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[2023] ZAFSHC 482
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Christo Strydom Nutrition v University of the Free State (A169/2022) [2023] ZAFSHC 482 (12 December 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Appeal
No: A169/2022
In
the appeal between:
CHRISTO
STRYDOM NUTRITION
Appellant
and
UNIVERSITY
OF THE FREE STATE
Respondent
CORAM:
VAN ZYL, J
et
NAIDOO, J
et
CHESIWE, J
JUDGMENT
BY:
VAN ZYL, J
HEARD
ON:
12 JUNE 2023
DELIVERED
ON:
12
DECEMBER 2023
[1]
In this matter an exception served before the court
a quo
(a
single judge of this Division).
[2]
The respondent (the plaintiff in the court
a quo
) issued
summons against the appellant (the defendant in the court
a quo
)
based on the appellant’s alleged breach of contract by his
failure to pay monthly royalties/levies to the respondent.
The
appellant duly filed a plea in response to the respondent’s
declaration. The respondent subsequently filed a Notice of
Exception
against the appellant’s plea, which exception was upheld by the
court
a quo
, with costs
.
[3]
This is an appeal directed at the upholding of the exception by the
court
a quo.
Leave to appeal was granted by the court
a
quo
. Adv SJ Reinders appeared for the appellant and Adv C Snyman
for the respondent.
[4]
For the sake of clarity I will henceforth refer to the parties as in
the court
a quo
, save where quotations from the record or from
the written agreement read differently
.
The
pleadings and the exception:
[5]
For ease of reference, I deem it apposite to quote extensive parts of
the pleadings and
the exception.
[6]
The applicable allegations in the declaration read as follows:
“
4.
“
On the 17
th
day of September 2015, the plaintiff and the defendant entered into a
written agreement in respect of quality standards with the
plaintiff
represented by Mr Gerhardus Verhoef and the defendant represented by
Mr Christo Strydom. A copy of the agreement
is attached hereto
marked Annexure ‘A’.
5.
The material terms of the
agreement were
inter alia
as follows:
5.1
The defendant, who is a supplier of nutrition supplements was
desirers (
sic
) to make use of the Plaintiff’s seals
(hereinafter referred [to] as seals).
5.2
The agreement commenced on the date of signature being September
2015, where
after it could be terminated by either party giving 3
calendar months written notice of termination.
5.3
The Plaintiff (
sic
) had the right to make use of the seals as
contemplated in the provisions of the agreement, subject to periodic
evaluations and
inspections to be performed by the Plaintiff for
(
sic
) its nominees, to enable the plaintiff to determine the
quality of the products provided and/or distributed by the Defendant,
to
enable it to ascertain whether the products distributed or
supplied by the Defendant complies by (
sic)
the standards
supplied by the Plaintiff.
5.4
The Defendant was entitled to make use of and display the seals,
following the
obtainment of written approval by the Plaintiff to
apply the seals to any specific batch of products, of which batches
the samples
were tested, contemplated in this agreement, and subject
to the procedure, having been followed and subject to the Defendant:
5.4.1
Making payment to (royalties) the Plaintiff of a levy of 3%
(excluding
VAT) on/or before the last day of each calendar month for
the duration of this agreement, whether sold directly to the consumer
or to wholesalers, retailers or any person;
5.4.2
Performing the administration to the satisfaction of the UFS;
5.4.3
Providing the Plaintiff with a detailed schedule, confirming all
products
sold, during a calendar month as contemplated in the
provisions of the agreement to which the seals were affixed, on/or
before
the last day of such calendar month, in order to circulate
(
sic)
the total amount of the levy payable by the Defendant to
the Plaintiff;
5.4.4
Providing the Plaintiff with samples from each production and/or
distribution
batch, prior to such production/the submission (
sic
)
batch leaving the premises of the Defendant, and prior to being sold
or distributed, which sample must be provided and transported
to the
Plaintiff, immediately after arrival at the premises of the
Defendant, at the cost of the Defendant, clearly marked with
the
batch number, the date and the products type, as well as such
reasonable other information as the Plaintiff may describe (
sic)
;
5.4.5
The amounts referred to as payable of the levy shall escalate
annually
with the same average percentage increase as the sale prices
of the relevant products;
5.4.6
The Defendant shall keep full, clear and accurate factual find (
sic)
reports to be submitted to the Defendant’s external auditors
with respect of sale of products;
5.4.7
The Defendant shall report on a monthly basis to the Plaintiff of any
amounts payable by the defendant to the Plaintiff in terms of the
provisions of the agreement in respect of each calendar month.
6.
The Plaintiff has duly
abided by its obligations in terms of the agreement by allowing the
Defendant to use the seals as contemplated
in terms of the agreement.
7.
Breach:
7.1
The Defendant has failed and/or refused to abide by his obligations
in terms of the agreement in that the Defendant has failed and/or
refused to make payment to the Plaintiff of the agreed amount
of 3%
of the monthly levy (royalties), excluding VAT. …
7.2
…
7.3
…
7.4
The amount of R768 330.25 is currently due, owing and payable by
the
Defendant to the Plaintiff in that the monthly levies (royalties)
were not paid by the Defendant in accordance with the provisions
of
the agreement.
