Bytes Systems Intergration (Pty) Ltd v Meek (AR218/08) [2009] ZAKZPHC 28 (1 June 2009)

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[2009] ZAKZPHC 28
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Bytes Systems Intergration (Pty) Ltd v Meek (AR218/08) [2009] ZAKZPHC 28 (1 June 2009)

1
NOT
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL, PIETERMARITZBURG
AR218/08
In the matter between:
BYTES
SYSTEMS INTERGRATION (PTY) LTD
APPELLANT
and
EDWARD
ALLA
N
MEEK RESPONDENT
JUDGMENT
Delivered
on:
SISHI J:
[1] The Respondent
instituted an action against the Appellant in the Magistrate’s
Court Durban wherein he successfully claimed
commission in the amount
of R74 840
.58
due to him as a result of obtaining an order from Toyota S.A. Motors
(Pty) Ltd, for services to be provided for by the Appellant
and which
order was obtained as a result of the Respondent’s efforts.
[2] The Respondent was employed by the
Appellant as a Business Development Manager with effect from 3 June
2002, which employment
was terminated by the Respondent pursuant to a
letter of resignation, bringing his contract to an end with effect
from 31 December
2004. The Respondent was, however, permitted by
appellant to leave its employ on 15 December 2004.
[3] In terms of paragraph 4 of
Plaintiff’s particulars of claim the express, alternatively,
implied, alternatively, tacit terms
of the agreement of employment
concluded by the parties were:
The
Plaintiff would canvass and solicit for orders, for products
supplied by the Defendant;
The
Plaintiff would transmit orders received from customers to the
Defendant;
Payment
would be made directly by customers to the Defendant;
The
Plaintiff would be paid by the Defendant a commission
on
orders executed by the Defendant
and on renewal for the portion of the annual amount on increased
repeats of such orders;
Commission
would be paid at the rate of six percent of the total of the gross
profit of the order;
The
gross profit would be calculated as at the time of final invoice of
the order;
The Plaintiff
would be entitled to be paid commission
on
orders executed prior to the termination of his agency
.
The Plaintiff in the court a quo is the Respondent herein and
Appellant herein the defendant therein.
[4] Paragraph 5 of the Plaintiff’s
particulars of claim provide that on or about 22 October 2004, a
contract was concluded between
the Appellant and the Toyota SA Motors
(Pty) Ltd. In terms of the policy, should the Respondent obtain
orders, he would be paid
a commission equal six percent of the total
gross profit. Paragraph 9 of the Particulars of Claim provide that
the Appellant remained
obliged to continue to account and pay to the
Respondent commission on orders placed through the Plaintiff (and
repeat orders)
prior to 31 December 2004, but executed by the
Defendant up to and after that date. The Respondent admitted in
evidence that the
word “executed” in the context as pleaded,
meant a concluded sale agreement.
[5] On 11 October 2004, the Respondent
sent an e-mail to his colleagues saying:
“
It has been a long road,
however, we have finally arrived. I would like to thank everyone
involved for your effort and commitment
to winning this bid.
The next steps are that we will
receive a letter of commitment from Toyota, followed by a contract
and order”.
The Respondent himself herein says
that the letter of 22 October 2004 is a letter of commitment.
[6] In the letter dated 22 October
2004, Toyota SA (Pty) Ltd advised both the Appellant and the
Respondent that the Defendant’s
tender had been successful. This
letter reads as follows:
“
Dear Eddie,
This letter
serves to inform you that CS Holdings have been successful in
tendering for the provision of an asset tracking system
at Toyota SA
Motors. Based on both parties signing a written agreement, CS
Holdings may commence with this projects. The agreement
will be
issued to you during the course of next week. Individual orders will
only be issued at the agreed milestones”.
I may as well point out that CS
Holdings is the former name of the Appellant.
