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[2016] ZAECPEHC 63
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Adel Fresh Fruit CC v Producer Ally (Pty) Ltd (4111/2014) [2016] ZAECPEHC 63 (27 September 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
Case
No.: 4111/2014
Date
Heard:18 August 2016
Date
Delivered: 27 September 2016
In
the matter between:
ADEL
FRESH FRUIT
CC
.......................................................................................................
Applicant
And
PRODUCER
ALLY (PTY)
LTD
...........................................................................................
Respondent
JUDGMENT
EKSTEEN
J:
[1]
The applicant (defendant) seeks
leave to amend its plea to the respondent’s (plaintiff’s)
Particulars of Claim in an
action instituted by the respondent. The
respondent opposes the application and has raised numerous objections
to the proposed
amendment.
[2]
The respondent, which operates as
freight forwarding agent, sued the applicant, an exporter of fresh
fruit, for monies allegedly
due owing and payable in respect of
services rendered to the applicant during 2014 and for certain
disbursements and expenses incurred
on the applicant’s behalf.
The respondent’s claim is based on a written contract comprised
of an application
for credit, which incorporated the respondent’s
standard terms and conditions of business, submitted by the applicant
which
was accepted by the respondent.
[3]
The applicant entered an appearance
to defend the action and duly filed a plea and a claim in
reconvention. Both the plea
and the claim in reconvention were
met by an exception which was upheld (in both respects) by Goosen J
on 11 November 2015.
Goosen J granted the applicant leave to
file a notice of intention to amend and a new claim in reconvention,
if so advised.
The applicant chose to file a notice of
intention to amend its plea which now forms the subject of the
present application.
Original
pleadings
[4]
It is necessary to record first the
material portions of the original pleading to which exception was
taken. The contract relied
upon by the respondent is pleaded thus in
paragraph 4, 5 and 6 of the respondent’s Particulars of Claim:
“
4.
On or about
22 February 2009
and at or near Johannesburg, the Defendant represented by Nadir
Zaptia, submitted an application for credit facilities to the
Plaintiff, which document incorporates the Plaintiff’s Standard
Terms and Conditions of business, a copy of which is annexed
hereto
marked
Annexure “
POC2”
.
5.
The Plaintiff subsequently accepted the application for credit
facilities, and the parties accordingly agreed to conduct their
business subject to such Standard Terms and Conditions of business of
the Plaintiff (herein referred to as “the Standard
Terms and
Conditions”).
6.
The Standard Terms and Conditions included
inter
alia
the following terms: …”
[5]
In paragraph 6.1 to 6.9 of the
respondent’s Particulars of Claim the respondent sets out
paraphrases of a number of the express
terms contained in the
standard terms and conditions, contained in annexure “POC2”
to the Particulars of Claim, upon
which reliance is placed for
purposes of the action. I shall revert to these specific terms,
to the extent necessary, later
herein.
[6]
The applicant originally pleaded as
follows to paragraphs 4, 5 and 6 of the respondent’s
Particulars of Claim:
‘
AD
PARAGRAPH 4
4.1
Insofar as annexure “POC2” constitutes a true and correct
copy of the Application for Credit Facilities, the contents
of this
paragraph are admitted.
4.2
Save as aforesaid, each and every allegation contained in this
paragraph is denied as if specifically traversed.
5.
AD PARAGRAPH 5
The
contents of this paragraph are admitted.
6.
AD PARAGRAPH 6 (6.1 to 6.9)
6.1
Insofar as the Plaintiff has correctly set out and/or described the
Standard Terms and Conditions, the contents of these paragraphs
are
admitted.
6.2
Save as aforesaid, each and every allegation contained in these
paragraphs is denied as if specifically traversed.’
[7]
I pause to record that the
application for credit annexed to the Particulars of Claim and to
which reference is made in paragraph
4 of the Particulars of Claim is
a ten page document numbered consecutively as “1 of 10”
to “10 of 10”.
Pages 1 and 2 constitutes a pro
forma application for credit which was completed under the hand of
one Nadir Zaptia (Zaptia) who
described himself as the “managing
director” of applicant. The standard terms and conditions
(herein referred
to as “the Standard terms”) are printed
on pages 3 to 10, however, each page of the ten page bundle bares the
heading
“credit application and standard terms and conditions”
in large bold print. In the ultimate paragraph of page
2 of the
document, immediately above the signature of Zaptia the document
records:
“…
The
customer acknowledges having read and understood the Standard Terms
and Conditions in this document and agrees that such terms
and
conditions shall be valid and are deemed to be binding in respect of
all transactions entered into between the customer and
the company …”
[8]
Each page of the ten page document
also bares the handwritten initials “NZ” at the foot of
the page.
[9]
As recorded earlier the applicant
also entered a claim in reconvention to which the respondent has
successfully excepted. I think
that the formulation of the original
claim is nevertheless material to the respondent’s first
objection (against the withdrawal
of an admission). I shall
revert later to the significance thereof. Suffice it for
present purposes to record that
the original claim in reconvention
was founded on an alleged breach of contract. In paragraph 2 of
the claim in reconvention
the applicant pleaded the contract upon
which reliance was placed for purposes of the claim in reconvention
thus:
‘
2.
During or about February 2009, the Plaintiff and Defendant entered
into a written agreement, a copy of which is annexed hereto
marked
“
CC1”
(“the agreements”).’
[10]
It is common cause that annexure
“CC1” was the self-same “application for credit and
standard terms of conditions”,
comprised of ten pages which was
annexed to the Particulars of Claim as annexure “POC2”.
[11]
Against this background the
applicant filed its notice of intention to amend after the said
exception had been upheld.
Proposed
amendment to paragraph 5 of the applicant’s plea
[12]
In respect of paragraph 5 the
applicant seeks to delete the express admission relating to the terms
of the contract and to replace
the entire paragraph 5 with the
following:
‘
5.
