Travelex (PTY) Limited v Jumbo Zips cc (A565/04) [2004] ZAWCHC 28 (22 October 2004)

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[2004] ZAWCHC 28
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Travelex (PTY) Limited v Jumbo Zips cc (A565/04) [2004] ZAWCHC 28 (22 October 2004)

IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL
DIVISION)
Case No: A565/04
In the matter between:
TRAVELEX (PTY)
LIMITED
Appellant
and
JUMBO ZIPS CC
Respondent
JUDGMENT: 22 OCTOBER 2004
VAN ZYL J:
INTRODUCTION
[1] The appellant instituted an action
against the respondent for damages in the amount of R22 578,48
arising from the delivery of
latently defective material. The
respondent denied liability and filed a claim in reconvention for
payment of the price of the material
in the amount of R4 223,70. The
claim was dismissed with costs and the counterclaim granted as
prayed, together with interest and
costs. This is an appeal against
such judgment.
THE PLEADINGS
[2] In its particulars of claim the
appellant averred that, during July 2000, the parties entered into an
oral agreement in terms
of which the respondent would supply the
appellant with four thousand chunky zips. It was a term of the
agreement that the zips would
be free of latent defects and suitable
for the purpose for which they were acquired by the appellant, namely
for use in sports bags
to be supplied by the appellant to its
customers. The respondent was at all relevant times aware of the fact
that the zips were to
be used for such purpose. The zips were,
however, latently defective and unsuitable for that purpose in that
the sliders of the zips
were prone to stick at certain points. As a
result the two hundred and fifty sports bags in which the zips had
been used were returned
by the customers to whom they had been sold
and the appellant suffered damages in the amount of R27 529,86,
representing the profit
it would have made on the bags had the zips
not been defective. This amount was later reduced to R22 578,48,
after deduction of the
amounts of R4 223,70, being the purchase price
of the material supplied by the respondent, R600,00 received from the
sale of thirty
of the defective bags at R20,00 each, and R127,68
received from the sale of a single bag.
[3] In
its plea the respondent denied having sold four thousand chunky zips
to the appellant, averring that the parties had agreed
that the
respondent would supply it with one thousand five hundred metres of
no. 3 zip chain and three thousand no. 3 sliders. The
respondent
admitted that it was a term of the agreement that the said material
would be free from latent defects, but denied that
it was defective
and likewise denied having any knowledge that it would be used in the
manufacture of sports bags. When this use
was brought to its
attention, it in fact advised against it. The appellant’s response,
however, was that the customer had insisted
that chunky zips be used.
For the rest the respondent denied that the appellant had suffered
damages as alleged or at all.
[4] In
its reply to the plea the appellant admitted that the material in
question consisted of zip chain and sliders, but denied that
the
respondent had not been aware, at the time the contract was
concluded, of the purpose for which such material was intended. It
likewise denied that the respondent had ever advised against its use
for such purpose.
EVIDENCE FOR THE PLAINTIFF
(APPELLANT)
[5] Mr Isaac Levy, the Managing
Director of the appellant, testified that the appellant had an
agreement with Investec Bank to supply
it with two hundred and fifty
sports bags, fitted with chunky zips. The price was calculated on the
basis of material, labour and
transportation costs expended, together
with a gross profit margin of 120%, which he estimated to be in the
region of R16 000,00.
As a result of the defective zips the full
order had been returned. Investec had indicated that it was not
interested in any substituted
performance since it no longer had any
faith in the appellant’s products. The value of the two hundred and
fifty rejected bags
was no more than R5 000,00, calculated on the
basis of R20,00 per bag. The appellant had in fact managed to sell
thirty bags for
R600,00 and another for R127,68. It was not prepared
to sell any bags to the respondent, however, because Investec had
instructed
it not to do so in view of the Investec logo on the bags.
An attempt by the appellant to remove the logo was abandoned because
“it
was too costly” and Mr Levy did not have the time. According
to Mr Levy the unsold bags were destroyed in that the pockets had
been removed from them. What remained of the bags was lying in a
warehouse.
