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[2007] ZASCA 162
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Be Bop A Lula Manufacturing & Printing CC v Kingtex Marketing (Pty) Ltd (042/07) [2007] ZASCA 162; [2007] SCA 162 (RSA); [2008] 1 All SA 529 (SCA); 2008 (3) SA 327 (SCA) (29 November 2007)
Links to summary
REPUBLIC
OF SOUTH AFRICA
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case
number:
042/07
In the matter between:
BE BOP A LULA
MANUFACTURING & PRINTING CC ................................
Appellant
and
KINGTEX
MARKETING (PTY) LTD ................................
Respondent
CORAM
:
HARMS ADP, NAVSA, LEWIS JJA, HURT and MALAN
AJJA
HEARD
:
20 NOVEMBER 2007
DELIVERED
:
29 NOVEMBER 2007
Summary:
Compromise - cheque sent in ‘full and
final settlement of account’ – whether offer of
compromise – deposit
of cheque – whether acceptance of
offer of compromise
Neutral
citation:
This judgment may be cited as
Be
Bop a Lula v Kingtex
[2007] SCA 162 RSA.
________________________________________________________________
JUDGMENT
________________________________________________________________
MALAN AJA:
[1] This is
an appeal with leave of this court against the judgment of the full
court of the Cape High Court,
1
dismissing the appellant’s appeal against the
judgment of the trial court (Traverso DJP), and upholding the
respondent’s
claim. The appeal concerns the rejection of the
appellant’s defence of compromise based on the deposit and
payment of a cheque
marked ‘full and final settlement of
account’ and sent to the respondent. This judgment overrules
the judgment of the
court a quo.
[2] The appellant ordered
60 000 T-shirts from the respondent, a garment manufacturer. Forty
thousand were delivered and invoiced
at R1 003 104,35. Four payments
were made and a credit passed leaving a balance of R229 846,07.
The T-shirts were ordered to
enable the appellant to sell them to
Adidas, its customer. They were delivered late and a dispute arose as
to their quality. Meetings
were held but the appellant eventually
repaired some of the garments and sold the remainder to Adidas at
half price. On 19 February
2002 the appellant sent a letter to the
respondent headed ‘Credit Request’, proposing in this way
to recoup its losses
on the Adidas contract by claiming a discount of
R122 649,18 to be deducted from the balance owing. The appellant sent
its cheque
for the balance, R107 196,89 with this letter as well as a
letter headed ‘Final Reconciliation’, also dated 19
February
2002, to the respondent. The cheque was post-dated 28
February 2002. The cheque was deposited for special clearance by an
employee
of the respondent and paid on 28 February 2002. On 1 March
2002, the respondent’s attorneys faxed a message to the
appellant
purporting to reject the offer of compromise, and
suggesting that the appellant stop payment of the cheque but stating
that, should
this not be possible, the money would be held in trust
pending an action by the respondent to recover the full balance
owing. This
letter was faxed to the appellant after business hours on
Friday 1 March 2002 and came to the notice of the appellant’s
member,
Mr Webster, only on Monday 4 March 2002. He called the bank
to ascertain whether it was still possible to stop payment of the
cheque
and, on learning that it was not, wrote to the respondent’s
attorneys on that day informing them that it was too late to stop
payment and that if the respondent wished to pursue its claim for the
balance the appellant would counterclaim for loss of profits
on the
T-shirts short delivered and for damages for late delivery. The
proceeds of the cheque were paid into the respondent’s
attorneys’ trust account on 8 March 2002 and R12 750,89 was
deducted in respect of fees owed by the respondent to his attorneys.
The balance of R94 446 was paid over to the respondent’s new
attorneys on 30 June 2002 and appropriated to legal fees in other
matters in which they acted for the respondent.
[3] The Credit Request
refers to ‘Rejects Delivered To Adidas At Half Price’ and
sets out their value totalling R52 702
to which the cost of
‘re-examining’, ‘repairs’ and value added tax
is added, leaving a balance of R122 649.18
for which a credit is
requested. The letter states that most of the defects related to
‘spirality’ and that all garments
were re-examined except
2819 ‘uniform’. The repairs related to ‘uneven
hems’ which were ‘unpicked,
trimmed straight, and
re-hemmed’.
[4] The Final
Reconciliation shows the total of R1 003 104.35 invoiced by the
respondent, four payments made as well as a credit note
passed by the
respondent, leaving a balance owing of R229 846.07. From this amount
is then deducted the amount of the Credit Request,
R122 649.18
leaving a balance ‘due’ at 28 February 2002 of R107
196.89. This was also the amount of the cheque dated
28 February 2002
which was payable to the respondent or bearer and bore the words
‘full and final settlement of account’
underlined and
written at the foot of the cheque across its face.
