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[2016] ZAFSHC 152
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Optic Powerlines (Pty) Ltd v J P Hattingh trading as Hat Kontruksie (3645/2015) [2016] ZAFSHC 152 (8 September 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
Number: 3645/2015
In
the matter between
OPTIC
POWERLINES (PTY) LTD
Applicant
and
J
P HATTINGH trading as HAT KONTRUKSIE
Respondent
HEARD
ON:
25
AUGUST 2016
JUDGMENT
BY:
FISCHER,
AJ
DELIVERED
ON:
8
SEPTEMBER 2016
I
INTRODUCTION
[1]
The applicant (“the defendant”) approaches this Court in
terms of Rule 42 of the Uniform Rules of Court for the
rescission of
a judgment by consent granted on 1 October 2015 pursuant to the
conclusion of a written settlement agreement with
the respondent
(“the plaintiff”).
[2]
The application by the defendant is premised on the allegation that
the judgment by consent was erroneously granted in that
the Court not
only failed
mero
motu
to find that the settlement agreement referred to therein contained
an unfair and excessive “penalty” but thereafter
failed
to deal appropriately therewith.
[3]
In the alternative, the defendant seeks that the order of Court,
incorporating the settlement agreement, be varied by deleting
the
clause contained therein incorporating what is alleged to be an
excessive “penalty”. Further ancillary relief relating
to
a writ of execution issued pursuant to the judgment is also sought.
II
THE
RELEVANT BACKGROUND FACTS
[4]
On 4 August 2015 JP Hattingh t/a Hat Konstruksie (the plaintiff)
instituted an action against Optic Power Lines (Pty) Ltd (the
defendant) for payment of the sum of R467 353,10 together with
interest and costs.
[5]
The plaintiff’s cause of action was based on an oral agreement
of lease concluded between the parties on 20 September
2013 in terms
whereof the defendant leased certain specified heavy earthmoving
machinery from plaintiff over a period of almost
two years at an
agreed upon hourly/daily tariff as well as the cost of fuel.
According to the plaintiff the defendant had
made various and
substantial payments over a sixteen month period where after it
defaulted leaving the balance now claimed.
[6]
The defendant entered appearance to defend the action pursuant to
which the plaintiff launched an application for summary judgment
supported by a founding affidavit in which the plaintiff acknowledged
under oath a subsequent payment of a further amount of R73
328,19
thereby reducing the amount allegedly due, owing and payable to R394
024,91.
[7]
On 30 September 2015 and in belated opposition to the application for
summary judgment, one Masia Lawrence Matsena (Matsena),
the tax and
accounting manager in the employ of the defendant, deposed to an
answering affidavit challenging the correctness of
the calculation of
the balance claimed by the plaintiff.
[8]
Later the same day a settlement agreement, titled
“
Skikkingsooreenkoms”
,
was sent by the attorneys representing the plaintiff to Matsena, who
thereafter proceeded to sign such document at Lanseria on
30
September 2015. The settlement agreement was returned to
Bloemfontein where it was subsequently signed on behalf
of plaintiff
by his attorney of record on 1 October 2015. Later that
same day Moloi J was approached in chambers and,
by agreement between
the parties, the aforementioned settlement agreement was made an
order of Court.
[9]
In terms of the settlement agreement, the particulars of which will
be dealt with more fully herein below, the defendant undertook
to
settle a stipulated reduced amount of R250 675,58, which included
costs relating to the summary judgment application, by means
of three
payments on three specified dates failing which it was agreed that
the defendant would be obliged to pay the larger balance
of R394
024,91 dealt with in the application for summary judgment.
[10]
The defendant failed to pay the last two payments on the stipulated
dates (it is common cause that the payments were two and
nine days
late respectively) as a result of which the plaintiff claimed that he
was now entitled to the balance of the larger amount
together with
interest and costs less all payments made in terms of the schedule,
albeit it belatedly, as agreed upon (R394 024,91
less payments plus
interest and costs) totalling R171 845,80, the breakdown of which was
fully set out in an annexure to the defendants
founding papers.
