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[2013] ZASCA 194
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Fourier Approach (PTY) v West (921/2012) [2013] ZASCA 194 (2 December 2013)
REPORTABLE
THE SUPREME COURT
OF APPEAL
OF
SOUTH AFRICA
JUDGMENT
Case No:
921/2012
Date: 02 December 2013
In
the matter between:
FOURIER APPROACH
(PTY)
...................................................
Appellant
and
LYNN
MARGARET
WEST
.....................................................
Respondent
Neutral
citation:
Fourier Approach v West
(921/12)
[2013] ZASCA
194
(2 December 2013)
Coram:
Nugent,
Shongwe, Leach and Willis JJA and Meyer AJA
Heard:
20
November 2013
Delivered:
02
December 2013
Summary: Interpretation of a contract ─ meaning
of phrase ‘sales realised’ ─ not including interest
on sale
price. Tender of payment ─ not discharging obligation
to pay.
O R D E R
On appeal from:
North Gauteng High Court,
Pretoria (Louw, Tolmay and Ranchod JJ sitting as court of appeal):
1 The appeal succeeds with costs.
2 The order of the Full Court is set aside and is
replaced with the following:
‘(a) The appeal succeeds with costs.
(b) The order of the court of first instance is set
aside and is replaced with the following:
“
(i) There will be judgment in favour of the
plaintiff against the defendant in the sum of R267 000 together
with interest thereon
calculated at the legal rate from 1 March 2008
to date of payment.
(ii) The defendant is to pay the plaintiff’s
costs.”’
J U D G M E N T
LEACH JA (NUGENT, SHONGWE AND
WILLIS JJA AND MEYER AJA CONCURRING)
[1] In February 2003 the appellant, a company that
carries on business in the information technology sector, employed
the respondent
as a sales representative. The respondent’s
contract of employment, the terms of which were reduced to writing,
provided
for her to be remunerated not only by way of a monthly
salary but also by way of commission (the precise terms of the
agreement
as to commission will be dealt with more fully below). The
respondent was thereafter the effective cause of the appellant
selling
a software system to a company referred to as ‘ACMB’
but, unfortunately, she and the appellant could not agree on the
amount of commission she had become entitled to receive as a result.
[2] Eventually, the respondent instituted action in
the North Gauteng High Court claiming payment of a substantial sum
which she
alleged was still due to her as commission on the sale. The
merits of her claim fell to be determined by an interpretation of the
provisions of the employment agreement relating to commission, and
the parties agreed that this should be done by way of a set
of agreed
facts set out in a document headed ‘Stated Case’.
[3] As appears from the agreed facts, the software
sale agreement giving rise to the dispute was concluded in February
2004.
It was, at the time, the appellant’s standard practice
to enter into written agreements with its clients in which provision
was made for invoices to be paid within 30 days, after which interest
would be payable at a rate of prime plus 2% on all amounts
overdue.
In the case of the sale to ACMB, however, the appellant for the first
time agreed to the contract price (R13.3 million)
being paid in
instalments. These were set out in a schedule; it provided for
payment of an initial sum of R2 660 000 followed
by tranches of
R2 953 141,18 on 31 January 2005, R3 278 587,53
on 31 January 2006 and R3 639 899,18
on 31 January 2007 and
a final payment of R4 041 028,63 on 31 January 2008.
Agreement was further reached on various
amounts of interest to be
paid monthly until the total indebtedness was discharged. Those
monthly sums of interest, too, were set
out in the schedule.
[4] As a result the total amount to be paid under the
agreement was increased from R13.3 million to R16 572 656,52
of
which R3 272 565,20 related to interest.
The
sale duly went ahead but, although various payments were made, they
did not accord precisely with those set out in the schedule.
At the
end of the day, final payment was only made on 29 February 2008 with
the total amount of interest paid by then having increased
to
R3 573 569,50.
[5] The dispute between the parties relates to how the
respondent’s commission is to be calculated in the light of
these facts.
