IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
1
Case No: 4086/2020
In the appeal between:
TECHNOLOGIES ACCEPTANCES RECEIVABLE (PTY) LIMITED First Plaintiff
FINTECH UNDERWRITING (PTY) LIMITED Second Plaintiff
and
PIETER TOERIEN PRODUCTIONS CC tla THEATRE ON THE BAY First Defendant
DYLAN SAGE
OXBOW EQUIPMENT (PTY) LIMITED
Second Defendant
Third Defendant
Heard: 26, 27 and 28 August 2024 and 12 September 2024
Judgment: 18 September 2024
JUDGMENT
Handed down by email to the parties' legal representatives
on 18 September 2024, that date being the date of the Judgment
2
KANTOR, AJ:
1. A mix of Shifren,1 a non-variation clause, public policy and what Grusd2 means,
in the world of office equipment finance and contracts of sale.
2. Overview:
2.1. The third defendant ("Oxbow" or the third defendant) leased two printers
("the Printers") to First Defendant ("Toerien" or the first defendant),
represented by Third Defendant ("Sage" or the second defendant), in
terms of a written Master Rental Agreement concluded on 1 June 2016
("the MRA").
2.2. The MRA was to replace an agreement in respect of other printers which
had been concluded by Toerien with a supplier called CBA ("CBA") which
Toerien no longer wanted. Toerien was liable to CBA for an early
cancellation payment. Oxbow agreed to incorporate the extent of the CBA
early cancellation into the monthly payments in terms of the MRA and CBA
was to be paid its early cancellation payment.
2.3. Plaintiffs contend that the MRA was ceded to Second Plaintiff ("FUN") and
from FUN to First Plaintiff {"TAR"). Where referred to together, TAR and
FUN may also be referred to as the plaintiffs.
1 SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964 (4) SA 760 (A)
2 Bank v Grusd 1939 TPD 286
3
2.4. Monthly rentals payments were charged to and debited from Toerien's
bank account. There is a dispute as to the amount thereof, with Toerien
contending that it was over-charged for three years, in consequence of
which Toerien purported to cancel the MRA and tendered return of the
Printers, and claims (in a counter claim) payment of what it avers it
overpaid (R209 130.88).
2.5. The plaintiffs contend that Toerien is liable in the amount of R451 466.66,
alternatively they claim that amount from Oxbow, on the basis of
representations, warranties and indemnifications by Oxbow, in the event
that their claims against Toerien and Sage are not upheld and a further
R209 130.88 in the event that Toerien's counter claim is upheld.
3. The law requires a discipline to pleading, for the delineation of the issues
between particular parties:
3.1. The introduction to Amler's Precedents of Pleadings 9ed reads as follows
in part:
Purpose of pleadings: A party must define its cause of action and defence in the
appropriate pleading in the court of first instance to inform the other parties to the matter
of the case they must meet and of the relief sought against them in that court. This is a
fundamental principle of fairness in the conduct of litigation, which promotes the parties'
rights to a fair hearing guaranteed by section 34 of the Constitution.
South African Police Service v Solidarity obo Barnard 2014 (10) BCLR 1195 (CC), [2014] 11 BLLR
1025 (CC),
2014 SA 123 (CC) para. 202
Pleadings define the issues not only for the other party and the trial court but also for any
court of appeal. The duty of courts is to adjudicate upon the pleaded disputes and those
disputes alone.
Mo/usi and others v Voges NO and others 2016 (7) BCLR 839 (CC), 2016 (3) SA 370 (CC)
Fischer and another v Ramahlele and others 3 All SA 395 (SCA), 2014 {4) SA 614 (SCA)
para. 13
Barkhuizen v Napier 2007 (7) BCLR 691 (CC), 2007 (5) SA 323 (CC) para. 39
Damons v City of cape Town 2022 (10) BCLR 1202 (CC), [2022] 7 BLLR 585 (CC), (2022) 43 ILJ
1549 (CC) paras 117-119
The oft-repeated statement that 'pleadings are made for the court not the court for the
pleadings' may be misunderstood. As mentioned, pleadings are made primarily for the
parties. They are also made for the court, meaning that they circumscribe the function of
the court in the matter. However, a court should not be hampered in deciding a matter by
pleading technicalities.
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3.2. In Minister of Safety and Security v S/abbert 2010 2 All SA 474 (SCA) it
was held at paragraph 11 as follows:
"The purpose of pleadings is to define the issues for the other party and the
court. A party has a duty to allege in the pleadings the material facts upon
which it relies. It is impermissible for a plaintiff to plead a particular case and
seek to establish a different case at trial. It is equally not permissible for a trial
court to have recourse to issues falling outside the pleadings when deciding
a case."
3.3. Mr Fasser, who appeared for the plaintiffs, accepted that the principles in
S/abberl are all correct but submitted that they are complied with by the
plaintiffs. The import of this appears below.
4. The pleaded cases of the parties are important. They are as follows:
4.1. Between plaintiffs and first and second defendants, in convention:
4.1.1. Plaintiffs claim (in the alternative between them) that Toerien is
liable for the balance of R451 466.66 due in terms of the MRA
( ceded from Oxbow), and that Sage is jointly and severally liable
as guarantor for that amount.
4.1.2. Toerien and Sage's defence is that the incorrect amount in terms
of the MRA were deducted from Toerien's account which
constituted a breach of the MRA which it cancelled.
4.1.3. TAR and FUN contend that the correct monthly rental amount in
terms of the MRA was R11 426.47, that being the amount which
it deducted on a monthly basis from Toerien's account.
4.1 .4. Toerien and Sage contend that the correct monthly rental
amount in terms of the MRA was R6 235.80.
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4.1.5. What had happened to cause the impasse was that the amount
of R6 235.80 provided for in the MRA (in handwriting) had been
crossed out and R11 426.47 inserted in its place (in handwriting)
and initialled by Sage for Toerien but not by anyone for Oxbow.
4.1.6. The core issue is whether this disputed amendment ("the
Disputed Amendment") was effective, taking into account the
non-variation clause in clause 15.1 of the MRA ("the Non
Variation Clause"). The wording of the relevant part of this clause
is quoted verbatim below.
4.1. 7. The other main issue is whether the MRA was validly ceded from
Oxbow to FUN and then to TAR.
4.1.8. It is in dispute whether the public policy issue raised by Oxbow
in its Plea against the plaintiffs, if upheld, will have implications
for the claim in convention between the plaintiffs and the first and
second defendants, because it was not pleaded by the plaintiffs.
4.1.9. The quantum of R451 466.66 is not in issue.
4.2. Between first defendant and plaintiffs, in reconvention:
4.2.1. Toerien avers that it overpaid the amounts due in terms of the
MRA in the total sum of R209 130.88, which sum was not due
and payable on the terms of the MRA. This turns on the Disputed
Amendment.
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4.2.2. As a result of the overpayments, Toerien avers that TAR,
alternatively FUN, was enriched at the expense of Toerien, which
enrichment was unjustified.
4.2.3. The quantum of R209 130.88 is not in issue.
4.3. Between plaintiffs and third defendant, in convention:
4.3.1. The first part of this claim in the amount of R451 466.66 is
conditional on the plaintiffs' claim against Toerien and Sage not
being upheld (i.e. the claim for the portion of the rentals based
on the increased monthly rental in the context of the Disputed
Amendment).
4.3.2. The second part of this claim in the amount of R209 130.88 is
conditional on Toerien's counter claim against the plaintiffs
succeeding (i.e. the claim for the rentals which Toerien alleges it
overpaid based on the lower monthly rental in the context of the
Disputed Amendment).