[11]
It is the defendant’s case that the clause in the settlement
agreement which was made an order of Court entitling the
plaintiff to
the larger amount (less any payments already made) should any
payments in respect of the lesser amount not be made
timeously, is
nothing more than a penalty clause which Moloi J should have
challenged and dealt with
mero
motu
in chambers, alternatively that the penalty clause should be deleted
from what is in effect a Court judgment.
III
THE
SETTLEMENT AGREEMENT/ORDER
[12]
The action was settled in terms of a written and signed agreement of
settlement which was made an order of Court on 1 October
2016.
It is necessary for purposes hereof to recite the whole settlement
agreement which reads as follows:
“
Skikkingsooreenkoms
DIE
PARTYE BEVESTIG hiermee dat die verskillende dispute geskik is op die
basis soos hierna uiteengesit, en by ooreenkoms versoek
albei partye
dat hierdie skikkingsooreenkoms vervat word in ‘n bevel van
bogemelde Agbare Hof:
1.
Die
verweerder sal aan die eiser se prokureurs betaal by wyse van
elektroniese fonds oorplasing na die bedoelde prokureurs se
trustrekening
waarvan die besonderhede as volg is :
Nedbank
rekening No. [1...]
Waterfront
takkode 110234 (Verwysing G22176);
1.1
Voor of op 31 Oktober 2015 die bedrag van : R124 337,79;
1.2
Voor of op 30 November 2015 die bedrag van R124 337,79;
2.
Die verweerder sal aan die eiser se
prokureurs die ooreengekome bedrag van R2 000,00 betaal synde die
koste veroorsaak deur die
uitstel van die aansoek om summiere vonnis
op 1 Oktober 2015 na 15 Oktober 2015 en handelinge gepaardgaande
daarmee, as gevolg
van die verweerder se versuim om tydig sy
opponerende verklarings tot die aansoek om summiere vonnis te
liasseer, welke bedrag
betaal sal word ook by wyse van elektroniese
fonds oorplasing na die prokureurs se voormelde bankrekening voor of
op Maandag, 5
Oktober 2015.
3.
Indien bogemelde betalings deur die
verweerder tydig, volledig en stiptelik gemaak word, sal dit deur die
eiser aanvaar word in
volle vereffening van alle eise wat hy teen die
verweerder het en sal elke party aanspreeklik wees vir betaling van
sy eie koste
in hierdie aksie.
4.
Indien
die verweerder sou versuim om enige van voormelde drie betalings
volledig, tydig en stiptelik te maak, sal die verweerder
aanspreeklik
wees vir betaling aan die eiser vir die volle bedrag soos gevorder en
bevestig in die eedsverklaring van die eiser
gedateer 11 September
2015, naamlik R394 024,91 plus rente daarop teen die koers van 9% per
jaar gereken vanaf 21 Augustus 2015
tot datum van betaling daarvan
plus eiser se gedingskoste en wel binne 10 dae na datum van die
Takseermeester se allokatur op die
getakseerde kosterekening van die
eiser se prokureurs plus moratore rente daarop, indien van
toepassing, teen die koers van 9%
per jaar.”
[13]
Mr van der Merwe, on behalf of the defendant, submitted that clause 4
of the settlement agreement contains a penalty provision
and that if
regard be had to the relevant provisions of the
Conventional
Penalties Act 15 of 1962
(“the
Act”), the balance the plaintiff was now seeking to
enforce by means of a writ of execution was disproportionate
to the
prejudice the plaintiff had allegedly suffered as a result of the
late payments and that, in the circumstances, this Court
had a
“
positive
duty”
to rescind the judgment in terms of rule 42, alternatively vary the
settlement agreement by deleting the offending clause 4 thereof.
[14]
Mr C Ploos van Amstel S.C. on behalf of the plaintiff submitted that
the settlement agreement was analogous to an “
incidental
credit agreement”
as defined in
section 1
of the
National
Credit
Act
34 of 2005
in that,
in
casu
,
nothing more than two prices had been quoted for settlement of the
account with the lower price being applicable if the account
was
settled on or before a pre-determined date(s) and the higher price
being applicable should the account not have been paid by
such
earlier dates. Notwithstanding the fact that the provisions of the
National
Credit Act
prevail
over those of the
Conventional
Penalties Act
to the extent that such provisions are in conflict with each other(
see s 172(1) read with Schedule 1 thereof), I do not deem it
necessary for purposes hereof to make any finding in this regard for
reasons that will become apparent later.
