between the merits and quantum. This was said to be so in the sense
that the declarator in respect of the indemnity in paragraph 1 was made subject to ‘all
the terms and conditions of the policy’; and that the declaratory order in paragraph 2,
to the effect that Zurich was required to pay the amount proved by the province in
respect of the damage it suffered, was made subject to ‘the limit of liability and
deductibles as set out in the policy’.

[67] Even if Zurich’s argument was correct that elements of the merits were left
undecided that, on its own, would not render the order vague, ambiguous and
unenforceable. Whatever issues remain for determination in the second stage of the
proceedings are not res judicata.

[68] The order unambiguously gives effect to the high court’s finding that the
damage to the tunnels alleged by the province fell within the terms of the policy, and
that Zurich was, as a result, obliged to indemnify the province. When it did so, it
rendered this issue res judicata. It disposed finally of it and left the remaining issues
to be determined later. The provisos to paragraphs 1 and 2 of the order do not concern
whether Zurich was liable to indemnify the province, but the quantification of the
damage that it suffered. They, and paragraph 2 in particular, postulate the second
stage of the proceedings concerning proof of the amount that it will cost to remedy the
damage, less any relevant exclusions and limits.

[69] This, it would appear, was precisely what Zurich had in mind, when it pleaded
in the alternative to there having been no damage to the tunnels, that ‘insofar as
Plaintiff’s claim is in respect of alleged damage to Tunnel Works, its entitlement to
indemnification is limited to the cost it has actually incurred to reinstate the damaged
property as is provided for in the final paragraph of clause 8 of the EXCLUSION TO
SECTION 1 clause’. The second stage of the process envisages the quantification of
the province’s claim. In so doing, the order sensibly makes provision for exclusions

and limitations specified in the policy to be taken into account, to the extent that they
apply.

[70] The order of the high court is clear, unambiguous and enforceable. Zurich’s
argument to the contrary is untenable.

Conclusion
[71] The three grounds in respect of which leave to appeal was granted have all
been decided against Zurich and in favour of the province. The result is that the appeal
must fail.

[72] I make the following order:
The appeal is dismissed with costs, including the costs of two counsel.

________________________
C Plasket
Judge of Appeal

APPEARANCES

For the appellant:

C Loxton SC (with D Smith)
Instructed by:
Knowles
Husain
Lindsay
Inc,
Johannesburg

McIntyre Van der Post, Bloemfontein

For the respondent:
A Subel SC (with A C Botha SC)
Instructed by:
Werksmans Attorneys, Johannesburg

Symington De Kok, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

28 September 2022

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment.

Zurich Insurance Company South Africa Ltd v Gauteng Provincial Government
(734/2021) [2022] ZASCA 127 (28 September 2022)

MEDIA STATEMENT

The Supreme Court of Appeal (SCA) today dismissed the appeal of the Zurich
Insurance Company South Africa Ltd (Zurich) against the Gauteng Provincial
Government (the provincial government). The appeal concerned whether Zurich was
liable, in terms of a contract of insurance (the policy), to indemnify the provincial
government, as an insured, in respect of damage that had been caused during the
construction of tunnels for the Gautrain Rapid Rail System (the Gautrain).
The Gauteng Local Division of the High Court, Johannesburg (the trial court),
had found that Zurich was liable to indemnify the provincial government for the
damage to the tunnels and that it was liable to pay whatever damages were proved in
due course. When it granted leave to appeal to the SCA, it limited that leave to three
grounds, namely whether the provincial government’s claim against Zurich had
prescribed; whether the rock mass surrounding the void of the tunnels was part of the
insured property, it being accepted that the damage was caused to the surrounding

rock mass; and whether the order, which envisaged a two stage process for the
finalisation of the claim, was enforceable.
Because of the limited grounds of appeal, the damage to the rock mass was
not in dispute. When the tunnels were designed, provision was made for the pre-
grouting of the rock mass as the excavation process progressed. In the construction
process, however, pre-grouting was inexplicably not done. The provincial government
suspected that damage had been caused to the tunnels because of the excessive
ingress of water into the tunnels. In due course, an international expert in rock
mechanics was able to identify the damage as increased permeability in the rock mass
surrounding the tunnel voids due to the failure to per-grout the tunnels.
By the time this expert had ascertained that there was indeed damage to the
tunnels, more than three years had elapsed since the completion of their construction.
Zurich pleaded as a result that the provincial government’s claim against it had
prescribed. The SCA upheld the finding of the trial court that the claim had not
prescribed. In order for prescription to start running, the provincial government had to
have knowledge of the damage, in order to complete its cause of action. It had
suspected that there may have been damage and had reported its suspicions to
Zurich, but the assessors sent to inspect the tunnels had found no damage. It was
only when the expert alerted the province to the damage that he, through his expert
knowledge had been able to identify, that the provincial government could be said to
have had knowledge of the damage, and thus a complete cause of action. As
summons was issued well within three years of the acquisition of this knowledge, the
claim had not prescribed.
The second point on appeal was whether the rock mass surrounding the void
of the tunnels was part of the property insured in terms of the policy. This required an
interpretation of the policy, as well as of the term ‘tunnel’.  It was clear from the policy
that damage to the tunnels were covered. The court considered the dictionary
definition of the word ‘tunnel’. It was ‘an artificial passage, as built through hills or under
a building’. This definition, the court said, of necessity included the floor, roof and sides
of the passage, which comprised the surrounding rock mass through which the tunnel
was excavated. This understanding of the word was also consistent with what was
meant by a tunnel in civil engineering terms. The rock mass surrounding the void of a
tunnel was considered to be an essential component of a tunnel because of its load-
bearing capacity, and crucial for the stability of a tunnel. Without the surrounding rock

mass, there can be no tunnel. On this basis, the SCA, again upholding the reasoning
of the trial court, held that the rock mass surrounding the tunnels was part of the
property insured in terms of the policy.
The third point was that the two-stage order was defective and unenforceable
as it did not finally dispose of the merits of the dispute. This argument, the SCA held
was erroneous. The trial court had found that Zurich was liable to indemnify the
provincial government. In the second stage of the process contemplated by the order,
the quantum of the claim was to be determined, and in that process limitations of
liability and exclusions, as contained in the policy, had to be taken into account.
Understood in this way there was nothing ambiguous about the order issued by the
trial court, and it was enforceable.
The appeal was accordingly dismissed with costs, including the costs of two
counsel, on all three grounds.