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[2014] ZASCA 178
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Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash and Another (725/13) [2014] ZASCA 178; 2015 (2) SA 118 (SCA) (21 November 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 725/13
In
the matter between:
SPRING
FOREST TRADING 599
CC
............................................................................
APPELLANT
and
WILBERRY
(PTY) LTD t/a
ECOWASH
........................................................
FIRST
RESPONDENT
COMBINED
MOTOR HOLDINGS LIMITED
........................................
SECOND
RESPONDENT
t/a
THE GREEN MACHINE
Neutral
citation:
Spring Forest Trading v
Wilberry
(725/13)
[2014] ZASCA 178
(21
November 2014)
Coram
:
Lewis, Cachalia, Bosielo and Swain JJA and Mocumie AJA
Heard:
10 November 2014
Delivered:
21 November 2014
Summary:
Contract – non-variation clause
providing for cancellation to be in writing and signed by the parties
– whether cancellation
by email valid – Whether
ss 13(1)
and (3) of the
Electronic Communications and Transactions Act 25 of
2002
applies – Whether interim interdict pendente lite
appealable.
ORDER
On
appeal from:
KwaZulu-Natal Local
Division, Durban (Madondo J sitting as court of first instance):
The
appeal is upheld with costs. The order of the high court is set aside
and in its place the following is substituted:
‘
The
application is dismissed with costs.’
JUDGMENT
Cachalia
JA (Lewis, Bosielo and Swain JJA and Mocumie AJA
concurring)
[1]
This is an appeal from a decision of the high court, KwaZulu-Natal,
Durban (Madondo J) granting interim relief pendente lite.
The order
was granted following an urgent application by Wilberry (Pty) Ltd t/a
as Ecowash against Spring Forest Trading 599 CC
and Combined Motor
Holdings Limited t/a The Green Machine (CMH). CMH is cited because it
has an interest in the relief claimed,
but is not party to this
appeal. So the protagonists in this appeal are Spring Forest Trading
599 CC and Wilberry (Pty) Ltd t/a
Ecowash. They shall be referred to
as the appellant and respondent respectively.
[2]
The appeal concerns a series of emails purporting to consensually
cancel written agreements between the parties. The agreements
required any ‘consensual cancellation’ to be in writing
and signed by them. The Electronic Communications and Transactions
Act 25 of 2002 (the Act) gives legal recognition to transactions
concluded electronically by email. The dispute between the parties
requires us to consider whether their exchange of emails met the
writing and signature requirements of the Act thereby constituting
a
consensual cancellation.
[3]
The learned judge found that the e-mail communications as a fact did
not evince an intention to cancel the agreements, but merely
recorded
the inconclusive negotiations between the parties to that end. And,
that in any event, the parties had not specified that
their
agreements could be cancelled by the exchange of emails. He thus held
that the Act did not apply to the emails and that the
appellant’s
purported cancellation of the agreements was in conflict with the
terms of their written agreements, and therefore
invalid. This appeal
is with his leave.
[4]
The facts are uncomplicated. The respondent is the proprietor of an
‘Eco-Wash System’ operated from one of its ‘Mobile
Dispensing Units’ (MDU’s). The business involves washing
cars in the parking lots of shopping malls, office parks,
hotels and
hospitals. The parties concluded a written agreement (the master
agreement) on 28 April 2012 in terms of which the respondent
appointed the appellant as its operating agent. This gave the
appellant the right to promote, operate and rent out the respondent’s
MDU’s to third parties. The agreement contained a non-variation
clause providing that no variation or consensual cancellation
would
be effective unless reduced to writing and signed by both parties.
[5]
On 20 June and 23 July 2012 the parties concluded four subsidiary
rental agreements all of which were subject to the respondent’s
standard terms of business as set out in the master agreement. The
rental agreements permitted the appellants to lease the respondent’s
MDU’s at four locations. They also contained non-variation
clauses providing that ‘no variation . . . or agreement
to
cancel shall be of any force and effect unless in writing and signed
by both you and us’.