7.5
…
WHEREFORE
the Plaintiff prays for judgment against the Defendant for:
1.
Payment in the amount of R768 330.25;
2.
Plus, interest thereon at the rate of 10%
a temporae
(
sic)
morae;
3.
Costs of the suit.”
[7]
In terms of the written agreement the parties thereto are described
as the “
University of the Free State (‘UFS’)
”
and “
Christo Strydom Nutrition (‘CSN’)”.
[8]
The relevant averments pleaded in the defendant’s plea to the
declaration, are the
following:
“
2.
AD PARAGRAPH 4
THEREOF:
2.1
On the 17
th
September 2015 the Plaintiff then and there
represented by G Verhoef, the Director of Contracts, and a company,
Silkblaze 11 (Pty)
Ltd with registration number 2007/001392/07
entered into a written Agreement. A copy of the Agreement is
attached to the
Declaration as Annexure ‘A’.
2.2
Silkblaze was represented by the Defendant.
2.3
Annexure ‘A’ does not reflect the common intention of
the
parties correctly in that it reflects defendant as the contracting
party instead of Silkblaze.
2.4
At the time when the Agreement was reduced to writing, the common
intention was that the Plaintiff and Silkblaze would enter into the
written agreement.
2.5
The Plaintiff drew up the Agreement and mistakenly prepared the said
document reflecting Defendant as the contracting party. The
mistake was a result of a
bona fide
mutual error,
alternatively an intentional act of the Plaintiff.
2.6
Annexure ‘A’ should therefore be rectified to reflect
the
contracting parties wherever it may occur therein to refer to the
contracting parties as the University of the Free State and
Silkblaze
11 (Pty) Ltd (registration number: 2007/001392/07).
2.7
Save as aforesaid the remainder of the allegations are denied.
3.
Without
derogating from what is pleaded above and in the event it being found
that the Defendant entered into the agreement, Defendant
avers:
AD
PARAGRAPH 5 THEREOF:
3.1
At all relevant times before the parties
entered into the contract it
was to the knowledge of the Plaintiff that Silkblaze, alternatively
Defendant is a supplier of nutrition
supplements and, intends to
distribute the aforementioned nutrition to amongst others,
wholesalers, retailers and third parties
worldwide.
3.2
It was to the Plaintiff’s knowledge
that Silkblaze,
alternatively Defendant as such, was desirous that the Plaintiff,
being a University would test the aforementioned
products to confirm
that same is of the highest quality standards as prescribed by the
applicable standards as well as applicable
law to enable Defendant to
distribute and/or sell the nutrition supplements as aforesaid.
3.3
As such, it was in the contemplation of the
parties, that the
Plaintiff, being a University be properly accredited to do the
aforementioned tests and as such be recognised
not only in South
Africa but worldwide. Wherefore it was a tacit term of the agreement
that Plaintiff’s laboratory be duly
accredited and registered
to do the tests it undertook to do.
3.4
On the aforementioned basis and understanding,
the parties concluded
the aforementioned agreement. More in particular Defendant avers:
AD
PARAGRAPHS 5.1 – 5.4.7 THEREOF:
3.5
This is admitted in as far as it corresponds
with the contents of
annexure ‘A’.
3.6
Defendant avers that the aforementioned agreement
was a reciprocal
agreement with reciprocity of obligations.
4.
AD
PARAGRAPH 6 THEREOF:
4.1
The Plaintiff has not complied with its obligations. More in
particular, the
Plaintiff was not accredited nationally (and/or
internationally) to do the periodic evaluations and inspections
and/or to determine
the quality of the products provided and/or
distributed and/or the periodic testing of samples or evaluations
thereof as agreed
upon.
4.2
The Plaintiff in any event failed to continuously monitor the
products, the
testing of samples and/or determine the quality of the
products provided.
4.3
As a direct consequence of the Plaintiff’s breach of the
agreement, Defendant’s
international contracts were cancelled
and defendant had to appoint an international accredited entity to do
the aforementioned
tests, evaluations, inspections, monitoring and
testing.
4.4
Save as aforesaid the remainder of the allegations are denied.
5.
AD PARAGRAPH 7 (7.1
– 7.5) THEREOF:
5.1
It is admitted that Defendant has failed to make the payments as
aforesaid.
5.2
Defendant avers that the Plaintiff has breached the agreement,
alternatively
did not comply or could not comply with the agreement
reached between the parties and that tests performed by Plaintiff
were worthless
as Plaintiff’s Laboratory was not accredited.
5.3
Save as aforesaid the remainder of the allegations are denied.
WHEREFORE
Defendant prays that the Plaintiff’s claim as rectified be
dismissed with costs, alternatively that Plaintiff’s claim
be
dismissed with costs.”
[9]
The plaintiff subsequently filed a notice in terms of Rule 23(1) in
terms whereof it indicated
that it intends to note an exception to
the defendant’s plea on the basis that it is vague and
embarrassing and/or lacks
averments which are necessary to sustain a
defence. In terms of the notice the defendant was afforded the
opportunity to
remove the cause of the aforesaid complaints within 15
days from date of receipt of the said notice, failing which the
plaintiff
will note an exception as stated.
