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[2014] ZAFSHC 3
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Mpumelelo Projects Construction CC v Sasol Wax (Pty) Ltd (720/2007) [2014] ZAFSHC 3 (23 January 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No. : 720/2007
In
the matter between:-
MPUMELELO
PROJECTS CONSTRUCTION CC
.............................
Plaintiff
and
SASOL
WAX (PTY)
LTD
................................................................
Defendant
HEARD
ON:
14
NOVEMBER 2013
JUDGMENT
BY:
RAMPAI,
AJP
DELIVERED
ON:
23
JANUARY 2014
[1]
The plaintiff sued the defendant for damages resulting from an
alleged breach of contract arising from the supply of a product
called “C9-C20 N paraffin”. The amount claimed is R21 052
422.00, according to the plaintiff, which constitutes the
loss of
profit it would have made over a period of four years had the product
complied with market expectations.
[2]
The action was defended. The defendant did not only defend the
plaintiff’s action, but also filed a counter claim.
I
shall return to this disputed counter claim later.
[3]
After the plaintiff had adduced the evidence of its managing member
Dr Clement Chalera, Ms Singo and Ms Tshabalala (end-users
of the
product), Mr Jacot-Guillarmod, a chartered accountant, and Mr L.F.
Opt’Hof, who gave evidence as an expert, I granted
absolution
from the instance.
[4]
The plaintiff appealed against that order to the full bench of the
Free State Division with the leave of the Supreme Court of
Appeal.
The appeal was successful, the order of absolution from the instance
was reversed and the case remitted to me to complete
the hearing.
[5]
At the resumed hearing, the defendant adduced the evidence or Mr
Heinrich Ernst (the defendant’s marketing manager), Mrs
Janette
Cawood (his assistant at the time), Ms Fritz and Mr Rossouw (analytic
chemists) and Mr Nicolas Louw (the principal scientist
of the
defendant). None of these experts’ expertise was disputed. I
shall deal with their evidence in more detail below in
due course.
[6]
Having heard the evidence adduced on behalf of the defendant, I
adjourned the matter for closing argument. The legal
representatives filed the written heads. The matter was subsequently
argued on 14 November 2013. I then reserved judgment.
[7]
Whether the plaintiff’s claim was founded on delict or contract
was not apparent from the pleadings. That being the case,
I had to
consider both possible causes of action since the cause of action
determines the
facta
probanda
and the onus.
[8]
In the first place I proceed to deal with the matter on the basis
that the plaintiff’s claim was founded on delict. In
delict, a
plaintiff may claim damages from a defendant which damages resulted
from an alleged extra contractual or pre-contractual
misstatement
made unlawfully and negligently and which induced the plaintiff to
conclude a contract with a defendant – Harms:
Ambler’s
Precedents of Pleadings
,
7th Edition, p 294-5.
[9]
The plaintiff pleaded that the alleged misrepresentation had induced
it to enter into a contract with the defendant. It appeared
that the
contract which was so entered into, was the “Memorandum of
Understanding” or MOU, which was, according to
the heads of
argument filed by the plaintiff’s attorney, subject to a
suspensive condition which would be fulfilled “once
the
business plan was developed by plaintiff with the defendant”.
[10]
The plaintiff then pleaded that the alleged representation was false
and was made negligently. It further pleaded that the
defendant owed
the plaintiff a duty of care.
All
of these averments, which the defendant denied, were indicative of
the delictual character of the plaintiff’s claim.
According to the pleadings so formulated, the plaintiff’s claim
can be nothing but a truly delictual claim.
[11]
I now proceed to examine the pleadings in order to determine whether
the plaintiff has discharged the requisite onus to prove
such
delictual damages. On the pleadings, the dispute is fivefold
namely:
·
the
alleged misrepresentation;
·
unlawfulness;
·
negligence;
·
inducement
to contract; and
·
causation
of damages.
[12]
As regards the first category of the dispute, the plaintiff pleaded
the alleged misstatement as follows at par 6 of the summons:
“‘
During
the negotiations defendant represented to plaintiff that the
illuminating and power paraffin that was to be sold by defendant
to
plaintiff was suitable for domestic use.’”
[13]
In a request for further particulars the plaintiff was required to
define the concept “domestic use”. In its reply
to the
request for further particulars the plaintiff conceded that the
representation was not made in writing, but stated that
“it was
clearly defined during the negotiations preceding the MOU and it was
agreed between the parties that the business
model was to target the
rural and semi-urban communities to use the paraffin for illuminating
and power purposes. Furthermore it
was an
implied term
that the product has to comply with the requirements of the law that
is, the Petroleum Products Act, 58 of 2003, as amended”.
[14]
The plaintiff’s choice of the words “implied term”
within the context of a delictual matrix was rather confusing
and
thus lamentable. Doing so tended to conflate issues delictual and
issues contractual. I think there is no room for those words
under
the current topic, delictual matrix. If necessary, I shall deal with
the expression later under a different topic, contractual
matrix.
