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[2015] ZAGPPHC 630
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Mobile Radio Communications (Pty) Ltd v Micromatica 327 (Pty) Ltd (3548/2004) [2015] ZAGPPHC 630 (19 August 2015)
OFFICE
OF THE CHIEF JUSTICE
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION: PRETORIA
CASE
NO: 3548/2004
In
the matter between:
MOBILE
RADIO COMMUNICATIONS (PTY)
LTD
APPLICANT
AND
MICROMATICA
327 (PTY)
LTD (formerly
VERTEL
NETWORKS
(PTY)
LTD
(now
i
n
li
quidation)
1
ST
RESPONDENT
SECURICOR
GREY SECURITY SERVICES
(CENTRAL) (PTY)
LTD 2
ND
RESPONDENT
HENEWAYS
FREIGHT SERVICES (PTY)
LTD
3
RD
RESPONDENT
S
AND
N AUTOTRI
M AND PANEL SHOP CC t/a
WESTERN
CROWN
4
TH
RESPONDENT
MIKE
VAN HEESE t/a DRG
SERVICES
5
TH
RESPONDENT
MIDDLEFORCE
SECURITY SERVICES
CC
6
TH
RESPONDENT
KAGISO
SECURITY
SERVICES
CC 7
TH
RESPONDENT
MANETRADE
168 (PTY) LTD t/a
SIYATHUTHUKA
SECURITY 8
TH
RESPONDENT
LAURO
TERESIO CORDERO
N.O 9
TH
RESPONDENT
ZAHEER
CASSIM
N.O 10
TH
RESPONDENT
BRIAN
CEYLON N.O
11
TH
RESPONDENT
VERTEL
INVESTMENTS (PTY)
LTD
12
TH
RESPONDENT
JUDGMENT
MAKHAFOLA
J:
INTRODUCTION
[1]
The applicant has launched motion proceedings for an order to effect
amendments to the “Classen J” order which is
already on
record marked “X” and FA3 on paginated page 415. The
application is opposed by 12 respondents.
MAIN
DISPUTE
[2]
The main issue in dispute in the present application is whether the
“Classen J” order is capable of amendment by
the court or
not. The applicant contends that the court is competent to grant the
amendment, whilst the respondents aver that the
court has no such
authority. The documents in the entire case are very voluminous, yet
the application is very narrow and limited
to the amendment only.
BACKGROUND
[3]
The whole case is complex with a long winded history of legal issues
running in and out of the courts unresolved since 2004
to date. There
are two court orders that have dominated the direction of the court
battles between the parties. These are: the
“Patel J”
order granted on 1yth February 2004 and the “Classen J”
order granted on 04th march 2004.
[4]
The “Clanssen J” order emanates from a draft order
whereby the parties had agreed to certain terms that they be
made an
order of court by consent.
[5]
The “Clanssen J” order postponed the main application and
the counter-application
sine die
for the parties to comply
with the terms of the agreement embodied in it for the resolution of
the disputes. The relevant terms
of the agreement in the order read
as contained in the order itself herein marked FA3 paginated page
415.
[6]
The terms of the order were not complied with. The crucial term is
number 08 providing that the disputes at issue be referred
to
arbitration within 5 days of the delivery of the accountant's report.
The referral to arbitration depended on the report of
the accountant,
one Danny Sabbagh who had to identify the unresolved issues. He
produced only an interim report dated 28th August
2006 which was
never used for referral to arbitration because it is not a final
report. Sabbagh's failure to produce a final report
is attributed by
him to his family problems.
NON-COMPLIANCE
WITH THE “CLASSEN J” ORDER
[7]
The parties reached a stalemate due to the non-compliance with this
court order. The whole main dispute remains unresolved.
The
impossibility to perform is anchored on the non-availability of the
Sabbagh's report which is the sole channel to arbitration.
THE
PRESENT APPLICATION
[8]
On 8
th
July 2008 the applicant launched the present
application which is opposed by the 1
st
respondent and the
liquidators namely: the 9
th
, 10
th
and 11
th
respondents and at a later stage by the 12
th
respondent
which entered the fray as the intervening party, and now a
fully-fledged 12
th
respondent.
