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[2018] ZASCA 177
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Starways Trading 21 CC and Others v Pearl Island Trading 714 (Pty) Ltd and Another (232/2018) [2018] ZASCA 177; 2019 (2) SA 650 (SCA) (3 December 2018)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 232/2018
In
the matter between:
STARWAYS
TRADING 21 CC (in
liquidation) FIRST
APPELLANT
SIMON
MATLESHE SEIMA
NO SECOND
APPELLANT
NURJEHAN
ABDOOL GAFAAR OMAR NO THIRD
APPELLANT
NANO
ABRAHAM MATLALA
NO FOURTH
APPELLANT
and
PEARL
ISLAND TRADING 714 (PTY) LIMITED FIRST
RESPONDENT
SHOPRITE
CHECKERS (PTY) LIMITED SECOND
RESPONDENT
Neutral
citation:
Starways
Trading v Pearl Island Trading
(232/2018)
[2018] ZASCA 177
(3 December 2018)
Coram:
Lewis,
Wallis, Zondi and Van der Merwe JJA and Matojane AJA
Heard:
19
November 2018
Delivered:
3
December 2018
Summary:
Sale –
in the absence of agreement to the contrary, provisions of s 59 of
the Customs and Excise Act 91 of 1964 are terms
of a sale agreement
implied by law – meaning of term
ex
warehouse
– not agreement to the contrary – insistence by seller on
incorrect interpretation of contract constituted repudiation
thereof.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Davis J sitting as court
of first instance):
The appeal is dismissed
with costs, including the costs of two counsel where so employed.
JUDGMENT
Van
der Merwe JA (
Lewis,
Wallis and Zondi JJA and Matojane AJA
concurring)
[1]
The first appellant, Starways Trading 21 CC (in liquidation)
(Starways), is an importer of,
inter alia
, sugar. Starways was
placed in provisional liquidation shortly before the hearing of the
appeal. Its provisional liquidators have
been authorised to continue
the prosecution of the appeal and they elected to do so. They have
since been added as the second,
third and fourth appellants in the
appeal. The first respondent, Pearl Island Trading 714 (Pty) Ltd
(Pearl), is a wholesale supplier
and the second respondent, Shoprite
Checkers (Pty) Ltd (Shoprite), is a retailer.
Background
[2]
On 14 July 2016, Starways and Pearl entered into a written agreement
in terms of which Starways sold 25 000 metric tonnes of
white refined
sugar to Pearl (the sugar contract). The sugar was destined for
Shoprite. When a dispute arose between Starways and
Pearl in respect
of payment in terms of the sugar contract, Starways contended that
Shoprite was contractually obliged to it to
pay the purchase prices
in terms of the sugar contract to Pearl. Starways approached the
Western Cape Division of the High Court,
Cape Town on motion for
final orders enforcing the sugar contract against Pearl and the
alleged contractual obligation of Shoprite
to make payment to Pearl.
That court (Davis J) dismissed the application and refused leave to
appeal. The appeal is with the leave
of this court.
[3]
In terms of the sugar contract the sugar would be delivered to Pearl
in 50kg bags. Clauses 7 to 10 of the sugar contract read:
‘
7.
DELIVERY
PERIOD:
Between
1
st
October 2016 and 31
st
May 2017, as follows:
a)
October 2016 – 8,000MT
delivered directly from Port to the BUYER
b)
November 2016 – 2,000MT
Ex Warehouse
c)
December 2016 – 2,500MT
Ex Warehouse
d)
January 2017 – 2,500MT Ex
Warehouse
e)
February 2017 – 4,000MT
Ex Warehouse
f)
March 2017 – 2,500MT Ex
Warehouse
g)
April 2017 – 2,500MT Ex
Warehouse
h)
May 2017 – 1,000MT Ex
Warehouse
The above draws are subject to
variation of about 500MT per month depending on space availability at
BUYER’S warehouse and
storage will be free of charge until end
of May 2017.
8.
PRICE:
For 10,000MT is ZAR10,350 per MT (Excluding VAT)
Ex
Warehouse Cape Town.
For 15,000MT is ZAR10,650 per MT
(Excluding VAT)
Ex
Warehouse Cape Town.
9.
INSURANCE:
To
be arranged by BUYER on transfer of ownership.
10.
PAYMENT:
Payment against invoice as follows, but not exceeding:
a)
8000MT@ ZAR10,350 (Excl VAT) in October 2016
b)
2000MT@ ZAR10,350 (Excl VAT) in November 2016
c)
2500MT@ ZAR10,650 (Excl VAT) in December 2016
d)
2500MT@ ZAR10,650 (Excl VAT) in January 2017
e)
5000MT@ ZAR10,650 (Excl VAT) in February 2017
f)
5000MT@ ZAR10,650 (Excl VAT) in March 2017’
Clause 12 provided that
the sugar contract ‘. . . shall be governed and construed under
and in accordance with the laws of
the Republic of South Africa.’