5.1
Save for admitting that the Plaintiff accepted the application for
credit facilities, the remaining contents of this paragraph
are
denied for the following reasons,
inter
alia
:-
5.1.1
Prior to receipt of the application for credit facilities (“the
credit application”), the Defendant
had decided to try
utilising the freight forwarding services offered by the Plaintiff;
5.1.2
In furtherance of this the Defendant sought and was given the credit
application in blank format by the
Plaintiff to complete and send
back to the Plaintiff;
5.1.3
The Defendant’s representative, being Nadir Zaptia (“Zaptia”),
filled in the information
sought by the Plaintiff on the credit
application and submitted same to the Plaintiff;
5.1.4
Zaptia did not read pages 3 to 10 of the credit application and only
read and completed pages 1 and 2 thereof
which he believed to be
relevant and material;
5.1.5
Zaptia did not comprehend or understand the contents of pages 3 to 10
which he believed to be irrelevant
as he intended only to apply to
the Plaintiff for credit facilities and in so doing to open an
account for the Defendant;
5.1.6
The Plaintiff did nothing to alert Zaptia and/or the Defendant to the
existence or alleged importance of
the contents of pages 3 to 10 of
the credit application;
5.1.7
As such, the Defendant pleads that no consensus was reached on the
standard terms and conditions between
the parties and the Plaintiff
cannot enforce same against the Defendant;
5.1.8
Once advised that the Plaintiff had opened an account and extended
credit facilities to the Defendant, trading
relations commenced
between the parties and endured until mid 2011;
5.1.9
At this time the Defendant became unhappy with the Plaintiff’s
lack of proper service and due to losses
and reputational damage
suffered by the Defendant in respect of its customers due to the
Plaintiff’s shortcomings, the Defendant
stopped using the
Plaintiff’s services;
5.1.10
Approximately 3 to 4 years passed before the Defendant, during or
about mid 2013, decided to try the Plaintiff’s
services once
more;
5.1.11
The Defendant, represented again by Zaptia, approached the Plaintiff
to quote on shipping a consignment of fresh produce
which the
Plaintiff did and the Defendant duly accepted;
5.1.12
Trading relations then commenced once more between the parties
de
novo
;
5.1.13
At this point at or during about mid 2013 the Plaintiff did not ask
the Defendant to sign a credit application;
5.1.14
Instead, in furtherance of its day to day business the Defendant
obtained orders from its customers overseas in Europe
and the Arab
States for fresh produce to be sold to them;
5.1.15
The Defendant procured supplies of such fresh produce from suppliers
in South Africa and when same was ready for despatch
the Defendant
contacted the Plaintiff to handle the forwarding and logistics of
moving the fruit satisfactorily from the Defendant’s
supplier
to its customer;
5.1.16
Prior to engaging the Plaintiff’s services for any given
consignment of produce the Defendant obtained a quotation
from the
Plaintiff for its charges in respect thereof;
5.1.17
If acceptable to the Defendant the Plaintiff provided its freight
forwarding service and rendered an invoice followed
by a monthly
statement to the Defendant which the Defendant paid if the produce
arrived satisfactorily within 30 days of statement;
5.1.18
It was an express, alternatively tacit alternatively implied term of
the commercial relationship between the Plaintiff
and the Defendant
that should any consignment of fresh produce handled by the Plaintiff
not arrive at its destination timeously
or in satisfactory condition,
the Defendant would not effect payment of the costs levied in
shipping such container by the Plaintiff;
5.1.19
The commercial relationship between the Plaintiff and the Defendant
proceeded on the above basis continuously from mid 2013
until late in
2014 when it broke down due once more to the Plaintiff’s
failure to provide a satisfactory service to the Defendant.
5.2
As such, the Defendant pleads that the standard terms and conditions,
insofar as this Honourable Court might find that they
were agreed to
between the parties during 2009, such standard terms and conditions
only governed dealings between the parties up
until mid 2011
whereupon they ceased to be of any force and effect once the
Defendant stopped utilising the Plaintiff’s services.
5.3
The standard terms and conditions were novated and replaced by the
aforesaid oral terms and conditions referred to in paragraph
5.1.15
to 5.1.18 above when the parties began dealing with each other once
again after the lapse of a period fo approximately 3-4
years.’
First
objection
[13]
The respondent objects to the
proposed amendment of the plea to paragraph 5 of the Particulars of
Claim in that the applicant seeks
to withdraw an admission already
made. The respondent records that it does not consent to the
withdrawal of the admission
and accordingly objects to the proposed
withdrawal which it contends is irregular. In the circumstances
the applicant is
required to apply on oath for the amendment.
Whist the objection is directed at the entire paragraph 5, it strikes
in essence
at paragraph 5.1.1 to 5.1.7 only.
[14]
The general approach to applications
to amend was set out in
Whittaker v
Roos; Morent v Roos
1911 TPD 1092
at 1102-1103 where Wessels J remarked:
“
This
court has the greatest latitude in granting amendments, and it is
very necessary that it should have. The object of the
court is
to do justice between the parties. It is not a game that we are
playing, in which, if some mistake is made, the
forfeit is claimed.
We are here for the purpose of seeing that we have a true account of
what actually took place, and we
are not going to give a decision
upon what we know to be wrong facts. It is presumed that when a
defendant pleads to a declaration
he knows what he is doing, and
that, when there is a certain allegation in the declaration, he knows
that he ought to deny it,
and that, if he does not do so, he is taken
to admit it. But we all know, at the same time, that mistakes
are made in pleadings,
and it would be a very grave injustice, if for
a slip of the pen, or error of judgment, or the misreading of a
paragraph in pleadings
by counsel, litigants were to be mulcted in
heavy costs. That would be a gross scandal. Therefore,
the court will not
look to technicalities, but we’ll see what
the real position is between the parties.”
(See
also
South African Steel Equipment Co
(Pty) Ltd & Ors v Lurelk (Pty) Ltd
1951 (4) SA 167
(T); and
Zarug
v Parvathie NO
1962 (3) SA 872
(D) at
876H-877A.) It is apparent from the reasoning in these cases
that amendments would generally be granted in order
to ventilate the
real issue between the parties.
