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[2009] ZAGPPHC 89
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McCain Frozen Foods (Pty) Limited v Creighton (A740/2008) [2009] ZAGPPHC 89 (18 June 2009)
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH AND SOUTH GAUTENG HIGH COURT, PRETORIA)
CASE
NO: A740
/2008
DATE:
18 June 2009
In the matter between:
McCAIN
FROZEN FOODS (PTY) LIMITED
Appellant
and
ARTHUR WILLIAM CREIGHTON
Respondent
JUDGMENT
HARTZENBERG J
The appellant appeals against an order, dated 21 September 2006, by
Mokgoatlheng AJ. The learned judge dismissed its application
for an
amendment of its Particulars of Claim and struck some of the
paragraphs out of its replication. It is common cause between
the
parties that the legal arguments underlying the objection to the
amendments and the application to strike out the paragraphs
in the
replication, are identical. The appellant buys potatoes on a large
scale from farmers. The respondent is a farmer. This
whole matter
concerns two revised agreements in terms of which the respondent
undertook to supply certain quantities of potatoes
to the appellant,
at certain times, at agreed prices; and the respondent’s
failure to supply the full quantities.
The parties entered in two agreements in terms of which the
respondent was to supply potatoes to the appellant during the months
of October, November and December of 2002. The original agreements
were concluded on 20 and 23 May 2002 respectively. They were
both
revised on 15 October 2002. The one agreement is known by the
parties as the Viljoenskroon agreement and the other one as
the
Delmas agreement, because the potatoes in respect of the first
agreement had to be delivered at Viljoenskroon and those in
respect
of the second agreement at Delmas. Although the agreements differ as
to time of delivery, quantity of potatoes to be delivered
and place
of delivery, the further terms of the agreements are identical. The
fate of the appeal will be the same for both agreements.
If the
appeal is to be dismissed it has to be dismissed in respect of both
claims based on the two agreements and conversely if
it is to
succeed, the amendments in respect of both agreements are to be
allowed and the application to strike out is to be dismissed.
It is
consequently unnecessary to deal with the provisions of both
agreements. It will be sufficient to analyse and discuss the
arguments in respect of the Viljoenskroon agreement and apply the
result also to the Delmas agreement.
In terms of the Viljoenskroon agreement in its original form the
respondent undertook to supply to the appellant, during the season
starting on or about 7 October 2002 and ending on or about 22
December 2002, 2850 metric tons of potatoes that comply with the
specifications contained in the agreement. In annexure A to the
agreement it was specified that the respondent was to deliver
900
tons of potatoes during October 2002 and in particular that 300 tons
per week had to be delivered during each of weeks 42,
43 and 44, 1200
tons of potatoes during November 2002 and in particular that 300 tons
of potatoes had to be delivered during each
of weeks 45, 46, 47 and
48 and that 750 tons of potatoes had to be delivered during December
2002 by way of delivery of 250 tons
during each of weeks 49, 50 and
51. The agreement was signed on 23 May 2002. In the revised
agreement, dated 15 October 2002,
the respondent undertook to supply
3 300 tons of potatoes during the season commencing on or about 14
October 2002 and ending on
or about 20 December 2002. According to
schedule F to the revised agreement delivery was to be as follows:
during each of the
weeks of 14, 21 and 28 October 350 tons; during
each of the weeks of 4, 11, 18 and 25 November 350 tons; during the
weeks of 2
and 9 December 300 tons per week and during the week of 16
December 250 tons. The appellant annexed schedules to the particulars
of claim indicating when delivery took place. It appears from them
that the respondent’s first delivery, accepted by the
appellant, occurred about two weeks prior to the first delivery date.
It is common cause that the respondent failed to supply
the
stipulated quantity in each one of the months. It only supplied 1
277,339 tons leaving a shortfall of 2 065,476 tons.
The appellant refused to pay the respondent for the potatoes
actually delivered. The respondent instituted an action in which
it
claimed payment for the potatoes delivered, according to the agreed
price. The appellant admitted delivery and failure to pay
but asked
for payment to be deferred until finalization of its counterclaim for
damages which was alleged to be in excess of the
respondent’s
claim. The respondent denied that it is liable to pay an amount in
damages to the appellant. When the trial
was to commence, the
parties agreed to refer the matter to arbitration. It was agreed
that the arbitration was to be regulated
by the Uniform Rules of
Court. In the arbitration agreement the parties stipulated that
there would be a right of appeal.
