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[2012] ZALCJHB 39
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Southgate v Blue IQ Investment Holdings (J 1788/09) [2012] ZALCJHB 39; [2012] 8 BLLR 824 (LC); (2012) 33 ILJ 2681 (LC) (4 May 2012)
REPUBLIC OF SOUTH AFRICA
THE LABOUR COURT OF SOUTH AFRICA, JOHANNESBURG
JUDGMENT
Reportable
case no: J 1788/09
In the matter between:
DOUGLAS
SOUTHGATE
…......................................................................................
Applicant
and
BLUE
IQ INVESTMENT HOLDINGS
….................................................................
Respondent
Heard: 08 November 2011
Delivered: 4 May 2012
Summary: Contractual damages.
JUDGMENT
AC BASSON J.
Introduction
The applicant in this matter is Mr Douglas
Southgate (hereinafter referred to as the ‘applicant’).
The respondent,
Blue IQ Investment Holdings (Pty) Ltd, was
established in terms of the provisions of the Blue IQ investment
Holding (Pty) Ltd
Act.
1
The respondent is listed as a Provincial Public
Entity under Schedule 3 (c) of the Public Finance Management Act
2
(‘the PFMA’).
Brief exposition of the facts
The applicant commenced his employment with the
respondent on 16 January 2007 in terms of a fixed term contract. (I
will refer
to this contract as ‘the first contract’.)
The contract was signed by the applicant and the then Chief
Executive
Officer, Ms Nomhle Canca (hereinafter referred to as ‘the
CEO’ or ‘Canca’). This contract contained a
non-variation (except in writing)/entrenchment clause
3
together with a non-waiver and estoppel clause.
(I will return to this clause in more detail hereinbelow.)
This contract was subsequently converted into a one year fixed-term
contract running from 1 May 2007 to 14 February 2008 at which
point
a new agreement would have been negotiated which would have
regulated the applicant’s contractual relationship with
the
respondent for the period 14 February 2008 to 15 February 2009. (I
will refer to this contract as ‘the second contract’).
In terms of the second contract, the applicant was employed as a
‘Special Projects Programme Manager’. This contract
was
again signed by the applicant and Canca on behalf of the respondent.
This second contract contained similar entrenchment
clauses under
clause 13. His salary under the first contract was R 100 000.00 per
month on a total cost to company basis and
R 1 680 000.00 under the
second contract to be paid in 12 equal monthly instalments.
In essence, it was the case for the applicant that, prior to the
expiry of the second contract, he and Canca commenced negotiations
directed at the conclusion of a new fixed-term contract of
employment. According to the applicant, these negotiations between
him and Canca did in fact culminate in the conclusion of a new fixed
term contract of employment. (I will refer to this contract
as ‘the
third contract’). At all material times during the
negotiations of the third contract, the applicant acted
personally
and the respondent was represented by Canca (in her capacity as the
Chief Executive Officer of the respondent). According
to the
applicant he was to be engaged in a new position as the ‘Group
Programme Coordinator’ for a three year period
commencing on
16 October 2008 and expiring on 15 October 2011. Further, according
to the applicant, he and Canca reached agreement
on the main
features of the agreement: (i) The second contract would terminate
with effect from 15 October 2008 and will be replaced
by the third
contract; (ii) The third contract would commence on 16 October 2008
and would endure for a period of three years;
(iii) The applicant
would assume the position of Group Programme Coordinator; (iv) The
applicant would receive the same remuneration
package as he had
received under the second contract; and (iv) His monthly salary
would be subject to the timings of the respondent’s
normal
salary review process. He further testified that he in fact had
started to work in this new capacity (in terms of the
third
contract) in October 2008 until he received a notice of termination
of the employment contract under the second contract.
In this notice
no reference was made to the third contract which, according to the
applicant, had been concluded with Canca (see
further hereunder).
[5] The applicant explained that under the first and second contracts
he performed duties under the B-link (a project within Blue
IQ) under
the bigger project called Blue Umbrella. The third contract was also
under B-link. However, since the B-link projects
were taken over by
Gauteng Shared Services Company he had fewer responsibilities. Canca
then began to give him responsibilities
under Phase 2 of Blue
Umbrella. According to him, the role envisaged for him under phase 2
was to take on new projects and grow
them as part of a strategic goal
for the respondent. As already pointed out, the applicant in fact
started to work in this new
capacity in October 2008.
[6] On 23 October 2008, Canca sent a job description (‘Blue
Umbrella PCO’) to the applicant. This document set out
the
tasks and outputs for the position of Blue Umbrella Programme
Coordination Officer as well as the skills and qualifications
required for the (new) position. The document further sets out the
project period as well as the remuneration package. On 24 October
2008, the applicant sent the document back to Canca and informed her
that he had changed the KPMG document significantly ‘to
mirror
the role that I have been playing with the Blue Umbrella Programme’.
On 30 October 2008, he again sent a document
to Canca to which he
attached the KPI document ‘as discussed’ as well as the
Group Programme Coordinator job profile.
In this e-mail the applicant
informed Canca that he will get Mr. John Mulaudzi (the respondent’s
Group Legal Advisor) to
draw up the employment contract which will be
similar to the one that was completed for Mr Davis Cook. It would
then be easy for
Mulaudzi to cut and paste from Cook’s
contract.
[7] In an e-mail dated 4 November 2008, Canca informed the applicant
that she had discussed the draft contract with John and that
‘he
is in the process of finalizing it. I expect to present it to you
tomorrow (Wednesday)’. On 5 November, the applicant
e-mailed
Mulaudzi and informed him that he could not find an electronic copy
of the contract. He told Mulaudzi that he should ask
Brian for a copy
of the contract.
[8] Mr Happy Molefe (from Human Resources) e-mailed the applicant
(and copied the e-mail to Davis Cook) regarding his job profiles.
In
this e-mail, he informed the applicant that he has attached the two
profiles for final check and that he will forward it to
Canca once
the applicant has checked them. The applicant reverted back to Molefe
and informed him of certain changes to the job
profile document. From
this document it appears that the applicant would have the job title
of Group Programme Coordinator: Blue
IQ and would be placed on the
job level as an executive. One of the key outcomes of his position
would be to manage existing programmes
as allocated by the CEO.
[9] On 7 November 2008, the applicant e-mailed Canca and asked her
where his contract was because he had an appointment with his
tax
consultant and would want to discuss the contract with him. Canca
responded to the e-mail on 12 November 2008 and informed
the
applicant that the ‘draft contract is with John [Mulaudzi] and
he is out of the office today, I hope to get it from him
tomorrow’.
She attached the applicant’s revised job profile for approval.
[10] On 14 November 2008, the applicant finally informed Canca (and
Happy Molefe) that he had looked through the job profile and
that he
was now in agreement with the contents thereof.
[11] On 14 November 2009, Canca was suspended and has not return to
the employ of the respondent. She therefore ceased to act as
the
respondent’s CEO and was replaced by Mr Jameel Chand (‘Chand’)
who assumed the position of Acting Chief Executive
Officer of the
respondent. It was common cause that Chand was at some stage provided
with a copy of the applicant’s proposed
revised job profile.
[12] As a result of Canca’s departure, the contract orally
concluded between herself (on behalf of the respondent) and the
applicant was not reduced to writing and signed.
[13] On 12 December 2008, there was a Board meeting at which the
applicant was discussed. It is recorded in the minutes that the
applicant contract ‘expires at the end of February 2009. Prior
to her departure, the former CEO was in the process of negotiating
a
contract with DS [Douglas Southgate], which contract has not been
signed….’