[10]
The defendant did not respond to the aforesaid notice of exception,
whereupon the plaintiff filed the
following exception to the
defendant`s plea:
“
1.
AD PARAGRAPH 2.3
AND 4 THEREOF:
1.1
The Plaintiff’s cause of action which the Defendant attempts
to
answer and/or respond in these paragraphs, is premised on a written
agreement concluded on the 17
th
of September 2015, a copy
of which is appended as annexure ‘A’ to the Plaintiff’s
declaration (hereinafter ‘the
written agreement’).
1.2
The written agreement stipulates and/or provides in:
1.2.1
clause 4, 5 and 6 thereof,
inter alia,
that the Plaintiff
undertakes to perform continuous monitoring, which includes, periodic
testing and evaluation of the Defendant’s/CSN’s
samples
and/or products
in order to solely
ascertain and/or determine
the quality of the products provided and/or distributed by
Defendant/CSN, to enable the Plaintiff to
ascertain whether the
products distributed or supplied by the Defendant/CSN complies with
the standards
prescribed by the Plaintiff
as contemplated in
the written agreement, and to establish whether and to what extent
Defendant/CSN complies
with the objectives of the Plaintiff
and the Defendant/CSN be allowed and/or authorised to use and display
the seals of the Plaintiff on its products; [Original emphasis
reflected in pleading as filed.]
1.2.2
clause 7 thereof,
inter alia,
that the Defendant agrees and
undertakes that for the duration of the written agreement (
which
Defendant does not aver, has been cancelled or terminated to date
),
will allow any of its products to be analysed and/or tested by any
third party; [This is incorrectly recorded, since the clause
in the
contract reads “will
not
allow” - my remark and my
emphasis.]
1.2.3
clause 11 thereof,
inter alia,
provides that the written
agreement contains all the terms and conditions of the agreement
between the parties concerning the subject
matter hereof and no
terms, conditions, warranties or representations whatever apart from
those contained in this agreement had
been made or agreed to by the
parties, while
1.2.4
clause 12 thereof,
inter alia,
states that no variation or
consensual termination of this agreement of any part thereof shall be
of any force or effect unless
in writing and signed by or on behalf
of the parties.
1.3
Apart from the Defendant seeking an order for rectification
of the
written agreement in respect of one of the contract entities (
other
than the Defendant in person as cited in the Plaintiff’s
declaration)
, the Defendant admits that the written agreement was
concluded with the Plaintiff (
except as already stated, with
Silkblaze 11 (Pty) Ltd as supposed to the Defendant as cited as
contracting party with the Plaintiff
).
1.4
Notwithstanding the above, the Defendant then further,
inter alia,
avers that to the Plaintiff’s knowledge, without such terms
being stated and/or contained in the written agreement, that
‘…
Silkblaze, alternatively, Defendant as such, was
desirous that Plaintiff, being a University would test the
aforementioned products
to confirm that same is of the highest
quality standards as prescribed by the applicable standards as well
as applicable law to
enable Defendant to distribute and/or sell the
nutrition supplements aforesaid. …’
and
‘…
[a]s such, it was in the contemplation of the
parties, that the Plaintiff, being a University be properly
accredited to do the aforementioned
test and as such be recognise not
only in South Africa but worldwide. Wherefore it was a tacit term of
the agreement that Plaintiff`s
laboratory be duly accredited and
registered to do the tests it undertook to do…”
1.5
The tacit term averred by the Defendant
supra,
is in more than
one way not only inconsistent with the written agreement or
instrument and the express terms of the written agreement,
but is
furthermore specifically excluded from any operation or legal
consequence between the parties by clauses 11 and/or 12 of
the
written agreement.
1.6
The Defendant thereafter further relies on such alleged tacit
term,
to aver that the Plaintiff breached the agreement and then in
particular, the alleged tacit term thereof, alternatively,
did not
comply or could not comply with the agreement reached between the
parties and then specifically, the purported tacit term,
and is
Defendant seemingly excused from any obligation or performance under
the agreement (
reciprocity of obligations
) as a result of
which, the Defendant seeks the dismissal of the Plaintiff’s
claim with costs.
1.7
In the premises, the Plaintiff contends that the Defendant’s
plea is vague and/or embarrassing and/or lacks averments which are
necessary to sustain a defence.
WHEREFORE
the Defendant (
sic
) prays for an order that:
(a)
The Exception is upheld with costs;
(b)
The Defendant’s plea be struck out; and
(c)
Alternatively to prayer (b) that the Defendant be granted
an
opportunity to remove the cause of complaint within fifteen days (15)
from the date of the granting of the Order to amend its
Plea, with
the Defendant ordered to pay the costs of the Exception.”
[11]
The crux of the exception therefore lies in the objections that the
pleaded tacit term that “
it was a tacit term of the
agreement that plaintiff`s laboratory be duly accredited and
registered to do the tests it undertook
to do
…”
is “
in more than one way not only inconsistent with the
written agreement or instrument and the express terms of the written
agreement,
but is furthermore specifically excluded from any
operation or legal consequence between the parties by clauses 11
and/or 12 of
the written agreement”
.
