About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2021
>>
[2021] ZASCA 7
|
|
MTN Service Provider (Pty) Ltd v Belet Industries CC t/a Belet Cellular (1077/2019) [2021] ZASCA 7 (15 January 2021)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
no: 1077/2019
In
the matter between:
MTN
SERVICE PROVIDER (PTY)
LTD
Appellant
and
BELET
INDUSTRIES CC t/a BELET
CELLULAR
Respondent
Neutral
citation:
MTN
Service Provider (Pty) Ltd v Belet Industries CC t/a Belet Cellular
(Case no 1077/2019)
[2020]
ZASCA 07
(15 January 2021)
Coram:
ZONDI, SCHIPPERS and NICHOLLS JJA and
WEINER and GOOSEN AJJA
Heard
:
9 November 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives
by email. It has been published
on the Supreme Court of Appeal website and released to SAFLII. The
date and time for hand-down
is deemed to be 10h00 on 15 January 2021.
Summary:
Interpretation of contract
– between cell phone service provider and dealer of cell phone
products – repudiation –
dealer alleged to possess goods
not supplied by service provider – not proved – indemnity
clause – dealer not
precluded from recovering damages resulting
from repudiation of agreement by service provider – whether
dealer precluded
by non-variation clause from including new store
under the agreement – permissible as agreement contains
procedure for an
amendment due to changed circumstances –
followed by service provider – appeal dismissed.
ORDER
On
appeal from:
Gauteng Local
Division of the High Court, Johannesburg (Kathree Setiloane J)
sitting as court of first instance:
(a)
The appeal is dismissed with costs;
(b)
The appellant is ordered to pay 30 percent of the costs incurred in
the preparation, perusal
and copying of the record on an attorney and
client scale.
JUDGMENT
Zondi
JA (Schippers and Nicholls JJA and Weiner and Goosen AJJA concurring)
[1]
On 14 October 2010, the appellant, MTN Service Provider (Pty) Ltd
(MTN) and the respondent,
Belet Industries CC t/a Belet Cellular
(Belet) concluded a dealer agreement (the agreement) in terms of
which MTN appointed Belet
to market, promote and facilitate
distribution by MTN of network services and stock in the territory.
The ‘territory’
is defined in the agreement to mean the
Republic of South Africa. The agreement was to continue ‘for an
indefinite period
unless terminated earlier in accordance with the
provisions of this agreement.’ The agreement replaced the
previous agreement
concluded by the parties on 4 April 2003 (the 2003
agreement). In return for its services Belet was to receive payment
by way of
commissions and discounts for pre-paid stock.
[2]
During the currency of the 2003 agreement, Belet had traded from
different stores
but at the time of the conclusion of the agreement,
it traded from two stores; one at the Central City Shopping Mall in
Mabopane
(the Mabopane store) and the other at the Temba City Mall in
Temba (the Temba City store). During April 2011 Belet closed the
Temba
City store and on 27 April 2011 it opened a further store
within the nearby Jubilee Mall (the Jubilee Mall store).
[3]
In consequence of a contractual dispute between the parties, the full
details of which
will be dealt with later in the judgment, MTN on 4
November 2011 terminated the agreement with effect from 5 November
2011. MTN
dispossessed Belet of its business by placing guards
outside both stores and refusing Belet access to the stores, taking
back all
stock, terminating the electronic access to the systems
needed to trade and refusing to supply further stock. On 7 and 8
November
2011 MTN notified the landlords of the respective premises
from which the two stores operated, of the termination of Belet’s
agreement and sought to be substituted as a lessee of the two stores
until replacement dealers were appointed. In due course MTN
installed
different dealers in these stores.
[4]
On 2 December 2011, Belet instituted action against MTN in the
Gauteng Local Division
of the High Court, Johannesburg (high court)
in which it claimed payment of R13 120 933, alternatively
the amount of
no less than R3 629 615.50, as damages. The
essential basis of the claim was that MTN’s termination of the
agreement
constituted a breach, alternatively a repudiation of the
agreement, resulting in Belet suffering damages.
[5]
MTN defended the action. It denied the breach, alternatively
repudiation, of the agreement
or that Belet had suffered damages. It
averred that it terminated the agreement because Belet had repudiated
the agreement. In
the alternative, MTN contended that Belet’s
claims had become prescribed. This latter defence was raised
following amendment
by Belet of its particulars of claim on 25
October 2016.
[6]
The matter came before Kathree-Setiloane J, who after hearing the
evidence, dismissed
MTN’s defences, upheld Belet’s claim
and granted the following order:
‘
1.
The special plea is dismissed.
2.
Judgment is granted in favour of the Plaintiff for:
2.1
Payment of the amount of R5 849 789.00 together with
interest on this amount at
the rate of 10.25% per annum from 1 March
2016 to date of payment;
2.2
Payment of the amount of R5 581 937.00 together with
interest on this amount at
the rate of 10.25% per annum from date of
judgment to date of payment;
2.3
Costs of suit on the scale as between attorney and client which shall
include all costs
previously reserved and the qualifying fees of Ms
Wood.’
[7]
MTN appeals against the judgment and orders with leave of the court a
quo. There is
no appeal against the dismissal of the special plea of
prescription.
Background
[8]
The facts which gave rise to the termination of the agreement between
MTN and Belet
are briefly the following. The agreement allowed MTN to
conduct a general audit of Belet’s stores at any time. In terms
of
the agreement, on 26 August 2011 MTN informed Belet that it
intended to conduct an internal audit of the Mabopane store on 2
September
2011. Mr Sulaiman, the auditor arrived just before the
store opened. In preparation for the audit, Mrs Letebele, the General
Manager
instructed the shop assistants to place obsolete items, which
she considered unnecessary for the audit, into black bags.