4.3.3. The. plaintiffs claim that there was a breach of certain
representations/warranties given by Oxbow in relation to the
MRA. The plaintiffs also rely on an indemnification from Oxbow.
4.3.4. Third Defendant pleads that the monthly rental was amended to
be R11 426.47.
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4.3.5. Third Defendant also pleads that if the Non-Variation Clause is
an impediment to this, then it would be contrary to public policy
to enforce it.
4.3.6. The other main issue is whether the MRA was validly ceded from
Oxbow to FUN and then to TAR
4.3.7. The quantum of R451 466.66 and R209 130.88 is not in issue.
5. During the course of the trial of the matter:
5.1. Mr Fasser placed on record that the plaintiffs are not relying on any
estoppel, both in respect of (ostensible) authority and in respect of the
Non-Variation Clause.
5.2. Mr Jonker, who appeared for the first and second defendants, placed on
record that the authority of Sage to act on behalf of Toerien is not an
issue in this matter.
5.3. In regard to public policy:
5.3.1. This was not pleaded by the plaintiffs. A party invoking public
policy has the onus in this regard (Beadica 231 CC and Others
v Trustees for the time being of the Oregon Trust and Others
2020 (5) SA 247 (CC) at paragraph 37, Caratco v Independent
Advisory (Pty) Ltd 2020 (5) SA 35 (SCA) at paragraph 26).
5.3.2. In his opening address, Mr Fasser placed on record that, from
the plaintiffs' perspective, it is relevant that the plaintiffs have not
pleaded public policy and a finding on this aspect will have legal
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implications for all the parties, whether the public policy defence
is upheld or not.
5.3.3. I asked Mr Jonker for his attitude in this respect and he pointed
out that public policy is not raised in the pleadings between the
first and second defendants, on the one hand, and the plaintiffs,
on the other, and in consequence submitted that it was not in
issue between them.
5.3.4. I raised with Mr Fasser, whether having been put on terms by Mr
Jonker, the plaintiff would wish to plead public policy in respect
of the Non-Variation Clause against the first and second
defendants. Mr Fasser placed on record that the Plaintiff will not
plead public policy and that whatever consequences may flow
from that will flow.
5.3.5. The public policy aspect is dealt with in detail below.
5.4. Mr Fasser placed on record that the quantum of Toerien's counter claim
is admitted, without admitting liability.
6. During the course of the trial of the matter, the parties agreed as follows
(recorded in a document filed of record):
"In addition to the admissions set forth in the pleadings, the parties record the
following additional admissions:
1. The plaintiffs are duly registered and incorporated in accordance with the Company
Laws of the Republic of South Africa.
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2. The conclusion of the first main cession agreement, as pleaded in paragraph 14 of
the particulars of claim ("the POC'), a copy of which appears at page 117 of bundle
"A".3
3. From 1 August 2016 to 1 July 2019, Sasfin Bank Ltd debited the first defendant's
account monthly with the rental payments provided for in the version of the rental
agreement appearing on page 136 of bundle "A".
4. Without admitting liability:
4.1 the first and second defendants admit the quantum of the plaintiffs' claim as set
out in prayer 1 of the POC; 4
4.2 the third defendant admits the quantum of the plaintiffs' claim as set out in
prayer 5 of the POC, 5 and the quantum of the first and second defendants'
counterclaim as set out in prayer (a) of the CC.6
4.3 The plaintiffs admit the quantum of the first and second defendants'
counterclaim as set out in prayer (a) of the CC.7 "
Plaintiffs' locus standi
7. The defendants contend that the plaintiffs lack locus standi, essentially because
there had not been compliance with certain procedural mechanisms for the
cessions. Oxbow further contended that the warranties relevant to this matter
were not ceded on a proper interpretation of the cession agreement.
8. The plaintiffs led evidence which established that insofar as they were concerned
the cessions relevant to the matter had been concluded and were in place and
that they acted in terms thereof, which included the warranties, representations
and indemnification at issue in this matter.
9. A third party cannot enter into the fray in regard to procedural mechanisms and
interpretations in respect of an agreement to which it is not a party, absent an
estoppel or prejudice (Aussenkehr Farms (Ptv) Ltd v Trio Transport CC 2002 (4)
3 Pleadings Bundle: page 10.
4 Pleadings Bundle: page 20.
5 Pleadings Bundle: page 20.
6 Pleadings Bundle: page 149.
7 Pleadings Bundle: page 149.
10
SA 483 (SCA) at paragraphs 24 to 27, Hillock v Hi/sage Investments 1975 (1) SA
508 (A) at 514C-5158).
10. Faced with this legal position, Mr Jonker abandoned the locus standi point taken
by the first and second defendants, save that he argued that the unamended
MRA without the purported handwritten amendments on it was the true
agreement and not the one with the purported handwritten amendments on it and
therefore the MRA was not ceded. In my view this has no merit: there was only
one document and one agreement in question, which either had a valid
handwritten amendment on it or not. It was the contract embodied in that
document, with or without the Disputed Amendment, which was ceded. It was
not a situation where, for example, the document signed on 1 June 2016 was
tom up and a new one signed on 22 June 2016 and the wrong one of the two
was ceded.
11. Similarly, Mr Quinn, who appeared for Oxbow, limited his submissions in regard
to locus standi to the argument that the cession between FUN and TAR, on a
proper interpretation thereof, did not include the warranties relied upon by them.
In my view this argument cannot be upheld based on the principles upheld in
Aussenkehr and Hillock.
12. I therefore conclude that the defendants' arguments as to focus standi are of no
merit.
Plaintiffs' claim in convention against first and second defendants as pleaded
13. This claim concerns, in effect, whether the Disputed Amendment was effective,
which is, in turn, answered by whether it complies with the Non-Variation Clause.
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14. The evidence revealed the following:
14.1. The MRA was signed by Sage for Toerien and on behalf of Oxbow by a
duly authorised representative of Oxbow (this was not in dispute).
14.2. The MRA was concluded between Toerien and Oxbow on 1 June 2016.
14.3. Clause 15.1 of the standard terms and conditions of the MRA provides
(in part) as follows:
"This agreement is the entire complete agreement between the parties. No
agreement differing from the terms of the shall be of any force or effect
unless it is in writing and signed by the parties to this agreement."
14.4. The "Agreed Monthly Rentaf', Value Added Tax thereon and the "Total
monthly rental (incl VAT)" in terms of the MRA were all provided for in
handwriting in the schedule on the main page thereof, the "Total monthly
rental (incl VAT)" being in the amount of R6 235.80.
14.5. At some point between 22 and 30 June 2019, the MRA was purported to
be amended in handwriting by crossing out and replacing the
handwritten figures in respect of the above-mentioned three items with
other figures, the "Total monthly rental (incl VAT)" being purportedly
amended to be in the amount of R11 426.47. This is the Disputed
Amendment.
14.6. It is the differential between the two handwritten figures for the "Total
monthly rental (incl VAT)" which resulted in the dispute and claims in this
matter.
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14. 7. The crossing out and replacing of the handwritten figures in respect of
the above-mentioned three items was initialled by Sage on behalf of
Toerien. It was not signed by him. It was neither initialled nor signed on
behalf of Oxbow.
14.8. In my view, with the purported amendment having been neither initialled
nor signed on behalf of Oxbow, it does not comply with the Non-Variation
Clause in the MRA and is therefore not effective and of force and effect.
This appeared to be accepted by the parties and was certainly not
disputed by them with any vigour or at all.