The
plaintiff subsequently contends that the defendant`s plea is “
vague
and/or embarrassing and/or lacks averments which are necessary to
sustain a defence
”. (My emphasis)
The
judgment of the court
a quo
[12]
In its judgment the court
a quo
stated that “
two
defences were pleaded by CSN
”, the first defence being
“
erroneous citing of parties to the written
agreement/contract”
and the second defence being “
tacit
term of the written agreement/contract not complied with
”.
[13]
With regard to what the court
a quo
called “
the first
defence
”, it found that the citing of the parties in the
written agreement was clear and unambiguous and that the acronym
“
CSN
” was used about 67 times in the written
agreement. It was consequently found at paragraph [17] of the court
a
quo
`s judgment that:
“…
The claim
by CSN that the contracting parties are the University and Silkblaze
11 (Pty) Ltd is unbelievable on the face of the written
agreement.”
[14]
I will later herein deal with the findings of the
court
a quo
in
respect of
what the court
a quo
termed “
the
second defence
”.
[15]
The court
a quo
delivered its judgment on 18 July 2022 and
made the following order:
“
1.
The exception is upheld with costs on both defences.
2.
The respondent/defendant is granted leave to amend the pleadings to
remove the cause of the complaints(s)/exception(s)
within fifteen
(15) days of the granting of this order, failing which, leave is
granted to the excipient/plaintiff, after proper
notice to the
respondent/defendant, to apply for judgment on the claim in the main
action.”
Notice
of appeal:
[16]
The defendant`s grounds of appeal are set out as follows in the
Notice of Appeal:
“
1.
The Trial Court
misunderstood
(with respect) what it had to adjudicate. The first defence
pleaded by the Appellant was a Plea and defence
of rectification.
This defence did not form part of the exception lodged by the
Respondent in its Notice of Exception dated the
19
th
January 2022
,
nor did it form part of the Heads of Argument before Court, nor was
the Court addressed on this defence. The Respondent did not
seek an
order that the aforementioned Plea of Rectification (the first
defence) must be struck or to be found legally untenable
or that same
was excipiable. On the contrary, the Exception was directed at
the second defence only.
2.
The Court, therefore (with respect) never had jurisdiction or legal
basis upon which it could struck
(sic)
the first defence,
nor was the Appellant requested to address the Court on the
possibility that the first defence could be struck
by the Court
mero
motu.
The
defence in any event is good in law for purposes of plea.
3.
In coming to the aforementioned finding (in respect of the first
Plea) the Court was wrong to find
the plea to be ‘
unbelievable’.
The Court at Exception stage, had to
accept the aforementioned allegations to be the truth.
4.
Wrong findings that the Appellant’s plea was ‘
unbelievable
’,
that the appellant had to refer the matter to arbitration conflated
the Judgment and the tenure of the Court`s view of
the Appellant,
which resulted therein that the Court did not apply its mind to the
question at hand namely whether the tacit term
averred by the
Appellant (Defendant) was inconsistent with the written agreement or
the instrument as a whole, and the express
terms of the written
agreement in particular whether clauses 11 and 12 of the written
agreement had the legal consequence that
the tacit term was to be
excluded from any operation or legal consequences. In this respect
the Court should have found that the
tacit term pleaded at this stage
was clear and unambiguous, did not prejudice the Respondent and was
not in conflict with the agreement
read as a whole bearing in mind
that the Respondent is a registered University and avers that it has
a laboratory to do the tests
it undertook. Therefore, with respect,
the Trial Court should have found that in so far as the second plea
is concerned, the silent
term pleaded by the Appellant was not in
conflict with the terms of the written contract and in fact, should
the innocent bystander
have been asked whether the silent term should
be read into the contract, such response would have been ‘
of
course
’.
5.
The Court erred in not dismissing the exception with costs.”
THE
MERITS OF THE APPEAL AGAINST THE COURT
A QUO`S
FINDINGS IN
RESPECT OF THE PLEA OF RECTIFICATION AS THE SO-CALLED “FIRST
DEFENCE”:
[17]
An excipient is confined to his complaint as stated in the grounds of
his exception. In
Feldman
N.O. v EMI Music SA (Pty) Ltd; Feldman N.O. v EMI Music Publishing SA
(Pty) Ltd
2010
(1) SA 1
(SCA) at para [7] this principle was stated as follows:
“
The
debate about the first exception in the court below appears to have
focused on a contention that the infringement claims were
excipiable
because the appellant had not joined the joint authors in the action.
Jajbhay J referred to various authorities to the
effect that a joint
owner should join his co-owner(s) in litigation concerning the
joint property. As authority for the proposition
that non-joinder may
be raised as a matter for exception, the learned judge referred
to
Collin
v Toffie
1944
AD 456
and
Smith
v Conelect
1987
(3) SA 689 (W)
. Apart from noting that Tindall JA
in
Collin
stated
that a point of non-joinder may be taken on exception,
but
only if it is expressly referred to in the exception
,
it is not necessary to consider whether the decision by Jajbhay
J of the first exception on the basis of joinder was correct
in law.