There was no space for the bags in the store and she asked the
assistants to place them in a shopping trolley and keep it outside
the store until the audit was completed. The assistant removed the
trolley in front of Mr Sulaiman. The trolley was left with a
parking
assistant where Mr Sulaiman saw it.
[9]
MTN claimed that 15 items in the trolley constituted grey goods, ie
goods not supplied
to Belet by MTN, and ‘were held in
violation’ of the terms of the agreement. It contended further
that Belet had hidden
these goods from the auditor and in doing so
obstructed the auditing process. As a result, MTN summarily cancelled
the agreement
by letter dated 27 September 2011(the termination
letter). On 4 November 2011, it confirmed the cancellation in a
letter. Belet
accepted the repudiation and cancelled the agreement.
[10]
On 2 December 2011, Belet instituted action against MTN in the high
court, seeking damages based
on a breach, alternatively, a
repudiation and cancellation of the agreement. It contended that, but
for the repudiation, it would
have continued trading for at least a
further ten years and it claimed the income it would have earned,
less expenses. Belet contended
that the damages flow generally and
naturally from MTN’s breach and/ or repudiation of the
agreement.
[11]
Belet alleged that MTN terminated the agreement prematurely without
lawful grounds and contrary
to its terms. In the alternative, Belet
contended that the conduct of MTN in terminating the agreement
prematurely constituted
a repudiation which, Belet contended, it
accepted and elected to cancel the agreement.
[12]
In the further alternative, Belet contended that MTN breached the
material terms of the agreement
in that, contrary to the provisions
of clause 39.1 of the agreement, MTN failed to give proper notice to
Belet to remedy the breach,
and denied Belet the opportunity to
dispute the issue of the ‘grey goods.’
[13]
MTN admitted that it terminated the agreement for reasons set out in
the termination letter,
and that Belet disputed its right to
terminate the agreement but it denied that the agreement was
prematurely cancelled and without
lawful grounds.
[14]
In amplification of its denial, MTN averred that in terms of the
agreement, Belet was obliged
to use MTN’s Online Management
System known as OMS 1 to which Belet had been given access and
furnished with its operating
procedures and directions. MTN averred
further that it had notified Belet to use MTN’s Point of Sales
operating system (POS)
for the purpose of recording, inter alia, all
stock supplied and received from MTN.
[15]
MTN further alleged that, in and during July 2011 and in particular
prior to the audit which
occurred on 2 September 2011, it instructed
Belet to migrate its OMS1 system to MTN’s new Online System
known as OMS2. It
contended that, as a result of the instruction,
Belet – by the time of the audit in September 2011 – was
not entitled
to use OMS1 and all stock reflected on its OMS1 ought to
have been transferred to OMS2. MTN alleged that the purpose of the
audit
it performed at Belet’s Mabopane store on 2 September
2011 was to ensure that Belet was utilising the OMS2. It averred that
during the audit it discovered several transgressions. These were
that Belet did not record 15 items in a trolley on OMS2; Belet
used
an unknown POS system and failed to explain its conduct when asked to
do so. MTN contended that Belet’s conduct indicated
an
intention on the part of Belet to be dishonest and not to comply with
its obligations in terms of the agreement; and/or to mislead
MTN.
[16]
MTN contended further that as a result of Belet’s conduct, the
trust between the parties
was lost, could not be restored and the
breach by Belet was irremediable and amounted to a repudiation of the
agreement entitling
MTN to cancel the agreement.
[17]
MTN denied that Belet suffered damages. It contended that the damages
allegedly suffered by Belet
are precluded from being claimed in terms
of clause 40.1 as read with clause 39.4 of the agreement. In
the alternative, MTN
alleged that in terms of clause 39.1 of the
agreement, MTN has a right to terminate the agreement by giving 90
days written notice
of termination of the agreement to Belet. MTN
contended that:
‘
14.3.2.
in terms of the special circumstances of the matter, by
the Defendant
terminating the Dealer Agreement on the basis of a breach of trust,
the Defendant expressly alternatively impliedly
notified the
Plaintiff that it did not wish to have any contractual relationship
with the Defendant and as a consequence, the Plaintiff
ought to have
known that had the Defendant terminated the said Agreement on the
basis set out in clause 39.1, the Plaintiff would
only have been able
to earn an income for 90 days thereafter and nothing more.
14.3.3. In the
circumstances, should it be found that the Defendant is liable to the
Plaintiff for damages (which is denied) the
Defendant pleads that
such damages should be limited to a period of 90 days from date of
termination based on the loss of trust
between the parties in respect
of the Dealer Agreement.’
[18]
The appeal therefore raises three issues: first, whether MTN’s
cancellation of the agreement
constituted a repudiation of the
agreement, or whether MTN was entitled to terminate it at the time
and in the manner in which
it did; second, whether Belet is precluded
from recovering the damages suffered by it because of clause 40.1
and/or clause 39.2
of the agreement and third, whether Belet is
precluded from recovering any damages suffered as a result of the
closure of its Jubilee
Mall store because this store did not fall
within the ambit of the agreement.
Did
Belet repudiate the dealer agreement?
[19]
Belet alleged that the cancellation by MTN of the agreement was
unlawful and amounted to a repudiation
entitling it to cancel the
agreement while MTN asserted that the cancellation was valid. The
court a quo found that Belet did not
repudiate the agreement and that
MTN was not entitled to cancel it. It held accordingly that MTN’s
cancellation constituted
a repudiation entitling Belet to cancel the
agreement.
