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[2016] ZAGPPHC 1171
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RDM Road Solutions (Pty) Ltd v Paramount Trailers CC and Another (98160/15) [2016] ZAGPPHC 1171 (21 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
22/11/16
CASE
NO: 98160/15
In
the matter between:
ROM
ROAD SOLUTIONS
(PTY)
LIMITED
Plaintiff
and
PARAMOUNT
TRAILERS
CC
First Defendant
PARAMOUNT
TRAILERS
(PTY)
LIMITED
Second Defendant
JUDGMENT
Tuchten
J
:
1
The first defendant was at a stage converted from a close corporation
into
a company. This explains the reference in the heading to this
judgment to two defendants. It is common cause that the reference
to
the first defendant is no longer appropriate. No point was taken on
either side of the translation of the defendant from close
corporation to company and I shall simply refer in what follows to
the defendant.
2
During February 2014, the plaintiff accepted a tender by the
defendant to
manufacture and supply to the plaintiff ten trailer
units for a purchase price of R4 850 000 million plus VAT of 14%.
Each trailer
unit consisted of a leading and a following trailer, so
the contract was to deliver twenty trailers in all. The plaintiff is
a
haulier, specialising in the delivery of commodities from different
locations in South Africa to Zimbabwe and Zambia. Sometimes
the
plaintiff makes bulk deliveries such as unpackaged grain. So the
trailers had to be designed to load and unload bulk items.
Specially
designed doors at the ends of the trailers catered for this.
3
The plaintiff intended the trailers to be drawn by mechanical horses,
which
the plaintiff anticipated buying for delivery contemporaneously
with delivery to it of the trailers.
4
In asking the defendant to tender, the plaintiff acted through its
agent
Mr Peter Grove, who traded as Peter Grove Tractor Sales. The
defendant's quotation, dated 27 January 2014 included a three page
document (the specifications document) setting out the specifications
of the trailers which the defendant was offering to build,
a one page
document headed "terms and conditions" and a drawing of the
leading and following trailers which the defendant
was offering to
manufacture.
5
The trailers which the defendant offered in its quotation to build
did not
comply with critical requirements of the plaintiff as to both
the length and weight of the trailers. These were critical because
of
strict regulatory requirements applicable to such vehicles. Haulage
units were routinely examined and weighed at the borders
the
plaintiff's vehicles had to cross and very serious negative
consequences for the plaintiff would follow if it were found that
the
haulage units did not comply with regulations both as to length and
weight.
6
In a letter dated 31 January 2014, Grove accepted the quotation
subject
to "provisos" which he set out. In a letter dated 3
February 2014, Mr Taylor, the managing director of the plaintiff
wrote to the defendant confirming the acceptance of the defendant's
quotation. In the letter Taylor emphasised that the specifications
of
the trailers had to be "strictly" as per the defendant's
quotation and Grove's letter dated 31 January 2014. Taylor
emphasised
the importance of delivery dates because of the plaintiff's need to
synchronise the arrivals of the horses and the trailers.
On 12 March
2014, Grove signed a new drawing prepared by the defendant in which
certain amended specifications of the trailers
as to length and
weight were recorded. These amended specifications were within the
limits demanded by the plaintiff.
7
But what was not varied when the agreement was concluded on 12 March
2014
was the specification in the specifications document which
related to the chassis of the trailers which read:
Fabricated
6mm/5mm "I" Beam with high tensile top and bottom flanges -
130 X 12 Flat Bar 55C
8
During the negotiations preceding the conclusion of the agreement,
Grove
made Mr Marques, the managing director of the defendant aware,
amongst other things, of the need for the trailers to comply with
the
length and weight regulations. Marques then, in consultation with his
engineer and draftsmen, redesigned the trailers to make
the trailers
regulation compliant.
