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[2011] ZAECBHC 8
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Siyepu and Others v Premier of the Eastern Cape (203/2000) [2011] ZAECBHC 8; 2013 (2) SA 425 (ECB) (8 September 2011)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE HIGH COURT: BHISHO)
CASE
NO. 203/2000
REPORTABLE
In
the matter between:
LUNGILE
ELLIOT SIYEPU & 508 OTHERS
Plaintiffs
and
PREMIER
OF THE EASTERN CAPE
Defendant
JUDGMENT
ALKEMA
J
[1]
Five hundred and nine plaintiffs instituted action against the
defendant claiming contractual damages in the total sum of R98
million arising from an alleged breach of contract. The facts
are largely undisputed.
[2]
The Provincial Government of the Eastern Cape Province (hereinafter
called the Government), on 7 November 1995 at Bisho, represented
by
its then Premier, concluded a written agreement (the agreement) with
the General Workers Union, then representing the former
employees of
the now defunct Transkei Road Transport Corporation (TRTC).
Being a para-statal corporation, the TRTC was dissolved
by
Proclamation in terms of section 13 of the Corporations Act No.10 of
1985 (Transkei) on 18 January 1996, and was subsequently
liquidated.
At the time of dissolution of the TRTC, it employed 1644 employees.
The object and purport of the agreement
was to settle the salary and
wages claims of the former employees.
[3]
I will later in this judgment refer in more detail to the terms of
the agreement. For present purposes it suffice to say
that the
agreement made provision for the payment by government to the workers
of salaries over a fixed future period, including
payment of leave
pay, accrued bonus, pension, and the like, and also the payment of
severance packages calculated in accordance
with an agreed formula.
These payments were duly made, received and accepted, and there is no
dispute between Government
and the workers in this regard. The
dispute relates to clause 3 of the agreement.
[4]
In summary, clause 3 records Government’s “
commitment”
to job creation (generally) in the transport industry for the 1644
workers, and in particular, to “…
assist former TRTC
employees to secure employment in a new transport arrangement.”
The clause specifically records that “…
government
will put in place mechanisms to address transport needs in the
Province and thereby creating employment opportunities.”
[5]
The gravamen of the dispute is whether clause 3 is legally
enforceable. There is a further dispute between the parties
relating to the question whether or not Government, as a matter of
fact, complied with its obligations under clause 3. I
will
later in this judgment return to these disputes.
[6]
A number of other preliminary issues also arise from the pleadings
which require clarification.
Ex facie
the agreement, the
contract is between Government and the General Workers Union “…
representing the former TRTC employees Grades 1 to 7.”
The first plaintiff was cited as the “
Ex TRTC United
Workers Front,”
a voluntary association of which plaintiffs
2 to 573 are members. It was formed specifically for purpose of
instituting this
action on behalf of its members. It has no
constitution. In an interlocutory application it was found not
to have
locus standi
to institute this action. It
therefore is no longer before this Court.
[7]
Plaintiffs 2 to 573 include workers who either were never members of
the Union, and nor was there any evidence placed before
this Court by
either the Union or the non-member workers to the effect that they
were represented by the Union when the agreement
was concluded.
In addition, plaintiffs 558 to 573 were at the time employees in
Grades 8 to 15 (managerial positions) who,
ex-facie
the
agreement, are not covered by the terms thereof, although they (or
some of them) may (or may not) be members of the Union.
[8]
The matter is further complicated by the fact, which appears to be
common cause, that some of the plaintiffs either died before
or after
the institution of the action, and were never substituted by the
executors in their deceased estates.
[9]
Mr
Delport
, who appeared on behalf of the plaintiffs,
submitted that the issue of the plaintiffs’
locus standi
only becomes relevant when the quantum of their respective claims
are considered. This is a startling submission. The
locus
standi in iudicio
of a plaintiff must exist from the time the
action was instituted until final judgment is delivered. In the
absence of
locus standi
, a plaintiff is not entitled to
judgment, either on liability or on quantum.
[10]
In these circumstances the matter was adjourned after argument to
enable the parties to reach agreement on a list on plaintiffs
who
have
locus standi
to institute the claim; and failing
agreement to lead evidence on this issue. Fortunately, the
parties managed to reach agreement
on a list of 509 qualified
plaintiffs who have the necessary
locus standi.
Such
list is attached to this judgment, and it follows that this judgment
is in respect only of those plaintiffs whose names appear
on the
attached list.
