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[2011] ZAECELLC 10
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Thornton v Fleet Africa Eastern Cape (Pty) Ltd (EL 1000/08, ECD 2400/08) [2011] ZAECELLC 10 (27 October 2011)
7
Not Reportable
IN THE HIGH COURT OF
SOUTH AFRICA
(EAST LONDON LOCAL
DIVISION)
Case No: EL 1000/08
ECD 2400/08
Date Heard: 25/10/11
Order Delivered:
26/10/11
Reasons Available:
27/10/11
In the matter between
GRANT THORNTON
…...............................................................
Plaintiff
and
FLEET AFRICA EASTERN
CAPE (PTY) LTD
…..........................
Defendant
REASONS FOR JUDGMENT
REVELAS J
[1] The plaintiff
issued summons against the defendant for payment of an amount of
R184 735.29 and interest thereon, which
it contends is the
balance of fees incurred for rendering additional accounting services
to the defendant in terms of an agreement
between them. It is common
cause between the parties that the defendant has already paid
R204 579.09 for fees on the presentation
of an invoice by the
plaintiff.
[2] The issue between
the parties is whether the defendant is liable for payment of fees in
respect of additional auditing time
spent by the plaintiff over and
above the work specified in the agreement between the parties. The
issues pertaining to the merits
of the matter (i.e. liability), was
separated from those issues pertaining to quantum, by agreement.
[3] At the end of the
plaintiff’s case, the defendant applied for absolution from the
instance. Both parties were
ad idem
that the trite test for
absolution should apply, namely whether a court, based on the
evidence presented, could reasonably find
for the plaintiff. If not,
the absolution should be granted.
[4] The following facts
are relevant to the application for absolution:
The defendant had
engaged the services of the plaintiff, a firm of chartered accounts,
for purposes of verifying, and quantifying
a claim made by the
defendant against the Eastern Cape Provincial Government (“ECPG”).
The defendant, a provider of
vehicles and transport services, was
awarded the total fleet outsourcing contract for the ECPG vehicle
fleet for a five year period
which was to come to an end in 2008. The
defendant claimed certain sums of money from the ECPG, resulting in a
dispute between
them. The defendant then invited quotations to be
submitted for an assignment, in terms whereof an independent audit
would be conducted
regarding the quantification of the defendant’s
claims against the ECPG. The purpose of the quantification, seen from
the
defendant’s perspective, was to resolve the existing
dispute between itself and the ECPG. The plaintiff’s quotation
was accepted. The parties then entered into oral negotiations which
culminated in an agreement which was reduced to writing in
a letter
of engagement, dated 14 January 2008.
[5] Both parties
regarded this letter headed “Terms of engagement” as the
contract which regulated their relationship
regarding the assignment
in terms whereof the plaintiff would conduct an audit which would
cover quantification of the claims against
the ECPG in respect of the
following: outstanding rental, interest on late payments, outstanding
abuse claims, and outstanding
rentals on buses.
[6] The plaintiff’s
case as pleaded was that on 26 February 2008, the plaintiff and the
defendant entered into a further agreement
where it was accepted by
the defendant, that the estimated budget for completing the
assignment was inadequate, by reason of the
fact that incomplete or
inaccurate information was furnished to the plaintiff. The
plaintiff’s declaration also states that
it was agreed between
the parties that the plaintiff should proceed with the assignment as
expeditiously as possible, and that
such fees as would be required,
if incurred, would be paid by the defendant as being additional fees
or costs, over and above “
the estimate of R244 047.00
in accordance with the agreed tariff
”. Subsequently,
because “pervasive errors” in the documentation provided
were identified and required correction,
there was an increase in the
audit time spent by the plaintiff’s staff on the assignment and
therefore, a concomitant increase
in fees. According to the
plaintiff, after the work had to be repeated in many instances, the
fee came to R562 003.75. Thereof,
R195 379.25 was written
off by the plaintiff. Since the defendant had already paid
R204 576.00, the balance of R162 048.50
plus Value Added
Tax, totalling R184 735.29 (the amount sued for) remained
outstanding. That is what is claimed.
[7] The defendant
admitted that a meeting was held between the parties on 26 February
2007, but denied that any binding agreement
was reached with regard
to the charging of additional fees at that meeting.
[8] In support of its
case, the plaintiff called one witness namely Mr Thys de Beer, a
partner of the plaintiff’s firm who
attended the meeting on 26
February 2008, and was involved in the assignment with which this
case its concerned. According to Mr
de Beer, the aforesaid meeting of
26 February took place at the plaintiff’s offices in Vincent
Park, East London. He and
another partner of the plaintiff
represented the plaintiff, and the defendant was represented by Mr
Oupa Ramaswiela, Mr Korkie
and Ms Fortuin. Mr de Beer conceded that
there was no agreement which provided for a specific increase in
fees, but the parties
were in agreement that there would be extra
work which, as I understood him, meant more billable hours. Because
the expeditious
completion or finalisation of the assignment enjoyed
such high priority, according to Mr de Beer, the parties agreed that
the quantification
of extra fees which would be necessarily, but
reasonably incurred, would stand over until after the completion of
the assignment,
which was targeted to be at the end of March 2008.
