THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case no: 765/2021
In the matter between:
G PHADZIRI & SONS (PTY) LTD APPELLANT
and
DO LIGHT TRANSPORT (PTY) LTD FIRST RESPONDENT
DEPARTMENT OF TRANSPORT,
LIMPOPO PROVINCE SECOND RESPONDENT
Neutral citation: G Phadziri & Sons (Pty) Ltd v Do Light Transport (Pty) Ltd and
Another (765/2021) [2023] ZASCA 16 (20 February 2023)
Bench: PETSE AP, MOCUMIE and MAKGOKA JJA and SALIE and SIWENDU
AJJA
Heard: 10 November 2022
Delivered: 20 February 2023
Summary: Contract law – written agreement referring to annexures , but same not
attached – whether such renders the agreement void for vagueness.
Tacit term – duration of agreement subject to occurrence of a specified event –
whether tacit term can be read in to allow a party to terminate the agreement on
reasonable notice.
___________________________________________________________________
ORDER
___________________________________________________________________
2
On appeal from: Limpopo Division of the High Court, Thohoyandou (Ledwaba AJ,
sitting as a court of first instance):
The appeal is dismissed with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
Makgoka JA (Petse AP, Mocumie JA and Salie and Siwendu AJJA concurring):
[1] The issue in this appeal is whether an agreement concluded between the
appellant, the first respondent and the second respondent is: (a) void for vagueness;
and (b) necessitates a tacit term to be read into it as to its duration. The Limpopo
Division of the High Court, Thohoyandou (the high court) answered both questions in
the negative, and made an order enforcing the agreement. Aggrieved by that order,
the appellant appeals against the decis ion with the leave of the high court. The
second respondent did not take part in the proceedings in the high court, and does
not participate in this appeal.
[2] The facts which gave rise to the dispute are as follows . The appellant,
Phadziri & Sons (Pty) Ltd ( Phadziri), and the first respondent, Do Light Transport
(Pty) Ltd ( Do Light), are bus service companies offering public transport services in
the V hembe district of Limpopo. Phadziri is the holder of a number of li cences in
respect of specific routes, issued to it by the second respondent, the Limpopo
Department of Transport ( the Department). Up until September 2010, Phadziri used
its licences for public transport services on those routes. However, due to its aging
bus fleet and other problems, Phadziri was unable to offer effective and reliable
public transport services as required in terms of the licences.
[3] As a result, on 15 September 2010, Phadziri concluded a written agreement
with Do Light (the bilateral agreement) in terms of which Do Light would, as a sub -
contractor, render the public transport services in Phadziri’s stead in terms of some
of those licences. The duration of the bilateral agreement was five years, ‘with a
3
grace period of 3 (three) years’; thus, potentially totalling eight years. The bilateral
agreement was subject to the approval of the Department, which subsequently
disapproved it.
[4] Over a week later , on 23 September 2010 , Phadziri, Do Light and the
Department concluded a tripartite agreement. In terms thereof, Do Light would be
Phadziri’s sub-contractor for the road public passenger services in respect of certain
routes. Those were identified in the agreement as the Maila and Vleifontein routes –
both to and from Louis Trichardt (the affected routes). As to its duration, the tripartite
agreement would ‘terminate when integrated public transport services are introduced
for the Vhembe District of the Limpopo Province’.
[5] In terms of the tripartite agreement, Phadziri undertook to: (i) allow Do Light to
operate on the affected routes in te rms of an agreed timetable, or as amended by
agreement between the Department and Do Light; (ii) cede the licences pertaining to
the affected routes for the duration of the agreement; and (iii) provide Do Light with
the necessary equipment required to enable it to operate on the affected routes. Do
Light’s obligations included, among other things, to take over the affected routes and
offer the required transportation services, as well as ancillary operational issues. For
its part, the Department undertook t o pay the subsidy claims directly to Phadziri and
Do Light in respect of the areas operated by the parties, respectively.
[6] For about eight years after it was concluded, the tripartite agreement was
implemented without any problems. However, towards the end of September 2018,
Phadziri asserted that the agreement had terminated. It demanded back the licences
it had ceded to Do Light, as well as the right to operate on the affected routes. Do
Light rebuffed Phadziri’s demands, and pointed out that the tripartite agreement
would only terminate upon the implementation by the Department of the integrated
public transport services . Efforts to resolve the impasse between the parties,
including interventions by the Department, failed to bear fruit.