An
excipient is obliged to confine his complaint to the stated grounds
of his exception. As in
Collin
the
exceptions here contain no mention of non-joinder. They accordingly
fell to be decided on the grounds taken, namely that
the particulars
did not contain averments which founded the claim for relief. Nor
did counsel in arguing the appeals
for either party present argument
based on the ground of non-joinder
.”
(My emphasis)
[18]
The defence and plea of rectification raised by the defendant in its
plea which the court
a quo
called
“
the
first
defence
”, was not raised in the plaintiff`s exception and
did not form part of the grounds of the exception.
[19]
It is, therefore, evident that the court
a quo
erred in even
addressing the plea of rectification and moreover so erred in
upholding the “exception” against the said
plea, since
the plaintiff did not except to
it.
[20]
Mr Snyman correctly conceded same during the hearing of the appeal.
[21]
The appeal should therefore succeed in respect of the upholding of
the exception against the plea of
rectification as the so-called
“first defence”.
THE
MERITS OF THE APPEAL AGAINST THE COURT
A QUO`S
UPHOLDING OF
THE EXCEPTION AGAINST “THE SECOND DEFENCE” IN RESPECT OF
THE TACIT TERM PLEADED BY THE DEFENDANT:
The
nature of a tacit term:
[22]
A tacit term, or term inferred from the facts, was described in
McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
1974 (3) SA 506
(A) at 531 – 532 to be
the following:
“…
an
unexpressed provision of the contract which derives from the common
intention of the parties, as inferred by the Court from the
express
terms of the contract and the surrounding circumstances. …”
[23]
A tacit term is one which the parties did not specifically agree
upon, but which (without anything
being said) both or all of them
expected to form part of their (oral or written) agreement. It is a
wordless understanding, an
unarticulated term, having the same effect
as an express term. See
Botha
v Coopers & Lybrand
2002
(5) SA 347
(SCA) at para [22].
[24]
In
Wilkens v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
(A) at 136 I the
following was said with regard to a tacit term:
“
The
paramount issue is the alleged tacit term. A tacit term, one so
self-evident as to go without saying, can be actual or imputed.
It is
actual if both parties thought about a matter which is pertinent but
did not bother to declare their assent. It is imputed
if they
would have assented about such a matter if only they had thought
about it - which they did not do because they overlooked
a present
fact or failed to anticipate a future one.”
[25]
In
Christie`s The Law of Contract in South Africa,
GB
Bradfield, Eighth Edition, at p. 217 – p. 218, the following
relevant principles are also stated with reference to applicable
case
law:
“
Since
the court is concerned with the states of minds of the parties
(subject to what have been said above about the objective nature
of
the officious bystander test) at the time they entered into their
contract,
the relevant facts to
investigate are the express terms of the contract and the context in
which the contract was concluded
.
…All that needs to be added is that it can be accepted that
the way in which the parties to a contract carried out their
agreement may be considered as part of the contextual setting to
ascertain the meaning of a disputed term. …
When
the context is in issue it may be difficult to dispose by exception
proceedings of a claim to import a tacit term
…”
(My emphasis)
[26]
A tacit term sought to be imported into a contract, must not conflict
with the express terms of the
agreement, since a tacit term only
supplements the contract by providing a term which the parties failed
to agree upon. A tacit
term can also only be imported into a contract
if it is necessary in a business sense to give efficacy to the
contract. Much will
depend on the express terms of the agreement and
the surrounding circumstances at the time it was entered into. The
tacit term
must further be capable of clear and exact formulation.
See
The Law of Contract in South Africa,
D. Hutchinson
et al,
at p. 245.
Applicable
principles in considering an exception:
[27]
It is trite that in considering an exception the court must accept,
as true, the allegations pleaded
by the relevant party. It is also
trite that when an exception is based on the ground that a pleading
lack averments necessary
to sustain a cause of action or a defence,
the excipient is required to show that upon every interpretation
which the pleading
in question can reasonably bear, no cause of
action or defence is disclosed.
[28]
The aforesaid principles were again confirmed in the judgment of
Trustees, Burmilla Trust v President of the Republic of
South-Africa
2022 (5) SA 78
(SCA) at para [16]:
“
It
is trite that in deciding an exception a court
has
to accept the facts alleged in the relevant pleading (save for those
that are palpably untenable)
. It is
for
the excipient to satisfy the
court that, upon every reasonable interpretation of those facts, the
pleading is excipiable
. An
interpretation that disregards
the
context in which the factual allegations are made
would generally not qualify as a reasonable one.”
(My
emphasis)
[29]
In
Erasmus: Superior Court
Practice
, DE van Loggerenberg,
at
RS 20, 2022, D1-29, the following two principles are also
stated:
“
10. An
excipient must satisfy the court that it would be
seriously
prejudiced
if the offending
pleading were allowed to stand, and an excipient is required to make
out a very clear, strong case before
the exception can succeed.
11. Courts
have been reluctant to decide exceptions in respect of fact bound
issues.”