[5] Mr Wang, a director
of the respondent, testified that the cheque was deposited on 28
February 2002 for special clearance according
to company policy,
without his knowledge and when he was not present at the office.
After he received information of the cheque and
its deposit he
consulted with the respondent’s attorneys. The consultation led
to the letter of the respondent’s attorneys
dated 1 March 2002
recording the following:
‘
We
address this letter to you on behalf of our client who has approached
us for advise [sic] and attention herein.
Our instructions are to
place the following facts on record:
Our client sold garments
to yourselves of which the total amount due and owing amounts to
R229 846.07;
On the 19
th
of February 2002 our client received a letter requesting a credit
request with which our client disagrees and places in dispute;
On the 28
th
of February 2002 our client received a cheque from yourselves in
favour of our client in the amount of R107 196.89, furthermore
with
the wording thereon “in full and final settlement of the
account”.
Our instructions now are
to inform you as follows:
Our client does not
accept this payment in full and final settlement and if you do not
agree with our client’s claim of R229
846.07 you must arrange
to stop payment on the said cheque.
Should you put stop
payment on the said cheque our client will then proceed with his
action against yourselves for the full amount
outstanding and owing
of R229 846.07.
Should you however not
put stop payment to this cheque our client will pay this amount into
our trust account pending the outcome
of the dispute regarding the
balance owing and payable to our client.
We reiterate that the
payment is not received in full and final settlement of your
outstanding account with our client and that you
have ample time if
you disagree with the amount of our client’s claim to reverse
this situation.
We await your reply
herein.’
[6] The appellant’s
response was sent by fax at 9h15 on Monday 4 March 2002. It recorded
that the respondent’s attorneys’
fax was received only at
8h15 on Monday 4 March 2002 because the office closed early on the
previous Friday and stated that the cheque
went through the
appellant’s bank account on 28 February 2002 and that it was
too late to stop its payment. The appellant added
that ‘[it]
therefore accept[s] that by depositing the cheque, your client
accepted the condition of it being in full and final
settlement.’
[7] The respondent’s
attorneys acknowledged receipt of the previous letter on 7 March 2002
and replied that the respondent would
deposit the amount of the
cheque in their trust account ‘pending the outcome of this
dispute.’ They also indicated that
they would be proceeding to
issue summons for the recovery of the full amount allegedly owing.
[8] Mr Webster confirmed
in evidence the contents of his letter of 4 March 2002 and that he
had endorsed the words ‘full and
final settlement of account’
on the cheque. He testified how he had arrived at the figure claimed
as a credit and the balance
left owing by the appellant. On receiving
the respondent’s attorneys’ letter of 1 March 2002 he
telephoned his bank to
inquire whether it was still possible to stop
payment of the cheque. He was informed that it was not because the
cheque had been
put through special clearance. His evidence in chief
in this regard is as follows:
’
On
receipt of that fax I then immediately sent back my reply fax to
their attorneys, when I say immediately, that was after first
phoning
the bank to find out whether it was still physically possible to stop
the cheque, and they said no, because it was put through
special
clearance on the 28
th
there was no chance of anything like that. That is why I immediately
wrote the letter to [the respondent’s attorneys] saying
that in
my opinion those conditions stood, which I thought was right at the
time.’
Under cross-examination
he testified as follows:
‘
Would
I be correct in assuming that if the bank manager would have
indicated to you that it was possible to stop payment of the cheque
we wouldn’t have been arguing about the principle, full and
final settlement today ---- Possibly. I only asked the bank a
question
based on the fact that the lawyers instructed me to stop the
payment.
You were requested to
stop payment. ---- Yes, but the request came through too late.
You attempted to stop the
cheque? ---- I found out if it was feasible.
Had it been possible at
that stage we wouldn’t have been arguing the principle today?
---- Correct, I would have stopped it
and then I would have had to
put my counterclaim in before the money was spoken about further.’
[9] In his
judgment for the full court Van Zyl J observed that neither the
Credit Request nor the Final Reconciliation that accompanied
the
cheque contained a reference to an offer of compromise or to the mode
of acceptance. From this he inferred that the appellant
merely
intended to inform the respondent of the amount it believed it owed.