[15]
The defendant, apart from denying the misstatement, also relied on a
disclaimer contained in a written contract, signed by
both parties,
into which certain standard “General Terms of Sale” have
been incorporated by reference. One such
clause is clause 7
thereof.
[16]
Clause 7.1 of the plaintiff’s Standard General Terms of Sale
concerns exclusion of warranties. It reads as follows:
“
7.1
Sasol Wax does not give any warranties in respect of the products or
their use, and all warranties implied by law are expressly
excluded.The purchaser waives any claim for loss, damage or liability
which it might have against Sasol Wax arising from, but not
limited
to, claims based on the products not being suitable for the
purchaser’s purposes.”
[17]
Clause 7.2 of the plaintiff’s Standard General Terms of Sale
concerns disclaimer of liability. It reads as follows:
“
7.2
Notwithstanding anything contained herein or elsewhere, Sasol Wax
shall not be liable, whether in contract or in delict, for
any
consequential loss such as, but not limited to, loss of production
and loss of market share.In all instances Sasol Wax’s
liability
shall be limited to the replacement of the products concerned at no
cost to the purchaser or re-imbursement of the purchasing
price as
set out in 4.10.”
[18]
It is accepted that, where a defendant facing a delictual claim,
wishes to rely on a disclaimer such as the one found in the
“General
Terms of Sale”, the onus is on the defendant to prove the
disclaimer.However, it is not necessary for the
defendant to prove
that the plainbtiff actually read and agreed to the terms of the
disclaimer. In
Durban’s Water Wonderland (Pty) Ltd v
Botha and Another
1999 (1) SA 982
(SCA) Scott, JA at 991D –
J held:
“
The
principles applicable to the so-called 'ticket cases' apply
mutatis
mutandis
to cases such as the present where reliance is placed on the display
of a notice containing terms relating to a contract.(See Joubert
(ed)
The
Law of South Africa
vol 5 part 1 (first reissue) para 186.) Had Mrs Botha read and
accepted the terms of the notices in question there would have been
actual consensus and both she and Mariska’s guardian, on whose
behalf she also contracted, would have been bound by those
terms. Had
she seen one of the notices, realised that it contained conditions
relating to the use of the amenities but not bothered
to read it,
there would similarly have been actual consensus on the basis that
she would have agreed to be found buy those terms,
whatever they may
have been. (
Central
South African Railways v James
1908 TS 221
at 226.) The evidence, however, did not go that far. Mrs
Botha conceded that she was aware that there were notices of the kind
in question at amusement parks but did not admit to having actually
seen any of the notices at the appellant’s park on the
evening
concerned, or for that matter at any other time.
In
these circumstances, the appellant was obliged to establish that the
respondents were bound by the terms of the disclaimer on
the basis of
quasi-mutual assent. This involves an inquiry whether the appellant
was reasonably entitled to assume from Mrs Botha’s
conduct in
going ahead and purchasing a ticket that she had assented to the
terms and disclaimer or was prepared to be bound by
them without
reading them.
(See
Stretton
v Union Steam Ship Co Ltd
(1881) 1 EDC 315
at 330 331;
Sonap
Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd v
Pappadogianis
[1992] ZASCA 56
;
1992 (3) SA 234
(A) at 239F – 240B.) The answer depends upon
whether in all the circumstances the appellant did what was
‘reasonably
sufficient’ to give patrons notice of the
terms of the disclaimer. The phrase ‘reasonably sufficient’
was used
by Innes CJ in
Central
South African Railways v McLaren
1903 TS 727
at 735. Since then various phrases having different
shades of meaning have from time to time been employed to describe
the standard
required. (See
King’s
Car Hire (Pty) Ltd v Wakeling
1970 (4) SA 640
(N) at 643G – 644A.) It is unnecessary to
consider them. In substance they were all intended to convey the same
thing,
viz
an objective test based on the reasonableness of the steps taken by
the proferens to bring the terms in question to the attention
of the
customer or patron.”
[19]
On behalf of defendant Mr Ellis contended that the plaintiff, through
Dr Chalera, its main member, actually received an email
from the
defendant to which those general terms of sale as well as the
purchaser’s credit application were attached.
Counsel
further contended that Dr Chalera went a step further than merely and
actually receiving the email. He opened the email
and printed it.He
printed the purchaser’s credit application form, completed it,
signed it and faxed it back to the defendant.In
that credit
application form, express reference to the general terms of sale was
made.
[20]
On behalf of the plaintiff Mr Khang contended that Dr Chalera did not
receive the alleged document in which general terms of
sale were
embodied. It was the plaintiff’s case that only one
document with the title “Purchaser’s Credit
Application”
was attached to the email.
