Al Mphango Civil Construction CC v Nhlapo and Another (60272/2013) [2015] ZAGPPHC 411 (29 May 2015)

80 Reportability

Contract Law

Brief Summary

Contract — Compromise — Oral agreement — Allegation of compromise based on telephone conversation — Defendants claimed a settlement was reached regarding liability apportionment — Evidence presented included recorded conversation and subsequent correspondence — Court found no valid offer and acceptance due to ambiguity in terms and lack of a "meeting of minds" — Special plea dismissed as defendants failed to prove the existence of a binding compromise.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were a civil action for damages arising from a motor vehicle collision, in which the defendants raised a special plea alleging that the plaintiff’s claim had already been settled by way of a compromise (a concluded settlement agreement).

The plaintiff was Al Mphango Civil Construction CC, a close corporation. The first defendant was Simons Nhlapo, who drove the defendants’ vehicle at the time of the collision, and the second defendant was Mzuzephi Nhlapo, alleged to be vicariously liable for the first defendant’s driving as the collision occurred in the course and scope of the first defendant’s duties to the second defendant.

Procedurally, the parties agreed at a pre-trial conference that the issues of merits and quantum should be separated, and the court made an order separating them. The trial then proceeded initially on the defendants’ special plea of compromise. The defendants bore the onus to prove the alleged settlement and accordingly began.

The dispute before the court concerned whether an oral settlement was concluded during a recorded telephone discussion between an attorney acting for the defendants’ insurer and a claims clerk at the plaintiff’s insurer, and whether that alleged settlement covered both apportionment (merits) and quantum (amount payable) in the manner pleaded.

2. Material Facts

A motor collision occurred on 3 November 2012 at Vereeniging between a vehicle driven by A. L. Mphago (associated with the plaintiff close corporation) and a vehicle driven by the first defendant, who was acting in the course and scope of his duties to the second defendant.

Certain matters were not in dispute. The plaintiff’s locus standi was admitted. The vicarious liability of the second defendant for any negligence proved against the first defendant was also admitted.

The special plea alleged that on 26 March 2013 the plaintiff and defendants, “duly represented”, concluded an oral agreement in terms of which the defendants admitted liability on a 55% / 45% apportionment in favour of the plaintiff and accepted liability to pay the plaintiff R239 814.00. The special plea identified these as the relevant terms relied upon.

To prove the alleged compromise, the defendants called Mr David Hugo, an attorney who acted on instructions from Clarendon Transport Underwriters (CTU), an underwriting manager for Hollard Insurance Company Limited, which insured the second defendant’s vehicle. It was common cause that Outsurance insured the plaintiff’s vehicle.

It was common cause that on 26 March 2013 Mr Hugo had a telephone conversation with Mrs Jeanine Portela, a claims clerk at Outsurance, and that this call was recorded. The parties produced transcriptions that differed slightly but not materially. The exchange relied on included an apparent agreement to “meet at 55/45” following discussion about percentages.

The facts the court treated as material included that, although apportionment was discussed, the telephone conversation did not mention accurate and specific amounts in relation to quantum. After the call, Mr Hugo sent a letter dated 26 March 2015 (sent on 27 March 2015 as described in the judgment) stating that it had been agreed the matter was settled on a 55/45 apportionment, and enclosed a release “in the sum of R239 814.00”.

The release document reflected, amongst other terms, that settlement was “subject to the approval of the Hollard Insurance Company Limited” and included language stating the payment would not constitute an admission of liability and was made solely to effect a compromise. It was common cause that the release was not accepted in the sense that Outsurance did not complete banking details and return a signed document.

Mrs Portela’s evidence, as accepted as relevant to the enquiry, was that she regarded the call as an attempt to obtain an offer for consideration, and she denied that a settlement was concluded. She also explained her understanding that a 50/50 apportionment would mean each party carried its own loss, and she did not appreciate that differing quantum could imply a net payment by one party to the other.

The court further noted that the defendants sought, after the evidence and prior to argument, to amend the special plea by adding an alternative date (27 March 2013) as the date of acceptance. The court considered the proposed amendment but held that it would not affect the outcome on the special plea as pleaded.

3. Legal Issues

The central legal question was whether the defendants had proved, on a balance of probabilities, that the parties concluded a binding compromise (settlement agreement) on the terms pleaded in the special plea, namely an agreement covering both a 55/45 apportionment and the specific payment of R239 814.00.

