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[2021] ZAWCHC 141
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Origin Global Holdings Ltd v Acorn Agri (Pty) Ltd and Others (10317/2019) [2021] ZAWCHC 141 (30 July 2021)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 10317/2019
In
the matter between:
ORIGIN
GLOBAL HOLDINGS LTD
Plaintiff
and
ACORN
AGRI (PTY) LTD
1st Defendant
AFRIFRESH
GROUP (PTY) LTD
2nd Defendant
Coram:
Bozalek J
Heard:
3 June 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email. The date and time
for
hand-down is deemed to be 12h00 on 30 July 2021.
JUDGMENT
BOZALEK
J
[1]
The
first defendant raises an exception to the plaintiff’s
particulars of claim on the basis that it fails to disclose a cause
of action against the first defendant, alternatively, that the
particulars of claim are vague and the first defendant is embarrassed
in pleading thereto.
[2]
The
plaintiff (‘Origin Global’), a Mauritian company,
instituted action against the first and second defendants (‘Acorn’
and ‘Afrifresh’) claiming against them jointly,
alternatively, jointly and severally, payment of US$796 617.72
by reason of the defendants’ alleged breach of their
obligations in terms of a share purchase agreement (hereinafter ‘the
SPA’).
[3]
The
plaintiff amended its Particulars of claim (‘the Particulars’)
on two occasions and on 17 March 2020 the first defendant
delivered
the notice of exception which is the subject of the present
proceedings.
[4]
The
SPA was concluded in writing on 3 September 2016, the parties thereto
being Standard Chartered Private Equity (Mauritius) III
Limited
(‘SCPE’) the first and second defendants, Afrifresh
Holdings (Pty) Ltd, represented by Mr Chris Conradie, and
Mr Conradie
himself.
[5]
Very
simply, in terms of the agreement SCPE sold 93% of the shares in the
second defendant (Afrifresh) to the first defendant (Acorn).
The key
clause in the SPA for the purposes of the exception is clause 9. In
reading this clause it must be borne in mind that ‘
the
Purchaser’
is Acorn (first defendant), ‘
the
Company’
is Afrifresh (second defendant,) ‘
Origin
Holdings’
is the plaintiff and ‘
Holdings’
is Afrifresh Holdings (Proprietary) Limited. Clause 9 reads follows:
‘
9.
SUPPLY AGREEMENT
9.1
The Purchaser undertakes in favour of Conradie that it will procure
that the Company enters
into negotiations with Conradie as soon as
reasonably possible after the Effective Date, with a view to
concluding an agreement
between the Company and Conradie or his
nominee in terms of which the Company agrees to supply
produce
to Conradie or his nominee (the Supply Agreement).
(For
purposes of this clause 9, Conradie hereby irrevocably nominates OFD
and ODA as his nominees.)
9.2
Pending the outcome of the negotiations referred to in clause 9.1,
(but
subject to clause 9.4)
the
Purchaser and the Company may not cede, alienate or encumber the loan
claim of USD1 950 000 which the Purchaser will
hold against
Origin Holdings pursuant to the terms of this Agreement.
9.3
The Company and Conradie undertake to negotiate in good faith with
each other with a view
to concluding a Supply Agreement.
9.4
If a Supply Agreement, on terms and conditions acceptable to the
Company and Conradie, is
not concluded within 6 months after the
Effective Date:
9.4.1
the Purchaser undertakes in favour of Origin Holdings and Holdings
that the loan of USD1 950 000 which the Purchaser
will hold against
Origin Holdings pursuant to the terms of this Agreement will not be
enforced by the Purchaser and/or the Company
and the rights of the
Purchaser and/or the Company in respect thereof will be ceded
outright and irrevocably to Origin Holdings
(provided that Conradie
has complied with his obligations in terms of clause 9.3); and
9.4.2.
the company will supply a minimum of 500 000 units of fruit per year
for 2 years from the Signature Date
(for
the benefit of)
to
Origin Holdings
(to
OFD and ODA collectively)
on
market related terms and conditions. For the avoidance of doubt, the
terms and conditions of the supply of fruit by the Company
to
Origin
Holdings
(OFD
and ODA)
will
be consistent with past practice and at market related prices and on
market related service provisions that do not materially
differ from
industry norms.
