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[2011] ZAKZDHC 78
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Stac Plastic Machinery Agency (Pty) Ltd v Swan Plastic CC (5117/2007) [2011] ZAKZDHC 78 (4 November 2011)
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
CASE NO 5117/2007
In the matter between:
STAC PLASTIC MACHINERY
AGENCY (PTY) LTD
…................................
PLAINTIFF
and
SWAN PLASTIC CC
…..............................................................................
DEFENDANT
JUDGMENT
Date: 4 November 2011
PLOOS VAN AMSTEL, J
[1] The plaintiff, as its
name suggests, does business as an agent in the plastic processing
industry. The defendant is a manufacturer
of PVC piping, which it
produces on extrusion lines from raw material. The plaintiff claims
commission from the defendant in respect
of a consignment of raw
material, referred to in the particulars of claim as ‘PVC
Polymer Grade 66/67’. The second
claim relates to the purchase
price of a belling machine and a belling tool which the plaintiff
claims it sold to the defendant.
The function of a belling machine is
to create a socket at the end of a pipe, which is used to accept the
end of another pipe,
thereby creating a joint.
[2] The defendant says
the amount of the commission in respect of the raw material was to be
negotiated, but was never agreed. With
regard to the second claim it
says the contract was between it and Zhoushan Jinhai Machinery Co Ltd
(Zhoushan), a Chinese company
which was represented in South Africa
by the plaintiff, as its agent, and that the plaintiff cannot claim
the purchase price. It
also says the belling machine was defective
and that on that basis also it is not liable to pay the purchase
price.
[3] The claims and the
defences to them must be considered against the background of the
matter, which is important to establish
the context in which the
evidence and the probabilities must be assessed. It is convenient to
deal with the second claim first.
[4] In 2004 the plaintiff
introduced the defendant to Zhoushan in China, pursuant to which the
defendant bought from Zhoushan an
extrusion line which included a
belling machine. The contract of sale was concluded between the
defendant and Zhoushan and the
latter paid the plaintiff a commission
on the deal. Payment of the purchase price was effected by the
defendant by way of a letter
of credit in favour of Zoushan.
[5] It was not disputed
before me that the belling machine gave problems from the start
which, in spite of continued efforts over
a period of about twelve
months, could not be sorted out. It broke down frequently and could
not cope with the defendant’s
twenty four hours production
cycle. The defendant was in regular contact with the plaintiff in
connection with these problems,
until eventually it was decided that
the belling machine had to be replaced. Zoushan agreed to pass a
credit for the purchase price
of the belling machine, which amounted
to a sum of USD 32 000, and sourced a replacement which was of a
better quality, and more
expensive. The defendant agreed to pay the
difference.
[6] The second belling
machine was delivered in about November 2006. It was commissioned by
the defendant but presented with basically
the same problems as the
first one. That led to the defendant refusing to pay for it, and the
plaintiff issuing summons for the
purchase price.
[7] I must decide first
of all whether the plaintiff was a party to the contract relating to
the second belling machine. It does
not claim to have acted as an
agent for an undisclosed principal. It claims that it was the seller.
In the absence of a finding
that it was the seller the claim for
payment of the purchase price cannot succeed.
[8] Mr Naicker, a
director and shareholder of the plaintiff, confirmed in his evidence
that the plaintiff acted as agent for Zoushan
when the defendant
bought the first belling machine as part of an extrusion line. He
also confirmed that the belling machine was
problematic and that the
defendant wanted it to be replaced. He said he was keen to maintain
the relationship with the defendant,
which is a major producer of PVC
pipes, and impressed upon Zoushan that it needed to keep the customer
satisfied if it wanted to
expand its business operations in Africa,
which was the case. Zoushan agreed to pass a credit in respect of the
first machine and
to source a replacement one.
[9] Mr Naicker said in
October/November 2005, in China, a discussion took place between him,
Mr Swanson (a member of the defendant)
and Zoushan, in the course of
which it was agreed that the plaintiff would pay Zoushan for the
replacement machine and would in
turn sell it to the defendant. The
reason for this arrangement, according to Mr Naicker, was that
Zoushan was not prepared to let
the machine leave China unless the
purchase price was paid or secured, whereas Mr Swanson was not
prepared to pay the purchase
price until the machine had been
installed in the defendant’s premises and operated
satisfactorily.
