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[2011] ZASCA 85
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Cellular Insurance Managers (Pty) Ltd v Foschini Retail Group (Pty) Ltd (456/2010) [2011] ZASCA 85 (27 May 2011)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 456/2010
In
the matter between:
CELLULAR INSURANCE
MANAGERS (PTY) LTD
.......................................
Appellant
and
FOSCHINI RETAIL GROUP
(PTY) LIMITED
..............................................
Respondent
Neutral citation:
CIM
v FOSCHINI
(456/2010)
[2011] ZASCA 85
(27 May 2011)
Coram:
Nugent,
Malan, Tshiqi and Seriti JJA and Petse AJA
Heard:
18 May
2011
Delivered: 27 May 2011
Summary:
Termination
of agreement – accrued rights – term implied by law.
______________________________________________________________
ORDER
On appeal from:
Western Cape High Court, (Cape Town) (Fourie J sitting as court
of first instance):
The appeal is dismissed
with costs including the costs of two counsel.
________________________________________________________________
JUDGMENT
MALAN
JA (Nugent, Tshiqi and Seriti JJA and Petse AJA concurring)
[1] This is an appeal
against the judgment of Fourie J in the Western Cape High Court (Cape
Town) who ordered the appellant, Cellular
Insurance Managers (Pty)
Ltd (CIM), to pay over to the respondent, Foschini Retail Group (Pty)
Limited (Foschini), some R6 million
with interest, being
administration fees collected by CIM in respect of cellular phone
insurance policies sold by Foschini; to
provide a monthly accounting
to Foschini; and to pay the costs. The appeal is with the leave of
the court below.
[2] Foschini’s
claim is based on an oral agreement between the parties concluded in
2001 pursuant to which Foschini would
market insurance policies
covering cellular phones sold by it to its customers on behalf of
CIM. The premiums due under the policies
were to be paid by the
customer to CIM by way of monthly debit orders. Foschini’s
staff would assist the customer in completing
the application form
for the policy and forward it to CIM. It would also assist the
customer with any queries and claims, undertake
the necessary head
office claims verification and reconciliation functions, and manage
the cellular phone replacement procedure
and collection of any excess
at the time of a claim. The policy would remain in force while the
customer continued to pay the premiums.
[3] It is not in dispute
that it was an express term of the agreement that in respect of each
policy sold, CIM was obliged to pay
to Foschini an amount of R5,00
(later increased to R R7,00, R8,50 and eventually R10) as an
administration fee upon receipt of
each and every premium paid by the
customer to CIM. However, CIM pleaded as follows to the express term
of the oral agreement:
‘
The
defendant alleges that it was a material, express,
alternatively
implied,
further
alternatively
tacit,
term of the oral agreement concluded between the defendant and the
plaintiff, that the defendant was obliged to pay the plaintiff
an
amount upon receipt of each and every premium paid by the customer to
the defendant, only for so long as the oral agreement
between the
parties remained in force.’
[4] It
is not in dispute that the oral agreement, which was silent as to its
duration, was terminable by either party on reasonable
notice.
1
The
oral agreement between the parties was terminated by Foschini by
notice with effect from 2 April 2007. Foschini’s claim
is for
the total amount of the administration fee due after termination of
the oral agreement and a monthly accounting. The only
issue is
whether it was an implied term of the oral agreement that the
administration fee would be payable only for as long as
the oral
agreement remained in force. CIM has abandoned all reliance on an
express or a tacit term. There was no express agreement
between the
parties supporting the term relied upon by CIM. As CIM’s only
witness, Mr J de Klerk, testified: ‘We certainly
didn’t
discuss any terms and conditions of that nature.’ This is
supported by Mr A D M Liquito who was called as a
witness by
Foschini. The appellant argues that the term relied upon by
themselves is a term imported by law,
2
and in
particular the rule of law that on termination of an agreement ‘there
is no longer any debt or right of action in existence’.
3
[5] In
a careful and reasoned judgment Fourie J found that the oral
agreement contained an express provision that, in respect of
each
policy sold to a Foschini customer, CIM was obliged to pay to
Foschini the agreed administration fee upon receipt by CIM of
each
and every premium paid by the customer to CIM. Since no limitation of
time was agreed upon, the administration fee remained
payable for the
duration of each policy sold. Fourie J accepted that, although
termination of an agreement usually puts an end
to the rights and
obligations of the parties thereunder, this usually applies only to
the executory portion of the contract unless
the parties have agreed
otherwise. The learned judge further relied on
Maw
v Grant
4
where
it was stated that where ‘executory’ or ‘running’
contracts are terminated, ‘either party can
recover from the
other the contra prestation for those portions of the contract he has
performed’. What the contra prestation
in a particular case is
depends on the construction of the agreement. Fourie J found, and it
was common cause, that the marketing
of the policies prior to
termination of the oral agreement created rights for Foschini, that
is the entitlement to payment of the
administrative fee upon receipt
by CIM of each and every premium paid by the customer. The learned
judge therefore declined to
import the term contended for into the
oral agreement because it would have deprived Foschini of the
benefits of the rights that
have accrued to it. Fourie J also had a
‘much shorter’ answer; stating that a term normally
implied by law is excluded
where it would be in conflict with the
express terms of the agreement.