9
As part of the process of redesigning the trailers to make them
regulation
compliant, Marques decided to change the specification of
the "55C" steel to "Domex" steel. Domex steel is
stronger than 55C steel. But of great importance for this case,
Marques decided to change the specification of the flanges of the
I
bars from a thickness of 12mm to a thickness of 8mm.
10
I bars formed major structural components in the trailers. The
flanges
are those components of the I bar which form the head and the
foot of the capital letter I, from which the I bar gets its name when
viewed in cross-section. The body of the I bar is known as its web.
11
The change of the flange thickness from 12mm to 8mm resulted,
notwithstanding
the greater strength of the Domex material compared
with the 55C material, in a significant weakening of the structure of
the trailer.
This was proved by the evidence of the expert, Dr
Grabler, called by the plaintiff and was confirmed by both Prof
Koursaris, the
expert who testified for the defendant, and by Marques
himself.
12
It is common cause that on 12 February 2014, the date on which the
agreement
was concluded, the agreement embodied the specification
that the I bar flanges must be constructed from 12mm material. It is
also
common cause that at that date neither Grove nor anyone else
from or acting for the plaintiff had been told of the changed
thickness
specification which Marques had decided to implement.
13
The experts and Marques were agreed that the thickness change was
material
and operated to the plaintiff's disadvantage and by itself,
without regard to any other factor, significantly reduced the
anticipated
lifespan of the trailers. I need not go into this in any
detail because in argument it was accepted as
the position by counsel for the
defendant.
14
Almost from inception, the trailers gave trouble. The first problem
that
manifested itself related to the trailers' braking systems.
These problems seem to have arisen because certain components in the
braking systems supplied to the defendant were incorrect. The braking
problems were rectified by the defendant when they were brought
to
its notice. Sometimes, of course, the problem arose when the trailer
was far away from the defendant's premises in Gauteng.
Then the
plaintiff had to have running repairs done, which it did through one
of its service providers local to where the breakdown
took place.
15
But then another problem arose: cracks in the chassis of the trailers
began
to appear, particularly at the welded union of a component
called the hanger bracket with the I beam from which the chassis was
constructed. The hanger brackets connected the chassis with the axles
below them.
16
It took some time for the cause of these cracks to be determined. One
of
the suspected causes was the way the trailers had been used and
maintained. Another was that the hanger bracket design included
very
close to its junction with the I beam a 14mm hole. The defendant had
specified that a branded product called a Henred 127
round 1910 track
axle with auto slack adjusters would be used in the construction of
the trailers. The Henred product came with
hanger brackets which had
these holes predrilled in them.
17
The agreement included a 12 month warranty. The constant requests by
the
plaintiff that the defendant repair the brake and cracking
problems free of charge caused the defendant to lose patience with
the
plaintiff. At a meeting in March 2015, the defendant's
representatives told those representing the plaintiff in effect that
the
plaintiff would have to start paying for repairs and that the
defendant would no longer recognise warranty claims. In an eleven
page report dated 1 March 2015, prepared by Marques, the conclusion
was drawn that the damage manifesting itself was the result
of
driving on poor roads and poor maintenance.
18
And then, in a letter dated 31 July 2015 written by the defendant's
sales
manager, Mr Canny, the defendant took up the position that the
plaintiff had breached the warranty by having repairs done by service
providers other than the defendant, thus relieving the defendant of
the obligation to carry out any further repairs of the trailers
free
of charge. This was a significant cause of the hardening of the
commercial relationship between the parties.
19
The facts I have recounted are either common cause or not seriously
disputed.
But in about August 2015, Taylor, who gave evidence for the
plaintiff, testified that he discovered the fact that the I beam
flanges
which had been used in the construction of the trailers were
of Smm and not 12mm material.
20
Taylor said that he communicated his discovery to both Taylor and
Mr
Thys Pelser, the technical manager of the plaintiff. Pelser was the
official at the plaintiff responsible for keeping its vehicles,
including the trailers, on the road. Grove had carefully noted on his
documents all changes to specifications discussed and agreed
with the
defendant or even contemplated. There was nothing in his notes
suggesting that he, Grove, had ever discussed changes to
the flange
specifications with Marques, let alone agreed to them.