14.9. This conclusion means that I need not consider the question as to
whether Sage having initialled the purported amendment, but not signed
it in full, would be sufficient for the purposes of compliance with the Non
Variation Clause (I am of the view that it is, but that need not be decided).
15. The finding in paragraph 14.8 above means that on the pleadings in respect of
the claim in convention between the plaintiffs, on the one hand, and the first and
second defendants, on the other hand, the plaintiffs have failed to establish their
pleaded case as to the Disputed Amendment and the first and second
defendants are successful against the plaintiffs in that respect, subject to the
possible legal implications of the defence of public policy raised by Oxbow on
which Mr Fasser submitted the plaintiffs intended to and were entitled to rely.
That submission and the defence of public policy is dealt with further below.
Toerien's claim in reconvention for enrichment
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16. Mr Quinn's cross-examination of Sage effectively teased out and stitched
together the facts and context underlying the purported amendment of the MRA
and the purpose thereof, which was ultimately that it was intended by both
Toerien and Oxbow to be amended as it was purported to be done and that this
was because Toerien and Sage had heavily underestimated the cost of the
cancellation of its existing lease with CBA. The evidence was as follows:
16.1. Sage agreed on behalf of Toerien to the increased monthly rental
payment which is the subject of the Disputed Amendment.
16.2. He and Toerien were not tricked into agreeing to and paying the
increased amount.
16.3. Mr Quinn put to Sage that it seems that there was a good faith attempt
to amend the contract but there was non-compliance with the formalities,
which Sage accepted.
16.4. The handwritten amendments to the MRA (i.e. the subject matter of the
Disputed Amendment) and the credit application form were made in
Sage's presence by someone from Oxbow and Sage initialled the
amendments there and then.
16.5. Leaving aside formalities, he did in fact agree to these amendments.
16.6. Sage accepts that there was no malice, bad faith and fraud on the part
of anyone in regard to the Disputed Amendment.
16.7. There was a factual and business-like basis for the purported
amendments and the debits in the amended amounts.
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16.8. Oxbow had presented a written comparison between CBA's offering and
what Oxbow could offer, which included the CBA settlement amount of
R44 349.97 which had been provided to them by Sage. It was Toerien's
responsibility to pay the CBA settlement amount, which was to be built
into the Oxbow contract rental payment.
16.9. Initially the CBA settlement was thought by Sage to be in respect of a
period of seven months resulting in the aforesaid sum of R44 349.97,
which he advised Oxbow. This was built into the paperwork signed on 1
June 2016, resulting in the rental payment of R5 470 (ex Vat) and the
"Total monthly rental (incl VAT)" of R6 235.80 provided for in the MRA,
which is the central focus of the dispute in regard to this aspect of the
matter.
16.10. On 21 June 2016, Sage requested the settlement amount from CBA. He
was trying to get on top of what was owed. The settlement figure was
stated to be R329 738.22 (including VAT) in the CBA settlement letter
dated 21 June 2016 received by Sage. Later that day, Sage wrote to
Dayne Ridgeway ("Ridgeway"), representing Oxbow, and said that CBA
had sent a huge settlement amount in the CBA settlement figure letter of
21 June 2016.
16.11 . Sage had not realised that the CBA contract had much more than seven
months to run and that the CBA settlement figure was as much as it was.
16.12. Mr Quinn put that Toerien was in a predicament because it had binding
agreements with two service providers and that it would cost to get out
of either agreement.
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16.13. Sage said to Ridgeway on 22 June 2016 that he is not sure how the big
CBA settlement would affect the contract signed with Oxbow.
16.14. Ridgeway tried to help with the CBA problem and said that in the worst
case scenario the Oxbow rental would have to increase but they will
cross the bridge when they got to it, 'so do not stress'.
16.15. The CBA contract was found and given to Ridgeway by Sage with the
CBA settlement letter on or about 22 June 2016. The contract was 20
months in with 40 months to go ( of the 60 month contract), as opposed
to the 6 or 7 months believed by Sage, which resulted in the CBA
settlement figure being R329 738.22, and not the expected R44 349.97
which had been the basis for the figures in the MRA signed on 1 June
2016.
16.16. The CBA settlement figure of R329 738.22 was subsequently reduced
to R276 919.48, for reasons not material to this judgment.
16.17. Sage then recorded in an email to Ridgeway on 22 June 2016 that: 'So
I guess we have to increase the rental proposal accordingly ?'
16.18. FUN paid the amount of R267 126.16 to CBA to settle the settlement
amount. CBA never asked Sage for money and never came to collects
its machines.
16.19. Oxbow installed the Oxbow machines on 17 June 2016.
16.20. Sage accepts that if Ridgeway had initialled the MRA then the issue as
to the amendment of the MRA would not be before the court today.
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17. The Disputed Amendment was therefore made by agreement between Oxbow
and Toerien.
18. The debt to CSA was initially thought by Sage to be in respect of a period of
seven months resulting in the sum of R44 349.97, which he advised Oxbow.
This was built into the paperwork signed on 1 June 2024, resulting in the rental
payment of R5 470 (ex Vat) and the "Total monthly rental (incf VAT)" of
R6 235.80 provided for in the MRA, which is the central focus of the dispute in
regard to this aspect of the matter. It turned out this this was incorrect and the
Disputed Amendment was made. The debt owing by Toerien to CBA was finally
settled by the amount of R267 126.16 being paid by FUN to CBA, to be financed
by the increased monthly rentals which are the subject of the Disputed
Amendment in respect of the MRA. This was substantially more than what was
envisaged to be due to CBA in terms of the MRA concluded on 1 June 2016.
19. Mr Jonker argued that it was a term of the MRA that Oxbow was to pay CBA and
therefore there could not be an enrichment of Toerien and an impoverishment of
FUN/TAR by that payment being made.
20. I asked Mr Jonker whether this meant that it was a term of the MRA that Oxbow
was obliged to pay CBA whatever the amount of the debt to CBA turned out to
be, whether R44 349.97 or R267 126.16 or something else. His effective answer
was an affirmative. I asked him where that was in the agreement. It is not there.
He then said it was a tacit term. I do not agree with that. It would mean that, were
the debt later to be found out to be R500 000.00, then Oxbow would be with
paying that amount to CBA. That would be quite a tacit term, to say the least. I
disagree with it.
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21. R44 349.97 is what was envisaged to be financed for the purposes of the CBA
debt when the MRA in unamended form was concluded. This was subsequently
established to be in a much greater amount eventually resulting in a payment to
CSA of the amount of R267 126.16. When the MRA in unamended form was
concluded, the CSA settlement amount was envisaged to be R44 349.97. It was
not some floating figure for which Oxbow would be liable to pay whatever it may
be.
22. The liability to CSA for the amount of R267 126.16 was Toerien's liability, not
Oxbow's. There was no agreement that Oxbow was taking on that liability or the
liability to CSA, whatever amount it may have been - that explains why the
Disputed Amendment had to be made, in order to cater for the financing of the
huge under-estimation of the CSA settlement amount.
23. That amount could have been paid to Toerien for it to pay to CSA or Toerien, at
its instance, could have elected to use the funds as working capital in its business
and continue to pay the monthly instalments to CSA as well as Oxbow. In any of
these instances, the monthly rentals would remain the same. As an example of
another difference, the payment instruction forming part of the discounting letter
itself from Oxbow provides for payment of the full amount from FUN into one
account.
24. As a result, the plaintiffs (FUN) paid R267 126.16 for the benefit of Toerien.
Whether the figure is R267 126.19 or that amount less the R44 349.97
envisaged when the MRA in unamended form was concluded on 1 June 2016, it
is greater than the R209 130.88 claimed by Toerien in its counter claim.
