About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2012
>>
[2012] ZAFSHC 31
|
|
Brisen Commodities (Edms) Bpk v Farmsecure (Edms) Bpk and Others (A255/11) [2012] ZAFSHC 31 (1 March 2012)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Appeal No. : A255/11
In
the appeal between:-
BRISEN
COMMODITIES (EDMS) BEPERK
…........................
Appellant
and
FARMSECURE
(EIENDOMS) BEPERK
…..................
First Respondent
FARMSECURE
CAPITAL
(EIENDOMS) BEPERK
….......................................
Second
Respondent
JEROME WILLIAM
YAZBEK
….................................
Third
Respondent
EUGENE LOURENS
YAZBEK
….............................
Fourth
Respondent
PETRUS FREDERICK DE
KLERK
…..........................
Fifth
Respondent
PIETER JOHANNES
MAAS
…...................................
Sixth
Respondent
DAVID SCHALK LUBBE
…...................................
Seventh
Respondent
_____________________________________________________
CORAM:
RAMPAI AJP, KRUGER
et
C.J. MUSI JJ
_____________________________________________________
HEARD ON:
27 FEBRUARY 2012
_____________________________________________________
DELIVERED ON:
1 MARCH 2012
_____________________________________________________
JUDGMENT BY:
KRUGER J
_____________________________________________________
[1] Five exceptions that
the particulars of claim did not disclose a cause of action were
upheld by the court
a quo
. Exception no. 1 was that plaintiff
could not rely on tacit or implied terms. Exception no. 4 dealt with
the omission to plead
a notice of cancellation and exceptions 3, 5
and 6 concerned the failure by plaintiff to plead aspects of the
arbitration clause
in the contract between plaintiff and first
defendant. The court
a quo
granted leave to appeal in respect
of exceptions 3, 4, 5 and 6, but not 1. Two exceptions that the
particulars were vague and embarrassing
were also upheld, but counsel
for plaintiff conceded that the granting of exceptions on the vague
and embarrassing ground is not
appealable (para [7] of the judgment
on leave to appeal by the court
a quo
). The excipient is
referred to as defendant and the appellant (respondent to the
exceptions) as the plaintiff. The plaintiff lodged
a petition with
the Supreme Court of Appeal against the refusal of the court
a quo
to allow the plaintiff to lead evidence and the refusal of leave to
appeal in respect of the first exception. The petition was
refused.
[2] At the beginning of
the hearing of the appeal before us, Mr Duminy, for defendant, raised
a point
in limine
seeking an order that parts of the record
(Volume I pages 69 – 125, Volume II pages 170 – 196)
containing evidence
which the plaintiff sought to introduce at the
hearing of the exception in the court
a quo
, which application
was refused by the court
a quo
and the Supreme Court of Appeal
in the Petition, be struck out. Mr Bosman, correctly, did not press
the point and conceded that
we could ignore those pages, which we do.
[3] Murray AJ sets out
the background to the particulars of claim as follows in her
judgment:
“
6.1
plaintiff obtained a financial facility with Standard Chartered Bank
(‘SCB’) to finance farming activities which
finance was
made available to First defendant.
6.2 first defendant concluded lease
and production agreements with farmers who then utilised such
financing for input costs to produce
grain and which contracts were
ceded to plaintiff.
6.3 the grain so produced was traded
by plaintiff, thereby reducing its facility with SCB and
simultaneously decreasing the farmer’s
facility;
6.4 plaintiff and first defendant were
to share in the income on a contractually agreed basis.”
Her judgment continues:
“
[7]
Plaintiff alleges that first defendant repudiated the co-operation
agreement and that this entitled plaintiff to payment of
three years’
loss of profit.
[8]
Clause 8.2
of the
co-operation agreement is the pivot on which this exception turns. It
sets out the contractually agreed prerequisites for
plaintiff’s
right to cancel the co-operation agreement and the prerequisites for
its right to claim three years’ loss
of profit. It determines:
8.1 that a right to cancel only arises
after a dispute had been referred for mediation and arbitration;
8.2 that the amount of the loss of
profit to which plaintiff would be entitled has to be determined by
the arbitrator;
8.3 that the plaintiff’s right
to claim three years’ loss of profit only arises in the
following very ‘
limited and exclusive circumstances’
.