[6] Mr
R H G Clarke, the general manager of a company that does textile
testing, confirmed in his testimony the content of a technical
report
he had submitted in connection with the zips in question. He had
carried out the test and found that the zip sliders were
prone to
stick at certain points. Close visual examination revealed no foreign
matter causing the obstruction, nor was there any
inconsistency in
the zip tape. He hence concluded that “the critical differences lie
in the shape or the spacing of the teeth of
the zips at the points
where the sticking occurred”. In cross-examination he conceded that
he was not an expert in the design of
sports bags. He likewise
conceded that, if the zip should be mounted on a curve the natural
spacing of its teeth would be disturbed.
The top part would be
widened and the lower part cropped. The extent to which this would
take place would depend on the way in which
it was inserted, the
sharpness of the curve and the rigidity of the tape relative to the
rigidity of the material to which it is
affixed. In this regard the
chunky zip differed from the spiral type of zip composed of
individual teeth. Although Mr Clarke was
not prepared to concede that
the zip stuck only where it was mounted on a curve or bend, he did
agree that, if a zip should be mounted
at an angle or on a bend or
curve, thereby exceeding the limitation of the zip, it would cause
the zip to stick.
[7] Mr
M Pretorius, the appellant's former travelling bag production
manager, testified that Investec had placed an order for sports
bags
fitted with chunky zips. He thereupon requested Ms G Schroeder, the
sales representative of the respondent, to furnish him with
a
two-metre sample of chunky zip. She showed her a cutting, taken from
a so-called "swatch-book", as a sample of the material
on
which the zip was to be used. Mr Pretorius made up and furnished the
sample to Investec, which approved it and subsequently placed
its
ill-fated order on the strength thereof. During the course of
production of the bags, however, the appellant's factory supervisor
indicated that they were encountering problems with the slider and
requested the respondent to send someone to attend thereto. At
that
stage some two hundred and forty of the bags had already been
completed, leaving only ten requiring completion. Ms Schroeder
came
to the factory with one of the respondent's experts, Ms Gloria
Martin, who demonstrated to the appellant's workers how to work
with
it. On testing one of the chunky zips Ms Schroeder observed its
sticking action and announced that it did not work because it
was not
supposed to stick. This prompted the respondent to bring a
"slider-puller" to the factory premises and the
respondent's
expert explained to the appellant's workers how to use
it properly by inserting the zips in a different way. No one
suggested that
the zips should not be used on that type of bag.
EVIDENCE FOR THE DEFENDANT
(RESPONDENT)
[8] Mr M C Roeloffze, the owner of the
respondent, became involved in the matter only towards the end, after
Investec had returned
the bags to the appellant. He met with Mr Levy
and his father, Mr Levy Snr, at the appellant's factory. One of the
bags was on the
desk. When Mr Roeloffze saw it, he said: "I will
never have used that zip in the bag". Mr Levy Snr responded by
saying
to his son: "I told you that was the wrong zip, that was
the wrong zip". He then left the room. Mr Roeloffze reiterated
to the younger Mr Levy that the zip would never work in that bag,
whereupon he himself left. This is confirmed in a letter dated
29
August 2000 written by him to the attorneys of the appellant. In it
he rejected the appellant’s claim and enclosed a letter
from Ms
Schroeder, dated 1 August 2000, to Mr Levy (see par [10] below).
[9] Mr
Roeloffze testified further that the respondent had been acquiring
its chunky zip from Taiwan and Shanghai for a period of
fourteen
years and had never encountered any problem with it. The suppliers
had always guaranteed its quality. The respondent manufactured
some
two thousand chunky zips per day. They were properly made and were
definitely not faulty. He was quite prepared to purchase
the
allegedly faulty bags from the appellant and to sell them at a
profit. He would have treated the teeth of the zips with candle
wax,
thereby rendering them usable for the next five years. The appellant,
however, had refused to sell them to the respondent, ostensibly
because it was not possible to remove the logo.
