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[2015] ZASCA 134
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Du Preez v Tornel Props (Pty) Ltd (20714/14) [2015] ZASCA 134 (29 September 2015)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 20714/14
In
the matter between:
LORRAINE
DU PREEZ
APPELLANT
and
TORNEL
PROPS (PTY) LTD
RESPONDENT
Neutral
citation:
Du
Preez v Tornel Props (Pty) Ltd
(20714/14)
[2015] ZASCA 134
(29 September 2015)
Coram:
Shongwe,
Saldulker, Swain, Mbha JJA and Baartman AJA
Heard:
26 August 2015
Delivered:
29 September 2015
Summary:
Contract – justifiable withholding of reciprocal obligation to
perform
– reasonable person not perceiving conduct as
repudiation – subsequent cancellation reasonably perceived by
innocent
party as repudiation – ensuing cancellation justified
– quantum of damages awarded not proved – court
re-assessing
damages.
ORDER
On
appeal from: North Gauteng High Court, Pretoria (Kollapen J sitting
as court of first instance):
1
The appeal is partly upheld.
2
The order of the court a quo is set aside and is replaced with the
following:
‘
(1)
The defendant is ordered to pay the plaintiff the sum of R104 817.
(2)
The defendant is ordered to pay interest thereon from 1 June 2007 to
date of final payment at the rate of 15.5% per annum.
(3)
The defendant is ordered to pay the costs of the action.
(4)
The defendant’s counter-claim is dismissed with costs’.
3
The application for condonation is granted and the appellant is
ordered to pay the costs of the application on the opposed party
and
party scale.
4
The appellant is ordered to pay the costs of the appeal.
JUDGMENT
Shongwe
JA (Saldulker, Swain and Mbha JJA and Baartman AJA concurring)
[1]
The central issue to be decided in this case is whether the
contractor, Tornel Props (Pty) Ltd (plaintiff in the court a quo)
was
justified in withholding performance and thereafter cancelling the
contract between it and the employer Ms Lorraine Du Preez
(defendant
in the court a quo). I shall refer to the parties as the plaintiff
and defendant as they were referred to in the trial
court. The appeal
is with the leave of the trial court.
[2]
The dispute arose out of a building contract entered into by the
defendant and Jonker Projekte CC (Jonker CC) on 10 November
2006. At
all material times, the defendant had been the owner of Erf 4358, The
Heads, Lydenberg, Mpumalanga Province. Jonker CC
undertook to build a
residential house on the aforesaid erf in accordance with the
building plans attached to the building contract.
The contract price
was R1 million inclusive of VAT. It was a term of the agreement
that the defendant undertook to pay the
contract price in scheduled
progress payments as and when certain phases of the works were
completed. The payments would be made
in cash after approval by an
inspector or valuer.
[3]
The building works commenced and the defendant paid a sum of R80 000
to Jonker CC as part of the scheduled progress payments.
It is common
cause that in November 2006 Jonker CC was liquidated. Subsequently,
the plaintiff (represented by Mr Cassim) offered
to purchase the sole
right to complete the partially finished construction from Jonker CC
(in liquidation). The offer not only
referred to the building works
of the defendant but included other projects undertaken by Jonker CC.
The offer was accepted –
the agreed amount was paid to the
liquidators.
[4]
In December 2006 the plaintiff and the defendant concluded a partly
written and partly oral agreement. The written portion of
the
agreement was the building contract and annexures – which was
originally concluded by the defendant and Jonker CC. It
was
expressly, alternatively tacitly or impliedly agreed inter alia that
the contract price would be R920 000 (nine hundred
and twenty
thousand rand); that the plaintiff would complete the works in
accordance with the building plans and specifications,
and that the
defendant would pay the full contract price in scheduled progress
payments as and when certain phases of the works
were completed –
after approval by an inspector or valuer. The plaintiff proceeded
with the building works. It appears that
during a December 2006
meeting, the plaintiff raised the question of VAT being excluded from
the contract price. The defendant
rejected the suggestion and
insisted that the terms of the contract price included VAT. The
defendant denied there was any discussion
regarding progress
payments, although the building contract provided for this.
