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[2011] ZAFSHC 109
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Brisen Commodities (Pty) Ltd v Farmsecure (Pty) Ltd and Others (4137/2009) [2011] ZAFSHC 109 (13 July 2011)
FREE
STATE HIGH COURT, BLOEMFONTEIN
REPUBLIC
OF SOUTH-AFRICA
Case no.
4137/2009
In
the matter between:
BRISEN
COMMODITIES (PTY) LTD
….....................................
Applicant
and
FARMSECURE
(PTY) LTD
….......................................
First
Respondent
FARMSECURE
CAPITAL (PTY) LTD
…...................
Second
respondent
YAZBEK:
JEROME WILLIAM
…..................................
Third
respondent
YAZBEK:
EUGENE LOUWRENS
…...........................
Fourth
respondent
DE
KLERK: PETRUS FREDERICK
…..........................
Fifth
respondent
MAAS:
PIETER JOHANNES
…....................................
Sixth
respondent
LUBBE:
DAVID SCHALK
…....................................
Seventh
respondent
_____________________________________________________
HEARD
ON:
26 MARCH 2011
_____________________________________________________
JUDGMENT
BY:
MURRAY, AJ
_____________________________________________________
DATE
OF JUDGMENT:
13 JULY 2011
_____________________________________________________
The plaintiff instituted
action against the defendants on 13 August 2009 for payment of three
years’ loss of profit due
to the alleged repudiation of a
written co-operation agreement between plaintiff and first
defendant.
Defendants served a
Notice of Exception to plaintiff’s particulars of claim on 23
March 2010, alleging that the particulars
of claim was vague and
embarrassing. Plaintiff filed amended particulars of claim on 10 May
2010.
On 25 June 2010
defendants filed two sets of exceptions against the amended
particulars of claim, namely:
Exceptions 1 to 11 on
the grounds of vagueness and embarrassment; and
Exceptions 1 to 6 on
the grounds of lacking averments to sustain plaintiff’s
action.
Plaintiff on 9 September
2010 lodged an application, to be heard simultaneously with the
exceptions on 22 October 2010, for leave
to submit written evidence
during the hearing to obtain an order declaring the exceptions,
alternatively exceptions three, five
and six regarding a lack of
averments to sustain a cause of action, an abuse of the court
process.
On 22 October 2010 the
application was dismissed and the exceptions were argued. In the
judgment on 23 December 2010 exceptions
1 and 2 based on vagueness
and embarrassment were upheld, as well as exceptions 1, 3, 4, 5, and
6 based on a lack of averments
necessary to sustain a cause of
action. The plaintiff was ordered to pay the costs of the
application and of the exceptions.
The plaintiff now seeks
leave in terms of Uniform Court Rule 49 to appeal to the Supreme
Court of Appeal,
alternatively
to the Full Bench of this
Division, against:
The dismissal of its
application on 22 October 2010;
The upholding of
exceptions 1, 3, 4, 5 and 6 on the grounds of a lack of averments
to sustain the action;
The costs orders.
The plaintiff initially
sought leave to appeal against the upholding of exceptions 1 and 2
based on vagueness and embarrassment
as well, but after arguing at
length on the appealability thereof, Mr Bosman for the plaintiff,
correctly in my view, abandoned
that prayer in reply.
Despite the dismissal of
its application on 22 October 2010, the plaintiff on 22 March 2011
filed a “supplementary affidavit”
purportedly to place
‘certain new evidence’ before this Court to be
considered during the hearing of the application
for leave to appeal
on 25 March 2010.
AD THE JUDGMENT ON
23 DECEMBER 2010
:
Before proceeding with
the application for leave to appeal, there are three aspects of the
judgment on 23 December 2010 that I
wish to clarify:
9.1 Paragraph [31]
thereof relates to third to seventh defendants in the context of that
paragraph;
9.2 Paragraph [30]
thereof should also refer to exceptions 3 and 4 as reflected in the
heading as well as in the conclusion in paragraph
[46];
9.3 The contents of
paragraph [47] seem to be in direct contradiction of the costs order
given, but, after having listened to and
considered the argument put
before me, I am satisfied that the costs order was indeed correct.