[14] When the applicant approached Chand and Mulaudzi about his
contract, Chand and Mulaudzi asked him to produce a written contract
entered into between himself and Canca. He was unable to do so as the
agreement between him and Canca was never reduced to writing.
[15] The Board again met on 30 January 2009 during which questions
were raised about the integrity of the applicant. During this
meeting
it was pertinently raised that, if there were any discussions between
the applicant and Canca, it should be in writing
and that there was
no proof of the terms of the contract in the absence of any written
contract.
Correspondence terminating the employment relationship
[16] On 10 February 2009, the applicant received an e-mail from
Mulaudzi informing him that his employment with the respondent
would
terminate on 15 February 2009 being the date of termination of the
second agreement. The letter attached to this e-mail is
dated 6
February 2009 and signed by Chand.
[17] On 19 February 2009, Chand confirmed to the applicant that they
have considered the correspondence and documentation in respect
of
the applicant’s employment relationship and has arrived at the
conclusion that the employment contract has terminated
on 15 February
2009 (as per the second contract).
Evidence regarding the contract
[18] Only Canca and the applicant were present during the
negotiations pertaining to the terms of the third contract. Both
testified
regarding the negotiation process with reference to the
e-mails that were exchanged between them as well as what they
intended
to agree upon. Both were
ad idem
that they intended
that the second contract would be replaced by the third contract and
that they in fact did reach agreement on
the material terms of the
contract of employment. Both also testified that they were
ad idem
that it was not a material requirement for the conclusion of the
contract that it had to be reduced to writing before the employment
relationship came into force. Both also confirmed that the applicant
had in fact commenced in his new position in October 2009.
Evidence of the applicant
[19] The applicant confirmed that he and Canca discussed the
possibility that he would take up a different role within the
organisation
and that these discussions commenced mid June 2008. He
accepted that his first contract could only be changed in writing and
that
the second contract was extended in writing. He also
acknowledged that he was familiar with clause 13.2 contained in the
second
contract. He confirmed that he and Canca had reached an
agreement on his position (which was to be different from the one he
had
fulfilled under the second contract) and that the (third)
contract would be for a three year period. In respect of remuneration
they agreed that his current package would remain the same (as it was
under the second contract) but that his salary would be subject
to
the normal review period. He confirmed that he in fact started
working in the new position early in October 2008. In this new
capacity he was required to take over the so-called A1-racing. He was
also involved in the so-called West Rand Water project. It
was also
agreed that he had to formulate the Key Performance Indicators
(‘KPI’s’) and formulate the job profile
for his new
position. The applicant confirmed that he did in fact prepare the
KPI’s for the new position and that he then
requested Mulaudzi
to draw up the employment contract. The applicant also confirmed that
he and Canca ultimately reached agreement
on the job profile.
[20] The applicant (and Canca) was adamant that it was never
contemplated between him and Canca that, until a written contract
had
been signed, that there would be no agreement. In fact, according to
the applicant there was no urgency with regard to the
contract and
that the only reason why the contract was to be recorded in writing
was to make sure that the good governance side
of Blue IQ would be in
place. As far as he was concerned he was already employed in the new
position as he in fact had already
started to do the job. He
testified that he was not concerned about the fact that he was not
given a written contract and that
it had not been signed. It was only
later when he was informed that the second contract was terminated
that he started to become
worried. According to the applicant, the
old contract immediately terminated once he and Canca had entered
into a new contract.
[21] In essence, therefore, it was the applicant’s evidence
that although he expected that a written contract would be drafted
at
a later stage, it was purely in terms of good governance that there
had to be a written contract. At no stage, however, was
it
contemplated between him and Canca that the employment relationship
would only come into being once the written contract was
signed. In
respect of the job profile, the applicant explained that it was a
work in progress and that it could only be finalised
once he had
taken up employment. In fact, according to him there was a tacit
agreement in respect of what the job profile would
be. There was,
according to him no disagreement and a number of the changes were in
fact just cosmetic. As far as he was concerned
he and Canca had
completed their negotiations and a contract had consequently come
into being.
[22] In respect of Canca’s authority to conclude the contract,
the applicant testified that he understood and still believed
that
the CEO was capable of creating any kind of line position. He also
testified that he was not aware of what was happening at
Board level
and that Canca dealt with the Board.
Evidence of Canca
[23] Canca confirmed that, once the B-link contract was taken over by
Gauteng, she had started to look for a new role for the applicant
and
contemplated that he would report directly to her (in her capacity as
the CEO). She confirmed that she had reached an agreement
with the
applicant in respect of his position, his remuneration and the
duration of the contract (a three year contract). She also
confirmed
that the applicant did in fact start performing the functions under
the new job description. She confirmed that a job
profile had to be
drawn up as this was a new role in Blue IQ. According to her, she and
the applicant definitely reached consensus
on the terms of the
contract and that the detail of the deliverables would have been
incorporated in the KPI’s.
[24] She testified that she had expected Mulaudzi to settle the
applicant’s contract and that she had in fact instructed
him
that a contract needed to be put in place as soon as was reasonably
possible. She confirmed that whilst the recordal of the
contract was
important as that was the natural conclusion of all the discussion,
it was, however, not contemplated between her
and the applicant that
a binding contract of employment would only come into existence once
the contract had been signed. Canca
emphasised that a binding
contract came into being once she had agreed what needed to be done
by the person (the applicant) that
was supposed to deliver. She
confirmed that the applicant had in fact already begun scoping the
projects.
[25] In respect of her authority to create the position of Programme
Coordinator she gave uncontested evidence that it was not
a
requirement that the Board had to approve the position as the post
was pre-approved at the remuneration committee level and as
such the
idea had already been taken through the Board. She further also gave
undisputed evidence that the hiring of individuals
was her
prerogative.
Evidence on behalf of the respondent
[26] Waja gave evidence to the effect that Canca did not have the
authority to create the position of Group Programme Coordinator
and
employ the applicant in that position without the approval of the
Board. He confirmed that it was the practice at the respondent
that
contracts had to be reduced to writing in order to avoid disputes
about the terms of the contract. Chand acknowledged that
there were
negations between the applicant and Canca about a further contract.
He, however, testified that these negotiations were
never finalised
because they were not reduced into a written employment contract. He
and Mulaudzi had made it clear to the applicant
during two meetings
that without a written contract, the termination of the second
contract stands and that there consequently
was no employment
relationship between the respondent and the applicant. Mulaudzi
conceded that he was instructed to draft a contract
between the
applicant and the respondent by Canca. However, according to him, no
further details had been given to him nor was
he given a template
contract to consider.
Facts in dispute
[27] The following facts were in dispute:
27.1 Whether the applicant and Canca had concluded a valid and
binding fixed-term contract which replaced the second existing fixed
term contract that was due to terminate on 15 February 2009.
27.2 Whether the respondent reneged on the terms of a binding
contract (concluded with Canca) by terminating the applicant’s
employment on the strength of the original termination date
contemplated by the second contract.
27.3 Whether in the negotiations between the applicant and Canca
agreement was reached on all the material terms of the contract
and
whether it was specifically required that the contract be reduced in
writing before it became effective and binding.
27.4 Whether at any stage prior to the termination of the applicant’s
employment, he in fact assumed the position of Group
Programme
Coordinator.
27.5 Whether the applicant as a consequence of the termination of his
employment suffered damages and the extent thereof.
The applicant’s case
[28] The crux of the applicant’s claim is a purely contractual
claim. He alleged that there was a premature breach or repudiation
of
a three year fixed term contract.