The cheque, he concluded, was therefore tendered with
a view to
making payment and not for the purpose of making an offer of
compromise. The inscription on the cheque was simply a confirmation
of what the appellant believed it owed. But even if, he said,
proceeding from the premise that a compromise required ascertaining
the ‘true intention’ or actual consensus of the parties,
the tender of the cheque could be seen as an offer of compromise,
it
was expressly rejected despite the cheque’s having been
deposited and paid. This rejection was confirmed by the respondent
inviting the appellant to stop payment. He further found that the
appellant did not regard payment of the cheque as an acceptance
of
the offer because Mr Webster attempted to stop payment when invited
to do so by the respondent’s attorneys. Referring to
Mr
Webster’s evidence Van Zyl J said
2
that had the appellant succeeded in stopping the cheque
’
it
would clearly not have placed any further reliance on the payment
thereof as being in full and final settlement of its indebtedness
to
the respondent. It was only on being informed that the payment could
not be stopped that it made the allegation … that
the
respondent had, by depositing the cheque, “accepted the
condition of it being in full and final settlement”.’
He thus came to the same
conclusion as did Traverso DJP in the trial court that the appellant
had no intention of holding the respondent
to the cheque but only
formed that intention on learning that the cheque had been paid. The
appellant moreover, Van Zyl J said, never
objected to the proceeds of
the cheque being put in the attorneys’ trust account nor did it
claim that the amount be repaid.
[10] The
essential issue is whether an agreement of compromise was concluded:
one is concerned simply with the principles of offer
and acceptance.
3
The first question is whether the cheque accompanied by
the Credit Request and Final Reconciliation constituted an offer of
compromise.
In other words, ‘the proposal,
objectively
construed, must be intended to create binding legal
relations and must have so appeared to the offeree.’
4
Van Zyl J, however, proceeded from the premise that
5
‘
the
court must determine the true intention of the parties, and not be
misled by what the one or the other of the parties may, by
the use of
particular terminology, purport to intend.’
He added:
6
The court must be
satisfied that the parties have achieved
consensus
on all the
relevant contractual requirements and have unequivocally intended to
settle the dispute or disputes between them. More
particularly it
must be satisfied that the debtor has made an offer of settlement and
that the creditor has accepted it.’
With
respect, these conclusions have been stated too generally. Although,
generally, a contract is founded on consensus, contractual
liability
can also be incurred in circumstances where there is no real
agreement between the parties but one of them is reasonably
entitled
to assume from the words or conduct of the other that they were in
agreement.
7
This is, as I will show, what happened in this case.
[11] The
words inscribed on the cheque, ‘full and final settlement of
account’, must be construed in the context of the
two letters
and the background of the dispute between the parties to ascertain
whether it was intended to effect a compromise or
to pay an admitted
liability.
8
In the Credit Request the appellant sets out exactly how
the amount of the credit requested is composed asking for a credit in
that
amount. This is surely an offer that the respondent could have
accepted or declined. Read with the Final Reconciliation, the
appellant
again shows the amount due after taking the amount of the
credit requested into consideration. The two letters set out clearly
the
extent to which the appellant asserts that it is liable. In this
context the words ‘full and final settlement of account’
on the cheque can only amount to an offer to the respondent to settle
their dispute by payment of that amount which the latter could
have
accepted or declined, but on acceptance of which the dispute between
the parties would be compromised.
9
The fact that the appellant admitted liability in a
certain amount is no bar to the proposal being construed as an offer
of compromise.
10
[12] This is indeed how
the respondent understood these three documents. They not only
objectively constituted an offer of compromise
but were also so
understood by the very person they were addressed to. This is
demonstrated by the letter the respondent’s
attorneys wrote on
1 March 2002. This conclusion is not affected by the fact that Mr
Webster attempted to stop payment of the cheque
on receiving this
letter: it seems entirely probable that he would attempt to do so on
learning that his offer of compromise was
purportedly rejected. His
conduct does not detract from the objective construction that has
been placed on the three documents and,
in any event, does not show
that he formed an intention to compromise the matter only subsequent
to the refusal. It means only that
he would, on refusal of the offer,
rely on his original cause of action. It is moreover trite that an
offeror may prescribe the manner
in which an offer may be accepted.
The cheque accompanying the two letters formed part of the offer and
amounts to an invitation
to deposit the cheque to indicate its
acceptance.
[13] The
second question is whether the deposit of the cheque on 28 February
2002 and retention of the proceeds, albeit in the attorneys’
trust account, and subsequent appropriation in payment of fees
constitutes acceptance of the offer. Usually an acceptance may be
inferred from the retention of the money or deposit of the cheque
accompanying the offer
11
but, as was emphasised,
12
‘
in every case it must be a question of fact
depending on all the circumstances.’