9.5
The Parties agree that this clause 9 constitutes a
stipulatio
alteri
for
the benefit of Origin Holdings and shall be open for acceptance by
Origin Holdings which shall be capable of acceptance at any
time by
Origin Holdings by delivering written notice to that effect to the
Parties. Prior acceptance, the benefit of this
stipulatio
alteri
may
not be withdrawn by the Parties without the prior written consent of
Origin Holdings’.
[6]
The
bracketed words in subclauses 9.1 and 9.4.2 reflect
insertions/amendments to the SPA subsequent to the original date of
signature
on 3 September 2016, whilst the words with a line through
them reflect words deleted pursuant to such amendments. Three
addendums
to the SPA were executed: on 9 September 2016, 15 November
2016 and again on 15 November 2016. The amendments to clause 9 were
effected by the second addendum.
[7]
The
focus of the exception is clause 9.4 of the SPA in which the
defendants give various undertakings in favour of Mr Conradie,
the
plaintiff and Holdings. In clause 9.1 the first defendant undertook
to procure that the second defendant entered into negotiations
with
Conradie with a view to concluding an agreement between them (the
Supply Agreement) in terms of which the second defendant
would supply
fruit to Conradie or his nominees, namely, OFD and ODA. This was to
take place within a period of six months after
signature of the SPA.
[8]
In
its Particulars the plaintiff pleads further that a Supply Agreement
could not be concluded within the six-month period as result
of which
clause 9.4 became operative, and in particular clause 9.4.2, in terms
of which, it alleged, the first and second defendants
were obliged to
supply a minimum of 500 000 units of fruit per year for two years for
the benefit of the plaintiff at market related
prices. The allegation
that the first defendant too was subject to this obligation forms the
core of its exception.
[9]
The
first defendant’s exception highlights paragraph 9 of the
Particulars, the introduction to which reads as follows:
‘
9.
The following were the material express, alternatively implied,
alternatively tacit
terms of the SPA as amended, alternatively such
terms arise upon a proper interpretation of the SPA as amended.
’
[10]
Also
material is paragraph 9.7 which reads as follows:
‘
9.7
In terms of clause 9.4, it was agreed that if a Supply Agreement, on
terms and conditionals
(sic)
acceptable
to the Second Defendant and to Conradie, was not concluded within 6
months after the Effective Date:
9.7.1
The First Defendant undertook in favour of the Plaintiff and
Afrifresh Holdings Proprietary Limited that the loan
claim of
US$1,950,000.00 would not be enforced by the First Defendant and/or
the Second Defendant and the rights of the First Defendant
and/or the
Second Defendant in respect thereof would be ceded outright and
irrevocably to the Plaintiff (provided that Conradie
complied with
his obligations in terms of clause 9.3); and
9.7.2
The Second Defendant undertook to supply a minimum of 500 000 units
of fruit per year for 2 years from the Signature
Date for the benefit
of the Plaintiff to OFD and ODA collectively on market related terms.
For the avoidance of doubt, the terms
and conditions of the supply of
fruit by the Second Defendant to OFD and ODA would be consistent with
past practice and at market
related prices and on market related
service provisions that do not materially differ from industry norms;
9.7.3
The First Defendant undertook that the Second Defendant comply with
its obligations pleaded above.’
[11]
The
following paragraphs in the Particulars are also relevant:
‘
10.
It was within the contemplation of the parties at the time of the
conclusion of the SPA, and the addenda
thereto, and the SPA and the
addenda thereto were concluded on the basis that:
10.1
The first defendant would become the de facto corporate controller of
the second defendant, upon implementation
of the terms of the SPA;
10.2
The plaintiff or Conradie had made commitments, or was in the process
of making commitments, to a purchaser
or intended purchaser of OFD
and ODA, being Mahindra Agri Solutions Limited (‘Mahindra’)
in terms whereof, inter alia
10.2.1
OFD and ODA would be able to secure the supply of 500 000 units of
fruit per year for 2 years on market related terms and
conditions;
102.2
The plaintiff would earn commission on the supply of fruit, via OFD
and ODA;
10.2.3
Clause 9, and specifically 9.1, and 9.4.2, were intended to enable
OFD and ODA to continue to reserve fruit for their European
clients.
10A
It was within the contemplation of the parties at the time of the
conclusion of second and third addenda
to the SPA and such addenda
were concluded on the basis that the Plaintiff or Conradie was or
would be exposed to Mahindra or to
OFD, in the sum of US$1 000
000.00, as a forfeiture or a penalty, were they not to secure supply
in accordance with the commitments
in paragraph 10.2. above.’
