About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2007
>>
[2007] ZASCA 101
|
|
Trustees for the Time Being of The Bus Industry Restructuring Fund v Breakthrough Investments CC and Others (397/06) [2007] ZASCA 101; [2007] SCA 101 (RSA); [2008] 1 All SA 23 (SCA); 2008 (1) SA 67 (SCA) (14 September 2007)
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number : 397/06
In the
matter between :
THE
TRUSTEES FOR THE TIME BEING OF THE BUS INDUSTRY RESTRUCTURING FUND
.......................
APPELLANTS
and
BREAK THROUGH INVESTMENTS CC
.......................
FIRST RESPONDENT
AHMED BHAYLA
.......................
SECOND RESPONDENT
FAZUL AHMED BHAYLA
.......................
THIRD RESPONDENT
BASFOUR 2488 (PTY) LTD
.......................
FOURTH RESPONDENT
CORAM : SCOTT, BRAND, LEWIS, JAFTA JJA
et
MALAN
AJA
HEARD : 3 SEPTEMBER 2007
DELIVERED : 14 SEPTEMBER 2007
Summary
: Exception against
particulars of claim – objection that claim precluded by
contractual provision – held that properly
construed provision
has no bearing on claim at all.
Neutral citation
: This
judgment may be referred to as
The Trustees,
Bus Industry Restructuring Fund v Break Through Investments
[2007]
SCA 101 (RSA)
JUDGMENT
_____________________________________________________
BRAND JA
/
BRAND JA
:
[1] The appellants are the trustees of the Bus Industry
Restructuring Fund (‘the Fund’). They appeal against the
upholding
of an exception to their particulars of claim by Kruger J
in the Pietermaritzburg High Court. His judgment has since been
reported
as
Trustees, Bus Industry
Restructuring Fund v Break Through Investments CC
2006
(3) SA 434
(N) and
[2006] 1 All SA 189
(N). The appeal against that
judgment is with the leave of the court
a quo.
[2] The issues between the parties will best be
understood in the light of the background which follows. I first deal
with matters
procedural. According to their particulars of claim, the
appellants claim payment of the sum of R297 340.87 from each of
the
four respondents in the alternative. As the basis for their
claim, they rely on two independent causes of action, the one being
statutory
and the other contractual. Two exceptions were raised by
the respondents. The first pertained to the statutory cause of action
(formulated
in para 55 of the particulars, quoted in para 9 of the
court
a quo’
s
judgment) while the second was directed at the claim founded in
contract. The court
a quo
upheld
both exceptions with costs and granted the appellants’ leave to
amend their particulars of claim.
[3] The order upholding the first exception is not
appealed against, save for the award of costs associated with that
order. The appeal
is in turn only resisted by the first, second and
fourth respondents. The third respondent abides the decision of this
court. Finally,
since the fourth respondent derived no assistance
from the upholding of the second exception, its resistance to the
appeal is limited
to issues relating to the costs order associated
with the upholding of the first exception. Apart from issues of
costs, the main
dispute therefore lies between the appellants, on the
one hand, and the first and second respondents, on the other.
Accordingly I
shall refer, where appropriate, to the second exception
as ‘the exception’ and to the first and second
respondents as
‘the respondents’.
[4] I revert to the facts, for which we must look –
by the nature of exception proceedings – at the allegations in
the
particulars of claim as they stand. These allegations are not
always easy to follow. Fortunately they can, for present purposes,
be
limited to broad outline. The Fund was set up with effect from 1
November 1999, pursuant to an agreement, referred to as the
tripartite
agreement, between the Minister of Transport, the South
African Bus Operators’ Association, representing employers
within the
passenger transport industry and various labour unions
representing employees in that industry. The purpose of the
tripartite agreement
was to facilitate the restructuring of the
passenger bus industry. The Fund was established to provide financial
assistance to bus
operators/employers in paying retrenchment benefits
to employees who, it was anticipated, would lose their jobs in the
restructuring
process.
[5] The National Department of Transport was obliged to
and did make a substantial contribution to the Fund. Participating
bus operators
were also required to pay contributions to the Fund,
which were calculated in accordance with formulae provided for in the
tripartite
agreement. One of the participating operators was an
entity known as Kwa-Zulu Transport (Pty) Ltd (KZT). After a tender
process,
KZT was awarded various subsidised contracts by the Kwa-Zulu
Natal Department of Transport (‘the Department of Transport’).
