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[2021] ZAGPJHC 397
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Kempster Sedwick (Pty) Limited v Monument Car Wash & Valet CC (A5076/2015) [2021] ZAGPJHC 397 (15 September 2021)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES:
NO
REVISED:
Date:
15
th
September 2021
CASE
NO
:
A5076/2015
In
the matter between:
KEMPSTER
SEDWICK (PTY) LIMITED
Appellant
and
MONUMENT
CAR WASH & VALET CC
Respondent
Coram:
Matojane,
Adams JJ
et
Nichols AJ
Heard
: 16
August 2021 – The ‘virtual hearing’ of the Full
Court Appeal was conducted as a videoconference on the
Microsoft
Teams
digital platform.
Delivered:
15
September 2021 – This judgment was handed down electronically
by circulation to the parties' representatives
via
email, by being uploaded to the
CaseLines
system of the GLD and by release to SAFLII. The date and time for
hand-down is deemed to be 11H00 on 15 September 2021.
Summary:
Contract
– for the rendering of services – contractual
interpretation — admissibility of contextual evidence —
parol evidence rule — agreement of indefinite duration –
pactum de contrahendo –
contractual damages arising from
breach of contract – in assessing the sufficiency of the
evidence in support of the quantum
of the damages, a ‘fairly
robust approach’ may be adopted – appeal dismissed
ORDER
On
appeal from:
The Gauteng Local
Division of the High Court, Johannesburg (Mokgoathleng J sitting as
Court of first instance):
(1)
The appellant’s appeal against the order of the court
a quo
is dismissed with costs, including those costs previously reserved.
(2)
The order of the court
a quo
is confirmed.
JUDGMENT
Adams
J (Matojane J
et
Nichols AJ concurring):
[1]
During
November 2004, the appellant
[1]
,
Kempster Sedgwick (Pty) Limited (‘Kempster’), and the
respondent
[2]
, Monument Carwash
and Valet CC (‘Monument’), entered into an agreement
(‘the agreement’) in terms of which
Kempster outsourced
to Monument the carwash and related services at its Dealership in
Roodepoort. In terms of the agreement, Monument
alone was to attend
to the interior and exterior cleaning requirements of all vehicles
sold and serviced by Kempster at the Dealership.
[2]
The issue in this appeal is simply whether the
agreement was a contract of indefinite duration. The parties did not
reduce to writing
all of the material terms and conditions of the
agreement between them. Importantly, they omitted to agree expressly
and in no
uncertain terms on the period during which the agreement
would endure. And, because of that, this dispute arose between the
parties,
which relates to whether or not the contract between them
was to endure for a period of one year or indefinitely.
[3]
Kempster is a motorcar Dealership, which does
business as a retailer of new and used motor vehicles. It also
services and does repairs
of motor vehicles. Monument, as its name
suggests, is in the carwash business, which includes valets and other
related services.
As indicated, during November 2004, Kempster, under
the leadership of its then Dealer Principal, a Mr Petzer (‘Petzer’),
decided to outsource the carwash, car cleaning and valet services
required at its Dealership in Roodepoort. Monument, who was known
to
Petzer, who had dealings with Monument whilst at other motorcar
dealerships, was then required to make to Kempster a business
proposal in relation to the provision of such services, which they
did.
[4]
Pursuant to a presentation made by
Monument to Kempster and following discussions between their
representatives, an agreement
was concluded between the parties in
terms of which Monument was to render to Kempster specified carwash,
valet and related services
at an agreed price. The agreement between
the parties was partly in writing and partly oral, and in terms of
the agreement, Monument
would render to Kempster the following
services: cleaning of the interior and exterior of cars – full
car washes; steam cleaning
of car engines and chasses; valets;
removal of oxidation and body polish; paint protection and auto care;
upholstery protection
and leather treatment.
[5]
As already indicated, the parties agreed on the
fees to be charged by Monument in respect of the services to be
rendered to Kempster.
This part of the agreement was contained in the
written portion, which was constituted by a one-page document, signed
on behalf
of Monument by a Ms E C Van Heerden (‘Van Heerden’)
and by Petzer on behalf of Kempster. The document, which strangely
enough was not dated, was authored by Monument and commenced with the
following sentence:
‘
We
thank you for the opportunity and are pleased to quote as follows:’
[6]
The concluding paragraph reads as follows:
‘
This
contract will be in place from the 1
st
of December 2004
and will be revised on a yearly basis thereafter.’
[7]
This document provided, for example, that
Monument would charge Kempster an amount of R55 (including value
added tax) for the PDI
(pre-delivery inspection) removal of plastic
stickers from a vehicle and R250 for a full valet of a used car.