AD APPLICATION TO
PRESENT EVIDENCE:
The first issue to
determine, then, is the appealability of the application for the
admission of evidence at the exception stage.
Despite the trite
principles that exceptions should be decided on the “
pleading
as it stands”
, (
BURGER v RAND WATER BOARD
2007 SA 30
(SCA)
at
32 D-E
)
,
and that “
no
facts outside those stated in the pleading can be brought into issue
– except in the case of inconsistency”
(
SOMA v
MARULANE NO 1975(3) SA 53 (T)
) and that “
no reference
may be made to any other document”
(WELLINGTON COURT
SHAREBLOCK v JOHANNESBURG CITY COUNCIL 1995(3) SA 827 (A)
at
833F
and
834D),
Mr Bosman contended that the
application should have been allowed in the Court’s discretion
because the purpose of the evidence
was to demonstrate that the
exceptions were an abuse of the court process. In the same vein he
submitted that an appeal against
the dismissal of the said
application should be allowed.
Mr Duminy for the
defendants argued that the dismissal of the plaintiff’s
application to present evidence at the exception
stage is not
appealable since it is a purely procedural or preparatory
application which this Court in its discretion dismissed.
Mr Bosman denied that
the application was an interlocutory one. His denial is
contradicted, however, by the plaintiff’s
own submission in
paragraph 11.3 thereof that: “
Hierdie is ‘n
interlokutêre aansoek (so voer ek eerbiedig aan) om sekere
getuienis voor die Agbare Hof te plaas...”
The Constitutional Court
in
S v SHAIK AND OTHERS,
[2007] ZACC 19
;
2008 (2) SA 208
(CC)
at
p.221
(par. [12](c)),
expressly labelled an application for leave to
adduce further evidence a “preliminary” or interlocutory
application.
Harmse AJA (as he then
was) with reference to
Van Streepen & Germs (Pty) Ltd v
Transvaal Provincial Administration 1987(4) SA569 (A)
stated in
ZWENI v MINISTER OF LAW AND ORDER 1993(1) SA 523 (A)
that
“
Section
20(1) of the Act no longer draws a distinction between ‘judgments
or orders’ on the one hand and interlocutory
orders on the
other. The distinction now is between “judgments or orders”
(which are appealable with leave) and decisions
which are not
“judgments or orders”.
In
JONES v KROK,
1995(1) SA 677 (A)
at
683H
and
687G
at 687I-J
Corbett CJ confirmed this in view of the fact that leave is now
required for all civil appeals.
According to Nienaber
JA, in
WELLINGTON COURT SHAREBLOCK v JOHANNESBURG CITY COUNCIL
1995(3) SA 827 (AD)
at
832F-G
the judgment in
Zweni’s
case (at 532F – G) makes it plain, furthermore:
“
that
the appealability of any decision given during the course of
proceedings is not contingent solely on the discretion of the
trial
Judge in granting leave to appeal. To be appealable the decision
primarily has to be a ‘judgment or order’ with
certain
attributes, the first of which is that it must be final in effect,
that is to say, not susceptible to alteration by the
Court of first
instance ... [which] was the very criterion, before the amendment to
S20 of the Act was introduced, for differentiating
between
interlocutory orders appealable as of right and simple interlocutory
orders appealable only with leave...”
The question of
appealability was fully addressed, furthermore, in
MAIZE BOARD v
TIGER OATS LTD AND OTHERS, 2002(5) SA 365
at
369I –
371F
by Streicher, JA, who stated that the general principle
stated in
Zweni,
more particularly the requirement of
finality, was reaffirmed by the SCA in a number of subsequent cases.
He referred to
CRONSHAW
AND ANOTHER v COIN SECURITY GROUP (PTY) LTD,
[1996] ZASCA 38
;
1996 (3) SA 686
(A)
in
which it was found that one of the attributes of a “judgment
or order” (in other words one which is appealable)
was that it
is final in effect and that the rule regarding the question as to
when a decision is final, was already laid down
by Schreiner, JA, in
PRETORIA GARRISON INSTITUTES v DANISH VARIETY PRODUCTS (PTY)
LIMITED,
1948 (1) SA 839
(A)
at
870
where he stated that:
“…
a
preparatory or procedural order is a simple interlocutory order and
therefore not appealable unless it is such as to ‘dispose
of
any issue or any portion of the issue in the main action or suit’,
or, which amounts, I think, to the same thing, unless
it ‘irreparably
anticipates or precludes some of the relief which would or might be
given at the hearing”.