In August 2001, KZT was, however, placed under liquidation. Though
KZT had paid part of the contributions for which it became liable
under the tripartite agreement to the Fund, there was still a
substantial amount outstanding at the time of its liquidation.
[6] Pursuant to the liquidation of KZT, its liquidators
sold its bus transportation business to the fourth respondent,
Basfour 2488
(Pty) Ltd (‘Basfour’), in terms of an
agreement of sale, attached to the particulars of claim. From the
agreement of
sale it appears that, as part of the business sold,
Basfour took over the subsidised contracts awarded to KZT and also
assumed liability
for the amounts owed by KZT to the Fund. According
to the particulars of claim, both the Department of Transport and the
Fund gave
their consent to these assignments.
[7] In the result, Basfour took over the whole of the
KZT business. Nonetheless, so the particulars of claim proceeded,
each of the
depots of that business was subsequently conducted by a
different entity as an independent enterprise. As part of this
process, the
particulars alleged, Basfour assigned its rights and
obligations
vis-à-vis
the
Department of Transport – under the subsidised contracts –
as well as its obligation to make payment to the Fund of
the amounts
previously owed by KZT under the tripartite agreement to the first,
second or third respondents. Again, the particulars
alleged, both the
Department of Transport and the Fund agreed to these further
assignments by Basfour. It is on the basis of these
assignments that
the appellants claimed the amounts previously owed by KZT from the
first, second and/or third respondents. The alternative
claim against
Basfour (as the fourth defendant) provided for the contingency of the
subsequent assignments to the other respondents
proving to be
invalid.
[8] Pivotal to the first, second and third respondents’
exception against the claim thus formulated, is clause 19.5 of the
agreement
of sale between Basfour and the liquidators of KZT. It
provides:
‘
The
buyer [ie Basfour] may not cede, delegate, assign or sub-contract any
of its rights or obligations in terms of this agreement
to any person
without the prior written consent of the liquidators.’
[9] With reference to the wording of clause 19.5, the
respondents contended – and the court
a
quo
held (in para 22 of its judgment) –
that on a proper interpretation, the expression ‘obligations in
terms of the agreement’
included KZT’s obligations to the
Fund that were taken over by Basfour pursuant to the agreement. In
accordance with this interpretation
of clause 19.5, Basfour required
the written consent of KZT’s liquidators before it could
lawfully assign these obligations
to any of the respondents. Since
the appellants did not allege that any such written consent had been
provided by the liquidators,
so the respondents argued and the court
a quo
held, the
allegations relied upon in the particulars of claim were insufficient
to found a cause of action against the first, second
or third
respondents.
[10] The appellants’ opposing contention was –
and still is – that clause 19.5 merely precluded Basfour from
ceding
or assigning, without the prior consent of the KZT
liquidators, rights or obligations between the liquidators and
Basfour granted
or imposed by the sale agreement itself; or
conversely stated, that clause 19.5 did not relate to rights or
obligations arising from
other contracts which were acquired by
Basfour pursuant to or as a result of the sale agreement. Thus
understood, the appellants
argued, clause 19.5 had no bearing on the
rights or obligations which Basfour might have in respect of third
parties, such as the
Fund or the Department of Transport, as a result
of acquiring KZT’s business pursuant to the sale agreement.
[11] It is thus apparent that the outcome of the appeal
turns on the interpretation of clause 19.5, and more particularly, on
the
correct meaning of the words ‘any of its [Basfour’s]
obligations in terms of this agreement’. Should the import
of
these words be limited to Basfour’s obligations towards the KZT
liquidators imposed by the agreement itself, or does it
also include
obligations of KZT to third parties which, but for the agreement,
would not have passed to Basfour? That is the crucial
question.
Because the respondents chose the exception procedure – instead
of having the matter decided after the hearing of
evidence at the
trial – they had to show that the appellants’ claim is
(not may be) bad in law. In the present context
they therefore had to
show that clause 19.5 cannot reasonably bear the narrower meaning
contended for by the appellants (see eg
Lewis
v Oneanate (Pty) Ltd
[1992] ZASCA 174
;
1992 (4) SA 811
(A) at
817F-G;
Vermeulen v Goose Valley Investment
(Pty) Ltd
[2001] 3 All SA 350
(A) para 7).