8.3.1
Clause 8.2.1
: If
plaintiff has proof that first defendant:
8.3.1.1 is using the finance provided
in terms of this agreement for reasons other than are stipulated in
this agreement,
or
8.3.1.2 is administering the input
finance in a negligent manner which could result in the withdrawal of
plaintiff’s financial
facility with SCB.
or
8.3.2
Clause 8.2.2
: If
first defendant is unable to produce the minimum of 80% of the
previous year’s tonnage due to first defendant’s
negligent management of its business.
8.4
Clause 8.2
also
determines
8.4.1 that plaintiff has to give first
defendant written notice to rectify within 7 business days a breach
as described in clause
8.2.1 or clause 8.2.2, and
8.4.2 that the cancellation will only
become effective if first defendant fails to remedy the relevant
breach within the said 7
days.
[9] The plaintiff’s claim
against first defendant is based on the abovementioned
clause 8.2
of the written co-operation agreement, a copy of which is annexed
to/his particulars of claim.
[10] As contractually agreed between
plaintiff and first defendant in the co-operation agreement,
therefore, plaintiff’s right
to claim three years’ loss
of profit arises only in the very ‘limited and exclusive
circumstances’ set out above
and only after plaintiff had
complied with certain agreed prerequisites.
[11] To establish his claim plaintiff
therefore needs to deal explicitly with the specific prerequisites
set out in the contract
and in order to succeed with his claim,
plaintiff needs to prove not only that the special circumstances do
exist, but also that
he has complied with the required agreed steps
or prerequisites. If it is plaintiff’s case that he did not
have to comply
with those requirements, but is nevertheless entitled
to his claim, he must allege and prove that.
[12] As in all contract-based claims,
plaintiff must therefore explicitly aver his compliance with the
agreed contractual terms,
or explicitly aver his non-compliance and
provide the reason/s why he is absolved from such compliance yet is
still entitled to
his claim, for instance that on a proper
interpretation of the contract he is entitled to claim three years’
loss, or that
defendants have waived their right to rely on the
prerequisites.
[13] A further factor impacting on the
averments and particulars required
in casu
is that second to
seventh defendants were not parties to the agreement on which
plaintiff relies.
[14] The exceptions are aimed at
plaintiff’s failure to make averments dealing with all the
requirements in order to establish
a cause of action against first
defendant, alternatively at his failure to furnish sufficient
particulars to enable defendants
to plead to the averments.”
[4] Clause 8.2 of the
co-operation agreement is central to this case. It reads:
“
8.2
Notwithstanding anything contained above in clause 6, and after any
dispute arising has been referred for mediation and arbitration,
Brisen
shall be entitled to cancel this agreement, and further be entitled
to claim three years of loss of profits, to be determined by
the
arbitrator, resulting from cancellation of this agreement from
Farmsecure, in the limited and exclusive circumstance where:
Brisen
has proof that
Farmsecure
is using the finance provided in terms of this
agreement for reasons other than are stipulated in this agreement
or is administering
the input finance in a negligent manner which
could result in the withdrawal of
Brison
financial facility
by SCB.
Farmsecure
is unable to
produce the minimum of 80% (per cent) of the previous year’s
tonnage due to the fault or negligent management
of
Farmsecure’s
business by
Farmsecure
.
8.2.3 Such cancellations shall become
affective upon the failure to remedy any of the above breaches within
a period of 7 (seven)
business days after receipt of written notice
from
Brison
(the ‘aggrieved party’) calling upon
the defaulting party to remedy the breach.”
[5] The first exception
was directed against plaintiff’s purported reliance on tacit
and implied terms. That exception was
upheld and there is no appeal
against that finding. The trial judge refused leave. As mentioned in
paragraph 1 above the petition
to the Supreme Court of Appeal was
dismissed. The result is that plaintiff cannot rely on any implied or
tacit terms. The written
contract, being the co-operation agreement,
contains all the provisions of the contract.
[6] Plaintiff instituted
action against the seven defendants for payment of R150 328 335,00.
The claim is based on the alleged repudiation
by first defendant of
its obligations under the co-operation agreement. Although the
co-operation agreement was only between the
plaintiff and first
defendant, the plaintiff in the particulars of claim seeks a
declaratory order that the second to seventh defendants
are jointly
and severally liable for payment of plaintiff’s claim.
EXCEPTION NO. 4:
NOTICE OF CANCELLATION
[7]
“
FOURTH
EXCEPTION
10.
