IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No: 4086/2020
In the appeal between:
TECHNOLOGIES ACCEPTANCES RECEIVABLE First Plaintiff
(PTY) LIMITED
FINTECH UNDERWRITING (PTY) LIMITED Second Plaintiff
and
PIETER TOERIEN PRODUCTIONS CC
t/a THEATRE ON THE BAY First Defendant
DYLAN SAGE Second Defendant
OXBOW EQUIPMENT (PTY) LIMITED Third Defendant
Heard: 26, 27 and 28 August 2024 and 12 September 2024
Judgment: 18 September 2024
JUDGMENT
Handed down by email to the parties’ legal representatives on 18 September 2024,
that date being the date of the Judgment
KANTOR, AJ:
1. A mix of Shifren,1 a non-variation clause, public policy and what Grusd2 means,
in the world of office equipment finance and contracts of sale.
2. Overview:
2.1. The third defendant (“Oxbow” or the third defendant) leased two printers
(“the Printers”) to First Defendant (“Toerien” or the first defendant ),
represented by Third Defendant (“Sage” or the second defendant), in
terms of a written Master Rental Agreement concluded on 1 June 201 6
(“the MRA”).
2.2. The MRA was to replace an agreement in respect of other printers which
had been concluded by Toerien with a supplier called CBA (“CBA”) which
Toerien no longer wanted . Toerien was liable to CBA for an early
cancellation payment. Oxbow agreed to incorporate the extent of the
CBA early cancellation into the monthly payments in terms of the MRA
and CBA was to be paid its early cancellation payment.
2.3. Plaintiffs contend that the MRA was ceded to Second Plaintiff (“FUN”)
and from FUN to First Plaintiff (“TAR”). Where referred to together, TAR
and FUN may also be referred to as the plaintiffs.
2.4. Monthly rentals payments were charged to and debited from Toerien’s
bank account. There is a dispute as to the amount thereof, with Toerien
contending that it was over -charged for three years , in consequence of
1 SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964 (4) SA 760 (A)
2 Bank v Grusd 1939 TPD 286
which Toerien purported to cancel the MRA and tendered return of the
Printers, and claims (in a counter claim) payment of what it avers it
overpaid (R209 130.88).
2.5. The plaintiffs contend that Toerien is liable in the amount of
R451 466.66, alternatively they claim that amount from Oxbow , on the
basis of representations, warranties and indemnifications by Oxbow, in
the event that their claims against Toerien and Sage are not upheld and
a further R209 130.88 in the event that Toerien’s counter claim is upheld.
3. The law requires a discipline to pleading, for the d elineation of the issues
between particular parties:
3.1. The introduction to Amler’s Precedents of Pleadings 9ed reads as
follows in part:
Purpose of pleadings: A party must define its cause of action and
defence in the appropriate pleading in the court of first instance to inform
the other parties to the matter of the case they must meet and of the
relief sought against them in that court. This is a fundamental principle of
fairness in the conduct of litigation, which promotes the parties' rights to
a fair hearing guaranteed by section 34 of the Constitution.
South African Police Service v Solidarity obo Barnard 2014 (10) BCLR
1195 (CC), [2014] 11 BLLR 1025 (CC),
2014 (6) SA 123 (CC) para. 202
Pleadings define the issues not only for the other party and the trial court
but also for any court of appeal. The duty of courts is to adjudicate upon
the pleaded disputes and those disputes alone.
Molusi and others v Voges NO and others 2016 (7) BCLR 839 (CC),
2016 (3) SA 370 (CC)
Fischer and another v Ramahlele and others [2014] 3 All SA 395 (SCA),
2014 (4) SA 614 (SCA) para. 13
Barkhuizen v Napier 2007 (7) BCLR 691 (CC), 2007 (5) SA 323 (CC)
para. 39
Damons v City of Cape Town 2022 (10) BCLR 1202 (CC), [2022] 7
BLLR 585 (CC), (2022) 43 ILJ 1549 (CC) paras 117-119
The oft-repeated statement that 'pleadings are made for the court not the
court for the pleadings' may be misunderstood. As mentioned, pleadings
are made primarily for the parties. They are also made for the court,
meaning that they circumscribe the function of the court in the matter.
However, a court should not be hampered in deciding a matter by
pleading technicalities.
3.2. In Minister of Safety and Security v Slabbert 2010 2 All SA 474 (SCA) it
was held at paragraph 11 as follows:
“The purpose of pleadings is to define the issues for the other
party and the court. A party has a duty to allege in the pleadings
the material facts upon which it relies. It is impermissible for a
plaintiff to plead a particular case and seek to establish a
different case at trial. It is equally not permissible for a trial court
to have recourse to issues falling outside the pleadings when
deciding a case.”
3.3. Mr Fasser, who appeared for the plaintiffs, accepted that the principles in
Slabbert are all correct but submitted that they are complied with by the
plaintiffs. The import of this appears below.
4. The pleaded cases of the parties are important. They are as follows:
4.1. Between plaintiffs and first and second defendants, in convention:
4.1.1. Plaintiffs claim (in the alternative between them) that Toerien is
liable for the balance of R451 466.66 due in terms of the MRA
(ceded from Oxbow) , and that Sage is jointly and severally
liable as guarantor for that amount.
4.1.2. Toerien and Sage’s defence is that the incorrect amount in
terms of the MRA w ere deducted from Toerien’s account which
constituted a breach of the MRA which it cancelled.
4.1.3. TAR and FUN contend that the correct monthly rental amount
in terms of the MRA was R11 426.47, that being the amount
which it deducted on a monthly basis from Toerien’s account.
4.1.4. Toerien and Sage contend that the correct monthly rental
amount in terms of the MRA was R6 235.80.
4.1.5. What had happened to cause the impasse was that the amount
of R6 235.80 provided for in the MRA (in handwriting) had been
crossed out and R11 426.47 inserted in its place (in
handwriting) and initialled by Sage for Toerien but not by
anyone for Oxbow.
4.1.6. The core issue is whether this disputed amendment (“the
Disputed Amendment”) was effective , taking into account the
non-variation clause in clause 15.1 of the MRA (“the Non-
Variation Clause ”). The wording of the relevant part of this
clause is quoted verbatim below.
4.1.7. The other main issue is wheth er the MRA was validly ceded
from Oxbow to FUN and then to TAR.
4.1.8. It is in dispute whether the public policy issue raised by Oxbow
in its Plea against the pla intiffs, if upheld, will have implications
for the claim in convention between the plaintiffs and the first
and second defendants, because it was not pleaded by the
plaintiffs.
4.1.9. The quantum of R451 466.66 is not in issue.
4.2. Between first defendant and plaintiffs, in reconvention:
4.2.1. Toerien avers that it overpaid the amounts due in terms of the
MRA in the total sum of R209 130.88, which sum was not due
and payable on the terms of the MRA. This turns on the
Disputed Amendment.
4.2.2. As a result of the overpayments, Toerien avers that TAR,
alternatively FUN, was enriched at the expense of Toerien,
which enrichment was unjustified.
4.2.3. The quantum of R209 130.88 is not in issue.
4.3. Between plaintiffs and third defendant, in convention:
4.3.1. The first part of t his cl aim in the amount of R451 466.66 is
conditional on the plaintiffs’ claim against Toerien and Sage not
being upheld (i.e. the claim for the portion of the rentals based
on the increased monthly rental in the context of the Disputed
Amendment).
4.3.2. The second part of this claim in the amount of R209 130.88 is
conditional on Toerien ’s counter claim against the plaintiffs
succeeding (i.e. the claim for the rentals which Toerien alleges
it overpaid based on the lower monthly rental in the context of
the Disputed Amendment).
4.3.3. The p laintiffs claim that there was a breach of certain
representations/warranties given by Oxbow in relation to the
MRA. The plaintiffs also rely on an indemnification from Oxbow.
4.3.4. Third Defendant pleads that the monthly rental was amend ed
to be R11 426.47.
4.3.5. Third Defendant also pleads that if the Non-Variation Clause is
an impediment to this, then it would be contrary to public policy
to enforce it.
4.3.6. The other main issue is whether the MRA was validly ceded
from Oxbow to FUN and then to TAR.
4.3.7. The quantum of R451 466.66 and R209 130.88 is not in issue.
5. During the course of the trial of the matter:
5.1. Mr Fasser placed on record that the plaintiff s are not relying on any
estoppel, both in respect of (ostensible) authority and in respect of the
Non-Variation Clause.
