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[2020] ZASCA 58
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Iveco South Africa (Pty) Ltd v Centurion Bus Manufacturers (Pty) Ltd (183/2019) [2020] ZASCA 58 (3 June 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case
no: 183/2019
In
the matter between:
IVECO
SOUTH AFRICA (PTY)
LTD APPELLANT
and
CENTURION
BUS MANUFACTURERS (PTY)
LTD
RESPONDENT
Neutral
citation:
Iveco South Africa (Pty)
Ltd v Centurion Bus Manufacturers (Pty) Ltd
(Case
no 183/2019)
[2020] ZASCA 58
(3 June 2020)
Coram:
NAVSA, ZONDI, DLODLO, MBATHA JJA AND KOEN AJA
Heard
:
6 MAY 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication
on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 9h45 on 3 June 2020.
Summary:
Contract – breach – claim
for damages for ‘loss of income’ in relation to part of
contract period –
interpretation of contract – whether
appellant obliged to supply minimum number of vehicles for conversion
per month –
whether obligations reciprocal – whether
order should have been granted separating merits and damages.
ORDER
On
appeal from:
The North Gauteng
High Court, Pretoria, sitting as a court of appeal, (Fabricius J,
Kollapen and Mokose JJ concurring):
1.
The appeal succeeds to the extent set out
below.
2.
The order of the full court of the North
Gauteng High Court is set aside and substituted with the following:
’
(a)
The appeal succeeds to the extent set out below.
(b)
The judgment of the trial court is set aside and substituted with the
following order:
“
(i)
It is declared that the agreement concluded between the parties
obliged the defendant to deliver a minimum of 40 vehicles for
conversion to the plaintiff per month;
(ii) The matter is
remitted to the trial court to determine all the remaining
outstanding issues, which will include, without detracting
from the
generality of the aforesaid, a determination of all issues relating
to the reciprocity of obligations, a determination
of which
obligations were reciprocal, the nature and extent of any
non-compliance with such obligations, the effect of such
non-compliance,
and a determination of the respondent’s
damages, if any;
(iii) The costs are
reserved.”’
3.
The costs of the appeals before the full
court and this court are reserved pending the finalisation of the
proceedings before the
trial court, whereafter the matter may be
re-enrolled and further submissions advanced regarding the liability
for the reserved
costs.
JUDGMENT
Koen
AJA (Navsa, Zondi, Dlodlo and Mbatha JJA concurring)
[1]
The
appellant, Iveco South Africa (Pty) Ltd (Iveco), is an importer of
Iveco panel vans, many of which are converted into passenger
minibuses. The respondent, Centurion Bus Manufacturers (Pty) Ltd
(CBM), carries on business as a converter of vehicles. The primary
issue for determination in this appeal is whether the written
agreement concluded between the parties on 21 September 2006, in
terms whereof Iveco appointed CBM to manufacture bus conversions,
[1]
obliged Iveco to supply a minimum of 40 vehicles for conversion to
CBM every month, or whether it merely required that CBM was
obliged
to establish and maintain the capacity to convert 40 vehicles per
month.
[2]
It
is common cause that Iveco did not consistently supply 40 vehicles
for conversion to CBM every month.
[2]
After the lapse of a few years from the inception of the agreement,
when the number of vehicles supplied for conversion had reduced
dramatically and talks between the parties to deal with that issue
failed to achieve a mutually satisfactory result, CBM instituted
an
action in the North Gauteng Division of the High Court for damages.
Its damages represented the income
[3]
it allegedly lost due to Iveco’s failure to supply 40 vehicles
for conversion every month. Iveco pleaded that CBM had not
at all
times maintained a minimum manufacturing capacity of 40 bus
conversions per calendar month, as it even failed, on occasion,
to
ensure that conversions numbering below 40 per month were completed
within a reasonable time and without undue delay (the capacity
defence). It also pleaded that many conversions had not been of ‘an
acceptable quality’ (the quality defence). These
obligations on
the part of CBM were pleaded to be obligations ‘reciprocal to
[Iveco’s] duties in terms of the agreement’
which, if
breached, would preclude CBM’s claim.