[11]
The issue remains whether those plaintiffs who have
locus standi
and were employed in Grades 8-15 (managerial positions), stand in any
contractual relationship with Government to claim damages
arising
from the alleged breach of clause 3 of the agreement. The
agreement, as I said, only covers Grades 1 to 7 and not
any of the
managerial positions. Some of the plaintiffs whose names appear
on the attached list were employed in the managerial
positions.
[12]
In this regard Mr
Delport
submitted that the agreement was
implemented by Government in respect of all the former employees of
the TRTC, including Grades
8-15 (managerial positions). Payment
of salaries and other benefits were made under the agreement to all
employees, including
managers, who accepted such payments. As
such, he submitted, a separate but implied and tacit agreement came
into existence
between Government and those employees in managerial
positions, which contain the very same terms and conditions as
contained in
the written agreement between the Union and employees in
Grades 1 to 7. He submitted that the cause of action in respect
of those plaintiffs is adequately covered by the allegations in
paragraphs 9 and 10 of the particulars of claim. Mr
Mbenenge
SC, on behalf of the defendant, accepted this proposition.
[13]
I am therefore prepared to accept, for purposes of this judgment
only, and without making any finding in this regard, the correctness
of Mr
Delport
’s submission.
[14]
Finally, the parties are agreed that the quantum of the claim should
stand over until after the liability is decided.
I am therefore
asked to determine the issue of liability only. It is, however,
agreed that if the ruling of this Court is
that the plaintiffs have
not proved liability, then either judgment or absolution from the
instance should be granted in favour
of the defendant.
[15]
The main issue remains whether or not clause 3 of the agreement
spawns legal and enforceable contractual rights and obligations.
It reads as follows (and I quote verbatim):
“
3
Job Security
3.1
The province of the Eastern Cape government is committed to job
creation in the transport industry and
Public/Passenger industry in
particular.
3.2
The government recognizes the crisis with former Transkei in respect
of the already high unemployment
and the lack of reliable, efficient
and affordable transport to the community.
3.3
To this end;
Government is
committed to assist former TRTC employees to secure employment in a
new transport arrangement, coupled with a process
of job creation in
the Transport industry from which TRTC employees would benefit.
3.4
The government will put in place mechanisms to address transport
needs in the Province and thereby creating
employment opportunities.
3.5
The
process of involving all stakeholders including the Union
should be initiated as a matter of urgency by the MEC for Transport
and the Department of Transport with a view to arriving at a new
transport system by 31 March 1996.”
[16]
Clause 1 of the agreement makes provision for Government to make
payment to the workers of salaries and ancillary benefits.
The
time period (10 weeks from 1 November 1995 to 16 January 1996) is
agreed upon; the payments in lieu of leave accrued and pro-rata
bonus
are agreed; and specific categories of payments of short falls on,
inter alia
Unemployment Insurance Fund and Medical Aid are
agreed upon. Clause 1 clearly establish a legal duty on
Government to make
payment of specific items, and it is common cause
that those legal duties have been complied with by Government.
[17]
Clause 2 provides for the payment of severance packages and it
prescribes the formulae for the computation of such severance
packages depending on the length of service. Again, it is
common cause that clause 2 imposes legal and enforceable contractual
duties on Government, and that these obligations have been fulfilled.
[18]
Clause 3 deals with the concerns of the future in respect of job
security for the workers. It is quoted in full above
and I
shall shortly return thereto.
[19]
Clause 4 deals with the implementation and monitoring of the
agreement by the establishment of joint committees to oversee
the
payments and deal with unresolved issues. It is common cause
that both parties have complied with their obligations thereunder
and
that the payments foreshadowed by the agreement were duly made.
[20]
Before considering whether or not clause 3 creates legal contractual
rights and obligations, it is necessary to first refer
to the legal
principles involved in this enquiry.
[21]
It is generally recognized that not all provisions in a written
agreement constitute enforceable undertakings. It may
contain
preambles recording historical events which may bear on
interpretation; it may contain ‘recordals’ and
‘recitals’;
it may document future intentions; or it may
contain clarificatory or explanatory statements; non of which were
intended to create
enforceable contractual terms. A case in
point is
Absa Bank Ltd v Swanepoel NO
2004 (6) SA 178
(SCA) at
181 paras 6-8.
[22]
Usually, the conclusion that a written provision in a contract
constitutes a recital or a recordal and not a serious intention
to be
bound, can be gleaned primarily from the language used. This
was the case in
Absa Bank Ltd
(
supra
). But this
is not always the case. Very often the words used point to an
intention to be bound by the undertaking,
but the law does not
recognize that particular undertaking to have legal effect or to
constitute an enforceable contractual obligation.