5.2. Mr Jonker, who appeared for the first and second defendants, placed
on record that the authority of Sage to act on behalf of Toerien is not an
issue in this matter.
5.3. In regard to public policy:
5.3.1. This was not pleaded by the plaintiffs. A party invoking public
policy has the onus in this regard (Beadica 231 CC and Others
v Trustees for the time being of the Oregon Trust and Others
2020 (5) SA 247 (CC) at paragraph 37, Caratco v Independent
Advisory (Pty) Ltd 2020 (5) SA 35 (SCA) at paragraph 26).
5.3.2. In his opening address, Mr Fasser placed on record that , from
the plaintiffs ’ perspective, it is relevant that the plaintiffs have
not pleaded public policy and a finding on this aspect will have
legal implications for all the parties, whether the public policy
defence is upheld or not.
5.3.3. I asked Mr Jonker for his attitude in this respect and he pointed
out that public policy is not raised in the pleadings between the
first and second defendants, on the one hand, and the
plaintiffs, on the other , and in consequence submitted that it
was not in issue between them.
5.3.4. I raised with Mr Fasser, whether having been put on terms by
Mr Jonker, the plaintiff would wish to plead public policy in
respect of the N on-Variation Clause against the first and
second defendants. Mr Fasser placed on record that the
Plaintiff will not p lead public policy and that whatever
consequences may flow from that will flow.
5.3.5. The public policy aspect is dealt with in detail below.
5.4. Mr Fasser placed on record that the quantum of Toerien’s counter claim
is admitted, without admitting liability.
6. During the course of the trial of the matter, the parties agreed as follows
(recorded in a document filed of record):
“In addition to the admissions set forth in the pleadings, the parties
record the following additional admissions:
1. The plaintiffs are duly registered and incorporated in accordance with
the Company Laws of the Republic of South Africa.
2. The conclusion of the first main cession agreement, as pleaded in
paragraph 14 of the particulars of claim (“ the POC”), a copy of which
appears at page 117 of bundle “A”.3
3. From 1 August 2016 to 1 July 2019, Sasfin Bank Ltd debited the first
defendant’s account monthly with the rental payments provided for in
the version of the rental agreement appearing on page 136 of bundle
“A”.
4. Without admitting liability:
4.1 the first and second defendants admit the quantum of the
plaintiffs’ claim as set out in prayer 1 of the POC;4
4.2 the third defendant admits the quantum of the plaintiffs’ claim as
set out in prayer 5 of the POC, 5 and the quantum of the first and
second def endants’ counterclaim as set out in prayer (a) of the
CC.6
4.3 The plaintiffs admit the quantum of the first and second
defendants’ counterclaim as set out in prayer (a) of the CC.7 ”
Plaintiffs’ locus standi
7. The defendants contend that the plaintiffs lack locus standi, essentially because
there had not been compliance with certain procedural mechanisms for the
cessions. Oxbow further contended that the warranties relevant to this matter
were not ceded on a proper interpretation of the cession agreement.
3 Pleadings Bundle: page 10.
4 Pleadings Bundle: page 20.
5 Pleadings Bundle: page 20.
6 Pleadings Bundle: page 149.
7 Pleadings Bundle: page 149.
8. The plaintiffs led evidence which established that insofar as they were
concerned the cessions relevant to the matter had been concluded and were in
place and that they acted in terms thereof , which included the warranties,
representations and indemnification at issue in this matter.
9. A third party cannot enter into the fray in regard to procedural mechanisms and
interpretations in respect of an agreement to which it is not a party , absent an
estoppel or prejudice (Aussenkehr Farms (Pty) Ltd v Trio Transport CC 2002
(4) SA 483 (SCA) at paragraphs 24 to 27, Hillock v Hilsage Investments 1975
(1) SA 508 (A) at 514C-515B).
10. Faced with this legal position, Mr Jonker abandoned the locus standi point
taken by th e first and second defendants, save that he argued that the
unamended MRA without the purported handwritten amendments on it was the
true agreement and not the one with the purported handwritten amendments on
it and therefore the MRA was not ceded. In my view this has no merit: there
was only one document and one agreement in question , which either had a
valid handwritten amendment on it or not. It was the contract embodied in that
document, with or without the Disputed Amendment, which was ceded . It was
not a situation where , for example, the document signed on 1 June 2016 was
torn up and a new one signed on 22 June 2016 and the wrong one of the two
was ceded.
11. Similarly, Mr Quinn, who appeared for Oxbow, limited his submissions in regard
to locus standi to the argument that the cession between FUN and TAR, on a
proper interpretation thereof, did not include the warranties relied upon by
them. In my view this argument cannot be upheld based on the principles
upheld in Aussenkehr and Hillock.
12. I therefore conclude that the defendants’ arguments as to locus standi are of no
merit.
Plaintiffs’ claim in convention against first and second defendants as pleaded
13. This claim concerns, in effect, whether the Disputed Amendment was effective,
which is , in turn , answered by whether it complies with the N on-Variation
Clause.
14. The evidence revealed the following:
14.1. The MRA was signed by Sage for Toerien and on behalf of Oxbow by a
duly authorised representative of Oxbow (this was not in dispute).
14.2. The MRA was concluded between Toerien and Oxbow on 1 June 2016.
14.3. Clause 15.1 of the standard terms and conditions of the MRA provides
(in part) as follows:
“This agreement is the entire complete agreement between the
parties. No agreement differing from the terms of the shall be of
any force or effect unless it is in writing and signed by the
parties to this agreement.”
14.4. The “Agreed Monthly R ental”, Value Added Tax thereon and the “ Total
monthly rental (incl VAT)” in terms of the MRA were all provided for in
handwriting in the schedule on the main page thereof , the “ Total
monthly rental (incl VAT)” being in the amount of R6 235.80.
14.5. At some point between 22 and 30 June 2019 , the MRA was purported
to be amended in handwriting by crossing out and replacing the
handwritten figures in respect of the above -mentioned three items with
other figures , the “Total monthly rental (incl VAT) ” being purportedly
amended to be in the amount of R11 426.47. This is the Disputed
Amendment.
14.6. It is the differential between the two handwritten figures for the “ Total
monthly rental (incl VAT) ” which resulted in the dispute and claims in
this matter.
14.7. The crossing out and replacing of the handwritten figures in respect of
the above -mentioned three items was initial led by Sage on behalf of
Toerien. It was not signed by him. It was neither initialled nor signed on
behalf of Oxbow.
14.8. In my view, with the purported amendment having been neither
initialled nor signed on behalf of Oxbow, it does not comply with the
Non-Variation Clause in the MRA and is therefore not effective and of
force and effect. This appeared to be accepted by the parties and was
certainly not disputed by them with any vigour or at all.
14.9. This conclusion means that I need not consider the question as to
whether Sage having initialled the purported amendment , but not
signed it in full , would be sufficient for the purposes of compliance with
the Non-Variation Clause (I am of the view that it is , but that need not
be decided).
15. The finding in paragraph 14.8 above means that on the pleadings in respect of
the claim in convention between the plaintiffs, on the one hand, and the first
and second defendants, on the other hand, the plaintiffs have failed to establish
their pleaded case as to the Disputed Amendment and the first and second
defendants are successful against the plaintiffs in that respect , subject to the
possible legal implications of the defence of public policy raised by Oxbow on
which Mr Fasser submitted the plaintiffs intended to and were entitled to rely .
That submission and the defence of public policy is dealt with further below.
Toerien’s claim in reconvention for enrichment
16. Mr Quinn ’s cross-examination of Sage effectively teased out and stitched
together the facts and context underlying the purported amendment of the MRA
and the purpose thereof, which was ultimately that it was intended by both
Toerien and Oxbow to be amended as it was purported to be done and that this
was because Toerien and Sage had heavily underestimated th e cost of the
cancellation of its existing lease with CBA. The evidence was as follows:
16.1. Sage agreed on behalf of Toerien to the increased monthly rental
payment which is the subject of the Disputed Amendment.
16.2. He and Toerien were not tricked into agreeing t o and paying the
increased amount.
16.3. Mr Quinn put to Sage that it seems that there was a good faith attempt
to amend the contract but there was non -compliance with the
formalities, which Sage accepted.