[7] Evidence
established that no agreement had been concluded until 20 January
2005 when the contract was signed by Toyota SA (Pty)
Ltd. Appellant
had signed this contract on 19 December 2004. However, the
Respondent has pleaded that this contract was concluded
on or about
22 October 2004.
[8] If the contract between the
Appellant and Toyota SA had been signed by both parties during
December 2004, the Respondent would
have been entitled to and would
have been paid his commission. It was not only the absence of the
Toyota officials to sign the
contract which caused the delay, but
there had been material issues outstanding for resolution, such as
the limitation of liability
and agreed milestones for performance.
[9] The commission policy was not
concluded in July 2004, the commission policy document circulated in
July 2004, constituted only
a variation of the original commission
policy concluded between Appellant and Respondent in terms of his
contract of employment
during June 2002. In terms of the variation
payment commission could only be made on the final invoice for a sale
and not on part
invoices or progress billing as it used to be.
[10] The Respondent admitted in
evidence that the policy was created in order to stipulate a cut off
point in order to avoid subsequent
disputes concerning commission
once an employee terminated his or her employment with Appellant. The
policy had been applied in
the same manner and consistently by the
Appellant in the past in respect of the employees such as Messrs
Blake and Lampel.
[11] In an e-mail dated 17 May 2005
addressed to the Respondent, Mr Hunter of the Appellant stated that
the commission would only
be calculated when the project is complete.
He had not communicated to the Respondent that the entitlement to
the commission was
challenged. It was only on 3 October 2005, that
the Appellant through its legal adviser, refuted that it was obliged
to pay anything
at all on the basis that the Respondent was no longer
employed by the Appellant.
[12] It is common cause that there
were no orders placed with the Appellant prior to the conclusion of
the written contract and
signature by both parties, and to this
extent, Toyota employees expressed their frustration in the delay.
[13] The terms of the Appellant’s
commission policy were as follows:
Commission
will be paid at the rate of six percent of the total gross profit;
The
gross profit will be calculated at the time of the invoice;
Commission
is payable for a new SLA, and thereafter on renewal only for the
portion of the annual amount that has increased, through
escalation
or value;
Payment
can only be made on a final invoice for a sale and not on part
invoices or progress billing. If an advance or commission
is
required, this must be authorised by management and will be regarded
as an advance on the final payment;
If
commission is to be split with another person, this must be agreed
in writing prior to the order being received and be approved
by
management.”
[14] This July 2004 commission policy
document, according to the evidence, constituted only a variation of
the original commission
policy concluded between the Appellant and
Respondent in terms of his contract of employment during 2002. As
indicated above,
the Respondent accepted that the policy was created
in order to stipulate a cut off point to avoid subsequent dispute
concerning
commission once an employee terminated his or her
employment with Appellant.
[15] The main issue in this appeal is
whether the Magistrate’s finding that a contract between Appellant
and Toyota S.A. was concluded
on 22 October 2004 was correct.
[16]
The
Appellant argued that the findings of the court a quo are clearly
inconsistent with the evidence before court and unsustainable,
given
the common cause facts before the court a quo, in particular,
concerning the terms of the commission policy as alleged and
proved
by both parties, and the evidence concerning whether or not a valid
binding contract had in fact been concluded in October
2004.
Alternatively, whether or not a written contract had yet to be
concluded in order for the sale to be considered as concluded
and
hence
“executed
”.
[17]
The
Appellant submits that although the Magistrate stated the law
correctly in relation to:
The fact that there had to be an
unequivocal acceptance of an offer;
An
agent was generally only said to have concluded his mandate on
conclusion of the contract between the principal and third party;

and
There had to be
an agreement on the essential terms and conditions of a contract and
an intention to be bound, notwithstanding
subsequent negotiations
and the conclusion of a written agreement,
animus
contrahendi,
in
order to find that the letter dated 22 October 2004 constituted an
agreement.
t
he
court a quo simply misdirected itself with regards to what in fact
was common cause and not disputed, and thereafter applied
the law
incorrectly to the facts.