[7] At the beginning of August 2019, Phadziri commenced operating on the
affected routes in competition with Do Light . In response, Do Light launched a two -
part application in the high court, and obtained, in part A , an urgent interim order
4
interdicting Phadziri ’s conduct. The interim order was to operate with immediate
effect pending the determination of part B of that application . When part B came
before it, the high court granted an order declaring that the tripartite agreement: (a)
was valid and enforceable until the introduction of the integrated public transport
services by the Department, or until it was lawfully terminated ; and (b) had
superseded the bilateral agreement . In coming to that conclusion, the high court
rejected the thrust of Phadziri’s two-pronged submission, namely that the tripartite
agreement was void for vagueness, alternatively that a tacit term should be read into
it as to its duration to remedy the perceived vagueness.
[8] In this Court, Phadziri persisted with the se submissions. In support of the
contention for vagueness, Phadziri relied on the fact that t wo documents referred to
as annexures 1 and 3 in the tripartite agreement were not attached to it. Because of
this omission, asserted Phadziri, the routes which it had cede d to Do Light in terms
of the tripartite agreement could not be identified.
[9] Annexure 1 is referred to in clause 3.1 of the tripartite agreement under
Phadziri’s obligations. The clause provides:
‘To allow [Do Light] to operate from Vleifontein and Maila to Makhado (Louis Trichardt) in
terms of the timetable as attached as annexure 1, or as amended by agreement between the
Department and Do Light.’
Annexure 3 appear s in clause 4.8 1 of the tripartite agreement under Do Light’s
obligations, and it reads as follows:
‘Cash journey tickets will be sold to passengers on the affected routes as per the fare tables
as attached in . . . annexure 3, or as agreed to.’
[10] These two annexures clearly refer to a timetable in terms of which Do Light
would operate its busses on the a ffected routes. ‘Timetable’ as defined in s 1 of the
National Land Transport Act 5 of 2009 (the Act) means:
1 Clause 4.5 refers to annexure 2, which in turn deals with the rates at which passengers would
purchase tickets from Do Light. There does not seem to be any dispute around this.
5
‘[A] published document informing passengers of headways (intervals between departures or
the passing of vehicles), or times when and places where public transport services are
available, indicating at least origin and destination points and significant interm ediate
locations along the route.’
[11] The question to be determined is whether the omission of the annexures
renders the agreement not capable of implementation. To answer that question, t he
clauses in which the annexures are mentioned should not be read in isolation, but as
part of the whole agreement. On a plain reading of the tripartite agreement, what
was to be ceded were the licences, which reflected the affected routes, identified in
clause 3.1 as ‘Vleifontein and Maila to Makhado (Louis Trichardt)’. Clause 3.2
obliged Phadziri to ‘cede the permits/operating licences pertaining to the affected
routes’ for the duration of the agreement. The effect of Phadziri ceding the licen ces
in terms of clause 3.2 to Do Light was that the latter would s tep into the shoes of
Phadziri and transport passengers in terms of the licen ces, as Phadziri had done
before the conclusion of the tripartite agreement.
[12] It is trite that a provision in a contract must be interpreted not only in the
context of the contra ct as a whole, but also to give it a commercially sensible
meaning.2 The principle requires a court to construe a contract in context – within the
factual matrix in which the parties operated.3 Recently, in University of Johannesburg
v Auckland Park Theological Seminary,4 the Constitutional Court emphasised that a
court interpreting a contract has to, from the onset, consider the contract’s factual
matrix, its purpose, the circumstances leading up to its conclusion, and the
knowledge at the time of those who negotiated and produced the contract.5
[13] In the present case, before the tripartite agreement w as concluded, Phadziri
and Do Light were competitors in the public transportation services sector. Phadziri
was at the risk of losing the licen ces issued to it by the Department , because of its
inability to deliver effective service s. To avoid that eventuali ty, Phadziri approached
2 Ekurhuleni Metropolitan Municipality v Germiston Municipal Retirement Fund [2009] ZASCA 154;
2010 (2) SA 498 (SCA); [2010] 2 All SA 195 (SCA) (Germiston Municipal Retirement Fund) para 13.