[5]
During March 2007 the plaintiff presented an invoice for a progress
payment in the amount of R240 000 to the defendant.
As a result
on 16 April 2007, the defendant’s attorneys wrote to the
attorneys representing the liquidators requesting approval
from the
liquidators to make this progress payment to the plaintiff. On 26
April 2007, new attorneys appointed to attend to the
liquidation
confirmed that the defendant could make the progress payment.
However, no payment was made. It is clear that at this
stage the
defendant’s attorneys accepted the defendant’s obligation
to make progress payments in terms of the contract.
[6]
Because this invoice was not paid, the plaintiff cancelled it and on
10 May 2007 sent another invoice to the defendant requesting
payment
of R600 000 plus VAT totalling R684 000. The invoice also
contained a proviso that payment must be made within
three working
days from date of invoice, failing which the plaintiff would stop the
building works – because of cash flow
problems. Discussions
between the parties continued – they included, inter alia,
whether the plaintiff was obliged to construct
the swimming pool, the
paving and the balustrades. The defendant’s stance was that the
plaintiff was obliged to carry out
this work in terms of the
contract. Notwithstanding these disputes the building works
continued.
[7]
On 24 May 2007, the defendant’s new attorneys (JC Marnewick) in
response to the invoice of 10 May 2007 wrote to the plaintiff
confirming the contract price as R1 000 000 but said that
payment was only due and payable upon completion of the building
works. This was contrary to the provisions of the contract. The
letter also advised that, should the plaintiff stop the building
works, this would be tantamount to repudiation. The stance of
the defendant accordingly was that no progress payments would
be
made.
[8]
On 29 May 2007 the plaintiff’s attorneys replied confirming the
contract price of R1 million but maintained it excluded
VAT. The
letter alleged that the parties orally agreed that the plaintiff was
not obliged to build the out-buildings, the paving,
swimming pool and
the balustrades. It referred to the first invoice rendered by the
plaintiff for payment of R240 000 which
was not paid by the
defendant. It was alleged that approximately 70 per cent of the
house had been completed, despite no
payment having been made by the
defendant. A further demand was made for payment of the sum of
R600 000, on or before 12 noon
on 1 June 2007, failing which the
plaintiff would cease building and summons would be issued. The
defendant’s attorneys replied
on 1 June 2007 disputing that the
plaintiff was not obliged to construct the specified items and
stating that if the plaintiff
ceased building, it would be
interpreted as a repudiation of the contract by the plaintiff.
[9]
The response by the plaintiff’s attorneys by letter dated 7
June 2007 was that it was clear that the defendant did not
intend to
make any payment at that stage, and advising that no further building
would be carried out until payment as demanded
was made. This
elicited a response from the defendant’s attorneys by way of a
letter dated 15 June 2007, in which it was
recorded that the refusal
to continue building constituted a repudiation by the plaintiff,
which was accepted by the defendant
and the contract was allegedly
cancelled.
[10]
It should be noted that the refusal by the defendant to make payment
of the amount claimed by the plaintiff of R600 000
was not based
upon the failure by the defendant to have this amount approved by an
inspector, or valuer. The refusal was based
solely upon the
defendant’s contention that no payment would be made until the
house was complete, contrary to the express
terms of the agreement.
If the defendant had tendered to make a progress payment, provided
its value had been approved by an inspector
or valuer in terms of the
contract, the outcome would have been entirely different. It is also
quite clear from the correspondence
that the peripheral dispute
between the parties as to whether the plaintiff was obliged to build
the disputed items, and whether
VAT was included in the contract
price, did not cause the termination of their contractual
relationship.