[15]
The present matter, however,
involves the withdrawal of an admission explicitly made in the
pleadings. An admission made in
pleadings ordinarily operates
to eliminate the admitted fact from the issues to be tried. Its
effect is to bind the party
making it and he or she is bound to the
extent of its inevitable consequences or necessary implications
unless these are specifically
stated to be denied. (Compare
for example
Beck’s Theory and
Principles of Pleading in Civil Actions
(6
th
ed) page 79.) The withdrawal of an admission therefore involves
a change of stance on the part of the party seeking to amend,
and in
the present instance a very significant change of stance. It is
for this reason that an amendment to a pleading involving
the
withdrawal of an admission is generally more difficult to achieve and
therefore requires a full explanation to convince the
court of the
bona fide
s
of the party seeking the amendment. (Compare
Herbstein
and Van Winsen: The Civil Practice of the High Court of South
Africa
(5
th
ed) vol 1 page 683.) The Appellate Division of the Supreme
Court (now the Supreme Court of Appeal) explained the approach
in
Bellairs v Hodnett and Another
1978 (1) SA 1109
(A) at 1150F-G:
“
The
Court's power, in its discretion to allow amendment of pleadings at
any stage of the proceedings, even on appeal, is undoubted.
…
But, as it has frequently been stated, an amendment cannot be had
merely for the asking. This is equally, if not especially,
true of a
proposed amendment which involves the withdrawal of an admission
in such cases the Court will generally require
to have before it a
satisfactory explanation of the circumstances in which the admission
was made and the reasons for now seeking
to withdraw it.”
(See
also
Frenkel,
Wise & Co Ltd v Cuthbert, Cuthbert v Frenkel, Wise & Co Ltd
1946 CPD 735
;
Jennings
v Parag
1955 (1) SA 290
(T);
Fleet
Motors (Pty) Ltd v Epsom Motors (Pty) Ltd
1960
(3) SA 401
(D);
Watersmeet
(Pty) Ltd v De Kock
1960 (4) SA 734
(E);
Zarug
v
Parvathie NO
supra
;
South British Insurance Co Ltd v Gibson
1963
(1) SA 289
(D) at 293-294A and
JR
Janisch (Pty) Ltd v WM Spilhaus and Co (WP)(Pty) Ltd
1992
(1) SA 167
(C) at 170D-171H.) It seems to me therefore that
where it is contended that the admission was made in error, which
would
usually be the case, the applicant will be required to make out
a case, on affidavit, sufficient for the court to understand the
circumstances that gave rise to the erroneous admission and the
reason for now wanting to withdraw it so as to satisfy itself of
the
bona fides
of the application.
[16]
Prior to the filing of the notice of
intention to amend it always was common cause that the parties
contracted on the basis and
in terms of the standard terms as set out
in annexure “POC2” to the Particulars of Claim.
That much was expressly
admitted in the original pleading and indeed
the applicant itself relied upon a contract in those terms for
purposes of the original
claim in reconvention.
[17]
At paragraph 23 of the founding
papers Mahfud Zaptia (herein referred to as “Mahfud”) who
describes himself as the “managing
member” of the
applicant purports to explain the allegedly erroneous admission in
paragraph 5 of the Particulars of Claim.
He states:
“
23.
This admission was regrettably a simple mistake on the part of the
Defendant. It arose because the Defendant noted that
the
company had signed page 2 of the credit application document.
Seeing this Defendant conceded that the Plaintiff had accepted
the
application for credit facilities.”
[18]
It is immediately apparent that
Mahfud is somewhat coy in his explanation. The applicant is a
close corporation. He
does not take the court into his
confidence as to who, on behalf of the applicant, is alleged to have
made the concession or who
made the simple mistake. It is,
however, apparent, that the applicant’s case in its founding
papers is that it was
the applicant who had made the mistake.
[19]
In opposing the application for an
amendment the respondent challenged the
bona
fides
of the explanation and alluded
inter alia
to
the counter claim instituted by the defendant reliant on the same
contract. Faced with this challenge the applicant contends
in
reply that it was in fact not the applicant who had made the mistake,
but its erstwhile attorneys who had done so in pleading
the
admission. Leaving aside the fact that the explanation in the
replying papers is wholly destructive of the explanation
given in the
founding affidavit, the applicant makes no attempt to explain the
circumstances under which the error on the part
of the attorneys
occurred. Mahfud does not take the court into his confidence as
to who instructed the applicant’s
erstwhile attorneys and what
the instructions were so as to enable the court to understand how the
error came about. In respect
of the claim in reconvention
Mahfud contends that neither Zaptia nor himself instructed their
erstwhile attorneys to base the defendant’s
counter claim on
the standard terms. The reasons as to why this occurred,
he states, are within the knowledge of the
applicant’s previous
attorneys. Again, no explanation is given as to who instructed
the previous attorneys in respect
of the claim in reconvention nor
what the instructions to the attorneys were in respect of the claim
in reconvention. No
supporting affidavit from a representative
of the erstwhile attorneys is attached and Mahfud declares that he
has not sought to
obtain an affidavit from them as the applicant is
in dispute with its erstwhile attorneys in respect of various
matters.
If indeed the admission occurred due to a
bona
fide
error or an innocent
misunderstanding it is difficult to understand why Mahfud should
assume, without more, that the applicant’s
erstwhile attorneys,
who are officers of the court, would refuse to explain how the error
occurred simply because they are in dispute
about other matters.
[20]
Rather than to explain the
circumstances under which the admission came to be made Mahfud seeks
to argue, with reference to the
unamended pleadings that it is
obvious that the applicant did not intend to admit that the standard
terms and conditions became
binding on the parties. The
argument is set out in the founding affidavit thus:
‘
24.
The Defendant certainly did not intend to admit that all of the
standard terms and conditions became binding upon the parties.
25.
This is clear from paragraph 6 of the Defendant’s plea (as
unamended) and in particular clause 6.2 where the Defendant
specifically denies as if specifically traversed each and every
allegation in paragraph 6. It needs to be noted that all
of the
allegations pleaded by the Plaintiff in paragraph 6 of its
particulars of claim are those terms and conditions the Plaintiff
has
selected from the so-called “standard terms and conditions”
it seeks to rely on. These terms and conditions
are
emphatically denied by the Defendant in the very next paragraph of
its plea (as unamended). The contradiction is self-evident.
All the Defendant is seeking to do with its amendment is resolve the
contradiction and plead the true position.’
