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[2014] ZASCA 196
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X-Procure Software SA (Pty) Ltd v Sutherland (882/2013) [2014] ZASCA 196 (28 November 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 882/2013
NON-REPORTABLE
In
the matter between:
X-PROCURE
SOFTWARE SA (PTY)
LTD
....................................................................
APPELLANT
and
SUTHERLAND,
TERRY
LINDA
.................................................................................
RESPONDENT
Neutral
citation:
X-Procure Software (Pty) Ltd v Sutherland
(882/13)
[2014] ZASCA 196
(28 November 2014)
Coram:
M
aya
,
Leach,
Willis
and
Saldulker
JJA
and M
ocumie
AJA
Heard:
18 November 2014
Delivered:
28 November 2014
Summary:
Interpretation of a written contract – claim for commission -
context and also the need for a sensible and businesslike
result
required an interpretation that commission would be payable –
appeal dismissed with costs.
ORDER
On
appeal from:
South Gauteng
High Court,
Johannesburg
(
Boruchowitz
J sitting as the court of first instance)
The
appeal is dismissed with costs.
JUDGMENT
Willis
JA (Maya, Leach and Saldulker JJA and Mocumie AJA concurring):
[1]
The appellant, the defendant in the high court, appeals with the
leave of that court. The high court had granted judgment in
favour of
the respondent. The high court found that there was an amount due to
her as commission, arising from a written agreement
concluded between
the parties on 9 October 2003, and granted its order accordingly. The
sum awarded was R447 873. Judgment included
interest thereupon and
costs.
[2]
The respondent had sued for specific performance, which was alleged
to have been the payment of commission due to her from advertising
agreements which she had concluded on the appellant’s behalf
with the appellant’s customers. The respondent had based
her
action on a term of this written ‘Outsource Sales Agreement’
(the agreement), clause 10 of which provides as follows:
‘
X/procure
[the appellant] shall effect payment to the marketer [the respondent]
of an amount equal to 20% of the gross amount payable
to X/procure
less any commission payable to advertising agencies for and in
respect of each advertising agreement concluded
solely
by
reason of the efforts of the [the respondent] pursuant to and in
terms of this agreement.’ (My emphasis.)
[3]
The agreement terminated on 31 March 2004 as a result of
disagreements between the respondent and Mr Dirk Odendaal, the
founder,
majority shareholder and executive chairman of the
appellant. In her particulars of claim, the respondent alleged that
she had
been entitled to the amount of her claim by reason of various
advertising agreements which had been concluded on behalf of the
appellant solely by reason of her efforts. The appellant’s case
was that the only advertising agreements which had been concluded
solely by reason of the respondent’s efforts had been two
agreements concluded between the appellant and pharmaceutical
companies known respectively as ‘Beyers Health Care’ and
‘Roche’. The appellant averred that the amount
due to the
respondent, arising from these agreements was R35 248.62.
[4]
After various preliminary skirmishes between the parties, which
included a later abandoned claim in reconvention by the appellant,
the respondent reduced her claim to the amount awarded to her by the
high court: viz R447 873.
[5]
The case turns on whether the clause in paragraph 2 above is to be
interpreted so as to mean that the respondent was entitled
to
commission only on contracts which she concluded on behalf of the
appellant with new customers or whether it applied to renewals
or
extensions of existing contracts with the appellant and its customers
as well. The appellant contended that, by reason of the
fact that
there had been pre-existing advertising agreements with certain of
the appellant’s customers, renewals or extensions
thereof could
not be regarded as having been concluded ‘solely by reason of
the efforts of’ the respondent.
[6]
By reason of the fact that there is disagreement over whether the
expression ‘solely by reason of the efforts of’
is
ambiguous, and whether there can therefore be a departure from the
parol evidence rule, it is necessary first to deal with the
question
of whether there is ambiguity in the expression.
[7]
As a contract is a bilateral juristic act (there must, at the very
least, be a meeting of two minds, even if one and the same
person
acts in different capacities), no contract can ever come into being
solely as a result of the efforts of one person, except
if that
person is acting in different capacities.
[1]
Inasmuch as it is common cause that a contract had indeed come into
being between the parties, the use of the word ‘solely’
in the clause is inherently ambiguous. This type of ambiguity in
question has been described as a ‘latent ambiguity’
in
Delmas
Milling Co Ltd v Du Plessis
,
[2]
which has been followed in innumerable cases since then. Referring to
Delmas
Milling
,
the trial court used this term to describe the expression that was in
contention between the parties. Having referred to the
Oxford
Dictionary
,
the trial court took a similar view regarding the ambiguity of the
word ‘solely’ in this context.
[8]
Where the language of a written contract is ambiguous, extrinsic
evidence is admissible in order to construe its meaning, by
reference
to its ‘context’ or the ‘factual matrix’ in
which the contract was concluded.
[3]
Moreover, the apparent purpose to which the contract was directed may
be considered when interpreting it.