In this regard each side placed a differing
interpretation upon the provisions of clause 6.3 of the respondent’s
written
employment contract which provided that (in addition to a
monthly salary):
‘
The (respondent) will
also be entitled to be paid an amount of 5% on sales realised,
payable in two payments namely 2.5% at the
formalisation of the
contract and the other 2.5% at the final payment on the contract.
’
[6] It is common cause that the respondent became
entitled to a first payment of 2.5% of the sale price of R13.3
million (ie R332 500)
when the sale was formalised between the
appellant and ACMB. It is also common cause not only that she was
paid that sum but that
she received a further sum of R65 500 in
or about March 2004 which is to be set off against the further amount
of commission
she became entitled to receive on the sale. The
dispute between the parties relates to the appellant’s
contention that the
respondent only became entitled to a second
payment of R332 500 when final payment under the sale was made
on 29 February
2008, whilst the respondent contends that she became
entitled not only to that sum but, also, to 5% of the interest of
R3 573 569,50
ACMB paid to the appellant.
[7] At first instance, the matter came before Polson
AJ, who upheld the interpretation advanced by the respondent and
found in
her favour. The appellant appealed unsuccessfully to a Full
Court of the North Gauteng High Court. While that court again upheld
the respondent’s interpretation, it felt that the order of the
court of first instance needed to be clarified. It therefore
set
aside the original order and replaced it with an order granting
judgment in the respondent’s favour in the sum of R445 678,48
(being the sum it is common cause would have been due as commission
should the respondent’s interpretation of the agreement
be
correct, less the payment of R65 500) together with interest and
costs. It is against this order that the appellant appeals
to this
court with special leave.
[8] The issue of interpretation may be dealt with
simply. The Full Court held that it could ‘only find that sales
realised
included everything received by the appellant until the date
of final payment’ including interest. This appears to have been
the same conclusion of the court of first instance. It is a
conclusion which is, however, clearly wrong.
[9] The matter turns on the interpretation to be placed
on the meaning of the phrase ‘on sales realised’ in the
clause
in question. It is trite that those words should be afforded
their ordinary and grammatical meaning unless it would lead to an
absurdity, repugnancy or inconsistency with the rest of the contract.
[10] The word ‘realised’ is the past tense
of the verb ‘realise’ which, in the context of a sale,
bears
the ordinary meaning of ‘sell for’ or ‘convert
(an asset) into cash’.
1
In ordinary parlance, an asset is therefore realised when it is sold
and paid for. This is clearly what was envisaged by clause
6.3 which
provided for a percentage of the sales realised to be
paid
as commission ‘at the formalisation of the contract’ and
the balance of such commission to be paid ‘at the
final payment
on the contract’.
[11] On the other hand, interest connotes the ‘money
paid for the use of money lent or for delaying the repayment of a
debt’
2
or ‘money paid for the use of credit or borrowed money’.
3
In the context of a sale interest therefore connotes what is paid by
the purchaser for the benefit of being extended credit in
respect of
the purchase price
[12] Bearing these concepts in mind, interest cannot be
regarded as being part of a ‘sale realised’. In the
present
case, the sale realised the price of R13.3 million. It did
not realise interest. The interest the appellant received from ACMB
was a consideration for not insisting upon payment on conclusion of
the sale and extending credit.
[13] Accordingly, the finding of both the court of first
instance and the Full Court cannot stand. As the respondent thus
failed
to prove the interpretation which she placed upon clause 6.3
of the employment agreement, she failed to prove that she was
entitled
to receive a second tranche of commission greater than
R332 500. And as she had already received the amount of R65 500
paid in March 2004, when ACMB made its final payment on 29 February
2008, the appellant became liable to pay her the difference
between
those two sums (ie R267 000) as commission.
[14] Counsel for the appellant suggested in his heads of
argument that in the event of this court reaching that conclusion,
the
order of the court a quo should be set aside and substituted with
an order allowing the appeal from the court of first instance
and
substituting an order dismissing the respondent’s claim with
costs. This was based on it being common cause that when
an amended
plea to the respondent’s claim was filed in the high court on 3
April 2009, the appellant had not only admitted
being liable for
commission in the sum of R266 000 but had gone on to plead:
‘
The (appellant) hereby
formerly tenders payment to the (respondent) in the amount of
R266 000 in accordance with a formal tender
in terms of the
provisions of Rule 34 which shall be filed simultaneously herewith
.’