21
The
plaintiff consulted
its
attorneys.
By letter
dated 9 November 2015 written
by the
plaintiff's
attorney
to
the
defendant,
the
plaintiff
said:
[1]
Since
5 Augustus 2014 [the plaintiff] encountered numerous breakdowns of
the trailers due to inter alia faulty brakes, the fitment
of
non-holdex automatic slack adjusters to the Henred Axles, incorrect
booster fitments, cracking of the chassis, weld cracking
and
incorrect fitting of 130mm x 8mm instead of 13-mm x 12mm as quoted.
It
further transpired that instead of Steel grade 55 C of BS 4360
specification as quoted, the chemical composition of the 130mm
x 8mm
flat bar did not conform to such standard, due to the fact that it
contained manganese which is higher than the maximum amount
stated in
the standard. The cracking of the welds was also attributed to poor
welding practices.
22
In its attorney's letter, the plaintiff asserted that the trailers
did not comply with the agreed specifications, cancelled the
agreement and demanded the repayment of the purchase price against
return of the trailers.
23
The defendant replied to this letter in a letter dated 23 November
2015 written by the defendant's attorney. In the reply, the defendant
"denied that it failed to produce Trailers that do not
comply
with the specification as alleged ..."; asserted that "the
specifications were provided and discussed with ...
Grove who managed
and supervised the entire contract with fine tooth and comb";
and denied in their entirety the allegations
that "the Trailers
were not manufactured in accordance with specifications ...".
24
The plaintiff issued summons against the defendant on 8 December
2015. The plaintiff's cause of action is that the defendant had
committed three specified material breaches
of the terms of the agreement on the
strength of which the plaintiff had cancelled the agreement
as per
its attorney's letter. The plaintiff recorded the fact of the tender
and the defendant's refusal to comply with the demand
for repayment
and claimed an order declaring the contract to have been validly
cancelled, together with repayment of the purchase
price, interest
from date of demand and costs.
25
The first specified breach on which the plaintiff relies are is that
the
...
bottom flanges of the chassis I-beams have been altered from the
130mm width x 12mm thickness specified for BS4360 Grade 55C
material
to 130mm width x 8mm thickness using EN101498 700MC material.
26
The second such alleged breach was of that the welding between the
flanges and the hanger brackets was sub-standard and lacked
appropriate tack welds. The third breach was that trailers had been
manufactured with inferior landing legs. No reliance was placed on
these second and third alleged breaches by the plaintiff's counsel
and I need refer to them no further.
27
As to the change of the character of the material, it is common cause
that the substituted material was stronger than that specified. So
the breach, if established, would not be material. I need deal
no
further with this allegation either. All that remains for
consideration is the change from 12mm to 8mm material (the thickness
allegation).
28
The
defendant
pleaded
that damage to the chassis was a result of the "normal
use
of
the
vehicles
...
and
the
road
conditions
to
which
the
vehicles
were
subjected
...".
In
specific
response
to
the
thickness
allegation,
the
defendant
pleaded:
[2]
The
... Defendant admits to making the alteration with the consent of the
Plaintiff's agent [ie Grove].
As
a result of the changes the
weight of the trailer was reduced.
As
a result of the changes the
chassis was lightened in comparison to
the
original design.
29
The contents of the plea and the other documents to which I have
referred in this regard are significant because of the actual defence
to the thickness allegation as it emerged during the trial:
that
after the conclusion of the agreement on 12 February 2014, the
agreement had been varied to provide for the new specification.
The
defendant alleges that during the construction process, Grove asked
Marques how the defendant had achieved the weight saving
which
brought the trailers (together with the plaintiff's payload
requirement and the weight of the horse) within the regulatory
limit.