3 Ibid.
4 University of Johannesburg v Auckland Park Theological Seminary and Another [2021] ZACC 13;
2021 (8) BCLR 807 (CC); 2021 (6) SA 1 (CC) para 66.
5 Ibid.
6
Do Light to come to its rescue as a sub-contractor. It follows that it was in Phadziri’s
interest that the agreement was implementable.
[14] Thus, when the tripartite agreement was concluded, Phadziri must have had a
timetable used in conjunction with its licences. Accordingly, it knew of the ‘origin and
destination points and significant intermediate locations along the route’ . It is
therefore contrived for it to now suggest that the routes were not known, because the
timetable was not attached to the tripartite agreement. On any conceivable basis,
when Phadziri invited Do Light to be its sub -contractor, both knew about the
timetable for Do Light’s scheduled trips on the affected routes . As to the purpose o f
the tripartite agreement, apart from the commercial efficacy it afforded to Phadziri, its
overall purpose was to avoid the collapse of public road transportation services on
the affected routes.
[15] Furthermore, our law inclines to preserving, instead of destroying, a contract
which the parties seriously entered into and considered capable of implementation. 6
In Hoffmann and Carvalho v Minister of Agriculture,7 the court observed:
‘. . . [T]he Courts are very willing to treat a contract as having been concluded if the parties
think they have made a binding contract (as they undoubtedly did in this case). Where
parties intend to conclude a contract, think they have concluded a contract, and procee d to
act as if the contract were binding and complete, I think the Court ought rather to try to help
the parties towards what they both intended rather than obstruct them by legal subtleties and
assist one of the parties to escape the consequences of all t hat he has done and all that he
has intended; except, of course, where parties have not observed statutory formalities
required in certain contracts, such as in a contract for the sale of fixed property.’8
[16] This approach was also emphasised in Soteriou v Retco Poyntons (Pty) Ltd ,9
where it was remarked that courts are ‘reluctant to hold void for uncertainty any
provision that was intended to have legal effect’. With reference to English cases,
this Court said that: ‘. . . [t]he problem for a Co urt of construction must always be so
to balance matters that, without the violation of essential principles, the dealings of
6 Genac Properties JHB (Pty) Ltd v NBC Administrators CC 1992 (1) SA 566 (A) at 579F-H.
7 Hoffmann and Carvalho v Minister of Agriculture 1947 (2) SA 855 (T) (Hoffmann).
8 Ibid at 860.
9 Soteriou v Retco Poyntons (Pty) Ltd 1985 (2) SA 922 (A).
7
men may as far as possible be treated as effective, and that the law may not incur
the reproach of being a destroyer of bargains’.10
[17] There is also authority for the proposition that the conduct of the parties in
implementing an agreement may provide clear evidence as to how reasonable
business persons construed a disputed provision in a contract. This Court explained
this in Comwezi Security Services v Cape Empowerment Trust11 (Comwezi) thus:
‘In the past, where there was perceived ambiguity in a contract, the courts held that the
subsequent conduct of the parties in implementing their agreement was a factor that could
be taken into account in preferring one interpretation to another. Now that regard is had to all
relevant context, irrespective of whether there is a perceived ambiguity, there is no reason
not to look at the conduct of the parties in implementing the agreement. Where it is clear that
they have both taken the same approach to its implementation, and hence the meaning of
the provision in dispute, their conduct provides clear evidence of how reasonable business
people situated as they were and knowing what they knew, would construe the disputed
provision.’12 (Footnotes omitted.)
[18] In Capitec Bank v Coral Lagoon Investments 13 (Coral Lagoon ), this Court
cautioned that the passage in Comwezi referred to above, should not be understood
‘as an invitation to harvest evidence, on an indiscriminate basis, of what the parties
did after they concluded their agreement’,14 and pointed out that such evidence ‘must
be relevant to an objective determination of the meaning of the words used in the
contract’.15
[19] The upshot of these authorities is that the tripartite agreement should be
preserved and enforced. I have no doubt that the parties seriously entered into the
tripartite agreement and considered it capable of implementation, and , in fact,
implemented it. I also consider, on the authority of Comwezi and Coral Lagoon, that
the evidence of how the parties conducted themselves in implementing the tripartite
10 Ibid at 931G-H.
11 Comwezi Security Services (Pty) Ltd and Another v Cape Empowerment Trust Ltd [2012] ZASCA
126 (SCA).