The test for
appealibility, as reiterated by Harms AJA, as he then was, in
ZWENI
v MINISTER OF LAW AND ORDER
, supra,
at 536 B – D
and confirmed in
TROPE AND OTHERS v SA RESERVE BANK
,
supra,
at 267 E – F and in
JONES v KROK
, supra,
at 684 C – D, is whether the decision in question is
final, definitive of the rights of the parties and effectively
disposes
of a substantial portion of the relief claimed in the main
case.
The question, then, is
whether in the light of the decisions in
ZWENI,
supra,
and
TROPE,
supra,
the dismissal of the application
in
casu
is an appealable ‘judgment or order’ for
purposes of Section 20 of the
Supreme Court Act, Act 59 of 1959.
What this Court, in
other words, needs to determine is whether any appeal can lie
against the order dismissing the application,
even with leave, and,
accordingly, whether it is competent for leave to be granted
regarding this order. In doing so, the Court
needs to consider,
predominantly, the
effect
of the dismissal (
ZWENI v
MINISTER OF LAW AND ORDER
, supra,
at 532H-I,
JONES v
KROK
, supra,
at 684B -C and
WELLINGTON COURT
SHAREBLOCK v JOHANNESBURG CITY COUNCIL
,
supra,
at
834 A-B.)
In my view this
application, similar to what was held in
WELLINGTON COURT
SHAREBLOCK v JOHANNESBURG CITY COUNCIL
,
supra,
at
p. 835, is
“
not
the sort of case where it is incontrovertible on the papers that the
ultimate relief claimed in the action, or a special defence
which
will be destructive of such relief... hinges solely on the point
taken in the [application].”
As in that case, the
action
in casu
is to continue to trial despite the dismissal
of the application. Here, too, “
final relief will only
follow if the [plaintiff] proves the remainder of its case”
against the defendants.
In my view, therefore,
the dismissal of the application
in casu
does not dispose of
a substantial portion of the relief claimed in the main action and
therefore does not amount to an appealable
‘judgment or order’
as envisioned in
JONES v KROK,
supra
,
at
684I-J
or on the basis of the decisions in
PRETORIA
GARRISON INSTITUTES, CRONSHAW
and
MAIZE BOARD v TIGER OATS
LIMITED,
supra.
It would therefore, in
my view, not be competent to grant leave to appeal against its
dismissal.
AD THE FURTHER
AFFIDAVIT:
Despite the dismissal of
the application to present written evidence, the plaintiff has now
filed a “supplementary affidavit”
under cover of a
filing notice dated 22 March 2011 without suggesting any basis for
the reception of such supplementary affidavit
at this stage of the
proceedings other than that this Court should allow it, on Mr
Bosman’s oral request, in order to “
lift the veil
”
and grant leave to appeal against the dismissal of the application
to declare the exceptions an abuse of the court process.
The plaintiff alleged
that the supplementary affidavit contains new evidence. It then
annexed a Notice of Intention to Amend filed
by the defendants on 26
March 2010. The Notice sets out the defendants’ intention to
amend their particulars of claim in
an action instituted in the
North Gauteng High Court to order the plaintiff to render its
statement of account. The intended
amendment,
inter alia,
was
to address the jurisdictional requirements of mediation and
arbitration contained in clause 7 of the contract.
I agree with Mr Duminy’s
submission that the supplementary affidavit does not introduce any
new matter which was not canvassed
before, but merely seeks to place
before court additional facts in support of the same contentions
contained in the dismissed
application.
The “supplementary
affidavit”, in essence, merely introduced the defendants’
subsequent application to allow
the proposed amendments filed on 28
January 2011. The proposed amendment regarding clause 7 of the
contract remained identical
to that contained in the Notice of
Intention to Amend which was filed on 26 March 2010 already.
The ‘evidence’
was therefore already known when the plaintiff filed its
interlocutory application to introduce evidence
on 23 August 2010.
No explanation was proffered for the plaintiff’s failure to
include the information in that application.