COUNTER-APPLICATION
[9]
In April 2009 the “joint liquidators” who are the 9th,
1oth and 11th respondents launched a counter-application
whose
founding affidavit is deposed to by the 09th respondent: Lauro
Teresia Cordero. Excluding costs and alternative prayers,
the
counter-application is predicated on two prayers, namely:
(1) An order that the
agreement contained in the consent order of Classen J dated 04th
March 2004 under case no: 3548/04 has lapsed;
and
(2) An order that monies
held in the trust account of attorneys Hofmeyer Herbstein &
Ghiwala Inc be paid to the insolvent estate
of the 1
st
respondent.
[10]
The grounds for launching the counter-application are the following:
(a) that Classen J
consent order has been breached in many respects, has failed in its
terms and that it is at an end;
(b)
no arbitration exists as per court order;
(c)
the accountant, Mr Sabbagh has failed to deliver his final report as
provided for in the Classen J order;
(d)
in the interim Micromatica (1
st
respondent) was liquidated
on 18
th
October 2005.
THE
LAW AND OTHER AUTHORITIES
[11]
Perhaps the starting point is to understand what the contract or
agreement is, before it can even be ventured to deal with
its
variation, cancellation or novation. The relevant dispute in the
application is the amendment of certain terms of the court
order.
[12]
An agreement by consent includes two or more parties. In CHRISTIE'S
THE LAW OF CONTRACT IN SOUTH AFRICA: 6
th
EDITION, the
learned authors have the following to say about an agreement on page
23: “In order to decide whether a contract
exists, one looks
first for the agreement by consent of two or more parties”. The
same authors have the following to say
on variation of contracts:
“The general rule that parties to a contract are as free to
vary or discharge their contract as
they were to make it is subject
to limitations” at p463.
[13]
In VAN STREEPEN & GERMS V TRANSVAAL PROVINCIAL ADMINISTRATION
1987(4) SA 569 (AD) at p589 the following is intimated by
the Court
of Appeal: “a contract such as the one presently under
consideration usually contains a clause empowering the employer
to
order 'variations', which term includes additional work, altered or
substituted work for that described in the contract and
the omission
of contract work. It is recognized that an unbridled power to order
variations could cause great hardship to the contractor.
Thus it has
been held in England that a variation clause will not permit the
employer to change completely the character of the
works as
originally contemplated (Halsbury (op cit at para 1174); Emden (op
cit at 147)).
[14]
In BLOU BUL BOORKONTRAKTEURS V McLACHLAN
1991 (4) SA 283(T)
at 285F-G
the learned Judge-President accepted that judgments entered by
consent could “under certain circumstances”
be set aside
“on the ground of just error”.
[15]
In WILLIAMS V VEVANS [1978(1)] SA 1170 (CPD) the court intimated that
where a contract is entered into on the basis of a common
assumption
as to a future state of affairs, it may fail if the assumption or
supposition fails and it is established that the parties
would not
have entered into the agreement had they known that their
expectations would not materialize.
[16]
AJ KERR in his book: THE PRINCIPLES OF THE LAW OF CONTRACT (6th
EDITION) has the following to say about a contract: “A
contract
comes into being by agreement and it may terminate by agreement”
at page 540.
[17]
RH CHRISTIE in his book: THE LAW OF CONTRACT IN SOUTH AFRICA (5
th
EDITION) has the following to say about agreements and contracts at
page 90 under the heading “Offer and acceptance without
contract”. : “not all agreements are contracts, so it is
incorrect to argue that because there has been an offer and
acceptance there must necessarily be a contract”.
[18]
In FARLAM AND HATHAWAY:
CONTRACT
(3rd Edition) the book edited
by GF Lubbe and CM Murray on page 18 under the heading: “creating
obligations through Agreement”
sourced from
Pothier
Obligations
S3 the following is recorded about an agreement. “An
agreement is the consent of two or more persons to form some
engagement,
or to rescind or modify an engagement already made... [A
contract is] an agreement by which two parties reciprocally promise
and
engage, or one of them singly promises and engages to the other
to give some particular thing, or to do or abstain from doing some
particular act”.
In
the same book on page 19 under NOTES 1. the learned editors note as
follows: “It follows that the possibility of creating
an
obligation by a unilateral declaration of intention (pollicitatio)
does not form part of our law”. Therefore,
in casu
the
applicant should not be granted a declarator to unilaterally amend
the order granted by consent. I hold that another agreement
by the
parties to amend “the Classen J” order is necessary if
any amendment is to be effected.