The arbitration was done before a retired judge of the Supreme Court
of Appeal, the Honourable Mr. Justice F H Grosskopf. The
arbitration
was done over a period of ten days. It appears from the award of the
arbitrator that a number of witnesses testified.
The respondent
testified about his farming ventures and his expected yield and he
and other witnesses on both sides testified
about the negotiations
leading to the agreements and the revised agreements and the
prevailing circumstances. There were witnesses
who testified about
the alleged damages and the computation thereof.
The arbitrator refused a claim for rectification by the respondent
to the effect that there was an oral agreement that he would
be
released from delivering a shortfall should it transpire that it has
become impossible for him to deliver. The arbitrator,
invited to do
so by the respondent, also refused to find that there was a tacit or
implied term in the agreement that the respondent
would be released
from his obligation to deliver in case of impossibility to perform.
The arbitrator found that there was an implied
term in the revised
agreement, that should the respondent be unwilling or unable to
deliver from his own fields, he would be obliged
to make good the
shortfall from other sources, at his own expense. He stated that the
overall agreement between the parties was
a simple contract of
purchase and sale in terms whereof the respondent was obliged to
deliver a certain quantity of potatoes of
a particular size during
specific weeks to the appellant and that the respondent was obliged
to make good any shortfall from other
available sources. He found
that the respondent was in breach of his obligations in terms of the
contract when he failed to deliver
the required tonnage on time. He
went on to state that damages are usually assessed as the adverse
difference between the contract
price and the market price of the
goods at the proper time and place of performance and found that in
this case the damages are
to be assessed at the time and place of
performance. He then discussed the question whether the appellant
succeeded in putting
sufficient evidence before him so that he could
make a proper assessment of the damages, having found that the
respondent was
in mora
right from the outset, and concluded
that it failed to prove the
quantum
of its damages, in that it
had failed to produce available evidence. In the result the
arbitrator made an award in favour of the
respondent in respect of
its claim and ordered absolution from the instance in respect of the
appellant’s counterclaim.
The appellant was ordered to pay
the respondent’s costs of the arbitration.
The appellant did not avail itself of its right of appeal, provided
for in the arbitration agreement, but failed to pay the amount
awarded against it and the costs to the respondent. Such conduct
caused the respondent to apply to the court to have the award
made an
order of court. The appellant brought a counter-application for the
matter to be remitted to the arbitrator to hear further
evidence on
the question of the
quantum
of the appellant’s damages
and for a stay of its obligation to pay the respondent the amount and
costs that was awarded to
it by the arbitrator, pending the further
hearing by the arbitrator. The application and counter-application
were heard by Bertelsmann
J. He made the award in favour of the
respondent an order of court and refused to remit the matter to the
arbitrator, being of
the view that that there was no legal basis
either in the Arbitration Act or elsewhere which authorizes a court
to make such an
order, and that even if there were such a basis that
he would have exercised his discretion against remitting the matter
to the
arbitrator.
Within days of his order the appellant instituted the present
action. The respondent pleaded and raised a number of defences
by
way of special pleas and in the plea. The respondent contended that
in terms of
section 28
of the
Arbitration Act, No. 42 of 1965
, the
appellant is bound by the award and has to submit to it. The
respondent further referred to the provisions of the arbitration
agreement itself and pleaded that they preclude the institution of
the action. It also pleaded that the time of delivery had been
finally determined by the arbitrator and that that aspect is
accordingly now
res judicata
.
The respondent
pertinently referred to the non-variation clause in the Viljoenskroon
agreement.
Another point pleaded by the respondent was a
denial that the arbitrator had found that the appellant had suffered
damages and,
in any event, a denial of the
quantum
of any
possible damages that it may have suffered.
In its replication the appellant denied:
1. that the counterclaims had been dismissed by the arbitrator;
2. that the award is final in terms of
section 28
of the
Arbitration
Act; and
3. that the appellant is obliged to abide by and comply with the
terms of the award.