[3]
The
trial court
[4]
granted an order
separating the merits and quantum. It observed that ‘the
contract is bilateral because the core obligations
are reciprocal in
that the performance of the plaintiff is conditional on the
performance of the defendant.’ It said that
[u]nless the
defendant supplied 40 vehicles the plaintiff could not convert 40
vehicles’. It found that the agreement contemplated
that CBM
would convert a minimum of 40 vehicles per month and, accordingly,
that Iveco’s failure to supply that number of
vehicles amounted
to a breach of the agreement. The capacity and quality defences were
not considered. The trial court granted
the following order: ‘The
claim succeeds and judgement is entered for the plaintiff with
costs’.
[4]
The
full court
[5]
of the North
Gauteng Division of the High Court dismissed an appeal against the
judgment of the trial court with costs. However,
because the
trial court had disregarded the order of separation, it altered the
trial court’s order to read that the ‘Plaintiff’s
claim succeeds with costs, with the quantum of damages to be
adjudicated upon separately’. Regarding the capacity and
quality
defences, the full court concluded that, as the ‘Plaintiff’s
claim is one for damages ... and that specific performance
was
certainly not sought ... [the] evidence relating to alleged
performance by the Plaintiff a quo was therefore irrelevant and
need
not be dealt with’.
[5]
The present appeal, with the special leave
of this court, is against the order of the full court.
The primary issue
– the interpretation of the agreement
[6]
It
is trite law that the provisions of an agreement must be read and
understood in the context within, and having regard to the
purpose
for which, the agreement was concluded.
[6]
The point of departure is the language employed in the document.
[7]
But the words must not be considered in isolation. A restrictive
examination of words, without regard to the context or factual
matrix, has to be avoided. Evidence of prior negotiations is
inadmissible, but evidence relating to the surrounding circumstances
and the meaning to be given to special words and phrases used by the
parties, is admissible.
[8]
No
distinction is drawn between context and background circumstances.
Words have to be interpreted sensibly so as to avoid unbusinesslike
results.
[7]
The
introduction/preamble to an agreement is instructive, but not
decisive, as it is regarded as subordinate to the operative part
of a
contract, which, if the meaning thereof is clear, will prevail over
anything to the contrary in the preamble. However, where
the
operative part is not clear, recourse may be had to the preamble to
assist in elucidating it.
[9]
The contextual setting for interpretation might furthermore include
subsequent conduct of the parties which indicates how
they understood
their agreement.
[10]
Recourse
to such evidence is permissible
[11]
where the evidence indicates a common understanding of the terms of
the agreement, and does not alter the meaning of the words
used,
provided such evidence is used as conservatively as possible.
[12]
All the above considerations must be considered holistically.
[13]
Insofar as it may find application, regard may also be had to the
contra
proferentem
rule.
The genesis
and terms of the agreement
[8]
Mr Vermeulen, the sole director and
shareholder of CBM, was responsible for the first draft of the
agreement which was sent to Iveco.
Iveco’s attorneys however
‘came up with the contract’ in its final form. Dr Jan
Nel signed the agreement
on behalf of Iveco and Mr Vermeulen signed
on behalf of CBM. The agreement expressly provides that it
constitutes the entire agreement
between the parties. No variation
thereto would be of any effect unless reduced to writing and signed
by the parties. Iveco appointed
CBM ‘to manufacture bus
conversions in terms of this agreement.’ The ‘Introduction’
clause recorded that
Iveco wished ‘to appoint [CBM] to
manufacture a minimum of forty (40) bus conversions per month’,
and that CBM wished
‘to accept the appointment ...’. The
agreement would endure for an initial period from 1 January 2007
until 31 December
2007, and would continue for an indefinite period
thereafter, subject to the right of either party to terminate the
agreement on
six months’ written notice.
[9]
The further material terms of the agreement
included the following:
‘
5
PRODUCTS & SERVICES TO BE PROVIDED
BY CBM:
5.1 CBM undertakes
to ensure that it has sufficient capacity and suitably qualified
staff, material and other facilities available
at all times to enable
it to:
5.1.1 Manufacture a
minimum of forty (40) bus conversions per calendar month totalling
480 conversions during the INITIAL CONTRACT
PERIOD.