[12]
The
Particulars allege further that, despite demand, and although they
made part performance of their obligations, the first and
second
defendants failed to effect, supply or procure the full supply of
fruit and failed to tender to perform their obligations
under clause
9.4.2 of the SPA and thereby breached the SPA, as amended. As a
consequence of the aforesaid breach, the plaintiff
suffered loss in
the form of the penalty or forfeiture pleaded in paragraph 10A, being
an amount of US$1mil, alternatively suffered
a loss of commission in
the sum of US$796 617.71.
[13]
The
first defendant’s exception is directed at paragraph 9.7.3 of
the Particulars in which the plaintiff alleges that the
first
defendant ‘
undertook
to procure that the second defendant comply with its obligations’
(to supply a minimum of 1mil units of fruit over a two-year period).
That allegation was in turn based upon clause 9.4.2 of the
SPA.
[14]
The
basis of the first defendant’s exception is captured in
paragraphs 4 and 5 of its notice of exception as follows:
‘
4.
Clause 9.4.2 imposes no obligation on the first defendant to supply
or procure the supply
of fruit by the second defendant.
5.
In the premises:
5.1
the allegation that first defendant was in breach of any obligations
in terms of clause
9.4.2 of the Master SPA, as is alleged by the
plaintiff in paragraphs 17, 19, 20 and 21 of the POC, is not
supported by the provision
of the Master SPA on which the plaintiff
relies; and
5.2
the POC fails to disclose any cause of action against the first
defendant jointly with the
second defendant or jointly and severally
with the second defendant, for payment of the sum of US$796 617,72’.
[15]
In
advancing its exception the first defendant eventually ultimately
relied only on the ground that the Particulars did not disclose
a
cause of action. In argument it noted that the plaintiff pleaded that
the obligation was imposed on the first defendant on four
separate
bases, namely: expressly, tacitly, impliedly or on a proper
interpretation of the SPA. It dealt with each of these bases
and
submitted that the allegation was not supported by the provisions of
the SPA on any basis and that the Particulars accordingly
failed to
disclose any cause of action against the first defendant.
[16]
In
argument the plaintiff relied only on the term having arisen tacitly
or, alternatively, on a proper interpretation of the agreement.
It
contended that since a tacit term is one that arises from the facts
and is thus ‘
fact
sensitive’
,
its existence could not be determined on exception. For much the same
reason, it contended, the SPA could not be properly interpreted
at
the exception stage since the exercise could only be done in the
context of all the facts which were as yet not before the Court.
In
regard to both bases the plaintiff relied
inter
alia
on Rule 18(7) which provides that there is no obligation to plead the
facts that are relied on for the imputation of an implied
term.
Finally, the plaintiff contended that there was sufficient contextual
material pleaded in the particulars of claim to demonstrate
that the
term upon which the plaintiff relied could be relatively easily
imputed or so interpreted.
The
principles to be applied in deciding an exception
[17]
It
is trite that in deciding an exception the Court must take the facts
alleged in the pleadings as correct. A further uncontentious
principle is that an excipient has the duty to persuade the Court
that upon every interpretation which the facts alleged in the
particulars of claim can reasonably bear, no cause of action is
disclosed. In
Francis
v Sharp and Others
[1]
it was held that an excipient should make out a very clear, strong
case before he should be allowed to succeed. It reaffirmed that
the
Courts are reluctant to decide upon exception questions concerning
the interpretation of a contract.
[18]
The
principle that Courts are reluctant to decide issues concerning the
interpretation of contracts upon exception is however, not
an
all-encompassing principle. As was stated by Nestadt JA in
Sun
Packaging (Pty) Ltd Vreulink
,
[2]
this approach does not apply where the meaning of the contract is
certain.
‘
Difficulty
in interpreting a document does not necessarily imply that it is
ambiguous … Contracts are not rendered uncertain
because
parties disagree as to their meaning … Counsel was probably
right in saying that the letter is not a lawyer’s
contract. But
this is no reason for interpreting it differently. For the reasons
given, I do not find the meaning of clause 3 doubtful.
Properly
interpreted, it has only one meaning.’.
[19]
I
turn now to the various bases upon which it is contended by the
plaintiff that the SPA, and more particularly, clause 9.4, can
be
interpreted as imposing an obligation on the first defendant to
procure that the second defendant supply a minimum of 500 000
units
of fruit per year for two years for the benefit of the plaintiff, to
OFD and ODA collectively on market related terms and
conditions.