[6]
The appellant was not able to meet its rental commitments under the
rental agreements on 1 February 2013. The parties then met
in Durban
on the morning of 25 February 2013 to discuss how they should proceed
in light of the appellant’s failure to meet
its rental
obligations. The respondent was represented at the meeting by Mr
Nigel Keirby-Smith and the appellant by Mr Gregory
Stuart Hamilton
and Mr Walter Burger. Keirby-Smith put four proposals to the
appellant’s representatives. They undertook
to consider these
and respond after the meeting.
[7]
Hamilton dispatched an email to Keirby-Smith later that morning at
11h44 am confirming the proposals. It read:
‘
Hi
Nigel,
Thanks
for meeting with Walter and I today. I would like to clarify the
options that you mentioned to us today.
1/
Pay a cash amount of R1 600 000.00 for the balance of 2
years.
2/
Cancel agreement and walk away.
3/
Carry on operating but we would end up in court.
4/
Pay R1 000.00 per month for 5 years with 15 % escalation.
Please
confirm the above then we will advise tomorrow.
Kind
Regards
Greg.’
At
11h56 am, Hamilton sent a further email to Keirby-Smith:
‘
Hi
Nigel,
[Fu]rther
to my previous mail, to clarify point 2. Please confirm that should
we elect this option to walk away, there [wi]ll be
no further claim
or legal action from either side.
Kind
Regards
Greg.’
At
12h18 pm, Keirby-Smith replied:
‘
Hi
Greg,
That
is correct subject to my last reply.
Nigel.’
The
‘last reply’ referred to in the email above was sent from
Keirby-Smith’s address (…) at 12h05 pm. It
read:
‘
All
arrear rentals due at the date of handover will be due.
Henry
Wilkinson
Chief
Executive Officer.’
At
04h02 pm, Hamilton sent the final email in this exchange:
‘
Dear
Henry and Nigel,
[A]s
per our discussion this morning and follow up emails, we thank you
for the 4 options offered to us. We confirm that we accept
your
second offer whereby we will return all equipment leased to us and
that there shall be no further legal recourse from either
party. We
would like all equipment picked up on or before 28 February 2013 so
that we do not incur further lease costs for the
following month.
Kind
Regards
Greg.’
[8]
On 13 March 2013, the appellant paid the arrear rentals. However, it
continued operating its car washing business at the locations
covered
by the rental agreements. It says it was entitled to do this as both
the master and rental agreements between it and the
respondent had
been cancelled. And following the cancellation it entered into an
agreement with another entity – CMH –
to use its mobile
cleaning devices at the locations from which it had been operating.
[9]
The respondent denies that the agreements were validly cancelled. It
therefore sought and was granted interdictory relief to
protect its
proprietary rights in its MDU’s pending the institution of an
action for breach of the agreements.
[10]
The appellant’s case is this. The respondent offered four
options to the appellant at the meeting on 25 February 2013.
The
appellant accepted the second option – that it could cancel the
agreements and walk away – in writing by email.
The parties
agreed further in the series of emails that once the appellant had
paid the arrear rental, which it did on 13 March
2013, and the
respondent’s equipment had been returned, which was also done,
there had been a consensual cancellation of
the agreement. The
cancellation meets with the requirements for the information to be
recorded in writing and signed by the parties
in terms of s 13(3) of
the Act.
[11]
The respondent disputes the appellant’s argument. It contends
that the email exchange was merely a negotiation between
the parties
regarding the appellant’s breaches and did not amount to a
consensual cancellation of the agreements, a contention
that the high
court upheld. At best for the appellant, says the respondent, the
emails refer only to the rental agreements, not
the master agreement.
However, if they do evince a cancellation of both the master and the
rental agreements, the emails did not
comply with s 13(1) of the Act.
This is because the section requires an ‘advanced electronic
signature’ to be used
on an email when a signature is required
by law – as specified by the non-variation clause in this case
– and no such
signature appears on the emails. In addition, s
13(3), relied upon by the appellant to bring the emails within the
ambit of the
Act, does not apply for reasons given later in this
judgment.