For instance,
I am invited to dinner or a social event. I accept the
invitation. However, without good cause and the
courtesy of
cancellation I fail to attend. My host may have suffered
financial loss for having catered for me, but he has
no enforceable
contractual claim against me. I am in breach of my moral and ethical
duties, but not in breach of an enforceable
legal obligation.
The authors De Wet and Van Wyk in
Kontraktereg en Handelsreg
(5
th
Ed.) p4-5, refer to such an example as a ‘
gentleman’s
agreement’
not capable of legal enforcement.
[23]
How does the law distinguish between a ‘
gentleman’s
agreement’
and an enforceable contractual obligation?
Historically, the demands of the merchant community required a person
to honour
his undertaking. The principle of sanctity of
contract –
pacta servanda sunt
– is not only based
on moral conceptions of good faith, but also on practical
considerations necessary for healthy commercial
trade. In
Absa
Bank Ltd
(
supra
) Cameron JA said at 181 para 7 that a
contractual provision can only be regarded as enforceable if it makes
commercial sense or
has business efficacy. This was also the
approach in
Man Truck & Bus (SA) v Dorbyl Ltd
2004 (5) SA
226
(SCA) at 232 para 9. The Court must therefore also have
regard to the nature of the undertaking.
[24]
But not every undertaking which has commercial value was necessarily
intended to have contractual effect, or was necessarily
understood to
have such effect. A politician who on the eve of an election on
behalf of his or her political party promises
to build roads and
houses and provide job opportunities to a particular community, and
who fails to deliver on his political promises
after being elected,
may very well face the political consequences of his or her breach of
undertaking, but it is doubtful in the
extreme that those
undertakings will necessarily be held to be enforceable in law.
(Leaving aside, for a moment, the issue
of a contract which is void
for vagueness). An example of a case where the obligation
relating to a pre-emptive right only
had commercial content but was
held to be a mere moral or ethical obligation not legally
enforceable, is
Robinson v Randfontein Est. G.M. Co, Ltd
SA
1921 AD 168
at 189.
[25]
Likewise, and as pointed out by the learned authors De Wet and Van
Wyk (s
upra
) at 4 and 5, even a social undertaking may be
enforceable. The learned authors refer to the example where
aged citizens agree
to prepare meals for each other for a period of
one week per person. The intention is not only to engage in
social interaction,
but also to save costs on the preparation of
meals. The authors suggest, convincingly, that in this
situation the relationship
is legally the same as that between a
guest and a guesthouse owner, and may constitute an enforceable
obligation.
[26]
The distinction between contracts which have social content and those
which have commercial content is thus helpful, but certainly
not
conclusive. There must be other criteria. The weight of
authority seem to indicate that the answer lies in the
intention of
the contracting parties. In addition to
consensus
on
what obligations are agreed upon, there must also be an intent that
those obligations are legally enforceable. In this
regard
Cameron JA (as he then was) said in
Absa Bank Ltd
(
supra
)
at 181F:
“
Only once it is
determined that a provision was intended to have contractual effect
will the Court try to interpret it so as to
give it business
efficacy. If it was not so intended, those rules of
interpretation do not come into play. No ‘business
meaning’ can be conjured out of a clause that was not intended
to have contractual effect at all.”
(See
also
De Wet and Van Wyk
(
supra
) at p4; Christie,
The
Law of Contract in South Africa,
(5
th
Ed.) p2 and
fn6).
[27]
As I will attempt to demonstrate in the course of this judgment, the
common intention of the contracting parties as a tool
to arrive at
the conclusion whether or not a contractual obligation is enforceable
in law, is with great respect neither helpful
on the facts of all
cases, and nor is it as a matter of legal principle in my respectful
view the correct tool to use.
[28]
In cases where the unambiguous and plain meaning of the words used in
the light of all contextual considerations clearly point
to a
‘
recital’
or ‘
recordal’
and to
the absence of an undertaking, such as in
Absa Bank Ltd
(
supra
), there is no difficulty. The difficulty arises
where the plain and grammatical meaning of the words in both internal
and
external context point to an obligation undertaken by one party
with the intention by all parties that the first party will abide
by
his or her undertaking. The following example demonstrates the
point.