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25. Toerien's enrichment claim is for overpayments of the monthly rentals in terms of
the MRA in the amount of R209 130.88, which is exceeded by the payment to
CSA.
26. Toerien has therefore not been impoverished and neither of the plaintiffs has
been enriched.
27. I therefore conclude that Toerien's counter claim fails.
Public policy
28. Public policy will be dealt with at this point because, although only pleaded by
Oxbow and not by the plaintiffs, it was argued by Mr Fasser that the resolution of
this issue has legal implications for the plaintiffs' claim in convention against
Toerien and Oxbow.
29. According to Amler's Precedents of Pleadings, 2018, 9ed at 120, a party relying
on the illegality of a term of an agreement must plead it. When illegality does not
appear ex facie the transaction but arises from surrounding circumstances, the
circumstances founding that illegality must be pleaded, and the party relying on
the facts must prove them.
30. However, a full bench decision of this court has held that the court has a duty to
raise the illegality of a contract mero motu when the parties to a dispute related
to it have not done so (Morley v Lambrechts (A 526/2013) (20141 ZAWCHC 124
{21 August 2014 ).
31. I am therefore of the view that the public policy issue is before the court in this
matter, and, as submitted by Mr Fasser, whatever implications flow from a finding
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in that respect apply to the matter as a whole, despite it having only been pleaded
by Oxbow.
Public policy per se
32. Mr Jonker, having accepted the principles in regard to locus standi articulated
above, sought to deploy them in Toerien and Sage's favour, submitting that
because, flowing from the cession to FUN, Oxbow is not a party to the MRA, it
therefore cannot raise public policy in respect of the MRA. In my view, that is a
false premise because, as pointed out by Mr Quinn, Oxbow did not assign its
obligations and remained a party to the MRA to that extent and for that purpose.
33. As the Non-Variation Clause itself is unobjectionable (which was common
cause), and that which is attacked on the grounds of public policy is its
enforcement (Barkhuizen v Napier 2007 (5) SA 323 (CC) at paragraphs 56-57,
Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust
and Others 2020 (5) SA 247 (CC) at paragraphs 26 and 37), Oxbow (who bears
the onus)" ... is required to show that, in the circumstances oft he case there was a good reason
why there was a failure to comply", which means that it must establish facts explaining
why it did not comply with the clause because "The difficulty in the present case is that
the applicant has not furnished the reason for the non-compliance ... For all we know he may
have neglected to comply with the clause in circumstances where he could have complied with
it ... " (Barkhuizen v Napier 2007 (5) SA 323 (CC) at paragraphs 58, 84 and 85).
34. In my view, this applies perforce to this matter in which there wa_s no evidence in
this respect. On the contrary, it was beyond any question that Oxbow could have
complied with the Non-Variation Clause but simply failed to do so. Mr Quinn
submitted that the court must 'Weigh the absence of the explanation as opposed
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to it being a threshold enquiry.' The problems with this are (1) that Barkhuizen
requires it for the reasons explained therein and that (2) this would have the
consequence that non-variation clauses would be vastly more vulnerable to
attack than what the cases suggest rendering the terms of contracts more
uncertain.
35. My Quinn relied on three cases in which non-variation clauses were held to yield
to public policy. In my view, however, none of them assist Oxbow, for the reasons
set out below:
35.1. Nvandeni Local Municipality v Hlazo 2010 (4) SA 261 (ECM):
35.1.1. The issues in that case were " ... resolved with reference only to the
constitutional values as constituting public policy." (paragraph 79).
35.1.2. The ultimate basis for the finding not to uphold the non-variation
clause was very different to what is in issue in the instant
matter, described as follows at paragraph 125:
"Public policy, as expressed by the constitutional values and
norms, does not tolerate the abuse of the process of law. The
rights and freedoms under the Constitution are there to be
used, and not abused. Courts often find that litigants use their
legal rights under the Constitution to manipulate legal
proceedings by obtaining postponements and causing
unwarranted delays, and by raising defences with improper
objectives and motives. Sadly, this trend seems to be on the
increase. Public policy requires courts to put an end thereto."
35.1.3. In my view, therefore, this authority is of no assistance to
Oxbow.
35.2. GF v SH 2011 (3) SA 25 (GNP):
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35.2.1. That matter involved the maintenance of minor children and
inequitable results flowing from the application of a non
variation clause (paragraphs 29 and 30).
35.2.2. In my view, that distinguishes the matter from the instant one.
35.2.3. In any event, as properly pointed out by Mr Fasser which I
appreciate, the findings in regard to the non-variation clause
and public policy in that matter did not survive an appeal before
the SCA which overturned them in SH v GF (De Haas v
Fromentin) 2013 (6} SA 621 SCA, holding as follows at
paragraph 16:
"In any event the view of Kollapen Al that in the light of the oral
agreement of variation of the maintenance order it would offend
against public policy to enforce the non-variation clause, cannot be
endorsed. This court has for decades confirmed that the validity of
a non-variation clause such as the one in question is itself based on
considerations of public policy and this is now rooted in the
Constitution. See SA Sentrale Ko-op Graanmaatskappy Bpk v
Shifren & andere 1964 (4) SA 760 (A) at 767A-C and Brisley v
Drotsky 2002 (4) SA 1 (SCA) paras 7, 8, 90 and 91. Despite the
disavowal by the learned judge, the policy considerations that he
relied upon are precisely those that were weighed up in Shifren.
In Media 24 Ltd & others v SA Taxi Securitisation (Pty) Ltd (Avusa
Media Ltd & others as amici curiae) 2011 (5) SA 329 (SCA) para 35
Brand JA said:
'As explained in Brisley v Drotsky 2002 (4) SA 1 (SCA)
(para 8), when this court has taken a policy decision,
we cannot change it just because we would have
decided the matter differently. We must live with that
policy decision, bearing in mind that litigants and legal
practitioners have arranged their affairs in accordance
with that decision. Unless we are therefore satisfied
that there are good reasons for change, we should
confirm the status quo.'
22
35.2.4. In my view, therefore, this authority is of no assistance to
Oxbow and, on the contrary, reinforces the enforcement of non
variation clauses in matters such as the instant matter.
35.3. Stevn and Another v Karee Kloof Melkery (Ptv) Ltd and Another
(2009/45448) [20111 ZAGPJHC 228 (30 November 2011 ):
35.3.1. This involved the settlement of a dispute to bring litigation to an
end and the avoidance of litigation, these being two of the
public policy reasons invoked (paragraphs 55 and 56 of the
judgment).
35.3.2. The Constitutional Court Eke v Parsons 2016 (3) SA 37 (CC) at
paragraphs 22 and 23 approved the following:
"(T}he policy underlying the favouring of settlement has as its
underlying foundation the benefits it provides to the orderly and
effective administration of justice."
35.3.3. In my view, that distinguishes the matter from the instant one.
35.3.4. In paragraph 57 a third reason was given, namely that it was
stated that " ... if effect were to be given to the entrenched formalities
clause, the principles of freedom and sanctity of contract would be
violated."
35.3.5. In my view, that, at face value, directly contradicts Shifren and,
if so, would not to be endorsed.
23
35.3.6. The next sentences in that paragraph 57 of the judgment,
however, goes on to show that this is not the case and explains
that it is in the context of the settlement of litigation:
"This is not in respect of the tension or paradox to which I have
referred to above in relation to the agreement insofar as it varies
the legal consequences of the original agreement. This would be
a violation of those principles in relation to the agreement insofar
as it relates to the settlement of the Magistrates' Court litigation
and the disputes which are outside the original agreement and
relate to collateral agreements. In respect of agreement relating
to these disputes, the parties have not taken upon themselves
entrenched formalities."