Express
term
[20]
The
first such basis was that this was what the clause expressly
provided. As was pointed out by the first defendant, it is clear
that
the SPA does not contain any such express provision and nor did the
plaintiff contend otherwise in argument.
Implied
term
[21]
The
second basis upon which the obligation was said to arise was as an
implied term. In
South
African Forestry Co Ltd v York Timbers Ltd
,
[3]
Brand JA dealt at some length with the concept of an implied
term explaining that, unlike tacit terms, which are based on
the
inferred intention of the party, implied terms are ‘
imported
into contracts by law from without’
.
He pointed out that the Courts have the inherent power to develop new
implied terms stating as follows:
‘
Once
an implied term has been recognised, however, it is incorporated into
all contracts, if it is of general application, or into
contracts of
a specific class, unless it is specifically excluded by the parties …
It follows, in my view, that a term cannot
be implied merely because
it is reasonable or to promote fairness and justice between the
parties in a particular case. It can
be implied only if it is
considered to be good law in general. The particular parties and set
of facts can serve only as catalysts
in the process of legal
development.’
[22]
From
this extract it is clear that the interpretation contended for by the
plaintiff could hardly arise from an implied term. Again
the
plaintiff did not pursue this line in argument, restricting itself to
reliance on a tacit term or on the alternative basis
of the term
arising on a proper interpretation of the agreement.
Tacit
Term
[23]
I
turn then to the argument that the term contended for arose tacitly
between the parties. In
Alfred
McAlpine and Son (Pty) Ltd v Transvaal Provincial Administration
,
[4]
Corbett AJA (as he then was), in the minority judgment, discussed at
some length the concept of an ‘
implied
term’
pointing out that in legal parlance the expression ‘
implied
term’
is
an ambiguous one in that it can be used to denote two or three
distinct concepts. For present purposes I need concern myself
only
with the second category or concept which was described by Corbett
AJA as follows:
‘
In
the second place, “implied term” is used to denote an
unexpressed provision of the contract which derives from the
common
intention of the parties, as inferred by the Court from the express
terms of the contract and the surrounding circumstances.
In supplying
such an implied term the Court, in truth, declares the whole contract
entered into by the parties. In this connection
the concept, common
intention of the parties, comprehends, it would seem, not only the
actual intention but also an imputed intention.
In other words, the
Court implies not only terms which the parties must actually have had
in mind but did not trouble to express
but also terms which the
parties, whether or not they actually had them in mind, would have
expressed if the question, or the situation
requiring the term, had
been drawn to their attention.’
The
learned judge elected to refer to such a term as a tacit term and
went on to state:
‘
The
tacit term, on the other hand, is a provision which must be found, if
it is to be found at all, in the unexpressed intention
of the
parties. … The Court does not readily import a tacit a term.
It cannot make contracts for people; nor can it supplement
the
agreement of the parties merely because it might be reasonable to do
so. Before it can imply a tacit term the Court must be
satisfied,
upon a consideration in a reasonable and businesslike manner of the
terms of the contract and the admissible evidence
of surrounding
circumstances, that an implication necessarily arises that the
parties intended to contract on the basis of the
suggested term.’
[24]
The
latter sentiments were endorsed and expanded upon by Brand JA in
Bourbon-Leftley.
[5]
Referring to the principle that a tacit term is not easily inferred
by the Court, he stated as follows:
‘
The
reason for this reluctance is closely linked to the postulate that
the Courts can neither make contracts for people nor supplement
their
agreements merely because it appears reasonable or convenient to do
so. … It follows that a term cannot be inferred
because it
would, on the application of the well-known
“
officious
bystander”
test,
have been unreasonable of one of the parties not to agree to it upon
the bystander’s suggestion. Nor can it be inferred
because it
would be convenient and might therefore very well have been
incorporated in the contract if the parties had thought
about it at
the time. A proposed tacit term can only be imported into a contract
if the Court is satisfied that the parties would
necessarily
have
agreed upon such a term if it had been suggested to them at the time.
... If the inference is that the response by one of the
parties to
the bystander’s question might have been that he would first
like to discuss and consider the suggested term,
the importation of
the term would not be justified.
20.
In deciding whether the suggested term can be inferred the Court will
have regard primarily
to the express terms of the contract and to the
surrounding circumstances under which it was entered into.’