[18] The Appellant
submitted that the court a quo erred in accepting that the letter
dated 22 October 2004 was an unequivocal acceptance
of an offer made
by the Appellant in the form of a tender. The acceptance was clearly
not unequivocal but contained the condition
that a written contract
signed by both parties needed to be concluded. This was accepted by
the Respondent and his Counsel in
argument and evidence. The
Respondent’s case was simply that the condition had been fulfilled,
albeit in January 2005. The
Appellant submits further that whether
or not in a particular case an alleged initial agreement acquires
contractual force or not,
depends upon the intention of the parties,
gathered from their conduct and terms of the agreement and
surrounding circumstances.
The Appellant referred to the case of
CGEE
Alsthom Equipments et Enterprises Electriques, South African Division
vs GKN Sankey (Pty) Ltd
1987 (1) SA 81
(A) at 92E.
[19] The
Magistrate’s finding that the letter dated 22 October 2004
comprised an unequivocal acceptance of an offer in the form
of a
tender and that performance or conclusion of the contract
was
not delayed until the formal agreement was signed by both parties
during January 2005, is untenable. Given the clear wording
of the
letter of the 22
nd
October 2004, the inclusion of the reference to performance only
being possible after a binding agreement had been signed by both

parties, together with the fact that no official orders were placed
and that actual performance was in fact delayed until such
time as
both parties had signed the formal agreement, I take a view which is
different from that taken by the Magistrate. Furthermore,
the
evidence was that there were material issues, such as the question of
the liability of the Appellant vis-a-vis Toyota SA, as
well as the
agreed milestones for performance, which had not yet been agreed at
the time and which required resolution, by way
of further negotiation
and agreement, before any final agreement could be formally concluded
by the signature thereof by the contracting
parties. The express
terms of the letter dated 22 October 2004 and the subsequent conduct
of the parties, demonstrate a clear
intention not to confer
contractual force upon their initial agreement and to be bound to
performance in terms of a purely provisional
contract, such as was
concluded during October 2004. Such initial agreement was merely a
precursor to the final agreement, as subsequently
concluded and
signed.
[20] Paragraphs 2
and 4 of the letter dated 22 October 2004 are important in
determining the issues before this Court. These paragraphs
read
,
inter
alia
,
that: “b
ased
on the parties signing original agreement CS Holdings may commence
with this project
”.
Paragraph 2 clearly provides that the project will only commence once
both parties had signed a written agreement. Paragraph
4,
“individual
order numbers will only be issued at the agreed milestones”.
[21] The main issue
is whether an agreement was concluded by virtue of the e-mail dated
22 October 2004.
The evidence and argument presented by the Respondent’s Counsel at
the hearing of the matter was certainly not that there was,
in
existence, some form of provisional executable agreement prior to
January 2005. In the pleadings the Respondent alleged that
on or
about 22 October 2004, a contract was concluded between the Defendant
and Toyota SA (Pty) Ltd. The Appellant denied this
and averred that
this was a letter of intent or a letter of commitment. The Appellant
has argued, correctly in my view, that the
answer to the question
whether an agreement was concluded by the letter of 22 October 2004
is to be found in the last paragraph
of the e-mail from the
Respondent. The last paragraph thereof reads as follows: “
the
next steps are that we will receive a letter of commitment from
Toyota followed by a contract and an order
.”
This e-mail was sent by the Respondent to the officials of the
Appellant on 11 October 2004. The letter of commitment from
Toyota
was received on 22 October 2004.
[22] Counsel for
the Respondent submitted that the contract was concluded prior to 31
December 2004. She further submitted that
the tender had been
accepted. However, such acceptance failed to provide the terms of
the agreement allegedly concluded on 22
October 2004. Counsel
invited to the Court to apply the principles as set out in the
Alsthom
case
supra
.