[15] Presumably this tender was an attempt to shield the
appellant from further costs, although whether it would have done so
might
be a matter of some debate given the provisions of Rule 36(10)
of the Uniform rules of court (this is an issue unnecessary to
discuss
any further). However the fact that an offer to settle was
made did not discharge the debt itself and, indeed, so we were
informed
by counsel, no further payment in respect of commission has
ever been made. That being so, the amount of commission that was due
on 1 March 2008 remains unpaid and, despite the appellant’s
tender, was still due when the matter came before the court of
first
instance. Judgment in respect of that amount ought to have been
entered in the respondent’s favour.
[16] Moreover, the amount tendered (R266 000) was
of course R1000 less than the amount in fact due. This was the result
of
the appellant having made an arithmetic error by deducting a sum
of R66 500 in respect of the payment of March 2004 whereas
it
had in fact been R65 500. In addition, counsel were agreed,
correctly, that interest on the amount of R267 000 became
due on
1 March 2008 after ACMB’s final payment, and the amount
tendered made no allowance for the interest that had accrued.
There
is thus no reason for the respondent not to have been awarded both
interest and costs when the court of first instance gave
judgment.
[17] There is no reason why costs should not follow the
event, and the appellant is entitled to its costs both in the court a
quo
and on appeal.
[18] In these circumstances, the appeal must succeed,
the order of the court a quo set aside, and the order of the court of
first
instance altered to that which ought to have been made by the
Full Court on appeal.
[19] The following order will issue:
1 The appeal succeeds with costs.
2 The order of the Full Court is set aside and is
replaced with the following:
‘(a) The appeal succeeds with costs.
(b) The order of the court of first instance is set
aside and is replaced with the following:
“
(i) There will be judgment in favour of the
plaintiff against the defendant in the sum of R267 000 together
with interest thereon
calculated at the legal rate from 1 March 2008
to date of payment.
(ii) The defendant is to pay the plaintiff’s
costs.”’
L E Leach
Judge of Appeal
APPEARANCES:
For Appellant: P J Vermeulen
Instructed by:
Philip Coetzer Inc, Pretoria
Naudes Attorneys, Bloemfontein
For Respondent: A W Pullinger
Instructed by:
Bernard Tanner & Associates,
c/o Weavind & Weavind Inc, Pretoria
Claude Reid Inc, Bloemfontein
THE SUPREME
COURT OF APPEAL
OF SOUTH
AFRICA
MEDIA SUMMARY –
JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL
From:
The
Registrar, Supreme Court of Appeal
Date: 2 December
2013
Status:
Immediate
Please note that
the media summary is intended for the benefit of the media and does
not form part of the judgment of the Supreme
Court of Appeal
Neutral citation:
Fourier Approach v West
(921/12)
[2013] ZASCA 194
(2 December 2013)
The appellant is the former employer of the respondent.
Under the respondent’s contract of employment, the appellant
was obliged
to pay her commission at an agreed rate ‘on sales
realised’ payable in two instalments: the first on
formalisation
of a contract of sale and the second on final payment
on a sale.
The respondent acted on the appellant’s behalf in
concluding a sale at a price of R13.3 million. A dispute arose
between them
how the payment of her second tranche of commission was
to be calculated in terms of her employment contract. The respondent
contended
that the amount was to be calculated with reference to the
interest that had been payable by the purchaser on the contract
price;
the appellant contended that regard was to be had solely to
the sale price and not to any interest.
The respondent’s contention was accepted both by a
High Court and by a Full Court of the High Court, on appeal. However
the
Supreme Court of Appeal today held that the meaning of the phrase
‘on sales realised’ clearly did not include interest.
The
appeal therefore succeeded and the appellant was ordered to pay
outstanding commission calculated without reference to the
interest
that it had been paid under the sale to a third party.
---ends---
1
See The Concise Oxford English Dictionary (12 ed).
2
Concise Oxford Dictionary
op cit.
3
Collins Dictionary of the English Language (2010).