[21]
I am persuaded by Mr Ellis’ argument.The defendant conclusively
proved that an email was sent to the plaintiff; that
two documents
were attached; that one of those attachments was a document titled
“Standard General Terms of Sale”;
that it can be
objectively deduced from the proven facts that it appeared more
probable than not that Dr Chalera received such
a document on behalf
of the plaintiff; that Dr Chalera’s undisputed actual receipt,
completion, signing and ultimate faxing
of the credit application
form, which was also attached to the same email militated against his
denial. In coming to this conclusion
I am fortified by the fact that
although Dr Chalera initially denied that he actually received the
email itself, he later admitted
he in fact did.
[22]
From the evidence I can infer that the defendant, to paraphrase the
words of Scott JA in the
Durban’s
Water Wonderland
case,
supra
,
was reasonably entitled to assume from Dr Chalera’s conduct in
returning the signed credit application and in going ahead
and
purchasing the product, that he had assented to the general terms of
sale containing the disclaimer or was prepared to be bound
by them
without actually reading them in order to familiarise himself with
their significance or import.
[23]
However, Mr Ellis submitted that it was equally possible, if not more
possible than not, that Dr Chalera in fact opened and
read those
standard and general terms and that he actually, albeit in a tacit
manner, consented to be thereby bound.There was substance
in that
argument. The witness projected the appearance of a seasoned and
astute businessman. It seemed to me improbable that such
a man would
have signed a contract without ascertaining the standard and general
terms of any sort. That, I find hard to believe.
[24]
The disclaimer is, however, only a safety net on which the defendant
did not really rely upon. I am persuaded that the plaintiff
failed to
prove that any false representation whatsoever was made by the
defendant to the plaintiff. The plaintiff’s
counsel had
great difficulty in extricating evidence from Dr Chalera regarding
the so-called misrepresentation.The high-water mark
of the
plaintiff’s case was the following sentence in the evidence of
Dr Chalera:
“
They
(sic) in fact told me that indeed thy (sic) had developed a new
product which is odourless and smokeless.”
[25]
That evidence, couched in the vaguest possible terms, does not
support the plaintiff’s claim, as pleaded in paragraph
6 of the
particulars of claim, and is diametrically opposed to clause 7 of the
general terms. The common cause evidence of both
Dr Chalera and Mr
Ernst was that numerous samples of the product were initially given
and later sold to the plaintiff by the defendant
for the purpose of
enabling the plaintiff to perform tests on the product to make sure
that the product was suitable for the application
to which the
plaintiff intended to put the defendant’s product.The evidence
of Mr Ernst and Mr Louw that the defendant does
not do “application
testing”, was not disputed, and was consistent with clause 7.1
of the general terms of sale. The
only possible purpose of the
handing out of samples could only have been to enable the plaintiff
to test the product beforehand.Such
samples of the product were, in
my view, not supplied for the purpose of actual marketing. If that
was so, any talk of loss of
expected profit would become absurd.
[26]
Any notion that a misrepresentation was made to the plaintiff is
destroyed by Dr Chalera when he said moments later:
“
I
personally tested this product and I think it is a product that is
going to be accepted in the market, but we need to physically
promote. Let’s test this market and see how the response
of the market is going to be.
The response I got was that
if
I think the product can work and it is my responsibility to buy the
product on my own, and test the market.
Well I was excited with the product and I did not really think it was
a problem to me so I bought the product myself…”
[27]
These statements are inconsistent with any representation by the
defendant that the product was suitable for any particular
purpose.
Significantly, it was not put to Mr Ernst that he had made any
misrepresentation to the plaintiff during the negotiations
or that
any tacit term was implied into the contract regarding the use of the
product.
[28]
I therefore find that the plaintiff failed to prove the
misrepresentation it relied upon. In any event, even if
representation
was made, the disclaimer contained in the “general
terms of sale” prohibits the plaintiff from relying thereon.
[29]
As regards the second category of the dispute, the plaintiff alleged
that the defendant owed the plaintiff a duty of care.
To the alleged
breach of the defendant’s duty of care I now turn.
[30]
Where, as in this matter, the plaintiff delictually sues for the
recovery of pure economic loss, (s)he or it must allege and
prove
that the defendant owes the plaintiff a duty of care to prevent the
incurrence of such pure economic loss.
[31]
In
Children's Resource Centre Trust and Others v Pioneer Food
(Pty) Ltd and Others
2013 (2) SA 213
(SCA) at par [17]
Wallis JA had this to say about a legal duty:
“
[17]
The
class action serves to bring a number of separate claims together in
one proceeding. In other words it permits the aggregation
of claims.
However, that is not its only function. Of equal or greater
importance, as Professor Silver points out, is the
fact that the
class action is 'a representational device'. It is —
'a
procedural device that expands a court's jurisdiction, empowering it
to enter a judgment that is binding upon everyone with covered
claims. This includes claimants who, not being named as parties,
would not ordinarily be bound. A class-wide judgment extinguishes
the
claims of all persons meeting the class definition rather than just
those of named parties and persons in privity with
them, as
normally is the case.