[6]
[25]
Recently,
in the matter of
Adhu
Investments CC and others v Padayachee
,
[7]
the Supreme Court of Appeal referred with approval to the approach to
tacit terms expressed in
Alfred
McAlpine
and stated:
‘
Whether
a contract contains such a term is a question of interpretation.
Generally, a court would be very slow to import a tacit
term in a
contract particularly where, as in the instant case, the parties have
concluded a comprehensive written agreement that
deals in great
detail with the subject matter of the contract, and it is not
necessary to give the contract business efficacy.
15.
The first step in the enquiry as to the existence of such a term is
whether, regard being
had to the express terms of the agreement,
there is any room for importing the alleged tacit term.’
[26]
The
Court noted clauses in the contract in question providing that the
written agreement was the whole agreement and for no variation
thereto unless recorded in writing and signed on behalf of the
parties. It stated in this regard:
‘
A
sole testimonial clause or non-variation clause does not necessarily,
of itself, exclude the existence of a tacit term.
These
clauses, however, contained as they are in a comprehensive contract
dealing in the greatest detail with the subject matter,
militate
against the inclusion of the tacit term contended for. In my view,
(the relevant clauses) give a strong indication that
in the present
matter the parties intended the written document to reflect the full
agreement between them leaving little room,
if any, for the
incorporation of such a tacit term
.’
[27]
In
advancing its exception the first defendant similarly relies on an
‘
entire
agreement’
and a ‘
non-variation’
clause which read respectively as follows:
‘
21.3
Entire
agreement
21.3.1
This agreement constitutes the entire agreement between the Parties
in regard to its subject matter.
21.3.2
Neither of the Parties shall have any claim or right of action
arising from any undertaking, representation or warranty not
included
in this Agreement.
21.4
Variation
No
agreement to vary, add to or cancel this Agreement shall be of any
force or effect unless recorded in writing and signed by or
on behalf
of the Parties.’
[28]
I
accept, however, as was contended on behalf of the plaintiff, that
the mere existence of a non-variation or an entire agreement
clause
does not preclude finding a tacit term in the agreement since, as was
held in
Wilkins
v Voges
,
[8]
a tacit term once found to exist is read into the contract and as
such is ‘
contained
in the written contract’
.
[29]
On
behalf of the first defendant it was contended that no surrounding
circumstances were pleaded by the plaintiff in support of
the
inclusion of the tacit term contended for. In response the plaintiff
argued that in terms of Rule 18(7) it was not incumbent
on it to
plead any facts upon which the claim for the importation of a tacit
term relied and, secondly, that in any event such
factors as are
apparent from the particulars of claim read together with the SPA
were ‘
more
than sufficient’
to support the possibility of the importation of that term.
[30]
In
regard to Rule 18(7), the plaintiff relied on the commentary in
Erasmus
Superior Court Practice
[9]
and on
Roberts
Construction Co (Ltd) v Dominion Earthworks (Pty) Ltd
.
[10]
It is correct that Rule 18(7) provides that it shall not be necessary
in any pleadings to state the circumstances from which an
alleged
implied term can be inferred. However, this clearly cannot mean that
any pleading containing a cause of action or defence
based on the
existence of a tacit term cannot be the subject of a successful
exception and must invariably go to trial, since this
would render
obviously specious claims or defences in contractual disputes,
exception-proof. Of relevance in this regard is the
following
statement by Harms JA in
Telematrix
(Pty) Ltd v Advertising Standards Authority SA
:
[11]
‘
Exceptions
should be dealt with sensibly. They provide a useful mechanism to
weed out cases without legal merit. An over-technical
approach
destroys their utility. To borrow the imagery employed by Miller J,
the response to an exception should be like a sword
that
“
cuts
through the tissue of which the exception is compounded and exposes
its vulnerability.”
Dealing
with an interpretation issue, he added:
“
Nor
do I think that the mere notional possibility that evidence of
surrounding circumstances may influence the issue should necessarily
operate to debar the Court from deciding such issue on exception.
There must, I think, be something more than a notional or remote
possibility. Usually that something more can be gathered from the
pleadings and the facts alleged or admitted therein. There may
be a
specific allegation in the pleadings showing the relevance of
extraneous facts, or there may be allegations from which it
may be
inferred that further facts affecting interpretation may reasonably
possibly exist. A measure of conjecture is undoubtedly
both
permissible and proper, but the shield should not be allowed to
protect the respondent where it is composed entirely of conjectural
and speculative hypotheses, lacking any real foundation in the
pleadings or in the obvious facts.”