[20]
MTN challenged the conclusions of the court a quo. It contended that
the court a quo failed to
appreciate that in and during July 2011 and
prior to the audit, MTN had instructed Belet to migrate its OMS1
system to MTN’s
OMS2 system. OMS2 was required to be used
by Belet for everything. It alleged that the purpose of the
inspection
it undertook on 2 September 2011 was to ensure that Belet
was utilising OMS2.
[21]
MTN argued that given the express terms of the agreement and the
surrounding circumstances, it
was a tacit term of the agreement that
Belet would at all times act in a trustworthy manner, honestly and
with integrity in its
dealings with MTN. It contended that honesty
and trust had always been an integral part of the relationship
between the parties.
[22]
MTN alleged that it found (a) Belet hiding goods from the auditor in
a trolley and obstructing
the auditing process which affected the
trust element of the parties’ relationship and (b) that there
were numerous problems
with Belet’s OMS2, in particular stock
relating to the Mabopane store that was supposed to be recorded on
OMS2 was not recorded
thereon and stock recorded on OMS2 was not
found in the store. Moreover, the goods hidden in the trolley were
not recorded on Belet’s
OMS2.
[23]
On the basis of these facts MTN inferred an intention on the part of
Belet to be dishonest and
not to comply with its obligations in terms
of the agreement and to mislead it. It contended that in the letters
it addressed to
Belet after the inspection it relied on these facts
as a basis for its decision to cancel the agreement. MTN pointed out
that in
the termination letter dated 27 September 2011, it inter
alia, conveyed the following to Belet:
‘
7.
Your conduct in hiding these goods from the auditor and thereby
obstructing the auditing
process amounts to a fraudulent
misrepresentation and is a breach of the dealer agreement which
cannot be remedied.
’
[24]
In the letter dated 6 October 2011 MTN stated:
‘
4.
…The trust with which MTN SP views [Belet] has been
irreparably broken.
5.
Accordingly, MTN SP
has no
alternative other than to terminate the Dealer
relationship.
6.
…[Belet] is hereby given a calendar month’s notice of
termination
that is, closure of the stores will take place on 5
November 2011.
’
[25]
And finally in the letter dated 4 November 2011, MTN informed Belet,
inter alia
that:
‘
2.
As the trust element of our relationship has been broken down
irretrievably our position
is not changed and the dealer agreement
between MTN SP and Belet Industries CC t/a trading as Belet Cellular.
3.
(sic) has been terminated in terms of our
letter dated
27 September 2011.
’
[26]
Belet’s conduct, argued MTN, constituted a repudiation of the
agreement entitling it to
cancel the agreement which it did.
[27]
MTN has not been consistent in the manner in which it pleaded its
defence. In its letter of cancellation
of 27 September 2011, it
sought to justify its cancellation on the basis that some of the
goods that were found in a trolley were
not supplied by it to Belet.
They were grey goods and were held in violation of the agreement. MTN
asserted that Belet’s
conduct in hiding these goods from the
auditor amounted to a fraudulent misrepresentation as it obstructed
the auditing process
and was in breach of the agreement which could
not be remedied.
[28]
As I have pointed out, in subsequent correspondence MTN accused Belet
of failing to ‘acknowledge
and recognise that such an act is
irremediable.’ Despite requests by Belet to meet with Mr
Forrester, MTN’s National
Franchise Manager to sort out the
issue, this was refused. On 4 November 2011 MTN wrote to Belet’s
erstwhile attorneys to
confirm that the agreement ‘has been
terminated in terms of our letter dated 27 September 2011’.
[29]
In the original plea MTN alleged that 15 items in the trolley were
‘grey goods’ and
that Belet’s representative told
the auditor that he had been advised ‘to hide the said products
until the audit was
completed.’ It then alleged that this
breach was irremediable and amounted to a repudiation of the
agreement entitling it
to cancel same. The original plea contained no
reference to the OMS2 system, being the POS system which MTN required
Belet to use
as from July 2011. In MTN’s amended plea, a
different justification for the cancellation was pleaded. MTN
abandoned the allegation
of possession of ‘grey goods’
and sought to justify its cancellation on the basis that Belet’s
conduct constituted
a breach of trust and amounted to repudiation of
the agreement.
[30]
The court
a quo
correctly
found that there was no evidence that the goods in the trolley had to
be recorded on OMS2, and that there was no obligation
that they had
to be kept in the store. It was also common cause at the trial that
MTN had never asked Belet for an explanation
for the goods in the
trolley. The allegation of an unknown POS being used was entirely
refuted and effectively abandoned at the
trial. In this regard, the
court a quo held that since MTN did not, during argument persist with
its pleaded case that Belet breached
the dealer agreement by using an
unknown POS, it saw no need to deal with that allegation. These
factual findings are not challenged
in MTN’s notice of
application for leave to appeal or in its heads of argument.
[31]
In its heads of argument on appeal, MTN advanced yet another version
to justify its summary cancellation.