[10] Ms
G P Schroeder, a sales representative of the respondent, testified
that she had been involved with the appellant's order of
the zip
chain with sliders. At that time she had not known for what purpose
the appellant intended using the material. When the appellant
experienced problems with the zips, she had gone to see them, taking
Ms Gloria Martin, the respondent's supervisor, with her. Ms
Martin
showed them exactly how to do the job, pointing out that it would
have been better to use the zip with spiral teeth, since
it would
work more effectively. Despite Ms Martin’s efforts the problem was
still not resolved since the zips continued to stick
on certain
sections. She herself went to see Mr Levy and suggested to him that
it would have been better to use another kind of zip.
Mr Levy
responded, however, that their client (Investec) had insisted on the
chunky zips. This was confirmed in Ms Schroeder’s
letter to the
appellant (for the attention of Mr Levy) dated 1 August 2000. The
relevant portion of it reads:
Please be advised that we do not sell
any faulty zips and that the zips supplied to you is [
sic
]
of
first quality
.
You have also accused me or the company of not advising you
correctly. Let me just reiterate that as I was not aware what the
zips
were used for initially, we sold you the zips in good faith.
However, when I did come out to help your people on a problem where
they were putting the zip in wrongly and showed them how to do it the
correct way I did point out to your staff that they should
have used
our ordinary type 5 zip as I mentioned to you when I came to see you
on Friday morning passed [
sic
].
I
also do think that you would have picked this up by checking the
first few bags that came out of production and thereby would be
saving yourself the headache of having all these bags returned.
At the time that I suggested to
your staff that you use the type 5 zip they replied that the customer
insists on that particular chunky
zip.
Let
me also advise you that we have so many clients who order zips that
we do not know what the application is for and we’ve never
encountered any problems when they wanted to return the products or
put in a claim for it as it really is up to the customer to check
it
out thoroughly and be certain before they order.
We
really and truly are very sorry for your financial loss as we too are
running a business where we hope that this kind of thing
will never
happen to us.
[11] Ms
Schroeder had no recollection of ever having been shown a sample of
the fabric the appellant intended to use in manufacturing
the bags.
Had this been done, she said, she would have remembered it. She did
recollect, however, that Ms Martin had shown the appellant’s
workers how to ensure that they start with the "leading member"
of the zip chain, in which event the others would follow.
This was
the correct way to execute the work.
[12] Ms
Gloria Martin, the respondent's aforesaid supervisor, substantially
confirmed the testimony of Ms Schroeder. She testified
that she had
explained to the appellant’s factory workers how to pull the two
panels together and to tuck the slider with the zip
chain. She had
also demonstrated the need to commence the work with the leading
member of the zip chain, in which event the zip would
not stick. She
did, however, comment to Ms Schroeder that the chunky zip was not
suitable for use in the sports bags. Ms Schroeder
in turn conveyed
this to Mr Pretorius.
THE JUDGMENT OF THE COURT
A
QUO
[13] Without
furnishing any reasons, the court
a
quo
dismissed the claim
with costs and granted the counterclaim with interest and costs. When
requested by the attorneys of the appellant
to furnish reasons, the
court complied as follows:
1. Plaintiff failed to prove that he
suffered any loss of profit.
2. Plaintiff failed to prove that the
zips in issue were latently defective.
3. Plaintiff
admitted Defendant’s counterclaim.
[14] The appellant promptly filed a
notice of appeal directed against these findings. The magistrate was
thereupon required, in terms
of the provisions of rule 51(8)(a) of
the
Magistrates’ Court Act
32 of 1944
Rules
of Court
, to furnish:
(i) the facts he found to be proved;
(ii) the grounds upon which he arrived
at any finding of fact specified in the notice of appeal as appealed
against; and
his reasons for any ruling of law or
for the admission or rejection of any evidence so specified as
appealed against.
His response was simply that the court
had “nothing further to add to reasons already furnished”.
[15] With respect to the learned
magistrate this response can scarcely be regarded as constituting
reasons for judgment. At the very
least one would have expected an
evaluation of the evidence in the light of the burden of proof
pertaining and with reference to
the relevant legal principles
relating to latent defects and damages arising from such defects, if
proved. The parties to litigation
are, in my view, entitled to be
accorded the courtesy of sufficient reasons to enable them to
consider whether they are satisfied
that the findings of the court
were justified or justifiable, or whether they should appeal such
findings. This would remain the
case even if the issues should appear
to be simple and the outcome of the litigation should appear to be
cut and dried or a
fait
accompli
.