Judges
and scholars sometimes treat the class action as a procedure for
joining absent claimants to a lawsuit rather than as one
that permits
a court to treat a named party as standing in judgment on behalf of
them. This is a mistake. . . . Class members neither
start out as
parties nor become parties when a class is certified.'
”
[32]
It was, therefore, incumbent upon the plaintiff to plead the material
facts, from which it could be inferred that indeed the
defendant owed
the plaintiff a legal duty of care. However, the plaintiff did not so
plead, as it was required to do.
[33]
In
Trope and Others v South African Reserve Bank
[1993] ZASCA 54
;
1993
(3) SA 264
(AD) at 273A – B F.H. Grosskopf JA aptly commented
as follows:
“
It
is trite that a party has to plead - with sufficient clarity and
particularity - the material facts upon which he relied for
the
conclusion of law he wishes the Court to draw from those facts
(Mabaso
v Felix
1981
(3) SA 865 (A)
at 875A-H; Rule 18(4)). It is not sufficient, therefore, to plead a
conclusion of law without pleading the material facts giving
rise to
it.
(Radebe
and Others v Eastern Transvaal Development Board
1988
(2) SA 785
(A)
at 792J-793G.)”
[34]
In the instant matter the plaintiff did not particularise any fact
from which the defendant’s alleged legal duty could
be
inferred. In view of such a glaring omission, I could not speculate
or guess as to the existence of the alleged legal duty of
care. Even
at the trial, no evidence was adduced on behalf of the plaintiff from
which a legal duty of care attributable to the
defendant could be
drawn. In the light of those two omissions I was not in a position to
determine whether the defendant owed the
plaintiff a legal duty of
care to prevent the incurrence of pure economic loss by the
plaintiff.
[35]
The evidence showed that the plaintiff approached the defendant and
proposed purchasing and reselling the latter’s product.
The
defendant gave the plaintiff ample samples of the product to enable
the plaintiff to test the market. The plaintiff did so
and later
returned for further supplies. The defendant then required the
plaintiff to apply for credit facility. The parties then
concluded a
credit agreement for further supplies.
[36]
As regards the element of negligence, it was merely pleaded but not
canvassed by the plaintiff at the hearing.No evidence was
adduced
which indicated or tended to indicate that the defendant acted
negligently in supplying the product to the plaintiff.In
such
circumstances there is hardly any room for guessing.During the course
of oral argument and in the plaintiff’s written
heads of
argument, the element of negligence was not meaningfully addressed.
[37]
As regards the element of inducement, the plaintiff alleged that the
defendant induced it to enter into the contract. The contract
that
the plaintiff was allegedly induced to conclude, is the Memorandum of
Understanding or “MOU”, which was, according
to the
plaintiff, subject to a suspensive condition, the occurrence of which
would transmute the MOU into a contract.
[38]
The parties fundamentally differed on the form and terms of the
contract between them. The MOU was signed by both parties on
4
February 2004. The plaintiff placed heavy reliance on the MOU. At
paragraph 3 of the particulars of claim the plaintiff pleaded:
“…
which would result
in a contract once
plaintiff
and defendant
had
developed
(sic) a business plan or model in terms of which defendant would
supply plaintiff with odourless and non-smoking illuminating paraffin
(C9-C20) for a period of your years.”
The
MOU and the business plan were attached to the particulars of claim
as annexure “CC1” and annexure “CC2”
respectively.
[39]
The defendant, whilst admitting that annexure “CC1” (the
MOU) records an understanding between the parties prior
to the
possible conclusion of the supply agreement, relies on a different
(oral) agreement, the terms of which were reduced to
writing and
incorporated by reference to a set of “general terms of sale
applicable to domestic sales” - annexure “a”
to the
plea.
The
evidence of the plaintiff is summarised in the following statement by
Dr Chalera:
“
The
effect of completing a business plan as the MOU states it was that
now the MOU would transmute (sic) into a supply agreement
between the
two parties.”
Dr
Chalera then testified that, in fact, the “transmutation”
occurred in March 2004.
[40]
Although the verb “to transmute” or its noun
“transmutation” are well known to authors of novels in
science fiction, it appears to be unknown to our domestic law. I,
therefore, assume as Mr Khang, counsel for the plaintiff seemed
to
do, that the plaintiff thereby meant that the MOU was concluded
subject to a suspensive condition. The effect of such condition
was
that the parties would reach an agreement on the terms of the
business plan: only upon such agreement being reached would the
MOU
become a binding supply agreement.
[41]
A contract subject to a suspensive condition must contain, within
itself, all the relevant terms. If a contract requires the
parties to
agree on yet further outside terms before it comes into effect, then
it is not a contract subject to a suspensive condition,
but at most,
“an agreement to agree” or a
pactum
de contratendo
.