[1]
[12]
The respondent’s contention that the emails merely record a
negotiation and do not amount to an agreement to cancel is
utterly
without merit. The emails say emphatically and unambiguously that
once the appellant settles the arrear rental and returns
the
respondent’s equipment it may ‘walk away’ without
any further legal obligation. This can only mean –
and did mean
– that the parties considered that all agreements between them
(the master and subsidiary rental agreements)
would be cancelled once
the appellant had satisfied two obligations: payment of the arrear
rental and return of equipment. The
obligations were met and the
agreements therefore do evince a consensual cancellation. Whether
this cancellation by email fulfilled
the requirements of the
non-variation clauses to be in writing and signed by both parties
requires a consideration of the relevant
provisions of the Act.
[13]
Before I consider these it is necessary to remind ourselves that when
parties impose restrictions on their own power to vary
or cancel a
contract – as they did in this case – they do so to
achieve certainty and avoid later disputes. The obligation
to reduce
the cancellation agreement to writing and have it signed was aimed at
preventing disputes regarding the terms of the
cancellation and the
identity of the parties authorised to effect it. Our courts have
confirmed the efficacy of such clauses.
[2]
[14]
It is apparent from the parties’ opposing contentions that the
proper interpretation of ss 13(1) and (3) lies at the
heart of this
dispute. But these provisions have to be analysed in their context.
This requires us to consider other sections that
also have a bearing
on this analysis.
[15]
The Act’s main objective is to ‘enable and facilitate
electronic communications and transactions in the public
interest’.
[3]
‘
Electronic
communications’ is defined as ‘communication by means of
data messages’. ‘Transaction’
is defined to include
‘a transaction of either a commercial or non-commercial nature
. . .’. An email means ‘electronic
mail, a data message
used or intended to be used as a mail message between the originator
and addressee in an electronic communication’.
[4]
It is thus common ground that the email-exchange between the parties
is governed by the Act.
[16]
One of the Act’s aims is to promote legal certainty and
confidence in respect of electronic communications and
transactions.
[5]
So,
when interpreting the Act, the courts are enjoined to recognise and
accommodate electronic transactions and data messages in
the
application of any statutory law or the common law.
[6]
Thus when there are formal requirements of writing and signature
imposed by statute or the parties to a transaction, these can
generally be satisfied through electronic transactions.
[7]
There
are, however, exceptions where agreements may not be generated
electronically. These are the agreements for the sale of immovable
property, wills, bills of exchange and stamp duties.
[8]
[17]
A legal requirement for an agreement to be in writing, subject to the
exceptions mentioned above, is satisfied if it is in
the form of a
data message.
[9]
There
is no dispute in this case that the emails met this requirement. The
real dispute is about whether or not the names of the
parties at the
foot of their emails constituted signatures as contemplated in ss
13(1) and (3). Section 13 reads as follows:
‘
(1)
Where the signature of a person is required by law and such law does
not specify the type of signature, that requirement in
relation to a
data message is met only if an advanced electronic signature is used.
(2)
. . .
(3)
Where an electronic signature is required by the parties to an
electronic transaction and the parties have not agreed on the
type of
electronic signature to be used, that requirement is met in relation
to a data message if-
(a)
a method is used to identify the person and to
indicate the person's approval of the information communicated; and
(b)
having regard to all the relevant circumstances at
the time the method was used, the method was as reliable as was
appropriate for
the purposes for which the information was
communicated.’
[18]
It is apparent that the Act distinguishes between instances where the
law requires a signature and those in which the parties
to a
transaction impose this obligation upon themselves. Where a signature
is required by law and the law does not specify the
type of signature
to be used, s 13(1) says that this requirement is met only if an
‘advanced electronic signature’
is used. Where, however,
the parties to an electronic transaction require this but they have
not specified the type of electronic
signature to be used, the
requirement is met if a method is used to identify the person and to
indicate the person’s approval
of the information communicated
(s 13(3)
(a)
);
and having regard to the circumstances when the method was used, it
was appropriately reliable for the purpose for which the
information
was communicated (s 13(3)
(b)
).