[29] In respect of Canca’s authority to enter into a contact on
behalf of the respondent, the applicant submitted that Canca
did in
fact have the necessary authority to enter into such a contract. The
applicant further argued that even if Canca was required
to consult
the respondent’s Board before appointing the applicant to the
position of Group Program Coordinator, the failure
to so consult did
not invalidate the contract concluded between the applicant and the
respondent. In the alternative it was pleaded
that, to the extent
that the applicant did in fact occupy a managerial position in
respect of which Canca had to consult the Board,
the applicant was
not aware of any deficiency or irregularity in relation to Canca’s
authority and/or the conclusion of the
third contract of employment
and therefore the applicant was entitled to assume that both Canca
and the respondent had complied
with any prescribed internal rule,
regulation or formality. It was therefore pleaded that the applicant
was entitled to assume
that Canca had the necessary power to conclude
a contract of employment and therefore the respondent is precluded
from relying
upon any alleged failure to comply with any prescribed
internal rule, regulation or formality.
The respondent’s case
[30] The respondent disputed the applicant’s claim on the
following grounds:
30.1 Although the respondent admitted that there were negotiations
regarding a new contract of employment between the applicant
and
Canca, such negotiations were not concluded and therefore no new
contract of employment was entered into as there was no meeting
of
minds on the essential term and conditions of employment being
negotiated.
30.2 The parties contemplated reducing their verbal negotiations to
writing. Because there was no written and signed contract between
the
parties there existed no contractual relationship between them. The
respondent argued that a contract would only have come
into existence
once it had been reduced to writing and signed by the parties. This
was the understanding as envisaged in numerous
e-mail exchanges
between the parties from about 24 October 2008 until 12 November
2008. The respondent further submitted that it
was standard practice
for employment contracts to be reduced to writing and signed by both
the employer and the employee parties.
30.3 Canca lacked authority to unilaterally create the position of
Group Programme Coordinator and to employ a person in such a
position
without first obtaining the approval of the respondent’s Board
of Directors in both instances. In this regard, Canca
failed to
comply with both the Act creating the respondent and the respondent’s
delegations of authority. Because the position
of Group Programme
Coordinator impacted on the organisational structure it had to be
approved by the Board.
30.4 The parties could not cancel, amend or novate
the second contract and enter into a new contract (the third
contract) as they
were bound to follow the formalities set out in the
entrenchment clause (clause 13) of the second contract.
4
Was there an agreement on the material terms of the employment
contract?
[34] Only Canca and the applicant were involved in the negotiations
regarding the agreement. There is, accordingly no evidence
before
this Court to refute their evidence regarding what was agreed upon in
respect of the third contract. In essence it was the
evidence of
Canca and the applicant that the contract was for the position of
Group Programme Coordinator and that the contract
was to be for a
period of three years. Both Canca and the applicant confirmed that
his remuneration would have been the same as
that which he had earned
at the time (in terms of the second contract). They further agreed
that the applicant would start in the
new position as early as
October 2008. Both Canca and the applicant also confirmed that the
applicant did in fact commence working
in the new position in October
2008.
[35] Wallis
5
points out as follows regarding the formation of
an employment contract:
‘
The
contract of employment requires no special formalities for its
formation and it accordingly arises from nothing more than the
agreement between the parties on its material terms, namely, the
services to be rendered and the remuneration to be paid as well
as
such other terms as they may regard as necessary to incorporate in
their agreement. These terms may be agreed upon express,
impliedly or
tacitly.’ [Footnote omitted]
It is required that the parties reach broad
consensus on the
essentialia
of the contract: In this regard Wallis
6
continues as follows:
‘
Although
the actual negotiations between prospective employer and prospective
employee may, as we have seen, be extremely limited,
they are
nonetheless critical to the question whether any contract at all
comes into existence. The terms there offered by the
employer and
accepted by the employee must be sufficient to encompass the
essentials of a contract of employment. It is necessary
in a contract
of employment, like any other contract, that agreement should be
reached on all material terms and that the agreement
should be
sufficiently clear to be enforceable.
It is not
necessary that there be agreement on every single detail concerning
the conditions of employment.
A
contract may be concluded on the basis that the parties will
subsequently enter into discussions and agree upon subordinate terms.
It has been
held that this requires the parties to enter into discussions on the
outstanding matters and make proposals which are
neither unreasonable
nor inconsistent with that which has already been agreed. Provided
the parties have reached agreement on all
essential elements of a
contract of employment and intend that the contract to commence and
be implemented prior to and without
agreement having been reached on
these subordinate matters the contract will be enforceable on those
terms which have been agreed.
In that case the contract can stand
without agreement having been reached on the subordinate matters.
Where, however, the parties
have only reached agreement in principle
and intend that there be agreement on other terms for the agreement
to be complete there
is no binding contract. An agreement to reach
agreement on these matters at a future stage will be unenforceable
.’
7
[Footnote
omitted and my emphasis]
[36] Mr Malindi submitted that because Canca and
the applicant did not reach agreement on the KPI’s / Job
profile of the position
- which is a material term of an employment
contract – the contract therefore did not come into being. In
this regard he
referred the Court to the decision in
Lambons
(Edms) Beperk v BMW (Suid Africa) Edms) Beperk.
8
[37] Although it is correct that the evidence confirm that Canca had
not seen the final KPI’s/Job profile of the applicant
before
she left the respondent’s employ, it is clear from the e-mail
to Canca and Happy Molefe dated 14 November 2008 (the
day Canca left
the respondent), that at that stage, the parties have in fact reached
agreement on the contents of the job profile.
[38] However, even if it can be concluded that
they did not reach agreement on this aspect, I am, in any event, not
persuaded that
a final agreement on the KPI’s/Job profile was a
material term of the contract. As already pointed out, it is not a
pre-requisite
for the validity of a contract of employment that there
has to be agreement on every detail of the contract. In fact, parties
may
even agree on a later stage what the exact nature of the
employee’s job would be. In the present case, I am on the
evidence
satisfied that the applicant and Canca were
ad
idem
that they had reached agreement on
the material terms of the employment contract. The evidence as well
as the e-mails confirm that
Canca and the applicant were
ad
idem
about their intention to create an
employment relationship and that it was their intention that the
applicant would render his employment
in the capacity as a Group
Programme Coordinator. Pursuant to their agreement the applicant did
in fact commenced working in the
new position that was contemplated
by the negotiations between Canca. They had further reached agreement
that the contract would
be for a three year period and that it would
be on the same salary level as that what was agreed upon in terms of
the second agreement.
The fact that Canca and the applicant may have
still been in the process of finalising the KPI’s of the
applicant’s
position did not in my view prevent the contract of
employment from coming into existence. There certainly was no
evidence before
this Court to suggest that it was ever contemplated
between Canca and the applicant that the contract would only come
into being
once they have reached agreement on the KPI’s.
[39] In passing it can only be pointed out that
even where parties have not agreed on the specific amount of
remuneration to be
paid to the employee, the contract of employment
can still be concluded provided that the parties have intended that
the employee
will be paid. In those circumstances, the employee will
be entitled to a ‘reasonable wage’. See in this regard
Middleton v Carr:
9
‘
In
other cases, also frequently described as
quantum
meruit
claims,
there is not a contract complete in all its terms which has failed or
been only partly fulfilled, but a contract in which
the express terms
are insufficient to fix the remuneration of the party who is to do
the work, whether he be a
conductor
operis
or a
locator
operarum.