In response to this question, thus the defendant (and Marques in
evidence), Marques drew the variation of the specification
to the
attention of Grove. When this was brought to Grove's attention, Grove
made no objection.
30
This dispute as formulated raises an issue the resolution of which
depends on the probabilities and the credibility of the witnesses who
testified to the issue, Grove and Marques in the main but
also
Pelser. It was accepted by counsel for the defendant that the onus
was on the defendant to prove the variation. In my view,
this
concession was properly made. See
George v Fairmead
(Pty)
Ltd
1958 2 SA 465
A 470A.
31
Grove in his evidence denied that the thickness change had been
brought
to his attention. He said that if it had been brought to his
attention, he would have accepted the variation because he believed
that the defendant, which had designed the trailer, knew what it was
doing. Groves said that if the variation had been brought
to his
attention, he would have made a note of it. But it is established
that Grove made no such note. I found Grove to be a careful
witness.
He noted all the other variations to the typed specifications
provided to him. Although he has no technical qualifications,
his
business has been since 1987 to buy and sell used trailers and to
advise on the purchase of trailers. He has much practical
experience
in the industry.
Grove
said that when he discovered the variation he told Taylor and Pelser
of his discovery. This was confirmed by Pelser.
32
To reject this evidence, I must find that Grove manufactured a
version.
But that is not the impression I gained from Grove in the
witness box. He struck me as a witness who was trying to tell the
truth.
33
I did not find Marques to be an impressive witness. He was given to
sweeping statements that he later had to qualify. In his evidence he
stated that his report dated 1 March 2015 did not deal with
any
matters which arose before conclusion of the agreement. But Marques
was driven to concede that a whole paragraph of the report
dealt with
matters which arose prior to manufacture. During his evidence he said
that he had inspected the trailers during 2016
and had found that no
maintenance had been done on them. After an adjournment, without
prompting, Marques qualified his evidence
about maintenance: he said
he accepted that maintenance had been done, but it was sub
standard maintenance. While this qualification
is an indication of
honesty, it lends weight to the conclusion that as a witness Marques
is not careful and is therefore not entirely
reliable.
34
A third criticism I have of Marques relates to the reliance he sought
to place on a document produced by the plaintiff called its standard
terms and conditions. Clause 3.5 of that document requires
variations
on orders placed on the defendant must be in writing signed by both
parties. When cross-examined on this document, Marques
said that when
he was on good terms with the client, he did not follow the
prescription in clause 3.5. He could not explain why
the defendant
had standard terms and conditions if its managing director did not
abide by them.
35
A fourth criticism of Marques arises from paragraph 15 of a joint
minute between the experts and confirmed in the evidence of Dr
Grabler: a firm such as the defendant ought to have performed a
fatigue analysis with a recognised design code for welded joints
before replacing the 12mm material with 8mm material. In fact
such an
analysis was not performed and the defendant had no such design code
for welded joints. This pointed, thus Dr Grabler,
to inadequate
supervision and guidance of the defendant's welders. It was in my
view Marques' job as managing director, to see
that these things were
done properly.
36
Marques may have made some passing reference to Grove during the
manufacturing process to the fact that the trailers the defendant was
making would not be as strong as those the defendant had originally
designed. But if Marques did so, then his purpose was as a sop to his
own conscience and no more. If he had wanted to vary the
specification he would have done so in writing and explained the
inferiority of the product as varied in comparison to the original
specification.
37
In fact, there is no mention in the several bundles of documents
placed before me and which preceded the plea of a change in the
thickness of the material. All one finds is a reference to the
quality of the roads in the context of the allegedly poor way in
which the trailers were driven and maintained. The parties spent
some
time debating the cause of the cracks. At no stage did Marques or
anyone else for the defendant say in effect:
But
you agreed to the change. I warned you that the trailers
could
only be driven on highways and you accepted that.