[15]
I do however deem it apposite to have regard to not only the relevant
provisions of the
Conventional
Penalties Act 15 of 1962
(“the
Act”) but, in addition thereto, the approach developed by the
Courts in determining whether or not a contractual
provision such as
that complained of is in fact a penalty and if so, whether or not the
penalty contained therein is out of proportion
to the prejudice
suffered by the plaintiff in his capacity as a creditor and falls to
be dealt with.
IV
THE
CONVENTIONAL PENALTIES ACT 15 OF 1962:
[16]
Sections 1 to 4 of the
Conventional Penalties Act 15 of 1962
provide as follows:
“
(1)
A stipulation, hereinafter referred to as a penalty stipulation,
whereby it is provided
that any person shall, in respect of an act or
omission in conflict with a contractual obligation, be liable to pay
a sum of money
or to deliver or perform anything for the benefit of
any other person, hereinafter referred to as a creditor, either by
way of
a penalty or as liquidated damages, shall, subject to the
provisions of this Act, be capable of being enforced in any competent
Court.
(2)
Any sum of money for the payment of which or anything for the
delivery
or performance of which a person may so become liable, is in
this Act referred to as a penalty.
2(1)
A creditor shall not be entitled to recover in respect of an act or
omission which is the
subject of a penalty stipulation both the
penalty and damages, or, except where the relevant contract expressly
so provides, to
recover damages in lieu of the penalty.
(2)
A person who accepts or is obliged to accept defective or non-timeous
performance shall not be entitled to recover a penalty in respect of
the defect or delay unless the penalty was expressly stipulated
for
in respect of that defect or delay.
3.
If upon the hearing of a claim for a penalty, it appears to the Court
that such penalty is out of proportion to the prejudice suffered by
the creditor by reason of the act or omission in respect of
which the
penalty was stipulated, the Court may reduce the penalty to such
extent as it may consider equitable in the circumstances:
Provided
that in determining the extent of such prejudice the Court shall take
into consideration not only the creditor’s
proprietary
interest, but every other rightful interest which may be affected by
the act or omission in question.
4.
A stipulation whereby it is provided that upon withdrawal from an
agreement by a party thereto under circumstances specified therein,
any other party thereto shall forfeit the right to claim restitution
of anything performed by him in terms of the agreement, or shall,
notwithstanding the withdrawal, the man liable for the performance
of
anything thereunder, shall have effect to the extent and subject to
the conditions prescribed in ss1 – 3 inclusive, as
if it were a
penalty stipulation.”
[17]
The parties to a contract not infrequently include a term in their
contract which seeks to bind the one party to pay a pre-determined
sum of money and forfeit all payments already made in the event of
such party committing a specified breach. What is
quite
clear from a reading of “the Act” as well as the relevant
authorities is that “the Act” has two objectives:
(i)
To state unequivocally that a penalty stipulation arising out of a
contractual obligation is in
fact enforceable at law; and
(ii)
To prevent enforcing or exacting an excessive penalty out of
proportion to the prejudice actually
suffered by the creditor and to
thereby further prevent the creditor from enforcing both a penalty
and damages (see
Van
Staden v The Central SA Lands & Mines
1969
(4) SA p 349 (W) at 351 D – F.)
[18]
Of relevance
in
casu
is that “the Act” does not prohibit parties to a contract
from avoiding the application of the provisions of “the
Act”
by agreeing in their contract to the payment of an admitted lesser
amount as a reward for timeous performance rather
than to couch the
relevant terms of the agreement as a penalty for subsequent breach.
(See
Sun
Packaging (Pty) Ltd v Vreulink
1996
(4) SA p 176 (A) at 185I – J.)