’
[12]
[31]
This
brings me to the plaintiff’s contentions that such facts as are
apparent from the pleadings, read with the SPA, are more
than
sufficient to support the possibility of the tacit term’s
existence. These facts or allegations comprise, as I understand
the
plaintiff’s argument, first, the averment in paragraph 9.7.3
that the first defendant ‘
undertook
to procure that the second defendant comply with its obligations
pleaded above’
.
However, this averment, apart from reflecting the first defendant’s
undisputed obligation in terms of clause 9.1 of the
SPA to procure
that the second defendant negotiate with the plaintiff for a Supply
Agreement, takes the issue of the first defendant’s
co-liability in terms of clause 9.4.2 no further. The same difficulty
arises in relation to the next averment relied on, namely,
the
preamble to paragraph 9 which broadly alleges that ‘
The
following were the material express, alternatively implied,
alternatively tacit terms of the SPA as amended …’.
Accordingly,
neither of these averments take the plaintiff’s case for a
tacit term any further since they are merely general
and
unsubstantiated assertions of its existence.
[32]
The
plaintiff then relies on allegations of matters that were ‘
within
the contemplation of the parties’
,
referred to paragraphs 10 and 10A of the Particulars, and on the
basis of which the SPA and the addenda were concluded. In these
paragraphs reference is made to the plaintiff or Conradie having made
commitments or being in the process of making commitments
to a
purchaser or intended purchaser of OFD and ODA and securing a supply
of fruit to OFD and ODA for two years in respect of which
the
plaintiff would earn commission or, failing the conclusion of such a
Supply Agreement, would be exposed to a penalty or forfeiture.
[33]
Accepting
these allegations as facts, I do not consider that the plaintiff’s
case for the tacit term contended for is in any
way advanced thereby
for the simple reason that clause 9.4 of the SPA, as it stands,
provides comprehensively for the consequences
of a Supply Agreement
not being concluded within the six-month period. Clause 9.4.1
provides that in such event, the first defendant
forfeits its right
to recover a loan of US$1 950 000.00 from the plaintiff and
cedes its rights in that regard irrevocably
to the plaintiff. Clause
9.4.2 provides a further negative consequence for the first (and
second) defendant in that the company
whose shareholding it purchases
in terms of the SPA, the second defendant, undertakes in that event,
as a fall back for the lack
of a negotiated Supply Agreement, to
supply fruit at a minimum amount of 500 000 units over two
years, for the benefit
of the plaintiff, to OFD and OFA. It is a
breach of that latter fall back provision, clause 9.4.2, upon which
the plaintiff’s
claim against the first defendant is based.
What it seeks, by way of the importation of the tacit term, is to add
the first defendant
as a party co-liable with the second defendant
for the consequences of a breach of subclause 9.4.2.
[34]
The
final averment relied on upon by the plaintiff in support of the
possibility of the tacit term being established on trial, is
that in
terms of the SPA, the first defendant became the exclusive ‘
corporate
controller’
of the second defendant, coupled with the submission that any
liability arising from clause 9.4.2 should equally rest upon the
first defendant. In my view, neither the averment (which must be
accepted as a fact) nor the linked submission advance the plaintiff’s
case for the tacit term sought to be imported into the SPA. The mere
fact that the first defendant is the corporate controller
of the
second defendant does not justify any imputation of co-liability to
the first defendant in terms of clause 9.4.2, particularly
against
the background of clause 9.4.1 already providing a substantial
financial penalty for the first defendant in the event that
the
negotiations for a Supply Agreement were unsuccessful. Nor is there
any suggestion to be gleaned, either from the pleadings
or from the
SPA, that the plaintiff’s contractual remedies for breach of
the provisions of clause 9.4.2 would be ineffectual
inasmuch as they
lie against the second defendant alone.
[35]
As
was referred to earlier and as stated in
Sun
Packaging
,
as a rule the Courts are reluctant to decide upon exception questions
concerning the interpretation of a contract but this is
only where
its meaning is uncertain. Furthermore, regard must be had to the test
for the existence of tacit term, namely, that
the Court does not
readily import a tacit term since it does not make contracts for
people.