[19]
ESTATE BREET V PERI-URBAN AREAS HEALTH BOARD
[1955 (3)] SA 523
[A.D]
at 532G-H. In his judgment the learned Judge of Appeal VAN DEN
HEEVER, JA said the following about judgment by consent: “Similarly
a judgment by consent cannot be said to create contractual
relationships” ...
EVALUATION,
ANALYSIS AND APPLICATION OF THE LAW
[20]
I do not think a court is competent to allow an amendment, even if it
were allowed to, where the “sense” and “substance”
of the subject-matter will change, thus creating a completely new
subject-matter to which, like in an agreement, the minds of the
parties were not and are not
ad idem.
In this case the
“Classen J” order was given after the parties had agreed
(para2) about the terms as embodied by paragraph
3 of the order.
[21]
This “Classen J” order by consent is founded on agreement
between the parties and it is capable of being amended
or altered or
set aside by consent between the parties on such grounds or upon
another agreement that initiates true consent between
them.
[22]
But here, there are no allegations that satisfy Rule 42 or Rule
31(2)(b) for the grant of the amendments sought. The applicant
does
not rely for its application on the said rules but on the common law.
The applicant does not attack the consent to the order
as fraudulent
or unlawful but relies on some impossibility to perform because of
some intervening factors that have emerged since
the grant of the
order. The applicant has not relied on the invalidity of the order as
it stands.
HYBRID
[23]
It is clear that the “Classen J” order is a hybrid order,
id
est,
a court order embodying an
agreement of the parties. I say so because it defers from an ordinary
court order not given by consent
of the parties for the embodiment of
an agreement but a court order issuing from granting prayers in a
notice of motion where the
applicant succeeds in an application. The
order in dispute is akin to Deed of Settlement incorporated into a
Decree of divorce
by consent of the parties. Such a deed of
settlement requires the consent of two parties to it for variation.
The simple reason
for that is that any is that any change or
amendment to be effected to it, may adversely affect the
non-consenting party.
[24]
The interpretation of the order is bound to the interpretation of the
agreement. It is a tricky order because should it be
found that the
agreement has failed and does no longer exist, that finding will
affect the existence of the order. As here, the
entry into an
agreement was for the purposes of referring the dispute to
arbitration. Referral was based on the condition that
the accountant
should submit a report and that within 5 days of receipt of the
report, the matter be referred to arbitration.
[25]
I am inclined to agree with the sentiments in Williams v Evans
(
supra)
although in the present case herein there is no
evidence that had the parties foreseen that future circumstances
would make the
agreement impossible to perform, they would,
nevertheless, have entered into that agreement. I am of the view that
that may be
implied that had the parties known that Sabbagh would not
produce a final report, and that arbitration would never take place
then
the parties would not have consented to the “Classen J”
order at all. The parties were desirous that their disputes
be
resolved through arbitration, and as speedily as would be convenient.
[26]
The applicants in their counter-application maintain that the terms
of the “Classen J” have not been complied with.
At
paragraph 15 of the founding affidavit the deponent avers that the
arbitration term is no longer workable.The answer by “MRC”,
the respondent in the counter-application, denies that applicants'
averment. But, on hindsight, indirectly concedes by saying:
“To
the extent that the order had not been complied with, this is
directly attributable to the dishonest conduct of Micromatica
and its
erstwhile directors”. This is clearly a concession that the
“Classen J” order cannot be complied with
in its present
form and that the “alleged dishonest conduct”, if any,
was never within the contemplation of the parties
together with other
unforeseen circumstances already spelt out above.
[27]
The following sentiments in BISCHOFBERGER V VAN EYK
1981 (2) SA
607(W)
at 611D are apposite in the present case, and these are: “If
the causes (of impossibility) were in the contemplation of the
parties, they are, generally speaking, bound by the contract. If, on
the contrary, they were such as no human foresight could have
foreseen, the obligations under the contract are extinguished”.
Analogically, this is correct, but the “Classen J”
order
embodies an agreement and not a contract.
[28]
The quoted sentiment in the BISCHOFBERGER'S case
(
supra)
was said to be acceptable with qualification in NUCLEAR FUELS
CORPORATION OF SA (PTY) LTD V ORDA AG 1996(4) SA 1190 (AD) at 12081
and 1209H-J and at 1211A-B. I also agree with these sentiments and
the reasons given that the sentiments be accepted with qualification.