35.3.7. The next paragraph (58) of the judgment explains the basis for
the formalities clause yielding to public policy being the context
of the settlement of litigation:
"Thus the third question is to be answered in the defendants'
favour. The Shifren principle must yield to the public policy
considerations requiring the enforcement of the second
settlement agreement."
35.3.8. In my view, therefore, this authority is of no assistance to
Oxbow.
36. I think that the essence of the legal concept of public policy is that it is not some
form of remedy to be applied on an unrestrained basis: on the contrary, the
authority is unanimous that it is to be applied sparingly and only in the clearest
of cases failing which uncertainty will abound. The Constitutional Court
emphasised in Beadica that contracts are to be respected (at paragraphs 76, 79,
82, 84 and 94).
37. The courts, in my view, should guard against any tendency developing by which
parties perceive there to be a licence to raise public policy when they wish to
24
escape a contract. It is essential to bear in mind that, as held in Sasfin (Pty) Ltd
v Beukes 1989 (1) SA 1 (SCA) at 9B, the power of a court in this regard must:
" ... be exercised sparingly exercised and only in the clearest of cases, lest uncertainty
as to the validity of contracts result from an arbitrary and indiscriminate use of the
power. One must be careful not to conclude that a contract is contrary to public policy
merely because its terms (or some of them) offend one's individual sense of propriety
and fairness."
38. Lest one loses sight of what appears to me to be the true ambit of public policy
in this legal context, two of the leading cases on this aspect may provide
guidance, being Eastwood v Shepstone 1902 TS 294 at 302 and Sasfin (Ptv) Ltd
v Beukes 1989 ( 1) SA 1 (A). which upheld similar public policy considerations,
namely where a person would "virluafly be relegated to the position of a slave"
(Sasfin at 13H) and reduced to "forced labour' (Eastwood at 302).
39. Mr Quinn relied on the following part of paragraph 33 of the judgment in fnfovest
Consulting {Pty) Ltd and Another v Libra Parlners LLC (19524/2018) [20231
ZAWCHC 85 (3 May 2023):
"Demonstrating in a given case that such contracts should not be enforced as being
contrary to public policy would require something more. It would require proof that
the operation of the given contract according to its tenor would be legally or societally
unacceptable for some objectively identifiable reason; for example, that it would
unjustifiably impinge on an inalienable constitutional right, be inconsistent with the
rule of law (the old case of Nino Bonino v De Lange 1906 TS 120 affords an example} or
bear unacceptably onerously on a party ... [the underling is Mr Quinn's]
40. In my view, what is instructive is the balance of the paragraph which immediately
follows the above part, in which Sasfin was cited as an example (virlual/y be
relegated to the position of a slave) to illustrate this principle:
" ... (as illustrated, for example, in Sasfin supra, where the features of a cession in
securitatem debiti executed in favour of Sasfin by its debtor (Beukes) that impelled
the conclusion that the agreement offended against public policy were described by
the court as follows: 'This follows from the provisions in clause 3.4 that Sasfin would
be "entitled but not obliged" to refund any amount to Beukes in excess of Beukes'
actual indebtedness to Sasfin. As a result Beukes could effectively be deprived of his
income and means of support for himself and his family. He would, to that extent,
virtually be relegated to the position of a slave, working for the benefit of Sasfin (or,
for that matter, any of the other creditors). What is more, this situation could, in
terms of clause 3.14, have continued indefinitely at the pleasure of Sasfin {or the
other creditors). Beukes was powerless to bring it to an end, as clause 3.14 specifically
provides that "this cession shall be and continue to be of full force and effect until
terminated by all the creditors". Neither an absence of indebtedness, nor reasonable
notice to terminate by Beukes in those circumstances would, according to the
wording of clause 3.14, have sufficed to bring the deed of cession to an end.').
25
41. In my view, what has been set out in the above paragraphs illustrates the proper
ambit of the application of public policy in this legal context, and to go beyond
that proper ambit would, in my view, take it out of context and would be to extend
the application of public policy well beyond its heavily curtailed sphere, which is
to be avoided " ... lest uncertainty as to the validity of contracts result from an arbitrary and
indiscriminate use of the power." ( Sasfin at 9B).
42. I think that the above considerations are neatly and concisely summed up by
borrowing from, paraphrasing and augmenting a dictum of Cameron J in Absa
Bank Limited v Moore and Another 2017 (1) SA 255 (CC) at paragraph 39: Public
policy is not a universal solvent providing an out to a contractant and nor is it a
flamethrower withering all within reach.
43. I therefore conclude that Oxbow's case grounded in public policy does not
succeed.
44. While the observer may at first blush consider this result to perhaps have some
unfairness, hard cases must not make bad law and the courts eschew " ... one's
individual sense of propriety and fairness." as held in Sasfin (Pty) Ltd v Beukes 1989
(1) SA 1 (SCA) at 9B (quoted more extensively above).
26
45. A final observation is that Oxbow raised public policy in respect of the Non
Variation Clause in the MRA in a curious way, by asserting it against the plaintiffs.
Toerien was a party to the MRA. My impression is that the proper way to have
raised and pleaded this issue would have included asserting it against Toerien.
fraud
46. In argument, Oxbow relied on fraud, linked to public policy, to avoid the Non
Variation Clause.
47. Fraud was not pleaded by Oxbow.
48. The courts will have no hesitation in not enforcing a provision which would involve
the condonation of a fraud ( Wells v SA Alumenite Co 1927 AD 69 at 72).
49. Fraud is defined in Van Heerden v S (A160/2016} [20161 ZAFSHC 191 (27
October 2016) as follows at paragraph 15:
"Fraud is the unlawful and intentional making of a misrepresentation which causes
actual prejudice or which is potentially prejudicial to another."
50. Mr Quinn relied on Bank v Grusd 1939 TPD 286, suggesting that Grusd requires
three things: (1) agreement on a variation, (2) allowing effect to be given thereto
and (3) receiving benefit from a co-contractant's performance in terms thereof. It
would appear that his argument is that Grusd is a special case of fraud, not
requiring intent or knowledge.
51. On my reading of Grusd, it is squarely based on fraud, the court holding at 287
that parties must "be answerable to the jurisdiction of this Court in cases of fraud". This
was the court's introductory premise of its ratio decidendi. I do not believe that
the court refers to fraud, as it does, only to effectively jettison the requirements
27
of that concept, as appears to me to be the effect of the submission made by Mr
Quinn. Grusd, to me, appears to regard as fraud, for example, allowing someone
to go ahead on a particular basis and then raising formalities. That suggests
some form of intention and knowledge. The judgment is short (two pages) and
this is not elaborated upon therein.
52. I am somewhat fortified in this view by the analysis in Gainsford NO and Others
v Sasol Chemical Industries (Ptv) Limited (24803/2015} [20171 ZAGPJHC 333 (5
August 2017) in which Grusd was considered and applied in an exception in
respect of which the court held that it was necessary to plead fraudulent or
unconscionable conduct. Paragraphs 17 to 20 of the judgment are quoted in
some length to provide context:
"[17] Finally, the ·liquidators also argue that 'Stainless Fabricators executed the
purchase orders and incurred extra costs as provided in the respective agreements.
The manufacturing process has been concluded and during this process Sasol stood
by and monitored the expenditure being incurred. They obtained the benefit of these
expenditures caused by the late placing of orders, amendments, and changes and
refuse to make payment therefor.' That SASOL stood by, monitored the expenditure
being incurred and obtained the benefit thereof, are counsel's contentions and not
factual averments made in the particulars of claim.
