The
agreed facts may be summarised as follows.
On
21 March 2012, the parties entered into a contract farming agreement.
The brief terms of which are as follows. The plaintiff would grow 80
hectares of hope barley and deliver 600 tonnes from its three farms
to the defendant after harvest. The plaintiff would sell its harvest
to the defendant at $450= per tonne. The defendant would supply the
plaintiff with inputs. The total value of the inputs advanced to the
plaintiff would be set off against the purchase price which the
defendant would pay to the plaintiff at the time of delivery of the
barley. The plaintiff would repay the total value of the inputs
together with interest by no later than 30 November 2012. The
defendant facilitated bulk insurance for its contract farmers who
wished to take insurance for their crop. The plaintiff entered into
an insurance agreement with CBZ Insurance Company (CBZ) under the
arrangement. The terms of the insurance agreement were that CBZ
Insurance Company (CBZ) would insure the plaintiff's barley against
fire, malicious damage, hail and windstorm, rain and frost damage.
The plaintiff would pay the plaintiff's premiums to CBZ Insurance
Company (CBZ) from the proceeds of the 2012 barley winter crop. The
premiums would be collected by the defendant and paid directly into
the account of CBZ Insurance Company (CBZ).
The
plaintiff successfully harvested its barley at Rakodzi Farm and sold
it to the defendant. The barley at the Churchill farm was rained on
whilst in the field, and before harvest, resulting in the moisture
content becoming too high. The defendant rejected the plaintiff's
barley on account of the high moisture content. The barley had
pre-germinated and was no longer suitable for the defendant's
purposes. The plaintiff sold the barley to a third party at a
discounted price of $250= instead of the $450= agreed on in the
contract with the defendant. The plaintiff made a total loss of
$53,432=. The proceeds realised from the sale of the barley were
insufficient to cater for payment of both the value of the inputs
supplied and the premiums due to CBZ Insurance Company (CBZ). No
funds were paid to CBZ Insurance Company (CBZ) for the plaintiff's
premiums. CBZ Insurance Company (CBZ) declined to compensate the
plaintiff for the loss it suffered on the basis that insurance
premiums were not paid and the claim was submitted five (5) months
after the loss.
On
17 May 2013, the plaintiff issued summons against the defendant
claiming $53,432= based on an alleged breach of contract. The
plaintiff claims compensation for the loss it suffered from the
defendant on the premise that the defendant failed and/or neglected
to pay all of the insurance premiums due to CBZ Insurance Company
(CBZ), and, further, that the defendant submitted the insurance claim
five (5) months after the loss in flagrant disregard of the policy
requirements resulting in CBZ Insurance Company (CBZ) refusing to
compensate the plaintiff for the loss it endured.
The
following issues were referred to trial;
1.
Whether the contract farming agreement is subject to the provisions
of the Farmers Stop Order Act.
2.
Whether the insurance agreement is subject to the provisions of the
Farmers Stop Order Act.
3.
Assuming that either or both 1 and 2 above is in the affirmative, who
between the defendant and the insurer, CBZ
Insurance Company (CBZ),
is the “addressee” and or the” payee.”
4.
Whether or not the barley was rain-damaged for insurance purposes.
Both
parties agree, in paragraph 11 of the Statement of Agreed Facts, that
the barley did not meet the defendant's conditions of acceptance.
The plaintiff does not take issue with the defendant's refusal to
take the barley. The defendant was entitled to reject the barley.
There is no insurance claim being pursued and therefore the fourth
issue need not be considered in this trial and falls away.
The
plaintiff's version of the story is that the defendant was
negligent in that it failed to pay its insurance premium, and,
further, that the defendant failed to lodge a claim on its behalf on
time resulting in the insurer refusing to honour the insurance
contract. That, therefore, the defendant breached the terms of the
contract farming agreement and is liable to pay damages.
The
defendant is defending the matter.