In such cases, of which the present is an example, the matter is
approached rather from the angle of implication, in fact or in
law,
of a term fixing the remuneration. In such cases before an amount of
money can be awarded the Court has to be satisfied both
that an
agreement to remunerate fairly or reasonably for the services is to
be implied and that the rate or amount of fair or reasonable
remuneration can be sufficiently certainly fixed on the evidence.’
[40] Wallis
10
likewise confirms that the existence of a contract
of employment may even be inferred from the parties’ conduct.
It is also
not necessary that the parties need to agree on every
detail of the contract as is suggested by the respondent (with
reference
to the fact that the parties have not agreed on the KPI’s
of the applicant). Moreover, even where the parties have not agreed
on the amount of remuneration, the contract of employment can still
come into being provided that it was intended that the employee
be
remunerated. In such circumstances, the employee will be entitled to
a ‘reasonable wage’ as remuneration.
11
See in this regard:
Chamotte
(Pty) Ltd v Carl Coetzee (Pty) Ltd
:
12
‘
The
contract, however, does not provide for the extent of the increase
should the parties fail to arrive at “a negotiated
increase”.
There is certainly authority for the view that where there is an
agreement to do work for remuneration and the
latter is not specified
(expressly or tacitly), the law itself provides that it should be
reasonable (cf. Wessels,
Law
of Contract
,
2nd ed., para. 3498;
De
Zwaan v Nourse, supra; Middleton v Carr, supra; Angath v Muckunlal's
Estate
,
at p. 284 A - H), but in the present case it is unnecessary to rely
on such a rule or to consider its general validity or its
application
to the contract. Applying well recognised tests (cf.
Mullin
(Pty.) Ltd v Benade Ltd.
,
1952
(1) SA 211
(AD)
at pp. 214C - 215A;
S.A.
Mutual Society v Cape Town Chamber of Commerce
,
1962
(1) SA 598
(AD)
), it seems, in any event, clear enough that the
contract implies that if the parties do not agree on the increase in
remuneration,
the plaintiff will in any case be entitled to a
reasonable remuneration for the additional work.’
[41] I am furthermore also not persuaded that the
Lambons
-case
is support for the contention that Canca and the applicant did not
reach agreement on material terms. In that matter the respondent
(BMW) had made a verbal offer over the telephone in terms of which
the applicant (Lamdons) would be a dealer in motor vehicles
manufactured by BMW. The Court concluded on the facts that the
parties have not entered into a binding and enforceable contract
as
they have not reached an agreement on material terms of the contract.
They have not reached agreement on the purchase price
and on area of
business.
[42] In conclusion therefore: Whilst I do accept
that if parties have not reached agreement on a material term of the
contract that
a contract will not come into existence, the evidence
in the present matter shows that the parties have indeed reached
agreement
on the material terms of the employment contract.
13
The evidence in my view clearly shows that Canca
and the applicant have contemplated that the agreement would come
into being once
they have agreed on the nature of the job, the
remuneration and the period of the contract. They did not contemplate
that an agreement
on the KPI’s/Job Profile was a material term
of the contract. In the present matter the parties have, in my view
reached
agreement on the material terms required for the conclusion
of a contract of employment. This conclusion is supported by the
e-mails
that were exchanged between the parties. In an e-mail dated 4
November 2008, Canca stated that she had discussed the draft contract
with John and that he was in the process of finalising the contract.
Yet at that time Canca and the applicant were still busy finalising
the KIP’s/Job Profile. Nowhere in these e-mails it is
contemplated that the contract will only be concluded once the
parties
have reached agreement on the KPI’s/Job profile.
Moreover, as already pointed out, as of 14
th
of November 2008, the parties have, if regard is
had to the e-mail dated 14 November 2008, in fact reached agreement
on the contents
of the KPI’s/Job profile.
Must the contract be in writing?
General principles
[43] Having concluded on the facts that Canca and the applicant have
reached an agreement on the material terms of the employment
contract, it now needs to be determined whether it was a requirement
that the third contract had to be in writing in order to be
binding
between the applicant and the respondent.
[44] It is accepted that, except where the parties
agree that the contract concluded between them shall be in writing,
an employment
contract need not be reduced to writing.
14
See in this regard
Goldblatt
v Freemantle
:
15
‘
Subject
to certain exceptions, mostly statutory,
16
any
contract may be verbally entered into; writing is not essential to
contractual validity’.
17
[45] Mr Wade relied on this
dictum
for his argument that a mutual undertaking to have
an oral agreement reduced to writing and signed was insufficient to
discharge
the burden and show that the oral agreement was not
intended to be binding. In support of his argument Mr Wade referred
to the
decision in
Shaik and Others v
Pillay and Others
and argued that the
onus
of
establishing that the recordal in writing was essential to the
validity of the contract rests squarely on the respondent
:
18
‘
Parties
negotiating a contract may bind themselves to the observance of
certain formalities in the framing of the contract. Thus,
they may
agree that there will be no binding transaction between them until
the agreed terms have been set out in a written document
signed by
both of them. Until this has been done, the contract has no legal
effect. See Grotius
Inleiding
3.14.26;
Voet
Commentarius
5.1.73;
Goldblatt
v Fremantle
1920
AD 123
129;
Woods
v Walters
1921
AD 303
305;
Mitchell
v Knox-Gore
1935
NPD 490
508;
Schlinkmann
v Van der Walt
1947
(2) SA 900 (E)
909;
SA
Sentrale Ko-op Graanmpy Bpk v Shifren
1964
(4) SA 760
(A)
766. Cf
First
National Bank Ltd v Avtjoglou
2000
(1) SA 989
(C)
995 - 996.
There is a
second possibility where the parties may intend their contract to be
put into writing merely to facilitate the proof
of its terms. Voet
5.1.73;
Woods
v Walters
(supra);
De
Bruin v Brink
1925
OPD 68
;
Electric
Process Engraving and Stereo Co v Irwin
1940
AD 220
229 - 230;
Cole
v Stuart
1940
AD 399
408;
SOS-Kinderdorf
International v Effie Lentin Architects
1991
(3) SA 574 (Nm)
580.
There were
never direct discussions between buyers and sellers in this case. So
this is not a case where the parties come to an
oral agreement after
a written document has been mentioned in the course of their
negotiations, which document is, however, never
drawn up. In such a
case the contract becomes binding immediately, even though it is not
reduced to writing. The oral agreement
may oblige the parties to
produce and sign a written memorial of the transaction, see eg
Amoils
and Others v Amoils
1924
WLD 88
95.
I accept
that even in the absence of clear proof that the parties intended
their contract should be contained in a written document,
it is
presumed that the oral agreement is binding.
19
Grotius
3.14.26;
Goldblatt
v Fremantle
(supra);
Woods
v Walters
(supra);
De
Bruin v Brink
(supra);
Electric
Process Engraving and Stereo Co v Irwin
(supra),
Cole
v Stuart
(supra);
Schlinkmann
v Van der Walt
(supra)
909 - 911.
I also accept
that if a party alleges that it was agreed that no binding contract
would be created without writing, the onus of
proving the existence
of such an agreement rests on him or her. See in this regard
Goldblatt
v Fremantle
(supra);
Woods
v Walters
(supra);
De
Bruin v Brink
(supra);
Cole
v Stuart
(supra)
408;
Electric
Process Engraving and Stereo Co v Irwin
(supra)
230.’
See also
Woods
v Walters
20
where
Innes,
CJ stated as follows:
‘
It
follows of course that where the parties are shown to have been
ad
idem
as to the material conditions of the contract, the onus of proving an
agreement that legal validity should be postponed until the
due
execution of a written document lies upon the party who alleges it.’