Another example is
that an amount of R513 would be charged for the
valet of a used car, including the application of auto care paint
protection, as
well as upholstery protection. Certain charges were
set at a monthly rate. So, for example, the washing of all of
Kempster’s
demo vehicles was charged for at a set tariff of
R1368 per month.
[8]
It is common cause that the agreement was
concluded during November 2004 and came into operation with effect
from the 1
st
of December 2004. What is however not so clear is what the parties
had agreed upon regarding the duration of the contract. In that
regard, nothing was expressly stated or discussed between the parties
in either the written or oral portions of the agreement.
And that is
the dispute which needs to be adjudicated in this appeal.
[9]
Monument’s case in this Full Court appeal
and in the trial court was that the agreement between the parties was
that the services
would be rendered indefinitely and that the
contract would endure for as long as its (Monument’s) standard
of service delivery
remained of a generally acceptable standard to
Kempster. Monument pleaded its cause in the trial court as follows:
‘
[The
parties], when concluding the agreement, intended to be bound in
perpetuity for as long as [Monument’s] standard of service
delivery remained of a generally acceptable standard to [Kempster].’
[10]
Kempster, on the other hand, was and is of the
view that the agreement was only to be for a one-year period. In
support of their
stance, Kempster relies heavily on the written part
of the agreement which indicates that the contract was to be revised
on a yearly
basis. This Kempster interprets to mean that the contract
was for a one-year period from the 1
st
of December 2004 to the 30
th
of November 2005. Monument disagrees. Having regard to the context
and the way in which the parties conducted themselves, so Monument
contends, the agreement was that the contract would be for an
indefinite period, terminable only in the event of Monument’s
standard of service delivery not being of a generally acceptable
standard to Kempster. It is also not without significance that
during
the trial in the court
a quo
,
Monument’s case was ostensibly supported by the evidence of Mr
Petzer, who, it will be recalled, represented Kempster when
the
agreement was concluded during November 2004.
[11]
The evidence on behalf of Monument was that
that the implementation of the agreement worked well for the period
from December 2004
to the end of October 2005, when Kempster
unceremoniously evicted Monument from the premises ostensibly on the
basis that the contract
had run its course and Monument was to be
replaced by another carwash and cleaning Contractor with effect from
the 1
st
of November 2005. This, according to Monument, amounted to an
unlawful repudiation by Kempster of the contract, which entitled
them
(Monument) to contractual damages for breach of contract.
Incidentally, at the hearing of this appeal, it was conceded by
Kempster that, in evicting Monument from their premises at the end of
October 2005, they (Kempster) breached the agreement, which,
on their
version was only due to come to an end at the end of November 2005.
In other words, Kempster accepted that their summary
cancellation of
the agreement at the end of October 2004 amounted to an unlawful
repudiation of the agreement, entitling Monument,
at least in theory,
to damages for breach of contract.
[12]
I interpose here to note that during the trial in the court
a quo
Kempster presented evidence by Mr Beeckman, its Dealer Principal
during November 2004, and a Mr Kruger, its Sales Manager at the
time
(November 2004), which suggested that the agreement was cancelled
because Monument’s standard of service delivery was
no longer
at a level acceptable to Kempster. This, so the evidence went,
entitled Kempster to cancel the agreement with effect
from the 1
st
of November 2004. This was denied in the strongest possible
terms by Monument and Ms Van Heerden during her evidence, as was the
claim by Kempster that at the end of October 2004 Monument, through
its member, Ms Van Heerden, accepted and agreed to the cancellation
of the agreement with effect from 1 November 2004.
[13]
The trial Court appears to have rejected, in my view, rightly so,
Kempster’s version
and accepted Monument’s on these
aspects. The detailed version of Ms Van Heerden on these aspects was
corroborated by a contemporaneous
email sent to Kempster on the 6
th
of November 2004, in which she placed on record her version of events
relating to the unlawful repudiation of the agreement by
Mr Beeckman
and the other representatives of Kempster. The trial court’s
factual finding in that regard can therefore not
be faulted.
[14]
In any
event, on the basis of the principles enunciated in
R
v Dhlumayo & Another
[3]
,
I cannot and should not interfere with the factual findings of the
trial Court. In that matter, Davis AJA at pg 706 held as follows:
'[8].
Where there has been no misdirection on fact by the trial Judge, the
presumption is that his
conclusion is correct; the appellate court
will only reverse it where it is convinced that it is wrong.’