[12] As the starting point of their argument in support
of the wider meaning for which they contend, the respondents refer to
the
extensive meaning usually conveyed by the term ‘any’
– which is used twice in clause 19.5 – as appears, for
example, from the following statement in
S v
Wood
1976 (1) SA 703
(A) at 706E-G:
‘
The
word “any” is, according to the
Oxford
Dictionary
, the
indeterminate derivative of
one,
an
or
a,
and means “whichever, of
whatever kind, of whatever quantity”. Quantatively it means a
quantity or number however large
or small . . . . Judicially the word
“any” has been defined as a word of very wide import,
“and
prima
facie
the use of it
excludes limitation” . . . .’
[13] Departing from this premise, the respondent’s
argument went as follows: The expression ‘in terms of’
means
the same as ‘pursuant to’ or ‘arising from’
the sale agreement and it therefore does not restrict the unqualified
reach of ‘any’. The appellants’ narrower
interpretation requires a distinction to be drawn between the
nature
of the obligations incurred by Basfour pursuant to the
sale agreement. On the wide and unrestricted wording of clause 19.5,
there
is simply no room for such a distinction. Moreover, the wording
of the clause does not distinguish the obligations which Basfour
incurred to the liquidators from those which it incurred to third
parties; nor does the wording allow for a distinction between the
sale agreement and the agreements concluded between KZT and third
parties. The words under consideration therefore intended the
prohibition
in the clause to apply to any obligation which, but for
the sale agreement, would not have been incurred by Basfour. Since
the ‘business’
sold to Basfour, as defined in the sale
agreement, specifically included KZT’s obligation to pay the
Fund, so the respondents’
argument concluded, this obligation
had undoubtedly been incurred by Basfour in terms of the sale
agreement.
[14] The respondents’ argument brings to mind the
statement by Conradie JA in
Lloyds of London
Underwriting Syndicates 969, 48, 1183 and 2183 v Skilya Property
Investments (Pty) Ltd
[2004] 1 All SA 386
(SCA) para 14, that:
‘
Sophisticated
semantic analysis is not the best way of arriving at an understanding
of what the parties meant to achieve by [the provision
in their
agreement]. A better way is to look at what, from the point of view
of commercial interest, they hoped to achieve by [that]
provision.’
[15] The respondents rightly asserted that the words in
clause 19.5 must be given their ordinary grammatical meaning. But at
the same
time, these words must be read in context. As Jansen JA
explained in
Sassoon Confirming and Acceptance
Co (Pty) Ltd v Barclays National Bank Ltd
1974
(1) SA 641
(A) at 646B-D:
‘
[T]he
‘ordinary’ meaning of words appearing in a contract will
necessarily depend upon the context in which they are used,
their
interrelation, and the nature of the transaction as it appears from
the entire contract . . .. The meaning of a contract is,
therefore,
not necessarily determined by merely taking each individual word and
applying to it one of its ordinary meanings.’
[16] The nature of the transaction under discussion, as
it appears from the sale agreement, is that the liquidators of KZT
sold the
business of the company ‘as a going concern’.
Apart from KZT’s obligations to the Fund, the ‘business’,
as defined in the agreement, also included most of KZT’s
corporeal assets, both immovable and movable, as well as KZT’s
rights and obligations under the subsidised contracts awarded to KZT
by the Department of Transport. It is clear that the words ‘in
terms of’, when used in clause 19.5 with reference to
obligations, must bear the same meaning as when used with reference
to
rights. If the prohibition against assignment without consent must
therefore be understood as applying to KZT’s former obligations
towards the Fund, it must of necessity be understood as applying
equally to cessions of the rights acquired by KZT from its subsidised
contracts with the Department of Transport.
[17] On the respondents’ interpretation, the
purpose of clause 19.5 could only have been to give the KZT
liquidators some measure
of ongoing control over the future disposal
of rights and obligations comprising KZT’s business. However –
and apart
from the commercial absurdity of assuming such an
intention, to which I shall presently return – clause 19.5 is
manifestly
inept at achieving the presumed intention. As I have said,
the KZT business sold to Basfour included corporeal property –
both
movable and immovable – and incorporeal property (rights).