5.1.2 Increase
production of an additional twenty (20) bus conversions per calendar
month to a total of sixty (60) bus conversions
per calendar month if
required by Iveco SA.
5.1.3 Ensure that
schedule of vehicle completion dates is sent to Iveco SA on a weekly
basis. This schedule is to be sent to Iveco
SA every Monday. Should
the Monday fall on a public holiday, the schedule will be sent on the
next working day.
5.1.4 Ensure that
Iveco SA are notified in writing a week in advance when more vehicles
should be delivered to ensure a continuous
flow of production in
order to meet the minimum requirement of forty (40) bus conversions
per month.
5.1.5 Ensure that
Iveco SA are notified in writing once vehicles have been completed
and are ready for collection.
5.1.6 Ensure that an
acceptable quality of bus conversions is provided and maintained
throughout the period of the agreement.
5.1.7 Ensure that no
dealer direct orders take preference and are accepted by CBM during
the contract period prior to the said forty
units for Iveco SA.
...
16
BREACH AND
TERMINATION:
16.1 Subject to the
provisions of clause 1.5.2 no party shall be entitled to cancel this
Agreement as a result of a breach, unless:
16.1.1 The
party has received written notice of the details of the breach,
calling upon the party to remedy the breach and
such party fails to
remedy the breach within thirty (30) days of receipt of the notice,
and
16.1.2 The
breach is substantial and material.
16.2 It is recorded
that the manufacturing of a minimum quantity of forty (40)
conversions per month is an essential term of this
Agreement and is
of the essence.’
...
18
CONDONATION OR
WAIVER
18.1 The failure by
any parties to enforce compliance of the provisions of this
Agreement, shall not be deemed to constitute a waiver
of the parties
rights.’
The context
and purpose of the agreement
[10]
For
some time prior to the conclusion of the agreement,
[14]
CBM and four other businesses
[15]
manufactured conversions for Iveco. The extent of the demand for
conversions depended on orders placed with Iveco through an
independent
dealer network. The volume of demand for conversions at
that stage was lower, initially around 10 and later 15 to 20
conversions
per month. With the boom in the South African economy in
2007, and the advent of the taxi recapitalisation programme in the
minibus
industry, an increased demand for conversions was
anticipated.
[11]
Iveco would require the services of CBM and
other converters to satisfy this increased demand for conversions.
The agreement did
not grant any exclusive rights to CBM. CBM could
manufacture conversions for customers other than Iveco as well, but
was required
to prioritise work for Iveco. Nor did the agreement
contain an express term guaranteeing a supply of vehicles for 40
conversions
per month. Mr Vermeulen testified that the calculations
regarding the taxi recapitalisation pointed to ‘more than 200
vehicles
a month that was supposed to be supplied’. It was
envisaged that the conversions which CBM would be required to
manufacture,
would increase to between 40 to 60 vehicles per month.
He fairly conceded that, at that stage, the anticipated demand was
just
a calculation in volumes of what the government planned; it was
only realised later on that the market would determine the number’;
that the only true measure of the increased number of conversions
required per month would be the market demand; and that anything
beyond that would be a mere projection – particularly as Iveco
was not a dealer, and was not marketing the conversions directly.
It
appears though that there was optimism on the part of all in respect
of demand.
[12]
It was common cause that in order to meet
the increased demand, a substantial capital investment was required
on the part of CBM.
It would have to increase its capacity in various
respects, including engaging a larger workforce, to enable it to
manufacture
40 conversions per month. It was in that context that the
agreement was drafted and concluded.
[13]
Following on the conclusion of the
agreement, CBM secured larger premises from which to operate. It
spent some R4.4 million to ready
the premises for a manufacturing
capacity of 40 conversions per month and employed additional staff.
Mr Vermeulen testified that
CBM invested in the belief and hope that
it would realise a positive return on its investment, if the numbers
which it and Iveco
had speculated about materialised.
[14]
During the initial period Iveco, at times,
ordered 40 or more conversions per month. Although orders for
conversions were initially
placed with CBM by Iveco, this
subsequently changed with some dealers exercising the option to buy a
new vehicle from Iveco and
thereafter selecting a converter, of its
choice or its customer’s choice, elsewhere, to attend to the
conversion of the vehicle.