[19]
In determining what was envisaged when the agreement was concluded
regard must be had to the actual intention of the parties
as the case
law quite clearly demonstrates that a proper interpretation of the
particular agreement will assist in determining
whether the provision
in question is to be regarded as a penalty, alternatively is not a
penalty. (See
SA
Mutual Life Assurance Society v Uys
1970
(4) SA 489
(O) and
Massey-Ferguson
(SA) Ltd v Ermelo Motors (Pty) Ltd
1973(4)
SA 206 (T);
DA
Mata v Otto
1972
(3) SA 858
(A) at 872 and
Tamarillo
(Pty) Ltd v BN Aitken (Pty) Ltd
1982
(1) SA 389
(A) at 438C to 439A.)
[20]
Mr van der Merwe sought to rely upon the
Massey-Ferguson
case
supra
in advancing the argument that,
in
casu
,
this Court was dealing with a penalty for breach which by far
exceeded the “
amount
agreed upon in the settlement”
.
[21]
In the
Massey-Ferguson
case the plaintiff instituted an action for payment of R81 670,77,
being the purchase price of certain goods sold and delivered
together
with payment in respect of certain further goods pursuant to which
the defendant filed a plea and counterclaim.
Thereafter
the action was settled out of Court in terms whereof the defendant
acknowledged liability in a lesser amount totalling
R65 000,00 and
undertook to repay such amount by means of several monthly
instalments over a period of some 18 months. It was further
agreed
that should any one instalment not be paid on due date, alternatively
should the defendant commit any other breach of the
settlement, then
in such event the plaintiff would be entitled to
“
reinstate
this action and apply for judgment of the full amount of its claim as
set out in the combined summons, less any amounts
paid as at the date
of the application for judgment.”
(See
the
Massey-Ferguson
case
supra,
at
207E to 208D). The Court found that a settlement had been
reached whereby the defendant acknowledged its liability in an
amount
of R65 000,00, that a
transactio
had
accordingly been effected and that the original debt of R81 670,77
had thereby been wiped out. (See the
Massey-Ferguson
case
supra,
at
215F – G.)
[22]
The Court found that
“…
.
(t)he
stipulation to pay, on breach, the full amount of the (plaintiff’s
claim) as set out in the combined summons constitutes
… in so
far as this amount exceeds the amount agreed upon in the settlement,
a penalty in terms of the Act…”
(See
Massey-Ferguson
case
supra
,
at 215G – H). The Court furthermore found that
there was a disproportionality in respect of the “
penalty”
the
plaintiff sought to enforce in that “
this
amount exceeds the amount agreed upon in the settlement”
and
was accordingly a penalty way out of proportion to the actual
prejudice suffered by reason of the defendant’s default.
(See
Massey-Ferguson
case
supra,
at 215H and further.)
[23]
In
casu
I am called upon to decide whether the contractual provision
contained in clause 4 of the settlement agreement is in fact a
penalty
in the sense that it may be interpreted as a stipulation in
terms whereof a debtor such as the present defendant shall, in
respect
of an omission or failure in terms of it’s contractual
obligations, be liable to pay a further sum of money to the creditor
(
in
casu
the plaintiff) in the sense that “
something
additional ”
must
now be paid by the defendant. What falls to be asked and
answered is whether the obligation by the defendant to pay the
larger
amount resulted in the plaintiff obtaining far more than what was
already owing to him (See
Parekh
v Shah Jehan Cinemas & Others
1982
(3) SA 618(D)
at 626B – H).
[24]
In the
Massey-Ferguson
case the Court found, as already pointed out, that the defendant had
only acknowledged its indebtedness in the sum of R65 000,00
and that
any other larger amount had been “
wiped
out”
.(
at
215G
).
[25]
In
casu a
literal translation of clause 4 of the settlement agreement
stipulates unequivocally that should any one of the three payments
totalling R250 675,58 not be paid on due date then in such event the
larger sum of R394 024,91 as confirmed under oath by the plaintiff,
would become due, owing and payable. In the absence of
any evidence and/or allegations to the contrary, it must be
accepted
on the face of it that at the time of the conclusion of the
settlement agreement the defendant acknowledged in writing
that two
amounts were due, owing and payable and that if it performed promptly
and timeously, it would receive a substantial discount,
failing which
the larger amount
it
admitted it owed
would
become due, owing and payable. It must furthermore be
accepted on the strength of what was placed before me that
in
breaching the settlement agreement nothing more accrued to the
plaintiff than what was agreed upon and in fact already owing
to him.