It submitted that the ‘hiding
of the goods by Belet in the trolley’ and Belet’s failure
to comply with the OMS2
system indicated an intention on the part of
Belet, first, to be dishonest and not to comply with its obligations
in terms of the
agreement; and second, to mislead MTN and obstruct
the auditing process, was in breach of trust, and constituted a
repudiation
of the agreement by Belet. It has never been MTN’s
case that it cancelled the agreement because Belet failed to
generally
comply with the OMS2 system. Unsurprisingly, this
allegation was never raised in the letters of cancellation of 27
September and
4 November 2011.
[32]
The court a quo correctly concluded that there was no evidential
basis on which to find that
by placing the 15 items in black plastic
bags, and removing them from the store, Belet was in breach of the
agreement. This conclusion
was based on the finding that the
agreement is silent as to where stock must be kept and that MTN did
not lead evidence indicating
that written instructions were given or
Standard Operating Procedures published as envisaged in the
agreement. Both Mr and Mrs
Letebele testified that all of these 15
items had previously been paid for by Belet. They were either
obsolete or defective. They
stated that there was no reason to hide
these goods. The court a quo accepted Mrs Letebele’s evidence
that the goods in the
trolley were all paid for, and that she could
therefore keep them wherever she wished. This was confirmed by Mr
Sulaiman, who testified
that once stock had gone beyond the 60 days
for returns and had been paid for, the dealer could do with it what
it liked.
[33]
MTN contended further that Belet’s breach of the agreement was
material and could not be
remedied by the payment of money. This is
so, MTN argued, because it resulted in a breach of the trust
relationship between the
parties. MTN submitted that it was
accordingly not required to give Belet a notice to remedy the breach.
The court a quo rejected
MTN’s contention. It reasoned that
clause 37.1 makes it clear that even in the case where the breach
appears irremediable
by the payment of money, MTN is still required
to give Belet notice to remedy its breach before it cancels the
agreement. I
cannot find fault with the court a quo’s
finding. If MTN was dissatisfied with the manner in which Belet was
implementing
the OMS2 system or considered it to be in breach of a
contractual term, it should and ought to have notified Belet of this
breach.
Such a breach would have been remediable and would fall
squarely within the provisions of clause 37.
[34]
In these circumstances the court a quo was correct in finding that
Belet did not repudiate the
agreement, that MTN was not entitled to
cancel it and that MTN’s cancellation constituted a repudiation
of the agreement.
Whether
the liability of MTN is limited / excluded by clause 40.1 read with
clause 39
[35]
Clause 39 deals with termination of the agreement and its
consequences. Sub-clause 39.4 in its
relevant terms provides as
follows:
‘
Upon termination
of this Agreement due to any reason whatsoever the following shall
apply:
39.4.1. the termination
shall be without prejudice to any other claims or remedies accrued by
either party immediately prior to
the date of termination;
. . .
39.4.3. the Dealer shall
immediately discontinue any allocation of Stock to Customers or
potential Customers;
39.4.4. the Dealer shall
immediately cease to use or display any mark or logo, whether
registered or unregistered, which is proprietary
to the Service
Provider or the Operator and shall make or cause to be made such
changes to its advertising in all media, vehicles,
shop frontage, the
interior of its premises, stationery and the like, so as to
distinguish its business, to the satisfaction of
the Service
Provider, from one that is being carried on in association with the
Service Provider;
. . .
39.4.8. the Dealer shall,
cease forthwith to qualify for any discounts, commissions and any
other amounts to which it would otherwise
have been entitled.’
Like clause 40.1, clause
39 survives the termination of the agreement.
[36]
MTN argued that Belet is not entitled to claim damages arising from
inability to earn commissions
and income from the sale of network
services and stock, because in terms of clauses 39 and 40 of the
agreement the parties specifically
agreed that, upon termination of
the agreement, Belet would not have any stock and would not be
entitled to earn any commission
or other amount. In support of this
contention, MTN relied on the evidence of Mr Letebele and Ms Wood,
who testified that their
understanding was that once there had been a
cancellation of the agreement Belet would not get an allocation of
stock from MTN
and would therefore not earn any commission or income.
[37]
MTN’s reliance on clause 39 and in particular sub-clause 39.4.8
is misplaced for two reasons.
First, properly read in its context
clause 39 has nothing to do with the limitation or exclusion of
liability in the event of repudiation
of the agreement. Belet is not
claiming specific performance. It claims damages. It alleges that,
but for MTN’s repudiation,
the agreement would not have
terminated, clause 39.4 would never have come into operation, and it
would have operated its two stores
for another ten years. It claims
to be put into the position that it would have been in, had the
contract been properly performed.
Second, questions of interpretation
of documents are matters of law and are the exclusive preserve of the
court.
[1]
The court is therefore
not bound by the subjective interpretation that either Mr Letebele or
Ms Wood placed on clause 39.4. The
court a quo, therefore, correctly
found that clause 39.4 does not preclude Belet’s claim.
[38]
MTN’s further argument is that clause 40.1 limits the liability
of the parties to each
other, that this limitation applies equally to
either a breach or cancellation of the agreement. This is so, MTN
argued, because
in terms of clause 40.4 the provisions of clause 40.1
survive any termination of the agreement for any reason. MTN
contended that
Belet’s claim for damages is precluded by clause
40.1 as the second sentence defines what is meant by ‘direct
damages
and in doing so excludes financial loss, loss of business,
profit, savings, revenue, or goodwill suffered or sustained by the
Dealer
howsoever arising.’
[39]
MTN’s contention is based on the wording of clause 40.1 which
has two parts. It provides
as follows:
‘
Liability and
indemnity
Except for consequential
damages which arise as a result of the Dealer not complying with the
provisions of clause 31, the liability
of the parties to each other
under this Agreement will be limited to direct damages. For the
avoidance of doubt, this excludes
financial loss, loss of business,
profit, savings, revenue, or goodwill suffered or sustained by the
Dealer howsoever arising.’
[40]
MTN argued that the reference to ‘consequential damages’
in the first part of the
first sentence relates to damages it may
suffer as a result of Belet’s failure to comply with clause 31
of the agreement.
