Secondary

flooded-mine

High Court orders Sasria to pay up for equipment lost during flooding

The High Court in Johannesburg recently ordered the South African Special Risk Insurance Association (Sasria) to settle a claim by a company that lost its equipment when a colliery was flooded during labour unrest.

Blackspear Holdings (Pty) Ltd, which owns earthmoving equipment used in mining, took Bryte Insurance and Sasria to court, contending that either insurer or both were liable to pay compensation for the loss.

Bryte’s all-risks policy excluded the perils covered by Sasria.

Blackspear put its loss at more than R18.6 million, although, according to the High Court’s judgment, the loss amount had yet to be proved.

Sasria disputed that the labour unrest was the proximate cause of the damage to the equipment. It contended that the equipment was unsalvageable because a generator had been removed, which resulted in the flooding of Thutsi mine in Ermelo.

Background: the pumps were essential

The mine experienced water ingress from the surrounding landmass. It was essential that pumps operated non-stop to extract the water. The pumps, which were operated by an attendant, were powered by a diesel generator at the surface.

On 25 June 2016, the workforce downed tools because they were not paid, as Thutsi Mining (Pty) Ltd had no funds. On 30 June, management switched off the generator.

The most probable reason to switch off the generator is that there was no point in burning fuel to generate electricity if no attendant was at the site of the pumps to operate them, according to the High Court’s judgment.

On 15 July, the generator was removed by its owner, who had leased it to the mine and had not been paid. The mine had a back-up generator, which belonged to Blackspear, but it was not put into operation, presumably for the same reasons that the main generator had been switched off.

Wages had still not been paid by 30 July. Members of the Association of Mineworkers and Construction Union began an underground sit-in. Management was denied access to the underground areas.

By the time a deal was reached with the workers on 20 September, the mine had been lost to flooding and was not capable of economic rehabilitation.

When the mine was inspected, it was apparent that the workers had extensively vandalised various pieces of equipment – most importantly, the electrical cabling. The destruction of the electrical reticulation infrastructure made it impossible to supply power to the pumps.

“The management of the mine and that of Blackspear were plainly powerless to resist the force exerted by the workers. In this regard, the evidence is that the police were loath to engage the workers physically. No criticism can be advanced that there were reasonable steps by Blackspear that could have been taken and which were neglected,” according to the High Court.

What is the legal cause of the damages suffered by Blackspear?

Both Blackspear and Bryte alleged the cause of the loss was the workers’ conduct, which was a peril covered by Sasria.

Sasria’s case was that the cause was the removal of the main generator – a Bryte peril.

Judge Roland Sutherland said the test for legal causation has been set out in Guardrisk Insurance Company Limited v Cafe Chameleon CC, where the Supreme Court of Appeal (SCA) stated:

  • “The general approach to causation also applies to insurance law. Factual causation is the first enquiry. The diagnostic tool is the ‘but for’ test, which involves a ‘hypothetical enquiry as to what probably would have happened but for the wrongful conduct of the defendant’ […] In the insurance context, the analysis is aimed at establishing what would have happened but for the insured peril.”
  • “A plaintiff is not required to establish the causal link with certainty, but only to establish that the wrongful conduct was a probable cause of the loss, which calls for a sensible retrospective analysis of what would probably have occurred, based upon the evidence and what can be expected to occur in the course of ordinary human affairs, rather than an exercise in metaphysics.” (Quoted from the SCA case of Minister of Safety and Security v Van Duivenboden.)
  • “There may be more than one cause or multiple causes giving rise to a claim. In that case, ‘the proximate or actual or effective cause (it matters not what term is used) must be ascertained’. Even if a loss is ‘not felt as the immediate result of the peril insured against, but occurs after a succession of other causes, the peril remains the proximate cause of the loss, as long as there is no break in the chain of causation’.”
  • “The enquiry into legal causation usually follows factual causation. It asks whether there is a sufficiently close relationship between the factual cause and the consequent loss to give rise to legal liability. Put differently, the question is whether the loss is too remote for the factual cause to also be the legal cause. If not, no legal liability may arise.”

Judge Sutherland said it was plain from the facts that the removal of the generator was not the cause of Blackspear’s loss. Indeed, the presence or absence of the generator was irrelevant.

The key question was, who was responsible for the failure to maintain the pumps in operation?

The court determined that the vandalism and denial of access rendered the pumping operations impossible, which in the chain of causation resulted in the mine being lost to flooding – not the fact that the generator had been turned off and removed.

The court ordered Sasria to pay Blackspear the sum of its proven damages.

Costs order

Blackspear argued that not only should Sasria pay the costs of its and Bryte’s counsel but it should also be ordered to pay punitive costs because Sasria had been fully acquainted, before the hearing, with all the evidence to establish its liability. Sasria conceded liability during argument.

In response, Sasria said despite the evidence disclosed in the witness statements, it was “not improper” to see what would emerge during the trial before reassessing its case.

Judge Sutherland said Sasria’s argument would enjoy some force if any of the evidence had at least been challenged.

“In this case, the evidence as laid out in the witness statements was barely amplified in cross examination. Nothing novel was extracted, because nothing novel was asked of the witnesses. It is thus fair to contend that a four-day trial could have been avoided.”

However, Judge Sutherland said a punitive costs order is appropriate where mala fide practices are evident, which was not the case, and so the court should not rebuke Sasria or its legal representatives.

He said the appropriate costs order was for Sasria to pay for Blackspear’s two counsel and Bryte’s counsel.

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