[10]
[19]
The respondent submits that the phrase: ‘Where the signature of
a person is
required by law
’ (emphasis added) in s 13(1)
it should be interpreted not only to include formalities required by
statute but must also incorporate
instances where parties to an
agreement impose their own formalities on a contract, as in this
case. And, so the contention goes,
because the parties required their
signatures for the contracts to be cancelled the requirement could
only be satisfied by the
use of an
advanced electronic signature
as contemplated in s 13(1), which did not occur in this case.
[20]
In my view the respondent’s reliance on s 13(1) is misplaced
for two reasons. First, the non-variation clauses were agreed
upon by
the parties: they were not imposed upon the parties by any law.
[11]
Secondly,
when one has regard to the purpose for which an advanced electronic
signature is required it is apparent that it does
not apply to the
private agreements between these parties.
[21]
An ‘advanced electronic signature’ is a signature which
results from a process accredited by an Accreditation Authority.
[12]
It
is used for accredited ‘authentication products and services’
which are designed to identify the holder of the electronic
signature
to other persons. An application for accreditation must be made in a
prescribed manner supported by prescribed information
and accompanied
by a non-refundable fee. Furthermore, elaborate and strict criteria
are applicable for the accreditation of authentication
products and
services to which the electronic signature relates.
[22]
There is no suggestion that either of the parties’ businesses
deal in products and services to which contracts that require
advanced electronic signatures as envisaged in the Act relate. And to
impose the onerous requirements and criteria for accreditation
upon
the parties in this case would have a detrimental effect on
electronic transactions, and the obligation of the courts, when
interpreting the Act, to recognise and accommodate electronic
transactions and data messages in the application of any statutory
law or the common law. In addition, it would render s 13(3) –
which provides for private agreements between parties –
superfluous. In my view s 13(1) does not apply in the circumstances
of this case, and on the face of it, s 13(3) does.
[23]
The respondent, however, says that even if s 13(3) does apply to
private agreements between parties the section does not assist
the
appellant. It advances three grounds to support this submission:
First, it contends that the emails do not and cannot constitute
a
separate electronic transaction because they pertain to the oral
negotiations about the written agreements. Secondly, even if
they do
constitute a separate electronic transaction, the parties did not
require an
electronic signature
as envisaged in the section;
and finally, there was no reliable method used whereby the parties
were identified and indicated their
approval of the information
communicated in the emails.
[24]
Regarding the first ground – that the emails do not constitute
a separate transaction – the simple answer is that
they do. The
oral negotiations between the parties were reduced to writing in the
form of emails and constituted an agreement to
cancel their written
agreements. And s 22(1) of the Act says emphatically that ‘[A]n
agreement is not without legal force
and effect merely because it was
concluded partly or in whole by means of data messages’.
[25]
As to the second ground – the requirement for an ‘electronic
signature’ – a brief discussion on how
the courts
generally approach signature requirements is necessary. Commonly
understood a signature is ‘a person’s name
written in a
distinctive way as a form of identification . . . .’
[13]
But
this is not the only way the law requires a document to be signed. In
the days before electronic communication, the courts were
willing to
accept any mark made by a person for the purpose of attesting a
document, or identifying it as his act, to be a valid
signature. They
went even further and accepted a mark made by a magistrate for a
witness, whose participation went only as far
as symbolically
touching the magistrate’s pen.
[14]
[26]
The approach of the courts to signatures has therefore been
pragmatic, not formalistic. They look to whether the method of
the
signature used fulfils the function of a signature – to
authenticate the identity of the signatory – rather than
insist
on the form of the signature used.
[27]
The Act describes an electronic signature – which is not to be
confused with an advanced electronic signature –
as ‘data
attached to, incorporated in, or logically associated with other data
and which is intended by the user to serve
as a signature’.
[15]
Put
simply, so long as the ‘data’ in an email is intended by
the user to serve as a signature and is logically connected
with
other data in the email the requirement for an electronic signature
is satisfied. This description accords with the practical
and
non-formalistic way the courts have treated the signature requirement
at common law.