[21]
Upon careful scrutiny of the
explanation I think that the argument is spurious. It is
necessary to consider the unambiguous
import of the material portion
of the unamended plea which I have set out earlier herein. In
paragraph 5 of the unamended
plea the applicant unequivocally
admitted that the Plaintiff accepted the application for credit
facilities, annexure “POC2”
to the Particulars of Claim,
and that the parties accordingly agreed to conduct their business
subject to the standard terms.
[22]
In paragraph 6 of the particulars of
the plaintiff’s claim the plaintiff contends that the standard
terms and conditions,
which the applicant had admitted to be part of
their agreement, “included
inter
alia
the following terms”.
In paragraphs 6.1 to 6.9, as Mahfud correctly points out, the
respondent pleaded paraphrases
of those terms and conditions
contained in its standard terms as set out in annexure “POC2”
to the Particulars of Claim.
In response the applicant pleaded
at paragraph 6.1:
“
Insofar
as the Plaintiff has correctly set out and/or described the Standard
Terms and Conditions, the contents of these paragraphs
are admitted.”
[23]
The applicant accordingly expressly
admitted that to the extent that the respondent’s paraphrasing
of the specific clauses
referred to in paragraph 6.1 to 6.9 of the
Particulars of Claim accord with the written formulation contained in
the standard terms
those clauses formed part of the contract which
the applicant admitted in paragraph 5 of its plea. The denial
contained in
paragraph 6.2 strikes only at the extent to which the
paraphrasing of the clauses set out in paragraph 6.1 to 6.9 of the
Particulars
of Claim may differ in their meaning from the actual
wording utilised in annexure “POC2”. The contention
by Mahfud
that the terms and conditions set out in paragraph 6.1 to
6.9 of the Particulars of Claim were emphatically denied in the
original
plea is simply fallacious. In my view the admission
contained in paragraph 6.1 of the applicant’s plea makes it
abundantly
clear that it was indeed the applicant’s intention
to admit that these clauses formed part of the contract which it had
admitted
in paragraph 5 of its plea.
[24]
In the replying affidavit Mahfud
sets out a further explanation for the error. He states:
‘
9.
The Defendant’s explanation for the mistake is by no means
illogical. All that the Defendant admits is having signed
page
2 of the credit application document. The act of signing one
page does not magically create a meeting of the minds on
the fine
print contained in some 48 paragraphs enshrined in a separate
document entitled “Standard Terms and Conditions”.
10.
It will be noted at the top of page 3 of annexure “POC2”
that the heading “
Credit
Application and Standard Terms and Conditions
”
appears.
11.
Pages 1 and 2 consist of the credit application. That is what
the Defendant admits having signed. The Defendant
wanted to
apply for credit, nothing more.
12.
There is then an entirely separate document entitled “Standard
Terms and Conditions”. The terms of that document
are
contained in pages 3 to 10. Importantly there is a place for
the name and signature at the top of page 3 of the party
who submits
itself and agrees to be bound by the standard terms and conditions.
There is no such name or signature on page
3 of the standard terms
and conditions. The absence of a signature on the standard
terms and conditions themselves (as opposed
to the separate credit
application) demonstrates categorically that the Defendant did not
agree to the standard terms and conditions
and its unfortunate
admission of having done so in paragraph 5 of the unamended plea is
nothing more than a simple mistake.’
[25]
Again I think that the explanation
is spurious. I have set out earlier herein the description of
the ten page document headed
“credit application and standard
terms and conditions”. It clearly is not a separate
document. Mahfud is
correct in his assertion that page 3 of
annexure “POC2” bares the heading “credit
application and standard terms
and conditions”. What he
does not, however, acknowledge is that the remaining nine pages also
bare such heading in
large bold letters. Mahfud is also correct
that on page 3 of the document there is provision for a name and
signature which
is uncompleted. It does not, in my view,
however, follow that the absence of a signature on page 3
categorically demonstrates
that the defendant did not agree to the
standard terms and conditions. On the contrary, the proposed
amendment proceeds on
the express allegation at paragraph 5.1.4,
which is set out earlier herein, that Zaptia in fact read and
completed pages
1 and 2 of annexure “POC2” prior to
signing the application for credit. As recorded earlier herein
he acknowledged
on page 2, which, on the case which the applicant now
seeks to advance, he had in fact read prior to attaching his
signature to
it, not only that he had read and understood the
standard terms contained in the document but also that he agreed that
such
terms and conditions shall be valid and deemed to be binding in
respect of all transactions entered into between the applicant and
the respondent. There are no “terms and conditions”
set out in pages 1 and 2 of the document and the acknowledgement
can
only refer to the standard terms set out in pages 3 to 10 of the
document. Mahfud has failed to engage at all with this
issue
save to state in the replying affidavit:
“
The
Plaintiff’s laborious reliance upon the paragraph dictating
that the signatory of the credit application automatically
acknowledges having read and understood the terms and conditions
fails to take account of the fact that the standard terms and
conditions are not only a separate document from the credit
application but also constitute a separate contract. More
importantly
the standard terms and conditions needed to have been
signed at the top of page 3 to become binding on the Defendant.”
[26]
For the reasons set out earlier
herein the protestation that the standard terms and conditions
constitute a separate document is
simply fallacious. It is
difficult to comprehend on what basis it is contended that the
standard terms and conditions needed
to have been signed at the top
of page 3 to become binding. Zaptia had, after all, in signing
page 2 of the document expressly
agreed in writing that such terms
and conditions would be binding upon all future transactions.
The contention that pages
3 to 10 of the document constitute a
separate contract is therefore in my view equally fallacious.
[27]
On a careful consideration of the
papers before me I am constrained to conclude that the application to
withdraw the admission as
to the terms upon which the parties
contracted is not
bona fide
.
I do not think that any satisfactory explanation is provided of the
circumstances under which the admission came to be made.
Accordingly
this part of the intended amendment cannot be allowed.
Second
objection
[28]
The second objection too relates to
paragraph 5.1.1 to 5.1.7 of the notice of intention to amend.
The defence relied upon
in these paragraphs is one of unilateral
error leading to a lack of consensus between the parties. The
essence of the objection
is that the introduction of these paragraphs
would be excipible in that the error is neither alleged to be nor
could it be a justus
error by virtue of the express provisions
accepted by Zaptia.