38
If the variation agreement had been concluded, the defendant would
have relied upon it as its main point in the debate about the defects
in the trailers, how the defects were to be fixed and who
should bear
the costs of remedial work. But nobody from the defendant did so
either in the oral discussions or the documents which
arose from the
debates or even when the defendant's attorney replied to what the
plaintiff's attorney had written to the defendant.
I accordingly
conclude that the probabilities are against the conclusion of the
variation agreement. The defendant has accordingly
failed to
establish its existence.
39
Counsel for the defendant submitted that the existence of a warranty
in the agreement precluded the plaintiff without more from cancelling
the agreement for material breach without first putting the
defendant
in mora. In my view the terms of the agreement do not so limit the
plaintiff's right to cancel for material breach. In
any event, the
unchallenged evidence of Dr Grabler was to the effect that a
reconstruction of the trailers with the correct material,
while
theoretically possible would not have been practical. The trailers
would have to be literally dismembered; then the dismembered
components would have to be ground to suitable dimensions and new
members welded in.
40
But the greatest problem with counsel's proposition, it seems to me,
is that the 12mm material was replaced because the 12mm material was
too heavy. If it had been reinstated, the weight problem would
have
recurred.
41
It follows, subject to what I am about to say, that the plaintiff
is
entitled to the declaration and the order for repayment which it
claims. But counsel for the defendant submitted that an order
for
repayment of the purchase price against a tender to return the
trailers was not competent because the condition of the trailers
had
deteriorated since the tender was made in November 2015.
42
Feinstein
v
Niggli
and
Another
[3]
dealt,
within
the
rubric
restitutio
in
integrum,
authoritatively
with
the
position
where
an
innocent
party
cancels a contract, tenders return of
the
benefits received and claims repayment of
the
purchase price.
[4]
The object of
the rule
that the
party
claiming
return of
the purchase price must tender
return of
what
he
received under the contract is
that the
parties ought to be restored to the
position
in
which
they
were
at
the
time
they
contracted.
The reason
is
that
the
innocent
party
may
otherwise
unjustifiably be enriched and the guilty party correspondingly
impoverished.
43
But
since
the rule
is
founded on
equity, it
may
be
departed
from where considerations
of
equity
and justice
necessitate
such
a
departure. Thus,
[5]
...
the deterioration in condition or the depreciation in value of the
subject-matter of the contract while in the representee's
possession
will usually not preclude
restitutio
if that occurred in the
ordinary course of events, or through its being used in the normal
way as contemplated by the parties, or
through some inherent defect
or weakness in the subject-matter itself, and was not due to any
fault of the representee ... . Even
where the deterioration or
depreciation is due to the representee's fault,
restitutio
is
not necessarily precluded, for the Court may allow him to adjust the
deficiency by a monetary compensation.
44
The
issue of
the
inadequacy
of the
tender,
if
it were
raised at
all in the defendant's
plea, was
raised
like
this:
[6]
The
... Defendant notes the tender but pleads that contrary to the
alleged cancellation ... the Plaintiff continues to use the trailers.
The Plaintiff is called upon to cease using the trailers to the
extent that it relies on the cancellation of the contract.
45
As
a
proposition
of
law, the
passage
I have just
quoted
is simply
wrong. There is
nothing
which
precludes
a
party
who
has
cancelled a
contract and
tendered
return of the
merx
from
using it. Such use may have consequences,
but
no issue
was
raised
in that
regard
in the
plea.
Extel
Industrial
(Pty)
Ltd and Another
v
Crown Mills (Pty) Ltd
[7]
is an example where the court, after affirming that the
restoration rule in question
is founded
on
equitable
considerations,
[8]
declined
to
enter upon
the
question
because
it had
not
adequately
been
raised
in the
pleadings.
46
Christie
[9]
deals
extensively with the topic and refers to the judgment
in
Harper
v
Webster
[10]
in which
the
point
was
made
that
the
innocent
party
who cannot
make
complete
restitution may make
good
the
deficiency
in money.