[18] The liquidators found authority for these contentions in Bank v Grusd 1939 TPD
286 at 288. There a building contract provided that no extra work was to be done
unless upon the written order of the owner and that no claim for extra payment
should be entertained unless supported by the written authority of the owner. Maritz
J held thus:
'it seems to me, therefore that if the defendant [builder] proves that the plaintiff
[owner] agreed that the extra work should be done or, knowing that the defendant
regarded the work to be done as falling outside the contract, stood by and allowed
him to do this work, well knowing that she was going to get the benefit, she ought
not to be heard when she says "I refuse to pay because I had given no written
authority to the defendant to supply the extras.'
[19) There can be no doubt, as is stated in RH Christie The Law of Contract in South
Africa 3rd Ed at 496-7, 'that a party whose conduct is "fraudulent or unconscionable,
or a manifestation of bad faith" will not be permitted to rely on a non-variation
clause' and that Bank v Grusd 'is still good law'. (See Grey v Waterfront Auctioneers
{Pty) Ltd and Another ~992 {2) SA 662 (WLD), at 668.) But the liquidators need to
Q.lead fraudulent or unconscionable conduct on the part of SASOL that legally
prevents reliance on the applicable restriction clauses of the contract in each
instance where price extras and allowances are claimed. [underlining added]
[20] I conclude, therefore, that the liquidators' claim as presently formulated is bad
in law and excipiable on the ground of vagueness and embarrassment."
28
53. In my view, the above reflects the proper interpretation of Grusd, namely that it
does require fraud. Indeed, I apprehend that Mr Quinn's proposed interpretation
of Grusd would have the effect that many, if not most, instances of reliance on a
Non-Variation Clause would be vulnerable to attack.
54. If Grusd means what I think Mr Quinn contended, then I would decline to follow
it for the reasons set out above. But I am of the view that is not the correct
interpretation.
55. No case was attempted to be made out, let alone made out, that Toerien and
Sage had any knowledge of the non-compliance with the Non-Variation Clause.
Further, no intent component was established for fraud.
56. I therefore conclude that Oxbow's argument based on fraud does not succeed.
57. As to Mr Fasser's 'legal implications' of this decision, the result is that the plaintiffs
do not succeed against the first and second defendants in this respect.
Plaintiffs case against Third Defendant
58. The question of public policy has been dealt with above.
29
59. The question to be decided in this matter, according to Mr Fasser, is not whether
there is liability, but rather which of Toerien and Sage, on the one hand, and
Oxbow, on the other hand is liable - if not the former, then the liability of the latter
follows as a matter of course (it was also submitted in the heads of argument
prepared by him that there is liability one way or the other). Core to this is his
submission that:
" ... if the MRA is ultimately found, on a conspectus of all the evidence, not to be
enforceable according to the amended terms against the First and Second
Defendants, then (i) the First and Second Defendants will succeed in their reliance on
the non-variation clause entailing that they are not liable to the Plaintiffs, and (ii) the
Third Defendant will be liable for breach of the applicable warranties."
60. Put another way, now that it has been found that Toerien and Sage are not liable
to the plaintiffs, according to the plaintiffs it follows as a matter of course that
Third Defendant is liable.
61. I consider this approach and submission to be too simplistic for the reasons set
out herein. In core principle, it is because the question for the court to determine
is whether a case for liability, as pleaded against any of the defendants, has been
made out by the plaintiffs. I have already found that no case is made out against
the first and second defendants. What remains is whether a case is made out
against the third defendant (leaving aside the public policy defence raised by the
third defendant which I have already found should not be upheld).
62. Even in the case of Mazibuko v Santam Insurance Co Ltd 1982 (3) SA 125 (A)
at 135C-136H relied upon by the plaintiffs, it was found, in an application for
absolution from the instance, that:
" ... the case should be decided on the evidence which all the parties might choose to
place before the Court, provided, as I say, that the plaintiff, when presenting his case,
has laid the necessary foundation of showing, prima facie, that one or other or both
of the defendants are legally liable."
30
63. I mention this at this point because the third defendant's possible liability depends
in the first instance on whether the provisions relied upon by the plaintiffs against
the third defendants are successfully invoked, and not as a matter of course if
the first and second defendants are not liable. Further, even if successfully
invoked, the third defendant will only be liable to the extent of losses which flow
from such breach.
64. Plaintiffs' case against Oxbow is based on the following contractual provisions
pleaded in their Particulars of Claim, the relevant ones being pleaded as follows
("the Provisions"):
" ... Oxbow:
36.1 warranted, represented and undertook:
36.1.1 the first defendant ... is bound by the terms of the rental
agreement; (clause 5, 5.1.16)
36.1.2 the first defendant has no right of action against FUN; (clause
5.1.19 and 5.1.25 and 5.1.28)
36.1.3 the first defendant shall not be entitled to claim termination of
the rental agreement for any reason whatsoever; (clause 5.1.23;
{hereinafter referred to as the warranty clause)
36.2 indemnified FUN and held it harmless against:
36.2.1 any claim, loss or expense (including consequential damages, loss
of revenue, profits and legal costs) arising out of or in connection
with or which may be sustained or incurred by FUN as a direct or
indirect consequence of any breach by the first defendant of any
of the terms, conditions, warranties or representations or
undertakings in terms of the first main cession agreement.
Including but not limited to any innocent or negligent
misrepresentation by Oxbow to FUN; (clause 6.1, and hereinafter
referred to as the indemnity clause)."
31
65. Toerien's counter claim has not been upheld. That aspect of the claim against
Oxbow therefore falls away insofar as the case between the plaintiffs and Oxbow
is concerned.
66. The plaintiffs' claim against the first and second defendants has already been
held not to succeed.
67. That, however, does not mean, as Mr Fasser has submitted, that it follows as a
matter of course that their claim against Oxbow must succeed. That claim must
still be established, which entails whether any of the Provisions have been
successfully invoked. Accordingly, what still remains is whether the plaintiffs'
case against Oxbow is upheld in this regard.
68. Oxbow and the plaintiffs both allowed the error on Oxbow's part in not effecting
the amendment to the MRA to slip through their systems. Oxbow, in particular,
did not act in this respect. None of this has anything to do with questions such
as blame or causation. It is mentioned because the MRA was not amended and,
accordingly, its terms were in the unamended form. I believe this to be a key
consideration when the terms of the Provisions are considered.
69. I have already found in respect of the pleaded case in convention between
plaintiffs, on the one hand, and the first and second defendants, on the other
hand, that the MRA was not amended. In other words, the terms of the MRA are
the terms in the unamended form
70. Accordingly:
70.1. The MRA was in the unamended terms.
32
70.2. Toerien was bound by the MRA in those unamended terms.
70.3. There was no breach thereof by Toerien.
70.4. There was no right to cancel the MRA by Toerien at the time of the
cession.
71. The aspects in the above paragraphs are, .in my view, material to the
consideration of whether the Provisions have been breached and are
successfully invoked.
72. In the result, I raised with counsel for the plaintiffs and Oxbow whether there was
any breach of any of the Provisions (pleaded in paragraph 36 of Particulars of
Claim), and whether there was a claim in respect of which the indemnification
pleaded therein can be invoked. Mr Fasser engaged on the issue but Mr Quinn
said he was not in a position to do so and would require some time. I therefore
afforded them the opportunity to deliver written supplementary notes on the
issue, which they did.