[14] In the
present case the cheque was deposited by one of the respondent’s
employees following the respondent’s policy
to deposit cheques
above a certain amount for special clearance and paid by the bank on
the same day.
13
The proceeds of the cheque, however, were retained in
the respondent’s attorneys’ trust account. The money,
albeit in
the trust account, was not held for the benefit of both
parties. Neither was it held ‘pending the outcome of the
dispute’.
In fact, fees and expenses were deducted and the
balance transferred to the respondent’s new attorneys and
appropriated to
fees. The respondent had to accept or reject the
offer of compromise. It could not add any conditions to it and retain
the money.
It had no right to do so and should have paid the proceeds
back to the appellant.
14
Any conditions attached to the acceptance are
irrelevant
15
and by retaining the proceeds of the cheque and
appropriating it the respondent became bound by the terms of the
offer.
16
In these circumstances, although actual consensus
between the parties may have been lacking, the appellant acted
reasonably in relying
on the impression that the respondent was
accepting the offer of compromise and compromising its claim.
17
[15] There was a
conditional counterclaim by the appellant based on the short-delivery
of certain T-Shirts which was successful in
the amount of R80 000.
The counterclaim can, however, not stand if the matter has been
compromised as I have found. The problem is
that the respondent did
not lodged a cross-appeal (conditional or otherwise). This judgment
can accordingly not deal with that issue.
[16] It follows that the
appeal should be upheld with costs. The following order is made:
1 The appeal is upheld
with costs;
2 The order of the court
a quo is set aside and replaced by the following:
‘
(a)
the appeal is upheld with costs:
(b) the order of the
court a quo is set aside and replaced with an
order dismissing the
claim with costs.’
_________
Malan AJA
Acting Judge of Appeal
CONCUR:
HARMS JA
NAVSA JA
LEWIS JA
HURT AJA
1
Reported
as
Be
Bop a Lula Manufacturing & Printing CC v Kingtex Marketing (Pty)
Ltd
2006
(6) SA 379
(C).
2
Para
46 (para 47 of the reported judgment).
3
ABSA
Bank Ltd v Van de Vyver
NO
2002 (4) SA 397
(SCA) para 17.
4
DT
Zeffertt ‘Payments “In Full Settlement”’
(1972) 89
SALJ
35
at p 38.
5
Para
42(b).
6
Para
42(c).
7
RH
Christie assisted by Victoria McFarlane
The
Law of Contract in South Africa
5ed
(2006) 24 ff and see, in particular,
Sonap
Petroleum SA (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v
Pappadogianis
[1992] ZASCA 56
;
1992
(3) SA 234
(A) 238I–240B.
8
ABSA
Bank Ltd v Van de Vyver NO
above
para 16.
9
ABSA
Bank Ltd v Van de Vyver NO
above
para 16.
10
ABSA
Bank Ltd v Van de Vyver NO
above
paras 15-18.
11
Van
Breukelen en ‘n Ander v Van Breukelen
1966
(2) SA 285
(A) 290 G-H;
Turgin
v Atlantic Clothing Manufacturers
1954
(3) SA 527
(T) 532G–533A;
Cecil
Jacobs (Pty) Ltd v Macleod & Sons
1966
(4) SA 41
(N) 48H-51A;
Louw
v Granowsky
1960
(2) SA 637
(SWA) 641 F-G;
Neville
v Plasket
1935
TPD 115 120.
12
Paterson
Exhibitions CC v Knights Advertising and Marketing CC
1991
(3) SA 523 (A) 529 D.
13
This
is therefore not a case such as
Blackie
Swart Argitekte v Van Heerden
1986
(1) SA 249
(A) where the employee who deposited a cheque sent in
full and final settlement had no authority to settle the dispute,
and where
there was no evidence that the debtor believed that either
the secretary or her employer had such authority. In the present
matter
the question of the respondent’s employees’
authority to compromise, or lack thereof, was cursorily dealt with
in evidence.
It was not argued before this court that the
respondent’s employee lacked authority.
14
Paterson
Exhibitions CC v Knights Advertising and Marketing CC
above 528 G-H.
15
Tractor
& Excavator Spares (Pty) Ltd v Lucas J Botha (Pty) Ltd
1966
(2) SA 740
(T)
743
D-E;
Van
Breukelen
above
290 G-H.
16
Contrast
Burt
v National Bank of SA Ltd
1921
AD 59.
17
Cf
Constantia
Insurance Co Ltd v Compusource (Pty) Ltd
2005
(4) SA 345
(SCA) paras 16 and 17