[29]
A restraint of trade in an employment agreement is perfectly valid
and legal, and acknowledged as such by the contracting parties
who
have every intention to respectively abide thereby and/or enforce
it. However, two years after the conclusion of the
agreement
the employee acts in breach thereof. The particular
circumstances and facts of the case show that the enforcement
of the
restraint, in those particular circumstances, will be
contra bonos
mores.
The Court refuses to enforce the restraint,
notwithstanding the breach and common intention by the parties at the
time of conclusion
that the clause will be legally operational and
enforceable. In these circumstances the refusal to enforce the
contract is
not based on the common intention of the parties, but on
the absence of the definitional element of wrongfulness. And it
is the Court, not the parties, who determines the issue of
wrongfulness or enforceability. It is, respectfully, unclear
why
intent should play an additional role to that of wrongfulness in
the enforceability of contracts.
[30]
The issue of intent in the law of contract, it seems to me, is
concerned with the formation of legal contracts and the creation
of a
vinculum iuris,
and not with its dissolution or
unenforceability based on wrongfulness. The philosophical
debates concerning contractual intent
are centered around theories
such as the subjective consensual theory, the objective declaration
theory and the reliance theory;
all of which are concerned with the
establishment of agreements and are dogmatically very far removed
from the issue of the enforceability
of contractual obligations which
vests in the element of wrongfulness. The search for the intent
that undertakings, which
are made and accepted seriously and in good
faith, be legally enforceable is, respectfully, illusionary and
somewhat artificial.
[31]
I say ‘illusionary and artificial’ because the search for
the common intent that their contract will be legally
enforceable is
as a matter of logic and common sense dependent on not only what
the parties’ legal convictions are
at the time of contracting,
but what they agreed their legal convictions will be when the
contract is enforced. Put differently,
it is not what they now
say they then intended (which evidence is in any event inadmissible),
but what the Court now finds they
then believed their legal
convictions will be at the time of enforcement. (also bearing in mind
they had no idea at the time of
contracting when, and if, legal
redress will be sought by either of them to enforce their
agreement). The Court, therefore,
ends up in objectively
enquiring what the legal convictions of society are at the time of
enforcement, and then ascribing such
legal convictions to the
subjective intention of the parties at the time. And such
circuitous reasoning brings the Court
back to the issue of
wrongfulness – a Court will only enforce a contract if it is
lawful, and its wrongfulness depends on
the legal convictions of
society at the time of enforcement. Of course, the internal and
external context of the agreement
may point to a subjective intent of
the parties which may be at variance with the legal convictions of
society, but for reasons
I will mention shortly, it makes no
difference in principle.
[32]
I will return to this issue again later in the judgment, but for
present purposes it suffices to acknowledge that this Court
is bound
by the
stare decisis
rule and that, accordingly, the weight of
authority obliges me to deal with the issue as a matter of common
intention, and not wrongfulness,
which I propose to do.
[33]
The point of departure is therefore to have regard to both the
content and the context or the written deed, and to determine
from
such evidence whether the written provision was intended to have
contractual effect. In this regard it is apt to observe
that
the distinction between background circumstances and surrounding
circumstances has been abandoned by the Supreme Court of
Appeal in
KPMG Chartered Accountants (SA) v Securefin Ltd
2009 (4) SA
399
(SCA) para 39. The context is now determined by both the
internal context, namely the language, words, grammar and syntax
of
both the provision in question and the document as a whole, and also
by the external context provided by the factual matrix
in which the
document finds its setting, which includes both the background and
surrounding circumstances.
[34]
In a thought-provoking article entitled “
What’s in a
word: Interpretation through the eyes of ordinary readers,
SALJ,
Vol 127, part 4, 673, the learned author Dr. Malcom Wallis suggests
(albeit in a slightly different context to the issue under
consideration in this case), with reference to the ‘
new’
approach to interpretation by English Courts (and followed to
some extent in Australia and Canada), that it is not the subjective
beliefs or understandings of the parties about their rights and
liabilities that govern their contractual relations. It is
what
each party by word and conduct would have led a reasonable person in
the position of the other party to believe. He
says at 685:
“…
The
idea that what is being sought is a notional common intention is
abandoned. Interpretation no longer has subjective overtones.
When we speak of the intention of the parties we really mean the
meaning objectively manifested in the words that embody their
agreement.”
As
pointed out by Dr Wallis in his article, the distance travelled by
the interpreter from the initial enquiry into the subjective
common
intent of the parties to the end enquiry of the objective meaning as
understood by ordinary and reasonable people (the legal
convictions
of society), is so far removed that the question can legitimately be
asked whether the ultimate answer in reality still
represents the
subjective common intention.