[4]
On 20 March 2013, Shoprite and Pearl had entered into a written
agreement (the supply agreement). In terms of the supply agreement
Shoprite would from time to time place orders for the supply of
products by Pearl, which would then warehouse, package and distribute
the goods so ordered. Although for reasons of practicality and
convenience Shoprite acted as intermediary for Pearl when the sugar
contract was negotiated with Starways, it is common cause that
Shoprite was not a party to the sugar contract and that Pearl onsold
the sugar to Shoprite in terms of a separate agreement. In terms of
this agreement, Pearl would package the sugar and deliver it
to
Shoprite at a higher price than the bulk prices specified in the
sugar contract.
[5]
As an importer, Starways was obliged to pay the import duty imposed
on sugar in terms of the Customs and Excise Act 91 of 1964
(the Act).
Starways no doubt calculated the purchase prices specified in the
sugar contract taking into account the import duty
that it expected
to pay. In this sense, these prices were inclusive of the import
duty. During the period 5 August 2016 to 16 September
2016, however,
the import duty on sugar was reduced drastically. It is common cause
that during this period the import duty decreased
from the amount of
R2 395 per metric tonne to R318,90 per metric tonne.
[6]
Section 59 of the Act provides:
59 Contract prices may be
varied to extent of alteration in duty
‘
(1) Whenever any duty is
imposed or increased, directly or indirectly, by amendment in any
manner of any Schedule to this Act, on
any goods and such goods, in
pursuance of a contract made before such duty or increased duty
became payable, are thereafter delivered
to and accepted by the
purchaser, the seller of the goods may, in the absence of agreement
to the contrary, recover as an addition
to the contract price a sum
equal to any amount paid by him by reason of the said duty or
increase.
(2) Whenever any duty is withdrawn or
decreased, directly or indirectly, by amendment in any manner of any
Schedule to this Act,
on any goods, and such goods in pursuance of a
contract made before the withdrawal or decrease became effective are
thereafter
delivered to the purchaser, the purchaser of the goods
may, in the absence of agreement to the contrary, if the seller has
in respect
of those goods had the benefit of the withdrawal or
decrease, deduct from the contract price a sum equal to the said duty
or decrease.’
[7]
The application of s 59 to the sugar contract would have resulted in
the reduction of the purchase price for the first consignment
of
sugar by some R18 million and of the total purchase price by some R51
million. It is no wonder that this lay at the heart of
the dispute
between the parties. Pearl took the stance that the sugar contract
did not include an agreement to the contrary as
contemplated by s 59
and that it was therefore entitled to pay reduced purchase prices.
Starways, on the other hand, contended
that the term
ex
warehouse
constituted
an agreement to the contrary that entitled it to the benefit of the
decrease in import duty. Pearl regarded Starways’
insistence on
this interpretation of the sugar contract as a repudiation thereof.
It maintained that its acceptance of the repudiation
put an end to
the sugar contract.
[8]
In the light of what I have said, there are three issues before us.
They are: the interpretation of the sugar contract, particularly
whether the term
ex warehouse
excluded the operation of s 59;
whether Starways repudiated the sugar contract and whether there was
contractual privity between
Shoprite and Starways as alleged. The
court a quo found against Starways on all three issues. I consider
these issues in turn.
Agreement
to the contrary?
[9]
It is trite that at common law the risk and benefit in respect of a
thing sold passes to the purchaser when the contract of
sale becomes
perfecta
,
even though delivery may take place thereafter. A contract of sale
becomes
perfecta
when agreement is reached on the two essential elements of the thing
sold and the price, and the contract is not subject to a suspensive
condition. See G Glover
Kerr’s
Law of Sale and Lease
4 ed (2014) pp 306 and 310; G R J Hackwill
Mackeurtan’s
Sale of Goods in South Africa
5 ed (1984) p 180.
[10]
This position may, of course, be altered by agreement. In line
herewith, Starways argued that an
ex
warehouse
agreement postpones the passing of risk and benefit until delivery
takes place. Because s 59 concerns risk and benefit in respect
of
sale agreements, so counsel for Starways contended, the term
ex
warehouse
constituted
an agreement to the contrary as contemplated.
[11]
I am unable to agree. The essence of the common law is that the
purchaser is obliged to pay the agreed purchase price, despite
fortuitous damage to or the destruction of the
merx.
Voet
Commentary on the Pandects
(Gane’s translation) 18.6.1
said:
‘
Under the name of “risk”
falls here every disadvantage which overtakes a thing sold, such as
death, running away and
wounding in the case of a human being or
animal sold; an opening of the ground in the case of a field;
conflagration and collapse
in the case of a house; shipwreck in the
case of a ship; mustiness, souring and leakage in the case of wine;
and finally spoiling,
going bad, perishing or purloining in the case
of all things.’