It appears that when Iveco had a free
choice, it, in the main, chose CBM as its preferred converter.
However, as there were these
other businesses also manufacturing
conversions and thus competing for the demand, the marketing required
to attract conversions
fell largely to the conversion manufacturers.
These factors all appear to have contributed to a decline in the
supply of vehicles
by Iveco to CBM, which culminated in the
litigation leading up to the present appeal. Iveco also placed the
blame for the downturn
in volumes of vehicles for conversion on the
diminished quality of the conversions manufactured by CBM and
complaints received
from its customers. It furthermore transpired
that where CBM, at one stage, manufactured roll over kits for Iveco,
orders for conversions,
corresponding to the number of roll over kits
manufactured, were not always received from Iveco.
Discussion
[15]
It is against the aforesaid contextual
setting that I turn to interpret the relevant clauses of the
agreement. Clause 3.1 appointed
CBM ‘to manufacture bus
conversions in terms of this Agreement’. Clause 5.1.1
required it to maintain the capacity
to manufacture a minimum of 40
conversions per month. CBM found larger premises and expended an
amount of some R4.4 million to
have the capacity to manufacture a
minimum of 40 conversions per month. It would be unbusinesslike to
undertake the obligation
to have that capacity, suitably
qualified staff, material and other facilities available at all
times, at CBM’s cost
and risk, if Iveco could provide vehicles
for conversions in volumes of less than 40 per month at its
discretion.
[16]
On Iveco’s construction of the
agreement, CBM only had to convert what was provided to it. CBM was
one of a number of converters
used by Iveco, which would then suggest
that Iveco could starve CBM of the supply of conversions, whilst
still insisting that CBM
maintain sufficient capacity to manufacture
40 conversions per month, even though those conversions were not
being realised.
[17]
An interpretation that 40 vehicles were to
be supplied for conversion on a monthly basis, is also consistent
with the terms of clause
5.1.4. It provides for weekly notifications
to ensure a continuous flow of production ‘in order to meet the
minimum requirement
of forty (40) bus conversions per month’ at
all times. Monthly production lists were sent to Iveco. If, in the
discretion
of Iveco, any lesser number of conversions could have been
requested by it, then there would have been no need to create an
administrative
process providing for the delivery of notices ‘to
ensure a continuous flow of production in order to meet the minimum
requirement
of forty (40) bus conversions per month’. Such an
interpretation is also consistent with the undertaking by CBM to
ensure
that no orders directly from another dealer would take
precedence over ‘the said 40 units for Iveco SA’,
contained
in clause 5.1.7. Significantly also, it was not the
capacity to manufacture 40 conversions, but the actual ‘
manufacture
of a minimum
of 40 conversions’,
that was stipulated to be an essential term of the agreement in
clause 16.2 for the purpose of any cancellation
(Emphasis added.)
This interpretation is also consonant with the termination on six
months’ notice clause, which gave either
party an opportunity
to assess whether it was to its advantage in the prevailing
circumstances to continue with the agreement or
to withdraw. The six
month period was one that gave each party sufficient time to adjust
to changing circumstances.
[18]
Iveco’s argument that these
provisions related only to CBM’s capacity to ‘manufacture’
a minimum of 40 bus
conversions per month, being the express
undertaking in clause 5.1.1, and that it did not require Iveco to
provide at least 40
vehicles per month for that purpose, could at
best have had some persuasive value if clause 5.1.1 was the only
provisions containing
a reference to a minimum of 40 conversions per
month. It is in conflict with the remainder of the wording of the
agreement. On
a proper construction of the agreement as a whole, the
argument cannot be sustained. Not surprisingly, the parties acted
consistently
with the interpretation of the agreement preferred
above, as the following two instances demonstrate.
[19]
Regarding
the first instance, the full court in reaching a similar conclusion
regarding the interpretation of the agreement, referred
to the
attempt by Iveco at one stage when the demand for conversion fell, to
‘change the obligation of 40 vehicles per month
to an
undetermined lower number of vehicles,.. [which] ...proposal was not
accepted by the [respondent]’. This refers to
a proposed
addendum to the agreement, which was attached to an email dated 17
September 2008 which was sent by Mr Hoffman, the
Sales and Marketing
director of Iveco at the time, to amongst others Mr Mienie, the
Finance director of Iveco,
[16]
prior to Mr Hoffman meeting with Mr Vermeulen. In the email Mr
Hoffman stated that he would ‘try to get them [CBM] to sign’.