Of such an agreement Schutz JA said the following in
Premier,
Free State
,
and Others v Firechem Free State (Pty) Ltd
2000
(4) SA 413
(SCA)
at
par [35]:
“
As
Christie
The
Law of Contract in South Africa
3rd ed at 152 explains, it is somewhat of a solecism to describe as a
conditional contract one in which the condition is purely
potestative
(the
si
volam
of
Roman law), as such a provision is destructive of any enforceable
agreement. Nor does it matter if the provision is cast
as a term:
Christie
(op cit
at 109). The result is the same. Accordingly, if the provision is
potestative it does not matter for present purposes whether it
is
classified as a condition or a term. In either case enforcement is
dependent upon the will of both parties, in this case
particularly the will of the province. An agreement that the parties
will negotiate to conclude another agreement is not enforceable,
because of the absolute discretion vested in the parties to agree or
disagree:
Scheepers
v Vermeulen
1948
(4) SA 884 (O)
at 892,
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd and
Other
Related Cases
1985
(4) SA 809
(A)
at 828I.”
[42]
In my view the MOU was not susceptible to the interpretation which
the plaintiff sought to place upon it. The MOU lacked
particularity.The
product to be supplied, the quantities to be
supplied and the precise price were not specified in that document.
The whole thing
was characterised by vagueness. Therefore, it did not
constitute a supply agreement, as the plaintiff contended.
The
business plan also suffered from the same shortcomings. Such aspects
were not addressed even in that document, the very business
plan
which would have been a suspensive condition that would have
triggered off the transmutation process of the MOU into a binding
and
final supply agreement.
[43]
The plaintiff also relied on an implied term to the effect that the
product had to comply with the requirements of the Petroleum
Products
Act, 58 of 2003. There is no room for such an implied term in the
face of an express provision to the contrary (clause
7.1 and 7.2 of
the “general terms”). In any event, I could not find any
specifications or requirements for C9 –
C20 N paraffin in the
particular statute or its regulations and none were specifically
pointed out to me.
[44]
The last paragraph of the MOU provides that:
“
This
MOU will result in a supply agreement once the final business model
has been developed.”
At
paragraph 29 of the particulars of claim the plaintiff pleaded that
the business plan must be developed between the parties.
[45]
Firstly, it is implicit, upon an integrated reading of those two
paragraphs, that the parties needed to do something more,
notwithstanding the signing of the MOU, to have consensus about the
terms of the business plan, a separate and distinct matter
apart from
the MOU, before a contract was concluded. It was quite obvious that
further steps, arrangements and negotiations were
therefore required
before a contract could be concluded. Whether or not that was
eventually concluded depended on consensus concerning
a great variety
of material points such as the product itself. Such a contract is
invalid in our law. On the facts, I cannot
find that the MOU
was a final supply agreement as the plaintiff contended.
[46]
Secondly, the MOU expressly provides for the eventuality of a
breakdown in negotiations which would entitle any party simply
to
walk away from the MOU. This is yet a further indication that further
negotiations were required to bring about a contract.
[47]
Thirdly, the MOU distinguishes between a “business model”
(to be developed between the plaintiff and the defendant)
and a
“business plan” to be developed between the plaintiff and
Sasol Limited
, a different company not cited as a party
in the current proceedings. The last paragraph of the MOU talks about
the former.The
particulars of claim in paragraph 3 refer to the
latter concept, that is to say a “business plan” to be
developed between
the plaintiff and the defendant.
[48]
The evidence of Dr Chalera on this “transmutation” was
vague, bald, sketchy and devoid of any factual substance.He
did not
testify about any single communication between the parties that would
constitute this “transmutation”.He attempted
to place it
in historical context and indicated that this occurred in March 2004.
If one analyses the document one only finds reference
to February
2004 and one incomplete reference to 2003. There is, therefore, no
evidence before me that anything happened to the
business plan
subsequent to 4 February 2004 and no evidence was adduced that the
parties came to any agreement on the terms of
the business plan or
business model after 4 February 2004.
[49]
Mr Ernst expressly testified that there was no further negotiation or
agreement between the parties on the business plan or
model to be
used by it, after 4 February 2004. That evidence was not contested by
the plaintiff during cross examination.
[50]
In any event, and insofar as it may be argued that the memorandum of
understanding had become a supply agreement, I am of the
view that
the method of determination of the price of the product was fixed
only for a period of three months whereafter it was
stipulated that
the parties “will negotiate and determine a suitable gap
between the SW product and the regulated IP government
price”.
[51]
About such an “agreement to negotiate” Du Plessis J had
the following to say in
Londoloza Forestry Consortium (Pty) Ltd
& Another v Safcol & Others
[2006] ZATPD (28738/06)
at p12 - 13:
“
Counsel
for all the parties were agreed that our law of contract does not
recognise a contractual obligation the sole content of
which is to
negotiate with a view to enter into another contract (
Premier,
Free State and Others v Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA) par. 35). Counsel for the applicants submitted
that our law should be developed to recognise such an obligation. In
view
of the binding authority of the judgment referred to, this court
is not in the position so to develop the law. Even if it were,
the
facts, as I have concluded, do not even prima facie prove the
consensus required for such a contract.”