[10] Mr Swanson was
adamant in his evidence that no such meeting took place. He said the
defendant bought the first belling machine
from Zoushan, together
with an extrusion line, and as far as he was concerned it was Zoushan
who had to replace the defective belling
machine. This was achieved
by Zoushan agreeing to pass a full credit in respect of the purchase
price of the first belling machine
and the defendant agreeing to pay
the difference in price because the replacement machine was of a
better quality and more expensive.
He said although these
arrangements were made through Mr Naicker, as before, as far as he
was concerned he was dealing with ‘the
Chinese’ who had
sold the defective machine to the defendant.
[11] In arguing that the
plaintiff was the seller of the second belling machine counsel for
the plaintiff placed considerable reliance
on a document which was
signed by Mr Naicker and Mr Swanson on 13 March 2006.
1
The letter is on the
plaintiff’s letterhead and is addressed to the defendant. It
reads as follows:
“
Dear Mike
Re: Placement of Belling Machine
I have arranged for the replacement of
the belling machine according to the following:
The replacement machine will be able
to use existing Sica belling tools. The factory will supply an
adapter to enable this. The
cost of this machine will be USD
55,000.00 with PLC control delivered to your premises. The machine
is scheduled to be ready
for commission in China at the end of this
month and you will have to send someone there to be trained and
accept delivery.
The machine you have at the moment
cost USD 32,000.00 FOB China, in addition to USD 5,000.00 for the
PLC. Please note that you
have as yet not paid for this.
On commissioning of the replacement
belling machine in your factory, you agree to pay USD 19,000.00
The old machine needs to be connected
and we will do the necessary modifications at our cost to do belling
of 110 and 160mm sewerage
pipes. When this machine is set up to run
as required, you will make a offer to purchase it. We will give you
a discount of 20%.
I have had to put in a lot of pressure on my
Principals to effect a solution and i hope you will accept the above
conditions.
[12] Counsel argued that
the fact that Mr Naicker signed the letter of 13 March for ‘Stac
Plastic Machinery Agency (Pty)Ltd’
demonstrates that he was
then acting as seller and no longer as agent for Zoushan. I think
this is a non sequitur. He signed the
letter on behalf of the
plaintiff because he was not acting in his personal capacity. It was
the plaintiff who was in business
as an agent, not Mr Naicker. There
is nothing in the letter to indicate that the plaintiff had replaced
Zoushan as the seller.
Counsel argued that the sale of the second
belling machine should be seen as a separate transaction and not as a
continuation of
the first one. In other words, the assessment of who
the seller of the second machine was should not be clouded by the
fact that
Zoushan was the seller of the first one. I do not believe
that this is a realistic approach. Zoushan agreed to pass a credit in
respect of the purchase price of the first machine because, as a
matter of probability, they accepted that the machine was giving
problems and they did not want to jeopardize the expansion of their
business in Africa. They were willing to pass a credit in respect
of
the first machine and supply a replacement, with the defendant paying
the difference in price. Why would it be necessary in
those
circumstances for the plaintiff, who at all times acted as the
go-between, to be the seller of the replacement machine? It
is
noteworthy that the letter of 13 March ends with the following: ’I
have had to put in a lot of pressure on my Principals
to effect a
solution and I hope you will accept the above conditions’.
[13] In a letter dated 29
November 2006
2
,
addressed to the defendant, Mr Naicker said, inter alia, the
following: ‘The replacement belling machine was supplied as
per
the conditions stated in the letter dated 13
th
March, 2006. It was
commissioned in presence (sic) of your Engineer and we have a signed
note authorising my Principals to ship.
Note that this machine was
imported and supplied through the above Company and as such remains
its property until paid for. As
you are not happy with the machine, I
am quite willing to remove it immediately.’ The company
referred to in the letter was
Zhejiang Jinhai Plastic Machinery Co.,
which, as I understand the position, also supplied the first belling
machine to Zoushan.
[14] The plaintiff placed
no reliance on the letter of 13 March in the pleadings. It pleaded an
oral agreement. It was the defendant
who relied on the letter in its
counterclaim. It pleaded, in the alternative and in the event of it
being found that it contracted
with the plaintiff, that the plaintiff
breached the terms contained in the letter. In its plea to the
counterclaim the plaintiff
denied that the letter formed part of the
agreement and averred that it was a without prejudice settlement
proposal in order to
resolve a dispute between the defendant and the
plaintiff’s principal. Further, in the defendant’s list
in terms of
rule 37(4) it requested the plaintiff to admit that the
terms and conditions under which the second belling machine was
supplied
were recorded in the plaintiff’s letter of 13 March.