It
asserts that it failed to remit any premiums to CBZ
Insurance Company (CBZ)
because the plaintiff's crop was damaged, and, resultantly, had no
funds to remit. As a result, the damage that occurred to the
plaintiff's crop was not covered by the insurance policy. It
refuted that it breached any conditions of the contract farming
agreement. The defendant contended that it is the plaintiff who was
required to lodge a claim on the occurrence of the damage in terms of
the insurance policy. Further, that the defendant was a mere agent of
the plaintiff and that the plaintiff ought to have sued the
principal, CBZ
Insurance Company (CBZ)
and hence there has been a misjoinder. The defendant maintained that
the plaintiff has failed to establish a cause of action against it.
The
dispute is centred on the plaintiff's failure to pay the insurance
premium on its behalf as well as lodge a claim timeously. No claim
has been made for an insurance pay-out against the insurer. The
damages claimed are for the loss suffered when the plaintiff sold the
crop to a third party at a loss.
Two
separate contracts are involved in this dispute.
The
first is the contract farming arrangement that the plaintiff entered
into with the defendant. The second is the insurance contract entered
into by the plaintiff and CBZ Insurance Company (CBZ).
The
court was requested to determine whether the contracts are subject to
the provisions of the Farmers Stop Order Act [Chapter 18:11] (the
Act). The Act provides for the registration by farmers of stop-orders
and special stop orders binding their crops and the proceeds thereof
and for matters incidental thereto. The Act defines a 'stop order'
as follows;
“stop-order
means any
written agreement or undertaking executed by a farmer whereunder he -
(a)
Purports to give to the holder any right, title or interest in or
over the whole or part of any crop which has been, is being or is to
be grown or produced in Zimbabwe or the proceeds thereof; and
(b)
Authorizes any person to pay to the holder the whole or part of the
proceeds of such crop.”
A
'stop order', as defined in terms of the Farmers
Stop Order Act [Chapter 18:11]
is an agreement where a farmer gives to the holder rights, title or
interest over a crop. The farmer may also authorise the payment of
the whole or part of the crop to a holder. The stop order provided
for in the Act mirrors the contract farming agreement. The insurance
contract also falls within the four corners of a stop order as
envisaged by the Act. This is for the reason that the insurance
contract executed by the farmer gave rights and interest over the
crop to another person, thus CBZ
Insurance Company (CBZ).
They were the insurer. The intention of the legislature, in enacting
this Act was to standardize, control and give legal effect to
agreements of this nature.
I
have no hesitation in finding that both the contract farming and the
insurance agreement are subject to the Farmers
Stop Order Act [Chapter 18:11]
as these are the activities the Act seeks to control.
The
court was asked to determine who the “payee” and 'addressee'
were in terms of the certificate issued in terms of the Farmers
Stop Order Act [Chapter 18:11].
In
defining the terms 'payee' and 'addressee', the court will be
able to determine who between the defendant and the plaintiff was
required to pay the insurance premium. The Farmers
Stop Order Act [Chapter 18:11]
defines the word “addressee” in the following terms -
“The
person instructed by a registered stop-order or a special stop order
to make payment in terms thereof.”
The
addressee is the person authorised or instructed to make payment in
terms of the stop order. The person required to make payment is the
addressee. There is a variance between this meaning and the ordinary
meaning of the word. The word 'addressee' ordinarily denotes a
receiver, recipient or destination.
The
term 'payee' is not defined in the Farmers Stop Order Act
[Chapter 18:11].
The
Oxford Advanced Learners Dictionary 8th
Ed defines 'payee' as “a person that money or cheque is paid
to.” The ordinary meaning of the word denotes someone required to
receive payment or be paid. The certificate refers to CBZ Insurance
Company (CBZ) properly as the 'payee'. A reading of the
certificate reflects that the defendant was to deduct the premium and
pay it directly into the payee's account.
The
addressee was therefore the defendant.
The
certificate is addressed to CBZ
Insurance Company (CBZ).