In
S v SHAIK
,
supra,
at
p. 224, par. [20]
the Court stated specifically
that leave to adduce further evidence on appeal, which for the
purpose of this application for
leave to appeal will be viewed as
the introduction of new evidence after judgment, is ordinarily
granted only where
“
special
grounds exist [or where] there will be no prejudice to the other side
and further evidence is necessary in order to do justice
between the
parties.”
In
RAIL COMMUTERS
ACTION GROUP AND OTHERS v TRANSNET LTD T/A METRORAIL AND OTHERS,
[2004] ZACC 20
;
2005 (2) SA 359
(CC)
in
par. 37 – 38
and in
PROPHET
v NATIONAL DIRECTOR OF PUBLIC PROSECUTIONS,
[2006] ZACC 17
;
2006 (2) SACR 525
(CC)
the requirement of “exceptional circumstances” was
confirmed as set out in
S v Lawrence; S v Negal; S v Silberg,
1997 (4) SA 1176
par. 22 – 23
:
“
The
court should exercise the powers conferred by section 22 ‘sparingly’
and further evidence on appeal should only
be admitted in exceptional
circumstances. Such evidence must be weighty, material and to be
believed. In addition, whether there
is a reasonable explanation for
its late filing is an important factor...”
The Supreme Court of
Appeal in
DORMELL PROPERTIES 282 (CC) v RENASA INSURANCE COMPANY
LTD AND OTHERS NN.O.,
2011 (1) SA 70
(SCA)
at
p.93, par. [69]
addressed this principle when Cloete JA confirmed the
requirements for the admission of new evidence set out in
S v EB,
2010 (2) SACR 524
(SCA) at 528 e – 529 e par. [5].
In the
latter case the Court reiterated the general rule that an appeal
court would decide on the correctness of a judgment on
the basis of
facts in existence at the time it was given, not according to new
circumstances subsequently coming into existence,
and cautioned that
while the rule has recently been relaxed
“
...
the more liberal approach by this court ...
must
not be interpreted as a willingness to open the floodgates ... the
application must be carefully scrutinised to ascertain whether
it
does indeed disclose exceptional or peculiar circumstances.”
I am of the opinion that
the plaintiff has established no exceptional circumstances which
would justify the admission of the ‘supplementary
affidavit’.
Neither did it establish a basis on which it can be found that the
evidence is likely to dispose of a substantial
or even of some
portion of the relief claimed in the main action. Nor was any
reasonable explanation offered for its attempted
introduction at
this late stage either.
I therefore do not
consider this to be one of the instances in which this Court would
be justified in deviating from the ‘sparing’
use of its
discretion to allow new evidence at this stage of the proceedings.
AD UPHOLDING OF THE
EXCEPTIONS BASED ON LACK OF AVERMENTS TO SUSTAIN A CAUSE OF ACTION:
The other issues that
remain to be adjudicated therefore is the application for leave to
appeal against this Court’s order
upholding exceptions 1, 3,
4, 5 and 6 of the exceptions based on a failure to sustain a cause
of action.
It is trite law that the
upholding of exceptions based on the failure to disclose a cause of
action is in principle appealable,
whereas the upholding of those
based on vagueness and embarrassment is in principle non-appealable.
This was set out in
TROPE,
supra
, at 270 F –
H:
“
Where
an exception is granted on the ground that a plaintiff’s
particulars of claim failed to disclose a cause of action,
the order
is fatal to the claim
as
pleaded
and
therefore final in its effect (Liquidators, Myburgh, Krone and
Company Ltd v Standard Bank of SA Ltd,
1924 AD 226
at 229; 230)....
On
the other hand, where an exception is properly taken on the grounds
that the particulars of claim are vague and embarrassing,
by its very
nature the order would not be final in its effect. All that the
plaintiff would be required to do in such a case would
be to set out
its cause of action more clearly in order to remove the source of
embarrassment.”
In principle, therefore,
the upholding of exceptions 1, 3, 4, 5 and 6 based on a lack of
averments to sustain a cause of action
is appealable should the
merits justify the granting of such leave.
AD EXCEPTION 1:
The defendants excepted
to the plaintiff’s averment that the contractual terms listed
in paragraphs 11.1 to 11.6.2 of the
amended particulars of claim
could also be or include implied or tacit terms.