The
judgment of the court
a quo
:
[30]
When the judgment of the court
a quo
is considered; it is evident that it
dealt at length and pedantically at paragraphs [10] – [15] with
the importance of one
of the basic principles of the law of contract
in South-Africa, namely
pacta sunt
servanda “which decrees agreements, freely and voluntarily
concluded, must be honoured”
,
with reference to applicable case law in support of “
the
paramount importance of upholding the sanctity of contracts…
”
as stated in one of the cases quoted at paragraph [15] of the
judgment. The court
a quo
did,
however, in conjunction therewith, correctly and duly also dealt with
the principle and case law pertaining to the “…
impact
of the Constitution on the enforcement of contractual terms through
the determination of public policy…
”
as stated in one of the other cases quoted at paragraph [15] of its
judgment, namely
Beadica 231 CC
and Others v Trustees, Oregon Trust and Others
2020 (5) SA 247
(CC). The court
a
quo
referred to the principle of
“
ubuntu”
dealt
with at paras [207] and [208] of the one dissenting judgment
delivered in the said case, where it is stated that the said
principle is to be applied in adjudicating contractual fairness
“
especially where there is
inequality in the bargaining power between the parties”
as a means of addressing, for example,
“
the economic positions or
bargaining powers of the contracting parties
”.
The court
a quo
further
referred to the principles enunciated at paras [87] and [88] of the
majority judgment delivered in the aforesaid case by
stating that the
principles of “
pacta sunt
servanda and
perceptive
restraint must be balanced on the facts of the case”.
In
the said judgment at para [88] it is explained that the principle of
“
perceptive restraint
”
entails the following:
“
[88]
…
According to this principle a
court must exercise 'perceptive restraint' when approaching the task
of invalidating, or refusing
to enforce, contractual terms. It is
encapsulated in the phrase that a 'court will use the power to
invalidate a contract or not
to enforce it, sparingly, and only in
the clearest of cases'.”
The
court
a quo
then concluded [with emphasis] as follows at para
[15] of its own judgment:
“
The
onus is on the party that claims a court must deviate from the pacta
sunt servanda to proof
(
sic)
that the facts of the case
justify this grave divergence.
”
[31]
As previously stated, the subsequent paragraphs [16] and [17] of the
judgment of the court
a quo
dealt with the plea of
rectification. Thereafter, at paragraphs [18] to [25] of its judgment
the court
a quo
dealt with the exception in respect of the
tacit term. I deem it necessary to quote the said paragraphs:
“
[18]
In
clause 2;
‘Recordal’, it is stated that: ‘2.1 CSN is a
supplier of nutrition supplements as listed in the schedules
hereto
and is desirous to make use of the UFS seals (‘Seals’).
[19] At
clause 2.3 “Seals” is described to mean: “As tested
by the UFS laboratories”, together
with the UFS logo, as
approved by the Department of Marketing”. There can be no
ambiguity that the agreement
does
not
include any specific national or international accreditation; it is
as tested by the UFS laboratories and as approved by the Department
of Marketing. Clause 4.2 refers to the “… standards
prescribed by the UFS, …” (Emphasis added by the
court
a quo)
[20] The
written agreement consists of 17 clauses and the word “international”
or implication of internationality
do not feature anywhere. The
alleged tacit term averred is specifically excluded from any
operation or legal consequence between
the parties in, for instance,
clauses 2, 11 and 12.
[21] Christo
Strydom may have botched the negotiations and the agreement when he
failed to demand the now commanded
terms be in the written agreement.
He will have to carry the responsibility and consequences of the
reality that eventuated, not
the University. He was on an equal
footing with the University during the signing of the written
agreement and is not a frail participant.
As said; he seems to be an
experienced, knowledgeable and international businessman. The written
agreement could not be clearer.
[22] It
will be a travesty of justice to allow the matter to go to trial. The
prejudice to the excipient is clear;
it will be a waste of resources
of which time and money count for the most. As pointed out; the
law is that a
n
exception is a valuable part of the system of procedure. Its
principal use is to raise and obtain a speedy and economical decision
on questions of law which are apparent on the face of the facts in
the pleadings.
[23] There
is nothing more to do by the excipient than to produce the written
agreement and it speaks for itself.
It is valid and constitutionally
enforceable as it is. The defences averred by CSN are bad in law in
comparison.
[24]
Apart from the above, clause 10 decrees that should any dispute arise
between the parties to this agreement with
regard to the
interpretation, implementation execution or termination of this
agreement, such shall be submitted to arbitration.
It seems as if
this was not complied with by CSN in terms of the agreement.
Litigation in the High Court on the defence itself
of CSN may thus be
premature and illegal in terms of the written agreement.
[25]
The defendant`s plea is bad in law, without merit and not trailable
(
sic)
without severe
prejudice to the excipient and the administration of justice.”
[32]
In my view, although regard is to be had to the nature of and the
principles applicable to tacit contractual
terms for purposes of the
adjudication of this exception, one
has
to be mindful of the very important fact that what served before the
court
a quo
was
an exception, hence,
the court should decide
whether the pleaded tacit term made the
plea excipiable on the basis of the plea being vague and/or
embarrassing and/or on the basis
of it lacking averments which are
necessary to sustain a defence. The determination thereof
should therefore entail the question
whether the plea pertaining to
the alleged tacit term should be allowed to remain in the defendant`s
plea, or not. It should not,
at exception stage, entail a
determination of whether the defendant proved the existence of the
alleged tacit term and/or the merits
of the defendant’s defence
based on the alleged tacit term. That would be for the trial court to
eventually decide after
the hearing of evidence, which will
include
admissible evidence of surrounding
circumstances, should the exception not be upheld. One has to
differentiate between the pleading
of a tacit term and the eventual
proving thereof. The mere fact that a party be allowed to plead a
tacit term, does not mean that
the relevant party will necessarily be
able to prove it during the eventual trial.