[35]
The objective approach supported by Dr. Wallis has not yet, as far as
I know, found its way into South African jurisprudence
on
interpretation, but for reasons which follow it is certainly in my
respective view a helpful guide to determine whether or not
it was
intended that contractual effect should be given to an undertaking
embodied in a written deed. Indeed, I can conceive
of no other
logical method to achieve the result.
[36]
With the above guidelines in mind, I now turn to consider if clause 3
of the contract under consideration was intended to have
operational
force.
[37]
It is common cause, as I said, that all the other clauses of the
written deed have operational content and have been given
effect to.
I think it is clear from their wording that clauses 3.1 and 3.2 are
recitals and expressions of intent in respect
of future conduct, but
do not create enforceable contractual obligations. Clause 3.5
proposes a flexible time-frame (“
should be initiated.”
)
without fixing specific dates for the operation of
mora debitoris
or
mora creditoris.
The argument of the plaintiffs
is directed in particular at clauses 3.3 and 3.4 which, following the
declaration of intent in 3.1
and 3.2, opens with the words “
To
this end…”
[38]
I agree with Mr
Delport
that the structure and syntax of the
words used point to a desire and intent on the part of Government to
give effect to its commitments
as recorded in 3.3 and 3.4. The
words “…
is committed to …”
and “…
will put in place …”
on their literal meaning
convey an undertaking or an obligation to perform, and can have no
other meaning. I am therefore
prepared to accept, in favour of
the plaintiffs, that the content of the clauses manifest an intention
on the part of Government
to be bound by its written commitments and
obligations.
[39]
Having regard to the role of Government in circumstances where
approximately 1644 workers were retrenched by it from a para-statal
institution formerly controlled by it, and in an area plagued by lack
of employment opportunities, I think it is fair to say that
in the
context of the prevailing circumstances, Government seriously
intended to create job opportunities and to assist the former
employees to obtain employment. And, as I will show shortly,
Government indeed took steps to comply with its commitments.
But what are these commitments which Government undertook? And
were they intended to be legally enforceable and so understood
by the
plaintiffs?
[40]
To answer these questions it is necessary, as I said, to examine the
nature of the obligations and to ask, objectively, if
the parties
reasonably expected such obligations to have operational content and
legal effect. The language used in 3.3 and
3.4 is imprecise and
loose. It is, effectively, a promise to provide a new transport
system in the former area of the Transkei
in order to create job
opportunities, and to assist former workers to find employment in
such new transport system.
[41]
At the level of enforcement of the clause, pertinent questions are
left unanswered. What is the precise nature of ‘
the
new transport system?
Is it State-owned or in the hands of
private enterprise? If the latter, how and to what extent, if
at all, was it going to
be funded? Was it intended that all
workers retrenched would be re-employed? If so, when, at what
rate, for how long
and by whom? The last two questions, in
particular, created a dilemma for Mr
Delport
when asked to
explain the computation of the damages claimed by his clients.
[42]
The plaintiffs do not claim specific performance of the obligations,
and nor can they do so in the absence of any agreement
in regard to
what precisely the performance must be. Instead, they claim
damages based on the alleged breach of contract
of clause 3.3 and
3.4. In their particulars of claim, they allege that they
reasonably expected “…
employment at the same level …
and at the same (rate of) remuneration ...”
of their prior
employment with the Corporation. They further allege “…
it was reasonable to expect employment for a period of 5 years and
Defendant was in law bound by the agreement to provide employment
for
such period to the Plaintiffs.”
In these
circumstances they claim a total of R98 million in damages from
Government.
[43]
The above allegations and computation of damages are unsupported by
the facts and untenable in law. The clause is silent
on the
rate of remuneration and duration of employment, and no facts
relevant to either the internal or external context of the
clause
were placed before me to infer such facts. And the unilateral
expectations of one contracting party, in the absence
of consensus,
and whether reasonable or otherwise, do not create substantive
contractual rights. It is not the function
of the Court,
and nor is it empowered, to make agreements for contracting parties –
its function is to interpret what the
parties had agreed upon.
See
Hochmetals Africa (Pty) Ltd v Otavi Mining Co. (Pty) Ltd
1968
(1) SA 571
(A) at 583 B-D;
Nordis Construction Co. (Pty) Ltd
v Theron Burke and Isaac
1972 (2) SA 535
(D) at 544 G-H.