[9] On 7 April 2008, Mr
de Beer wrote a letter to the defendant, addressed to Mr Ramaswiela
which was headed: “Request for
extension of budget for the
above assignment”, and in it he set out a breakdown of the work
in progress up to 31 March 2008,
and the factors on which he based
his request for the increased budget. Incidentally, this letter does
not refer to any agreement
previously reached, or that in principle
it was agreed that there would be an increase in the budget. One
would have expected mention
thereof if there was indeed such an
agreement.
[10] In clause 4 of the
contract or letter of engagement headed “Fees”, it is
recorded that the plaintiff’s fees
are based on the time spent
by its staff and on the level of their skills and responsibility.
Further under this fees clause, it
is stipulated that the plaintiff’s
fees would be presented monthly and were payable on presentation of
the invoices. The
second paragraph of clause 4 reads as follows:
“
Our
fees (
sic
)
this assignment will be R244 047.00 inclusive of VAT and
disbursements. GTEL [the plaintiff] have (
sic
)
taken cognisance of background information presented by FAEC [the
defendant]. Should this information decrease, the audit time
spent on
the assignment by our staff, the savings, and the savings will be
passed onto the client”.
[11]
Notably,
there is no provision made under this heading, for the eventuality of
an increase in the information and audit time spent
on the
assignment. The defendant’s counsel submitted during
cross-examination of the plaintiff’s witness, Mr de Beer,
that
such variation would just be part of the job (the assignment) and did
not affect the fixed fee set for the assignment as stipulated
in this
clause.
[12] There are two
terms in the letter of engagement which are highly relevant in the
determination of this application for absolution:
The first is clause 8,
which provides that the terms of the agreement will remain effective
until the contract is replaced or renewed
by amendment or otherwise,
in which case there has to be agreement between the parties. This is
a non-variation clause. Clause
9, headed “Agreement of terms”
contains the other relevant term which reads:
“
This
letter sets out the entire agreement and understanding between the
company, you and our firm and, once it has been agreed,
this letter
will remain effective until it is terminated, amended or superseded”.
[13] It is not open to
the plaintiff in my view, to rely on the agreement on 14 January 2008
(the letter of engagement) to support
its claim for additional fees.
Mr de Beer, in his testimony recognized that the fee referred to in
clause 4 (“Fees”)
of the letter of engagement or the
contract between the parties, was not a budgeted fee (or “estimate”
as it was referred
to in the plaintiff’s declaration), but a
fixed fee which had already been paid by the defendant.
[14] That leaves the
part of the claim which according to the plaintiff, arises from the
meeting of 26 February 2008. There were
indications in Mr de Beer’s
evidence which could support the assertion that some form of
agreement was reached with regard
to additional work that had to be
done. However, Mr de Beer also conceded that the earlier agreement of
14 January 2008 was not
terminated. That letter then constitutes the
only contract between them and there was also no variation of that
contract. No new
contract was reduced to writing. The question of
additional fees payable would then hinge on the terms of the earlier
agreement
and the non-variation clause contained therein.
[15] The defendant
relied on the trite principle applicable to non-variation clauses in
written contract, as formulated in
S.A. Sentrale Ko-op
Graanmaatskappy Bpk v Shifren en andere
1964 (4) 761, which binds
contracting parties to a non-variation clause in their written
agreement to the effect that no variation
thereof shall be binding
unless agreed to in writing and signed by both parties.
[16] The plaintiff’s
opposition to the application for absolution is premised on the
second paragraph of clause 9 of the contract
which reads:
“
If
any additional services are to be rendered, or if the terms of our
engagement are not in accordance with your understanding,
please
contact the engaging partner, Thys de Beer, directly. We will then
arrange for an additional meeting to discuss the terms
of our
engagement in order to avoid misunderstandings or to discuss
additional services that we may render for you”.
[17] The aforesaid
clause does not assist the plaintiff. It clearly contemplates that
additional work or any other aspects must
be taken up prior to
consensus being reached. This did not happen and therefore the letter
of engagement became the entire agreement
between the parties and
that agreement contains a non-variation clause. Any amendment or
variation thereto would have had to be
by consent in accordance with
the principle formulated in
Shifren
,
which it was not. In the absence of a written variation to the
agreement or a new agreement, which the plaintiff was unable to
prove, the additional work or repetition thereof,
remains
part of the assignment for which the defendant has already paid the
plaintiff.
[18] That being the
evidence, and faced with the applicable principle formulated in
Shifren
, I am not able
to reasonably find for the plaintiff. In the circumstances, the
defendant is absolved from the instance with costs.
_________________
E REVELAS
Judge of the High
Court
Counsel for the
plaintiff: Adv Brooks
Grahamstown
Instructed by: Abdo &
Abdo Attorneys
East London
Counsel for the
defendant: Adv Paterson SC
Paterson
Instructed by: Wesley
Pretorius & Associates
East London
Date Heard: 25 October
2011
Order Delivered: 26
October 2011
Reasons Available: 27
October 2011