12 Ibid para 15.
13 Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others
[2021] ZASCA 99; [2021] 3 All SA 647 (SCA); 2022 (1) SA 100 (SCA).
14 Ibid para 48.
15 Ibid.
8
agreement is relevant to the determination of how the y understood their obligation s
in terms thereof, despite the missing annexures.
[20] Save for the timetable in respect of route 7, which was rectified per the order
of 18 May 2020 at the instance of Phadziri, the parties had a meeting of the minds as
to the routes in respect of which licen ces had to be ceded . Phadziri relied on this
rectification to support its assertion that the routes could not be identified. I disagree.
In my view, it points in the opposite direction, when one considers that a total of eight
licences were ceded, and it was only in respect of one that clarity had to be sought
from the court. What is more, if Phadziri is correct in its stance, it would have
approached the court to rectify the routes in respect of all the licences. The fact that
it sought rectification in respe ct of only one, erodes its assertion. As mentioned
already, the tripartite agreement was concluded in September 2010 , and for close to
eight years thereafter, it was implemented without any issues.
[21] In my judgment, this is a case where ‘the Court ought ra ther to try to help the
parties towards what they both intended rather than obstruct them by legal subtleties
and assist one of the parties to escape the consequences of all that he has done and
all that he has intended’.16 Clauses 3.1 and 4.8 must be read so as to give them, and
the tripartite agreement, a commercially sensible meaning.17
[22] For all of the above reasons, and on the basis of the authorities referred to, I
conclude that the high court was correct in holding that the tripartite agreement is not
void for vagueness.
[23] Turning now to whether a tacit term should be read into the agreement as to
its duration, I consider first the approach adopted in Transnet Ltd v Rubenstein 18
(Rubenstein). There, this Court considered an agreement with a termination clause
similar to the one in the present case. The respondent was given the exclusive right
to operate a jewellery boutique on one of the businesses of the appellant, the Blue
Train. The contract specifically provided for termination on the privatisation of the
16 Hoffmann at 860.
17 Germiston Municipality Retirement Fund fn 9 above, para 13.
18 Transnet Ltd v Rubenstein 2006 (1) SA 591 (SCA); [2005] 3 All SA 425 (SCA).
9
Blue Train. It later became apparent that the privatisation was not going to happen.
The appellant argued that it was necessary to read into the contract a term that if
privatisation did not occur, the contract would be terminable on reasonable notice .
This, the respondent submitted, was to avoid locking the parties in a n indefinite
contract, which was clearly never their intention.
[24] This Court explained that when a contract was terminable upon the happening
of an uncertain future event, in the absence of evidence as to what the parties
intended, it was not possible to impute into such a contract a term which was in
conflict with the parties’ express agreement as to its duration. This followed from the
principle that a tacit term may not be imputed into a contract if it would be in conflict
with its express provisions. 19 On the facts , it was found that there was thus no
common underlying supposition or assumption as to the termina tion of the contract ,
should privatisation not occur. Accordingly, the appeal was dismissed.
[25] In the present case, the tacit term which Phadziri maintains should be read
into the tripartite agreement is that its duration was terminable on reasonable notic e
after eight years. Initially, Phadziri predicated this on its stance that the tripartite
agreement was based on the bilateral agreement, which , as mentioned already, had
a duration of eight years. In the high court, Phadziri abandoned this stance, correctly
in my view, and accepted that the tripartite agreement had superseded the bilateral
agreement. The significance of this is that the premise of the initial argument (that
the tripartite agreement was based on the bilateral agreement) was no longer open
to Phadziri.
[26] However, that did not deter Phadziri. In this Court, it had a further string to its
bow. As mentioned already, in Auckland Park Theological Seminary it was held that
in interpreting a contract, reliance may be placed on the evidence of the
circumstances leading to its conclusion, and the context in which it was concluded.
Relying on that principle, Phadziri held up: (a) the provisions of the National Land
Transport Act 5 of 2009 (the Act); and (b) government resolutions on the
implementation of the integrated public transport system , as the contextual setting
19 Ibid paras 13, 18 and 19.
10
within which the tripartite agreement was concluded, to pre ss for a tacit term to be
read in thereto.
