About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Durban
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Durban
>>
2013
>>
[2013] ZAKZDHC 30
|
|
Northern Ocean Marine (Pty) Ltd v FFS Fisheries (Pty) Ltd (5537/2013) [2013] ZAKZDHC 30 (11 June 2013)
IN THE
KWAZULU-NATAL HIGH COURT, DURBAN
REPUBLIC OF
SOUTH AFRICA
Case No: 5537/2013
In
the matter between:
NORTHERN
OCEAN MARINE (PTY) LTD
..................................................
Applicant
and
FFS
REFINERS (PTY) LTD
.....................................................................
Respondent
JUDGMENT
Delivered on 11 June 2013
The applicant seeks urgent interim
relief the effect of which is to enforce certain contractual
arrangements between it and the
respondent, such relief to remain
effective and in force pending the resolution of an alleged dispute
over price adjustments
either by arbitration or adjudication.
The application was commenced as a
matter of urgency on 22 May 2013 and served before me in the Motion
Court on 24 May 2013. After
hearing preliminary submissions I
adjourned the application and fixed dates for the expeditious
exchange of further answering
and replying affidavits and it was
subsequently enrolled for argument before me on 30 May 2013.
At the opposed hearing Mr
Camp
,
who appeared for the applicant, and Mr
Voormolen
, who
appeared for the respondent, were in agreement that although the
relief was couched in the Notice of Motion in the form
of a
Rule
Nisi
, I was at liberty to finally determine the matter. In order
words, I was to grant relief pending the final determination of the
intended arbitration or litigation if I was with the applicant, or
refuse the application if I was with the respondent. That
approach
was a sensible one.
Ships operating in and frequenting
the Port of Durban need to dispose of a waste product known to the
industry as
Slops
.
Slops
are hydrocarbon liquids (fuel
oil) contaminated with water and other impurities originating from
ships’ engine rooms, machinery
spaces and centrifuges. The
applicant carries on business as a supplier of services to the
shipping industry for the removal
of
Slops
from vessels. The
respondent is in the business of refining
Slops
by means of a
treatment process to separate the hydrocarbons from the water and
other impurities.
On 28 April 2010 the applicant and
the respondent concluded a written agreement regulating the sale and
delivery of
Slops
by the applicant to the respondent. The
material portions of the agreement provide:
‘
3PERIOD
This
Agreement shall be deemed to have commenced on date of final
signature hereof and shall continue to be in force and effect
until:
3.1.
terminated by either party to this Agreement by providing three (3)
calendar month's notice, in writing of such termination.
However,
such notice of termination may not be given prior to fifty seven full
calendar months having elapsed from date of final
signature.
3.2.
terminated as a result of a breach by either party to the terms and
conditions of this Agreement, subject to clause 16.
…
6
COLLECTION AND DELIVERY
NOM
shall deliver the slops to the nominated FFS branch and/or depot, or
arrange with FFS to assist in the collection thereof.
Having
regard to the above, in the event that NOM is unable to provide a
crew and the resources, including but not limited to hoses,
fittings
etc, required to unload slops from a ship, FFS shall be upon
reasonable notice provide such service.
Should
FFS be required to assist in the collection of slops, such a request
will be raised at least 18 hours before the vessel is
expected, in
order to allow FFS to arrange the necessary transport and drivers.
Continuous communication regarding the status of
the vessels approach
is required to prevent premature deployment of trucks, which could
result in unnecessary standing times and
associated costs. Trucks
will only be deployed once FFS has received notice that the harbour
pilot is on board the vessel and about
to enter the harbour. FFS
reserves the right to charge NOM at a rate of R500 per hour or part
thereof, in excess of 2 hours, caused
by delays in utilising the FFS
trucks being deployed, but such right will not be exercised without
consultation with NOM. The slops
discharge rate into FFS' trucks is
expected to be at a minimum rate of 5 ton per hour. Should a slower
pump rate be expected, this
must be made known to FFS when the trucks
are booked. FFS reserves the right to withdraw its trucks if undue
delays are being experienced
in receiving the slops. Should
communications prove to be unsatisfactory, the ship's agent must be
made known to FFS on request,
in order to allow FFS to gather
information regarding the vessel's movements and optimise transport.
FFS
reserves the right to accept or reject any tank washings offered.
…
8
PRICE
8.1.
FFS shall pay NOM for the "dry oil" received as per the
attached pricing table, annexed hereto as Annexure A and
Annexure B.
8.2.
the water content will be deducted from the total received mass and
payment will be calculated on the remaining dry oil mass.
The price
of the dry oil will be determined on an individual load basis.
8.3.
after the initial twelve month period, the price will be reviewed an
annual basis.
…
10
SUPPLY
NOM
agrees to exclusively supply to FFS all the slops collected by them.