[44]
The above principle, in turn, is derived from the principle of
pacta
sunt servanda
– the self-autonomy and freedom of choice to
make your own contracts, and the expectation of public policy that
contracts
made freely and voluntarily should be honoured. See
Telcordia Technologies Inc. v Telkom SA Ltd
[2006] ZASCA 112
;
2007 (3) SA 266
(SCA) and
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) para 57.
[45]
What, then, was intended by the parties? Once it is found, as I
did, that sub-clauses 3.3 and 3.4 contain an obligation
coupled with
the intention to comply therewith, then effect must be given to the
clauses. And to do this the nature of the
obligation must be
determined. The external context in which such determination
can be made, is the following.
[46]
The facts before the Court show that the TRTC was the main, if not
the only, road transport operator in the Transkei at the
time.
It serviced all the main routes and provided transport facilities for
all the inhabitants of the Transkei. When
it became a financial
burden for the State which it could no longer afford, it was
liquidated. Approximately 1644 households
in the Transkei lost
their only source of income. Thousands of commuters were left
stranded and in need of transport facilities
to reach schools,
hospitals, towns and work. The State was left with hundreds of
busses and numerous bus-depots and other
assets to sell. It was
also left with the responsibility –
qua
government –
to assist the citizens with transport needs and to create a business
environment where new job opportunities
can arise and flourish.
The recognition of these governmental responsibilities is recorded in
clauses 3.1 and 3.2.
It is given effect to in 3.3 and 3.4.
[47]
The pecuniary damages suffered by the plaintiffs due to their
retrenchment were compensated by Government by the payment of
salaries and other benefits under clauses 1 and 2. Clause 3 is
therefore not aimed at the compensation for such damages.
It
was aimed at addressing the transport needs of the public and to
create new job opportunities. It created an environment
for new
job opportunities by arranging the formation and registration of a
number of companies; the members, directors and employees
of which
were former TRTC employees. It then subsidized the companies by
selling the busses of the liquidated TRTC to them
at discounted
rates. It rented their depots to the companies and authorized
transportation services along the routes previously
serviced by the
TRTC. It created a Transkei Bus Tenders Forum and rendered
assistance in the management of these companies.
Sadly, it
seems that, for various reasons, these companies collapsed and never
became successful enterprises. Jobs which
were created were
again lost.
[48]
The steps taken by Government in satisfaction of its obligations
under clause 3 may not today in the belief of the plaintiffs
constitute compliance with its obligations as understood by them at
the time, but in my view Government neither intended to replace
the
TRTC with another para-statal transportation corporation, nor to
re-employ any of the former retrenched employees. At
best, the
undertakings constitute the role Government perceived it to play as
Government – not to physically create job opportunities,
but to
create a climate or environment where private enterprise can flourish
and job opportunities can be created to fill the void
left by the
liquidation of TRTC. And this it did. And, I believe, it
was objectively and reasonably so understood by
the plaintiffs at the
time when the agreement was concluded.
[49]
Did the parties intend the obligations of Government described above
to be legally enforceable? For the reasons advanced
earlier in
this judgment, and in the absence of the context pointing to a
different direction, the answer to this question can
only be
determined on the assumption that the legal convictions of the
parties at the time of contracting were reasonable and accorded
with
that of society. Therefore, when they contracted, they must
have intended that at the time of enforcement of the clause
it will
be recognized as lawful and enforceable only if recognized as such by
the legal convictions of society at the time of enforcement.
To
arrive at the subjective intention of the parties therefore, the
Court must objectively determine the legal convictions of society
at
the time of enforcement.
[50]
In this regard even early South African law of contract, following
Roman-Dutch and Roman Law, recognized that not every contractual
obligation is enforceable, but only those contractual obligations
recognized by the law as being enforceable. In para 12
p6
Wessels,
The Law of Contract in South Africa
(Edited by A A
Roberts, 2
nd
Ed., Vol.1) the learned author states:
“
The State, or,
as it is usually expressed, the law, determines in what cases the
vinculum juris
should
be established and in what cases there shall be no bond.”
And in para 16 p7:
“…
It
must, however, be remembered that every contract derives its binding
force from the law. It is only by virtue of the law
that an
agreement is enforceable in our Courts. A contract is not
enforceable because there is a moral obligation to keep
one’s
promise but because the law insists that certain promises shall be
carried out …”
[51]
In casu,
the promises made by Government in this case were in
the nature of political promises to do its duty; to assist private
enterprise
to create job opportunities. It was not, and nor was
its duty, to form or establish a new State owned transportation
business
which would re-employ all retrenched employees of the TRTC.