16.4. The handwritten amendments to the MRA (i.e. the subject matter of the
Disputed Amendment) and the credit application form were made in
Sage’s presence by someone from Oxbow and Sage initialled the
amendments there and then.
16.5. Leaving aside formalities, he did in fact agree to these amendments.
16.6. Sage accepts that there was no malice, bad faith and fraud on the part
of anyone in regard to the Disputed Amendment.
16.7. There was a factual and business -like basis for the purported
amendments and the debits in the amended amounts.
16.8. Oxbow had presented a written comparison between CBA’s offering
and what Oxbow could offer , which included the CBA settlement
amount of R44 349.97 which had been provided to them by Sage . It
was Toerien’s responsibility to pay the CBA settlement amount, which
was to be built into the Oxbow contract rental payment.
16.9. Initially the CBA settlement was thought by Sage to be in respect of a
period of seven months resulting in the aforesaid sum of R44 349.97,
which he advised Oxbow. This was built into the paperwork signed on 1
June 2016, resulting in the rental payment of R5 470 (ex Vat) and the
“Total monthly rental (incl VAT)” of R6 235.80 provided for in the MRA,
which is the central f ocus of the dispute in regard to this aspect of the
matter.
16.10. On 21 June 2016 , Sage requested the settlement amount from CBA.
He was trying to get on top of what was owed. The settlement figure
was stated to be R329 738.22 (including VAT) in the CBA settlem ent
letter dated 21 June 2016 received by Sage. Later that day, Sage wrote
to Dayne Ridgeway (“Ridgeway”), representing Oxbow, and said that
CBA had sent a huge settlement amount in the CBA settlement fig ure
letter of 21 June 2016.
16.11. Sage had not realise d that the CBA contract had much more than
seven months to run and that the CBA settlement figure was as much
as it was.
16.12. Mr Quinn put that Toerien was in a predicament because it ha d binding
agreements with two service providers and that it would cost to get out
of either agreement.
16.13. Sage said to Ridgeway on 22 June 2016 that he is not sure how the big
CBA settlement would affect the contract signed with Oxbow.
16.14. Ridgeway tried to help with the CBA problem and said that in the worst
case scenario the Oxbow rental would have to increase but they w ill
cross the bridge when they got to it, ‘so do not stress’.
16.15. The CBA contract was found and given to Ridgeway by Sage with the
CBA settlement letter on or about 22 June 2016. The contract was 20
months in with 40 months to go (of the 60 month contract), as opposed
to the 6 or 7 months believed by Sage, which resulte d in the CBA
settlement figure being R329 738.22, and not the expected R44 349.97
which had been the basis for the figures in the MRA signed on 1 June
2016.
16.16. The CBA settlement figure of R329 738.22 was subsequently reduced
to R276 919.48, for reasons not material to this judgment.
16.17. Sage then recorded in an email to Ridgeway on 22 June 2016 that: ‘So
I guess we have to increase the rental proposal accordingly ?’
16.18. FUN paid the amount of R267 126.16 to CBA to settle the settlement
amount. CBA never asked Sage for money and never came to collects
its machines.
16.19. Oxbow installed the Oxbow machines on 17 June 2016.
16.20. Sage accepts that if Ridgeway had initialled the MRA then t he issue as
to the amendment of the MRA would not be before the court today.
17. The Disputed Amendment was therefore made by agreement between Oxbow
and Toerien.
18. The debt to CBA was initially thought by Sage to be in respect of a period of
seven months resulting in the sum of R44 349.97, which he advised Oxbow.
This was built into the paperwork signed on 1 June 2024 , resulting in the rental
payment of R5 470 (ex Vat) and the “ Total monthly rental (incl VAT) ” of
R6 235.80 provided for in the MRA, which is the central focus of the dispute in
regard to this aspect of the matter . It turned out this this was incorrect and the
Disputed Amendment was made. The debt owing by Toerien to CBA was finally
settled by the amount of R267 126.16 b eing paid by FUN to CBA, to be
financed by the increased monthly rentals which are the subject of the Disputed
Amendment in respect of the MRA. This was substantially more than what was
envisaged to be due to CBA in terms of the MRA concluded on 1 June 2016.
19. Mr Jonker argued that it was a term of the MRA that Oxbow was to pay CBA
and therefore there could not be an enrichment of Toerien and an
impoverishment of FUN/TAR by that payment being made.
20. I asked Mr Jonker whether this meant that it was a term of the MRA that Oxbow
was obliged to pay CBA whatever the amount of the debt to CBA turned out to
be, whether R44 349.97 or R267 126.16 or something else . His effective
answer was an affirmative . I asked him where that was in the agreement . It is
not there. He then said it was a tacit term. I do not agree with that. It would
mean that, were the debt later to be found out to be R500 000.00, then Oxbow
would be with paying that amount to CBA. That would be q uite a tacit term, to
say the least. I disagree with it.
21. R44 349.97 is what was envisaged to be financed for the purposes of the CBA
debt when the MRA in unamended form was concluded. This was subsequently
established to be in a much greater amount eventually resulting in a payment to
CBA of the amount of R267 126.16. When the MRA in unamended form was
concluded, the CBA settlement amount was envisaged to be R44 349.97. It
was not some floating figure for which Oxbow would be liable to pay whatever it
may be.
22. The liability to CBA for the amount of R267 126.16 was Toerien’s liability, not
Oxbow’s. There was no agreement that Oxbow was taking on that liability or
the liability to CBA, whatever amount it may have been – that explains why the
Disputed Amendment had to be made , in order to cater for the financing of the
huge under-estimation of the CBA settlement amount.
23. That amount could have been paid to Toerien for it to pay to CBA or Toerien, at
its instance, could have elected to use the funds as w orking capital in its
business and continue to pay the monthly instalments to CBA as well as
Oxbow. In any of these instances, t he monthly rentals would remain the same.
As an example of a nother difference, t he payment instruction forming part of
the discounting letter itself from Oxbow provides for payment of the full amount
from FUN into one account.
24. As a result, the plaintiffs (FUN) paid R267 126.16 for the benefit of Toerien.
Whether the figure is R267 126.19 or that amount less the R44 349.97
envisaged when the MRA in unamended form was concluded on 1 June 2016 ,
it is greater than the R209 130.88 claimed by Toerien in its counter claim.
25. Toerien’s enrichment claim is for overpayments of the monthly rentals in terms
of the MRA in the amount of R209 130.88, which is exceeded by the payment
to CBA.
26. Toerien has therefore not been impoverished and neither of the plaintiffs has
been enriched.
27. I therefore conclude that Toerien’s counter claim fails.
Public policy
28. Public policy will be dealt with at this point because, although only pleaded by
Oxbow and not by the plaintiffs , it was argued by Mr Fasser that the resolution
of this issue has legal implication s for the plaintiffs’ claim in convention against
Toerien and Oxbow.
29. According to Amler’s Precedents of Pleadings, 2018, 9ed at 120, a party relying
on the illegality of a term of an agreement must plead it. When illegality does
not appear ex facie the transaction but arises from surrounding circumstance s,
the circumstances founding that illegality must be pleaded, and the party relying
on the facts must prove them.
30. However, a full bench decision of this court has held that the court has a duty to
raise the illegality of a contract mero motu when the parties to a dispute related
to it have not done so (Morley v Lambrechts (A 526/2013) [2014] ZAWCHC 124
(21 August 2014).
31. I am therefore of the view that the public policy issue is before the court in this
matter, and, as submitted by Mr Fasser, whatever implication s flow from a
finding in that respect apply to the matter as a whole, despite it having only
been pleaded by Oxbow.
Public policy per se
32. Mr Jonker, having accepted the principles in regard to locus standi articulated
above, sought to deploy them in Toerien and Sage’s favour, submitting that
because, flowing from the cession to FUN, Oxbow is not a party to the MRA, it
therefore cannot raise public policy in respect of the MRA. In my view, that is a
false premise because, as pointed out by Mr Quinn, Oxbow did not assign its
obligations and remained a p arty to the MRA to that extent and for that
purpose.