As a general proposition, where
a purchaser
has rescinded
the
contract
of sale
and
has
tendered
return of
the
goods
purchased
and
the
seller
refuses
the
tender,
the
seller is
in
mora
creditoris.
I
n
these
circumstances the purchaser owes no greater duty
to the
seller
than
that
he will
not
injure the
goods
intentionally
or
by
negligence.
Wingerin
v Ross
and
Another
1951 2
SA
82
C 860.
47
The
proposition that restitution is
an
equitable
remedy has
been affirmed
at
the
highest
level.
In
North-West
Provincial
Government
and Another v
Tswaing
Consulting
CC
and
Another,
[11]
the
Constitutional Court
observed
that
the
party
raising
the
issue
of
a
deficiency
in a tender
was
free
to
establish
that
claim
in
appropriate proceedings.
The
court
had
in
mind,
I
think,
a
claim
based
on
unjustified
enrichment.
48
Marques in his evidence, after being encouraged to be generous to
the
defendant in this regard, put the cost as at the second half of 2016
of repairing the trailers at R1,4 million. Against that,
the
defendant had the use of the plaintiff's money for some two and a
half years. I assess the value of that sum, roughly R5 million,
at
the current
mora
interest rate of 9% per annum, to be roughly
R1,1 million. In addition, the plaintiff has had to spend money
repairing the cracks
to the chassis and has suffered consequential
losses through inability to use the trailers while they were being
repaired, a loss
the plaintiff's witnesses called down time.
49
Viewing the evidence against the principles I have mentioned, I have
decided to order the defendant to pay the plaintiff
mora
interest
on the sum claimed by the plaintiff not from date of demand (ie 9
November 2015) but from date of judgment. I think I am
being generous
to the defendant. If the defendant feels aggrieved, it is free to
claim compensation from the plaintiff in appropriate
proceedings.
50
By refusing
to accept the plaintiff's tender
of
restitution, the defendant fell in my
judgment
into
mora
creditoris
in that
regard.
It
can therefore no longer
insist on
the
return
of the trailers
reciprocal
with the defendant's
obligation
to
repay the
purchase
price.
[12]
The
trailers
are
being used
by the
plaintiff
to carry
goods and
may
not even
be in the
Republic
when this
judgment
is
delivered.
The plaintiff offered
to
accumulate
the
trailers at
its
place
of
business
within
ten
days
of payment
by
the
defendant.
I
shall
incorporate this offer in
the order
for return of the trailers
which
I shall
make.
51
I make the following order:
1
It is declared that the plaintiff validly cancelled the contract
between
the parties.
2
The second defendant is ordered to pay the plaintiff the sum of R4
850 000
plus VAT of 14%.
3
The second defendant must pay
mora
interest on the sum
of R4 850 000 at the rate of 9% from the date of this order until the
date of payment.
4
Within ten days after receipt of payment under both 2 and 3 above,
the plaintiff
must return to the defendant at the defendant's
premises in Gauteng or such other place as may be agreed between the
parties the
ten trailer units sold and delivered by the
defendant to the plaintiff (twenty trailers in all).
5
The defendant must pay the plaintiff's costs of suit.
_____________________
NB
Tuchten
Judge
of the High Court
21
November 2016
RDMParamount98160
15
[1]
Paragraphing numbering omitted.
[2]
Paragraph numbers again omitted.
[3]
1981 2 SA 684
A
[4]
At 700-701
[5]
Feinstein
v Niggli and Another
701A-C
[6]
Paragraph 17
[7]
[1998] ZASCA 67
;
1999 2 SA 719
SCA
[8]
At 734E
[9]
Christie's
The Law of Contract in South Africa
6th
ed, 2011, 301-303
[10]
1956 2 SA 495
FC 499-500
[11]
2007 4 SA 452
CC para 22
[12]
Wessels,
The
Law of Contract in South Africa
vol
1 (1937) para 2338