Because the legal convictions of society do not expect political
promises of this nature to be legally enforceable, the common
intention could not be, and therefore was not, that promises of this
nature be legally enforceable. I therefore come to the
conclusion that the parties harbored no common intention that clause
3 will have any contractual effect.
[52]
It remains to make a final remark. I think it is clear from the
aforesaid that the reasoning process in the search for
a common
intent that the agreement made will be legally enforceable, is
laborious, circuitous and somewhat artificial. For
the reasons
mentioned, the search for the subjective common intent concludes with
an objective assessment of the legal convictions
of society, and this
is precisely the test for the definitional element of wrongfulness as
requirement for the enforceability of
a contractual undertaking –
which in my respectful view should have been the enquiry in the first
place. Ultimately,
it remains a question of whether or not the
law recognizes the contract as being enforceable – not whether
the parties intended
it as such. And the law will only
recognize a contractual obligation as legally enforceable if the
legal convictions of society
where the contract is to be enforced
recognize it as lawful.
[53]
Take the following example: A criminal drug dealer concludes an
agreement with an illegal and criminal drug manufacturer for
the
supply and delivery of prohibited drugs. Both parties genuinely
and honestly have every intention to abide by the agreement
(and know
what the consequences of non-performance will be). But both
know full well that their agreement will have no legal
force or
effect and will be unenforceable in a Court of law. They
therefore have no intention to enforce it in a Court of
law. As
a matter of law, and not by factual intention, the agreement is
unenforceable on the basis of its unlawfulness. But
what if
they did not know that their agreement will be legally unenforceable?
What if they genuinely believed and intended at the
time to enforce
it by law, such as a restraint of trade agreement, but then find the
law refuses to enforce it? Our law recognizes
in the latter
case that if the enforcement offends the legal convictions of
society, it remains to be unenforceable, notwithstanding
the
subjective intention of the parties, and the same principle applies.
I fail to see, with respect, in these circumstances
what role
intention has to play in the enforceability of contractual
obligations.
[54]
It is necessary to remark on the use of the legal concepts of
‘unlawfulness’ and ‘wrongfulness’.
These words are used intermittently to describe certain conduct in
breach of legal obligations which attract the sanction of the
law or
which call into play the force of judicial recognition. The
concept of ‘unlawfulness’, on my understanding,
in the
narrow sense refer to a breach of a statutory duty or to conduct in
contravention of a general recognized legal principle
such as,
inter
alia
, a common law crime or delictual wrong. The concept
of ‘wrongfulness’ in the wider sense goes beyond conduct
in contravention of recognized legal principles, and includes conduct
which is regarded by the legal convictions of society as so
immoral,
unethical and reprehensible that it is deserving of judicial
protection. In this sense, certain contractual obligations
may
attract mere moral, or ethical obligations, but they are neither
‘unlawful’ nor ‘wrongful.’ And
to be
termed ‘wrongful’ such obligations need not necessarily
constitute a breach of a statutory, criminal or delictual
wrong; they
will be held ‘wrongful’ if the legal convictions of
society demand that such obligations become justicable
in a Court of
law. Notwithstanding the intermittent use of these two
concepts, they have in common the judicial recognition
of legal
protection or enforcement of the law. In this sense, a
contractual obligation may not be ‘unlawful’
in the
narrow sense, but it may be deserving of legal protection or
enforcement in the wider sense and accordingly be held ‘wrongful’.
On the facts of this case, I have already found the contractual
obligation under consideration to be neither ‘unlawful’
nor ‘wrongful’ and thus not deserving of legal
protection.
[55]
The above approach is, in my respectful view, not only a frank
recognition of the real nature of the enquiry, but it
is also firmly
rooted in the jurisprudential dogma as it developed from early Roman
law to present modern South African legal principles.
I say
this for the following reasons.
[56]
The law of delict and the law of contract are not only branches of
the private law, but are also the main sources of legal
obligations.
As such, both branches of the law form part of the law of
obligations. In both branches of the law the
performance or
non-performance of the obligation give rise to certain legal
consequences. Provided the respective definitional
requirements
of a contract or a delict are met, it gives rise to either a
vinculum
iuris
in the law of contract which establishes a legal and
enforceable contract, or it gives rise to the existence in the law of
delict
of a wrong which attracts legal sanction such as a claim for
damages. But the similarity does not end here. In neither
the law of contract, nor the law of delict, is an enforceable claim
established (notwithstanding the presence or existence of all
other
essentials or requirements), unless the law recognizes such
obligation to be legally protectable and enforceable.