[15]
I am not convinced that the trial Court was wrong in its findings
relating to these facts
– far from it. I have little doubt that
there has been no misdirection on the part of the trial Judge in that
regard. And
this is probably why this contention – that the
agreement was lawfully cancelled in terms of the cancellation clause
–
was not pursued with any vigour on appeal.
[16]
During August 2007, Monument instituted action in the High Court
against Kempster for damages
for breach of contract. Kempster
disputed liability to Monument and defended the action on the basis
that it was fully within its
rights to evict Monument from their
premises as the contract expired at the end of November 2005 after a
period of one year. They
therefore denied that they were in breach of
the Agreement and that they were liable for damages.
[17]
The trial court (Mokgoathleng J), after considering the evidence,
concluded that the contract
was for a period in excess of one year.
He accepted the version of Monument that the agreement was to endure
indefinitely. He accordingly
made the following order:
‘
1.
The defendant is ordered to pay the plaintiff damages in the amount
of R420 000
in respect of future loss of profits.
2.
The defendant is ordered to pay the plaintiff the amount of
R97 817.95 in
respect of loss of wages, meaning that the
defendant is ordered to pay in aggregate the plaintiff the amount of
R517 817.95,
plus cost of suit, including all the reserved costs
in the prosecution of this matter.’
[18]
The appeal lies against this order with leave of the Supreme Court of
Appeal. The question
for determination on appeal is whether the trial
court’s legal conclusion and its interpretation of the
agreement were correct.
The questions to be answered are: (1). What
was the agreement between the parties as regards the duration of the
contract? (2).
Did the parties agree on a one-year contract or did
they agree that the contract would endure in perpetuity?
[19]
In its particulars of claim, Monument pleaded that the agreement was
to endure for as long
as Monument’s standard of service
delivery remained of a generally acceptable standard to Kempster. I
understand this to
mean that, according to Monument, the agreement
was to endure indefinitely and in perpetuity and that neither of the
parties could
under any circumstances cancel the agreement for as
long as the services rendered by Monument pursuant to the agreement
were of
a standard generally acceptable to Kempster.
[20]
Monument’s
cause of action, based on a contract of indefinite duration, is sound
and legally sustainable. In that regard,
Unterhalter J in
Trio
Engineered Products Inc v Pilot Crushtec International (Pty) Ltd
[4]
,
held as follows:
‘
[8]
It is common ground between the parties that an agreement of
unspecified duration is a valid
agreement. Such an agreement cannot
be terminated unless it contains a clause to that effect, express or
tacit.
… … …
[10]
The exception proceeds from an incorrect premise. As the
Pillman
case makes plain, absent a term of the agreement permitting of
termination (which is a question of construction), there is no
presumption that a contract of unspecified duration is terminable on
reasonable notice. If the agreement is one in perpetuity, then
the
parties will be held to that bargain.
[11]
Pilot pleads that the agreement was continuous and indefinite. The
agreement is thus not of unspecified
duration in the sense that it is
silent on the matter of duration, rather it is specified to be
indefinite. Once that averment
is made, the agreement must be
understood to endure in perpetuity, and there is no requirement to
plead that the agreement is not
terminable. There is no presumption
that an agreement expressed to be of indefinite duration must be
taken to be tacitly subject
to termination on reasonable notice. On
the contrary, once the agreement is expressed to endure in
perpetuity, it is for the party
relying on reasonable notice to make
the case for such a construction. No such burden rests upon Pilot.
[12]
This conclusion is not at odds with the holding in
Putco
. In
Putco
the express language of the agreement stipulated that it
was a temporary interim arrangement and hence the intention of the
parties
could not have been that the agreement continues
indefinitely. As the court in
Putco
made plain: where the
agreement is silent as to duration, it is terminable on reasonable
notice, in the absence of a conclusion
that it was intended to
continue indefinitely.’
[21]
This postulation by Monument relative to the
agreement was denied by Kempster in its plea. It pleaded that the
contract would be
in place from the 1
st
of December 2004 and was to be revised on a yearly basis thereafter.
Kempster furthermore pleaded that, in the event that the contract
was
not revised as aforesaid, it would terminate after a year from its
inception, that being the 30
th
of November 2005.
[22]
From the evidence led during the trial, I think
that it can safely be accepted that there was no express agreement
relative to the
period of the contract. So, for example, the
evidence-in-chief of Petzer on that point went as follows:
‘
Monument’s
Counsel:
U het reeds vir die agbare hof gesê u was namens
die verweerder en Mnr Fenner en Mev Van Heerden namens die eiser. Nou
benewens
hierdie prysstrukture wat daar onderhandel was, was daar
verdere onderhandelinge oor die [onhoorbaar] van die eiser gewees en
die
manier waarop hulle die diens sou verskaf?