The essence of the
plaintiff’s complaint against the upholding of this exception
is the finding that clause 11 of the co-operation
agreement excludes
the operation of tacit and/or implied terms.
Mr Bosman relied on
DURITY ALPHA (PTY) LTD v VAGG 1991(2) SA 840 (AD)
at
845
B-C
to contend that the Court, in order to determine whether a
tacit agreement came into existence, needs to examine the conduct of
the parties and the relevant surrounding circumstances. He relied,
too, on
ALLY v DINATH, 1984(2) 541 (TPD)
where it was found
at
452
that it is a firmly established principle that any
type of contract can be created tacitly by conduct.
It must be borne in
mind, however, that parties can expressly exclude any type of term
from their contract by agreement, even
the operation of the implied
naturalia
or
ex lege
terms that would normally form
part of a specific type of contract.
Clause 11 of the
agreement reads as follows:
“
This
agreement constitutes the entire agreement between the parties with
regard to the matters dealt with herein and no representations,
terms, conditions, or warranties, express or implied not contained in
this agreement shall be binding on the parties.”
In
VAN DER MERWE, VAN
HUYSSTEEN, REYNEKE & LUBBE: CONTRACT: GENERAL PRINCIPLES, 2
nd
Ed, p.256,
a clear distinction is made between ‘implied’
and ‘tacit’ terms:
An ‘implied’
term is one implied by law “
regardless of the actual
intention or conduct of the parties”
and which, in the
absence of agreement to the contrary, invariably and as a matter of
course applies, as one of its
naturalia,
to the specific
type of contract which the parties have concluded.
A ‘tacit’
term, on the other hand, is one which is said to derive from the
common intention of the parties without
being expressed by them (in
words) but which is inferred or deduced from the express terms and
the surrounding circumstances
of the contract, in other words from
the facts, including the conduct of the parties.
There is no distinction
between the nature and effect of express terms and tacit terms, but
an ‘express’ term is
proved by direct evidence and a
‘tacit’ one by circumstantial evidence.
Van der Merwe,
et al,
cautioned that courts “
are generally slow to import
tacit terms into a contract”
and should only do so if, on
the basis of the so-called ‘
innocent bystander test’:
“
[the
tacit term] is necessary in the business sense to give efficacy to
the contract; that is, if it is such a term that you can
be confident
that if at the time that the contract was being negotiated someone
had said to the parties: “What will happen
in such a case?”
they would have both replied : “Of course, so-and-so. We did
not trouble to say it, it is too clear.”’
With reference to the
“innocent bystander” test Mr Bosman contended, as well,
that the court should have found that
this exception was not tenable
since consideration could not be given at the exception stage to any
implied terms, especially
those implied by law or in terms of
business practices, since evidence at the trial could play a
material role regarding implied
terms.
I agree that in
contracts which do not contain clauses explicitly excluding the
operation of tacit or implied terms, evidence
and the ‘innocent
bystander’ test could play a role and that in such cases the
presence of tacit or implied terms
cannot be decided at the
exception stage.
But, in the case under
consideration the parties in Clause 11 explicitly excluded from the
contract “
with regard to the matters dealt with [in the
co-operation agreement]”
all “
terms ... express
or implied not contained in”
the contract.
They reconfirmed their
intention to limit the contract to that which is expressly contained
in the written agreement by adding
Clause 14 which reads:
“
No
agreement varying, adding to, deleting from or cancelling this
agreement, and no waiver, whether specifically, implicitly or
by
conduct of any right to enforce any term of this agreement, shall be
effective unless reduced to writing and signed by or on
behalf of the
Parties. It is recorded that there exists no collateral and/or other
agreements and that this is the sole agreement
entered into by and
between the Parties.”
Mr Duminy argued, in my
view correctly, that similar provisions have been applied in a
similar way to exclude the use of tacit
and/or implied terms in our
courts.