Stated differently, its argument was that claims
for ‘consequential damages’ can only accrue to MTN. It
further argued
that in the second part of the first sentence, both
parties are treated equally and it specifically provides that the
liability
of the parties to each other under the agreement would be
limited to ‘direct damages’.
[41]
Based on this construction, MTN submitted that the liability of Belet
to MTN is limited on a
dual basis. Firstly, for ‘consequential
damages’ relating to a failure to comply with clause 31.
Secondly, its liability
for ‘direct damages’ is further
limited by the second sentence of clause 40.1.
[42]
MTN contended that the second sentence in clause 40.1 precludes Belet
from claiming damages for
financial loss, loss of business, profit,
savings, revenue, or goodwill suffered or sustained by Belet,
howsoever arising. In developing
this argument MTN, argued that the
second sentence caters for and is no different to the consequences
that arise as a result of
a cancellation of the agreement in terms of
clauses 39.4.3 and 39.4.8. These clauses preclude Belet from claiming
financial loss,
loss of business, profit, savings and revenue it
sustained due to any reason whatsoever.
[43]
Belet contended, on the contrary, that the purpose of clause 40.1 is
to exclude consequential
damages and must for that reason be
interpreted to mean that liability is limited to direct damages. The
second sentence serves
to illustrate what types of claims may
constitute consequential damages, and thus are not claimable. Belet,
however, argued that
since the question of whether damages are direct
or consequential is a factual one, one cannot predetermine that a
certain type
of damages is either one or the other.
[2]
[44]
Clause 40.1 is not a model of clarity. A similar argument was
initially raised by MTN by way
of an exception to Belet’s
particulars of claim before the amendment. The exception was upheld
by the high court, but its
judgment was subsequently overturned by
this Court.
[3]
It held that the
clause was ambiguous and could bear the meaning contended for by
Belet.
[45]
The issue between the parties turns on the interpretation of clause
40.1 and in particular, whether
the types of loss referred to in the
second sentence of the limitation clause are examples of
‘consequential damages’
or the ‘direct damages’
the recovery of which is excluded. The recent cases of this Court
have made it clear that in
interpreting any document, while the
starting point is inevitably the language of the document, ‘the
process of interpretation
does not stop at a perceived literal
meaning of those words, but considers them in the light of all
relevant and admissible context,
including the circumstances in which
the document came into being’, the apparent purpose to which
the document is directed
and the material known to those responsible
for its production.
[4]
[46]
There are two fundamental problems with the construction contended
for by MTN. First, in general
under the common law, an innocent party
to a contract is entitled to be placed in the position it would have
occupied had the contract
been performed, so far as that can be done
by the payment of money, and without undue hardship to the defaulting
party. Such damages
only are awarded as flow naturally from the
breach, or as may reasonably be supposed to have been in the
contemplation of the contracting
parties as likely to result
therefrom. The parties are taken to have intended their legal rights
and obligations to be governed
by the common law unless they have
plainly and unambiguously indicated the contrary. Where one of the
parties wishes to be absolved
either wholly or partially from an
obligation or liability which would or could arise at common law from
a contract of the kind
which the parties intend to conclude, it is
for that party to ensure that the extent to which it is to be
absolved is plainly spelled
out.
[5]
There is no evidence that this was intended to be the case in the
present matter.
[47]
Secondly, on MTN’s construction, it would mean that clause 40.1
suffers from internal inconsistency
in that, in the first sentence it
recognises a claim for direct damages while in the second sentence it
excludes the same claim.
To avoid an internal conflict and to render
clause 40.1 meaningful, one would have to ignore the first part of
the first sentence
which reads: ‘the liability of the parties
to each other under this Agreement will be limited direct damages.’
This
is not a sensible meaning, because it renders clause 37 - which
recognises that in the event of a breach of the agreement an
aggrieved
party is entitled to sue for damages – nugatory.
MTN’s construction ignores the context in which clause 40.1
appears
in relation to how the parties’ liability to each other
would be limited. As correctly pointed out by Belet, the purpose of
the first sentence is to limit the parties’ liability to each
other – except in relation to damages flowing from a
breach of
clause 31 - to direct damages.
[48]
Belet’s claim is for the loss of net income which flows
naturally from the repudiation
of the agreement. It is this loss
which Belet alleged it had suffered as a result of the repudiation of
the agreement. It was conceded
by MTN that the loss claimed by Belet
constitutes direct damages. The conclusion of the high court that
clause 40.1 of the agreement
does not absolve MTN of liability for
Belet’s claimed loss of income can, therefore, not be faulted.
Whether
the Jubilee Mall store is also subject to the agreement.
[49]
It is common cause that during April 2011, Belet closed the Temba
City Store and opened its store
in the Jubilee Mall with the
knowledge and concurrence of MTN. MTN approved the relocation of the
store, determined the design
of the Jubilee Mall store and appointed
the contractors and subcontractors who fitted out the store, paid
them for the work done
and appointed its own supervisor to the
project. Thereafter MTN claimed a fitting out allowance from the
landlord and it provided
Belet with promotional material for the
opening of the store. Once the store was set up, MTN supplied stock
to the store, linked
it to the OMS and paid commissions to Belet for
sales made by the store. As in the case of the Mabopane store MTN
also subjected
the Jubilee Mall store to an internal audit.