[52]
As regards the element of causation and damages, I also had
difficulty with the plaintiff’s claim. Delictual damages
are
expressed in the form of negative
interesse
:
the plaintiff must be placed in the position in which it would have
been had the delict not been committed, that is to say had
the
alleged misstatement
not
been made
.
The plaintiff’s claim is not based on that premise: it is based
on the position the plaintiff would have been in had the
alleged
misstatement
been true
.
If the misstatement was not made, two possible scenario’s
arise: either the plaintiff would not have entered into
the contract
at all (in which case it would not have suffered any damages, save
what it wasted in entering into the contract) or
it would have
entered into the contract but on different terms.
[53]
The basic principles regarding the assessment of damages, in a case
of an alleged misrepresentation said to have induced the
conclusion
of a contract are set out by Visser & Potgieter:
Law of
Damages
, 3
rd
ed on p 429. The authors write:
“
The
basic principles are the following: the misrepresentee is entitled to
cancel or uphold the contract. If the contract is
rescinded
he or she must through an award of damages be placed in the position
he or she was in
before
the conclusion of the contract
.
Where the contract is
upheld
a distinction is to be made between a case where there would have
been no contract without the misrepresentation (
dolus
dans
)
and where there would still have been a contract but on different
terms (
dolus
incidens
).
In the former case damages are calculated by determining the position
in which the misrepresentee would have been without
a contract and in
the latter instance by assessing his or her position if a
hypothetical contract has in fact been concluded.”
[54]
I share the aforesaid sentiments. In the instant matter, the
plaintiff’s pleadings did not provide any useful guidance.
It
was not possible to discern whether the plaintiff wanted to rescind
or to uphold the contract, which the plaintiff was allegedly
induced
by misrepresentation to conclude. The plaintiff’s key witness
in this regard was Dr Chalera.However, his evidence
in this regard
did not really assist me.
[55]
It follows, therefore, that the plaintiff cannot succeed in its claim
based on a delictual foundation. In the circumstances
I am
inclined to dismiss the plaintiff’s claim.
[56]
I now proceed to consider the plaintiff’s claim assuming that
it was based on contract. A plaintiff may conceivably claim
damages
in a case where the contract was induced by misrepresentation. In
that event, the plaintiff, having entered into an otherwise
valid
contract, has a choice: if the misrepresentation was material, the
contract is voidable at the instance of the misrepresentee
–
Service v Pondart-Diana
1964 (3) SA 277
(D). Voidness
brings with it restitution from both sides.No allegation is made that
the plaintiff elected to declare the contract
void, or to abide the
contract. No tender of restitution has been made.The absence of those
averments tends to indicate that the
claim is not a contractual one.
[57]
Nonetheless I proceed to consider the plaintiff’s claim as if
it were founded on contract.In the case where the plaintiff
sues for
contractual damages, it must allege and prove:
·
The
contract;
·
The
misrepresentation;
·
The
inducement;
·
The
election to void or abide the contract;
·
Causation;
and
·
Damages.
[58]
The plaintiff contended, on the one hand, that the parties entered
into an agreement as more fully evidenced by the MOU. The
defendant
denied the contention and contended that the plaintiff failed to
prove the alleged contract. The defendant pleaded
and
contended, on the other hand, that the contractual relationship
between the parties was governed by the terms and conditions
of the
standard general terms, “annexure “a” to the
defendant’s plea.That contention was denied by the
defendant
who stated that the annexure was never part of the agreement and that
such a document was, for the very first time, annexed
to the
defendant’s plea.
[59]
The plaintiff’s bore the onus of proving that the general terms
did not apply to the contract between the parties.The
onus did not
rest on the defendant to prove that they did –
D
& H Piping Systems (Pty) Ltd v Trans Hex Group Ltd and Another
[2006] ZASCA 29
;
2006 (3) SA 593
(SCA) at 599G.
[60]
The evidence relating to the supply of the paraffin turned out to be
mostly common cause. In the first instance I was of the
view that the
plaintiff bore the onus to prove that the “general terms”
did not apply to the contract between the parties:
the onus was not
on the defendant to prove that they did. The evidence relating to the
supply of the paraffin turned out to be
mostly common cause:
60.1 Two orders were
initially placed by Dr Chalera to the defendant orally.
60.2 Those oral orders
were recorded in a written order confirmation by a certain Ms
Antoinette Cawood employed by the defendant.
Those documents
were then sent to Dr Chalera who completed and signed them and
returned them to the defendant by fax.
60.3 Two invoices were
generated and the product was delivered to the plaintiff in the
quantities and according to the prices mentioned
in the order
confirmation.