[28]
The argument that s 13(3) does not apply because the parties did not
require an electronic signature as contemplated in the
section, is
based, in my view, on a misreading of the section. It envisages a
situation where a signature is required by the parties
but the
parties have not specified the type of electronic signature that is
required.
[16]
Here
the parties did require a signature to cancel the agreement, but when
they cancelled the agreement by email they did not specify
the type
of electronic signature that was required. So, the section does apply
in the circumstances of this case. The typewritten
names of the
parties at the foot of the emails, which were used to identify the
users, constitute ‘data’ that is logically
associated
with the data in the body of the emails, as envisaged in the
definition of an ‘electronic signature’. They
therefore
satisfy the requirement of a signature and had the effect of
authenticating the information contained in the emails.
[29]
The third ground for which the respondent contends – that there
was no reliable method used in the emails whereby the
parties were
identified and indicated their approval of the information
communicated – is also without merit. There is no
dispute
regarding the reliability of the emails, the accuracy of the
information communicated or the identities of the persons
who
appended their names to the emails. On the contrary, as I have found
earlier, the emails clearly and unambiguously evinced
an intention by
the parties to cancel their agreements. It ill-behoves the
respondent, which responded to clear questions by email
itself, to
now rely on the non-variation clauses to escape the consequences of
its commitments made at the meeting on 25 February
2013 which were
later confirmed by email.
[30]
I turn to the final issue in this appeal. At the outset the parties
were asked to address the question as to whether the order
of the
high court, being an interim order pending an action for damages to
be instituted by the respondent against the appellant
for breach of
contract, was appealable.
[31]
In granting the relief sought the court found that the appellant had
established that, on a proper interpretation of the emails,
the
written agreements and the relevant provisions of the Act, the
respondent had established a ‘clear right’ to the
relief
claimed. The order thus disposes of the main issue between the
parties concerning the cancellation of the agreements. This
means
that the respondent’s right to claim damages for breach of
contract is no longer an issue open for consideration by
the trial
court. All that remains, once the respondent commences its action for
breach of contract, is to prove and quantify its
contractual damages.
The interdict restraining the appellant from conducting its business
in competition with the respondent is
therefore final in effect, and
appealable. On this the parties agree.
[32]
The following order is made:
The
appeal is upheld with costs. The order of the high court is set aside
and in its place the following order is substituted:
‘
The
application is dismissed with costs.’
_________________
A
CACHALIA
JUDGE
OF APPEAL
APPEARANCES
For
Appellant: C T Vetter
Instructed
by:
Shepstone
& Wylie Attorneys, Durban
Webbers,
Bloemfontein
For
First Respondent: M E Stewart
Instructed
by:
Biccari
Bollo Mariano Inc, Durban
E
G Cooper Majiedt Inc, Bloemfontein
[1]
Sections
13(1) and (3) are set out below para [17].
[2]
SA
Sentrale Ko-op Graanmaatskappy Bpk v Shifren & andere
1964 (4) SA 760
(A);
Brisley
v Drotsky
2002
(4) SA 1
(SCA). See generally R H Christie & G B Bradfield
Christie’s
The Law of Contract in South Africa
6
ed at 464-466.
[3]
Section
2(1) of the Act.
[4]
Section
1
of the
Electronic Communications and Transactions Act 25 of 2002
.
[5]
Section
2(1)
(e)
.
[6]
Section
3 of the Act.
[7]
Section
4(1) provides that the Act applies to any electronic transaction or
data message:
Christie’s
The Law of Contract in South Africa
op
cit at 109.
[8]
These
are specifically provided for in ss 4(3) and 4(4) of the Act read
with the applicable schedules.
[9]
Section
12
(a)
.
[10]
Christie’s
The Law of Contract in South Africa
op
cit p 110.
[11]
See
for example
s 6(12)
of the
Companies Act 71 of 2008
.
[12]
Sections
1 and 37 of the Act.
[13]
Concise
Oxford Dictionary 12 ed.
[14]
Putter
v Provincial Insurance Co Ltd & another
1963
(3) SA 145
(W) at 148F-G.
[15]
Section
1.
[16]
Christie’s
The Law of Contract in South Africa op cit
p 110.