[50]
However, despite these objective facts MTN argued that the Jubilee
Mall store should not be taken
into account in computing Belet’s
damages for the reasons that the Jubilee Mall store is not reflected
in annexure ‘A’
to the agreement; the
agreement contains a non-variation clause; Belet is unable to produce
an amended annexure ‘A’
reflecting the Jubilee Mall store
and countersigned by MTN and that Belet cannot prove which part of
the loss of income is attributable
to the Mabopane store and
which to the Jubilee Mall store. The court a quo rejected MTN’s
contentions and concluded
that the Jubilee Mall store formed part of
the agreement.
[51]
MTN attacked the court a quo’s conclusion and argued that on
the pleadings, the facts and
the law, its finding was incorrect. As
regards the pleadings it contended that in the original particulars
of claim, the application
for leave to appeal against the upholding
of the exception, and in Belet’s reply to MTN’s request
for trial particulars,
there was no reference to the Jubilee Mall
store. Additionally, continued MTN’s argument, in Belet’s
application to
amend its particulars of claim, Mr Letebele stated
under oath that clause 35.2 was not applicable and that it had not
applied for
an additional store, nor had it been required to close
any store. MTN contended that it defended the claim on the basis that
Belet
was relying on a relocation as opposed to the removal or
addition of a new store and as a result, only clause 45 of the
agreement
was applicable. It argued that Belet should not have been
allowed to rely on clause 35.2 to support an argument that the
agreement
had been lawfully varied. This was inappropriate, so it was
argued, as Belet was bound by the concessions made by its counsel.
MTN argued that Belet should not have presented an argument in
conflict with the parties’ common understanding as to what
exactly the issues were in the trial and in support of this
proposition, relied on
Filta-Matrix
(Pty) Ltd v Freudenberg and Others
[1997] ZASCA 110
;
1998 (1) SA 606
(SCA) at 614B-C. In
Filta-Matrix
this Court held that ‘to allow a party, without special
circumstances, to resile from an agreement deliberately reached at
a
pre-trial conference would be to negate the object of Rule 37, which
is to limit issues and to curtail the scope of the litigation
(cf
Price NO v Allied-JBS
Building Society
1980 (3)
SA 874
(A) at 882D-H). If a party elects to limit the ambit of his
case, the election is usually binding.’
[52]
The court a quo considered and rejected MTN’s contentions in
these terms:
‘
[93]
Properly construed, clause 35.2 applied to the situation where a
dealer has successfully applied for
an additional dealer store or has
been required to close a Dealer Store. In these instances, the Dealer
will be required to complete
a new set of annexure documents in order
to incorporate or remove as the case may be, the dealer stores in
question from the Dealer
Agreement. On the evidence, once Belet
applied to relocate the Temba City store to Jubilee Mall, the Temba
City store was required
to close down and, in terms of clause 35.2, a
new set of annexures was required to remove it from the Dealer
Agreement and replace
it with the Jubilee Mall store. Thus, whether
the opening of the Jubilee Mall is regarded as a relocation or an
additional store,
clause 35.2 would have application. Accordingly, I
am unable to agree with MTN that Belet is disallowed from relying on
clause
35.2 of the Dealer Agreement because it did not originally
rely upon it.’
[53]
I agree with the reasoning of the court a quo. Clause 35.2 provides:
‘
Where the Dealer
has successfully applied for an additional Dealer Store or has been
required to close a Dealer Store, the Dealer
will be required to
complete a new set of Annexure documents in order to incorporate or
remove as the case may be, the Dealer Stores
in question from this
Dealer Agreement.’
[54]
Clause 45 provides:
‘
Alterations
No alterations,
consensual cancellation, variation of, or addition hereto shall be of
any force or effect unless reduced to writing
and signed by the duly
authorised representatives of both parties and attached to this
Agreement. Notwithstanding the above, the
Service Provider reserves
the right to amend the provisions of the Annexures “E1”,
“E2”, “B”
and “F” by furnishing
the Dealer with a sixty (60) day written notice to that effect.’
[55]
It is not a variation, as envisaged in clause 45, where the agreement
makes specific provision
(and prescribes its own procedures) for an
amendment by virtue of a change of circumstances. It appears from
clause 35.2 that the
parties foresaw that, during the currency of the
agreement, dealer stores could be removed from, or added to, the
ambit of the
agreement. They chose to make specific provision for the
procedure that would be followed in such a case. Belet would then be
required
to sign a new set of annexures, but there was no requirement
that MTN would have to countersign the annexures. If the addition or
removal of a store fell within clause 45, it would have been entirely
superfluous to require, in clause 35.2, that Belet would
be required
to sign new annexures.
[56]
Annexure ‘B’ to the agreement, headed Performance
Management, sets out the targets
which the dealer must meet in
respect of material targets (relating to the number of connections)
and so-called immaterial targets
relating to accounts and service.
Clause 1.1 of Annexure ‘B’ provides that “[U]pon
the addition or removal of
any Store from the Dealer, the targets and
thus this Annexure “B” will be adjusted accordingly.”
This is exactly
what happened in this case. Together with the amended
annexure “A”, Ms Allers of MTN sent Mr Letebele a new
annexure
“B” which reflected new targets for the Jubilee
Mall store.
[57]
Clause 35.2 presupposes that MTN would have already approved the
additional store. All that would
then be required to avoid disputes
is that Belet signified its assent by way of the amended annexures,
which were to be prepared
by MTN (and it would not have prepared
these documents if it had not in fact agreed to the
removal/addition).
[58]
MTN’s argument that Belet should not be allowed to rely on
clause 35.2 because its counsel
had, in interlocutory proceedings,
disavowed any reliance on it, should fail for the simple reason that
a submission by counsel,
or a witness, as to the meaning of a
contractual clause does not bind the party, or the court. The
interpretation of the agreement
is a matter of law and not
evidence.