33. As the Non -Variation Clause itself is un objectionable (which was common
cause), and that which is attacked on the grounds of public policy is its
enforcement (Barkhuizen v Napier 2007 (5) SA 323 (CC) at paragraphs 56-57,
Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust
and Others 2020 (5) SA 247 (CC) at paragraphs 26 and 37), Oxbow (who bears
the onus) “… is required to s how that, in the circumstan ces of the case there
was a good reason why there was a failure to comply ”, which means that it
must establish facts explaining why it did not comply with the clause because
“The difficulty in the present case is that the applicant has not furnished the
reason for the non -compliance … For all we know he may have neglected to
comply with the clause in circumstances where he could have complied with it
...” (Barkhuizen v Napier 2007 (5) SA 323 (CC) at paragraphs 58, 84 and 85).
34. In my view, this applies perforce to this matter in which there was no evidence
in this respect. On the contrary, it was beyond any question that Oxbow could
have complied with the Non-Variation Clause but simply failed to do so. Mr
Quinn submitted that the court must ‘Weigh the absence of the explanation as
opposed to it being a threshold enquiry. ’ The problems with this are (1) that
Barkhuizen requires it for the reasons explained therein and that (2) this would
have the conseque nce that non -variation clauses would be vastly more
vulnerable to attack than what the cases suggest rendering the terms of
contracts more uncertain.
35. My Quinn relied on three cases in which non-variation clauses were held to
yield to public policy. In my v iew, however, none of them assist Oxbow, for the
reasons set out below:
35.1. Nyandeni Local Municipality v Hlazo 2010 (4) SA 261 (ECM):
35.1.1. The issues in that case were “ … resolved with reference only
to the constitutional values a s constituting public policy. ”
(paragraph 79).
35.1.2. The ultimate basis for the finding not to uphold the non -
variation clause was very different to what is in issue in the
instant matter, described as follows at paragraph 125:
“Public policy, as expressed by t he constitutional
values and norms, does not tolerate the abuse of the
process of law. The rights and freedoms under the
Constitution are there to be used, and not abused.
Courts often find that litigants use their legal rights
under the Constitution to ma nipulate legal
proceedings by obtaining postponements and
causing unwarranted delays, and by raising
defences with improper objectives and motives.
Sadly, this trend seems to be on the increase. Public
policy requires courts to put an end thereto.”
35.1.3. In my view, therefore, this authority is of no assistance to
Oxbow.
35.2. GF v SH 2011 (3) SA 25 (GNP):
35.2.1. That matter involved the maintenance of minor children and
inequitable results flowing from the application of a non -
variation clause (paragraphs 29 and 30).
35.2.2. In my view, that distinguishes the matter from the instant one.
35.2.3. In any event, as properly pointed out by Mr Fasser which I
appreciate, the findings in regard to the non -variation clause
and public policy in that matter did not survive an appeal
before the SCA which overturned them in SH v GF (De Haas
v Fromentin) 2013 (6) SA 621 SCA , holding as follows at
paragraph 16:
“In any event the view of Kollapen AJ that in the light of
the oral agreement of variation of the maintenance
order it would offend against public policy to enforce the
non-variation clause, cannot be endorsed. This court
has for decades confirmed that the validity of a non -
variation clause such as the one in question is itself
based on considerations of public policy and this is now
rooted in the Constitution. See SA Sentrale Ko -op
Graanmaatskappy Bpk v Shifren & andere 1964 (4) SA
760 (A) at 767A -C and Brisley v Drotsky 2002 (4) SA
1 (SCA) paras 7, 8, 90 and 91. Despite the disavowal
by the learned judge, the policy considerations that he
relied upon are precisely those tha t were weighed up
in Shifren. In Media 24 Ltd & others v SA Taxi
Securitisation (Pty) Ltd (Avusa Media Ltd & others as
amici curiae) 2011 (5) SA 32 9 (SCA) para 35 Brand JA
said:
‘As explained in Brisley v Drotsky 2002 (4) SA
1 (SCA) (para 8), when this court has taken a policy
decision, we cann ot change it just because we
would have decided the matter differently. We must
live with that policy decision, bearing in mind that
litigants and legal practitioners have arranged their
affairs in accordance with that decision. Unless we
are therefore satisfied that there are good reasons
for change, we should confirm the status quo.’
35.2.4. In my view, therefore, this authority is of no assistance to
Oxbow and, on the contrary, reinforces the enforcement of
non-variation clauses in matters such as the instant matter.
35.3. Steyn and Another v Karee Kloof Melkery (Pty) Ltd and Another
(2009/45448) [2011] ZAGPJHC 228 (30 November 2011):
35.3.1. This involved the settlement of a dispute to bring litigation to
an end and the avoidance of litigation, these being two of the
public policy reasons invoked (paragraphs 55 and 56 of the
judgment).
35.3.2. The Constitutional Court Eke v Parsons 2016 (3) SA 37 (CC)
at paragraphs 22 and 23 approved the following:
“(T)he policy underlying the favouring of settlement has
as its underlying foundation the benefits it provides to
the orderly and effective administration of justice.”
35.3.3. In my view, that distinguishes the matter from the instant one.
35.3.4. In paragraph 57 a third reason was given, namely that it was
stated that “… if effect were to be given to the entrenched
formalities clause , t he principles of freedom and sanctity of
contract would be violated.”
35.3.5. In my view, that, at face value, directly contradicts Shifren
and, if so, would not to be endorsed.
35.3.6. The next sentences in that paragraph 57 of the judgment,
however, goes on to show that this is not the case and
explains that it is in the context of the settlement of litigation:
“This is not in respect of the tension or paradox to
which I have referred to above in relation to the
agreement insofar as it varies the legal consequences
of the original agreement. This would be a violation of
those principles in relation to the agreem ent insofar as
it relates to the settlement of the Magistrates' Court
litigation and the disputes which are outside the
original agreement and relate to collateral
agreements. In respect of agreement relating to these
disputes, the parties have not taken u pon themselves
entrenched formalities.”
35.3.7. The next paragraph (58) of the judgment explains the basis
for the formalities clause yielding to public policy being the
context of the settlement of litigation:
“Thus the third question is to be answered in the
defendants' favour. The Shifren principle must yield
to the public policy considerations requiring the
enforcement of the second settlement agreement.”
35.3.8. In my view, therefore, this authority is of no assistance to
Oxbow.
36. I think that the essence of the legal concept of public policy is that it is not some
form of remedy to be applied on an unrestrained basis: on the contrary, the
authority is unanimous that it is to be applied sparingly and only in the clearest
of cases failing which uncertainty will abo und. The Constitutional Court
emphasised in Beadica that contracts are to be respected (at paragraphs 76,
79, 82, 84 and 94).
37. The courts, in my view, should guard against any tendency developing by which
parties perceive there to be a licence to raise public policy when they wish to
escape a contract. It is essential to bear in mind that, as held in Sasfin (Pty) Ltd
v Beukes 1989 (1) SA 1 (SCA) at 9B, the power of a court in this regard must:
“… be exercised sparingly exercised and only in the clearest of cases ,
lest uncertainty as to the validity of contracts result from an arbitrary
and indiscriminate use of the power . One must be careful not to
conclude that a contract is contrary to public policy merely because its
terms (or some of them) offend on e’s individual sense of propriety and
fairness.”
38. Lest one loses sight of what appears to me to be the true ambit of public policy
in this legal context, two of the leading cases on this aspect may provide
guidance, being Eastwood v Shepstone 1902 TS 294 at 302 and Sasfin (Pty)
Ltd v Beukes 1989 (1) SA 1 (A) , which upheld similar public policy
considerations, namely where a person would “virtually be relegated to the
position of a slave” (Sasfin at 13H) and reduced to “forced labour” (Eastwood at
302).