I
accept that, in modern times, risk in this context includes the
attachment of a legal burden to the
merx
after the sale
becomes
perfecta
, such as the imposition of excise duty
payable on the thing or the expropriation of the thing. See Hackwill
p 179. In respect of
benefit Glover says the following:
‘
Note, however, that the rule on
benefit does not include fortuitous gains. The benefit must be
directly connected with and actually
produced by the property which
has been sold.’
See
also
Van
Deventer v Erasmus
1960
(4) SA 100
(T) at 104.
[12]
Even accepting that the expression
ex
warehouse
altered
the incidence of the risk to some degree, it needs to be borne in
mind that Starways and Pearl expressly subjected the sugar
contract
to South African Law. In terms of the sugar contract the
obligation to pay the import duty therefore rested only
on Starways
and would under no circumstances be transferred to Pearl. The
advantage and disadvantage caused by fluctuation in the
import duty,
however, would be passed on to Pearl in the manner provided for in s
59 unless the parties agreed to the contrary.
[13]
The legal effect of s 59 on a contract of sale is to impose implied
terms in relation to the purchase price. Unless they are
excluded by
agreement, the provisions of s 59 provide the seller, in the
specified circumstances, with the right to add to the
purchase price
or the purchaser with the right to pay a reduced purchase price. This
has a direct impact on their bargain in respect
of price. In these
circumstances, their agreement is subject to the provisions of s 59,
whether the parties are aware thereof or
not. This, to my mind, means
that their contract is subject to terms implied by law. See
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506
(A) at 531E-H;
South
African Forestry Co Ltd v York Timbers Ltd
2005
(3) SA 323
(SCA) para 28; G B Bradfield
Christie’s
Law of Contract in South Africa
7 ed (2016) p 187-190.
[14]
The onus was on Starways to prove that the ordinary meaning of
ex
warehouse
excluded the application of s 59 or that that term had to be ascribed
a special or technical meaning to that effect. See
Krige
v Wallace
1990
(3) SA 724
(C) at 737A-C;
Wides
v Davidson
1959
(4) SA 678
(W) at 682B. (Starways rightly did not rely on terms
implied by trade usage or custom.)
[15]
The ordinary meaning of
ex
warehouse
is ‘out of or in front of the warehouse’. Extensive
research on behalf of Starways has not unearthed any authority
to the
contrary in South African law. The attempt by Starways to prove that
ex
warehouse
has
a special or technical meaning in the industry, failed dismally. None
of the witnesses said that
ex
warehouse
means
that the operation of s 59 is excluded and the evidence was, in any
event, vague and contradictory.
[16]
It follows that Starways did not prove that the term
ex
warehouse
in the sugar contract had any other meaning than ‘out of or in
front of the warehouse’. The term was used simply to
indicate
where delivery would take place. It served to distinguish between
delivery in terms of subclause 7(a) (directly from the
port to Pearl)
and delivery in terms of subclauses 7(b)-(h) (at Starways’
warehouse in Cape Town). There is no reason to
find that
ex
warehouse
had a different meaning in clause 8 of the sugar contract.
[17]
In the result, Pearl was entitled to a reduction of price in terms of
s 59(2). Starways’ interpretation to the contrary
was wrong.
The next question is whether Starways’ conduct amounted to a
repudiation of the sugar contract.
Repudiation
[18]
It is well established that repudiation of an agreement takes place
by unequivocal intimation, by word or conduct and without
lawful
excuse, that all or some of the obligations arising from the
agreement will not be performed
according
to their true tenor
.
The test is objective and the matter is approached from the vantage
point of the innocent party. See
Datacolor
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001
(2) SA 284
(SCA) para 16-19.
Bona
fide
insistence
on an incorrect interpretation of a material term of a contract may
amount to the repudiation of the contract. See
Metalmil
(Pty) Ltd v AECI Explosives and Chemicals Ltd
[1994] ZASCA 96
;
1994
(3) SA 673
(SCA) at 684J-685G.
[19]
In terms of the sugar contract payment would be made ‘against
invoice’. It is common cause that an invoice would be
rendered
upon delivery of each consignment. Payment would therefore become due
upon delivery.
[20]
During August and September 2016, Starways was informed on more than
one occasion that Pearl had acquired imported sugar at
a cheaper
price and would not honour the sugar contract. It is clear that Pearl
was able to obtain cheaper imported sugar because
of the reduction in
the import duty on sugar. On 30 September 2016 Starways wrote to
Pearl as follows:
‘
We are pleased to advise that
we will shortly be in position to execute our contractual obligation
to supply 8,000MT of White Refined
Sugar during the month of October
2016, as provided for in sub-clause 7(a) of the aforementioned
agreement.