[6]
A party is bound by
its pleadings. Belet in its amended particulars alleged that MTN had
agreed that Belet would close the Temba
City store and open the
Jubilee Mall store in its place.
[59]
The court a quo upheld Belet’s contention that in terms of
general contractual principles,
a party is not allowed to approbate
and reprobate and that MTN is precluded from now asserting that the
Jubilee Mall store did
not form part of the agreement.
[7]
MTN contended that the court a quo erred in this regard. It argued
that at no time during the trial was any evidence led that showed
that MTN insisted that the Jubilee Mall store was subject to the
agreement and none of the witnesses for Belet gave evidence that
the
parties had any verbal discussions or communications regarding a
written variation of the agreement.
[60]
On the undisputed facts the court a quo was correct in finding that
MTN, having relied on the
Jubilee Mall store being subject to the
agreement, could not now, when sued, contend that it was not. MTN
conducted two audits
of this store. It would, but for the provisions
of the agreement, have had no right to do so. It set performance
targets for this
store. But for the provisions of the agreement it
would have had no right to do so. After purportedly terminating the
agreement
it insisted that it was entitled to debar Belet from access
to the premises of the Jubilee Mall store (leased by Belet), to take
back all stock in the premises, to substitute itself as lessee and to
offer the store to a different dealer. But for the provisions
of the
agreement, it would have had no right to do so. I agree with Belet’s
contention that having so insisted that the Jubilee
Mall store was
subject to the agreement, notwithstanding that the agreement may not
have been properly varied, it is not open to
MTN to now assert that
there has been non-compliance with the non-variation clause. MTN’s
contention should therefore fail.
[61]
In any event, even if clause 45 was applicable, in my view there was
a proper written variation.
Clause 45, in its terms, does not
specifically require that an amendment to the ‘approved Dealer
Stores’ must happen
by way of a new annexure ‘A’ to
the agreement being drafted and signed by the parties. Any written
document, signed
by both parties, would therefore suffice. As was
held by this Court in
Spring
Forest Trading CC
,
[8]
a name appended to an email would constitute a signature.
[62]
It is common cause that Belet applied in writing during September
2010 for permission to relocate
the Temba City store to one at the
Jubilee Mall. On 1 November 2010, Belet accepted an offer to lease
from the landlord of the
Jubilee Mall subject to its approval by MTN
by 30 November 2010. On 10 November 2010 Mr Govender, the Account
Manager of MTN wrote
to Mr Kevin Reichert of MTN’s Site
Procurement and Storebuild referencing Belet’s discussion with
him and Ms Eleanor
Mitrovich, and requesting confirmation that:
·
‘
Store relocation has
been approved from Temba to Jubilee Mall
·
Confirm store build schedule
for Q1 occupation on 1 May 2011.’
Mr
Reichert responded on 11 November 2010 stating: ‘we have the
motivation and El [Mitrovich] has signed off the feasibility
for this
relocation.’
[63]
Mr Letebele responded seeking confirmation that ‘
this would
be planned for beneficial occupation on 1
st
April, and trading by 1
st
May please’.
Mr Govender forwarded this email to Mr Reichert and Mr Kapp of MTN.
On 17 November 2010 Mr Govender sent an email to Mr Letebele
stating
‘
please see attachment for Jubilee Mall approval letter. As
per discussion with Kevin [Reichert] yesterday, dates have been
confirmed
1
st
April 2011.’
The
attachment consisting of a letter addressed to ‘
To whom it
may concern’
, is headed ‘
Re: Belet Industries
Application for a store in the upcoming new Jubilee Mall in 2011’.
It stated that:
‘
MTN SP (Pty)
Limited hereby confirms Beni Letebele of Belet Industries as the
preferred dealer for an application of a dealership
store in the
upcoming Jubilee Market in 2011. This would be a relocation of Temba
City store to new store in Jubilee Mall.’
It
is signed by Mr Govender and Mr Anton Kapp of MTN.
[64]
I agree with counsel for Belet’s submission that these emails,
in context, constitute an
agreement in writing that the Temba City
store would be replaced by the Jubilee Mall store and therefore, to
the extent that clause
45 applies, Belet’s application for
permission and MTN’s emails of 10 November 2010 and 17 November
2010 constitute
a variation in writing, substituting the Temba City
store with the Jubilee Mall store.
Quantum
of Belet’s claim
[65]
The court a quo, relying on the uncontested evidence of Ms Wood,
Belet’s expert, found
that Belet had suffered damages and
granted an order for the amount of R5 849 789 and the
second amount of R5 581 937
plus costs plus interest at the
applicable rate. It also found that MTN adduced no evidence that, but
for its repudiation of the
agreement, it would have exercised its
rights in terms of clause 39.1 and when it would have done so. The
court a quo held that
clause 39.1 was therefore inapplicable.
[66]
MTN argued that since Belet was unable to prove its variation as
pleaded and inasmuch as the
evidence relating to quantum could only
relate to the Mabopane Store, Belet’s claim should fail. In
addition, it argued that
the court a quo failed to take into account
material aspects of Belet’s claim and the evidence of Ms Wood.
MTN alleged that
Ms Wood had determined the value of Belet’s
business in 2015 in terms of clause 33.2.3 of the agreement. It
argued that it
is entirely inapposite to use the provisions of clause
33.2.3 to determine the damages suffered by Belet as they only apply
to
determine the purchase price of the business in the event of its
disposal. In view of the findings I have made in relation to whether
the Jubilee Mall store was subject of the agreement, it is
unnecessary to deal with MTN’s argument. In any event, the
quantum
of Belet’s claim was agreed during the course of the
trial between Ms Wood, Belet’s expert and Prof Wainer, MTN’s
expert.