Mr
Petzer:
Van my kant af, van die
maatskappy se kant af, op daardie stadium was daar nie verdere
vreeslike onderhandelinge nie. Dit was ’n
proses waarin ek
[onhoorbaar] gevra het, kom aan boord en doen die ding vir ons
ordentlik. Wat toe tot gevolg gehad het dat met
die huidige ultleg
van waar die voertule gewas was, was daar verskeie goed wat moes
gebeur het. Ek herinner myself aan 'n drain
wat gebou moes word en ek
herinner myself aan afvoerwater wat gekanaliseer moes word
[tussenbei] … …
---
Op die eerste perseel herinner ek my dat daar daadwerklike
veranderings moes plaasgevind het om effektiewe dienste te kan lewer
en die detail daarvan moet ek bieg 'n paar, die drain kan ek onthou,
die afloop-voere kan ek onthou. Dit was relatief gevaarlik
waar die
water heen gevloei het wat volgens reels en regulasies moes nagekom
word. Daardie spesifieke proses het ek aan die diensverskaffer
oorgelaat, en in 'n relatiewe kort tydjie was al daardie goed in plek
en het die dienslewering dan relatief vlot verloop.’
[23]
And then later on in his evidence-in-chief,
Petzer had this to say:
‘
As
ek die vraag kan antwoord soos wat ek die betrokke intensie van die
onderhandelings kan herroep, is dit was daadwerklik onderhandel
dat
die kontrak sal begin. My, met my verstandhouding dat die kontrak sal
beëindig wanneer die dienste nie korrek gelewer
is nie. Nou my
rekolleksie van die intensie van waarom hierdie ding begin is, was
daadwerklik op ’n langer termyn as net
'n jaar gebaseer, as dit
enige lig op enige aspek kan werp.
Monument’s
Counsel:
Nou u sê dit was u
begrip van die intensie, wie se intensie?
---
My intensie as handelaarshoof van die handelaarskap was definitief om
dit 'n langer termyn as net 'n jaar te [onhoorbaar].
Monument’s
Counsel:
Hoekom so, kan u vir die
hof verduidelik hoekom u bedoeling so was?
---
Daar is geen miskonsepsie by my dat hierdie tipe dienslewering, soos
baie ander tipe dienslewering in ons bedryf 'n mens nie
lukraak
veranderings aanbring nie. 'n Mens bou 'n verhouding op met 'n
verskaffer en probeer dan daardie verhouding kweek tot tyd
en wyl
either een kan of die ander kant, in hierdie proses dan die
verskaffer, die dienste nie meer na die, either na hulle vermoê
lewer nie, of na die verwagting van die handelaar.
Dit is nie n proses wat weekliks in heroorweging
geneem word nie.
…
… …
Monument’s
Counsel:
Met hierdie, of in hierdie
onderhandelings proses wat u vir die hof sê uiteindelik die
ooreenkoms tot gevolg gehad het, het
u en die eisers, Mev Van Heerden
en Mnr Fenner saamgestem oor die duur van die kontrak, of oor hoe
lank dit sou moes wees?
---
Ek het, ek het geen illusies gehad oor die duur van die kontrak nie.
Ek sou nie kan sê, ek sou nie direk kan sê
wat Monument
Car Wash se bedoeling was nie, ek kan net aannames maak daar.
Monument’s
Counsel:
Is dit bespreek tussen u
daar? … …
Het
u aan die een kant, en Mev Van Heerden en mnr Fenner, onderhandel oor
die duur van die kontrak op daardie dag toe u hierdie
dokument
bespreek het en die onderhandelings gevoer het?
---
Ek kan nie onthou of ons spesifiek oor die totale tydperk van die
kontrak onderhandel het nie. Wat ek wel onthou is dat daar
nooit 'n
spesifieke beperking op die kontrak geplaas is nie. Ek sal nie die
waarheid praat as ek sê ons het gesê dit
gaan 'n
twee-jaar termyn of 'n drie-jaar termyn of 'n vyf-jaar termyn wees
nie. Wat ek wel weet is dat die tipe kontrakte word
nie gewoonlik vir
minder as drie jaar geskryf nie. … …’
[24]
The evidence of one of the members of Monument,
a Mr Fenner, who also represented Monument when the contract was
concluded, went
as follows on this point relating to the duration of
the agreement:
‘
Monument’s
Counsel:
Met ander woorde vir hoe lank moes u hierdie dienste
verskaf het?