If the liquidators wanted to retain control, one would have expected
them to restrict Basfour’s right to transfer all forms of
assets acquired in terms of the agreement, yet clause 19.5 is
confined
– on the respondents’ interpretation – to
rights and therefore does not extend to the corporeal property
acquired
pursuant to the agreement. The respondents’ answer to
this inconsistency was that there is nothing in law which precludes
the
parties to a contract from restricting the disposal of
incorporeal property (or any other property for that matter) and not
to restrict
the disposal of other property sold in terms of the same
agreement. As a matter of abstract law, the answer is clearly right.
Yet,
the question remains why the parties to the sale agreement under
consideration would have intended to do so. To this question the
respondents suggested no answer and I can think of none.
[18] In the context of the transaction at issue, further
questions raised by the respondents’ interpretation of clause
19.5
are these: Why would the liquidators of KZT have sought to
retain control over part of KZT’s erstwhile business,
potentially
even after Basfour had performed all its obligations
under the sale agreement? Why would Basfour and the Department of
Transport,
for example, not be able to agree between themselves
whether, and if so, to whom, the subsidised contracts should be
transferred?
Why would the KZT liquidators insist that the two
parties to the subsidised contracts were required to seek and obtain
their consent
again, even after Basfour had performed all its
obligations under the sale agreement?
[19] What is more, these questions must, of course, be
considered against the background that the sellers were the
liquidators of
KZT. Their statutory responsibilities, as pointed out
by the appellants, were, in essence, to obtain the best value for
KZT’s
assets for the benefit of the creditors; to present a
report to creditors; to file a liquidation and distribution account;
to distribute
the estate in accordance therewith; and so forth. It is
therefore unlikely in the extreme that they would have insisted on
controlling
what the purchaser of KZT’s business (Basfour) did
with any part of that business after acquiring it and paying the
purchase
price. Indeed, the liquidators would have expected to be
discharged from their duties by the Master as soon as the winding-up
of
KZT was completed. After their discharge they would not be in a
position to approve, or veto, any assignment by Basfour. This renders
it even more unlikely that the parties to the sale agreement would
have intended to bestow control over KZT’s erstwhile business
on the liquidators for an indefinite future period.
[20] For their answer to these seemingly absurd
commercial consequences of their interpretation, the respondents
relied on the statement
by Diemont JA in
Arprint
Ltd v Gerber Goldschmidt Group South Africa (Pty) Ltd
1983
(1) SA 254
(A) at 262D-E that:
‘
The
ways of businessmen sometimes pass understanding, at least the
understanding of lawyers, so that it has been said more than once
that a court must hesitate to set itself up as an arbiter of business
efficacy.’
[21] I am not persuaded by this answer. I believe the
statement relied upon can only hold true if the commercially
nonsensical meaning
appears so clearly from the wording of the
contract that it cannot be avoided; that is, if the provision under
consideration is not
reasonably capable of any alternative
interpretation. If an alternative interpretation is available, the
court will not accept a
meaning which would lead to absurd practical
and commercial consequences (see eg
Cape
Provincial Administration v Clifford Harris (Pty) Ltd
[1996] ZASCA 115
;
1997
(1) SA 439
(A) at 446H-I). With reference to clause 19.5 there is, in
my view, indeed an alternative interpretation available (and the
literal
one at that). That is the interpretation contended for by the
appellants, namely, that the clause pertains only to rights and
obligations
between the parties to the agreement. Thus understood,
Basfour only required the liquidator’s prior written consent
for the
assignment of an obligation owing to, or a right enforceable
against the KZT liquidators, which arose from the sale agreement
itself.
According to this interpretation the purpose of the clause is
relatively easy to understand: what the liquidators sought to protect
themselves against was the substitution of Basfour as their
debtor/creditor under the sale agreement by some unknown entity,
without
their written consent.
[22] During argument in this court, the respondents
sought to advance a novel purpose that would be served by clause 19.5
having the
wider meaning for which they contended. Broadly stated
their argument went as follows: Unless and until the assignment of
KZT’s
obligation to Basfour had been approved by the Fund, the
KZT liquidators remained at risk of being held liable by the Fund. In
that
event, the only remedy available to them would be to seek an
indemnity from Basfour in terms of the sale agreement. During this
period
of uncertainty it would therefore be in the liquidator’s
interest to prevent Basfour from assigning its obligations to pay
the
Fund, which it had undertaken in terms of the sale agreement, to some
unknown entity. It is true, the argument acknowledged,
that once the
Fund had approved the assignment to Basfour – as it eventually
did – the KZT liquidators would no longer
have any interest to
protect because they would no longer be liable to the Fund. Yet, so
the respondents argued, one should not confuse
the purpose and the
effect of clause 19.5 because for some unknown reason, including
oversight, the parties may have agreed on a
contractual protection
for the liquidators which was wider in effect than required by the
purpose it was originally intended to serve.