[46] In this regard both Canca and the applicant led unchallenged
evidence to the fact that a recordal in writing was
not
a
pre-condition for the third contract to be valid although it was
contemplated that the contract be reduced to writing from a
good
corporate governance perspective.
[47] The respondent relied on the fact that the applicant and the
respondent had entered into a fixed term contract of employment
for
the period 15 February 2008 to 15 February 2009 (the second contract)
which contained a non-variation (except in writing) clause.
The
second contract was to terminate automatically on 15
th
February 2009 unless lawfully terminated an earlier date for any
reason. More in particular the respondent relied on clause 3.2
which
states as follows:
‘
3.2
The parties specifically agree that the company cannot offer
employment to the executive on any other basis as to the duration
of
this agreement than on the basis recorded in this clause and this
agreement or any action done hereunder does not give rise
to
permanent employment or any expectation of renewal or permanent
whatsoever.”
Clause 3.3 of the contract further provides that:
‘
3.3The
parties undertake to sign a performance agreement by no later than 30
days after the signature of this agreement
.’
[48] Mr. Malindi submitted that clause 3 could not leave any doubt,
especially in the mind of the applicant, that the duration
of his
contract of employment was subject to the following: Firstly, that
the contract was for one year only and secondly, that
the contract
would automatic expiry upon the expiry date. Thirdly, no expectation
(reasonable or legitimate) could arise on the
part of the applicant
that anything done in terms of this contract that permanent
employment or renewal may result and lastly that
the contract is
subject to a suspensive condition that the contract is dependent on
the signing of a performance agreement within
30 days after the
signature of the contract.
[49] In addition to the above, Mr. Malindi submitted that the parties
bound themselves to clause 13.2 (the non-variation clause)
which
provided as follows:
‘
13.2
No amendment of this agreement or any consensual cancellation thereof
or any part thereof shall be binding on the parties unless
reduced to
a written document and signed by them.’
[50] Furthermore, the respondent declared that no relaxation or
indulgence that may be shown to the applicant shall be deemed to
be a
waiver of its rights or lead to it being stopped from exercising its
rights. The clause reads as follows:
‘
13.4
No relaxation or indulgence which the company may show to the
executive shall in any way prejudice the company or be deemed
to be a
waiver of its rights hereunder nor shall such relaxation or
indulgence preclude or estop the company from exercising its
rights
in terms of this agreement in respect of any further breach.’
[51] Lastly, the contract contains a clause which provides as
follows:
‘
13.5
This agreement constitutes the whole agreement between the parties
and no warranties or representations whether express of
implied have
been given or made by the company to the executive.’
[52] In light of the aforegoing, Mr. Malindi
therefore submitted that there could not have been any doubt in the
applicant’s
mind firstly, that the contract could only be
amended by reducing such amendment to writing and that such amendment
had to be signed
by both the applicant and respondent. Secondly, that
any agreement to cancel this agreement had to be done in writing and
such
consensual cancellation had to be signed by both applicant and
respondent.. Lastly that the respondent did not, and ought not to
have been deemed to have waived its rights. In support of this
contention the Court was referred to the matter in SA
Sentrale
Ko-Op Graanmaatskappy Bpk v Shifren en Andere
21
where the written contract between the parties
provided that
‘…
any
variations in the terms of this agreement as may be agreed upon
between the parties shall be in writing otherwise the same shall
be
of no force or effect’.
22
The Court held that the contract could not be
altered verbally and that to hold otherwise would be tantamount to
deviating from
the elementary and basic general principle that
contracts entered into freely and seriously between parties
authorised to enter
into such contracts are in the public interest to
enforce.
23
In
Brisley v
Drotsky
,
24
the Court held that the
principle
laid down in the
Shifren-
case, namely that a term in a written contract
that all amendments to the contract have to comply with specified
formalities, was
still binding.
25
The Court further held that the principles of
bona
fides
, namely that the entrenchment
clause ought not be enforced because it would in the circumstances be
unreasonable, unfair and in
conflict with the principles of
bona
fides
, cannot be successfully invoked:
26
The High Court in
Nyandeni
Local Municipality v Hlazo
27
also uphold the
Shifren
-principle
as being good law.
28
[53] As I understand Mr. Malindi’s argument, the respondent can
therefore seek refuge in clause 13.2 of the second argument
to
support its argument that the employment contract can therefore only
be amended by reducing such amendment in writing. Likewise
the
agreement can only be cancelled if it is done in writing (even where
the cancelation was consensual). I have no quarrel with
the
respondent insofar as the second contract is concerned. The legal
authorities are clear: the purpose of a ‘non-variation
clause
except in writing’ clearly implies that any variation to the
agreement may be invalid unless the variation was to
be reduced to
writing. An oral agreement which purportedly varies the contract will
there be ignored. Similarly it is required
that a cancellation of the
contract should be in writing.
[54] I have considered this argument. I am, however, not persuaded
that the non-variation clause contained in the second contract
has
the effect of rendering the third contract invalid simply on the
basis that it (the third contract) was not reduced to writing.
The
purpose of a non-variation clause (except in writing) is to protect
the parties to the agreement by preventing one of the contracting
parties (for example the employer) from, for example, vary the salary
that was agreed upon in the employment contract.
[55] Clause 13.2 of the second contract is, in my view, valid only in
respect of the second contract. This clause cannot be used
to prevent
the parties (in this case the applicant and Canca contracting in her
capacity as the CEO on behalf of the respondent)
from concluding a
third or further contract. In the present case, the applicant and
Canca did not negotiate the amendment of the
second contract. They
had negotiated the terms of another (third) contract in terms of
which the applicant was appointed to a
different
position and
for a
longer
period. Clause 13.2 of the second contract is
therefore in my view irrelevant
vis à vis
the third
contract. Moreover, nothing in the second contract prevents the
parties from entering into a new contract. Lastly, the
two parties to
the contract were
ad idem
that they did not contemplate that
it was a requirement that the new contract had to be reduced to
writing. Canca contracted on
behalf of the respondent. She was the
CEO at the time and she concluded the contract on behalf of the
respondent and she concluded
the third contract on the basis that it
was not a material requirement that the contract had to be in
writing.
[56] Lastly, even if I am wrong in my finding that
the third contract need not have been in writing in order to be
binding, I have
taken note of the fact that the applicant will then
not have been employed simply because the respondent had not drafted
his contract
in time. Had
Mulaudzi
drafted
the contract when he was asked to do so by Canca, the contract would
have been reduced to writing. I can also not ignore
the fact that the
applicant had in fact commenced in the new position in October only
to be informed four months later that he
did not have a written
(third) contract and therefore the second contract came to an end by
fluxion of time.
[57] Lastly, I have also considered the fact that had it not been for
the fact that Canca had been suspended and ceased to act
as the
respondent’s CEO, the contract of employment as negotiated
between the applicant and Canca would have been reduced
to writing.
In light of these factors, I am in conclusion of the view that the
third contract came into being despite the fact
that it was not in
writing.
Canca’s authority
[58] The respondent pleaded that Canca did not have the necessary
authority to create the position of Group Programme Coordinator
without first obtaining the approval of the respondent’s Board
of Directors. The respondent’s argument in this regard
is as
follows:
58.1 The position of Group Programme Coordinator had financial
implications and impacted on the respondent’s organisational
structure. Consequently the Board’s approval was needed.