It furthermore pleaded that as the award was one of absolution from
the instance the respondent is precluded and/or estopped from
pleading
lis finita
and/or
res judicata
. In particular
the appellant pleaded that the award was not a judgment for the
respondent and accordingly did not preclude the
institution of fresh
proceedings. It also pleaded that the arbitrator had found that the
appellant had suffered damages and that
the only outstanding issue is
the quantification thereof. It then alleged that the interpretation
of the agreement was to the
effect that the respondent undertook to
deliver 3 300 tons of potatoes during the period 14 October 2002
until 20 December 2002
and alternatively averred tacit or implied
terms as follows: [i] that the respondent did not regard himself as
being bound by the
time schedule; [ii] that the dates in the schedule
were estimated dates which could be extended for a reasonable period
and that
three weeks would be a reasonable period; [iii] that the
dates in the schedule were approximate dates and that the respondent
would
be entitled to deliver shortages within a reasonable time after
each specified date; [iv] that it is a custom or a trade usage in
the
farming industry that the dates could only be approximate dates and
finally denied that the appellant’s claims could
have
prescribed before November or December 2005.
The appellant then gave notice of an intention to amend its
Particulars of Claim in the following respects: [i] that there was
an
oral agreement that the respondent would not be bound by the schedule
(the appellant did not and does not persist with this
portion of the
proposed amendment and it is of no further relevance.); [ii] that
there were implied or tacit terms in the agreement
with the import as
set out in the previous paragraph; [iii] that the revised agreements
were concluded, both parties being aware
of and influenced by the
past and prevailing weather conditions; and [iv] referring to certain
methods of quantification of damages
based on a publication known as
“Aartappels Suid Afrika”.
The issues are clear. The respondent’s main contention is
that the arbitrator gave his award, that it is final and that
the
parties are bound by it, if not by
section 28
of the
Arbitration Act
then
by the provisions of the very agreement in terms of which they
submitted it to the arbitrator. In any event, says the respondent,
the arbitrator has adjudicated on the dates upon which the respondent
breached the agreement, and has also found that they are
the relevant
dates upon which the assessment of the damages is to be made. The
summons only interrupted prescription in respect
of instances of
breach that occurred after it was issued. By introducing the tacit
or implied terms or the alleged trade usage
the appellant tries to
circumvent the fact that most of its alleged claims, had already
prescribed by the time that the summons
was issued. That, according
to the respondent, cannot be done due to the non-variation clause.
The appellant does not deny the
relevant arbitration agreement or the
award but argues that an order of absolution from the instances
allows for an opportunity
to institute fresh proceedings and that the
dates when the respondent fell into breach of contract and whereon
the damages are
to be assessed have not been finally decided by the
arbitrator.
Mogoathleng AJ (as he then was) stated the following about the legal
principles governing amendments:
“
[1] The Court has a discretion to allow a party to amend a
pleading or, in the case of an application, to file further
affidavits
at any time before judgment.
[2] Amendments bona fide sought are generally granted unless the
application to amend will cause prejudice in the sense of an
injustice
to the other side in circumstances where the prejudice
cannot be eliminated (
if not totally then at least
materially
) by a suitable postponement and or an order for
costs.
[3] The factors which have shaped the Court’s policy
regarding amendments are a positive endeavour to encourage a full and
proper ventilation of the real issues between the parties.
[4] Whilst an amendment remains an indulgence which has always to
be justified by the seeker, it is the prejudice to the opponent
that
is the touch stone to the grant or refusal of the application.”
The appellant argued that the legal position was correctly. The
argument was that if those principles had been applied the amendments
should have been granted. The respondent did not argue that that
there was anything wrong in any of the quoted statements by the
learned judge. That is accordingly the basis on which this matter is
to be decided.
The court
a quo
found: [i] that the only issue not decided by
the arbitrator is the question of the quantum of the damages
(para.14); [ii] that
the delivery dates are critical to determine the
damages (para.15); [iii] that the arbitrator finally adjudicated upon
the delivery
dates (para.18) and [iv] that this court cannot deal
with matters finally decided by the arbitrator but only with issues
that the
arbitrator was unable to decide. The court
a quo’s
judgment was to the effect that the appellant cannot revisit an
issue already decided by the arbitrator i.e. the determination of
the
dates of delivery.
The fact of the matter is that there was a claim and a counterclaim.