In
ROUWKOOP CATERERS
(PTY) LTD v INCORPORATED GENERAL INSURANCE LTD 1977(3) SA 941(C)
at
946
it was stated that the provisions of the written
contract themselves militated against an implied term:
“
It
must be remembered that this is a written contract which specifically
records the exceptions, limitations and conditions; these
are
expressly circumscribed and confined in the policy to those
“contained herein””
In
FIRST NATIONAL
BANK OF SA LTD v RUGBY UNION AND ANOTHER 1997(3) SA 851 (W)
at
864H/I
to
865A
the court in explaining why it could
not import a tacit term, held
inter alia
that “
the
alleged tacit term”
was
“
struck
by a clause [in the agreement] providing that no party would be bound
by any express or implied term not recorded therein”
In
CASH CONVERTERS
SOUTHERN AFRICA v ROSEBUD WP FRANCHISE
2002 (5) SA 494
(SCA)
at
511B-D
Brand JA pointed out that
“
the
hypothesis of the tacit term ... militates against the express
provision in Clause 16.4 of the sale that ‘no agreed
cancellation
of this agreement shall be of any force and effect
unless in writing and signed by the parties...”.
In my opinion Mr Duminy
was therefore correct in stating that the Appeals Court has
confirmed that if the contract itself determines
that one cannot
rely on implied terms, one cannot plead implied or tacit terms.
In my view, then, it
would not be competent to allow the appeal against this exception as
it would be fruitless to allow the allegations
of implied and/or
tacit terms to proceed to the hearing of the main case when it is
clear from the express terms of the written
contract itself that the
parties intended to explicitly exclude reliance on implied or tacit
terms.
Mr Bosman’s
argument, which he repeated regarding the other exceptions as well,
that the exception itself, particularly
paragraph 3 thereof, was not
sufficient to be a valid exception and was therefore untenable does
not carry any water since he
failed to except to the exception
although he had the opportunity to do so.
He also averred that the
plaintiff was indeed entitled to depend on tacit or implied terms as
long as those terms were not contrary
to the express terms of the
written contract.
In
CHRISTIE: THE LAW
OF CONTRACT IN SOUTH AFRICA, 5
th
edition,
p.168
it was stated that in order to decide whether a tacit term
is to be imported into the contract the court must first examine the
express terms of the contract. In the words of
Rumpff JA
in
PAN AMERICAN WORLD AIRWAYS INCORPORATED v SA FIRE AND ACCIDENT
INSURANCE CO LTD,
1965 (3) SA 150
(A)
at
175 C:
“
When
dealing with the problem of an implied term the first enquiry is, of
course, whether, regard being had to the express terms
of the
agreement, there is any room for importing the alleged implied term.”
He went on to say that:
“
The
express terms may deliberately exclude the possibility of importing
tacit terms of a particular type. A tacit term cannot be
imported on
any question to which the parties have applied their minds and for
which they have made express provision in the contract,
so no tacit
term can be imported in contradiction of an express term. The
principle was well expressed by Van Winsen JA in South
African Mutual
Aid Society v Cape Town Chambers of Commerce,
1962 (1) SA 598
(A) at
615 D
:
“
A
term is sought to be implied in an agreement for the very reason that
the parties failed to agree expressly thereon. Where the
parties have
expressly agreed upon the term and given expression to that agreement
in a written contract in unambiguous terms no
reference can be had to
surrounding circumstances in order to subvert the meaning to be
derived from a consideration of the language
of the agreement only.
See: Delmas Milling Company Ltd v Du Plessis,
1955 (3) SA 447
(A) at
454”
.
If the question is dealt
with unambiguously by an express term, therefore, no tacit term
covering the same question can be imported.
However, the express
terms may also exclude the possibility of importing tacit terms even
when the express terms do not expressly
cover the question, but give
rise to the inference that the parties did not wish to include the
term in question. As
Solomon JA
said in
UNION GOVERNMENT
(MINISTER OF RAILWAYS) v FAUX LTD,
1916 AD 105
112:
“
Now
it is needless to say that the court should be very slow to imply a
term in the contract which is not to be found there, nor,
particularly in the case like the present, where in the printed
conditions the whole subject is dealt with in the greatest detail;
and where the condition which we ask to imply is one of the very
greatest importance on the matter which could not have in absent
from
the minds of the parties at the time when the agreement was made.”
In my view neither of
the two relevant clauses
in casu
, clauses 11 and 14, leaves
any doubt as to the intention of the parties that no terms not
expressly contained in the written
contract would be of any effect.