[11]
The plaintiff accordingly issued summons against the defendant
claiming damages on the basis that the defendant breached the
contract, alternatively repudiated it by failing to make progress
payments. In the result, the plaintiff alleged it had cancelled
the
contract. In the alternative, the plaintiff accepted the repudiation
of the contract by the defendant and cancelled the agreement,
and
claimed contractual damages suffered in the sum of R765 300 in
respect of the contract price excluding VAT. In the further
alternative, plaintiff claimed the sum of R636 500 in the event
it was found that the contract price included VAT. The difference
in
both respects between the amount claimed and the contract price was
alleged to be the costs that would be saved by the plaintiff
in not
completing the building works, in the amount of R283 500. This
amount was based upon an estimate provided by
the defendant’s
attorney in the letter of 24 May 2007 referred to above. This amount
purported to be the costs saved by the
plaintiff in not completing
the works, plus an additional amount of R50 000 being an
estimate of any additional fair and reasonable
costs that would be
saved by the plaintiff as a result of not completing the works.
[12]
The court a quo concluded that the plaintiff’s conduct in
ceasing building work did not constitute a repudiation of the
agreement. It further decided that the defendant’s refusal to
make a progress payment, which was a material term of the contract,
constituted a breach of the agreement. This breach, the court a quo
reasoned, entitled the plaintiff to cancel the contract and
claim
damages. As will be seen, the court a quo incorrectly categorized the
legal nature of the conduct of the respective parties.
As regards the
quantum of the plaintiff’s damages, the court a quo relied upon
a quotation prepared by Neobuild building
contractors, which the
defendant attached to her counterclaim in support of her assertion of
the respects in which the defendant
alleged the building was not
completed and defective, as well as the cost of completing the
building in accordance with the agreement.
It is common cause that no
expert evidence however was led to prove the Neobuild quotation, as
the defendant never led this evidence.
As will be seen, the court a
quo erroneously relied upon this evidence, classifying it as the best
evidence available when it was
no evidence at all.
[13]
On appeal, the defendant challenged the order of the court a quo on
the following basis:
(a)
the plaintiff repudiated the agreement by denying that the
agreed price included VAT;
(b)
the plaintiff repudiated the agreement by refusing to build the pool,
balustrades, paving, garage and servants’ quarters;
(c)
the plaintiff did not prove that progress payments had to be made in
terms of the agreement;
(d)
even if progress payments had to be made, it was never proved that
the invoice for R600 000 had been approved by a valuer
or
inspector.
In
the result, it was submitted any obligation upon the defendant to
make a progress payment was suspended during the plaintiff’s
repudiation of the agreement.
[14]
As pointed out above, it is clear from the exchange of correspondence
between the parties’ attorneys which preceded the
purported
cancellation by the defendant, that the conflict between the parties
as to the obligation upon the plaintiff to construct
the disputed
items, as well as whether VAT was included in the contract price, did
not cause the termination of the parties contractual
relationship.
Although the plaintiff clearly attempted to get the defendant to
agree that he was not obliged to build these items
and that VAT was
not included in the price, these disputes did not cause the plaintiff
to cease building the house. It is quite
clear that the decision by
the plaintiff to cease building culminated in the termination of the
contract. The plaintiff took this
decision because the defendant
refused to make payment of any amount until the house was complete.
The defendant’s refusal
to make any payment at all until the
house was complete, as set out in the letter dated 24 May 2007, it
seems was motivated by
the fear that the plaintiff would not complete
the house. Be that as it may, this did not entitle the defendant in
the face of
the express wording of the contract, to refuse to make
any payments until the house was complete. The safeguard in the
contract
for the defendant lay in insisting that any claim for a
progress payment be approved by a valuer or inspector.
[15]
It is therefore clear that the defendant never proved that she relied
upon the plaintiff’s alleged repudiation of the
agreement, in
refusing to build the disputed items and maintaining that VAT was
included in the contract price, as justification
for cancelling the
agreement. It is clear from the defendant’s attorneys’
letter of cancellation of the 15 June 2007
that the act of
repudiation on the part of the plaintiff, relied upon by the
defendant to justify cancellation, was the refusal
by the plaintiff
to continue building. The other issues, although complained of, were
never relied upon as acts repudiation by
the defendant.