The addendum provided:
‘
With
reference to the points 5, 5.1, 5.1.1 and 16, 16.2 of the agreement
it is understood between the above named parties that a
changed
economic environment and the difficulties in the targeted taxi market
have led to a significant slowdown of sales, especially
bus
conversions as manufactured by CBM. The number of previously agreed
40 units per month will be reduced to a lower, undetermined
number of
units to be produced in accordance and within the needs of the IVECO
SA sales organization.’
Mr
Vermeulen’s undisputed evidence was that when he met with Mr
Hoffman, he declined to sign the addendum because the ‘lower,
undetermined number’ of conversions referred to therein could
not be justified in view of the investment CBM had already
made. The
terms of the addendum would render CBM’s investment cost
ineffective.
[20]
There would have been no reason for Iveco
to want to conclude such an addendum if it was not required to
provide a minimum of 40
vehicles per month for conversion, and if it
could, instead, provide any number of vehicles to CBM for conversion
in its discretion.
Mr Hoffman was still employed by Iveco at the time
of the trial but was not called to testify to explain what else the
addendum
might have intended to achieve.
[21]
In
the second instance, Mr Vermeulen testified that CBM sent production
lists to Iveco every month. He however came to realise
[17]
that despite Iveco having indicated that the sales of converted buses
had reduced, Iveco was sending vehicles it required for conversion
to
other converters. He instructed CMB’s attorney to address a
demand to Iveco for the supply of a minimum of 40 vehicles
per month
for conversion. Iveco’s attorney replied to this demand on 30
May 2011 as follows:
‘
4.
Due to the down-turn of financial markets worldwide and in or about
September 2008, discussions were held by Mr Markus Hoffman
of our
client with Mr Vermeulen of your client where a reduction of the
agreed forty units per month to an undetermined number
of units to be
produced in accordance with the needs of our client’s sales
organisation was discussed. It was agreed that
our client would
prepare an addendum which it did and which was e-mailed to your
client on 17th September 2008.
5.
Whilst Mr Vermeulen of your client failed to sign the addendum, our
respective clients continue to conduct business in terms
of the
agreement in respect of units below the minimum as specified in the
agreement. This was accepted by your client who continued
with
conversions without demur or complaint until receipt of your letter
under reply.
[22]
There
would be no need for Iveco to assert that business was continued in
respect of units ‘below the minimum as specified
in the
agreement’, if Iveco had not considered itself obliged to
provide a minimum of 40 vehicles for conversion per month.
It was not
contended that the attorney’s letter did not convey Iveco’s
instructions accurately. The fact that fewer
vehicles were being
converted by CBM, without demur or protest, is legally irrelevant in
the light of the provisions of clause
18.1
[18]
of the agreement.
[23]
Finally,
to the extent that there might be any ambiguity because clause 5.1.
refers to CBM having to ensure that it has sufficient
‘capacity’
to manufacture 40 conversions per month, in contradistinction to
clauses 5.1.4, 5.1.7 and 16.2 which all
suggest that the parties
contemplated a ‘minimum’ of 40 conversions per month
being manufactured, regard may be had
to wording of the introductory
clause and the
contra
proferentem
rule. Any ambiguity that might still remain must also be interpreted
against Iveco, as
proferens
,
in accordance with the
contra
proferentem
rule.
[19]
[24]
For
all the reasons set out above, it has been shown that neither the
trial court, nor the full court, erred in finding that Iveco
was
contractually obliged to provide 40 vehicles for conversion per
month. To that extent the appeal must fail. The effect of that
conclusion is that for each month, when the obligation to provide the
minimum 40 vehicles was not met, CBM was notionally entitled
to claim
damages for Iveco’s failure to do so, without any need to
cancel the agreement.
[20]
The separation of
issues, the reciprocity of obligations, and damages
[25]
This
court has frequently cautioned that a separation of issues should not
be resorted to readily where issues arise that are intertwined.