[36]
Before
proceeding onto the issue of ‘
admissible
evidence of surrounding circumstances’
,
it is appropriate to mention another factor which must be brought
into the balance when considering whether the tacit term relied
upon
by the plaintiff could possibly be imported into clause 9.4. That is
the issue of the amendments to clause 9 of the SPA. As
noted earlier,
the SPA was the subject of three addenda over a period of little more
than two months. The second addendum focussed
inter
alia
on the amendment of clause 9, the Supply Agreement clause, and made
detailed changes to clause 9.4.2. This is the very subclause
which in
effect the plaintiff wishes to amend by the importation of the tacit
term for which it contends. On a plain reading clause
9.4.2 provides
that it is the second defendant alone which would supply the minimum
of 500 000 units of fruit per year for two
years in the event that
the negotiations for a Supply Agreement were unsuccessful.
Accordingly, it is clear from the SPA, the addenda
and the
Particulars, that the plaintiff had three further opportunities after
the conclusion of the SPA to reconsider the terms
of subclause 9.4.2
and, if it felt they were lacking, inaccurate or did not fully
express the intention of the parties, to amend
them to include the
first defendant as a co-responsible party in terms of clause 9.4.2.
The fact that the parties did not do so
is in my view a strong
indication that its terms were seen at all material times as
comprehensive and accurate as far as the obligations
and rights of
the parties were concerned.
[37]
There
remains the notional possibility of surrounding circumstances coming
to light in the trial which support the existence of
the tacit term
and the linked submission that this possibility militates against
deciding the issue by way of exception. It seems
widely accepted that
a measure of conjecture or speculation is permissible as to the
nature of such evidence and its materiality.
There is understandably,
however, a limit to the extent of such conjecture or speculation.
This was well stated by Miller J (as
he then was) in
Davenport
Corner Tea Room
[13]
in the passage quoted with approval by Harms JA in
Telematrix
.
[14]
That dictum was also quoted with approval in
Michael
v Caroline’s Frozen Yoghurt Parlour (Pty) Ltd
,
[15]
where Marcus AJ stated as follows:
‘
The
possibility that evidence of surrounding circumstances may clarify
any ambiguity in the contract must not be fanciful or remote’.
[38]
What
must also be taken into account are the strictures on the plaintiff
as regards the adducing of evidence at the trial in seeking
to
establish the tacit term contended for, and which evidence might
establish an intention of the parties at variance with the
clear
provisions of clause 9.4.2. The growing trend in our courts is to
reassert the parol evidence rule which largely precludes
such
evidence. The following extract from the judgment of Harms JA in
KPMG
Chartered Accountants SA v Securefin Ltd
[16]
is relevant:
‘
[39]
First, the integration (or parol evidence) rule remains part of our
law. However, it is frequently ignored by practitioners
and seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence
may not
contradict, add to or modify its meaning
(Johnson
v Leal
1980 (3) SA 927
(A) at 943B)
.
Second, interpretation is a matter of law and not of fact and,
accordingly, interpretation is a matter for the court and
not for
witnesses … Third, the rules about admissibility of evidence
in this regard do not depend on the nature of the document,
whether
statute, contract or patent … Fourth, to the extent that
evidence may be admissible to contextualise the document
(since
“context
is everything”
)
to establish its factual matrix or purpose or for purposes of
identification,
“one
must use it as conservatively as possible”
(
Delmas
Milling Co Ltd v du Plessis
1955 (3) SA 447
(A) at 455B-C
).’
[39]
These
sentiments were recently confirmed and endorsed in
The
City of Tshwane Metropolitan Municipality v Blair Athol Homeowners
Association
[17]
where the Court, per Navsa ADP and Mothle AJA, stated as follows:
‘
[63]
This court has consistently stated that in the interpretation
exercise the point of departure is the language of
the document in
question. Without the written text there would be no interpretive
exercise. In cases of this nature, the written
text is what is
presented as the basis for a justiciable issue. No practical purpose
is served by further debate about whether
evidence by the parties
about what they intended or understood the words to mean serves the
purpose of properly arriving at a decision
on what the parties
intended as contended for by those who favour a subjective approach,
nor is it in juxtaposition helpful to
continue to debate the
correctness of the assertion that it will only lead to self-serving
statements by the contesting parties.
Courts are called upon to
adjudicate in cases where there is
dissénsus
.
As a matter of policy, courts have chosen to keep the admission of
evidence within manageable bounds. This court has seen too
many cases
of extensive, inconclusive and inadmissible evidence being led. That
trend, disturbingly, is on the rise.’