I am not convinced that
there is a reasonable possibility that any other court would come to
a different conclusion on this point
and therefore leave to appeal
against this exception is refused.
AD EXCEPTIONS 3, 5
and 6:
In his argument for
leave to appeal Mr Bosman persisted with the allegations that the
defendants are abusing the court process
with the exceptions by
‘relying on arbitration’ while claiming in another court
that the arbitration clause in the
contract is invalid.
Mr Duminy submitted,
however, which submission I find persuasive, that the plaintiff
appears to overlook the basic fact that the
defendants are not
raising arbitration or mediation as a defence, but are excepting to
the plaintiff’s failure to deal
in its particulars of claim
with those aspects which are expressly stipulated in clause 8.2 of
the written contract to be jurisdictional
requirements for the
cancellation of the said contract.
Mr Bosman argued that
the court should have found that clause 8.2 which determines that
the dispute should be referred to mediation
and arbitration is not a
matter to be decided at the exception stage but which should have
been raised by way of a special plea
or an application in terms of
section 6 of the Arbitration Act, in other words an application to
stay the proceedings.
Had the defendants
indeed relied on arbitration as a defence, Mr Bosman’s
averments that they should file a special plea
or institute a S6
application in terms of the Arbitration Act to stay the proceedings
would have been correct.
Mr Bosman further argued
that the court should have found that mediation and arbitration is
not an absolute bar against instituting
action in a court and that
any clause averring that, would be contrary to the Constitution.
He averred that the
court should have found that the exception is an abuse of a court
process:
Because the first
defendant in a matter in another court refused to take part in any
mediation or arbitration; and
because any term in an
agreement that a matter could only be adjudicated by way of
arbitration excludes the court’s jurisdiction
and is in
contradiction of the terms of the Constitution, alternatively
contradicts the law and the
bone mores
.
Mr Duminy emphasized
that exception 3 was upheld because of the plaintiff’s failure
to address the contractual requirements
stipulated in clause 8.2 of
the co-operation agreement without having given any indication on
what basis the court erred in requiring
the plaintiff to comply with
the basic principles of pleading regarding contractual matters.
The purpose of a
pleading is not only to enable the other party to plead thereto, but
also to inform the Court about the issues
it needs to decide. In the
instant case the trial court will need to decide whether the
arbitration clause is indeed invalid
and whether it is a
jurisdictional requirement for the activation of the penalty clause
in the term in which it is contained.
To enable the Court to do so,
the plaintiff needs to address the requirements of the submission of
the dispute to prior mediation
and arbitration and the prior
determination of the amount claimable by the arbitrator.
Although I am of the
view that the plaintiff needed to address the requirements expressly
contained in clause 8.2 of the co-operation
agreement, there is a
reasonable possibility that another court may come to a different
conclusion as to whether the plaintiff
needed to address the express
requirements of arbitration and mediation before cancelation.
I therefore grant the
plaintiff leave to appeal against the upholding of exceptions 3, 5
and 6.
AD EXCEPTION 4:
The particular issue
with which the fourth exception is concerned is the plaintiff’s
failure to deal with the seven days’
notice requirement of
clause 8.2.3.
The plaintiff relies on
a written contract, and more specifically on a penalty clause in the
contract.
In order to plead itself
within the parameters of the written contract upon which it relies,
the plaintiff therefore, as Mr Bosman
argued, needs at least to
address the express terms of the contract in order to disclose a
cause of action.
Once again, however, the
plaintiff ignores the wording of clause 8.2 which provides for a
claim for three years of loss of profits
to be determined by the
arbitrator “
resulting from cancellation of this agreement
….”, in the limited and exclusive circumstances where”
the requirements of clauses 8.2.1 to 8.2.3 are satisfied.
It is common cause that
the right to claim three years’ loss of profit is a penalty
clause. The courts regard a penalty
clause as “
an
alternative to a claim for damages for breach of contract”
.
(
VAN DER MERWE
et al,
supra
,
p. 417
.) It is
important to note that a contractant may not claim damages instead
of a penalty clause unless the contract expressly
provides
otherwise, which the contract in the instant case does not do. If a
breach of contract occurs which is not covered by
the penalty
clause, the penalty cannot be claimed for that breach, but nothing
prevents the plaintiff from claiming damages for
the breach.