Costs
[67]
The court a quo upheld Belet’s claim and imposed a punitive
costs order on MTN. The scale
of the costs order made by the court a
quo is not placed in issue by MTN and since the determination of
costs involves the exercise
of discretion by the trial court there is
no basis for this Court to interfere with it in the absence of
evidence of misdirection.
[68]
With regard to the costs of appeal it was submitted by Belet that MTN
should be ordered to pay
the costs, on an attorney and client scale,
necessitated by the inclusion in the appeal record, documents which
were unnecessary
for the determination of the appeal. In this appeal
the Court was furnished with a record comprising 13 volumes running
into some
2500 pages and an additional supplementary volume. In
consequence this Court directed the Registrar to send a note to the
parties’
legal representatives informing them that at the
hearing of the appeal, they would be expected to furnish reasons why
they should
not be penalised in so far as the recovery of their fees
is concerned for non-compliance with the Rules of this Court
regarding
the record of the appeal and a core bundle. Their attention
was drawn to the judgment of this Court in
Van Aardt v Galway
[2011] ZASCA 201
;
2012 (2) SA 312
(SCA);
[2012] 2 All SA 78
(SCA). This Court held at para 36:
‘
[36]
The practice note requires a statement of counsel’s view, in
the form of a list, of those parts
of the record that need to be
considered in order to decide the case. The fact that his or her
opponent may disagree is neither
here nor there. That will emerge
from the opponent’s practice note. In addition the list is to
be confined to those parts
of the record that are ‘necessary’
for that purpose. Documents and evidence are not to be included in
the list on the
off chance that someone might wish to refer to them.
The list should include only those parts of the record that counsel
is likely
to refer to either in support for the argument, or for
rebuttal, or to highlight flaws in the judgment appealed against. It
is
inappropriate to include material on the basis that if a
particular question is asked, or explanation is sought, it may be
necessary
to refer to it. What is required is a list setting out the
portions of the pleadings, the documents and the particular passages
in the record of evidence that counsel believes are necessary to
determine the case. The list must identify by reference to volumes
and pages where those parts of the record are to be found. Lastly, it
would be a salutary practice for counsel to prepare the list
in
positive terms, identifying the parts of the record necessary for the
determination of the appeal, rather than, as seems frequently
to be
the case, identifying portions that need not be read. The list is
supposed to assist the judges in identifying what needs
to be read.
It should not be treated as the commencement of a process of
elimination of unnecessary material.’
[69]
MTN ignored the rules of this Court, relating to ‘the
preparation of the records by attorneys
and the practice directive
relating to the filing of a practice note by counsel specifying the
portions of record that counsel
regards as necessary to be read.’
The list in MTN’s practice note does not identify by reference
to volumes and pages
where those parts of the record are to be found.
The explanation proffered by MTN is that the parties were unable to
agree on the
documents to be included in the core bundle.
[70]
Belet alleged that it had repeatedly drawn to MTN’s attention
that a number of documents
included in the record should be excluded
as they were not necessary for the determination of the appeal and
that MTN ignored the
suggestion. In its practice note Belet
identified those portions of the record that were needed in order to
decide the appeal.
Belet accordingly submitted that MTN should be
ordered to pay the costs, on an attorney and client scale,
necessitated by the inclusion
in the appeal record of these
unnecessary documents.
[71]
It is clear from the practice note prepared by Belet that it was
unnecessary for this Court to
read approximately 30 percent of the
record. In my view, MTN should be ordered to pay the costs, on an
attorney and client scale,
occasioned by the inclusion in the appeal
record of 30 percent of the record.
[72]
The following order is made:
(a)
The appeal is dismissed with costs;
(b)
The appellant is ordered to pay 30 percent of the costs incurred in
the preparation, perusal
and copying of the record on an attorney and
client scale.
_____________
D
H Zondi
Judge
of Appeal
Appearances:
For
appellant: T
Motau SC (with him B Maselle)
Instructed
by:
Macrobert Attorneys, Pretoria
Phatshoane Henney
Attorneys, Bloemfontein
For
respondent:
A de Kok SC
Instructed
by:
Cheadle Thompson & Haysom Inc, Johannesburg
McIntyre van der Post,
Bloemfontein
[1]
International
Business Machines South Africa (Pty) Ltd v Commissioner for Customs
and Excise
[1985] ZASCA 87
;
[1985] 2 ALL SA 596
(A) at 609.
[2]
Victoria Falls
and Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd
1915
AD 1
at 22.
[3]
Belet
Industries CC t/a Belet Cellular v MTN Service Provider (Pty) Ltd
[2014]
ZASCA 181
; para 10-12.
[4]
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
[2013]
ZASCA 176
;
2014 (2) SA 494
(SCA) para 12;
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) para 29-40;
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012 (4) SA 593
(SCA) para 18; and
Norvatis
v Maphil
[2015] ZASCA 111
;
2016 (1) SA 518
(SCA) para 27.
[5]
First National
Bank of Southern Africa Ltd v Rosenblum
[2001]
4 All SA 355
(A) para 6.
[6]
KPMG Chartered
Accountants (SA) v Securefin Ltd
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) para 39-40.
[7]
Telcordia
Technologies Inc v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) para 12.
[8]
Spring Forest
Trading CC v Wilberry
[2014] ZASCA 178
;
2015 (2) SA 118
(SCA) paras 18 and 25-27.