[29]
By virtue of the conclusion to which
I have come in respect of the first objection, namely that the
earlier admission that the parties
expressly contracted on the basis
of the standard terms must stand, it is neither necessary nor
desirable to consider this objection
further.
Third
objection
[30]
The third objection relates to the
defence raised in paragraph 5.1.8 to 5.3 and more in particular to
paragraph 5.1.15 to 5.1.19
as read with paragraph 5.2 and 5.3 of the
notice of intention to amend.
[31]
I pause to record at the outset that
the notice of intention to amend is certainly not a model of
clarity. Whilst paragraphs
5.1.8 to 5.3 are not pleaded in the
alternative to paragraphs 1.1.1 to 1.1.7 it seems to me on a proper
construction of the notice
of intention to amend that these
paragraphs seek to set up a self-contained defence. Paragraphs
5.1.1 to 5.1.7 attempts to
set out a case for a unilateral error
giving rise to a lack of consensus whilst paragraph 5.1.8 to 5.3
proceeds on an acceptance
that the parties in fact contracted
initially on the express terms set out in the standard terms.
Paragraph 5.1.8 to 5.3
purports to set out a subsequent novation of
the agreement as recorded in paragraph 5.3 of the notice of intention
to amend.
[32]
Novation is a contract involving an
agreement between the parties that an existing valid and binding
obligation be extinguished
and that it be substituted with a fresh
obligation. Paragraph 5.1.8 to 5.3 sets out various
interactions between the parties
relating to their business
dealings. It does not allege any agreement concluded between
the parties, however, at paragraph
5.1.18 certain express,
alternatively tacit, alternatively implied terms of the commercial
relationship between the plaintiff and
the defendant are contended
for.
[33]
The intended pleading does not
remotely comply with the provisions of Rule 18(6) of the Uniform
Rules of Court. I have recorded
that it does not allege any
particular agreement. To the extent that an agreement may be
contended for it does not record
whether it is oral, in writing or
tacit, however, at paragraph 5.3 it is alleged that the “aforesaid
oral terms and conditions”
governed the dealings between the
parties in concluding the agreement. For the purposes of this
judgment I shall therefore
accept that the applicant seeks to reply
on an oral agreement. Even accepting that the agreement was for
an oral novation
there is no allegation as to when and where the
agreement was concluded nor does it contain any allegation as to who
represented
the parties in concluding the agreement. In the
circumstances, it appears to me that the pleading may well be vague
and embarrassing
and it may have been attacked as an irregular step.
The respondent, however, has not relied on these grounds. In
the
circumstances I shall make no finding relating thereto and this
judgment is limited to the objection raised.
[34]
The respondent objects to the
amendment raised in these paragraphs on the basis that it would
render the plea excipiable as the
oral agreement contended for in
paragraph 5.3 is precluded by the express terms of the written
contract.
[35]
I have recorded earlier that Zaptia
acknowledged in signing annexure “POC2” that he had read
and understood the standard
terms and that he agreed that such terms
and conditions would be valid and binding in respect of all
transactions entered into
between the parties. The standard
terms and conditions commence with an introductory paragraph
recording:
‘
These
Standard Trading Terms and Conditions shall govern all present and
future transactions and commercial dealings to be concluded
between
the parties herein …. These Standard Trading Terms and
Conditions shall prevail over any “standard terms
of order of
the customer”, which may be incorporated as part of the
customer’s order or request for services and the
acceptance by
the company of the customer’s order … shall not override
the Standard Trading Terms and Conditions save
to the extent
expressly agreed to in writing … These Standard Trading
Terms and Conditions will be read together with
any express terms
agreed to in writing between the customer and the company and only to
the extent of a conflict between the express
terms and the terms
hereof shall the former prevail.’
[36]
Clause 33 of the standard terms
stipulates that no variation of such terms shall be binding on the
respondent unless it is embodied
in the written document signed by a
duly authorised director of the respondent. Any other purported
variation, whether in
writing or oral would be of no force and
effect. Clause 33 does not expressly preclude any consensual
cancellation or novation
which is not in writing.
[37]
Mr
Gess
,
who appeared on behalf of the respondent, submitted that the
“novation” alleged by the defendant is, in reality,
nothing other than a variation or an alteration of the standard terms
which, as recorded earlier, provides that such terms shall
apply to
all future business between the parties.
[38]
It is well-established that a
non-variation clause of the kind contained in annexure “POC2”
is enforceable between the
parties. (See for example
SA
Sentrale Ko-op Graanmaatskappy Beperk v Shifren en andere
1964 (4) SA 760
(A);
Brisley v
Drotsky
2002 (4) SA 1
(SCA).) The
reason for enforcing clauses of this nature is that it provides for
commercial certainty and avoids disputes
of fact regarding the terms
of an oral agreement, which may sometimes be difficult to resolve.
(See
Yarram Trading CC t/a Tijuana Spur
v Absa Bank Limited
2007 (2) SA 570
(SCA) at 581C-D.)
[39]
Mr
van
Rooyen
, who appeared on behalf of the
applicant, does not dispute that the clauses of this nature are
ordinarily enforceable. He
argues, however, that the clause
does not find application to the present facts.
[40]
Novation, as set out earlier, is a
contract whereby an existing obligation is extinguished and at the
same time a new obligation
is incurred in its place. It may be
argued that it involves the termination of the original agreement as
opposed to the variation
thereof. In this regard it has been
held that a non-variation clause such as is relied upon by the
respondent serves to curtail
the common law freedom of contract of
the parties and must therefore be restrictively interpreted (see
Randcoal Services Limited and Others v
Randgold and Exploration Company Limited
[1998] ZASCA 45
;
1998 (4) SA 825
(SCA) at 841F.) In the absence of a clause
precluding an oral or tacit termination or novation a subsequent
agreement which
has the effect of novating the entire existing
agreement does not seem to me to be necessarily precluded by the
non-variation clause.
(Compare
Klub
Lekkerrus/Liebertas v Troye Villa (Pty) Ltd
[2011] 3 All SA 597
(SCA) para [28] p. 606h-607a; and
Van
der Merwe, Van Huyssteen, Reinecke and Lubbe
:
Contract: General Principles
(4
th
ed) p. 133.) Whether or not it does so in a particular case is
a matter of interpretation.