Mr
Fenner:
Daar was werklikwaar, ons
kan sê die tendens daar buite soos wat ek ook met al my ander
Dealerships het, is werklikwaar dit
is ‘n oop kontrak. Solank
as wat ek die diens lewer en waarde vir die dealership gee is hulle,
sal hulle … hou hierdie
kontrak net aan, behalwe vir op ‘n
jaarlikse basis wat ons net dan die pryse hersien. Ons moet eskalasie
in ag neem ook aan
die dealership se kant.
Monument’s
Counsel:
Die verweerder se saak is
dat die ooreenkoms gesluit was net vir 'n jaar. Wat is u kommentaar
daarop?
Mr
Fenner:
U Edele, nee, absoluut nie.
Eerstens om 'n span van, ek dink dit was omtrent 7 mense oor te vat
vanaf niks, ’n wash bay en
alles op te sit vir 'n jaar, dis –
geen persoon sal ooit so 'n besluit [onhoorbaar] dit is [onhoorbaar],
niemand sal dit
so, so n ooreenkoms [onhoorbaar] nie. Dit is, hierdie
was 'n verhouding wat oor jare gebou word. So [onhoorbaar] huidiglik
15 jaar
by hierdie [onhoorbaar], dit kom oor jare. Dit is nie 'n, dit
is glad nie dat dit 'n jaar sou gewees het nie. Ek sou glad nie eers
in so iets ingegaan het as dit moes vir n jaar gewees het nie, en dit
kan u sien aan my kostes wat ek aangegaan het. Daar is geen
manier
wat 'n mens daardie kostes sal [onhoorbaar) in 'n jaar se tyd om te
[onhoorbaar].’
[25]
Under cross-examination, the evidence of Mr
Fenner on this point continued as follows:
‘
Kempster’s
Counsel:
Nee, maar wat ek eintlik in belangstel is, wat ek wil
weet is, wat is, of enigsins iets gesê is in verband met die
duur van
die kontrak. Kan u spesifiek onthou dat julle daaroor
gepraat het? ---
Mr
Fenner:
Daar was glad nie, ons het
glad nie daaroor gepraat in daardie sin nie. Dit was [onhoorbaar] van
al twee partye dat hierdie is
'n aaneenlopende [onhoorbaar], daar is
nie 'n einde op dit nie. Soos ek voorheen getuig het, ek sal nooit in
so iets ingegaan het
as daar 'n tyd periode op so iets was.’
[26]
The point about these extracts from the
evidence led during the trial is simply that there was no express
agreement between the
parties as regards the duration of the
agreement. The question, therefore, is whether the parties tacitly
agreed on the duration
of the contract.
[27]
Kempster’s case, as I have already
indicated, was that the agreement was to come to an end on the 30
th
of November 2005 and in support of that viewpoint, reliance was
placed on the wording of the written portion of the agreement,
which
was to the effect that the contract would be in place from the 1
st
of December 2004 and would be revised on a yearly basis thereafter.
This, so Kempster contends, should be the end of the matter
–
the wording of the agreement, which is clear and unequivocal and
requires no interpretation, provides that the contract
would come to
an end after one year as it would have been revised at that point. In
the absence of such revision, so the contention
on behalf Kempster
goes, there would have been no contract in place.
[28]
Moreover, so it was submitted by Mr Smit, who
appeared on behalf of Kempster, in subsequent correspondence from and
on behalf of
Monument, this view is in fact supported by Monument.
So, for example, on the 7
th
of November 2005 – about seven days after Monument was evicted
from their premises by Kempster – Ms Van Heerden, the
other
member of Monument, addressed an email to Kempster in which she
confirmed that the parties had entered into ‘a contractual
agreement for a provisional period of one year’.
[29]
Also, on 2 February 2006, Monument’s
attorneys addressed a letter to Kempster in which it was stated that:
‘
The
services provided by [Monument] would, in terms of the agreement, be
for a period of one year, whereafter it would be renewed
again for
another year’.
[30]
As indicated above, Monument contends that the
agreement was to endure in perpetuity. This contention is based on
the circumstances
surrounding the conclusion of the contract.
Monument also disputes the claim by Kempster that the agreement is
clear, unequivocal
and not open to an interpretation other than one
to the effect that the agreement was to commence on 1 December 2004
and end on
30 November 2005. The evidence on behalf of behalf of
Monument was that the reference in the written part of the agreement
to ‘the
contract’ being revised on a yearly basis after
its commencement on the 1
st
of December 2004, was intended to refer to the pricing structure,
which would be revised annually. I will revert to this aspect
of the
matter later on in the judgment. For the moment, it suffices to say
that at first blush, there is merit in Monument’s
contention
that the wording of the particular clause is certainly open to an
interpretation that supports its version. One needs
look no further
than the way in which the relevant clause is structured – it is
not inconceivable that, according to this
clause, the contract was to
commence on 1 December 2004 and that the written portion, which dealt
almost exclusively with the pricing,
would be reviewed annually. My
view, therefore, is that the parol evidence rule was not offended by
the testimony for Monument
that what the parties intended was not to
agree that the agreement itself would be revised but only the pricing
structure.