It
held in amongst others
Consolidated
News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks
(Pty) Ltd and Another
[21]
that
:
‘
Piecemeal
litigation is not to be encouraged. . . This Court has warned that in
many cases, once properly considered, issues initially
thought to be
discrete are found to be inextricably linked. And even where the
issues are discrete, the expeditious disposal of
the litigation is
often best served by ventilating all the issues at one hearing. A
trial court must be satisfied that it is convenient
and proper to try
an issue separately.
In
the present case counsel for both parties informed us that
notwithstanding a decision in this matter a number of issues would
still be outstanding. Not all of the remaining issues were
identified, nor do they appear to have occupied the mind of the court
below.’
[26]
Rule
33(4) of the Uniform Rules of Court,
[22]
providing for a separation of issues, exists ‘so that a factual
issue can be determined which can give direction to the rest
of the
case and, in particular, to obviate the leading of evidence. The
purpose is to determine the plaintiff’s claim without
the costs
and delays of a full trial.’
[23]
The ‘word “convenient” within the context of the
sub-rule conveys not only the notion of facility or ease or
expedience, but also the notion of appropriateness and fairness.’
[24]
[27]
In
Denel
(Edms) Bpk v Vorster
[25]
Nugent JA cautioned that, although rule 33(4) ‘is aimed as
facilitating the convenient and expeditious disposal of litigation’,
an order that issues are separated will not necessarily lead to that
result. He continued:
‘
In
many cases, once properly considered, the issues will be found to be
inextricably linked, even though, at first sight, they might
appear
to be discrete. And even where the issues are discrete, the
expeditious disposal of the litigation is often best served
by
ventilating all the issues at one hearing, particularly where there
is more than one issue that might be readily dispositive
of the
matter. It is only after careful thought has been given to the
anticipated course of the litigation as a whole that it will
be
possible properly to determine whether it is convenient to try an
issue separately.’
[26]
[28]
In the present matter the question arises
as to which issues were to be included under the ‘merits’
when the order for
separation was granted, and whether, those issues
did not overlap with issues more appropriately forming part of the
inquiry into
damages. The interpretation issue, determined above,
could be separated, although even that separation might require the
same witnesses
to be recalled in respect of damages, thus perhaps
making it an issue not to be separated ‘conveniently’.
The further
issues arising from the pleadings, which might affect the
merits, included at least:
(a)
whether Iveco’s obligation to provide vehicles for 40
conversions per month, and the obligations of respondent to
manufacture
a minimum of 40 conversions timeously and of an
acceptable quality every month, were reciprocal;
(b) whether and when
CBM failed to comply with its obligations; and
(c)
if so, the materiality and effect of such non-compliance.
[29]
The agreement is prima facie a bilateral
synallagmatic contract imposing a number of obligations on each of
the contracting parties.
Iveco pleaded that its obligation to supply
vehicles to manufacture a minimum of 40 conversions per month, and
CBM’s obligations
to manufacture a minimum of 40 conversions of
an acceptable quality every month, were reciprocal. It argued that if
it is found
that CBM did not maintain the capacity to manufacture a
minimum of 40 conversions per month, or that the quality of
conversions
was unacceptable, that it was excused altogether from
providing 40 vehicles per month.
[30]
Much
time was also spent in the evidence on the alleged defective quality
of some conversions
[27]
and
the failure to deliver conversions, even when they numbered
significantly less than 40 per month timeously, within a month,
or at
least within a reasonable time. In many instances conversions of only
a few vehicles, often as few as six or less, would
take months to
complete. Whether the failure to manufacture 40 conversions in each
month was all due to Iveco’s conduct,
or was in part due to
defective quality of the work, and whether CBM would have been able
to manufacture 40 conversions if supplied
with 40 vehicles, are
issues that called for thorough consideration and detailed evidence.
It might also call for a consideration
of whether the failure to
supply 40 vehicles over a sustained period crippled capacity. These
issues impact potentially both on
the merits of each claim for
damages and on the quantum. The issues were not explored properly, as
they ought to have been. The
trail court did not consider or
decide any of these issues and insufficient thought by both parties
was given to the necessary
evidence. The full court took the view,
wrongly, that as CBM’s claim was one for damages, any evidence
relating to CBM’s
failure to meet its obligations was
immaterial and affected only the quantum of damages. That conclusion
was not supported on appeal
by CBM.