[4]
The high court therefore correctly admitted and had regard to
extrinsic evidence in order to determine what was probably in the
minds of the parties when the agreement was concluded.
[9]
Relevant to the interpretation of the agreement is the definition of
‘advertising agreements’, which is as follows:
‘
the
standard form agreements used and prescribed by [the appellant] from
time to time to contract with manufacturers, wholesalers
and
distributors of pharmaceutical products stipulating the terms and
conditions in terms whereof [the appellant] sells advertising
space
on [the appellant] to such manufacturers, wholesalers and
distributors of pharmaceutical products.’
Implicit
in the use of the words ‘from time to time’ in this
definition is that existing agreements between the appellant
and its
customers could be varied.
[10]
The agreement also provides that:
‘
In
addition to its other obligations under this agreement the marketer
shall:
11.1
use its best efforts to promote, sell and service the products within
the territory using trained and qualified personnel;
11.2
be responsible for all costs and expenses related to its performance
under this agreement.’
It
is significant that the promotion, sale and service of products is
not qualified in any way suggestive of the interpretation
which the
appellant has sought to place on the agreement. The contrary is true.
The word service is indicative of a continuing
relationship with an
existing customer.
[11]
Clause 5 of the standard advertising agreement between the appellant
and its customers provides that:
‘
This
agreement shall thereafter commence on the date of signature thereof
by or on behalf of the parties and shall continue indefinitely
until
6 (six) calendar months written notice of termination is given by
either party to the other, unless otherwise stated’.
Despite
the seemingly indefinite nature of the advertising agreement, it
refers also to annexures thereto. In these annexures
are set
out different products of the appellant and the rates to be applied
thereto. It was the evidence not only of the respondent
but also Mr
Lewis, who had been the managing director of the appellant at the
relevant time, that the advertising agreements were
often varied by
adding to or substituting previous annexures.
[12]
In addition to the definition of ‘advertising agreements’
in the agreement between the parties and the terms of
clause 5
of the standard advertising agreement, there are various other
pointers to what must have been intended between
the parties when
they entered into their agreement. These pointers are to be found
against the background that not only had the
respondent been
appointed to market the appellant’s products that had been
defined in the agreement as types of ‘advertising
space’
known as ‘banners, browser pages, screen savers and linked
adverts’ but also the respondent’s remuneration
of the
appellant was derived entirely from commission.
[13]
The undisputed evidence of the respondent was that 90 per cent of her
time had been spent maintaining the appellant’s
relationship
with these existing customers and it was as a result of the
respondent’s sole efforts that existing advertising
agreements
had either been renewed or extended. Furthermore, she had to carry
all the administrative expenses relating to the procurement
of
advertising agreements herself, regardless of whether these related
to new customers or renewals or extensions of these agreements
with
pre-existing customers. There was no evidence that anyone else,
within the appellant, was responsible for the renewal
or extension of
agreements with these pre-existing customers. Self-evidently, the
renewal or extension of the agreements would
not have occurred either
automatically or autonomously. As the trial court correctly observed:
‘
It
is highly improbable and makes unreasonable business sense to think
that the respondent would have expended all her financial
and
personal efforts in procuring advertisements when she, on the version
of the appellant, would not have been remunerated at
all in respect
of these agreements.’
[14]
An analysis of the notes of the appellant’s negotiations with
Bayer shows that the appellant had introduced Bayer to
its products
prior to Bayer having had any dealings or association with Bayer.
Nevertheless, the appellant had remunerated the
respondent for
agreements concluded between Bayer and the appellant between
September 2003 and June 2004, during which period the
respondent had
actively participated in the negotiations. Similar considerations
apply in respect of advertising contracts concluded
between the
appellant and Roche.
[15]
It is common cause that, during the currency of the agreement, the
respondent had received R109 002.37 from the appellant
as
commission for concluding advertising agreements with these existing
customers. This payment was not made in a lump sum but
on an ongoing
basis. Tax was deducted on these sums and made over to the South
African Revenue Service. Mr Odendaal, who testified
on behalf of the
appellant, said that these payments had been made ‘ex gratia’.
In its plea and in its affidavit resisting
summary judgment, the
appellant described these payments as having been ‘overpayments’.
No satisfactory explanation
for this discrepancy in versions could be
given by Mr Odendaal when he was cross-examined thereupon.
[16]
Mr Lewis, the former operations manager of the appellant, who at one
stage in his evidence said that the sum of R109 002.37
was an
‘overpayment’, under cross-examination later said that he
did not know how the payments to the respondent had
been calculated
as he had not been responsible therefore. He also conceded under
cross-examination that the respondent would have
been entitled to
commission for new business which she had generated from existing
customers of the appellant. This is a clear
indication that the
appellant itself did not understand its agreement with the respondent
to be as it now purports to interpret
it.