The plaintiff declined to make this admission. In response to a
question
whether any of the terms of the alleged oral agreement were
recorded in writing, the plaintiff referred to its invoice which was
rendered after the sale of the machine. It also stated in its reply
that it had given no warranty that the machine would be able
to use
SICA belling tools.
[15] Mr Naicker’s
explanation as to how and why the plaintiff became the seller of the
second machine appears to me to be
improbable. It seems more likely
that he persuaded Zoushan to let the machine go on the basis that the
plaintiff would ensure that
it got paid. At one stage in his evidence
he said that the plaintiff guaranteed the purchase price. This seems
to accord with what
he said to Mr Swanson in a letter dated 1
December 2006
3
:
‘With regards to accountability, I would like to know who has
taken responsibility for the payment of the replacement machine,
sea-freight, insurance, clearing and delivery costs to your factory?’
[16] The defendant can
only be bound to the plaintiff, as a purchaser to a seller, if it had
agreed to contract with the plaintiff
on that basis. It is clear from
Mr Swanson’s evidence that he never regarded the plaintiff as
the seller. He had no animus
contractus vis-a vis the plaintiff. He
regarded Zoushan as the seller. That also accords with the
probabilities. The plaintiff
could not thereafter invoice the
defendant for the purchase price as if it had become the seller
through a unilateral declaration
to that effect. The fact that
Zoushan never invoiced the defendant for the second machine is
probably explained by the fact that
it set the purchase price off
against the plaintiff’s commissions, as Mr Naicker suggested.
That however did not entitle
the plaintiff to sue as seller. If it
paid a debt which was owing by the defendant then, in principle, it
would have had an enrichment
claim for its recovery. That is however
not its case.
[17] If the plaintiff
were the seller it would have faced the further difficulty that the
purchase price would only be payable once
the machine had been
installed at the defendant’s premises and operated
satisfactorily. It was not seriously disputed that
that never
happened. The defendant offered to return the second machine against
a refund of the USD 32 000 which it had paid for
the first one, and
which became part payment for the second one. In cannot be said that
in doing so it accepted the machine with
its defects and became
liable to pay the purchase price.
[18] The plaintiff’s
claim for the purchase price can therefore not succeed.
[19] The claim for the
commission relates to a consignment of raw material. It was not
disputed that the plaintiff put the defendant
in touch with the
supplier, that the defendant bought and received the raw material
from the supplier and that the defendant had
agreed that, in
principle, the plaintiff was entitled to be paid a commission. The
dispute before me related to whether there was
a binding agreement
for the payment of commission.
[20] Mr Naicker testified
that on 16 November 2005 he handed to Mr Swanson a written quotation
4
for the supply of the raw
material, which included the following: ’Commission: To be paid
locally at a flat rate of R5000
per 20 ft. container.’ He said
Mr Swanson did not expressly agree to the commission but went ahead
and ordered the raw material
from the supplier in China without
indicating to him that the commission was unacceptable. He agreed
that on a later date Mr Swanson
said to him that a commission of
R5000 per container was too high, and that they agreed to negotiate a
more acceptable commission
later. It seems clear that Mr Naicker
agreed to that in the hope that the defendant would order further
machinery through it.
As
it turned out they did not later negotiate or agree the amount of the
commission, nor did the defendant order further machinery
through the
plaintiff. The suggestion by Mr Naicker that they had agreed that the
commission of R5000 per container would stand
if there were no
further orders was disputed by Mr Swanson and does not seem to me to
be probable. It is more likely that Mr Naicker
agreed that they would
negotiate an acceptable commission later because he wanted to
preserve and strengthen the relationship between
the plaintiff and
the defendant. The fact that in those circumstances the plaintiff is
unable to enforce any claim for commission
may seem unfair, but that
is the result of the plaintiff not ensuring that there was a binding
agreement in place.
[21] The result is that
the plaintiff cannot succeed on either of the two claims. They are
both dismissed with costs.
_______________________
PLOOS VAN AMSTEL J
1
P
43 of exh B
2
P
52 of exh B
3
P
58 exh B
4
P
26 of exh B