FFS is not actively competing with its slops collectors,
but will
respond to direct requests from the shipping industry to collect
slops and to agents specifically wanting to deal with
FFS directly.
…
15
LOYALTY/HARDSHIP
In
signing this Agreement, the parties agree on the principle that the
further performance of this Agreement should meet their mutual
requirements in an economical and reasonable manner. If this
contractual objective can, in the future, no longer be reached
because
of changes and developments which could not reasonably have
been foreseen at the time that Agreement was concluded, the
so-affected
party shall have the right to request an adaptation of
the relevant articles of this Agreement to the changed conditions.
These
adaptations are to restore the original contract equilibrium in
a fair and reasonable manner.
…
17
DISPUTES
Any
dispute that arises out of or in connection with this Agreement, its
termination or cancellation, including claims in delict
or
rectification of the agreement, should be resolved within 14 days of
that dispute arising by the parties respective representatives
identified by the signatories to this Agreement. Any unresolved
dispute must be referred to the parties' senior management or their
respective nominees to try and resolve the dispute. If they fail to
resolve the dispute or to agree on an alternative dispute resolution
process (including mediation or arbitration) within 30 days of the
date of the referral or such extended date as agreed between
them,
either party may approach any court having jurisdiction for
appropriate relief.”
Annexure A to the agreement is a
detailed table grid headed "Slops Received Price Calculation
Table". It provides firstly
for different pricings for Slops
received in Durban and in Cape Town. It then provides for different
calculations to be applied
in situations, for Durban, where the
water content is less than 80% and where it is higher than 80% and
for Cape Town where it
is less than 85% and where it is higher than
85%. Thereafter factors are applied in different transportation
scenarios for a
treatment and disposal charge as well as transport
costs, with the final result being shown in a Rand Price per Ton for
the dry
oil result. Annexure B sets out, for Slops collected in
Richards Bay, the details of the different operating hours and, in
US
dollar prices, provides the rates for standing charge, pumping
rate, slow pumping rate and overtime rates to be applied with regard
to road tankers. In addition it provides for the charges applicable
to a disposal fee. It also sets out how the exchange rate
is to be
determined and applied.
It appears not to be in dispute that
until about August 2012 the parties enjoyed a reasonably good
business relationship. Until
that time, so the applicant alleges,
its trucks were attended to at the respondent's depot with a
discharging turn-around time
of approximately 3 hours. A quick and
efficient turn-around time in this regard was important to the
efficient running of the
applicant's business. The longer it took
for a truck to discharge its contents the higher the costs
associated with that particular
delivery of Slops.
The applicant alleges that from about
August 2012 the turn-around time grew substantially without any
apparent cogent reason therefor.
It goes on to allege that that
appeared to coincide with the respondent acquiring an interest in
the Western Cape in an entity
that competed directly with the
applicant. The delay in turn-around time increased so that by
February 2013, so says the applicant,
delays could be anything up to
72 hours of standing time with a turn-around time of approximately 6
hours. The applicant concluded
that it was the target of an
orchestrated campaign.
On 13 February 2013 the respondent
give notice to the applicant of the immediate termination of the
agreement. It was alleged
that the applicant had breached the
exclusive supply arrangement, that that breach was not capable of
being remedied, and that
it then called for the immediate
termination of the agreement. Subsequent interactions between the
parties resulted in that notice
of termination being withdrawn by
the respondent.
Following up on that the applicant
alleges that it experienced a significant improvement in the
turn-around time for the discharge
of Slops at the respondent's
premises. It alleges that the agreement continued to be honoured
thereafter.
On 25 April 2013 the respondent
issued a notice to the applicant advising of the respondent's annual
pricing adjustment effective
from 28 April 2013. That pricing
adjustment, so says the applicant, was in effect a unilateral 58%
reduction in the price paid
per ton of oil. It was also, according
to the applicant, a unilateral reduction in the allowable percentage
of water in the collected
and supplied Slops, and a substantial
increase in the treatment and disposal charges.
The applicant challenged the
imposition of that price increase and suggested that if the
respondent persisted therein then the
matter ought to be regarded as
a dispute requiring the invocation of the arbitration procedure
provided for in clause 17 of the
agreement. Two meetings were held
between the parties thereafter, both involving the parties' legal
representatives but the matter
could not be resolved.
Subsequent to 28 April 2013 the
respondent has been paying the new price determined by it and this
is unacceptable to the applicant.
According to the applicant it
wants to resolve the dispute as to price in accordance with the
provisions set out in clause 17
of the agreement.
Given the history of the interactions
between the parties the applicant contends that the respondent's
unilateral price variation
is nothing more than a
mala fide
attempt to force a termination of the contractual relationship
between the parties. It says so because the "new" pricing
structure is unsustainable for the applicant.