She submitted that
in the
Alsthom
case, supra, it was held that the words “…
we
have pleasure in informing you that the order … has been awarded to
yourselves”
were susceptible only of the meaning that the Respondent’s tender
had been accepted and that it constituted an unqualified acceptance

of the Respondent’s tender, and that despite the existence of
outstanding matters, that agreement had been intended by the parties

to constitute a binding contract. She drew attention to the fact
that Corbett JA stated as follows at page 90:
As Watermeyer ACJ
remarked in Reid Brothers (South Africa Ltd) v Fischer Bearings
company Ltd
1943 AD 232
at 241, ‘…
a
binding contract is as a rule constituted by the acceptance of an
offer’
”.
[23] Counsel for
the Appellant submitted that what happened in Alsthom’s case,
supra
,
was completely distinguishable from what the situation was in this
case. She submitted that similarly there was a clear tender
in that
case. From the judgment one can understand or infer that there was
evidence led in that matter as to what the terms of
the tender were.
In other words, the tender was capable of being accepted, thereby
giving rise to the conclusion of a contract.
The letter or the
telefax in that matter confirmed acceptance, thereby accepting the
business. It said subject to officiation,
which was the word used in
that contract. But what was important in that case was that the
letter was precipitated because the
Plaintiff needed to be able to
place orders to start performing the contract. He needed to give
himself time to order steel, which
was part of the goods that were
dealt with in that tender. There the Court of Appeal held that the
intention of the parties, to
be gathered from their conduct, the
terms of their agreement and the surrounding circumstances, was
decisive of whether or not
the initial agreement acquired contractual
force. In the present case, not only did the letter clearly state
that the project
can only commence once both parties have signed a
formal written agreement, but it was further specified that only
thereafter would
order numbers be issued at the agreed milestones.
Such milestones, in turn, was an issue yet to be agreed. It was
clear that there
would be no execution of any orders prior thereto.
The contents of the letter could therefore hardly be clearer and the
conduct
of the parties is consistent only with the fact that there
was no binding agreement at that stage. All of that is compounded by

the fact that there was no evidence before the court a quo of what
the terms of the tender were and whether or not such unspecified

terms were comprehensive enough to create a binding contract, even
had the parties so intended. This lacuna was further exacerbated
by
the fact that the agreement, as eventually signed on 20 January 2005,
was also not before the court.
[24] In
Alsthom’s
case, supra, unlike the present matter, what happened there was that
the letter of acceptance was permissive of the arrangement
that
performance would be allowed to start before the formal agreement was
reduced to writing. The facts of the
Alsthom
case are therefore clearly distinguishable from the facts of the
present case.
[25] Counsel for the Respondent
submitted that the terms of the contract between Toyota and Appellant
were not relevant in the circumstances.
According to her, the
mandate had been duly obtained, despite the fact that it was clear
that no orders could be placed consequent
upon the so-called
agreement of 22 October 2004. It is in fact common cause that no
orders were placed until after the written
agreement was signed on 20
January 2005.
[26] The response
by Toyota was clear. It said that, in order to commence the course
of business, it required a written agreement,
duly signed by the
parties thereto. What had,
inter
alia
,
to be included in such written agreement were the milestones, which
still had to be agreed. It appears from further correspondence
prior
to the signature of the contract that there was also a further
sticking point, this being relevant to the issue of liability,
which
needed to be resolved before the contract was eventually signed.
[27] Where parties
are
ad
litem
as to the material terms or conditions of a contract, the onus of
proving that agreement existed that the legal validity of the

contract should be suspended or postponed until after due execution
of a written document, lies upon the party who alleges it.