[23] I do not accept this argument. I believe its
underlying reasoning is fundamentally flawed and that, properly
analysed, it carries
the kernel of its own destruction. The argument
departs from the premise that, as long as the assignment to Basfour
had not been
approved by the Fund, Basfour would not have any
obligation towards the Fund. Its potential liability could only be
towards KZT pursuant
to the sale agreement. But that contractual
right of the KZT liquidators was already protected on the narrow
interpretation of clause
19.5, because from Basfour’s point of
view it was an obligation arising from the sale agreement itself. The
question that concerns
us is whether an interpretation of clause 19.5
which extends the ambit of its operation to an obligation by Basfour
towards the Fund,
can serve any interest of the KZT liquidators.
[24] According to the respondents’ argument, the
crucial moment was when the Fund approved the assignment to Basfour.
Prior
to the approval, the KZT liquidators required the protection of
clause 19.5 – which was provided for even on its narrow
interpretation.
After the approval, the KZT liquidators were no
longer liable to the Fund and they therefore needed no protection
from clause 19.5.
The result is that the moment when clause 19.5 –
on its narrow interpretation – ceased to afford the KZT
liquidators
any protection coincided with the moment when they ceased
to require any protection from the clause. I think the inevitable
conclusion
to be drawn from all this is that, on the respondents’
own argument, the only protection the KZT liquidators could possibly
require from clause 19.5 would be afforded by the narrow construction
of that clause. Logic therefore dictates that the KZT liquidators
could derive no possible benefit from the wider construction of the
clause contended for by the respondents. This only serves to
illustrate that the parties to the contract probably intended the
clause to bear the narrower meaning. It follows that, in my view,
the
respondents did not even come close to satisfying the test on
exception – that clause 19.5 cannot reasonably support the
interpretation relied upon by the appellants. On the contrary, I
think that the interpretation advanced by the appellants is probably
the correct one.
[25] It follows that the appeal against the upholding of
the second exception must succeed. This brings me to the costs order
associated
with the upholding of the first exception. In considering
this issue, it is apparent that the costs order by the court
a
quo
in favour of the respondents was based on
the premise that both exceptions had been upheld. Since that premise
no longer holds good,
the costs issue needs to be reassessed. In this
regard the appellants argued that, on a proper analysis of the
position that eventually
held true, two independent exceptions were
taken of which one was successful and the other not. In the event,
they argued, a fair
result would be achieved by making no order as to
costs. It is true, they conceded, that the fourth respondent
(Basfour) had no direct
interest in the second exception. But, so
they argued, since the four respondents at all times made common
cause in the court
a quo
and
were at all times represented by the same legal team, no distinction
between them in the costs order would be justified. I agree
with
these arguments. With reference to the costs in the court
a
quo,
I therefore propose to make the
suggested order.
[26] As to the costs of appeal, it is clear, in my view,
that the appellants have been substantially successful and that costs
should
follow that event. Yet the fourth respondent made it clear
from the outset that it only had a relatively minor interest in the
outcome
of the appeal. Since the real interest in the outcome of the
appeal lies with the first and second respondents, they should, in my
view, be held liable for the appellants’ costs.
[27] For these reasons:
(a) The appeal is allowed with costs, including those
occasioned by the employment of two counsel, such costs to be paid by
the first
and second respondents, jointly and severally, the one
paying the other to be absolved.
(b) The order made in the court
a
quo
is set aside and replaced by the
following:
1. ‘The first exception is upheld.
2. Paragraph 55 of the plaintiff’s particulars of
claim is struck out.
3. The plaintiff is granted leave, if so advised, to
amend its particulars of claim within fifteen days.
4. The second exception is dismissed.
5. There will be no order as to costs.’
…………………………
F D J BRAND
JUDGE OF
APPEAL
Concur
:
SCOTT JA
LEWIS JA
JAFTA JA
MALAN AJ