I pause to mention that arising out
of the meetings referred to, and prior to the launch of the present
urgent application, the
respondent suggested that if the applicant
was to persist in its contention that the dispute concerning the
price adjustment
was capable of resolution by arbitration or
litigation, and that if the applicant persisted with such
arbitration or litigation,
it (i.e. the respondent) would continue
to pay the applicant the new stipulated price with the difference
being retained in the
respondent's attorney's trust account and
offered that the amount so retained be paid over to the applicant if
matters were eventually
resolved in the applicant's favour. That
offer was made to the applicant in the form of a firm undertaking
pending the resolution
of the alleged dispute.
Notwithstanding that offer the
applicant persisted with the relief sought in the urgent
application.
Against that backdrop the respondent
contends that the relief being sought at this stage is in effect
final in nature. That must
be so, argues the respondent, because the
applicant has not offered any security for the repayment of the
price difference should
the "dispute" ultimately be
resolved in the respondent's favour. It says that there is no
guarantee that the respondent
will recover the money paid to the
applicant if the applicant is ultimately unsuccessful.
If the effect of the relief sought is
indeed final in nature, and given the factual disputes that emerge
from the papers, then
it is clear that the applicant must present
and meet the test for final relief. Firstly, it must demonstrate
that it enjoys a
clear right, and secondly, in accordance with the
rule in
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A), the matter must be decided on the undisputed
facts and the facts as stated by the respondent. I agree with those
submissions.
It seems to me that the agreement
between the parties, reduced to its essential basics, is nothing
more than an agreement of sale
between them. That being the case,
price, being one of the essentials of an agreement of sale, must be
fixed or, at the very
least, must be easily determinable.
[20] Upon a proper construction being
placed upon the agreement, and reading it so as to give it business
efficacy, the following
must emerge:
a. the agreement was intended to
endure for an indefinite period. However, and putting aside for the
moment any question of a consensual
cancellation or of a cancellation
for breach, it could be cancelled by either party, without that party
having to furnish any reason
for such cancellation, upon the giving
of three calendar months' notice to the other, such notice however
only being capable of
being given after the agreement had endured for
a period of 57 calendar months;
b. a fixed method was agreed upon for
the determination of price during the initial twelve months;
c. it was agreed that the price would
be reviewed on an annual basis. In this regard it is worth mentioning
that that is something
quite different from the price being
reviewable
on an annual basis. The fact that the price
might not have been changed on certain anniversaries in the past does
not mean that
it did not undergo a review process. All that points to
is this: the parties either actually or tacitly agreed not to change
it
on a particular anniversary. That process still constituted a
review.
It is trite that in the absence of an
agreement as to price no agreement of sale can exist. In other words
parties must either
agree upon a price or must agree upon a
mechanism by which price can objectively be determined.
The applicant contends of the
agreement provides such a mechanism, and because it does contents
further that the ruling price
must obtain until the new one has been
properly determined.
Upon clause 17 of the agreement being
examined in context it is abundantly clear that it was not designed
to resolve disputes
as to price and nor can it be interpreted or
implemented so as to resolve disputes as to price. It is clear that
in implementing
the provisions of clause 17 the parties cannot be
compelled to arbitration. Therefore, the only ultimate resort is to
litigation
to achieve the applicant's desired result.
In theory all of that is possible but
the ground rules have to be provided in order for that determination
to take place. This
is where clause 17 fails. If an agreement it is
to provide for the determination of price by a third party, and here
the applicant
contends that that third party is either the
arbitrator or the court, it must provide for a mechanism by which
that determination
can be made. See in this regard
Southernport
Developments (Pty) Ltd v Transnet Ltd
2005 (2) SA (SCA). The
agreement in question in this case leaves the method by which price
can be determined by either the arbitrator
or the court wholly
unstated and in those circumstances for the court to entertain such
dispute it would be tantamount to making
a contract for the parties.
That is impermissible.
As matters stand at present there is
no agreement as to price in place, and consequently there is no
agreement between the parties.In
the result the so-called dispute
resolution clause is of no assistance to the applicant.
The application is dismissed with
costs, such costs to include those reserved on previous occasions.
_____________
Vahed J
CASE INFORMATION
Date of Hearing: 30 May
2013
Date of Judgment: 11 June
2013
Applicant’s
Counsel: A C Camp
Applicant’s
Attorneys: Gey Van Pittius Attorneys
Unit 3, 17 Ennisdale
Drive
Durban North
(Ref: NOM1/0001-FFS)
Tel: 031 564 2437
info@gvplaw.co.za
Respondent’s
Counsel: V Voormolen
Respondent’s
Attorneys: Shepstone & Wylie
24 Richefond Circle
Ridgeside Office Park
Umhlanga Rocks
(Ref: JvK/FFSR1.192)
Tel: 031 575 7000
vonklemperer@wylie.co.za