60.4 The defendant then
realised that they had incorrectly charged value added tax on the
purchase price according to those invoices
and thereupon cancelled
them and issued new corrected and tax-free invoices.
60.5 The order
confirmations signed by Dr Chalera provided that:
“
The
confirmation order together with our general terms and conditions of
sale, which are already in your possession or available
on
requirement (sic) shall constitute the legal and binding agreement
between the purchaser and Sasol Wax SA (Pty) Ltd.”
[61]
The background of this procedure was explained in meticulous detail
by Mr Ernst and Mrs Cawood. Their evidence was not seriously
challenged in cross-examination. They were, in my view, impressive
witnesses whose demeanour and answers clearly showed confidence,
authority and truthfulness. According to them Dr Chalera had a
discussion with Mr Ernst and requested that a credit facility be
approved for the plaintiff. On 15 April 2004 Ms Cawood (then
Taljaard) sent and e-mail to Dr Chalera. Attached to the email were
two documents:
·
An
“application for credit facilities: domestic sales”; and
·
“
General
terms of sale: domestic sales”.
In
the e-mail Dr Chalera was invited to complete the application for
credit facilities and to return same to the defendant’s
credit
manager, Mr Nico Janse van Rensburg.
[62]
During the course of the presentation of the defendant’s case,
the plaintiff’s representative and agents and I
were invited to
view and inspect the email by Ms Cawood on the computer of Mr Ernst,
whom she had copied on 15 April 2004. The
email was viewed in an open
court. Mr Ernst opened both attachments. I carefully perused them.
Upon my inspection I found that
they were identical to those forming
part of “exhibit x”.
[63]
Ms Cawood further testified that she received an email from Dr
Chalera on 29 April 2004, which was generated by using the “reply”
function on the computer of Dr Chalera who “replied” to
her earlier email dated 15 April 2004. That was evidenced
by
the fact that the email of 15 April 2004 was printed at the bottom of
the email of 29 April 2004. Ms Cawood correctly
inferred
therefrom, that Dr Chalera must have received the email of 15 April
2004 and its attachments.
[64]
Dr Chalera’s conduct also supported the contention that he
received the credit application and the “general terms”
as well. He completed, printed and signed the credit
application form. Later on he returned it to Mr Janse van
Rensburg
by fax, as instructed in the email of 15 April 2004.
In the credit application, below the printed name of Dr Chalera but
above his signature, appear the following contractual terms:
“
I
Clement Stanley Chalera (and) Kabena Justice Mohape by my signature
hereto do warrant that:
(1)
All
the information of the application is true, correct and up to date;
(2)
I am
duly authorised to seek credit facilities for the applicant;
(3)
I am
duly authorised generally to represent and to act for and bind the
applicant;
(4)
The
applicant accepts the attached Sasol Wax SA general terms of sale
applicable to domestic sales (the agreement):
(5)
The
applicant authorises Sasol Wax SA to make the necessary trade
inquiries by contacting any of the references provided and/or
any
risk information agency for the purposes of assessing this
application for credit facilities and the applicant grants permission
for the references and/or risk information agency to supply Sasol Wax
SA the information requested. …”
[65]
That document was signed by Dr Chalera and Mr Mohapi on 16 April 2004
and sent by fax on 16 April 2004 at 15h38 from the offices
of Mohapi
Optometrists to the office of Mr Janse van Rensburg. Mr Janse van
Rensburg promptly responded thereto and on 29 April
2004 informed the
plaintiff that credit facilities were in fact granted and an account
opened for it.
[66]
The sole basis advanced by the plaintiff why it is not bound by the
“general terms” is that “same was only
annexed
for
the first time
to the defendant’s plea”. Dr
Chalera gave evidence in similar terms: He testified that “I
first became
aware of this document through the defendant’s
plea attached as an annexure”.
[67]
I was urged to reject the version of the defendant as narrated by Dr
Chalera. The witness did not impress me as a candid and
truthful
witness. He is a seasoned and experienced business man. He would not
ordinarily sign documents if he did not agree with
the contents
thereof. He conducted virtually all of the negotiations leading up to
the conclusion of the memorandum of understanding,
by email.It is
therefore probable that the application for credit facilities and all
related documents would be sent to him via
email and not via fax as
he contended during cross-examination. It is not only most probable
that he would have received both attachments
to the 15 April 2004
email, but it is inconceivable that he did not receive both. The
suggestion that the “icon” in
the email message
indicating that the “general terms” were attached, was
absent, was simply unconvincing, since all
the attachments were
clearly and identifiably listed in the email message itself.
[68]
I am persuaded that the quality of Dr Chalera’s evidence on the
particular issue was indeed seriously unconvincing and
lacking in
candour and probability. Therefore, the finding that the witness
received Ms Cawood’s email, together with both
attachments on
15 April 2004, is inescapable.In reaching this conclusion I am
fortified by the undisputed fact that he received
one of the
attachments, completed, signed and returned it to the defendant. He
thereby incorporated the other by reference.