[41]
It is not necessary at this stage to
resolve this issue. The respondent’s objection to the
amendment is that it would
render the pleadings excipiable.
Exception is generally not an appropriate procedure to settle
questions of interpretation
because, in cases of doubt, evidence may
be admissible at the hearing relating to surrounding circumstances
and other matters which
serve to place the agreement in context (see
Murray & Roberts Construction v
Finat Properties (Pty) Ltd
[1991] 1 All
SA 382
(A);
1991 (1) SA 508
(A)) and
Sun
Packaging (Pty) Ltd v Vreulink
[1996] ZASCA 73
;
1996 (4)
SA 176
(SCA).) In the result I conclude that the fourth
objection should not be upheld.
[42]
In these circumstances evidence
which seeks to establish a novation of the agreement would be
admissible at the trial and the amendment
should be granted in
respect of these paragraphs.
Proposed
amendment to paragraph 6 of applicant’s plea
[43]
The respondent’s fourth
objection to the proposed amendment strikes at the intended amendment
to paragraph 6 of the plea which
I have quoted above. In the
application of intention to amend the applicant seeks to insert after
the existing paragraph
6.2 the following:
‘
6.3
Specifically the Defendant pleads in response to the Plaintiff’s
reliance on clause 27 as set out in paragraph 6.3 of
its Particulars
of Claim as follows:-
6.3.1
In purporting to carry out the services the Defendant required from
the Plaintiff, the Plaintiff used and relied upon its
agent, Somerset
Cold Store (“SCS”);
6.3.2
As set out in paragraph 8 hereof SCS and hence the Plaintiff as its
principal failed to perform as agreed, causing the Defendant
to
suffer damages;
6.3.3
The Plaintiff specifically acknowledged this and agreed to release
the Defendant from liability to pay SCS’s charges;
6.3.4
Instead the Plaintiff agreed to pursue SCS itself for the recovery of
the sum of R224 601,85 already paid by the Plaintiff
to SCS in
respect of their defective performance thereby releasing the
Defendant from any obligation to pay the Plaintiff the sum
of
R224 601,85;
6.3.5
The Plaintiff specifically agreed in writing that the Defendant as
its customer was not liable to pay to it the sum of R224 601,85
in respect of SCS in the letter dated 17 March 2014, a copy of which
is annexed marked “
P1
”.’
(The
annexure was not annexed to the notice of intention to amend.
The parties are agreed that the objection should be assessed
on that
basis.)
[44]
The respondent objects to the
proposed amendment as it alleges that the proposed amendment is
excipiable because the applicant contends
for a variation of the
provisions of clause 27 of the standard terms. It is argued
that the applicant does not allege that
the document, annexure “P1”,
complied with the requirements for the variation of the agreement as
provided for in the
standard terms in that it is not alleged that the
written document was signed by a duly authorised director of the
applicant.
[45]
On a proper reading of the intended
amendment I am not persuaded that the applicant necessarily contends
for a variation of the
provisions of clause 27. It seems to me
that the amendment, which is not a model of clarity, is equally
susceptible to an
interpretation that annexure “P1”
constituted “express terms agreed to in writing between the
customer and the
company which are in conflict with the standard
terms” (as intended in the introductory paragraph to the
standard terms which
I have quoted above and which prevail over the
standard terms). Similarly it may be argued that the amendment
strikes at
a unilateral waiver in writing of a right which accrues
exclusively to the respondent. Waiver in those circumstances
does
not constitute a variation of the contract. (Compare
Impala Distributors v Taunus Chemical
Manufacturing Company
(Pty)
Ltd
1975 (3) SA 273
(T) at 278B;
and
Van As v Du Preez
1981 (3) SA 760
(T).) In each case the argument is dependent on
evidence which would be admissible.
[46]
I pause to record that although the
fourth objection did not rely on the “non-waiver clause”
Mr
Gess
argues
that the non-waiver clause read in conjunction with the non-variation
clause precludes reliance on any such waiver. I am
not persuaded by
the cogency of this argument.
[47]
The alleged non-waiver clause
(clause 34) provides:
“
No
extension of time or waiver or relaxation of any of the trading terms
and conditions shall operate as an estoppel against any
party in
respect of its rights under these trading terms and conditions, nor
shall it operate so as to preclude such party thereafter
from
exercising its rights strictly in accordance with these trading terms
and conditions.”
[48]
The clause is, at best, ambiguous.
It is not a provision which requires a waiver to be in writing in
order to be binding nor
does it preclude an effective unilateral
waiver of accrued rights by either party. The applicant
contends for an express
waiver in writing by the respondent of its
exclusive right to claim a particular sum of money. I do not
consider that the
said clause necessarily finds any application to
the proposed amendment. The clause does not seem to me to
authorise the
respondent to proceed against the applicant for the
recovery of the amount which has already been expressly waived.
The effect
of a waiver is to extinguish the right in issue, it cannot
then be resurrected. At best for respondent the argument is
dependent
on the interpretation of the said clause. I have
recorded earlier that exception is generally an inappropriate
procedure
to resolve issues of interpretation.
Proposed
amendment to paragraph 8 of applicant’s plea
[49]
In paragraph 3 of the notice of
intention to amend the applicant seeks to plead that clauses 33, 40,
41, 42 and 45.3 of the standard
terms are void
ab
initio
and therefore unenforceable as
they are contrary to public policy in the circumstances relevant to
this matter and constitute clauses
which are
contra
bono mores
. The respondent has
objected to each of these proposed amendments and I shall deal with
these clauses separately.
[50]
It is necessary at the outset to
consider the general approach to an attack upon contractual terms on
the grounds raised by the
applicant herein. In the
Shifren
matter
supra
Steyn CJ pointed to what he considered to be an elementary and
fundamental general principle that contracts freely concluded in
all
sincerity by competent parties should be enforced in the public
interest. Similarly, Rabie CJ remarked in
Magna
Alloys and Research (SA)(Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984 (4) SA 874
(A) at 893I-894A that it is in the public interest
that persons should be held to contracts which they have concluded.
This
must be the point of departure.
[51]
More recently in
Brisely
v Drotsky
supra
the Supreme Court of Appeal cautioned that to afford a general
discretion to judges to ignore contractual principles whenever they
consider them to be unreasonable or unfair would serve to undermine
the principle of
pacta servanda
sunt
because
the enforceability of contractual terms would depend upon what a
particular judge considered to be reasonable and fair.