Please be reminded that the BUYER is
required to insure the product upon delivery. Furthermore that
payment in full at delivery
of invoice and copy of Bill of Lading is
expected; such payment amounting to R82 800 000 plus VAT.’
Starways
thus elected to enforce the sugar contract and quoted the price for
the first consignment without any reduction.
[21]
Starways’ attorneys wrote to Pearl on 13 October 2016. In the
letter they made clear that Starways expected payment from
Pearl of
the purchase prices stipulated in the sugar contract, without
reduction. Pearl’s attorneys responded by letter dated
2
November 2016. They asserted,
inter
alia
,
that it was a tacit, alternatively implied term of the sugar contract
that should the import duty on sugar be reduced, the purchase
price
would be reduced accordingly. As I have said, the contention that the
sugar contract contained such term implied by law,
was correct. The
letter further stated that Starways’ letter of 13 October 2016
amounted to a repudiation of the sugar contract
and that Pearl
accepted the repudiation and cancelled the sugar contract.
[22]
Starways responded by launching the application in the court a quo.
By that time delivery of the first consignment was already
overdue.
Delivery of the first consignment was not tendered, but in fact
withheld. In the founding affidavit Starways expressly
denied the
existence of a price adjustment term. Starways sought an order
directing Pearl to accept delivery in terms of the sugar
contract
and, upon such delivery, to make payment of the prices stipulated in
the sugar contract. In this manner Starways unequivocally
conveyed
that it would deliver the sugar only against payment of the full
purchase prices reflected in the sugar contract, without
any
reduction.
[23]
In my judgment, a reasonable person in the position of Pearl was, in
all these circumstances, entitled to accept that Starways
would not
perform its duties in terms of the objective and correct
interpretation of the sugar contract but would insist on its
interpretation thereof. Pearl was therefore entitled to cancel the
sugar contract by acceptance of the repudiation, as it also
did in
its answering affidavit. Compare
Highveld 7 Properties (Pty) Ltd
and others v Bailes
1999 (4) SA 1307
(SCA) paras 29-31.
Contractual
privity with Shoprite
[24]
In the light of this conclusion, it is not necessary to deal with the
third issue in any great detail. After some prevarication,
Starways
indicated that it relied on an express or tacit tripartite agreement,
separate from the sugar contract, in terms of which
Shoprite was
obliged to make payment of the purchase prices reflected in the sugar
contract to Pearl.
[25]
The founding affidavit contains no evidence at all on which a finding
could be made that an express tripartite agreement was
entered into.
The admitted dual transaction in question is unexceptional. Shoprite
ordered imported sugar from Pearl. Pearl purchased
bulk sugar from
Starways and onsold it in packaged form to Shoprite at a higher
price. Pearl would make payment to Starways on
invoice delivered to
it by Starways and Shoprite would make payment to Pearl on invoice
delivered to it by Pearl. The transaction
was complete and
efficacious. This leaves no room for an additional tacit contract
between all three parties in terms of which
Shoprite is obliged to
make payment to Pearl of the amounts that the latter is obliged to
pay to Starways.
[26]
In this court Starways also relied, for the first time, on the
doctrine of the undisclosed principal, presumably in the alternative
to the alleged tripartite agreement. According to the argument,
Shoprite played the role of the undisclosed principal of Pearl
as far
as Starways was concerned. The argument has no merit, for a variety
of reasons other than that it was not raised in time
for Shoprite and
Pearl to properly respond thereto. It suffices to say the following.
Starways elected to enforce the sugar contract
against Pearl only. In
law this precluded a claim against Shoprite as the principal in terms
of the sugar contract. In order to
claim from Shoprite in terms of
the doctrine of the undisclosed principal, Starways had to allege and
prove that Pearl had been
mandated by Shoprite to conclude the sugar
contract as agent for Shoprite. No such allegation was made and no
such evidence was
adduced. On the contrary, Starways accepted that
the converse applied, namely that Shoprite acted as intermediary for
Pearl when
the sugar contract was negotiated. And at all times the
identity and involvement of all three parties were known.
[27]
It follows that the appeal cannot succeed. In the result the
following order is issued:
The
appeal is dismissed with costs, including the costs of two counsel
where so employed.
________________________
C
H G van der Merwe
Judge
of Appeal
APPEARANCES
For
Appellants: J G Dickerson SC (with him A Heunis)
Instructed
by:
Park
& Khan Inc, Landsdowne
EG
Cooper Majiedt Inc, Bloemfontein
For
First Respondent: L M Olivier SC
Instructed
by:
De
Klerk & Van Gend Inc, Cape Town
McIntyre
& Van der Post, Bloemfontein
For
Second Respondent: I J Muller SC (with him H L du Toit)
Instructed
by:
Van
der Spuy, Cape Town
Hill
McHardy & Herbst, Bloemfontein