[33]
Considering the relevant principles of the law of contract which the
court
a quo
dealt with in its judgment as its point
of departure, read in conjunction with the above quoted paragraphs of
the judgment, it unfortunately
seems to me that the court
a
quo
wrongly, although probably
unintentionally so, approached and adjudicated the exception on the
basis of the aforesaid contractual
principles and adjudicated the
merits of the plea based on those principles, instead of having
adjudicated the merits of the exception.
From all of the aforesaid
and the conclusions at paragraphs [23] and [25] of the judgment, it
is in my view evident that what the
court
a quo
in actual fact concluded was that the
defendant should be held to the terms of the written agreement on the
basis of
pacta sunt servanda.
The
effect of the said conclusion is that the court
a
quo
actually found that the
defendant failed to prove the existence of the pleaded tacit term and
that the merits of the defendant`s
defence based on the pleaded tacit
term is bad in law, which findings were not only made without having
applied the principles
applicable to tacit terms, but the court
a
quo
was also not called upon to have
adjudicated same at this stage. The court
a
quo
misdirected itself by not having
applied the principles applicable to exceptions and by having failed
to determine the merits of
the exception as such, as it was called
upon to do.
[34]
It is, however, also trite that an appeal lies against an order and
not the reasons for the order.
As a court of appeal we are
consequently still called upon to determine the correctness of the
order of the court
a quo
upholding the exception.
The
merits of the exception:
[35]
I have indicated above that the one ground of the exception is that
the pleaded tacit term is “
specifically
excluded from any operation or legal consequence between the parties
by clauses 11 and/or 12 of the written agreement”.
This was also the
main submission in support of the exception made by Mr Snyman, who
appeared on behalf of the plaintiff.
[36]
The court
a quo
found accordingly at
paragraph [20] of the judgment that “
the alleged tacit term
averred is specifically excluded from any operation or legal
consequence between the parties in, for instance,
clauses 2, 11 and
12”.
[37]
I will deal first with this finding in respect of the said clauses 11
and 12 of the written agreement.
[38]
These clauses are very common and are included in most written
agreements, often referred to as “entire
agreement clauses”
and “non-variation/Shifren clauses”. In the present
instance they read as follows:
“
11.
ENTIRE AGREEMENT
This
agreement contains all the terms and conditions of the agreement
between the parties concerning the subject matter hereof and
no
terms, conditions, warranties or representations whatever apart from
those contained in this agreement have been made or agreed
to by the
parties.
12.
NON-VARIATION
No
variation or consensual termination of this agreement or any part
thereof shall be of any force or effect unless in writing and
signed
by or on behalf of the parties.”
[39]
In the judgment of
Adhu Investments CC v Padayachee
[2019] JOL 42043
(SCA) the Supreme Court of Appeal re-confirmed the
following principle at para [17] of the judgment:
“
[17]
A sole testimonial clause or non-variation clause does not
necessarily, of itself, exclude the existence of a tacit term.”
[40]
In
Caney’s: The Law of Suretyship in South Africa
,
6
th
Edition, CF Forsyth
et
JT Pretorius at ch6-p92
the said principle was stated as follows:
“
I
t
is important to note that while a tacit term can obviously not
contradict an express term, clauses which provide that the written
document contains the ‘entire agreement between the parties’
and that no variation or modification of the contract
shall be
possible unless ‘reduced to writing and signed by the parties’
do not prevent the court from
inferring a tacit term
. As Nienaber
JA said in
Wilkins NO v Voges:
‘
A
tacit term in a written contract, be it actual or imputed, can be the
corollary of the express terms - reading, as it were, between
the
lines- or it can be the product of the express terms read in
conjunction with evidence of admissible surrounding circumstances.
Either way, a tacit term, once found to exist, is simply read or
blended into the contract: as such it is 'contained' in the written
deed. Not being an adjunct to but an integrated part of the contract,
a tacit term does not fall foul of terms [such as those mentioned]’".
[41]
The finding of the court
a quo
in paragraph [20] of its
judgment, that the alleged tacit term is specifically excluded from
any operation or legal consequence
between the parties because of the
“entire agreement” and “non-variation”
clauses, is consequently clearly
wrong.
[42]
As also indicated earlier, the other ground of the exception is that
it is “
inconsistent with the written agreement or
instrument and the express terms of the written agreement”.
[43]
Although based on different principles
to
those
applicable to tacit terms and the adjudication of an exception, the
court
a quo
,
as referred to earlier,
found that the agreement did not
include any reference to national or international accreditation, and
concluded that the entire
agreement made no reference to
“international or implication of internationality”.