The defendant took issue with this fact. The defendant submitted that
the impression created is that CBZ
Insurance Company (CBZ)
is the addressee instead of the defendant whose role it was to make
the payment of the premium. The defendant contended that the stop
order is materially defective and is therefore a nullity. The
prescribed costs certificate relied on is captured in the following
terms:-
“Prescribed
Cost Stop Order
(Barley
Insurance)
'TO
CBZ INSURANCE COMPANY
GROUND
FLOOR, WESTGATE HOUSE EAST
…,.
It is hereby certified that an amount of…,% on total value of crop
is payable by the addressee to the payee from the proceeds of the
2011 Barley winter crop being a premium for Barley/Wheat Frost, Fire
Rain Damage Hail/ Field to Floor Insurance.
The
premium being collected by Delta Beverages and paid directly into the
payees account (Optimal Insurance Company).'…,.
Signed
by Gift MARIMO
--------------------------------
Farmer
Payee
CBZ
Insurance Company (Private)
Limited”
The
certificate issued is required to be forwarded to the addressee in
terms of section 9 of the Farmers
Stop Order Act [Chapter 18:11].
The purpose being to facilitate payment of taxes on behalf of the
farmer to the fiscus by the addressee. The certificate ought to have
been addressed to the addressee and not the insurer. The confusion
arises from the different meanings ascribed to the word 'addressee'.
CBZ
Insurance Company (CBZ)
is the addressee in the sense that the certificate was addressed to
it, but is not the addressee contemplated in terms of the Farmers Stop Order Act [Chapter 18:11].
The
next issue is who was supposed to pay the premium in terms of the
certificate.
It
is clear that the person required to make the payment is the
defendant. The certificate, when read in totality is clear that the
premium was “payable by the addressee to the payee from the
proceeds of the 2011 winter barley crop”. The defendant, the
addressee, would, in terms of the certificate, collect the premium
and pay it into the CBZ
Insurance Company (CBZ)
account, the payee. This in no way implies that the defendant was
required to pay the premium from its own resources. This point is
clarified by the words in italics which record that the defendant was
required to have collected the premium first and then paid into the
payee's account.
The
plaintiff's argument that the defendant was legally bound to pay
the premiums due to CBZ
Insurance Company (CBZ)
on account of the stop order does not find favour with the court.
In
addition, the definition of stop-order does not imply that the
proceeds so paid would have to come from the addressee but rather
that the farmer 'authorizes any person to pay to the holder the
whole or part of the proceeds of such crop'. The premium was
required to be paid from the proceeds of the crop. The fact that the
certificate may have been addressed to the wrong person does not take
away the fact that the premium was required to be paid from the
proceeds of the crop. The contents of the certificate are
unambiguous.
When
one reads the certificate together with the contracts involved, it
becomes even clearer that the responsibility to pay the premium
rested on the plaintiff. The contract farming agreement does not
delve into issues of payment of the insurance premium. In order to
determine what the intention of the parties was with regards payment
of the premium, the court will also examine the terms of the
insurance contract and correspondences on the subject of the policy.
On
19 July 2012, CBZ Insurance Company (CBZ) wrote to the plaintiff
informing it that its crop was now covered by the insurance policy.
It was made clear that the premium would be collected from the
plaintiff's contractor at the time of selling. The proposal form,
signed on 13 July 2012, is on a CBZ Insurance Company (CBZ) Insurance
letterhead. A representative of the plaintiff signed the proposal
form on its behalf. At the bottom of the proposal form it is stated
that the defendant would collect the premiums and pay them directly
into the payee's account. A
letter written by CBZ Insurance Company (CBZ) to the defendant, on10
February 2012, spells out the roles of CBZ Insurance Company (CBZ)
and the defendant and states, clearly, that it shall be the role of
the defendant to distribute proposal forms to interested farmers on
behalf of CBZ Insurance Company (CBZ), submit them to the insurer,
and to collect premiums from all farmers insured and pay the premium
into the insurer's account. The defendant would pay premiums to CBZ
Insurance Company (CBZ) from the proceeds of the 2012 barley season.