39. Mr Quinn relied on the following part of paragraph 33 of the judgment in
Infovest Consulting (Pty) Ltd and Another v Libra Partners LLC (19524/2018)
[2023] ZAWCHC 85 (3 May 2023):
“Demonstrating in a given case that such contracts should not be
enforced as being contrary to public policy would require something
more. It would require p roof that the operation of the given contract
according to its tenor would be legally or societally unacceptable for
some objectively identifiable reason; for example, that it would
unjustifiably impinge on an inalienable constitutional right, be
inconsistent with the rule of law (the old case of Nino Bonino v De
Lange 1906 TS 120 affords an example) or bear unacceptably
onerously on a party … [the underling is Mr Quinn’s]
40. In my view, what is instructive is the balance of the paragraph which
immediately follows the above part, in which Sasfin was cited as an example
(virtually be relegated to the position of a slave) to illustrate this principle:
“… (as illustrated, for example, in Sasfin supra, where the features of a
cession in securitatem debiti executed in favour of Sasfin by its debtor
(Beukes) that impelled the conclusion that the agreement offended
against public policy were described by the court as follows: ‘This
follows from the provisions in clause 3.4 that Sasfin would be "entitled
but not obliged" to refund any amount to Beukes in excess of Beukes'
actual indebtedness to Sasfin. As a result Beukes could effectively be
deprived of his in come and means of support for himself and his
family. He would, to that extent, virtually be relegated to the position of
a slave, working for the benefit of Sasfin (or, for that matter, any of the
other creditors). What is more, this situation could, in t erms of clause
3.14, have continued indefinitely at the pleasure of Sasfin (or the other
creditors). Beukes was powerless to bring it to an end, as clause 3.14
specifically provides that "this cession shall be and continue to be of
full force and effect un til terminated by all the creditors". Neither an
absence of indebtedness, nor reasonable notice to terminate by
Beukes in those circumstances would, according to the wording of
clause 3.14, have sufficed to bring the deed of cession to an end.’).
41. In my view, what has been set out in the above paragraphs illustrates the
proper ambit of the application of public policy in this legal context , and t o go
beyond that proper ambit would, in my view, take it out of context and would be
to extend the applic ation of public policy well beyond its heavily curtailed
sphere, which is to be avoided “… lest uncertainty as to the validity of contracts
result from an arbitrary and indiscriminate use of the power.” (Sasfin at 9B).
42. I think that the above considerations are neatly and con cisely summed up by
borrowing from, paraphrasing and augmenting a dictum of Cameron J in Absa
Bank Limited v Moore and Another 2017 (1) SA 255 (CC) at paragraph 39:
Public policy is not a universal solvent providing an out to a contractant and nor
is it a flamethrower withering all within reach.
43. I therefore conclude that Oxbow’s case grounded in public policy does not
succeed.
44. While the observer may at first blush consider this result to perhaps have some
unfairness, hard cases must not make bad law and the courts eschew “… one’s
individual sense of propriety and fairness.” as held in Sasfin (Pty) Ltd v Beukes
1989 (1) SA 1 (SCA) at 9B (quoted more extensively above).
45. A final observation is that Oxbow raise d public policy in respect of the Non -
Variation Clause in the MRA in a curious way, by asserting it against the
plaintiffs. Toerien was a party to the MRA. My impression is that the proper way
to have raised and pleaded this issue would have included asserting it against
Toerien.
Fraud
46. In argument, Oxbow relied on fraud , linked to public policy, to avoid the Non -
Variation Clause.
47. Fraud was not pleaded by Oxbow.
48. The courts will have no hesitation in not enforcing a provis ion which would
involve the condonation of a fraud ( Wells v SA Alumenite Co 1927 AD 69 at
72).
49. Fraud is defined in Van Heerden v S (A160/2016) [2016] ZAFSHC 191 (27
October 2016) as follows at paragraph 15:
“Fraud is the unlawful and intentional making of a misrepresentation
which causes actual prejudice or which is potentially prejudicial to
another.”
50. Mr Quinn relied on Bank v Grusd 1939 TPD 286 , suggesting that Grusd
requires three things: (1) agreement on a variation , (2) allowing effect to be
given thereto and (3) receiving benefit from a co -contractant’s performance in
terms thereof. It would appear that his argument is that Grusd is a special case
of fraud, not requiring intent or knowledge.
51. On my reading of Grusd, it is squarely based on fraud, the court holding at 287
that parties must “ be answerable to the jurisdiction of this Court in cases of
fraud”. This was the court’s introductory premise of its ratio decidendi. I do not
believe that the court refers to fraud, as it does, only to effectively jettison the
requirements of that concept, as appears to me to be the effect of the
submission made by Mr Quinn. Grusd, to me, appears to regard as fraud , for
example, allowing someone to go ahead on a particular basis and then raising
formalities. That suggests some form of intention and knowledge. The judgment
is short (two pages) and this is not elaborated upon therein.
52. I am somewhat fortified in this view by the analysis in Gainsford NO and Others
v Sasol Chemical Industries (Pty) Limited (24803/2015) [2017] ZAGPJHC 333
(5 August 2017) in which Grusd was considered and applied in an exception in
respect of which the court held that it was necessary to plead fraudulent or
unconscionable conduct. Paragraphs 17 to 20 of the judgment are quoted in
some length to provide context:
“[17] Finally, the liquidators also argue tha t ‘Stainless Fabricators
executed the purchase orders and incurred extra costs as provided in
the respective agreements. The manufacturing process has been
concluded and during this process Sasol stood by and monitored the
expenditure being incurred. They obtained the benefit of these
expenditures caused by the late placing of orders, amendments, and
changes and refuse to make payment therefor.’ That SASOL stood by,
monitored the expenditure being incurred and obtained the benefit
thereof, are counsel’s con tentions and not factual averments made in
the particulars of claim.
[18] The liquidators found authority for these contentions in Bank v
Grusd 1939 TPD 286 at 288. There a building contract provided that
no extra work was to b e done unless upon the written order of the
owner and that no claim for ext ra payment should be entertained
unless supported by the written authority of the owner. Maritz J held
thus:
‘it seems to me, therefore that if the defendant [builder] proves that the
plaintiff [owner] agreed that the extra work should be done or, knowing
that the defendant regarded the work to be done as falling outside the
contract, stood by and allowed him to do this work, well knowing that
she was going to get the benefit, she ought not to be heard when she
says “I refuse to pay because I had given no w ritten authority to the
defendant to supply the extras.’
[19] There can be no doubt, as is stated in RH Christie The Law of
Contract in South Africa 3rd Ed at 496-7, ‘that a party whose conduct is
“fraudulent or unconscionable, or a manifestation of bad fa ith” will not
be permitted to rely on a non -variation clause’ and that Bank v Grusd
‘is still good law’. (See Grey v Waterfront Auctioneers (Pty) Ltd and
Another 1992 (2) SA 662 (WLD), at 668.) But the liquidators need to
plead fraudulent or unconscionable conduct on the part of SASOL that
legally prevents reliance on the applicable restriction clauses of the
contract in each instance where price extras and allowances are
claimed. [underlining added]
[20] I conclude, therefore, that the liquidators’ claim as presen tly
formulated is bad in law and excipiable on the ground of vagueness
and embarrassment.”
53. In my view, the above reflects the proper interpretation of Grusd, namely that it
does require fraud. Indeed, I apprehend that Mr Quinn’s proposed interpretation
of Grusd would have the effect that many, if not most, instances of reliance on a
Non-Variation Clause would be vulnerable to attack.
54. If Grusd means what I think Mr Quinn contended, then I would decline to follow
it for the reasons set out above. But I am of the view that is not the correct
interpretation.
55. No case was attempted to be made out, let alone made out , that Toerien and
Sage had any knowledge of the non-compliance with the Non-Variation Clause.
Further, no intent component was established for fraud.
56. I therefore conclude that Oxbow’s argument based on fraud does not succeed.
57. As to Mr Fasser’s ‘legal implications’ of this decision, the result is that the
plaintiffs do not succeed against the first and second defendants in this respect.
Plaintiff’s case against Third Defendant
58. The question of public policy has been dealt with above.
59. The question to be decided in this matter , according to Mr Fasser , is not
whether there is liability , but rather which of Toerien and Sage, on the one
hand, an d Oxbow, on the other hand is liable – if not the former, then the
liability of the latter follow s as a matter of course (it was also submitted in the
heads of argument prepared by him that there is liability one way or the other) .
Core to this is his submission that:
“… if the MRA is ultimately found, on a conspectus of all the evidence,
not to be enforceable according to the amended terms against the
First and Second Defendants, then (i) the First and Second
Defendants will succeed in their reliance on the non -variation clause
entailing that they are not liable to the Plaintiffs, and (ii) the Third
Defendant will be liable for breach of the applicable warranties.”
60. Put another way, now that it has been found that Toerien and Sage are not
liable to the plaintiffs, according to the plaintiffs it follows as a matter of course
that Third Defendant is liable.
61. I consider this approach and submission to be too simplistic for the reasons set
out herein. In core principle, it is because the question for the court to
determine is whether a case for liability, as pleaded against any of the
defendants, has been made out by the plaintiffs. I have already found that no
case is ma de out against the first and second defendants . What remains is
whether a case is made out against the third defendant ( leaving aside the
public policy defence raised by the third defendant which I have already found
should not be upheld).