[31]
Before us, counsel on behalf of both
parties were constrained to concede that insufficient thought had
been given to the aforementioned
aspects when the parties agreed to a
separation of issues, and that further evidence, which impacted both
on merits and damages
ought to have been considered and led. It was
agreed that this court ought to decide the primary issue and if it
redounded in favour
of CBM the matter ought to be remitted to the
trial court for further ventilation on those aspects, in accordance
with the terms
of the order set out below.
Costs
[32]
It
is appropriate, as the costs of the appeal might be influenced by the
success or failure of the claim for damages, which at this
stage is
still uncertain, that the costs of the appeals before the full court
and this court be reserved pending finalisation of
the proceedings
before the trial court.
[28]
The matter may thereafter be re-enrolled, and further submissions
advanced on the question of costs.
The order
[33]
The following order is granted:
1.
The appeal succeeds to the extent set out
below.
2.
The order of the full court of the North
Gauteng High Court is set aside and substituted with the following:
’
(a)
The appeal succeeds to the extent set out below.
(b)
The judgment of the trial court is set aside and substituted with the
following order:
“
(i)
It is declared that the agreement concluded between the parties
obliged the defendant to deliver a minimum of 40 vehicles for
conversion to the plaintiff per month;
(ii) The matter is
remitted to the trial court to determine all the remaining
outstanding issues, which will include, without detracting
from the
generality of the aforesaid, a determination of all issues relating
to the reciprocity of obligations, a determination
of which
obligations were reciprocal, the nature and extent of any
non-compliance with such obligations, the effect of such
non-compliance,
and a determination of the respondent’s
damages, if any;
(iii)
The costs are reserved.”’
3.
The costs of the appeals before the full
court and this court are reserved pending the finalisation of the
proceedings before the
trial court, whereafter the matter may be
re-enrolled and further submissions advanced regarding the liability
for the reserved
costs.
_____________________
P A KOEN
ACTING
JUDGE OF APPEAL
Appearances
For
appellant: D Vetten
Instructed
by: Lovius Block
31
First Avenue
Westdene
Bloemfontein
Ref
C12973*PDY/mn/AD317/18.
For
respondent: JP Vorster SC and CA Kriel
Instructed
by: Phatshoane Henney
35
Markgraaf Street
Westdene
Bloemfontein
(Ref
J le Riche/Bianca Strydom
[1]
The
conversions were predominantly to 23-seater buses but the agreement
also provided for conversion to
16
and 28 seater buses.
[2]
Iveco
also asserted that from the end of 2008, instead of it being the
only conduit for conversions, private owners and dealers/franchisees
placed orders for conversions directly with CBM as one of three
manufacturers, and that these numbers ought to be taken into
account
when determining whether there was compliance with the respective
obligations of the parties.
[3]
Although
the agreement terminated on notice on 30 November 2011, CBM’s
claim for lost income, represented by the profit
it allegedly would
have made had it manufactured 40 vehicles per month, was confined to
the period from June 2009 to September
2011.
It
claimed for 1120 conversions (calculated at 40 conversions per
month) at an agreed price of R45 300 including VAT per conversion,
at an average profit loss of 9%, resulting in a claim for payment of
R4 566 240.
[4]
Per
Makhafola J.
[5]
Fabricius
J, Kollapen and Mokose JJ concurring.
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) at 603E-604D;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014 (2) SA 494
(SCA) para 12;
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018] ZASCA 176
;
2019 (3) SA 398
(SCA) paras 59-61;
Swart
en ‘n Ander v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
(A) at 202C-D;
Coopers
& Lybrand and Others v Bryant
[1995] ZASCA 64
;
1995 (3) SA 761
(A) at 767H-768E;
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA) at 409I-410B.
[7]
See
for example
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018]
ZASCA 176
;
2019 (3) SA 398
(SCA) para 63.