5
[6]
Foschini’s particulars of claim contain no reference to the
termination of the oral agreement. In its particulars of claim
it
alleged the facts set out above and continued that it sold insurance
policies on behalf of CIM, completed the various forms
on their
behalf ‘and complied with all of its obligations in terms of
the agreement in respect of each policy sold by it’.
Termination of the oral agreement thus forms no part of its cause of
action; nor was there any need to allege that the agreement
was
terminated. CIM admitted that Foschini sold the insurances but
pleaded that Foschini by giving notice of termination repudiated
the
oral agreement which repudiation was accepted by CIM. Because the
agreement had been terminated, CIM was no longer obliged
to perform
in terms of it. CIM, however, does not rely on the repudiation or
breach of the agreement any more but only on its termination
with the
consequences implied by law referred to above. The principles are the
same, whatever way the agreement is terminated.
6
[7]
The entitlement to the administration fees payable after termination
had accrued to Foschini prior to termination of the oral
agreement.
Foschini established an ‘accrued right’, that is a ‘right
which is accrued, due, and enforceable as
a cause of action
independent of any executory part of the contract.’
7
I have
not been persuaded that anything ‘executory’ remained on
which payment of the administration fee depended. The
case of CIM was
that payment of the administration fee depended on continued
marketing of the policies. But the term entitling
Foschini to payment
is not expressed as being reciprocal to its continued marketing of
the policies. Continued marketing is not
the contra prestation to
Foschini’s entitlement to the administration fee. Moreover,
there is nothing in the reference to
Maw
v Grant
8
to
‘running contracts’ that detract from this conclusion.
Indeed, that decision supports the conclusion of the court
below. In
Maw’s
case
the appellant’s right to payment was not dependent upon his
undertaking further work. However, his right to ‘payment’,
that is his right to have his name coupled with that of his
contracting party as architects on a builders’ signboard, had
accrued but was postponed until a time after the consensual
termination of the agreement, if and when the building was
constructed.
[8] After argument was
heard in this matter the appellant directed a letter to the Registrar
with the request that a further written
submission be considered by
this court. The submission arises from a question put to counsel for
CIM by the court during argument.
It is not only improper to place
further submissions to the court after argument but particularly so
where the other side has refused,
as it did here, to consent to it. I
have nevertheless considered the argument put forward on behalf of
CIM in this submission.
As I have said earlier, what the contra
prestation for Foschini’s right to the administration fees is
depends on the construction
of the agreement. To my mind, the
submission does not add to the contentions already advanced on behalf
of CIM. I am in agreement
with the judgment of the court below and
the reasons advanced for its decision. It follows that the appeal
should be dismissed.
[9] The appeal is
dismissed with costs including the costs of two counsel.
________________
F R MALAN
JUDGE OF APPEAL
APPEARANCES:
For Appellant: L J
Morison SC
P R V Strathern
Instructed by:
Brian Kahn Inc
Johannesburg
Claude Reid Inc
Bloemfontein
For Respondent: R W F
MacWilliam SC, and
L B urger SC
Instructed by:
C K Friedlander Shandling
Volks Inc
Cape Town
Webbers
Bloemfontein
1
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd & other related
cases
1985 (4) SA 809
(A) at 827I-J.
2
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531D-533E.
3
Atteridgeville
Town Council & another v Livanos t/a Livanos Brothers Electrical
[1991] ZASCA 139
;
1992 (1) SA 296
(A) at 304H-I.
4
Maw
v
Grant
1966 (4) SA 83
(C) at 87A-C. See
further
Walker Fruit Farms Ltd v Sumner
1930 TPD 394
at 401;
Crest
Enterprises (Pty) Ltd v Rycklof Beleggings (Edms) Bpk
1972
(2) SA 863
at 870G-H;
Shelagatha
Property Investments CC v Kellywood Homes (Pty) Ltd; Shelfaerie
Property Holdings CC v Midrand Shopping Centre (Pty)
Ltd
1995
(3) SA 187
(A) at 193H-I .
5
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531E-F;
Group
Five Building Ltd v Minister of Community Development
[1993] ZASCA 75
;
1993
(3) SA 629
(A) at 653F-G.
6
Thomas
Construction (Pty) Ltd (in liquidation) v Grafton Furniture
Manufacturers (Pty) Ltd
1988 (2) SA
546
(A) at 564B-C.
7
Crest
Enterprises (Pty) Ltd v Rycklof Beleggings (Edms) Bpk
1972
(2) SA 863
(A) at 870G-H;
Thomas
Construction (Pty) Ltd (in liquidation) v Grafton Furniture
Manufacturers (Pty) Ltd
1988 (2) SA
(A) at 561A-B.
8
Maw
v
Grant
1966 (4) SA 83
(C) at 87B-D.