58.2 Because the Board was responsible for its organisational
structure, the Board therefore had to approve the appointment of
the
applicant. If regard is had to the ‘Delegation of Authority and
Approval Framework’ (hereinafter referred to as
‘the
delegations’) Canca had to consult the Board when appointing a
management member. The respondent accepted that
because the applicant
was appointed to a management position reporting directly to Canca
(the CEO), the board had to be consulted
before appointing the
applicant to the position. In this regard clause 4.6 of the
delegations (effective date 23 September 2008)
states as follows:
‘
4.6
Powers & duties of the CEO
The CEO has the following duties
and powers:
•
to
appoint, determine the conditions of employment of and dismiss the
staff of Blue IQ, including members of staff on management
level;
where the management members are reporting to the CEO the Board must
be consulted’.
‘
Delegation’
is defined as follows:
‘
Delegation
entails that a subordinate is officially entrusted with specified
authority to execute responsibilities bestowed upon
him/her allowing
him/her to take action and make decisions that will be legally
bending which may be beneficial and which might
present a risk to
Blue IQ’.
‘
Department’
is defined as follows:
‘
Means
a main functional Unit within Blue IQ, tasked with specific functions
which are related to the achievement of that Unit’s
objectives,
i.e Finance, Marketing and Communications ect.’
‘
Executive manager” is defined as
follows:
‘
Means
a manager who is responsible for the management of Blue IQ
Department.’
‘
Senior
manager’ is defined as follows:
‘
Means
a manager who exercises direct managerial control over specific human
resources utilized in a Department or Section in the
achievement of
that Department of Section’s objectives.’
[59] In terms of the delegations, the Member of the Executive Council
(‘the MEC’) appoints the CEO on the recommendation
of the
Board. If regard is had to paragraph 3.2 of the delegations, no
express power is given to the Board to employ employees
at any other
level. However, if regard is had to paragraph 4.6 of the delegations,
the CEO is specifically granted the power to
appoint employees. In
the case of management members that report to the CEO, the Board must
be consulted. In terms of the ‘Master
Delegations of Authority
in Blue IQ’ (referred to as ‘the Master’), the CEO
has the power to determine departmental
structures (clause 5.1.3) and
has the power to implement systems for financial management, risk
management, internal control systems
etc (clause 5.3). Under ‘Human
Resource Matters’ (clause 5.32) the CEO is given the power to
create vacancies.
What was the position of the applicant?
[60] It was submitted on behalf of the applicant that the position of
Group Programme Coordinator was in fact not a management
position and
that Canca therefore had a free hand in appointing the applicant. The
applicant was therefore not an executive or
senior manager as defined
in the delegations and consequently the CEO was empowered to appoint
him in terms of her delegated powers.
The respondent was, however, of
the view that the applicant was a managerial employee hence the Board
was required to give its
approval whenever a manager was appointed.
Canca’s unchallenged evidence was that the applicant was not a
manager. Waja was
called to confirm whether the applicant was a
‘manager’ yet had no idea what the applicant did.
[61] I am on the evidence not persuaded that the applicant was in
fact a senior manager as defined in the delegations. In fact,
it was
never put to Canca that the applicant was a senior manager and that
she therefore had to consult the Board. What was put
to Canca was
that the new position was an important position and that the Board
had to approve the position. Canca’s unchallenged
response was
that the approval of the Board was not necessary as the position was
pre-approved at the remuneration committee level.
In the event, I am
of the view that Canca had the necessary authority to appoint him to
the designated position.
Application of the Turquand rule
29
[62] If I am wrong in concluding that Canca did in
fact have the necessary powers in terms of the respondent’s
delegations
to appoint the applicant and in fact had to consult with
the Board before appointing him, I am nonetheless of the view that by
operation of the
Turquand
-rule
that the applicant was entitled to assume in good faith that Canca
had the necessary authority to appoint him and conclude
the
employment contract on behalf of the respondent. (See in this regard
Royal British Bank v Turquand
.
30
)
This rule was defined in
Morris v
Kanssen
31
to mean that ‘persons contracting with a
company and dealing in good faith may assume that acts within its
constitution and
powers have been properly and duly performed, and
are not bound to enquire whether acts of internal management have
been irregula
r.
’
32
[63] This rule may apply firstly, ‘where a
person or persons purporting to transact for the company under an
authority conferred
by its constitution (in other words, purporting
to transact as an organ of the company) would have had that actual
authority if
the necessary internal formalities had been complied
with. When it applies,
it entitles the
third party to assume that those formalities have been complied
with’
33
Secondly the rule will not apply where the person
dealing with the company knew that the formalities had not been
complied with.
Thirdly, the rule will also only apply where the
person acting on behalf of the company acts within his usual
authority. Fourthly,
the rule will not apply where the person who
deals with the company ought to have known of the irregularity.
34
See further in general:
FPW
Engineering Solution (Pty) Ltd v Technicon Pretoria and Others
35
'As is well
known, the
Turquand
Rule
protects
bona fide third parties against the defence by a corporate body that
it had not complied with the internal requisites for
a valid contract
and was, accordingly, not liable. I do not believe that the
Rule
would protect
a bona fide third party against an omission to obtain the Minister's
approval. The
Rule
applies to
cases where there was an omission in complying with a requirement of
internal
management.
The Minister's approval is not an internal matter, but a matter
external to the running of the Technikon. That some
balancing must,
in any case, take place when even internal matters are evaluated for
their importance against the application of
the
Rule,
emerges from
the recent instructive judgment of Cleaver J in
Farren
v Sun Service SA Photo Trip Management (Pty) Ltd
[[2003]
2 All
SA 406
(C)], where the learned judge held that since a company cannot
be held liable for a sale of its sole asset by a director, unless
the
approval of its shareholders is given in terms of section 228 of the
Companies Act, the
Turquand
Rule
could
not save the transaction. This was so since the approval by
shareholders was, in the court's opinion, regarded as of particular
importance by the Legislature. I agree with the balancing approach
applied in the said judgment and, with respect, with the result
thereof. In the light of my approach to the Minister's approval it
is, however, not necessary to delve deeper into the application
of
the
Rule
in this
respect. . . .
'I might add
that if I am wrong in my conclusion as to the ambit of the Council's
approval as to detail, such as the mode of payment
by way of
promissory notes, the
Turquand
Rule
would
protect FPW. Engelbrecht was authorized to sign contracts and,
accordingly, the
Rule
could be
operative. The
Rule
is also
applicable in regard to corporate entities such as Technikons. An
omission in the approval of Council as to the mode of
payment amounts
to an omission in internal management, which would not have the
weight of the absence of the shareholders' resolution
in
Farren's
case or the
absence of the Minister's approval in terms of section 40(3)(b) of
the Act. In any case, I am satisfied that the Technikon
Council
validly resolved, in terms of section
40(3)(a)
of the Act,
that there could be "embarked" upon this kind of project.
The
Turquand
Rule,
accordingly,
does not need to be resorted to, except possibly in the
alternative.
36
'
[Footnote omitted]
[64] If the respondent’s version is to be accepted that the
applicant was to be appointed as a managerial employee, Canca
therefore had to consult with the Board before appointing him. This
requirement is plainly a matter of internal formality or procedure
in
that Canca had to discuss the matter with the Board in order to
ascertain its view on the proposed appointment. Clearly the
ultimate
decision to appoint or not remained with her.
[65] I am persuaded that in the present case the applicant is
entitled to rely on the
Turquand
Rule for the following
reasons: Firstly, Canca would have had the authority to appoint the
applicant if the necessary internal
formalities (namely the
requirement to consult) had been complied with. Secondly, there is no
evidence before this Court to suggest
that the applicant knew that
the formalities had not been complied with. Thirdly, there is no
evidence before this Court to suggest
that the applicant ought to
have known that Canca had acted beyond the scope of her duties when
she negotiated and concluded the
contract of employment with him.