62. Even in the case of Mazibuko v Santam Insurance Co L td 1982 (3) SA 125 (A)
at 135C-136H relied upon by the plaintiffs , it was found , in an application for
absolution from the instance, that:
“… the case should be decided on the evidence which all the parties
might choose to place before the Court, provided, as I say, that the
plaintiff, when presenting his case, has laid the necessary foundation
of showing, prima facie, that one or other or both of the defendants are
legally liable.”
63. I mention this at this point because the t hird defendant’s possible liability
depends in the first instance on whether the provisions relied upon by the
plaintiffs against the third defendants are successfully invoked , and no t as a
matter of course if the first and second defendants are not liable . Further, even
if successfully invoked, the third defendant will only be liable to the extent of
losses which flow from such breach.
64. Plaintiffs’ case against Oxbow is based on the following contractual provisions
pleaded in their Particulars of Claim, the relevant ones being pleaded as follows
(“the Provisions”):
“… Oxbow:
36.1 warranted, represented and undertook:
36.1.1 the first defendant … is bound by the terms of the
rental agreement; (clause 5, 5.1.16)
36.1.2 the first defendant has no right of action against FUN;
(clause 5.1.19 and 5.1.25 and 5.1.28)
36.1.3 the first defendant shall not be entitled to claim
termination of the rental agreement for any reason
whatsoever; (clause 5.1.23; (hereinafter referred to as
the warranty clause)
36.2 indemnified FUN and held it harmless against:
36.2.1 any claim, loss or expense (including consequential
damages, loss of revenue, profits and legal costs)
arising out of or in connection with or which may be
sustained or incurred by FUN as a direct or indirect
consequence of any breach by the first defendant of
any of the terms, conditions, warranties or
representations or undertakings in terms of the first
main cession agreement. Including but not limited to
any innocent or negligent misrepresentation by Oxbow
to FUN; (clause 6.1, and hereinafter referred to as the
indemnity clause).”
65. Toerien’s counter claim has not been upheld. That aspect of the claim against
Oxbow therefore falls away insofar as the case between the plaintiffs and
Oxbow is concerned.
66. The plaintiffs’ claim against the first and second defendants ha s already been
held not to succeed.
67. That, however, does not mean, as Mr Fasser has submitted, that it follows as a
matter of course that their claim against Oxbow must succeed. That claim must
still be established , which entails whether any of the Provisions have been
successfully invoked . Accordingly, what still remains is whether the plaintiffs’
case against Oxbow is upheld in this regard.
68. Oxbow and the plaintiffs both allowed the error on Oxbow’s part in not effecting
the amendment to the MRA to slip through their systems. Oxbow, in particular,
did not act in this respect. None of this has anything to do with questions such
as blame or causation . It is mentioned because the MRA was not amended
and, accordingly, its terms were in the unamended f orm. I believe this to be a
key consideration when the terms of the Provisions are considered.
69. I have already found in respect of the pleaded case in convention between
plaintiffs, on the one hand, and the first and second defendants, on the other
hand, that the MRA was not amended. In other words, the terms of the MRA
are the terms in the unamended form
70. Accordingly:
70.1. The MRA was in the unamended terms.
70.2. Toerien was bound by the MRA in those unamended terms.
70.3. There was no breach thereof by Toerien.
70.4. There was no right to cancel the MRA by Toerien at the time of the
cession.
71. The aspects in the above paragraph s are, in my view, material to the
consideration of whether the Provisions have bee n breached and are
successfully invoked.
72. In the result, I raised with counsel for the plaintiffs and Oxbow whether there
was any breach of any of the Provisions (pleaded in paragraph 36 of Particulars
of Claim ), and whether there was a claim in respect of which the
indemnification pleaded therein can be invoked. Mr Fas ser engaged on the
issue but Mr Quinn said he was not in a position to do so and would require
some time. I therefore afforded them the opportunity to deliver written
supplementary notes on the issue, which they did.
73. I will set out (1) each of the provisions relied upon by the plaintiffs in this regard
and detail what I consider to be their import and meaning ; and then (2) the
plaintiffs’ supplementary argument in some detail in italics , and after each
aspect thereof express in bold unde rlined words where I agree and disagree
and explaining why.
74. In undertaking this exercise, I consider it important to bear the following in
mind: Oxbow, for example in the discounting letter, and by means of the invalid
purported amendment, created the impression that the higher rental was validly
agreed. Intuition, informed by this , and perhaps fuelled by perceptions of what
may be fair, has the propensity to lose sight of what is the real question, and
the consideration thereof, namely whether the re was a breach of the
Provisions. I must confess that initially it did not occur to me there may have
been a discord between what was to be concluded on the facts and the law in
regard to the MRA and its terms, on the one hand, and what was covered by
the Provisions, on the other. It was while considering the matter prior to
argument, during which I considered the terms of Provisions against the MRA
as unamended, that the possibility thereof occurred to me. It is with this in mind
that the analysis below is undertaken.
75. The Provisions relied upon by the plaintiffs in their claims against Oxbow are as
follows (the emphasis in bold or underlining or both is that of Mr Fasser in his
supplementary written submissions , which emphasis I have retained for the
purpose of presenting his argument):
75.1. In terms of clause 5.1 of the First Main Cession Agreement, Third
Defendant agreed to the following: “The cedent hereby warrants,
represents and undertakes to TA in respect of each and every Contract
as at the cession effective date…”
75.2. ‘Contract’ is defined in clause 1.1.7 as “a written lease or rental
agreement entered into between the Cedent and a customer, which shall
have a value of not less than R20 000-00 (twenty thousand rand) in a
form approved by TA in writing from time to time.”
In my view this definition is of fundamental importance to the resolution
of this aspect of the matter.
75.3. The ‘Cession Effective Date ’ is defined in clause 1.1.8 as “… in respect
of each Contract, the effective date or Cession by the Cedent to TA, as
set out in the Final Discounting Letter.”
75.4. The plaintiffs rely on the following specific Provisions to justify their
contention that the third defendant was in breach:
75.4.1. In terms of clause 5.1.16:
“the Contract is factually correct in every respect ,
correctly reflects the intention of the parties
thereto, and no Contract has been amended,
altered or modified in any respect except in
writing, and copies of all such writings are attached to
the Contract. In addition, unless otherwise agreed in
writing by TA, the Contract delivered to TA comprises
the only original document /s in existence relating to
the transactions and the Goods referred to therein;”
This clause detained consideration more than the others, in
particular the words “ the Contract is factually correct in every
respect, correctly reflects the intention of the parties
thereto”. In my view, the key is to identify that this relates to the
‘Contract’ as defined . I have already found that the Disputed
Amendment was not effective and that the contract is the MRA
in its unamended form . The question is whether something
handwritten but not part of the contract is covered by this
provision, in other words whether it i s part of the ‘Contract ’ as
defined. I think that putting this question effectively answers it
because the invalid amendment is not part of the contract. This
is understandable because the plaintiffs would not want
anything outside of the legally valid ‘Contract’ to be raised
against them and would require to be covered by the Provisions
should that arise. As an aside, i t is easy to see that the
purported amendment does not comply with the Non -Variation
Clause and is not validly part of the contract. Further, this
clause 5.1.16 records that it has not been amended except in
writing “and copies of all such writings are attached to the
Contract”, yet the handwriting on the document is with
incomplete signatures as required by what is a standard Non -
Variation Clause and is not in writing attached to the ‘Contract’ .
Of some interest in this respect is the evidence of Gené Olivier,
a national support manager for plaintiffs, who testified that her
team receives new deals for checking and if acceptable
processes them , and had it been picked up that there was a
(purported) amendment to an MRA initialled by only one party
and not the other, then it should have been raised with Oxbow
and it would then be a matter for Oxbow to counter -sign the
amendment and that would solve the problem. Accordingly, it is
the MRA in its unamended form that was warranted. That
contract was not breached.
75.4.2. In terms of clause 5.1.23:
“the Customer shall not be entitled to claim termination
of the Contract for any reason whatsoever.”
In my view, this relates to the ‘Contract’ as defined at the time of
the cession (the effective date as defined above) , i.e. the MRA
in its unamended form . Contrast the wording in clause 5.1.25
below. Guaranteeing the future is unbusinesslike and I believe
that this clause did not intend to do so.