(See First National Bank Ltd v
Avtjoglou
2000 (1) SA 989
CPD at 995 (E); Build a Brick & Another
v Eskom
1996 (1) SA 115
(OPD)
In First National
Bank Ltd,
supra
,
at page 995 E-G Maya AJ (as she then was) stated:
“
It is trite
that where the parties are shown to have been ad litem as to the
material conditions of the contract, the onus of proving
an agreement
that legal validity would be postponed until the due execution of a
written document lies upon the party who alleges
it. Wood v Walters
1921 AD 303
at 305-6; Goldblatt v Freemantle
1920 AD 123
at 128
Defendant states
in the letter that: “I do however require a signed returned copy
duly signed by a bank before paying the first
R2 000 as agreed.”
In my view, this statement demonstrates that defendant did not hold
himself bound by the agreement until
plaintiff had also signed it and
furnished him with a copy thereof. The contrary is untenable
.”
In the present
matter it is clear that appellant and Toyota, as the parties were
ad
idem
regarding
certain of the material terms of their agreement, save in respect of
those relating to milestones and liability, which
were material to
the conclusion of the final written contract, as eventually signed.
The onus is therefore on the Appellant to
prove that legal validity
should be postponed until the execution of a legal document in the
form of the contract, as eventually
signed during January 2005.
Considering all the material placed before the court, I am satisfied
that Appellant has discharged
this onus.
[28] Consequentl
y,
the letter of 22 October 2004 cannot in my view be construed as a
final agreement between the parties upon which orders could
be placed
within the ambit of the policy on the commission which governed the
relationship between Appellant and Respondent.
In the alternative, Counsel for the
Respondent submitted that in the event of it being found that the
letter of 22 October 2004
was not intended to be construed by
Appellant and Toyota as an enforceable contract, then it is the
submission of the Respondent
that a binding agreement had in fact
come into existence when the contractual offer, in the form of the
written contract, had been
presented to the Appellant and it accepted
such offer by signing it. It is not disputed that this was during
December 2004, prior
to the termination of the Respondent’s
employment.
[29] The Respondent submitted further
that the mere fact that the agreement had not been signed by the
Toyota prior to the Respondent’s
termination of his employment did
not mean that there was no binding contract between the Appellant and
Toyota. It could not have
been intended that the Respondent would
forfeit his commission merely as a result of the failure of Toyota to
sign he agreement
timeously.
Miss Smart, for the
Respondent, referred to the case of
Roberts
and Another v Martin
[2005] ZAWCHC 12
;
2005 (4) SA 163
C
where is was held that where a party has made a written offer and it
was unequivocally accepted and signed by the offeree, but
not signed
by the offeror, and the offeror has continued to act in accordance
with the terms embodied in the offer, there was no
reason why the
offeror could not be bound by the contract. Miss Smart submitted
that in order to determine the intention of the
party to a contract,
one has to look at the behaviour and the surrounding circumstances.
[30] The interpretation of a contract
starts firstly, with the wording of the document. If its ambiguous,
one looks to other aids
to interpretation, one of which may
ultimately be the conduct of the parties. But if the wording of the
contract is unequivocal,
one does not need to consider the conduct of
the parties. The letter of 22 October 2004 is clear and unambiguous.
The terms of
that letter could never have constituted a binding
agreement between the parties which would entitle the Respondent to
be paid
commission in terms of the policy.
[31] Furthermore,
what is clear from the pleadings is that the Plaintiff (Respondent in
the appeal) would be paid by the Defendant
(the Appellant) a
commission on orders
executed
by the Defendant and upon renewal of such orders, for that portion by
which the annual amount increased on repeat of such orders.
In the
present matter, the contract was only signed on 20 January 2005. It
is also common cause that no orders were executed
by the Defendant
prior to the termination of his employment and/or prior to the
signing of the agreement (paragraph 4(d) of the
plea). Furthermore,
in paragraph 4(g) of the plea the Defendant pleaded that the
Plaintiff would be entitled to be paid commission
on orders executed
prior to the termination of his agency. It is common cause that no
such orders were executed prior to the termination
of his agency in
terms of the contract which was signed by Toyota on 20 January 2005.