In
VAN DER MERWE
,
et al,
supra,
on
p. 413
a penalty clause is defined as
a term which provides that a party
‘
shall,
in respect of an act or omission in conflict with a contractual
obligation, be liable to pay a sum of money ...either by
way of a
penalty or as liquidated damages.”
A penalty stipulation in
terms of S1 of the
Conventional Penalties Act, Act 15 of 1962
is intended to become operative upon a breach of contract (which is
what is meant with the reference to “
an act or omission in
conflict with a contractual obligation”
above. See in this
regard
SUN PACKAGING (PTY) LTD v VREULINK
[1996] ZASCA 73
;
1996 (4) SA 176
(A).
In the instant matter,
the parties agreed on
mora
as the method of cancellation, as
expressly stated in Clause 8.2. In terms of the common law,
mora
cannot occur in respect of an unliquidated debt since an
unliquidated debt is unenforceable until it has been liquidated by
agreement or otherwise. (
VAN DER MERWE
,
supra,
p.
312).
I do not agree with Mr
Bosman’s contention that the contractual terms which were
specially agreed by the parties and explicitly
included in the
contract as applying only “
in the limited and exclusive
circumstances where the requirements of clauses 8.2.1 and 8.2.3 are
satisfied”
can simply be ignored in the particulars of
claim because of the plaintiff’s reliance on repudation while
the plaintiff
explicitly relies on the penalty clause.
Mr Bosman namely
contended that the Court should have found that the plaintiff had
the right to cancel by way of repudiation despite
the express
agreement on
mora
as the form of breach which leads to the
right to invoke the penalty clause after seven days’ notice to
remedy the breach
and after an arbitrator had determined the amount
on which the claim can then be based.
He relied on
DATACOLOR
INTERNATIONAL (PTY) LTD v INTAMARKET (PTY) LTD 2001(2) SA 284 (SCA),
to argue that because a plaintiff can later, when he finds that
another type of breach had occurred rather than the one he
originally
relied on, rely on such new type of breach, the plaintiff
did not need to address the express issues of
mora
and the
seven days’ notice in his particulars of claim since he now
relies on repudiation.
Based on the findings in
DATACOLOUR
-
decision and the finding in
TAGGART
v GREEN
1991 (4) SA 128
(T); METALMIL (PTY) LTD v AECI EXPLOSIVES
AND CHEMICALS LTD
[1994] ZASCA 96
;
1994 (3) SA 673
(A)
at
683H
that a
provision in a contract which determines that if malperformance
takes place the debtor must be notified to rectify the
defect within
a certain period does not afford a party in breach any protection in
case of repudiation, it is conceivable that
another court may come
to a different conclusion regarding the sufficiency of the
plaintiff’s averments to sustain the
right to invoke the
penalty clause by way of repudiation.
I therefore grant the
plaintiff leave to appeal against the upholding of exception 4.
AD COSTS ORDER:
In view of the leave to
appeal granted regarding the upholding of exceptions 3, 4, 5 and 6
of the exceptions based on a lack of
averments to sustain a cause of
action, leave is granted to appeal against the corresponding costs
order regarding the said exceptions.
WHEREFORE THE
FOLLOWING ORDER IS MADE:
1. The application for
leave to appeal against the dismissal of the application to present
evidence is dismissed with costs.
2. The
viva voce
application to admit the “supplementary affidavit” is
dismissed with costs.
3. Leave to appeal
against the upholding of exception 1 based on the lack of averments
to sustain a cause of action is refused.
4. Leave to appeal to the
Full Bench of this Court against the upholding of exceptions 3, 4, 5
and 6 based on a lack of averments
to sustain a cause of action is
granted.
5. Leave to appeal to the
Full Bench of this Court against the costs order in as far as it
pertains to exceptions 3, 4, 5 and 6
based on a lack of averments to
sustain a cause of action is granted.
6. Costs of this
application are to be costs in the appeal.
__________________
MURRAY AJ
FOR DEFENDANTS: Adv. WRE
Duminy SC
Adv JJ Pretorius
Instructed by:
Lovius-Block Attorneys
Bloemfontein
FOR PLAINTIFF: Adv AJH
Bosman SC
Instructed by: Naudes
Attorneys
Bloemfontein