[40]
Having
regard to all these factors, including the lack of any ambiguity in
clause 9.4 (and specifically clause 9.4.2), the dearth
of any
indications of surrounding circumstances in the pleaded allegations
read with the SPA, or elsewhere, which would militate
in favour of
the implied term contended for, and the fact that clause 9.4.2 was
reconsidered and amended by way of an addendum
which left the crucial
provisions untouched, I consider that there is no room for the
importation of the tacit term for which the
plaintiff contends.
The
proper interpretation
[41]
This
leaves the final basis upon which the applicant sought to defeat the
exception, namely, that on a ‘
proper
interpretation’
of the SPA, clause 9.4 tacitly imposes the contended for obligation
upon the first defendant.
[42]
The
statements in
KPMG
and
Tshwane
City
quoted above are also relevant to this leg of the plaintiff’s
argument to the effect that the first defendant’s co-liability
in terms of clause 9.4.2 of the SPA emerges on its ‘
proper
interpretation’
.
Also relevant to this issue is the well-known quotation from
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[18]
regarding the interpretation of documents:
‘
The
present state of the law can be expressed as follows. Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light of the ordinary
rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material
known to those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the
light of all these
factors. The process is objective not subjective. A sensible meaning
is to be preferred to one that leads to
insensible or unbusinesslike
results or undermines the apparent purpose of the document. Judges
must be alert to, and guard against,
the temptation to substitute
what they regard as reasonable, sensible or businesslike for the
words actually used. To do so in
regard to a statute or statutory
instrument is to cross the divide between interpretation and
legislation. In a contractual context
it is to make a contract for
the parties other than the one they in fact made. The ‘inevitable
point of departure is the
language of the provision itself’,
read in context and having regard to the purpose of the provision and
the background to
the preparation and production of the document.
[43]
The
wording of clause 9.4 is, to my mind, clear and unambiguous,
inter
alia
for the reasons furnished earlier, and does not produce a result
which is unreasonable, lacking in sense or unbusinesslike. In
the
circumstances I see no room for interpretation of the SPA which
imposes any obligation on the first defendant in terms of clause
9.4.2.
[44]
For
these reasons I find that the allegation that the first defendant was
in breach of any obligations in terms of clause 9.4.2
of the SPA is
untenable on the pleadings in their present form and accordingly that
they fail to disclose any cause of action against
the first
defendant.
[45]
In
the result the following order is made:
1.
The
first defendant’s application to amend paragraph 5.2 of its
notice of exception by the insertion of the words ‘US$1mil
alternatively’ between the words ‘sum of’ and
‘US$796 617.72’, is granted;
2.
The
exception is upheld with costs, including the costs of two counsel
and, by agreement between the parties, the costs occasioned
by the
earlier postponement of the hearing of the exception;
3.
The
allegations in paragraph 17, 19, 20 and 21 of the Particulars, to the
extent that they allege that the first defendant was in
breach of any
obligations in terms of clause 9.4.2 of the SPA, are struck out;
4.
The
plaintiff is granted leave to amend its combined summons by the
procedure prescribed in Rule 28, the notice of amendment to
be served
within 21 days of date hereof.
BOZALEK
J
For
the Plaintiff
: Adv J Butler
(SC)
As
Instructed by
Hayes Inc
For
the Defendant
: Adv J
Muller (SC) et Adv W Jonker
As
instructed
by
VanDerSpuy Inc
[1]
2004 (3) SA 230 (C).
[2]
1996 (4) SA 176 (A).
[3]
2005 (3) SA 323 (SCA).
[4]
1974 (3) SA 506 (A).
[5]
City of Cape Town (CMC
Administration) v Bourbon-Leftley and Another NNO
2006
(3) SA 488
(SCA) at para 9, 494 H – 495 A.
[6]
At page 494/495 H – C.
[7]
[2019] ZASCA 63
(24 May 2019).
[8]
1994 (3) SA 130 (AD).
[9]
(2
nd
Ed) at D1-224
[10]
1968 (3) SA 255
(A) at 261 E.
[11]
2006 (1) SA 461 (SCA).
[12]
Quoting from
Davenport
Corner Tea Room (Pty) Ltd v Joubert
1962
(2) SA 709
(D) 715H and 716C-E.
[13]
See footnote 12
[14]
Para 30 above.
[15]
1999 (1) SA 624
(W) at 632H –
633D.
[16]
2009 (4) SA 399
(SCA) at para
39.
[17]
2019 (3) SA 398 (SCA).
[18]
2012 (4) SA 593
(SCA) at 603F –
604A and 604E-F.