PRINCIPAL
SUBMISSIONS ON BEHALF OF THE APPELLANT
[16] Ms Heese, on behalf of the
appellant, submitted that the appellant’s evidence was sufficient
to show, on a balance of probabilities,
that the zips or zip chains
and sliders provided by the respondent were defective and that the
appellant suffered a financial loss
as a result thereof. She
suggested that the appellant had made out a
prima
facie
case for the relief
sought in the particulars of claim and that the evidence tendered on
behalf of the respondent had been insufficient
to refute such case.
[17] On
the question of damages Ms Heese submitted that the amended claim,
after deduction of the cost of the material supplied by
the
respondent and of the proceeds of the sale of thirty-one bags,
constituted damage suffered by the appellant in the form of net
profit lost as a result of the respondent’s breach of contract.
[18] In
regard to the alleged defect Ms Heese argued that the respondent had
not countered the appellant’s expert evidence tendered
by Mr Clarke
except for suggesting that another kind of zip should have been used.
This was not sufficient to contradict Mr Clarke’s
findings.
PRINCIPAL SUBMISSIONS ON BEHALF OF
THE RESPONDENT
[19] Mr McLachlan, on behalf of the
respondent, submitted at the outset that the appellant had failed to
discharge the
onus
of
proving that the material supplied to it by the respondent was
latently defective, that the respondent had been aware of the purpose
for which the material was purchased and that the appellant had
suffered damages.
[20] With
reference to Mr Clarke’s expert evidence Mr McLachlan argued that
his evidence did not demonstrate any latent defect in
the material
supplied by the respondent. Mr Clarke was, in any event, not an
expert in the design of sports bags and was unable to
comment on the
effect of a zip mounted on a curve or bend or at an angle. More
importantly, there was no proof that the material
supplied by the
respondent was in fact that used by the appellant in manufacturing
the bags. And even if it were, the possibility
could not be excluded
that the problems with the bags had been caused by their design, by
the faulty insertion of the zips or by
the use of the wrong kind of
zips.
[21] Mr
McLachlan submitted further that the appellant’s claim, being based
on loss of profit, was directed at a form of special
damages. This
could be claimed only if it had been within the contemplation of the
parties at the time the contract was concluded.
Ms Schroeder’s
evidence that she did not know, at the time the oral agreement was
concluded, for what purpose the appellant required
the material
ordered from the respondent, could not be contradicted. No basis
could hence be laid for special damages.
[22] In the alternative Mr McLachlan
submitted that the appellant had failed to establish the
quantum
of its damages. The amount claimed could not constitute loss of
profit since it clearly included costs other than those incurred
in
respect of the material supplied by the respondent. The bulk of the
material used in manufacturing the bags was not that forthcoming
from
the respondent and no value was attached to such material. In any
event the net profit could be calculated only with reference
to
overhead expenses such as labour, electricity, transport and the
like. Mr Levy’s estimate of a gross profit of approximately
R16
000,00 (120%) did not assist the appellant since there was no
indication that this was the profit margin applicable in the present
case. The appellant simply failed to place the necessary evidence
before the court.
[23] Finally
Mr McLachlan argued that, even if it should be held that the
appellant had proved damages, it had failed to mitigate
such damages.
It had been suggested by Mr Levy that the sale of the bags could
realise at least R5 000,00 (two hundred and fifty
bags at R20,00 per
bag), yet when the respondent offered to purchase them it was turned
down purportedly because of time constraints
and the Investec logo’s
on the bags.