[44]
Upon consideration of Mr Snyman`s arguments on this second basis of
the exception, as set out in his
Heads
of Argument and presented during the hearing of the appeal, it is in
my view evident that in essence his arguments were actually
again
only based on clauses 11 and 12 of the written agreement. His
argument is, with reference to the parol evidence, that considering
that the pleaded tacit term is not expressed and contained in the
written agreement, it will be inconsistent with the written agreement
and its specific terms should it be included in the agreement, which
is prohibited by clauses 11 and 12.
[45]
In my view the court
a
quo
(and Mr Snyman) misunderstood
and/or failed to consider the nature of a tacit term since it
precisely entails a term which the parties
agreed upon or which they
would have agreed upon, depending on the applicable circumstances,
but which term was not expressed in
the written agreement; hence, “
an
unexpressed provision” or “an
unarticulated term” of an agreement
.
(See the case law already cited above.) If it had been
contained in the written agreement, it would not have been a tacit
term and the pleading of the existence of a tacit term would not have
been necessary. Its absence from the written agreement
necessitates
it
being
categorized as a tacit term.
Its absence from the written contract can therefore not serve as a
bar to it being pleaded and relied
upon as part of the terms of the
written agreement. I have also already found that clauses 11 and 12
do also not serve as such
a bar.
[46]
From a reading of the totality of the written agreement, it is
evident from the
explicit terms
that the written agreement was concluded between the parties in
circumstances where the parties, at the time of the conclusion
of the
written agreement, agreed that:
1.
CSN was a supplier of nutrition supplements, which it sold and
distributed;
2.
CSN sought to make use of and display the UFS seal in respect of the
foresaid products, which right was granted
to him, subject to certain
conditions;
3.
The UFS was to
conduct
periodic testing
and evaluation of samples of the products;
4.
CSN was to ensure that all products were “
of the highest
quality standards as prescribed by the applicable standards as well
as applicable law
” (clause 6.1.1), whilst the aforesaid
testing and evaluation were to be done to enable the UFS to ascertain
whether the products
“
comply with the standards prescribed
by the UFS
” (clause 4.2), “
comply with the
objectives of the UFS
” (clause 5.1.1.2) and “
comply
with the requirements
” (clause 8).
5.
CSN was to pay the UFS the percentage levy per month
calculated as agreed upon in the written agreement;
6.
CSN was not to allow any of its products to be analysed and/or tested
by any third party.
[47]
When the contents of the defendant`s plea in respect of the tacit
term are considered, it is very important
to apply the trite
principle that the alleged facts are to be accepted for purposes of
the adjudication of the exception.
[48]
Mr Reinders submitted that upon a proper
reading and interpretation of the written agreement as a whole it is
evident that the spirit
and purpose of the agreement were that the
defendant wanted to sell and distribute the products and sought to
use and display the
UFS seal on the products as prove of and
to
confirm that the products are of the highest quality standards as
prescribed by the applicable standards as well as applicable
law
,
the plaintiff, a university, were to perform testing and evaluation
of the products and if satisfied with the standard of a specific
batch of products, the plaintiff was to approve the use of the UFS
seal on those products, in return for which the defendant was
to pay
the agreed levy. I agree with his submission. Therefore, in my view,
based on
the acceptance of the
pleaded facts
, in order not to
undermine the purpose of the written agreement and for it to be a
sensible agreement with business efficacy, the
pleaded tacit term
“
that the plaintiff`s
laboratory be duly accredited and registered to do the tests it
undertook to do
” goes without
saying, otherwise the testing of the products and the displaying of
the seal would have been meaningless and
worthless.
[49]
It was for the excipient to satisfy the
court that, upon every reasonable interpretation of the aforesaid
accepted facts, they contradict
the explicit terms of the written
agreement and cause an inconsistency in the plea. Like I have already
found earlier in the judgment,
other than for incorrectly relying
upon clauses 11 and 12 of the written agreement, the excipient failed
to do so. More importantly,
the court
a
quo
also failed to make any finding
(based on the correct principles) in this regard.
[50]
In my view the pleaded tacit term does not contradict the explicit
terms of the written agreement and does
not cause any inconsistency
in the plea. The tacit term, as pleaded, is also clear and
unambiguous and does not prejudice the plaintiff
in any way. The
defendant`s plea as a whole, in its present form, is therefore not
vague and embarrassing, nor does it lack averments
which are
necessary to sustain a defence.
[51]
The court
a quo
should
consequently have dismissed the exception, with costs. The
appeal should therefore be upheld.
Costs:
[52]
There is no reason why the usual order that the costs follow the
outcome, should not be made.
Order:
[53]
The following order is made:
1.
The appeal is upheld, with costs.
2.
The order of the court
a quo
is set aside and substituted with
the following order:
“
The exception is
dismissed, with costs.”
______________
C.
VAN ZYL, J
I
concur:
______________
S.
NAIDOO, J
I
concur:
______________
S.
CHESIWE, J
On
behalf of the appellant:
Adv. S. J. Reinders
Instructed by
:
Hendré Conradie
Inc
BLOEMFONTEIN
(e-service@rossouws.com)
On
behalf of the respondent: Adv. C. Snyman
I
nstructed by:
Phatshoane Henney Inc
BLOEMFONTEIN