This analogy leaves no doubt in my mind that the insurer was CBZ
Insurance Company (CBZ), the insured the plaintiff, and the defendant
was solely an agent of CBZ Insurance Company (CBZ) which facilitated
the insurance contract.
The
defendant was obliged to pay the premium from the proceeds of the
barley only. The defendant was not obligated, in terms of any
agreement, to insure the plaintiff's barley.
It
has been shown that the defendant's role in the insurance contract
was purely to facilitate the insurance policy between the parties. It
was not a party to that contract and did not contract as a principal
to the contract. Its role was to distribute proposals to farmers on
contract farming and collect premiums where such farmers had
delivered crops to it. It was an agent of CBZ
Insurance Company (CBZ)
in so far as the distribution of the forms and collection of the
premiums was concerned. There is nothing to point towards the
suggestion that the defendant chose to assume personal responsibility
for the obligations that fell on CBZ
Insurance Company (CBZ)
arising from the insurance contract. It was not the responsibility of
the defendant to pay the premium from its own pocket. It would not be
reasonable to expect the defendant to pay the premium when there was
simply no delivery of the crop and hence no sale. The contract does
not create an obligation on the part of the defendant to pay the
premium from its own resources. This means that if the plaintiff did
not deliver the crop, for whatever reason, the defendant would not be
able to pay the insurance premium. It was, in effect, the plaintiff
that was paying its own premiums. It is only where a crop has been
successfully delivered and its proceeds are sufficient to meet the
premiums that the defendant can be held accountable for failing to
pay the insurance premiums.
There
is no breach to talk about as it was never a term of the contract
that the defendant would be required to fork out its own resources to
pay the insurance premiums. If this court were to find the defendant
accountable for the failure to remit the premiums this would amount
to making it a party to a contract to which it was never a party to.
It would be preposterous to expect the defendant to pay the
plaintiff's premium before the barley had been delivered to it. The
problems the plaintiff is saddled with are out of its own creation.
There
is nothing to suggest that the defendant assumed personal
responsibility for the loss suffered as suggested by the plaintiff.
Similar insurance arrangements were successfully implemented during
the 2011 and 2013 farming season where the defendant remitted the
plaintiff's premium payments to CBZ
Insurance Company (CBZ).
This was because the plaintiff had successfully delivered its entire
crop. The intention of the parties is clear from the language of the
contract itself. The premium due to CBZ
Insurance Company (CBZ)
would be computed at the end of the farming season after the farmer
had submitted its sales sheets and remitted to CBZ
Insurance Company (CBZ).
The premium was to come from the proceeds of the sale of the crop.
There
is simply no cause of action against the defendant.
In
any contract farming arrangement where there is a specific term of
the contract that an insurance premium for the crop will be paid out
of the proceeds of the crop, any premiums required to be paid depend
on the success of the crop and realisation of proceeds of the crop
sufficient to meet the charge. Where a contract farmer has failed to
deliver its crop it cannot expect that the contractor will pay
insurance premiums on its behalf.
The
next inquiry relates to the failure by the defendant to lodge a claim
on the plaintiff's behalf.
The
insurance contract required the insured itself to notify the insurer
of any loss, damage or destruction to crops. The contract states,
under the claims condition, as follows:-
“In
the event of a loss, damage or destruction to insured crops:
(i)
The Insured must notify the Insurer within 24 hours of the occurrence
of any loss or potential loss and provide details of the date and
time of loss, the cause of loss, and the insured crops which have
been damaged…,.''
This
term is clear that the insured was required to lodge the claim
itself.
There
is no suggestion anywhere in the policy document that the defendant
was required to lodge the claim on behalf of the plaintiff. The
plaintiff's assertion that the defendant neglected to submit the
claim on its behalf does not find favour with the court….,.
It
is trite that a claim for non-payment of an insurance claim cannot be
directed towards an agent….,.
No
legal basis has been laid for the bid to hold the defendant
answerable for the loss suffered. The plaintiff has failed to prove
its case on a balance of probabilities. In the result, it is ordered
as follows:-
The
plaintiff's claim is dismissed with costs.