THE RELEVANT LEGAL PRINCIPLES
[24] In any claim for patrimonial
damages arising from breach of contract it must be proved not only
that there was a breach of contract,
but also that the damages
claimed were caused by such breach. See
Swart
v Van der Vyver
1970 (1) SA
633
(A) at 643C;
Everett and
Another v Marian Heights (Pty) Ltd
1970
(1) SA 198
(C) at 204D;
Sommer
v Wilding
[1984] ZASCA 53
;
1984 (3) SA 647
(A) at 664D-F;
International
Shipping Co (Pty) Ltd v Bentley
1990
(1) SA 680
(A) at 696F and 700H-I;
Visagie
v Gerryts en ‘n Ander
2000
(3) SA 670
(C) at 682C-E.
[25] The party claiming damages must
demonstrate that they flow naturally and generally from the breach by
the defaulting party in
the sense that they constitute foreseeable
loss within the contemplation of the parties at the time of
conclusion of the contract.
In assessing damages the court is
required to place the party suffering such damages in the position he
would have been had the contract
been properly performed, provided
this can be done in monetary terms without causing the defaulting
party undue hardship. This means
that the claimant must take
reasonable steps to mitigate his loss or damage. See
Holmdene
Brickworks (Pty) Ltd v Roberts Construction Co Ltd
1977
(3) SA 670
(A) at 687C-H.
[26] Where special damages are
claimed, the claimant must prove that special circumstances pertained
at the time of conclusion of
the contract, from which circumstances
it must be assumed or inferred that the parties actually or
presumptively contemplated that
special damages would probably result
from a breach of contract. See
Shatz
Investments (Pty) Ltd v Kalovyrnas
1976
(2) SA 545
(A) at 550C-E. For a general discussion on damages in
contract see
LAWSA
7
(1
st
reissue 1995) par 25-27 and 44-61; R H Christie
The
Law of Contract
(4
th
ed 2001) 629-644; A J Kerr
The
Principles of the Law of Contract
(6
th
ed 2002) 737-788 (with particular emphasis on causation).
[27] A contractual party is regarded
as being in breach of contract if he has failed to perform,
adequately or at all, the obligations
imposed on him by the contract.
See Christie (
supra
)
575-577; Kerr (
supra
)
601-602.The party alleging a breach of contract must, in general,
prove it. See
Strydom v Van
der Merwe
1951 (3) SA 81
(T) at 83G;
Culverwell and
Another v Brown
1988 (2) SA
468
(C) at 475A;
Culverwell
and Another v Brown
1990
(1) SA 7
(A) at 14E-F and 24I-J.
[28] In contracts of purchase and sale
(
emptio venditio
)
the seller
venditor
)
is in breach if the thing sold (
res
vendita
) is defective. The
edict of the
aediles
curules
, Roman officials
charged with the supervision of public markets, introduced a warranty
against latent defects with a view to protecting
the interests of the
purchaser (
emptor
)
who could not be expected to be aware of such defects. In terms of
this aedilitian edict the seller was liable for any defect that
wholly or substantially impaired the utility or effectiveness of the
thing sold. The purchaser could claim full restitution by means
of
the
actio redhibitoria
or a diminution of the purchase price by means of the
actio
quanti minoris
. In later
Roman law the
actio empti
(the action arising from
the purchase) could be used instead of the aedilitian actions. See
the full discussion in
Norman’s
Purchase and Sale in South Africa
(4
th
ed 1972 by C I Belcher) 308-304;
MacKeurtan’s
Sale of Goods in South Africa
(5
th
ed 1984 by G R J Hackwill) 123-163. See also
LAWSA
24 (1
st
reissue 2000) par 99-105;
Phame
(Pty) Ltd v Paizes
1973 (3)
SA 397
(A);
Janse van
Rensburg v Grieve Trust CC
2000
(1) SA 315
(C).
EVALUATION OF THE EVIDENCE
[29] This court, of course, did not
have the benefit of observing the demeanour of any of the witnesses
who testified before the court
a
quo
. That court, as
mentioned before, failed to furnish any evaluation of the witnesses
or their evidence. We are hence limited in our
evaluation to the
evidence actually recorded at the trial. Suffice it to say that, even
if all the witnesses for the appellant had
been impeccable, their
evidence came nowhere near assisting the appellant in discharging the
onus
of proof resting upon it. This conclusion is reached on the basis of
the following considerations.