Plaintiff’s contract of employment ended
on 31 December 2004, prior
to the signing of the contract by Toyota.
[32] In paragraph 9 of the pleadings
the Respondent (Plaintiff) also averred that the Defendant
(Appellant) would remain obliged
to continue to account and pay to
the Plaintiff his commission on orders placed through the Plaintiff,
or on repeat orders placed
prior to 31 December 2004 but executed by
the Defendant (Appellant) up to and after that date. However, it is
common cause that
in terms of the agreement which was signed by
Toyota on 20 January 2005, no orders were placed in terms of that
agreement prior
to such signature.
[33] In my view the Magistrate clearly
misdirected himself in concluding that the letter dated 22 October
2004 constituted an agreement
between the parties which entitled the
Respondent to be paid commission. He also misdirected himself in
finding that the validity
of the said contract, as eventually
concluded following upon the letter dated 22 October 2004 and as
signed by Toyota on 20 January
2005, did not depend upon the
signature thereof by the parties thereto, for its legal efficacy.
[34] In my view the Magistrate
therefore erred in finding, notwithstanding the fact that agents
normally only become entitled to
their commission upon conclusion of
their mandates, which generally are based upon the conclusion of
valid and enforceable contracts
between their principals and the
third parties, that the Respondent had in fact and in law duly
performed his obligations. The
Magistrate should have found that a
valid and binding contract had not come into existence on 22 October
2004 and alternatively
that the contract submitted by Toyota SA to
Appellant on 14 December 2004 for signature was not, in the absence
of Toyota having
signed it, an offer upon the signature of which by
the Appellant any valid and binding contract was created. This is
so particularly
in the light of the fact that the contract document
did not serve in evidence before the court a quo, and not
withstanding the
fact that the letter dated 22 October 2004 made
provision for both parties to sign the written agreement before the
project could
be commenced.
[35] Counsel for the Appellant
submitted, correctly in my view, that the findings of the court a quo
are clearly inconsistent with
the evidence before court and
unsustainable, given the common cause facts before the court a quo.
In particular, concerning the
terms of the commission policy as
allegedly approved by both parties and the evidence concerning
whether or not a valid and binding
contract had in fact been
concluded in October 2004, alternatively whether or not a written
contract had yet to be concluded before
the sales could be considered
as concluded and hence executed. In my view the alternative
justification for the Magistrate’s
finding, namely that the written
contract produced by Toyota SA comprised an offer which was concluded
and accepted by Appellant
during December 2004, is untenable. This
is so given the express terms on the letter dated 22 October 2004,
requiring that both
parties should sign the agreement, as well as the
absence of any evidence led on the agreement, which would no doubt
have contained
a term that the contract would only be concluded upon
signature by both parties. It was not the Respondent’s case that
an agreement
had in fact been concluded in December 2004 as
ultimately found by the court a quo. There is simply no evidence to
support this
alternative justification.
[36] Consequently
the misdirections committed by the Magistrate in the court a quo and
as they are set out above, justify the setting
aside of his decision
in this matter. In my respectful view the Magistrate misdirected
himself in regard to the evidence before
him and mis-applied the law
in relation to such evidence. The appeal should therefore be
upheld and the decision of the court
a
quo
be set aside.
In the result I propose that the
following order be made:
The appeal is upheld, with costs.
The judgment of the court a quo is
set aside and substituted with the following:
“The Plaintiff's claim is
dismissed, with costs.”
SISHI J
I agree and it is so ordered.
_______________
Van Zyl J
Date of Hearing : 8 September 2008
Date of
Judgment : June 2009
Appellant’s Attorneys : Strauss Daly
Inc
c/o Botha & Olivier Inc
239 Chapel Street
Pietermaritzburg
3201
Appellant’s Counsel : Adv C.A Nel
Respondent’s Attorneys : Steenkamp
Weakley Ngwane
46 Braid Street
Pietermaritzburg
3201
Respondent’s Counsel : Adv Smart
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