In paragraphs 13 and 14 of the
particulars of claim, plaintiff purports to cancel Annexure ‘A’
and claims payment of
the loss of three years’ profit.
11.
In terms of clause 8.2.3 of Annexure
‘A’, such cancellation shall only become effective upon
the failure to remedy such
alleged breaches within 7 days after
receipt of written notice by plaintiff, calling upon first defendant
to remedy the breach.
12.
Plaintiff fails to deal with the 7
days’ demand prior to cancellation and the particulars of claim
therefore lacks averments
to sustain its claim.”
[8] The plaintiff’s
case is that because it relies on repudiation of the agreement, it
need not plead or prove demand. Mr.
Duminy contends that plaintiff is
incorrect. He says plaintiff is seeking to enforce an extremely
onerous penalty and because the
parties knew, when they entered into
the agreement, they expressly agreed on
mora
as the operative basis of cancellation. This means that
the plaintiff cannot claim the penalty unless there has been a notice
of
cancellation. Although Mr. Duminy agrees that in general a party
need not first place the defaulting party in
mora
in the event of repudiation, the agreement on which
plaintiff relies, must to be treated differently and here a notice of
mora
is essential.
[9] Mr. Bosman, for
plaintiff, says that because repudiation is the form of breach relied
upon, there is no need to place the defendants
in
mora
. Courts
are reluctant to decide on exception questions concerning the
interpretation of a contract (
SUN PACKAGING (PTY) LTD v
VREULINK
[1996] ZASCA 73
;
1996 (4) SA 176
(A)) at 186J. The question is
whether the meaning is uncertain, not whether there is difficulty in
interpretation or whether the
parties disagree (187 A – B). Mr.
Bosman says the defendants must demonstrate that on every possible
construction, the pleading
does not disclose a cause of action
(
MANYATSHE v SOUTH AFRICAN POST OFFICE LTD
[2008] ZAGPHC 253
;
[2008] 4 ALL
SA 458
(T) par [7]). Mr. Duminy interprets clause 8.2 of the contract
to mean that, in order to claim damages, there has to be a demand
and
notice to terminate before cancellation of the contract.
[10] The contract
contains a severe penalty clause. That is evidenced by the quantum of
plaintiff’s claim of R150 million.
It is no wonder that the
parties wanted to limit the circumstances in which damages could be
claimed. Because the written contract
contains all the terms of the
agreement between the parties, the interpretation of the contract
will not be guided by evidence
at the trial. The procedure of
exception is intended to bring a speedy end to litigation without the
cost attendant upon a trial.
The mechanism of an exception is
appropriate in this case. There is no doubt that the parties limited
the right to cancel and claim
damages to a situation where there had
been a
mora
notice and failure to remedy that alleged breach
within seven days. Repudiation is an imprecise term and in the
particulars of
claim plaintiff does not provide details of the
contents of the acts of first defendant which purportedly amounted to
a repudiation.
A cancellation notice would have defined precisely
what the breach was and put the parties in a position to deal with
the breach.
The fourth exception was correctly upheld.
EXCEPTION NO 3, 5
AND 6
[11]
“
THIRD
EXCEPTION
7.
In paragraphs 13 and 14 of the
particulars of claim, plaintiff purports to cancel Annexure ‘A’
and claims payment of
the loss of three years’ profit.
8.
In terms of clause 8.2 of Annexure
‘A’, plaintiff may only so cancel and claim after such
dispute had been referred
to mediation and arbitration.
9.
Plaintiff fails to deal with these
jurisdictional prerequisites and therefore fails to make averments
necessary to sustain its said
claim.”
“
FIFTH
EXCEPTION
13.
In paragraphs 13 and 14 of the
particulars of claim, plaintiff purports to cancel Annexure ‘A’
and claims payment of
the loss of three years’ profit.
14.
In terms of clause 8.2 plaintiff shall
only be entitled to so cancel and claim the loss of three years’
profit, after such
dispute had been referred for mediation and
arbitration, as set out in the third exception supra.
15.
In addition, in terms of clause 7.1 of
Annexure “a”, such dispute shall only be referred to
mediation and arbitration
after written notice to remedy the facts
giving rise to the dispute.
16.
Plaintiff fails to deal with the
prescribed written notice that had to precede any mediation and
arbitration and therefore the particulars
of claim lacks averments to
sustain plaintiff’s claim.
SIXTH EXCEPTION
17.
