Constantia Insurance Company Ltd v Compusource (Pty) Ltd

Constantia Insurance Company issued two post-dispute litigation (PDL) insurance policies to Compusource (Pty) Ltd through a broker, Legal Protection Services (LPS). The policies insured Compusource against adverse costs and later its own costs in high-value arbitration proceedings, on a so-called 'no win, no premium' basis. After new developments adversely affected Compusource’s prospects of success, Constantia cancelled the policies under clause 3.3.2, which allowed cancellation where prospects worsened. Relying on clause 3.5, Constantia nevertheless claimed that the full premiums (about R1.3 million) had been ‘fully earned’ and were payable despite cancellation. Compusource resisted the claim, contending that its representative, Mr Rust, was unaware of clause 3.5, that it had never intended to be bound by it, and that no true consensus had been reached regarding this term. The High Court dismissed Constantia’s claim, and Constantia appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs; Constantia was not entitled to recover the premiums under clause 3.5.

The case is significant for clarifying South African contract law principles on dissensus, particularly in the context of standard-form contracts and novel insurance products. It reinforces that apparent acceptance of contractual terms does not bind a party where the other party’s belief in consensus is not reasonable. The judgment is also important in insurance law, highlighting the need for insurers to draw attention to unusual or onerous terms, especially in innovative insurance products.