73. I will set out ( 1) each of the provisions relied upon by the plaintiffs in this regard
and detail what I consider to be their import and meaning; and then (2) the
plaintiffs' supplementary argument in some detail in italics, and after each aspect
thereof express in bold underlined words where I agree and disagree and
explaining why.
7 4. In undertaking this exercise, I consider it important to bear the following in mind:
Oxbow, for example in the discounting letter, and by means of the invalid
purported amendment, created the impression that the higher rental was validly
agreed. Intuition, informed by this, and perhaps fuelled by perceptions of what
33
may be fair, has the propensity to lose sight of what is the real question, and the
consideration thereof, namely whether there was a breach of the Provisions. I
must confess that initially it did not occur to me there may have been a discord
between what was to be concluded on the facts and the law in regard to the MRA
and its terms, on the one hand, and what was covered by the Provisions, on the
other. It was while considering the matter prior to argument, during which I
considered the terms of Provisions against the MRA as unamended, that the
possibility thereof occurred to me. It is with this in mind that the analysis below is
undertaken.
75. The Provisions relied upon by the plaintiffs in their claims against Oxbow are as
follows {the emphasis in bold or underlining or both is that of Mr Fasser in his
supplementary written submissions, which emphasis I have retained for the
purpose of presenting his argument):
75.1. In terms of clause 5.1 of the First Main Cession Agreement, Third
Defendant agreed to the following: "The cedent hereby warrants, represents
and undertakes to TA in respect of each and every Contract as at the cession effective
date ... "
75.2. 'Contracf is defined in clause 1.1.7 as "a written lease or rental agreement
entered into between the Cedent and a customer, which shall have a value of not less
than R20 000-00 (twenty thousand rand) in a form approved by TA in writing from time
to time."
In my view this definition is of fundamental importance to the resolution of
this aspect of the matter.
34
75.3. The 'Cession Effective Date' is defined in clause 1.1.8 as" ... in respect of
each Contract, the effective date or Cession by the Cedent to TA, as set out in the Final
Discounting Letter."
75.4. The plaintiffs rely on the following specific Provisions to justify their
contention that the third defendant was in breach:
75.4.1. In terms of clause 5.1.16:
"the Contract is factually correct in every respect, correctly
reflects the intention of the parties thereto, and no Contract has
been amended, altered or modified in any respect except in
writing, and copies of all such writings are attached to the
Contract. In addition, unless otherwise agreed in writing by TA,
the Contract delivered to TA comprises the only original
documentjs in existence relating to the transactions and the
Goods referred to therein;"
This clause detained consideration more than the others, in
particular the words "the Contract is factually correct in every respect,
correctly reflects the intention of the parties thereto". In my view, the
key is to identify that this relates to the 'Contract' as defined. I
have already found that the Disputed Amendment was not
effective and that the contract is the MRA in its unamended form.
The question is whether something handwritten but not part of
the contract is covered by this provision, in other words whether
it is part of the 'Contract' as defined. I think that putting this
question effectively answers it because the invalid amendment is
not part of the contract. This is understandable because the
plaintiffs would not want anything outside of the legally valid
'Contract' to be raised against them and would require to be
covered by the Provisions should that arise. As an aside, it is
easy to see that the purported amendment does not comply with
the Non-Variation Clause and is not validly part of the contract.
Further, this clause 5.1.16 records that it has not been amended
except in writing "and copies of all such writings are attached to the
Contract", yet the handwriting on the document is with incomplete
signatures as required by what is a standard Non-Variation
Clause and is not in writing attached to the 'Contract'. Of some
interest in this respect is the evidence of Gene Olivier, a national
support manager for plaintiffs, who testified that her team
receives new deals for checking and if acceptable processes
them, and had it been picked up that there was a (purported)
amendment to an MRA initialled by only one party and not the
other, then it should have been raised with Oxbow and it would
then be a matter for Oxbow to counter-sign the amendment and
that would solve the problem. Accordingly, it is the MRA in its
unamended form that was warranted. That contract was not
breached.
75.4.2. In terms of clause 5.1.23:
"the Customer shall not be entitled to claim termination of the
Contract for any reason whatsoever."
In my view, this relates to the 'Contract' as defined at the time of
the cession (the effective date as defined above), i.e. the MRA in
its unamended form. Contrast the wording in clause 5.1.25
35
below. Guaranteeing the future is unbusinesslike and I believe
that this clause did not intend to do so.
75.4.3. In terms of clause 5.1.25:
"the Customer has not and will not acquire during the currency
of that Contract, any claim enforceable against TA for the
reduction of any amounts payable under any Contract, the
return of Goods, or for damages."
In my view, this relates to the 'Contract' (i.e. the MRA in its
unamended form). This is what was warranted and it was not
breached, as considered further above.
75.4.4. In terms of clause 5.1.28:
"the Customer has no counterclaim or right to set-off any claim or
amount against any sum payable or which becomes payable by
the Customer in terms of the Contract."
In my view, this relates to the 'Contract' as defined at the time of
the cession (the effective date as defined above), i.e. the MRA in
its unamended form. Guaranteeing the future is unbusinesslike
and I believe that this clause did not intend to do so. Further, its
wording appears to relate to claims outside of the 'Contract' as
defined.
75.4.5. In terms of clause 5.1.4:
"The Contract will be valid, binding and enforceable in
accordance with its terms and will comply fully with all
relevant South African laws or instruments having the force
of law. It is specifically agreed that approval by TA of the
form of the Contract for cession purpose shall not relieve
the Cedent of any liability or obligation in terms of this
clause."
36
37
In my view, this relates to the 'Contract', i.e. the MRA in its
unamended form, as considered further above. This is what was
warranted and it was not breached.
75.4.6. In terms of clause 5.1.5:
"there is no challenge, dispute or claim by or against the
Lessor under or in respect of such Contract."
In my view, this relates to the 'Contract' as defined at
the time of the cession (the effective date as defined
above), i.e. the MRA in its unamended form.
Guaranteeing the future is unbusinesslike and I believe
that this clause did not intend to do so.
75.5. Each of these warranties, representations and undertakings was agreed
to be material to the decision to accept the offer to purchase a contract
from the third defendant. This is expressly catered for in clause 5.4 which
reads:
"Each representation, warranty and undertaking shall be deemed
to be a separate representation, warranty or undertaking and !!.
material representation, warranty or undertaking which induced
TA to enter into this Agreement and to accept any Offer made
under this Agreement."
75.6. In terms of clause 5.5:
"In the event that there is any breach of any of the above
representations, warranties and/or undertakings, or if any
Customer makes any allegation which, if proved by the Customer,
would result in a breach of any of the above representations,
warranties and/or undertakings, and in particular if any Customer
withholds payment of any amount owing under a Contract as a
result of such allegation, the Cedent shall be in breach of the
Agreement and, without limiting any other remedies TA may have
under this Agreement or at common law, TA shall have the right to
require the Cedent to repurchase the Contract upon such terms
and conditions provided in 6.2 below."
38
76. The plaintiffs' supplementary argument is set out below in italics with my views
in respect thereof, based on my understanding of the Provisions relied upon by
the plaintiffs as articulated above, following in bold underlined words:
76.1. The warranties, representations and undertakings were material to the
plaintiffs' decision to purchase, and thereby take cession, of the MRA.
I agree with this (relating, as it does, to the Provisions}.
76.2. From the evidence of the plaintiffs' witnesses, at the time that the MRA
was offered for cession, the version of the MRA that was offered for
cession was the (purportedly) amended version which reflected the
higher rental amount. I agree with this (I added in the word
'purportedly'). Key, however, is that the purported amendment was
not valid and did not form part of the contract. It was therefore not
part of what was covered by the Provisions because it was the
contract which was covered thereby.