(See
Parekh
case
supra,
at
628F).
[26]
In the circumstances I am of the view that the Court order
incorporating the settlement agreement does not contain a penalty
clause and that in view thereof issues relating to what Moloi J
allegedly should have done
mero
motu
as well as the questions of disproportionality and prejudice become
irrelevant.
V
THE
COURT ORDER
[27]
It is trite that a settlement agreement incorporated in and
subsequently made an order of Court falls to be interpreted like
any
other Court order or judgment and that a direct consequence thereof
is that the
lis
between the parties comes to an end. The
lis
as
such becomes
res
iudicata
and in practice will not be lightly tampered with and/or set aside
(See
Eke
v Parsons
2015
(11) BCOR 1319 CC and
Schierhaut
v Union Government
1927
AD 94
at 98.)
[28]
In
casu
the defendant relies upon the provisions of rule 42 of the Uniform
Rules of Court. Mr van der Merwe cast his net as
wide as
possible in seeking to rely on one or more of the provisions of rule
42 relating to orders or judgments erroneously sought/granted,
alternatively orders or judgments containing ambiguity and/or potent
error or omission, and orders or judgments granted as a result
of a
common mistake. Nothing was placed before me in an
attempt to persuade me that there was an error, ambiguity or
common
mistake. Of further significance is that no allegations
and/or evidence and/or affidavit by the signatory to
the settlement
agreement on behalf of the defendant (Matsena), or anyone else for
that matter, was placed before me dealing with
the reasons as to why
I should consider impugning the court order and making a finding in
favour of the defendant.
[29]
Even if I was to have found that the defendant had undertaken to pay
more
than
it had acknowledged it in fact owed,
the defendant failed to quantify the amount and persuade me as to
what, in it’s opinion, a reasonable reduction of what it
claimed was a penalty amount, would be. (See
Citybank
N.O. South Africa Branch v Paul N.O. & Another
2003
(4) 180 (TPD) at para [21] to para [30]).
[30]
In seeking to persuade me to reduce the extent of the penalty
provision the onus is on the defendant to prove to what extent
the
penalty is disproportionate to the prejudice and to what extent, if
at all, it should be reduced. (See
Company
Unique Finance (Pty) Ltd & Another v Johannesburg Northern
Metropolitan Local Council & Another
2011
(1) SA 440
(GSJ) at 467G – 468J.)
In
casu
and having found that the Court order does not contain a penalty
provision, I deem it unnecessary to deal any further with the
aforementioned shortcomings in the defendant’s case.
For similar reasons I deem it unnecessary to deal with the
protracted
time lapse between the granting of the order incorporating the
settlement agreement and the launching of the current
application in
May 2016 (some 6½ months).
[31]
Ironically, the defendant performed, albeit belatedly, in terms of
the Court order incorporating the settlement agreement,
not only
thereby acquiescing but as importantly giving effect thereto. The
only logical inference to be drawn therefrom is that
the defendant
regarded itself as bound by the court order and only sought to
challenge it once the plaintiff sought to enforce
the consequences of
non-compliance. In the absence of any suggestion that there was a
patent error or mistake common to both parties
I am obliged to accept
that Matsena willingly and knowingly bound the defendant
contractually. On the facts placed before me I
cannot but find that
the application cannot succeed. Mr C Ploos van Amstel S.C., on
behalf of the plaintiff, did not persist
with the written submission
contained in his heads of argument that this Court should consider a
punitive cost order. I am inclined
to agree with him.
[32]
In the circumstances the following order is made:
The
application is dismissed with costs.
_______________
P.U.
FISCHER, AJ
On
behalf of the applicant:
Adv. B. Van der Merwe
Instructed
by:
Honey
Attorneys
BLOEMFONTEIN
On
behalf of the respondent:
Adv. C. Ploos van Amstel SC
Instructed
by:
Hill
McHardy & Herst Inc.
BLOEMFONTEIN