[31]
I
find support for this view in what was recently said by the
Constitutional Court in
University
of Johannesburg v Auckland Park Theological Seminary and Another
[5]
.
At para 69 Khampepe J held as follows:
‘
[69]
What the preceding discussion clearly shows is that, to the extent
that the Supreme Court of Appeal
in the current matter purported to
revert to a position where contextual evidence may only be adduced
when a contract or its terms
are ambiguous, it erred.
Context must
be considered when interpreting any contractual provision and it must
be considered from the outset as part of the
unitary exercise of
interpretation
.’ (My emphasis).
[32]
The
pertinent question is whether the parties tacitly agreed that the
agreement would be of indefinite duration. In seeking to answer
this
question the approach to be adopted should be as per
Trident
Sales (Pty) Ltd v A H Pillman & Son (Pty) Ltd
[6]
,
which held that (1) It is a question of construction of the agreement
according to the ordinary principles of construction; (2)
Since,
however, such agreements,
ex
hypothesi
,
contain no express provisions dealing with determination by the party
who asserts that it should be inferred, it is a question
of
construction in the wider sense of ascertaining what the intention of
the parties was when they entered into the agreement;
(3) This
intention is determined in the light of all the admissible evidence
and in the light of what the parties have said or
omitted to say in
their agreement; (4) There is no presumption either way; (5) The onus
is on the party who asserts that the parties
intended something which
they omitted to state expressly to demonstrate that this was so.
[33]
Once a Court is persuaded that, on a proper
construction of their agreement, the parties intended to be bound in
perpetuity, there
is no reason why such a bargain, like any other,
should not be enforced.
[34]
I agree. This is the approach to be adopted in
this matter when interpreting the agreement between the parties.
Importantly, the
context in which the agreement was concluded was
testified about by the witnesses on behalf of the plaintiff, notably
by Mr Petzer,
whose evidence was to the effect that it was envisaged
by the parties that the agreement would endure for a considerable
period
of time. This agreement, in particular, required of Monument
to invest in the infrastructure and setting up of the car wash
premises
at Kempster to support the carwash.
[35]
Kempster specifically required Monument to set
up a Valet Centre at the premises of Kempster. This was unusual as
all cars for other
Dealerships were normally valeted at Monument’s
premises. Therefore, this was an additional expense that Monument had
to
incur for the specialised valet equipment, such as high
pressure-washing machines, dryers and bigger vacuum cleaners.
Additionally,
specialised valet staff members were required to be
seconded to Kempster. The start-up costs, which was for the account
of Monument,
amounted in total to approximately R170 000. These
costs included the costs of moving the Car Wash, the Valet Centre and
all
the equipment and machinery to new premises after Kempster moved
their Dealership early in 2005. The evidence of Mr Fenner in relation
to these expenses was to the effect that Monument believed that these
costs would in the course of the duration of the agreement
be
recouped by them.
[36]
Kempster also required of Monument to take over
all of the Kempster staff – about seven in total – who
were involved
at that stage in the car wash and cleaning side of the
business. This investment, in the normal course of events, would only
start
showing a dividend after a few years of being operational.
[37]
The first issue which needs to be addressed is
whether the agreement was for an indefinite period of time. In that
regard, the witnesses
of Monument were cross-examined at length on
the agreement which would have prevailed in the event of the parties
being unable,
when the pricing was being revised, to reach agreement.
Most of the witnesses were not able to give a definitive answer, as
they
were confident that that scenario was unlikely to eventuate.
This then gives rise to a further question, that being whether the
agreement was not a species of
pactum
de contrahendo
, i e an
agreement to make a contract in the future. If so, it might not be
enforceable.
[38]
The trial Judge accepted Monument’s
contention that the agreement was to continue in perpetuity unless it
was terminated on
the specific ground set out therein. The trial
Judge also rejected Kempster’s contention that the agreement
came to an end
on the 30
th
of November 2005. In arriving at a proper construction of the
agreement the trial Judge, on the basis of the context in which the
agreement was concluded, held that it was to be interpreted as
enduring in perpetuity. The trial Judge said:
‘
Consequently,
despite the fact that Ms van Heerden in an email which she had
addressed to [Kempster] had stated that the contract
was
provisionally for a year, there is a reasonable explanation which is
bona fide
that when she wrote that letter she was upset and
she was not in her normal state of mind. Also, that the attorneys who
previously
represented [Monument] had written a letter to
[Kempster’s] attorneys wherein they stated that the contract
concluded between
the parties was concluded to endure for a year.