[30] In
the first place the material sold was described in the particulars of
claim as four thousand chunky zips. In its reply to
the plea the
appellant conceded, however, that the material consisted of one
thousand five hundred metres of zip chain and three
thousand sliders.
In their evidence Mr Levy and Mr Pretorius appear to have accepted
that this material was used to make up the zips
which were eventually
mounted on the bags. What is not clear, however, is whether only the
appellant’s material was used for this
purpose. At no stage was the
material specifically identified.
[31] It
was not, in my view, proved that the material furnished to the
appellant by the respondent was defective in any way. At worst
it was
unsuitable for the purpose for which it was purchased. If I
understand Mr Clarke’s evidence correctly, the zip chain and
sliders were neither patently nor latently defective. His close
visual examination revealed no obstructive “foreign matter” or
inconsistency which could account for the inclination of the zips to
stick at certain points. He in fact attributed it to “the
shape or
the spacing of the teeth of the zips at the points where the sticking
occurred” and conceded that this might relate to
the mounting of
the zips at an angle or on a curve or bend. The sticking might in
fact have been the result of the incorrect procedure
followed in
mounting the zips, or simply from having used the wrong kind of zip
(chunky instead of spiral) for the purpose for which
the zips were
required. This is supported by the evidence of Mr Roeloffze, Ms
Schroeder and Ms Martin. In short, none of the testimony
tendered by
either party was indicative of any defect in the material supplied by
the respondent to the appellant.
[32] Even
if the material were in fact latently defective, the appellant failed
dismally in its attempt to prove any form of damages,
let alone
special damages, allegedly suffered by it. More particularly it
failed to prove that the respondent was aware of the purpose
for
which the material was required. Ms Schroeder’s evidence in this
regard, as fortified by her letter of 1 August 2000, makes
this
abundantly clear. There is no reason to reject her evidence that, at
the time the oral agreement was concluded, the respondent’s
representatives were not aware of the use to which the appellant
proposed to put the material. It was only after the appellant had
drawn their attention to the problems being encountered that they
realised that the wrong kind of zip was being used for mounting
on
sports bags and, in any event, that the wrong process of mounting was
being employed.
[33] Even
should the appellant have been able to surmount these difficulties,
it was quite unable to prove loss or damage as claimed
in the
original or amended particulars of claim. The amount claimed
certainly did not constitute loss of profit in that it totally
ignored costs and expenses necessarily incurred. I refer here to the
cost of the fabric used for the bags, of which the zips would
eventually constitute only a minor part, and overhead expenses
relating to labour, electricity, transport and the like. I fully
agree
with Mr McLachlan that the appellant simply failed to place the
necessary evidence before the court.
[34] I
likewise agree with Mr McLachlan’s submission that, even if the
appellant had managed to get past all these obstacles, it
had clearly
failed to mitigate its damages. The excuses tendered by Mr Levy for
not having attempted to sell the bags, with or without
the logo’s,
were lame in the extreme and fall to be rejected out of hand.
CONCLUSION
[35] It follows from these
considerations that the court
a
quo
quite correctly
dismissed the appellant’s claim and granted the respondent’s
claim in reconvention.
[36] In
the event the appeal is dismissed with costs.
D
H VAN ZYL
Judge of the High Court
I
agree.
D
M DAVIS
Judge of the High Court
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
Case No: A565/04
In the matter between:
TRAVELEX (PTY)
LIMITED
Appellant
and
JUMBO ZIPS CC
Respondent
JUDGMENT : JUDGE
D H VAN ZYL
FOR
THE APPELLANT : ADV A E HEESE
INSTRUCTED BY : MICHALOWSKY,
GELDENHUYS &
HUMPHRIES
(Cape Town)
FOR
THE RESPONDENT : ADV H McLACHLAN
INSTRUCTED
BY : DU TOIT & COMPANY
(Stellenbosch)
c/o
VISAGIE VOS & PARTNERS
(Cape
Town)
DATE
OF HEARING : 15 OCTOBER 2004
JUDGMENT
DELIVERED : 22 OCTOBER 2004