This was primarily a dispute involving the application of legal principles of contract and compromise to the established facts (including the content of the recorded telephone discussion and subsequent correspondence). It also involved factual assessment as to whether there was a meeting of minds on the pleaded terms, particularly on the alleged agreement as to quantum.

A further issue, arising from the defendants’ argument, was whether the court could treat the pleaded compromise as separable so as to uphold it as a compromise on merits only, notwithstanding the special plea’s explicit pleading of both merits and a quantified payment term.

4. Court’s Reasoning

The court approached the special plea on the basis that a compromise in the context of an insurance claim is governed by general principles of contract. The existence and scope of the alleged compromise had to be established through ordinary contractual requirements, including a valid offer and acceptance, and through construing what was allegedly agreed.

The court emphasised that the onus to prove a compromise rests on the party alleging it, and accordingly the defendants had to establish that the settlement was concluded on the pleaded terms. In assessing whether an enforceable compromise had been proved, the court treated as significant that an offer must be certain and definite, and that acceptance must be unequivocal.

Applying those principles, the court focused on the discrepancy between what the defendants pleaded and what the evidence established. While the transcript supported that apportionment was discussed and that the parties appeared to converge on 55/45, the court found that there was no evidence demonstrating a meeting of minds on the specific quantum of R239 814.00 as pleaded. The court considered the discussion of quantum during the telephone call to have been brief and not to have included accurate and specific amounts.

The court also evaluated the defendants’ reliance on the later letter enclosing a release for R239 814.00, and noted contextual difficulties with the underpinning figures, including that an earlier letter of 12 February 2013 contained figures produced without supporting documentation then being available on the plaintiff’s side, and included salvage-related calculations. The court concluded that, on the evidence, it could not find that the parties had reached agreement on the amount pleaded as a term of compromise.

A key aspect of the reasoning was the court’s insistence on the binding effect of pleadings. The court held that the defendants were bound by the special plea as formulated. The defendants’ argument that the court should treat the two pleaded terms as severable and uphold the compromise as to merits only was rejected, because the special plea, on its wording, advanced a single compromise comprising both apportionment and a quantified payment obligation. The court stated it could not read into the plea what it did not contain, and it treated it as significant that the special plea appeared to have been drafted with knowledge of the transcript.

In relation to the attempted amendment (introducing an alternative acceptance date), the court considered it unnecessary to decide the issue because it held that even on the amended date the difficulty remained: the pleaded compromise required proof of agreement on both apportionment and the stated amount, and the evidence did not establish consensus on the quantum.

Although not determinative of the special plea, the court also commented adversely on the conduct of the defendants’ attorney in communicating directly with the judge by personal email while judgment was being prepared, describing the conduct as unfortunate and distasteful, and indicating that common sense dictated refraining from such communication.

5. Outcome and Relief

The court ordered that the issues of merits and quantum were separated.

The court dismissed the defendants’ special plea of compromise.

The dismissal of the special plea was accompanied by an order that it was dismissed with costs. The trial was postponed sine die pending the judgment on the special plea, given that the allocated trial days were insufficient to finalise the matter if the special plea failed.

Cases Cited

The Torch Moderne Binnehuis Vervaardiging Venn (Eiendoms) Beperk v Husserl 1946 (CPD) 548.

Hubbard v Mostert 2010 (2) SA 391 (WCC).

Erasmus v Davis 1962 (1) SA (A).

Stirling v Federated Insurance Co. Ltd. 1983 (1) SA 897 (W).

Asmuth v Jacobs 1987 3 SA 629 (SWA).

Boerne v Harris 1949 1 SA 793 (A).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

No specific rule of court was cited in the judgment.

Held

The court held that the defendants, who bore the onus, failed to prove the pleaded compromise. On the evidence there was insufficient basis to find a meeting of minds on the pleaded quantum term of R239 814.00, and the court was not prepared to treat the pleaded compromise as severable so as to uphold it as a settlement on the merits alone. The special plea was therefore dismissed with costs, and the merits and quantum remained separated for later determination.

LEGAL PRINCIPLES

A party alleging a compromise/settlement bears the onus to prove that a binding compromise was concluded on the terms relied upon in the pleadings.

A compromise is assessed under general principles of contract, requiring a valid offer and acceptance and a consensus (meeting of minds) on the material terms relied upon.

An offer must be certain, definite, and made with the intention of being binding upon acceptance, and acceptance must be unequivocal, positive, and unambiguous.

Litigants are bound by their pleadings, and a court will not read into a special plea terms or a basis (such as a compromise on merits only) that the plea, properly construed, does not contain.