Mr
Fenner and Ms van Heerden vehemently denied that such instructions
were given to the attorneys, because they at all reasonable
times
understood that the contract would have to endure for a period in
perpetuity. For this contention, this court finds comfort
in that it
is confirmed by Mr Petzer, who said unequivocally that the contract
was not intended to endure for a year, it was intended
to endure in
perpetuity or at least for a minimum of three to five years.
Consequently, the court finds that that was the intention
of the
parties.’
[39]
I agree. Applying the principles in
Trident
Steel
and having regard to the
evidence led during the trial and the context in which the agreement
was entered into, the contract was
to continue for an indefinite
period. As indicated above, I do not believe that the language and
the wording of the written portion
of the agreement is in conflict
with this interpretation. On the contrary, I am of the view that, on
a proper interpretation, the
relevant clause simply provides that the
pricing shall be revisited on a yearly basis. In the light of the
words of the clause,
the parties probably contemplated that, failing
agreement on a new pricing structure when same fell due to be revised
within a
year from 1 December 2004, the agreement, as it stood, would
have been binding upon them in perpetuity.
[40]
I do not agree with Kempster’s contention
that the language used in the agreement is inconsistent with an
intention that the
agreement should continue indefinitely if
agreement on a revised pricing structure was not reached. The parties
clearly contemplated
that the agreement would endure for a period
well in excess of one year, and their rights and obligations under
the agreement must
be determined on that basis. Furthermore, the
parties bound themselves to an agreement which required them to work
closely together
and to have mutual trust and confidence in each
other. This is evidenced by the fact that Kempster required Monument
to take over
some of their staff together with any and all of the
concomitant obligations which go with that. The individuals
representing the
parties during the conclusion of the contract also
had a history together. It is reasonable to infer that they intended,
as stated
by the witnesses, to bind themselves indefinitely.
[41]
It is so that, where an agreement is silent as
to its duration, it is terminable on reasonable notice. However,
in
casu,
the conclusion is ineluctable
that the agreement by implication was intended to continue
indefinitely. In that regard, I disagree
with Kempster’s
contention that, in the event of a new pricing structure not being
agreed upon after the expiration of one
year, the agreement would
come to an end. This contention is without substance. It has not been
established in the present matter
that the parties would have
refrained from entering into the agreement had they known that
revised prices would not be agreed upon
when the time came for
revision thereof. The agreement envisaged that the parties would
negotiate and conclude new agreements in
relation to the quoted
prices.
[42]
Had the new pricing structure eventuated, the
agreement would have continued on the basis of the new prices.
However, there is no
indication to be found in the agreement and in
the evidence relating thereto that it would have terminated on the
failure to reach
an agreement on a revised pricing structure. This
contention by Kempster, therefore, cannot succeed.
[43]
Therefore, I conclude that the learned trial
Judge was correct in finding that the agreement between the parties
was to endure for
an indefinite period in perpetuity.
[44]
That brings me to the issue of the quantum of
Monument’s contractual damages as a result of Kempster’s
breach of the
agreement. The trial court assessed such damages at
R517 817.95, which sum was constituted as follows: R420 000,
representing
R20 000 estimated profit per month from the
business times 24 months (two years); plus R97 817.95 in respect
of salaries
and wages, which, according to Monument, it had to incur
unnecessarily as a result of the unlawful termination of the
contract.
[45]
The R97 817.95 was roughly calculated on
the basis of approximately six months’ salaries for all of the
workers, who
had been employed by Monument at the premises of
Kempster. They had to be redeployed and accommodated somewhere else
and at other
branches by Monument, who continued to pay their wages
and salaries, when in truth and in fact they were superfluous. Their
salaries
and wages for a period of six months would therefore have
been damages flowing naturally from Kempster’s breach, and the
trial court was therefore correct in awarding this amount to Monument
as damages.
[46]
As regards the amount of R480 000, the
trial Court reasoned that Monument’s damages should be
calculated on the basis
that the agreement would at least have
endured for five years. The evidence indicated, so the trial Court
found, that the business
from the agreement would have started
turning a profit of about R20 000 per month from about the third
year onwards. This,
in turn, means that Monument would have earned a
profit at least for a period of twenty-four months, being the
remaining two years
of the five-year period of the contract.