Lastly, there is further no evidence before this Court to suggest
that the applicant by virtue
of his position within the respondent
ought to have known of an irregularity in appointing him. In the
event I am of the view that
even if the applicant was appointed at a
management level requiring Canca first to consult with the Board
prior to effecting the
appointment of the applicant, the respondent
is not entitled to rely on this deficiency with a view to challenging
the validity
of the contract.
[66] In the event, it is concluded that the respondent unlawfully
repudiated and/or breached the third contract by failing to give
proper effect to the third contract concluded between the applicant
and Canca on behalf of the respondent.
Damages
[67] As a result of the repudiation and/or breach of contract, the
applicant suffered damages. In terms of
section 77(3)
of the
Basic
Conditions of Employment Act, 75 of 1997
the Labour Court has the
requisite jurisdiction to determine the applicant’s cause of
action.
[68] In respect of the amount of damages, the applicant has prepared
a document which addresses three scenarios. At the outset
I must
point out that the evidence of the applicant in respect of the
damages that he had suffered was not disputed. The first
scenario
projected what the applicant would have earned at his ordinary salary
assuming a 5% increase for the rest of the contract
period including
bonuses. The second scenario projected no increase but a bonus and
the third scenario projected no increase and
no bonus.
[69] In the statement of claim, the applicant claims damages as a
consequence of the respondent’s unlawful repudiation. In
terms
of the first scenario the applicant would have earned R 6.216.500.00.
The applicant has, however, also provided the Court
with a schedule
of so-called Seychelles earnings that he earned post termination.
According to this calculation, the applicant
earned R 640 000.00.
The damages suffered by the applicant are accordingly calculated as
follows: R 6 216 500.00 minus
R 640 000.00 = R
5 576.500.00.
[70] In respect of costs, I can find no reason why costs should not
follow the result. Although the applicant sought a costs order
on a
scale as between attorney and own client I can find no reason why I
should grant order on such scale.
Order
[71] In the event the following order is made:
The respondent is ordered to pay the applicant contractual damages
in the amount of R 5 576.500.00
The respondent is ordered to pay the applicant’s costs on a
scale as between party and party.
_______________________
AC BASSON J
Judge of the Labour Court
APPEARANCES:
FOR THE APPLICANT : Advocate R. Wade
Instructed by : Webber Wentzel Attorneys
FOR THE RESPONDENT : Advocate G. Malindi SC
Instructed by : Mkhabela Huntley Adekeye Incorporated
.
1
5
of 2003 (Gauteng Provincial Legislature – hereinafter referred
to as ‘the respondent’.
2
Act
1 of 1999.
3
Clause
13.2 reads as follows: ‘No amendment of this agreement or any
consensual cancellation thereof or any part thereof
shall be binding
on the parties unless reduced to a written document and signed by
them’.
4
On
26 November 2010, the respondent filed a notice of amendment in
terms of which the respondent pleaded the circumstances in
terms of
which this defence was being invoked. The amendment was not opposed.
5
Labour
and Employment Law
(1995,1
st
ed Butterworths
)
at page 2-21.
6
Labour
and Employment Law
First edition at pages 2-22.
7
Wallis
Labour and Employment Law
at page 2-22.
8
[1997] ZASCA 51
;
[1997]
3 ALL SA 327
(A).
9
1949
(2) AD 274
at page 386.
10
Labour
and Employment Law
at pages 2-21 at para 12.
11
See
Angath v
Muchkunlal’s Estate
1954
(4) SA 283
(NPD) at 284 C – F: ‘
As
I see the case at the present stage, it is not one of vagueness. The
contract, as I have said, is not in its language vague
in any
respect - rather it is silent in certain respects. From what was
said by Schreiner, J.A., in
Middleton
v Carr
,
1949
(2) SA 374 (AD)
at
p. 386, it seems to me clear that the Law can imply what is
necessary in order to supply the unexpressed terms in a case such
as
the present, so that reasonable remuneration may be awarded. From
Fluxman
v Brittain
,
1941 AD 273
, it seems to me it is possible to imply that the
plaintiff, if he is entitled to remuneration, is not obliged to
leave it after
the termination of his employment or, at any rate,
beyond a reasonable time after the termination of his employment. On
the evidence
up to now I am unable to say that a reasonable man
could not do what is necessary in regard to implying the unexpressed
terms.
Consequently it seems to me that the plaintiff has made out a
prima
facie
case
for reasonable remuneration.’
12
1973
(1) SA 644
(A).
13
See
in this regard
CGEE Alsthom Equipments et
Enterprises Electriques, South African Division v GKN Sankey (Pty)
Ltd
1987 (1) 81 at page 92 A—F
where Corbett JA held as follows: 'There is no doubt that,
where in the course of negotiating
a contract the parties reach an
agreement by offer and acceptance, the fact that there are still a
number of outstanding matters
material to the contract upon which
the parties have not yet agreed may well prevent the agreement from
having contractual force.
A good example of this kind of situation
is provided by the case of
OK
Bazaars v Bloch (supra
) (see also
Pitout v North Cape Livestock
Co-operative Ltd (supra
)). Where
the law denies such an agreement contractual force it is because the
evidence shows that the parties contemplated that
consensus
on the outstanding matters would have to be reached before a binding
contract could come into existence (see
Pitout's
case
supra
at 851B--C). The existence of such outstanding matters does not,
however, necessarily deprive an agreement of contractual force.
The
parties may well intend by their agreement to conclude a binding
contract, while agreeing, either expressly or by implication,
to
leave the outstanding matters to future negotiation with a view to a
comprehensive contract. In the event of agreement being
reached on
all outstanding matters the comprehensive contract would incorporate
and supersede the original agreement. If, however,
the parties
should fail to reach agreement on the outstanding matters, then the
original contract would stand. (See generally
Christie
The
Law of Contract in South Africa
at
27--8.) Whether in a particular case the initial agreement acquires
contractual force or not depends upon the intention of
the parties,
which is to be gathered from their conduct, the terms of the
agreement and the surrounding circumstances (see
Pitout's
case
supra
at 851D--G). I did not understand counsel to dispute the correctness
of these general propositions.'
14
Wallis
supra
at 2-21.
15
1920
AD 123
at 128.
16
Most
notably in respect of contracts dealing with the alienation of land.
17
In
fact a contract can even exist where no words have been used but
where it can be inferred from the conduct of the parties that
a
contract has been concluded. See
Timoney and King v King
1920
AD 133
at 141.
18
2008
(3) SA 59
(N) at paras 27-31.
19
My
emphasis.
20
1921
AD 303.at
305. Referred to with approval by the Court in
Shaik
(supra)
.
21
1964
(40 SA 760
(A).
22
Ibid
at 764 A.
23
Ibid
a
t 766-767.
24
2002
(4) SA 1
(SCA).
25
Ibid
at paras 6-10.
26
Ibid
at paras 11-34. The Court in
Shifren
held as follows: ‘[23]
'n Ander waarde onderliggend aan die kontraktereg is deur Rabie HR
in Magna Alloys and Research (SA)
(Pty) Ltd v Ellis
[1984] ZASCA 116
;
1984
(4) SA 874
(A)
op 893I-894A onderstreep toe hy daarop gewys het
dat 'dit in die openbare belang is dat persone hulle moet hou aan
ooreenkomste
wat hulle aangegaan het. In laasgenoemde verband het
Steyn HR in SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en H
Andere
1964
(4) SA 760 (A)
op 767A, gewag gemaak van - ''die elementêre
en grondliggende algemene beginsel dat kontrakte wat vrylik en in
alle erns
deur bevoegde partye aangegaan is, in die openbare belang
afgedwing word''.'