[27] As to (a), Phadziri’s argument was this. Sections 34 and 35 of the Act provide
for five-year National Strategic Framework s and five -year Provincial Strategic
Frameworks, respectively, to be put in place with a view to preparing integrated
public transport plans. The plans must be developed in terms of s 36 of the Act with
a view to establish a public transport system. Section 40 of the Act obliges provinces
to take steps as soon as possible after the commencement of the Act to integrate
contracted bus services in their areas into the larger public transport system.
[28] According to Phadziri, these provisions envisaged that an integrated public
transport system could be put in place not long after the coming into force of the Act
in 2009. This would be relatively shortly before the tripartite agreement was
concluded in September 2010. This, it submit ted, ‘created an impression which all
the persons in the position of the three parties would have been aware of that the
integrated transport services might be implemented not long after a period of five
years’ if all went smoothly, with three additional years, with delays.
[29] It was then s ubmitted that the officious bystander 20 would have detected that
when the parties opted for the duration linked to the implementation of the integrated
public transport system, they had failed to discuss the possibility of long and
repeated delays, as the implementation required co -operation of all three tiers of
government. According to Phadziri, it is not unrealistic that the officious bystander
would have foreseen delays, and suggested a tacit clause to the effect that the
duration of the tripartite agreement would be terminable on reasonable notice by any
of the parties after eight years.
[30] I do not think that these provisions support the tacit term agitated for by
Phadziri. It has simply failed to furnish evidence that the minds of those who
represented the parties at the conclusion of the agreement were directed to these
provisions. In the negotiations leading to the conclusion of the agreement, Phadziri
20 The so-called ‘officious bystander’ test is often applied, which originates from English law and has
found application in our law . T he essence of which is that were an officious bystander to suggest
some express provision for a term in their agreement, it would be one which the parties would readily
agree was their intention.
11
was represented by Mr Tshikume Phadziri. But he did not depose to any affidavit to
support Phadziri’s submissions . Instead, the answering affidavit, which is silent on
the tacit term, was de posed to by Mr Khangweni Patrick Phadziri. When the issue
was first raised in Phadziri’s supplementary answering affidavit, the deponent was its
attorney, Mr André Naudé. None of the deponents was part of th ose negotiations.
The result is that there is no evidence that the parties had meant for the duration of
the tripartite agreement to be anything other than what it expressly says.
[31] As to (b) , Phadziri referred to the resolutions taken at a meeting on 6 May
2015, held between the Minister of Transport (the Minister) and provincial members
of the executive committee (ME Cs) responsible for transport. The resolution s are
summarised in a letter dat ed 1 June 2015 from the Minister to the relevant MEC in
Limpopo. However, a simple regard to tho se resolutions shows that they have no
bearing whatsoever on the negotiations which preceded the conclusion of the
tripartite agreement . The resolutions refer i n general terms to the government’s
policy of introducing an integrated public transport system throughout the country
and the provinces’ role in it. They do not speci fically refer to any area, like the
Vhembe district, where the affected routes are. There is also no suggestion in any of
the resolutions that the integrated public transport system in any given province or
district would be implemented within five years after the Act had come into force.
They therefore shed no light on the intention of the parties.
[32] Thus, as was the case in Rubenstein, in the absence of evidence as to what
the parties intended, the express duration term of the tripartite agreement should be
preserved and honoured. The term which Phadziri seeks to impute into the
agreement is in conflict with its express term as to its duration. It follows that t he
tripartite agreement is enforcea ble until the implementation of the integrated public
transport services by the Department. Although there has been a delay in
implementation, unlike in Rubenstein, there is no evidence that the Department has
abandoned the project.
[33] In all the circumstances, the appeal must fail. As to costs, Do Light employed,
and sought costs of, three counsel. However, I do not think that th is matter
warranted the employment of more than one counsel.
12
[34] In the result, the following order is made:
The appeal is dismissed with costs.
__________________
T M MAKGOKA
JUDGE OF APPEAL
Appearances
For appellant: J L van der Merwe SC (with him I M Hlalethoa)
Instructed by: Coxwell, Steyn, Vise and Naudé, Thohoyandou
Horn & Van Rensburg Attorneys, Bloemfontein
For first respondent: U B Makuya (with him M C Netshiendeulu and
L M Magau)
Instructed by: Erasmus Motaung Incorporated, Roodepoort
Phatshoane Henney Attorneys, Bloemfontein