[47]
The approach of the trial Court cannot be
faulted. There can be little doubt that Monument would have suffered
damages as a result
of Kempster’s breach of the agreement. The
simple fact of the matter is that up to the point when Kempster
summarily and
unlawfully cancelled the agreement with effect from the
27
th
of October 2004, Monument had been earning gross monthly income of
approximately R20 000. That income stream was closed when
the
agreement was cancelled and it, therefore, stands to reason that,
however one views this matter, Monument’s income was
reduced by
R20 000 per month – this is the very definition of a loss
or damages.
[48]
That
having been established, the trial Court opted to adopt, correctly
so, in my view, a robust approach in the quantification
of the
damages. In that regard, the trial Court was guided by cases such as
AA
Alloy Foundry (Pty) Ltd v Titaco Projects (Pty) Ltd
[7]
,
in which the SCA at para 14 held as follows:
‘
[14]
Due recognition must be given to the fact that it is extremely
difficult to prove damages such as these
and that in assessing the
sufficiency of the evidence “a fairly robust approach”
may be adopted (
Thompson v Scholtz
[1998] ZASCA 87
;
1999 (1) SA 232
(SCA) at
249B).’
[49]
I believe that the evidence on behalf of
Monument sufficed to establish as a probability that it would have
suffered the future
loss of profit as formulated by the trial judge.
[50]
I do not accept Kempster’s submission
that Monument did not prove that it suffered damages, because, on
Monument’s version,
that part of the business, which operated
from the premises of Kempster, made a loss on a monthly basis for the
period from December
2004 to October 2005. That then means, so the
argument on behalf of Kempster goes, that Kempster in fact did
Monument a favour
by cancelling the agreement, thus saving them from
the further losses suffered by them on a monthly basis. This
contention misses
the point, that being Monument lost the income
generated from that operation, which reduced the net income of
Monument.
[51]
Even if I am wrong in calculating Monument’s
damages on the aforesaid basis, I nevertheless believe that the said
amount of
damages should be awarded to Monument. I say so for the
following reasons.
[52]
There is an alternative approach which would
also justify the award of damages under the head of loss of future
profits. That would
be on the basis that during the period from
December 2004 to October 2005, Monument earned additional income from
the contract
with Kempster. Assuming conservatively that the
agreement would have endured for another two years after 30 November
2005, Monument
would have earned that R20 000 per month for
those two years. In view of the unlawful cancellation of the
contract, that R20 000
X 24 was wiped off Monument’s
Income Statement for those two years. That, in my view, equates at
the very least to a loss
by Monument irrespective of whether the
contract on its own was a loss-making enterprise.
[53]
For these reasons, I am of the view that the
award of damages by the trial Court cannot be faulted.
[54]
The appeal must therefore fail.
Costs
of Appeal
[55]
The general
rule in matters of costs is that the successful party should be given
his costs, and this rule should not be departed
from except where
there are good grounds for doing so. See
Myers
v Abramson
[8]
.
[56]
I can think of no reason to deviate from the general rule. Kempster
should therefore pay
Monument’s costs of the appeal.
Order
[57]
In the result, the following order is made: -
(1)
The appellant’s appeal against the order of the Court
a quo
is dismissed with costs, including those costs previously reserved.
(2)
The order of the court
a quo
is confirmed.
L R ADAMS
Judge of the High
Court
Gauteng
Local Division, Johannesburg
HEARD
ON: 16
th
August 2021 – in a ‘virtual hearing’ during a
videoconference on the
Microsoft Teams
digital platform.
JUDGMENT
DATE: 15
th
September 2021 – judgment handed down electronically
FOR THE
APPELLANT:
Advocate Mark Smit
INSTRUCTED
BY:
Pearce, Du Toit & Moodie Attorneys, Sandton
FOR
THE RESPONDENT:
Advocate G V F Fouché
INSTRUCTED
BY:
Suené Meyburg Incorporated, Roodepoort
[1]
The
defendant in the trial court.
[2]
The plaintiff in the trial court.
[3]
R v
Dhlumayo & Another
1948 (2) SA 677 (A)
[4]
Trio
Engineered Products Inc v Pilot Crushtec International (Pty) Ltd
2019 (3) SA 580 (GJ)
[5]
University
of Johannesburg v Auckland Park Theological Seminary and Another
(CCT 70/20) [2021] ZACC 13; 2021 (8) BCLR 807 (CC)
[6]
[7]
AA
Alloy Foundry (Pty) Ltd v Titaco Projects (Pty) Ltd
2000 (1) SA 639 (SCA)
[8]
Myers v
Abramson
,1951(3)
SA 438 (C) at 455