[17]
It is obvious that renewals or extensions of existing contracts
between the appellant and its existing customer could not be
self-generating. The decision to renew would depend, inter alia, on
the following: the historical effectiveness of past advertising
arrangements, budgets, experience of the appellant’s
competitors and the introduction of new products and/or the
discontinuance
of other by the customer. The decision would also
depend on the building of relationships between the appellant and its
customers
which would include advice and guidance from the
appellant’s representative. It is in this regard, that the
contribution
from the respondent would have played a significant
role.
[18]
The appellant’s case was that the only commission to which the
appellant had become entitled was an amount of R35 248.62.
It was not
in dispute that the appellant had paid the plaintiffs an amount of
R139 746.63 in respect of various a commissions.
This, the appellant
claimed, was an overpayment. In its counterclaim the appellant
claimed the difference between these two amounts.
This claim was
later abandoned by the appellant.
[19]
In proving the aggregate of her claim the respondent relied on an
exhibited schedule of contracts, for each individual item
of the
claim. Although she was cross-examined in general terms about her
claims, most of the individual items were not disputed.
Cross-examination focused on whether she could correctly assert that
the contracts were concluded ‘solely’ as a result
of her
efforts. The arithmetic of the schedules was not in question. The
respondent stood up well under cross-examination. There
was no reason
to disbelieve her. The concessions that the respondent made under
cross-examination and that were seized upon by
counsel for the
appellant in an attempt to show that she had admitted that these
contracts had not been concluded solely by her
on the appellant’s
behalf did not, in the context in which they were made, detract from
her essential version of events.
That account of affairs is that,
without her efforts the appellant, would in all probability, not have
secured the renewal or extension
of contracts as it did. The
trial court correctly held that each extension or renewal relating to
contracts concluded with
existing clients constituted a new
advertising agreement.
[20]
Accordingly, the trial court cannot be criticised for having accepted
the respondent’s version. The trial court also
correctly found
that, as the respondent’s contentions in respect of the
interpretation of the agreement had prevailed over
those of the
appellant, she had succeeded in proving her revised claim for R447
873.
[21]
The trial court relied strongly on the decision of this court in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[5]
to conclude that not only context but also the need for a sensible
and businesslike result required an interpretation that commission
would be payable in respect of new sales in respect of advertising
agreements concluded not only between the appellant and its
new
customers, but also existing customers. In reaching this conclusion,
the trial court relied on the following facts:
(a)
the respondent had been remunerated purely on a commission basis;
(b)
by a huge margin, most of her time had been spent maintaining the
appellant’s relationship with these existing customers;
(c)
it was as a result of the respondent’s sole efforts that
existing advertising agreements had either been renewed or extended;
(d)
the respondent had to carry all administrative expenses relating to
the procurement of advertising agreements herself;
(e)
she had, during the currency of the agreement, received commission
for concluding advertising agreements with these existing
customers;
(f)
the ‘internally contradictory’ evidence of Mr Odendaal
and Mr Lewis, as to whether the payments for commission
had
been made ‘ex gratia’ or were ‘overpayments’;
(g)
the improbability and absurdity that the parties could have intended
the clause in contention to have the interpretation which
the
appellant wishes now to have place on it.
In
my opinion, the reasoning of the trial court cannot be faulted.
[22]
The following order is made:
The
appeal is dismissed with costs.
_______________________
N
P WILLIS
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant:
M D Cochrane
Instructed
by:
Harris
Billings Attorneys
,
Johannesburg
c/o
Honey Attorneys
, Bloemfontein
For
the Respondent:
A R G Mundell SC
Instructed
by:
Van
Zyl Hertenberger
,
Johannesburg
c/o
Kramer Wehmann & Joubert Inc
,
Bloemfontein
[1]
See
for example
Vaal
Reefs Exploration and Mining Co Ltd v Burger
1999 (4) SA 1161
(SCA) para 8;
Van
der Merwe v Nedcor Bank Bpk
2003 (1) SA 169
(SCA) paras 4 to 8.
[2]
Delmas
Milling Co Ltd v Du Plessis
1955 (3) SA 447
(A) at 454G.
[3]
See
Coopers
& Lybrand & others v Bryant
& others
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 768C-D. See also
Van
der Westhuizen v Arnold
2002
(6) SA 453
(SCA) paras 22 and 23;
Masstores
(Pty) Ltd v Murray & Roberts Construction (Pty) Ltd &
another
[2008] ZASCA 94
;
2008 (6) SA 654
(SCA) para 7;
KPMG
Chartered Accountants (SA) v Securefin Ltd & another
2009 (4) SA 399
(SCA) para 39;
Potgieter
& another v Potgieter NO & others
2012 (1) 637 (SCA) para 24 and
North
East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
2013
(5) SA 1
(SCA) para 2.
[4]
See
Communicare
& others v Khan & another
2013 (4) SA 482
(SCA) para 31.
[5]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18.