[8]
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
[2009] ZASCA 7
;
2009 (4) SA 399
(SCA);
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018] ZASCA 176
;
2019 (3) SA 398
(SCA) para 67.
[9]
RH
Christie
& GB Bradfield
Christies
Law of Contract in South Africa
7 ed(2016) at 251, the previous edition of which was referred to
with approval in
ABSA
Bank Limited v South African Commercial Catering and Allied Workers
Union National Provident Fund (under curatorship)
[2011] ZASCA 150
;
2012 (3) SA 585
(SCA) para 32.
[10]
Unica
Iron and Steel (Pty) Ltd and Another v Mirchandani
[2015]
ZASCA 150
;
2016 (2) SA 307
(SCA) para 21.
[11]
Urban
Hip Hotels (Pty) Ltd v Kcarrim Commercial Properties (Pty) Ltd
[2016] ZASCA 173
para 21.
[12]
Ibid.
[13]
See
generally
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018]
ZASCA 176; 2019 (3) SA 398 (SCA).
[14]
Iveco
suggested that an association relating to the conversion of vehicles
by CBM for Iveco existed from 2002 to 2003. CBM suggested
it was
from 1999. Nothing turns on this.
[15]
Iveco
also used other converters, namely Angelo Kater (from 2002), Bus
Truck (2007/2008), Mr Coach (but very minimally) and TFM
(from
2003).
[16]
Mr
Mienie under cross examination denied having had sight of Mr
Hofmann’s email. This denial does not affect the import
of
what the addendum sought to achieve.
[17]
CBM
would in some months manufacture 40 roll over kits which would be
supplied to Iveco, but then CBM would not receive 40 vehicles
for
conversion.
[18]
Similarly,
Iveco’s failure to have taken steps regarding any delayed
conversion of some vehicles would likewise be legally
irrelevant.
[19]
Verba
fortius accipiuntur contra proferentem
(words
are interpreted against/to the disadvantage of the party uttering
them).
[20]
A
plaintiff who claims damages for breach, whether expectation or
reliance damages, need not cancel – see generally
RH
Christie
& GB Bradfield
Christies
Law of Contract in South Africa
7
th
ed (2016) at 644.
Indeed,
during the currency of the agreement neither party sought to cancel
the agreement.
[21]
Consolidated
News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks
(Pty) Ltd and Another
[2009]
ZASCA 130
;
2010 (3) SA 382
(SCA) paras 89-91. Also see
City
of Tshwane Metropolitan Municipality v Blair Atholl Homeowners
Association
[2018]
ZASCA 176
;
2019 (3) SA 398
(SCA) para 52;
South
African Broadcasting Corporation SOC Ltd and Others v Democratic
Alliance and Others
[2015]
ZASCA 156
;
2016 (2) SA 522
(SCA) para 67;
ABSA
Bank Ltd v Bernert
[2010]
ZASCA 36
;
2011 (3) SA 74
(SCA) para 21.
[22]
Rule
33(4) provides that:
‘
If,
in any pending action, it appears to the court
mero
motu
that there is a question of law
or fact which may conveniently be decided either before any evidence
is led or separately from
any other question, the court may make an
order directing the disposal of such question in such manner as it
may deem fit and
may order that all further proceedings be stayed
until such question has been disposed of, and the court shall on the
application
of any party make such order unless it appears that the
questions cannot conveniently be decided separately.’
[23]
DE
van Loggerenberg
Erasmus
Superior Court Practice
2 ed (2016) at D1-436. (Citations omitted.)
[24]
Ibid.
[25]
Denel
(Edms) Bpk v Vorster
2004
(4) SA 481
(SCA) at 484I-485B.
[26]
Denel
(Edms) Bpk v Vorster
(op
cit fn 24) at 485A-C.
[27]
Seat
upholstery was cracking, escape hatches that were installed for
safety became loose and water leaked into the cab, and seat
covers
were coming loose. According to Mr Wannenburg, by 2010 some dealers,
for example AFS, Italian Commercial, and Track City,
no longer
wanted conversions manufactured by CBM, and others did not want to
send vehicles for conversion to CBM because of the
problems relating
to quality and late performance.
[28]
Pretorius
v Slabbert
2000
(4) SA 935
(SCA) at 939E-G.