[29]
There is no evidence that the applicant seeks cancellation of the
court order or the agreement embodied in it. It is clear
that the
application is limited to amendment of the order. All the authorities
cited above relate to impossibility of performance
in a contract. It
is only by analogy that I have imported the principle of bindingness
of a contract to a consent order sought
to be amended. My view is, if
an order sought to be amended was obtained by consent, in the absence
of fraught or other grounds
to invalidate it, then it ought to be
amended by consent. And such an order by consent cannot remain
indefinitely applicable and
binding if its terms are impossible to be
complied with, because of its basic purpose having lapsed. If its
basic purpose lapses
then it is extinguished and can no longer bind
parties to it.
[30]
The agreement lacking remedies for non-compliance with its terms,
created a
lacuna
which cannot, retrospectively, be
cured by variations or amendments that were never catered for in it
or in the consent order forming
part of the original document.
[31]
In my view, the only way out of the deadlock, is for the applicant to
obtain the consent of the other party to the agreement
in order to
facilitate the amendments sought. At best, the applicant needs to
enter into another agreement with the respondents
who should consent
to amendments sought.
[32]
It is clear and lucid that
ex facie
the “Classen J”
order there exists no remedies in the event of: non-compliance and
impossibility of performance relating
to any terms of the order by
any party to the agreement embodied in it.
[33]
Furthermore, having regard to the ordinary grammatical meaning of the
words used like: “the parties agree” and
“by
consent” read in the context of the whole document (the Classen
J) order, nowhere do the parties explicitly reserve
to themselves any
lex commisoria
(a right to cancel upon a breach of the
agreement). It is in this context understood why the applicant does
not rely upon a breach
of the agreement. In any event, no facts
indicate that the respondents are in breach of any terms of the
agreement or in contempt
of the court order.
[34]
If any breach of the agreement was to be part of the enquiry, (which
is not), it could be found that it is the accountant,
(Mr Sabbagh),
who is in default of producing a report and that he is the cause of
the
impasse
the parties find themselves in.
ARGUMENTS
[35]
In summary form, the respondents in support of their
counter-application contended that the “Classen J” order
cannot be redeemed and to amend it, will alter its “sense”
and “substance”. They further submitted that
amending it
is tantamount to rewriting a new agreement for the parties, by the
court. This sentiment is shared by the 1st and the
12th respondents.
They have also submitted that there is impossibility of performing in
terms of the agreement because of the absence
of Mr. Sabbagh's report
which is a “
sine qua non”
for referral to
arbitration.
[36]
The applicant argued that the respondents' submission that the court
order at issue is not capable of amendments should be
rejected. It
was further argued that it is the fault of the respondents that the
terms of the “Classen J” order have
not been complied
with.
FINDINGS
[37]
All the evidence, the authorities and the submissions having been
evaluated and analyzed above, I hold as follows:
(1)
that the applications postponed
sine die
by Classen J on 04th
March 2004 have been pending for an inordinate period. My view is
that there needs to be finality in these
matters;
(2)
that the “Classen J” order by its nature, does not
qualify to be amended or varied under the provisions of Rules
42 or
31(2)(b) of the Uniform Rules of Court and the Common Law
(3)
that the court is not competent to amend the “Classen J”
order because this would be tantamount to creating a new
obligation
in the order by a unilateral declaration of intention at the sole
instance and request of the applicant;
(4)
that to amend the “Classen J” order affects the “sense”
and “substance” of the agreement,
and that would issue a
new agreement without the consent of the other party to the original
agreement;
(5)
that the applicant has not alleged and proved the invalidity of the
original agreement in its unamended form. Therefore, for
the court to
grant a unilateral amendment without the consent of the 1st
respondent will render it invalid;
(6)
that, in the circumstances, the “Classen J” order
embodies a lapsed agreement because of impossibility of performance.
Therefore, the basis of the order has collapsed rendering the order
to lapse;
(7)
that this application to amend 1s ill-fated and falls to be dismissed
with costs;
(8)
that the counter-application stands to be granted with costs;
(9)
that the time-frame for referral to arbitration has not materialized
and that Sabbagh's report is wanting;
(10)
that under the prevailing circumstances, no arbitration will be held.
The 1
st
respondent has been liquidated on 18th October
2005 and the principles relating to contracts in the authorities
cited above are
applicable to this application at issue herein, and
liquidators have been appointed.
CONCLUSION
[38]
In the result, I pronounce the following order:
(i)
The application to amend is dismissed with costs;
(ii)
The counter-application is granted with costs.
______________________________
KHAMI
MAKHAFOLA
JUDGE
OF THE ABOVE COURT