75.4.3. In terms of clause 5.1.25:
“the Customer has not and will not acquire during
the currency of that Contract, any claim
enforceable against TA for the reduction of any
amounts payable under any Contract , the return of
Goods, or for damages.”
In my view, this relates to the ‘ Contract’ (i.e. the MRA in its
unamended form) . This is what was warranted and it was not
breached, as considered further above.
75.4.4. In terms of clause 5.1.28:
“the Customer has no counterclaim or right to set -off
any claim or amount against any sum payable or
which becomes payable by the Customer in terms
of the Contract.”
In my view, this relates to the ‘Contract’ as defined at the time of
the cession (the effective date as defined above) , i.e. the MRA
in its unamended form . Guaranteeing the future is
unbusinesslike and I believe that this clause did not intend to do
so. Further, its wording appears to relate to claims outside of
the ‘Contract’ as defined.
75.4.5. In terms of clause 5.1.4:
“The Contract will be valid, binding and
enforceable in accordance with its terms and
will comply fully with all relevant South African
laws or instruments having the force of law. It is
specifically agreed that approval by TA of the
form of the Contract for cession purpose shall
not relieve the Cedent of any liability or
obligation in terms of this clause.”
In my view, this relates to the ‘ Contract’, i.e. the MRA in its
unamended form , as considered further above . This is what
was warranted and it was not breached.
75.4.6. In terms of clause 5.1.5:
“there is no challenge, dispute or claim by o r
against the Lessor under or in respect of such
Contract.”
In my view, this relates to the ‘ Contract’ as defined at
the time of the cession (the effective date as defined
above), i.e. the MRA in its unamended form .
Guaranteeing the future is unbusinesslike and I
believe that this clause did not intend to do so.
75.5. Each of these warranties, representations and undertakings was agreed
to be material to the decision to accept the offer to purchase a contract
from the third defendant. This is expres sly catered for in clause 5.4
which reads:
“Each representation, warranty and undertaking
shall be deemed to be a separate representation,
warranty or undertaking and a material
representation, warranty or undertaking which
induced TA to enter into this Agreement and to accept
any Offer made under this Agreement.”
75.6. In terms of clause 5.5:
“In the event that there is any breach of any of the
above representations, warranties and/or undertakings,
or if any Customer makes any allegation wh ich, if
proved by the Customer, would result in a breach
of any of the above representations, warranties
and/or undertakings, and in particular if any Customer
withholds payment of any amount owing under a
Contract as a result of such allegation, the Ceden t shall
be in breach of the Agreement and, without limiting any
other remedies TA may have under this Agreement or
at common law, TA shall have the right to require the
Cedent to repurchase the Contract upon such terms
and conditions provided in 6.2 below.”
76. The plaintiffs’ supplementary argument is set out below in italics with my views
in respect thereof, based on my understanding of the Provisions relied upon by
the plaintiffs as articulated above, following in bold underlined words:
76.1. The warranties, representations and undertakings were material to the
plaintiffs’ decision to purchase, and thereby take cession, of the MRA. I
agree with this (relating, as it does, to the Provisions).
76.2. From the evidence of the plaintiffs’ witnesses, at the time that the MRA
was offered for cession, the version of the MRA that was offered for
cession was the (purportedly) amended version which reflected the
higher rental amount. I agree with this (I added in the word
‘purportedly’). Key, however, is that the purported amendment was
not valid and did not form part of the contract . It was therefore not
part of what was covered by the Provisions because it was the
contract which was covered thereby.
76.3. In so offering the MRA for cession, the third defendant thereby
undertook, represented and warranted that the plaintiffs would be able
to claim rental on the MRA at the amount recorded therein (i.e. the
amount of R10 023-22 per month excluding VAT). While superficially
attractive, in my view this does not pass muster when one
considers (as has been done above) the terms of the Provisions,
which relate to the ‘contract’ and its terms, which is the MRA in its
unamended form which does not include the ab ove figure , the
Disputed Amendment having been ineffective. What was therefore
actually warranted therefore was the contract as I have found it to
be. This is an example of the intuition referred to above and below.
76.4. In other words, the third defendant, in effect, said the following to the
plaintiffs:
‘Here is the MRA we are offering you for cession. We represent,
warrant and undertake that you will be able to claim (or debit)
rental from the client in the amount of R10 023-22 per month
excluding VAT. This has been agreed between the parties and
any amendment effected to the MRA was compliant with its
terms. You will be able to lawfully debit and enforce payment of
this rental amount for a period of 60 months. The client does not
have, and will not acquire, any claim against you during the
currency of the MRA and does not have any reason whatsoever
to cancel this MRA. This MRA is legally enforceable on th ese
terms.’
I disagree with this for the reasons stated in the above paragraph.
76.5. However, these warranties, representation and undertakings proved to
be incorrect. To the contrary:
76.5.1. The plaintiffs were not, in law, entitled to claim the amount of
R10 023-22 excluding VAT from the first defendant over a
period of 60 months. While this is correct, I disagree that it
constitutes a breach for the reasons stated above.
76.5.2. The amendment of the rental amount was not, as a matter of
fact, effected in writing and signed in accordance with the
MRA’s non-variation clause. While this is correct, it is not
covered by any of the Provisions relied upon by the
plaintiffs. It is also easy to see ex facie from the MRA
itself. Paradoxically, this submission shows why the MRA
is in the unamended terms.
76.5.3. The parties’ respective intentions to increase the rental
amount was not legally effective or binding. While this is
correct, it is not covered by any of the Provisions relied
upon by the plaintiffs.
76.5.4. The MRA was not factually correct in every respect and did
not correctly reflect the parties’ intentions insofar as the
parties had not properly given effect to that intention in
accordance with clause 15.1. My views expressed above
and below apply equally here.
76.5.5. The first defendant had, and/or acquired during the currency
of the MRA, a legal basis to cancel the MRA due to (i) the
legally ineffective amendment, and (ii) the subsequent
incorrect debiting of amounts that had not legally been
agreed, or consented to, for a period of three yea rs. While
this is correct, it is not covered by any of the Provisions
relied upon by the plaintiffs.
76.5.6. The first defendant did, in fact, cancel the MRA on the
aforegoing basis as it was legally entitled to do. The plaintiffs
debiting of higher amounts of rental over a period of three
years, as a consequence of the ineffective amendment, and
without having any legal ba sis to do so, is undoubtedly a
material breach going to the root of the contract justifying
cancellation. While this is correct, it is not covered in any
of the Provisions relied upon by the plaintiffs.
76.5.7. The first defendant did, in fact, institute a counterclaim against
the plaintiffs for the amount by which it alleged constituted
overpayments to the plaintiffs. While this is correct, it is not
covered in any of the Provisions relied upon by the
plaintiffs as it rel ates to a future claim . In any event , the
counter claim is dismissed in this judgment.
76.6. In the event of the Court upholding the first defendant’s contentions,
then the Customer (i.e. Toerien) has indeed made allegations which
entail that the third defendant was (and is) in breach of the aforegoing
representations, warranties and undertakings. As recorded above, I
do not agree that there was any breach.
76.7. It matters not that what was actually ceded by the third defendant was
an MRA that was enforceable according to its unamended terms (i.e.
that the plaintiffs could have enforced the unamended MRA). I
disagree. The terms of the Provisions relied upon by the plaintiffs
must be considered. They relate to the ‘contract’ which is the MRA
in it unamended form, as superficially unattractive as that may be.
76.8. The question is not whether the Third Defendant was in breach of
warranties and/or indemnities with regard to the MRA in its unamended
form. The MRA in its unamended form is not what was offered by the
Third Defendant for cession to the Plaintiffs. I disagree. The MRA in
its unamended form is the ‘contract’ which was ceded . The terms
of the Provisions relied upon by the plaintiffs must be considered.
They relate to the ‘contract’ which is the MRA in it s unamended
form, as superficially unattractive as that may be.
76.9. What matters is that the third defendant sold and ceded to the plaintiffs
an MRA that was supposedly enforceable in its amended form
according to its amended terms, and which the plaintiffs understood to
be enforceable as such. It was in respect of the amended MRA that the
plaintiffs, in fact, made payment of the total sum of R628 518-54. While
this is correct, the terms of the Provisions relied upon by the
plaintiffs must be considered. They relate to the ‘contract’ which is
the MRA in its unamended form, as superficially unattractive a s
that may be. This is an example of the intuition referred to above
and below.