[69]
Moreover, both attachments were specifically referred to in the
email. Yet in the reply the plaintiff’s witness did not,
as one
would have expected, instantly point out to Ms Cawood that he
received one attachment only,
viz
the credit application form but not the general terms. In the light
of that material omission and other unsatisfactory or unfavourable
aspects of the defendant’s version, the witness’ evidence
that he actually received the application for credit only,
but not
the general terms, was probably false. Accordingly I find it
unacceptable. I reject it.
[70]
Accepting, as true in favour of the plaintiff, that Dr Chalera did
not receive a set of the defendant’s general terms,
would still
not constitute a valid ground in law for holding the defendant liable
towards the plaintiff. In
Burger
v Central South African Railways
1903 TS 571
at 578 the court held a contractant bound by the traffic
regulations even though neither he nor his agent had read the traffic
regulation applicable to the consignment of his goods, because such
regulations were incorporated into the contract by express reference
in the consignment note signed by such party’s agent.The
principle is discussed in detail by Kerr:
The
Principles of the Law of Contract
,
sixth edition on p934.
[71]
The email of 15 April 2004 and the subsequent events evidenced a kind
of a previous course of dealing between the parties.
In my view, not
only did the plaintiff fail to discharge the onus of proving that the
general terms did not form part of the agreement,
but that the
defendant conclusively proved that they did.
[72]
It is therefore clear that the “general terms” were
incorporated by reference and also by the two order confirmations
submitted by the plaintiff’s Dr Chalera, in which those general
terms were specifically mentioned. Specific reference is
made to
paragraph 4.8, 4.10 and 6.2 of the general terms.
[73]
Clause 7 of the general terms deals with the question of liability as
follows:
“
7.1
Sasol Wax does not give any warranty in respect of the products of
their use and all warranties implied by law are expressly
excluded.
The purchaser waives any claim for loss, damage or liability which it
might have against Sasol Wax arising from but not
limited to claims
based on the products not being suitable for the purchaser’s
purposes.
7.2
Notwithstanding anything contained herein or elsewhere Sasol Wax
shall not be liable whether in contract or delict for any
consequential loss such as, but not limited to loss of profit, loss
of production and loss of market share. In all instances Sasol
Wax’s
liability shall be limited to the replacement of the products
concerned that cost to the purchaser or reimbursement
of the
purchasing price as set out in 4.10.”
[74]
Clause 9 deals with variations of the agreement and reads as follows:
“
9.1
This agreement read with any annexures thereto constitutes the sole
agreement between the parties in regard to the subject matter
thereof
and supersedes all prior and contemporaneous negotiations, offers,
discussions, promises, representations, agreements and
understandings
of the parties with respect thereto.Any inconsistencies introduced by
the purchaser’s order shall not apply
unless expressly agreed
to in writing by Sasol Wax.”
9.2
No addition to or variation or agreed cancellation of this agreement
shall be of any force or effect unless agreed to in writing
by or on
behalf of the parties.”
[75]
It is, therefore, clear that the parties expressly agreed that no
liability shall attach to the defendant in the event of the
product
“not being suitable for the purchaser’s purposes”.On
the facts, I cannot find otherwise but that the
general terms applied
to the contract between the parties.That being my conclusion, the
plaintiff’s claim evaporates into
thin air.
[76]
In view of that decisive conclusion, I deem it unnecessary to deal
with the remaining issues.No finding favourable to the plaintiff
on
one or more or all of the remaining issues can ever salvage the
plaintiff’s claim. Although Mr Ellis painstakingly addressed
the remaining issues such as misrepresentation, election, causation
and damages
ex
abundanti cautela
,
I am not inclined to go that far. Whatever may be found there in
favour of the plaintiff is unlikely to alter the outcome.
[77]
The defendant had already abandoned its counterclaim by the time I
erroneously granted an absolution from the instance.
Therefore
nothing further needs to be said about it.
[78]
For the reasons given in support of this judgment, it is obvious that
the plaintiff did not succeed to prove its case on a
balance of
probabilities.
[79]
Accordingly I make the following order:
79.1 The plaintiff’s
claim is dismissed with costs, which costs shall include the costs
consequent upon the employment of
two counsels.
The
costs shall also include the qualifying and reservation fees of the
following experts:
Prof
Philip Lloyd;
Ms
Carina Fritz
Mr
Johannes Hendrik Rossouw
Mr Nicolas Louw
Mr Justus van Wyk
M.
H. RAMPAI, AJP
On
behalf of the plaintiff: Attorney M. Khang
Instructed
by:
Mphafi
Khang Inc
BLOEMFONTEIN
On
behalf of the defendant: Adv P. Ellis SC
With
him:
Adv
P. Leeuwner
Instructed
by:
Hill,
McHardy & Herbst Inc
BLOEMFONTEIN
/spieterse