[16]
As regards proof by the plaintiff that the defendant was obliged to
make progress payments, even if it is assumed in favour
of the
defendant that annexure D to the agreement, which set out the stages
when progress payments had to be made, never formed
part of the
agreement, clause 2.1 makes the defendant’s liability to make
these payments clear. As regards the plaintiff’s
failure to
prove that the invoice for R600 000 had been approved by an
inspector or valuer, it is clear that the defendant
never refused to
make payment on this basis.
[17]
The central issue accordingly is whether the refusal by the plaintiff
to continue building was legally justified or whether
it amounted to
a repudiation which entitled the defendant to cancel the contract.
The test for repudiation is objective and not
subjective. The
test as to whether conduct amounts to repudiation of a contract is
whether fairly interpreted, it exhibits
a deliberate and unequivocal
intention no longer to be bound by the terms of the contract (
Street
v Dublin
1961 (2) SA 4
(W) at 10B and
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
1978
(2) SA 835
(A) at 845A-C in which case Rabie JA referred with
approval to statements made by Williamson J in
Street
v Dublin
(above). See also
OK
Bazaars (1929) Ltd v Grosvenor Buildings (Pty) & another
[1993] ZASCA 56
;
1993 (3) SA 471
(A). Whether the plaintiff’s conduct was
legally justified requires a determination of whether the plaintiff
was entitled
to withhold this performance. It is clear that the
defendant was obliged to make progress payments and the reciprocal
obligation
upon the plaintiff to continue building was dependent upon
the performance by the defendant of this obligation.
[18]
Simply put the failure to comply with the terms and conditions of the
contract by the defendant in not making progress payments
as agreed,
entitled the plaintiff to withhold its reciprocal obligation to
continue building the house. The defendant’s objectively
unjustifiable conduct in treating this as a repudiation of the
agreement and purporting to cancel the agreement, objectively
assessed
amounted to a repudiation which the plaintiff accepted and
justifiably cancelled the agreement. In
Datacolor International v
Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001 (2) SA 284
para 1, Nienaber JA,
observed that:
‘
Repudiation
has sometimes been said to consist of two parts: the act of
repudiation by the guilty party, evincing a deliberate and
unequivocal intention no longer to be bound by the agreement, and the
act of his adversary, “accepting” and thus completing
the
breach’.
In
addition as pointed out at 294E-H:
“
The
emphasis is not on the repudiating party’s state of mind, on
what he subjectively intended, but on what someone
in
the position of the innocent party would think he intended to do;
repudiation is accordingly not a matter of intention, it is
a matter
of perception. The perception is that of a reasonable person placed
in the position of the aggrieved party. The test is
whether such a
notional reasonable person would conclude that proper performance (in
accordance with a true interpretation of the
agreement) will not be
forthcoming. The inferred intention accordingly serves as the
criterion for determining the nature of the
threatened actual
breach.”
On
the evidence a reasonable person placed in the position of the
plaintiff, faced with the refusal by the defendant to make any
progress payments, would conclude that proper performance would not
be forthcoming, which would justify cancellation of the agreement.
The plaintiff however, as it was entitled to, elected at this stage
not to cancel the agreement but rather to withhold its reciprocal
obligation to continue building the house. A reasonable person in the
position of the plaintiff would have concluded, from the
defendant’s
subsequent response, being the purported cancellation of the contract
by the defendant, that no further performance
would be forthcoming,
entitling the plaintiff thereafter to cancel the contract. It is
therefore clear that the contractual bond
that existed between the
parties was justifiably severed by the plaintiff. The law accordingly
provides compensation for the innocent
party being in this case the
plaintiff.