The
measure then would no longer be the law but the view of the
particular judge. The consequence hereof would be that the
contracting parties would no longer be in a position to regulate
their interaction in the expectation that their contract would
be
enforced in accordance with the terms thereof in the event of a
dispute. They would have to wait on each occasion to see
what
the particular judge might consider to be reasonable and fair.
[52]
The sentiments expressed in
Brisley
v Drotsky
supra
were reinforced two years later in
South
African Forestry Co Ltd v York Timbers
2005 (3) SA 323
(SCA) para [27] where the Supreme Court of Appeal
held:
“
[A]lthough
abstract values such as good faith, reasonableness and fairness are
fundamental to our law of contract, they do
not constitute
independent substantive rules that courts can employ to intervene in
contractual relationships. These abstract
values perform creative,
informative and controlling functions through established rules of
the law of contract. They cannot be
acted upon by the courts
directly. Acceptance of the notion that judges can refuse to enforce
a contractual provision merely because
it offends their personal
sense of fairness and equity will give rise to legal and
commercial uncertainty. “
(See
also
Maphango and Others v Aengus
Lifestyle Properties (Pty) Ltd
2011 (5)
SA 19
(SCA) at para [22] and [23].)
[53]
Finally it
should be borne in mind that the mere fact that exclusionary clauses
as a specie are in principle enforceable does not
mean that any
particular exclusionary clause may not be held by a court of law to
be contrary to public policy. (See
Afrox
Healthcare v Strydom
2002
(6) SA 21
(SCA) at p. 35 para [10].)
[54]
I turn to
consider the particular clauses which are attacked in the notice of
intention to amend. In each case the applicant
contends that
any reliance which the respondent may seek to place on the said
clauses will constitute conduct which is sufficiently
oppressive,
unconscionable and immoral to constitute a breach of public policy
which in turn the applicant contends justifies a
refusal to enforce
such provisions.
Clause
33 non-variation clause
[55]
The applicant
contends that the effect of this clause is to preclude the defendant
from relying on
bona
fide
and
factually existent agreements entered into between the parties
orally, tacitly or impliedly. To this extent the applicant
is
of course correct, however, it is difficult to conceive of any
objection thereto based on public policy. In
Impala
Distributors
supra
Hiemstra J set out the background to the
Shifren
decision.
He observed that there were two schools of thought, each reliant upon
the principle of
pacta
servanda sunt.
The one school held the view that the original agreement, containing
the non-variation clause, was binding while the other
school
contended that a later agreement concluded orally and which sets
aside the initial agreement should be honoured. In
Shifren
these two schools of thought were weighed up carefully, one against
the other, and the Supreme Court of Appeal (then the Appellate
Division of the Supreme Court) opted for the former.
[56]
In
Brisley
v Drotsky
supra
the Supreme Court of Appeal were invited to reconsider the
Shifren
decision. They unanimously declined to do so. Cameron JA
stated at p. 34 paragraph [90]:
“
The
appellant's attack invites us to reconsider that decision. We are
obliged to do so in the light of the Constitution and of
our
'general obligation', which is not purely discretionary,
to develop the common
law in the light of fundamental constitutional values. For the
reasons the joint judgment gives, I do not
consider that the attack
can or should succeed. The
Shifren
decision represented a doctrinal and policy choice which, on balance,
was sound. Apart from the fact of precedent and weighty
considerations of commercial reliance and social certainty, that
choice in itself remains sound four decades later. Constitutional
considerations of equality do not detract from it. On the contrary,
they seem to me to enhance it.”
[57]
The proposed
amendment proceeds further to record that by enforcing the
non-variation clause against the applicant it places the
respondent
in a position whereby it can elect to enforce either the standard
terms and conditions on the one hand or the aforesaid
agreements on
the other, which ever suits the respondent best at the time, thereby
putting the applicant in an oppressive, unconscionable
and immoral
situation.
[58]
The contention
is simply fallacious. On the unequivocal terms of clause 33 any
purported variation or alteration to the terms
of the original
agreement which does not accord with the procedural requirements set
out in the clause itself will be “of
no force and effect”.
Neither party can chose to rely upon such an amendment. This is
precisely the consequence
of the
Shifren
decision. (See
Brisley
v Drotsky
supra
at p. 11 para [7].)
[59]
In these
circumstances I consider the proposed amendment is bad in law and
therefore excipiable. In the result, this amendment
cannot
succeed.
Clause
40
[60]
Clause 40 of
the standard terms provides for the limitation of the respondent’s
liability. It excludes any liability
arising from a number of
circumstances unless such claim arises from a “grossly
negligent act or omission on the part of
the company or its
servants”.
[61]
The
enforceability of clause 40 is attacked in the proposed plea on the
basis that the effect of this clause is to allow the plaintiff
to
unfairly and unlawfully escape liability for its own negligent acts
to the undue prejudice of the defendant. No particular
facts
peculiar to the conclusion of the agreement in issue are pleaded in
support of this contention nor does Mahfud address this
issue at all
in the founding affidavit.
[62]
It is, of
course, correct that a clause of this nature will always permit the
plaintiff to escape liability for its own negligence
to the prejudice
of the defendant. It does not follow, however, that it is
therefore contrary to public policy. In
Government
of the Republic of South Africa v Fibre Spinners and Weavers
(Pty) Ltd
1978 (2)
SA 794
(AD) the court considered a clause which provided:
“ …
you
are hereby absolved from all responsibility for loss or damage
however arising in respect of the bailor’s property.”
[63]
The parties
accepted that the clause served to exclude liability for negligence,
however, it was argued on behalf of the plaintiff
that the clause
should so be construed as not to apply to the responsibility for loss
or damage caused by the bailee’s “gross
negligence”.