In paragraph 14 of the particulars of
claim, plaintiff claims three years’ loss of profit.
18.
In terms of clause 8.2 of Annexure
“a”, such loss of profits stands to be determined by the
arbitrator.
19.
Plaintiff fails to deal with the fact
that such loss of profits stands to be determined by the arbitrator
and therefore fails to
make averments necessary to sustain its
claim.”
[12] According to
exception no. 3, plaintiff may, because of clause 8.2 of the
contract, only cancel and claim damages after the
dispute has been
referred to arbitration. Exception no. 5 states that the plaintiff
may only claim the loss of three years’
profit after such
dispute has been referred for mediation and arbitration. In terms of
exception no. 6 the loss of profits are
to be determined by the
arbitrator. The defendants say that the plaintiff has failed to
allege that the dispute has been referred
for arbitration, or that it
was unnecessary to do so.
[13] Mr. Duminy contends
that the plaintiff has failed in its particulars of claim to address
the contractual requirements of clause
8.2 of the contract. The
plaintiff must allege that there has or has not been mediation or
arbitration. That allegation is absent.
Plaintiff’s claim is
framed within the four corners of clause 8.2. Plaintiff has to allege
that the jurisdictional requirements
of clause 8.2 have been complied
with. Plaintiff is not claiming ordinary contractual damages.
Plaintiff is claiming the specific
penalty provided for (three years’
loss of profit), and therefore plaintiff must allege that it complied
with the contract.
In paragraph 14 of the particulars of claim it is
not alleged that the amount was determined by an arbitrator.
[14] Mr. Bosman argues
that the mediation and arbitration clause does not oust the court’s
jurisdiction (
UNIVERSITEIT VAN STELLENBOSCH v J A LOUW (EDMS)
BPK
1983 (4) SA 321
(A) at 333 H). A party who is disgruntled
because an arbitration clause was not used can do one of two things:
(i) apply for a stay of
the legal proceedings under
section 6
of the
Arbitration Act 42 of
1965
, or
(ii) file a special plea
(
NICK'S FISHMONGER HOLDINGS (PTY) LTD v DE SOUSA
2003
(2) SA 278
(SECLD) para [10]).
Mr Bosman contends that a
party cannot except to a pleading on the basis that the issue must be
tried by an arbitrator, because
the court in enforcing an arbitration
clause in a contract, exercises a discretion. See Harms,
Civil
Procedure in the Superior Courts
(Service Issue 44, September
2011, A-58, who cites as authority
S & R VALENTE (PTY) LTD
v BENONI TOWN COUNCIL
1975 (4) SA 364
(W)).
[15] In the co-operation
agreement the arbitration clause is interwoven with cancellation and
damages. It is not simply a clause
envisaging alternate dispute
resolution. Damages are determined by the arbitrator. There is very
little difference between an exception
and a special plea (
SANAN
v ESKOM HOLDINGS
2010 (6) SA 638
(GSJ) pars [14] –
[18]). The main point is that at a special plea evidence can be led.
The case of
S & R VALENTE (PTY) LTD v BENONI TOWN COUNCIL
(
supra
), on which Mr Bosman relies for stating that an
objection to not using an arbitration clause should be dealt with by
way of a special
plea; dealt with a case where the defendant asked in
its plea that plaintiff’s action be stayed pending the outcome
of an
arbitration. The plaintiff excepted to the plea seeking a stay
of the proceedings. Galgut J considered the power of the court to
order a stay of proceedings, and listed the relevant considerations
(366A - B). He found that there were insufficient reasons to
allow a
stay (366B - D), and allowed the exception to the plea.
[16] In the present case
there is no plea seeking a stay. There is an exception to the
particulars of claim for failing to deal
with the arbitration clause
in the contract. On the facts of this case, where the arbitration
clause is central to the agreement,
and the calculation of damages,
such exception is well-founded, as was held by the court
a quo
.
[17]
ORDER
The appeal is dismissed
with costs, including the costs of two counsel.
__________
KRUGER
I
concur.
________________
M.H. RAMPAI, AJP
I concur.
___________
C.J. MUSI, J
On
behalf of appellant: Adv. A.J.H. Bosman SC
Instructed
by:
Naudes
BLOEMFONTEIN
On
behalf of respondents: Adv. W.R.E. Duminy SC
Instructed by:
Lovius Block
BLOEMFONTEIN
/sp/wm