[19]
The court a quo, in my view, albeit arriving at the correct
conclusion incorrectly analysed the sequence of events between
the
parties as follows:
‘
defendant’s
stance in refusing to make payments would in my view constitute a
breach of contract which then would have the
result that the
plaintiff was entitled to cancel the contract as it did on account of
the defendant’s conduct. … In
my view the plaintiff was
entitled to consider the defendant’s failure to pay as a breach
of contract and was accordingly
under those circumstances entitled to
stop further work on the dwelling house of the defendant in the light
of such refusal to
pay and in the light of the breach of the
agreement by the defendant’.
In
view of my conclusion that the defendant repudiated the agreement by
purporting to cancel the agreement – leading to its
cancellation by the plaintiff, it is not necessary to deal with the
merits of the counterclaim. It stands to be dismissed.
[20]
I now turn to deal with the quantum. As pointed out the court a quo
erroneously relied on a quotation prepared by Neobuild
Building
Contractors, annexed by the defendant to her counterclaim. Mr Soomar,
an expert called by the plaintiff simply used this
quotation without
verifying the correctness thereof. The purpose of the quotation was
to give an indication of costs the defendant
would have to incur to
complete the work, and not to give an indication of costs saved by
the plaintiff. The contents of this quotation
cannot be viewed as
evidence placed before the court a quo because Neobuild was not
called to give evidence to prove its contents.
As pointed out the
court a quo misdirected itself in this regard, describing this as the
best evidence available when it was no
evidence at all. This court is
therefore at large to interfere with the award granted by the court a
quo.
[21]
Counsel for the plaintiff before us conceded that the plaintiff will
not do better than to recover damages in the sum of R104 817,
which amount was calculated and arrived at by Mr Botes upon the
request of the defendant. The purpose was to calculate what the
plaintiff would be entitled to for the work done considering all the
uncompleted work. Counsel for both parties agreed that the
sum of
R104 817, as calculated by Mr Botes was justifiable – in
the event that this court found that the plaintiff had
justifiably
cancelled the agreement.
[22]
I turn to the issue of the costs of the appeal. Although the
defendant has been successful in the reduction of the amount awarded
to the plaintiff from R434 746, 46 to R104 817 it has
nevertheless been unsuccessful on the merits. It was the defendant’s
unjustifiable conduct in refusing to make any progress payments,
despite the clear wording of the agreement, which brought the
contractual relationship to an end. In the light of the evidence I do
not regard this as substantial success sufficient to entitle
the
defendant to an award of the costs of appeal in her favour. The
defendant must accordingly pay the costs of the appeal.
[23]
I now deal with the condonation application for failing to lodge with
the Registrar, six copies of the record of the proceedings
as
prescribed by rule 8 of the rules of this court. Because of the
importance of the matter to the parties and in the interest
of
justice, I am of the view that condonation be granted with costs on
the opposed party and party scale. The default by the defendant
and
her attorneys does not warrant a punitive costs order.
[24]
For the above reasons the following order is made:
1
The appeal is partly upheld.
2
The order of the court a quo is set aside and is replaced with the
follow:
‘
(1)
The defendant is ordered to pay the plaintiff the sum of R104 817.
(2)
The defendant is ordered to pay interest thereon from 1 June 2007 to
date of final payment at the rate of
15.5% per
annum.
(3)
The defendant is ordered to pay the costs of the action.
(4)
The defendant’s counter-claim is dismissed with costs’.
3
The application for condonation is granted and the appellant is
ordered to pay the costs of the application on the opposed party
and
party scale.
4
The appellant is ordered to pay the costs of the appeal.
______________________
J
B Z SHONGWE
JUDGE
OF APPEAL
Appearances
For
the Appellant: J L Bergenthuin SC with him C
A L Korf
Instructed
by:
Ernst
J.V. Penzhorn Attorneys, Pretoria;
Hill,
McHardy & Herbst Inc., Bloemfontein.
For
the Respondent: Q Pelser SC
Instructed
by:
Döman
Weitsz Attorneys, White River;
Christo
Dippenaar Attorneys, Bloemfontein.