The Appeal Court (now the Supreme Court of Appeal) held that there is
no justification for so restricting
the plain meaning of the words of
the exemption clause and proceeded to hold that there was also no
reason, founded on public policy,
why it should be held that, insofar
as the clause refers to loss or damage caused by the defendant’s
gross negligence, it
is not enforceable. (See
Fibre
Spinners
at p. 807D.) The decision in
Fibre
Spinners
was referred to with approval in the Supreme Court of Appeal in
First
National Bank of SA Ltd v Rosenblum and Another
2001 (4) SA 189
(SCA) where a similar clause was upheld. (See
also
Afrox
Healthcare Ltd
supra
where a clause excluding liability for gross negligence was upheld.)
[64]
The
exclusionary clause in the present contract is far less intrusive and
by parity of reasoning I consider that no basis is advanced
in the
proposed amendment, founded on public policy, why the clause could
not be enforced. In the circumstances the proposed
plea
relating to clause 40 is bad in law, therefore excipiable and cannot
be allowed.
Clauses
41 and 42
[65]
Clauses 41 and
42 of the standard terms provides:
“
41.
MONETARY LIMITATION OF LIABILITY OF THE COMPANY
41.1
In those cases where the company is liable to the customer in terms
of clause 40.1, in no such case whatsoever shall any liability
of the
company, howsoever arising, exceed whichever is the least of the
following respective amounts:
41.1.1
the value of the goods evidenced by the relevant documentation or
declared by the customer for customs purposes or for any
purpose
connected with their transportation;
41.1.2
the value of the goods declared for insurance purposes;
41.1.3
double the amount of the fees raised by the company for its services
in connection with the goods, but excluding any amount
payable to
sub-contractors, agents and third parties.
41.2
If it is desired that the liability of the company in those cases
where it is liable to the customer in terms of clause 40.1
should not
be governed by the limits referred to in clause 40.1
(sic)
written notice thereof must be received by the company before any
goods or documents are entrusted to or delivered to or into the
control of the company (or its agents or sub-contractors), together
with a statement of the value of the goods. Upon receipt of
such
notice the company may in the exercise of its absolute discretion
agree in writing to its liability being increased to a maximum
amount
equivalent to the amount stated in the notice, in which case it will
be entitled to effect special insurance to cover its
maximum
liability and the party giving the notice shall be deemed, by so
doing, to have agreed and undertaken to pay the company
the amount of
the premium payable by the company for such insurance. If the
company does not so agree the limits referred
to in clause 41.1 shall
apply.
42.
GENERAL AVERAGE
The
customer indemnifies and holds harmless the company in respect of any
claims of a general average nature which may be made against
the
company and the customer shall provide such security as may be
required by the company in this connection.”
[66]
In the
proposed amendment the applicant seeks to allege that these clauses
are null and void
ab
initio
as
they are contrary to public policy because they have the effect that
they unfairly limit liability thereby depriving the defendant
of its
right to recover the true quantum of the loss suffered by the
defendant. That they have this effect is of course true,
however, where the parties have in all sincerity contracted on these
terms public interest demands that they be held to the contracts
which they concluded. (See
Shifren
supra
and
Magna
Alloys
supra
.)
[67]
Clause 41
seeks to limit the extent of the respondent’s liability for
damages which flow from its gross negligence.
As set out
earlier it has repeatedly been held that an exclusion clause which
exempts a party from liability arising from his gross
negligence or
that of his employees is not contrary to public policy. It seems to
me to follow that there can be no room to conclude
that a lesser
clause which seeks merely to limit the liability for damage arising
from gross negligence could be unenforceable
for being contrary to
public policy. The desired amendment in respect of these
clauses would accordingly also be excipiable
and cannot be granted.
Clause
45.3
[68]
Clause 45.3
relates to the procedure to be followed in the case of disputes
between the parties. Clause 45.3 provides:
“
Without
affecting the generality of clause 45.1 and 45.2 the customer shall
not be entitled to withhold payment of any amounts,
by reason of any
dispute with the company, whether in relation to the company’s
performance in terms of any agreement, or
lack of performance or
otherwise, after which payment the customer’s rights of action
against the company in terms of this
clause can be enforced.
Until such pay is made, any rights that the customer may have, shall
be deemed not yet to have arisen
and it is only the payment to the
company which releases such rights and makes them available to the
customer in respect of any
claim that he may have against the
company.”
[69]
The intended
amendment seeks to attack this clause as the effect thereof is to
compel the defendant to pay the plaintiff monies
for its own
shortcomings and failures which, it is alleged, is innocuous.
[70]
Neither party
has referred me to any case law directly relevant to clauses of this
nature. The effect of this clause can only
be properly assessed
in the context of the relationship between the parties and the
interpretation of the agreement as a whole.
In my view evidence
which may cast light on the effect and impact of this clause is
permissible. In these circumstances the
applicant should be
granted leave to introduce this paragraph in its plea.
Costs
[71]
I turn to
consider the question of costs. By virtue of the conclusion to which
I have come each party has achieved a measure of
success in the
application. The applicant was however obliged to approach the
court in order to achieve the amendments to
its plea. In the
circumstances I consider that it would be appropriate that the
applicant pay the costs of the application
on an unopposed basis.
[72]
In the result,
it is ordered:
1.
That the
application to amend the defendant’s plea by:
(i)
Deleting
paragraph 5 of the existing plea;
(ii)
introducing
paragraphs 5.1 and 5.1.1 to 5.1.7 as set out in the Notice of
Intention to Amend; and
(iii)
introducing
paragraph 8.4 (to the extent that it relates to clauses 33, 40, 41
and 42), paragraphs 8.4.1, 8.4.2 and 8.4.3 as set
out in the Notice
of Intention to Amend
is
dismissed.
2.
The defendant
is granted leave to amend its plea by the introduction of:
(i)
Paragraphs
5.1.8 to 5.3;
(ii)
paragraphs 6.3
to 6.3.5; and
(iii)
paragraphs 8.4
(only to the extent that it refers to clause 43.5), 8.4.4 and 8.5 (to
the extent that it refers to paragraph 8.4.4)
as
set out in the Notice of Intention to Amend.
3.
The applicant
is ordered to pay the costs occasioned by the application on an
unopposed basis.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Applicant: Adv C van Rooyen
Instructed
by Dewey Hertzberg Levy Inc c/o Jacques Du Preez Attorneys, Port
Elizabeth
For
Respondent: Adv D W Gess
Instructed
by Springer Nel Attorneys c/o Goldberg & De Villiers Inc, Port
Elizabeth