There were pleadings and evidence was led. The interpretation
of the
agreements was the very issue before the arbitrator. In the process
both parties urged the arbitrator to imply terms into
the agreement
which would be for their own benefit. The appellant’s whole
defence against the respondent’s claim was
that it had a
counterclaim in excess of the claim. The claim itself and the amount
thereof were never in issue. The whole purpose
of the arbitration
was to determine whether the appellant had suffered damages, and if
so, what the amount thereof was. The date
of delivery of the
potatoes was of vital importance. That had to be determined by
interpreting the agreement. It is evident that
both parties
addressed the issue. Both parties maintained that there were implied
terms in the agreement that regulated the dates
of delivery. The
arbitrator adjudicated that very issue with reference to the
agreements, the evidence and the arguments. As
already indicated
some of the contentions were rejected. What is important is that
evidence was placed before the arbitrator on
which he was asked to
determine the damages suffered by the appellant. He considered that
and concluded in respect of the Viljoenskroon
agreement:
“
The Plaintiff delivered 891.917 tons short in October2002,
391.42 tons short in November 2002 and 782.148 tons short in December
2002 (a total shortfall of 2065.485 tons). It appears that the
plaintiff was in
mora
right from the outset.”
A little later he said:
“
It is common cause that the Defendant bought in only
1017.05 tons of the total shortfall of 2065.485 tons, leaving a
balance of
1048.43 tons. There is no evidence that the Defendant
bought in any potatoes against the Plaintiff during October or
November
2002. It is not in dispute that the 1017.05 tons actually
bought in against the Plaintiff were only bought in as from 2
December
2002. The prices which the Defendant paid for the 1017.05
tons in December 2002 were certainly higher than the prices at which
he could have bought those potatoes in October and November 2002,
at the proper time of performance.
And there is in any
event no evidence that the prices actually paid by the Defendant in
December 2002 were in fact the true market
prices at that stage.
In
my judgment the Defendant has therefore failed to prove the true
market price of the 1017.05 tons of potatoes as at the proper
time of
performance.
”
(Own emphasis)
In respect of the Delmas agreement the arbitrator stated:
“
The Defendant claims a much higher price of R2 715.12 per
ton for the shortfall of 953.86 tons bought in against the Plaintiff
during
the period 2 to 14 December 2002, when the price of potatoes
was much higher than in November 2002. Those December 2002 prices
clearly do not represent the market price
at the proper
time of performance
and is therefore of no use in
assessing the Defendant’s damage.”
(Own emphasis)
It is evident from the remarks of the arbitrator that both the time
of performance and the actual price of potatoes at those times
were
in issue and addressed by both parties. The arbitrator had to
determine whether there were implied terms that varied the
dates
stipulated in the agreement. It was for the appellant to raise the
issue. It is also clear that the arbitrator had no problem
in
determining the time of performance. He found that the proper time
was the times agreed upon in the schedule. If he was wrong
not to
find that the time of performance was different from the times agreed
upon because of the implied terms in the agreement
the appellant had
a right of appeal. The arbitrator was unable to determine the damage
because there was no evidence before him
of the market value of
potatoes at the time when the respondent had to deliver. That caused
him to absolve the respondent from
the instance.
The appellant had a right of appeal against that award. It was
specifically stipulated for in the arbitration agreement. The
appellant deliberately chose not to avail itself of that right. The
result is that, as between the parties there is now, after
a lengthy
hearing and argument, a final finding as to the time of performance.
The only outstanding issue before the arbitrator
was the market value
of potatoes at the relevant times. By trying to introduce the issues
in the notice of amendment the appellant
clearly wants to nullify the
decision about the time of performance.
Section 28
of Act 40 of 1965,
the
Arbitration Act is
applicable. It reads:
“
Unless the arbitration agreement provides otherwise, an
award shall, subject to the provisions of this Act, be final and not
subject
to appeal and each party to the reference shall abide by and
comply with the award in accordance with its terms.”
In the circumstances the approach of the court
a quo
was
correct. The appeal can accordingly not succeed.
The appeal is dismissed with costs, which costs include the costs
occasioned by the employment of two counsel.
W J HARTZENBERG
JUDGE OF THE HIGH COURT
I agree
C P RABIE
JUDGE OF THE HIGH COURT
I agree
L
N M POSWA
JUDGE OF THE HIGH COURT
HEARD
ON
:
3
June 2009
ON BEHALF OF THE APPELLANT
Counsel : H Z SLOMOWITZ (SC)
R COHEN
Instructed
by :
MERVYN JOEL SMITH
C/o JACOBSON & LEVY INCORPORATED
ON BEHALF OF THE RESPONDENT
Counsel : P P DELPORT (SC)
S D WAGENER (SC)
Instructed
by : SNYMAN DE JAGER INCORPORATED