[57]
I have already referred to the authorities in the law of contract in
support of the above proposition, and to some examples
of obligations
which create mere moral or ethical obligations but are not recognized
by the law as legally enforceable. Similarly,
in the law of
delict not every negligent or intentional act or conduct becomes
actionable – it is only actionable once it
occurs in
circumstances that the law recognizes it as actionable. But
this is where the similarity between the law of contract
and the law
of delict, in respect of
ius obligationes
, ends.
[58]
In the law of contract, as I said, we are told that the law only
recognizes contractual obligations as legally enforceable
if it is
lawful and, in addition, if it was so intended by the parties. In
the law of delict, the element of fault is only
capable of being
legally recognized if the act of omission can be termed as legally
wrongful. In both instances of
omissio
and
commissio
it has been held in the law of delict that the element of fault
(intent) must not be confused or conflated with the element of
wrongfulness.
In the law of delict it is now trite that the
issue of wrongfulness must be determined anterior to the issue of
intent, and that
these are two very different concepts.
(See
Minister of Safety and Security v Van Duivenboden
2002 (6) SA
431
(SCA) at 441E-442C (para 12;13). In cases of both
commissio
and
omissio
the conduct is labeled in delict as wrongful
only if it offends the
boni mores
of society. And the
boni mores
of the society is vested in the legal convictions
of society. See
SM Goldstein & Co (Pty) Ltd v Cathkin
Park Hotel (Pty) Ltd and Another
2000 (4) SA 1019
(SCA) at 1024;
Minister van Polisie v Ewels
1975 (3) 590 (A) at 596H –
597G;
Van Eeden v Minister of Safety and Security
2003 (1) SA
389
at para 9 (SCA);
Cape Town Municipality v Bakkerud
2000
(3) SA 1049
(SCA) at 1056E-H (para14);
Minister of Safety and
Security v Van Duivenboden
(
supra
), and my own attempt in
R L Judd v Nelson Mandela Bay Municipality
(Eastern Cape, Port
Elizabeth) unreported, Case No. 149/2010 delivered on 17 February
2011.
[59]
The enforceability of an obligation in the law of delict is thus
dependent on the legal convictions of society. And although
certain obligations give rise to mere moral or ethical obligations,
they do not enjoy the legal force of the law. An example
often
referred to in the law of delict is where a passer-by observes a
child falling into a swimming pool. He or she foresees
the real
possibility that the child may drown, but does not render
assistance. Although morally and ethically repugnant,
the law
does not recognize in all these circumstances a legal duty on the
passer-by to render assistance and the failure to do
so may not
necessarily attract legal sanction. I have already referred to
some examples where the principle operate in the
law of contract and
where an obligation which has only social or political content may
attract moral and ethical duties, but is
not contractually
enforceable.
[60]
The law of contract also recognizes the unenforceability of certain
contractual obligations in circumstances where the enforcement
will
offend the
boni mores
of society. Lawfulness is an
essential element of an enforceable contract. However, in the
law of contract, it seems,
common intent that the contract will be
held to be lawful is an additional requirement for enforceability.
Whereas the concepts
of lawfulness and intent are kept separate in
the law of delict, it seems to be conflated in the law of contract on
the issue of
enforceability.
[61]
There is no reason, in my respectful view, why the
ius
obligationes
cannot be uniformly applied. The issue of the
enforceability of a legal obligation, whether contractual or
delictual, does
not as matter of principle vest in the element of
intent, but in the element of wrongfulness.
[62]
The temptation to deal with the issue of enforceability of
contractual obligations as a matter of wrongfulness and not as a
matter of intent, seems, at this stage of the development of our law
on the subject, a bridge too far. Until such time the
Supreme
Court of Appeal gives another direction, the High Courts must deal
with the issue as a matter of intent. I have done
so, but am
constrained to remark that even if I had dealt with it as a matter of
wrongfulness (which I believe is the correct approach),
the result
would have been the same and, may I add, less cumbersome to arrive
at.
[63]
I make the following order:
The plaintiffs’
claims are dismissed with costs, such costs to include the costs
consequent upon the employment of two counsel.
ALKEMA
J
Delivered
on :
09/08/11
Attorney
for Plaintiffs:
Mr J
T Delport
Instructed
by:
Delport
van Niekerk
Counsel
for Defendant:
Mr S
M Mbenenge SC
with
Ms C T S Cossie
Instructed
by:
The
State Attorney,
King
Williams Town