[24] Die taak van howe in die algemeen en van hierdie
Hof in besonder is om hierdie grondliggende waardes wat soms met
mekaar
in botsing kom teen mekaar op te weeg en om by geleentheid,
wanneer dit nodig blyk te wees, geleidelik en met verdrag
aanpassings
te maak. Of A soos Lord Simon of Glaisdale dit stel in
Miliangos v George Frank (Textiles) Ltd:
'(J)udicial advance should be gradual. . . . (O)ne step
is enough. . . It is, I concede, a less spectacular method of
progression
than somersaults and cartwheels; but it is the one best
suited to the capacity and resources of a Judge.'
Om eensklaps aan Regters 'n diskresie te verleen om
kontraktuele beginsels te verontagsaam wanneer hulle dit as
onredelik of onbillik
beskou is in stryd met hierdie werkswyse. Die
gevolg sal immers wees dat die beginsel van pacta sunt servanda
grotendeels verontagsaam
sal word omdat die afdwingbaarheid van
kontraktuele bepalings sal afhang van wat 'n bepaalde Regter in die
omstandighede as redelik
en billik beskou. Die maatstaf is dan nie
meer die reg nie maar die Regter. Vanuit die hoek van die
kontrakterende partye gesien,
sal hulle nie kan handel op die
algemene verwagting dat wanneer daar 'n dispuut tussen hulle
ontstaan hulle kontrak ooreenkomstig
die terme daarvan afgedwing sal
word nie. Hulle sal moet wag en sien of die individuele Regter die
bepalings as redelik en billik
beskou. Dat so 'n algemene benadering
nie aan die behoeftes van die handelsverkeer sal voldoen nie, spreek
eintlik vanself. 'n
Hof kan nie skuiling soek in die skaduwee van
die Grondwet om vandaar beginsels aan te val en omver te werp nie;
wel in die lig
van die Grondwet kan en moet die reg aangepas word.
In hierdie konteks is vaagweg na konstitusionele waardes verwys
sonder om
spesifiek te wees. 'n Vrye regterlike diskresie is nie so
'n waarde nie en ons is ook nie in staat 'to discern any societal
value
which is imperilled' deur die handhawing van Shifren en die
weiering om 'n 'special equity theory' in die kontraktereg in te
voer nie.
[25] Wat verskansingsklousules in die besonder betref,
is, soos reeds ten dele aangedui, dit duidelik dat die uiteindelike
beslissing
in die Shifren-saak juis die resultaat is van 'n opweging
van verskillende geldige oorwegings. So het die Hof byvoorbeeld die
vraag gestel of daar enigiets verkeerds of onaanvaarbaar is in die
oorwegings wat die verskansingsklousule ten grondslag lê.
Hierop gee Steyn HR die volgende antwoord (op 766H):
'Hul [dit is die kontrakterende partye se]
klaarblyklike doel met so 'n bepaling is om te waak teen die
geskille en bewysmoeilikhede
wat by mondelinge ooreenkomste kan
ontstaan. Om albei daarteen te beskerm kom hulle uitdruklik ooreen
dat mondelinge wysigende
ooreenkomste . . . al word hulle animo
contrahendi aangegaan, tussen hul van nul en gener waarde sal wees.'
[26] Dit staan dus vas dat 'n verskansingsklousule op
sigself nie ongeldig is nie ten spyte daarvan dat 'n beroep daarop
noodwendig
sal neerkom op 'n weiering om uitvoering te gee aan 'n
mondelinge ooreenkoms wat animo contrahendi aangegaan is. Wat
beklemtoning
uit die aanhaling verdien, is dat die
verskansingsklousule beide partye beskerm - en dit was hulle vrye
keuse. Die potensiële
ongelykheid van die partye in hulle
bedingingsmag of finansiële vermoë en die beskerming van
swakkere kontraktante
kom dus glad nie hier ter sprake nie’ …
Cameron AR observes as follows: ‘[90] The
appellant's attack invites us to reconsider that decision. We are
obliged to do
so in the light of the Constitution and of our
'general obligation', which is not purely discretionary, to develop
the common
law in the light of fundamental constitutional values.
For the reasons the joint judgment gives, I do not consider that the
attack
can or should succeed. The Shifren decision represented a
doctrinal and policy choice which, on balance, was sound. Apart from
the fact of precedent and weighty considerations of commercial
reliance and social certainty, that choice in itself remains sound
four decades later. Constitutional considerations of equality do not
detract from it. On the contrary, they seem to me to enhance
it. As
the joint judgment observes (para [7]), it is fallacious to suggest
that insistence on only written alterations to a contractual
regimen
necessarily protects the strong at the expense of the weak. In many
situations the reverse is likely to be true. And
where a contracting
party, strong or weak, seeks to invoke the writing-only requirement
in deceit or to attain fraud, the courts
will not permit it to do
so.’
27
2010
(4) SA 261
(ECM).
28
At
paragraphs [43] – [44] the Court held as follows: [43] The
judgment in
Shifren
convincingly deals with
policy considerations such as the need to avoid disputes, evidential
difficulties often associated with
oral agreements, the need for
certainty and clarity in the commercial environment, and the
infringement of the right to contractual
freedom to allow a
departure from the elementary principle of
pacta
sunt servanda
. The
principle in
Shifren
has consistently been
reaffirmed by the Supreme Court of Appeal and remains good law
(
Impala
Distributors v Taunus Chemical Manufacturing
Co (Pty) Ltd
1975
(3) SA 273 (T)
at 277A - E;
Brisley
v Drotsky
2002
(4) SA 1
(SCA)
([2002]
3 All SA 363
;
2002 (12) BCLR 1229)
in
paras 6 - 10;
Kovaks
Investments 724 (Pty) Ltd v FC Marais
(SCA case No 232/08, 20
August 2009, as yet unreported).
[44] Of course, in the absence of an
entrenchment (non-variation) clause, the contracting parties are
free to informally or verbally
cancel or vary the terms of their
written contract. This proposition was accepted in
Shifren
(at 766C - G) and is
supported by subsequent authority such as
Academy
of
Learning
(Pty) Ltd v Hancock and Others
2001
(1) SA 941
(C)
at 954B - E.’
29
Section
20
(7) of the
Companies Act, No 71 of 2008
provides as follows:
‘A person dealing with a company in good faith, other than a
director, prescribed officer or shareholder
of the company, is
entitled to presume that the company, in making any decision in the
exercise of its powers, has complied with
all of the formal and
procedural requirements in terms of this Act, its Memorandum of
Incorporation and any rules of the company
unless, in the
circumstances, the person knew or reasonably ought to have known of
any failure by the company to comply with
any such requirement.’
30
(1856)
6 E & B 427
[1856] EngR 470
; ;
119 ER 886.
31
1946
AC 459
474;
1946 1 All ER 586
592 (HL) at 592.
32
As
quoted in LAWSA vol 4 Part 2: Companies paragraph 184 at page 332.
33
LAWSA
at page 331.
34
LAWSA
at page 331- 332.
35
[2004]
1 ALL SA 204
(T).
36
FPW
Engineering Solution (Pty) Ltd v Technicon Pretoria and Others
at 217-218 paras 37-38.