76.10. This entails that the conclusion reached by Oxbow, namely, that ‘In the
circumstances, the warranties on which the plaintiffs rely are not
activated by the rental contract in unamended form’ is simply irrelevant.
I disagree for the reasons set out above.
76.11. It is apposite to note that the discounting letter provided to the plaintiffs
in which the third defendant offered to cede the MRA itself expressly
reflects the ame nded monthly rental of R10 023-22 (excluding VAT). It
is correct that the discounting letter provides as such . Howe ver,
while that itself may ground a misre presentation, it is not covered
by the Provisions relied upon by the plaintiffs in this action and is
not the claim sought to be enforced by the plaintiffs in this action.
This is an example of the intuition referred to above and below.
76.12. In short, the plaintiffs did not get what they bargained for with the third
defendant and, more particularly, they did not get what the third
defendant expressly warranted or represented they would get. While
the plaintiffs did not get what they expected , t he terms of the
Provisions relied upon by the plaintiffs are what must be
considered. They relate to the ‘contract’ which is the MRA in it
unamended form, as superficially unattractive as that may be.
76.13. Such a conclusion logically and legally entails that the third defendant
was (and is) in breach of the aforegoing representations, warranties
and undertakings. I disagree, for the reasons set out above.
76.14. In terms of the relevant portion of clause 6.1:
“The cedent hereby indemnifies TA and holds TA
harmless against any claim, loss or expense
(including consequential dam ages, loss of revenue
and profits, legal costs on the scale as between an
attorney and his own client, and any other costs)
arising out of or in connection with, or which may be
sustained or incurred by TA as a direct or indirect
consequence of any breach by the Cedent of any of
the terms, conditions, warranties, representations or
undertakings of the Cedent in terms of this Agreement
or any cession pursuant hereto including, but not limited
to, any innocent or negligent misrepresentation by the
Cedent to TA …”
76.15. The plaintiffs have suffered loss insofar as they purchased the MRA in
question from Oxbow expecting to be able to claim the higher rental
amount, for a period of 60 months, from the first defendant, and they
are unable to do so. This is precisely the sort of loss that the third
defendant undertook to indemnify the plaintiffs against. While the first
sentence may be so and I agree that the plaintiffs did not get what
they expected, the terms of the Provisions relied upon by the
plaintiffs are what must be considered. They relate to the
‘contract’ which is the MRA in it unamended form, as superfi cially
unattractive as that may be . I therefore disagree with the second
sentence.
76.16. It is also a loss that undoubtedly arises as a direct consequence of the
fact that the third defendant did not properly attend to the legally
effective amendment of the MRA. I agree. However, while that may
possibly ground a claim on another basis , it doe s not do so in
respect of the Provisions and it is the terms of the Provisions
relied upon by the plaintiffs are what must be considered. They do
not cover this. They relate to the ‘contract’ which is the MRA in it
unamended form, as superficially unattractive as that may be.
76.17. Given that the third defendant admits the quantum of the plaintiffs’ loss
in this case, it follows as a matter of logical and legal necessity that the
third defendant must recompense the plaintiffs for this amount (i.e. the
amount that the plaintiffs expected they would receive from the first and
second defendants, in terms of the MRA, for the period of 60 months). I
disagree for the reasons set out above. Further, breach of different
aspects of the Provisions will not necessarily have the same
consequences insofar as the quantum of damages is concerned.
76.18. Furthermore, in the event of the Court upholding Toerien’s
counterclaim, this also constitutes a type of damage or loss, incurred by
the plaintiffs, flowing directly from Oxbow’s failure to have properly
amended the MRA, yet warranting and representing to the plaintiffs that
the MRA as amended was enforceable. Such loss or damage would
also be for the third defendant’s account. The quantum of the first
defendant’s counterclaim has also been admitted by the third
defendant. Toerien’s counter claim is not upheld in this judgment .
This need not be commented on further.
77. In short:
77.1. The following occurred:
77.1.1. Oxbow represented to the plaintiffs that the deal with Toerien
was in the figures as contained in the discounting letter.
77.1.2. The plaintiffs understandably expected those figures to apply.
77.1.3. The MRA was sent through with th e same figures inserted by
means of handwriting and the crossing out of lower figures.
77.1.4. That was invalid and the terms of the MRA were in the
unamended form.
77.2. However, in my view:
77.2.1. The question in the claim against Oxbow is whether the
Provisions are breached by the aforegoing.
77.2.2. The question is not whether a representation was made
external to the ambit of those Provisions, such as in the
discounting letter or in the form of an invalid amendment.
77.2.3. The ambit of those Provisions was in essence the terms of the
‘contract’, which has be en found in this judgment to be the
unamended MRA, and the breach of the terms thereof.
77.2.4. It did not incorporate any terms not forming part thereof.
77.2.5. There was, accordingly, no breach of the Provisions for the
reasons set out in the analysis of the argument in respect
thereof above.
78. In even shorter terms, the claim against Oxbow is based on the Provisions
which in essence relate to the ‘contract’ and, because the ‘contract’ is the
unamended MRA, there is no breach of the Provisions.
79. I must confess that initially it did not occur to me there may have been a discord
between what was to be concluded on the facts and the law in regard to the
MRA and its terms, on the one hand, and what was covered by the Provisions,
on the other. It was while considering the matter prior to argument, during which
I considered the terms of Provisions against the MRA as unamended, that the
possibility thereof occurred to me.
80. The result on this issue in this judgment may not appear to be intuitive , fuelled
by what may be perceived to be fair . That contrary intuition, however, I found,
arises if one does not analyse the content of the Provisions and the terms of
the MRA as it exists in fact and law . As found in this judgment , those terms do
not include the Disputed Amendment. What was covered by the Provisions was
the ‘contract’, which is the MRA as I have just identified it. To test this:
80.1. One might consider what the situation would be, were the Provisions to
be found to cover the MRA with the invalid amendments as they are, in
the scenario where the figures were crossed out and new ones inserted
but no-one (including Sage) had initialled. The question would then be
whether that was covered by the Provisions. In that scenario, the
perception of unfairness and the contrary intuition weakens.
80.2. What about the scenario if only the total monthly rental amount, and not
the other figures , was crossed out and a new figure inserted with
neither party having initialled it ? I think that the answer can only
present itself in the negative, with contrary intuition very weak.
80.3. What about if the new figures were written on a separate piece of paper
which accompanied the MRA ? I think that the answer must present
itself in an even firmer negative, with contrary intuition all but absent.
The point and reason for this are that it is the ‘contract’ (i.e. its actual terms)
which the Provisions cover.
81. I therefore conclude that t he p laintiffs have no claim against Oxbow , as
pleaded.
82. This leaves the plaintiffs without a successful claim against any of the
defendants.
Conclusion
83. In the premise:
83.1. The plaintiffs’ claim against the first and second defendants will be
dismissed.
83.2. The plaintiffs’ claim against the third defendant will be dismissed.
83.3. The first defendant’s claim in reconvention against the plaintiffs will be
dismissed.
84. As to costs, I am of the view that with plaintiffs and Toerien having been
unsuccessful in their claims against each other, it would be appropriate in their
cases for neither of them to be awarded costs or to have costs awarded against
them. In regard to Oxbow, while it has been successful, the problem in this
matter arose originally because of its (and the plaintiffs ’) failure to properly
prepare and/or check the documentation relevant to this matter (the MRA), core
to their businesses, and therefore, in the exercise of my discretion , there shall
be no award as to costs in respect of the case between the plaintiffs and
Oxbow. All counsel agreed that scale B in terms of Rule 67A should apply to
any cost order made. In the light of my finding in this paragraph , this is not
applicable.
Order
85. The following order is granted:
1. The plaintiffs’ claim against the first and second defendants is dismissed.
2. The plaintiffs’ claim against the third defendant is dismissed.
3. The first defendant’s claim in reconvention against the plaintiffs is
dismissed.
4. The parties shall pay their own costs.
_________________
A Kantor
Acting Judge of the High Court
Legal Representation
For Plaintiff Adv. Eron Fasser
Attorney: Kern, Armstrong & Associates
For Defendant: Adv. Jonker
Attorney: Bernadt Vukic Potash & Getz Attorneys