76.3. In so offering the MRA for cession, the third defendant thereby
undertook, represented and warranted that the plaintiffs would be able
to claim rental on the MRA at the amount recorded therein (i.e. the
amount of R10 023-22 per month excluding VAT). While superficially
attractive, in my view this does not pass muster when one
considers {as has been done above) the terms of the Provisions,
which rel.ate to the 'contract' and its terms, which is the MRA in its
unamended form which does not include the above figure. the
39
Disputed Amendment having been ineffective. What was therefore
actuanv warranted therefore was the contract as I have found it to
be. This is an example of the intuition referred to above and below.
76.4. In other words, the third defendant, in effect, said the following to the
plaintiffs:
'Here is the MRA we are offering you for cession. We represent warrant and
undertake that you will be able to claim (or debit) rental from the client in
the amount of RlO 023-22 per month excluding VAT. This has been agreed
between the parties and any amendment effected to the MRA was compliant
with its terms. You will be able to lawfully debit and enforce payment of this
rental amount for a period of 60 months. The client does not have, and will
not acquire, any claim against you during the currency of the MRA and does
not have any reason whatsoever to cancel this MRA. This MRA is legally
enforceable on these terms.'
I disagree with this for the reasons stated in the above paragraph.
76.5. However, these warranties, representation and undertakings proved to
be incorrect. To the contrary:
76.5.1. The plaintiffs were not, in law, entitled to claim the amount of
R10 023-22 excluding VAT from the first defendant over a
period of 60 months. While this is correct, I disagree that it
constitutes a breach for the reasons stated above.
76.5.2. The amendment of the rental amount was not, as a matter of
fact, effected in writing and signed in accordance with the
MRA 's non-variation clause. While this is correct, it is not
covered by any of the Provisions relied upon by the
plaintiffs. It is also easy to see ex facie from the MRA itself.
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ParadoxicallY, this submission shows why the MRA is in
the unamended terms.
76.5.3. The parties' respective intentions to increase the rental amount
was not legally effective or binding. While this is correct, it is
not covered by any of the Provisions relied upon by the
plaintiffs.
76.5.4. The MRA was not factually correct in every respect and did not
correctly reflect the parties' intentions insofar as the parties had
not properly given effect to that intention in accordance with
clause 15. 1. Mv views expressed above and below apply
equally here.
76.5.5. The first defendant had, and/or acquired during the currency of
the MRA, a legal basis to cancel the MRA due to (i) the legally
ineffective amendment, and (ii) the subsequent incorrect
debiting of amounts that had not legally been agreed, or
consented to, for a period of three years. While this is correct,
it is not covered by any of the Provisions relied upon by
the plaintiffs.
76.5.6. The first defendant did, in fact, cancel the MRA on the
aforegoing basis as it was legally entitled to do. The plaintiffs
debiting of higher amounts of rental over a period of three
years, as a consequence of the ineffective amendment, and
without having any legal basis to do so, is undoubtedly a
material breach going to the root of the contract justifying
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cancellation. While this is correct, it is not covered in any
of the Provisions relied upon by the plaintiffs.
76.5. 7. The first defendant did, in fact, institute a counterclaim against
the plaintiffs for the amount by which it alleged constituted
overpayments to the plaintiffs. While this is correct, it is not
covered in any of the Provisions relied upon by the
plaintiffs as it relates to a future claim. In any event, the
counter claim is dismissed in this judgment.
76.6. In the event of the Court upholding the first defendant's contentions, then
the Customer (i.e. Toerien) has indeed made allegations which entail that
the third defendant was (and is) in breach of the aforegoing
representations, warranties and undertakings. As recorded above, I do
not agree that there was any breach.
76.7. It matters not that what was actually ceded by the third defendant was
an MRA that was enforceable according to its unamended terms (i.e. that
the plaintiffs could have enforced the unamended MRA). I disagree. The
terms of the Provisions relied upon by the plaintiffs must be
considered. They relate to the 'contract' which is the MRA in it
unamended form1 as superficially unattractive as that may be.
76.8. The question is not whether the Third Defendant was in breach of
warranties and/or indemnities with regard to the MRA in its unamended
form. The MRA in its unamended form is not what was offered by the
Third Defendant for cession to the Plaintiffs. I disagree. The MRA in its
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unamended form is the 'contract' which was ceded. The terms of
the Provisions relied upon by the plaintiffs must be considered.
They relate to the 'contract' which is the MRA in its unamended
form, as superficially unattractive as that may be.
76.9. What matters is that the third defendant sold and ceded to the plaintiffs
an MRA that was supposedly enforceable in its amended form according
to its amended terms, and which the plaintiffs understood to be
enforceable as such. It was in respect of the amended MRA that the
plaintiffs, in fact, made payment of the total sum of R628 518-54. While
this is correct, the terms of the Provisions relied upon by the
plaintiffs must be considered. They relate to the 'contract' which is
the MRA in its unamended form, as superficially unattractive as that
may be. This is an example of the intuition referred to above and
below.
76.10. This entails that the conclusion reached by Oxbow, namely, that 'In the
circumstances, the warranties on which the plaintiffs rely are not
activated by the rental contract in unamended form' is simply irrelevant.
I disagree for the reasons set out above.
76.11. It is apposite to note that the discounting letter provided to the plaintiffs
in which the third defendant offered to cede the MRA itself expressly
reflects the amended monthly rental of R10 023-22 (excluding VAT). It is
correct that the discounting letter provides as such. However, while
that itself may ground a misrepresentation, it is not covered by the
Provisions relied upon by the plaintiffs in this action and is not the
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claim sought to be enforced by the plaintiffs in this action. This is
an example of the intuition referred to above and below.
76.12. In short, the plaintiffs did not get what they bargained for with the third
defendant and, more particularly, they did not get what the third
defendant expressly warranted or represented they would get. While
the plaintiffs did not get what they expected, the terms of the
Provisions relied upon by the plaintiffs are what must be
considered. They relate to the 'contract' which is the MRA in it
unamended form, as superficially unattractive as that may be.
76.13. Such a conclusion logically and legally entails that the third defendant
was (and is) in breach of the aforegoing representations, warranties and
undertakings. I disagree, for the reasons set out above.
76.14. In terms of the relevant portion of clause 6. 1:
"The cedent hereby indemnifies TA and holds TA harmless against anv
claim, loss or expense (including consequential damages, loss of
revenue and profits, legal costs on the scale as between an attorney
and his own client, and any other costs} arising out of or In connection
with, or which may be sustained or incurred by TA as a direct or
indirect consequence of any breach by the Cedent of any of the terms,
conditions, warranties, representations or undertakings of the
Cedent in terms of this Agreement or any cession pursuant hereto
including, but not limited to, any innocent or negligent
misrepresentation by the Cedent to TA ... "
76.15. The plaintiffs have suffered loss insofar as they purchased the MRA in
question from Oxbow expecting to be able to claim the higher rental
amount, for a period of 60 months, from the first defendant, and they are
unable to do so. This is precisely the sort of loss that the third defendant
undertook to indemnify the plaintiffs against. While the first sentence
44
may be so and I agree that the plaintiffs did not get what they
expected, the terms of the Provisions relied upon by the plaintiffs
are what must be considered. They relate to the 'contract' which is
the MRA in it unamended form, as superficially unattractive as that
may be. I therefore disagree with the second sentence.
76.16. It is also a loss that undoubtedly arises as a direct consequence of the
fact that the third defendant did not properly attend to the legally effective
amendment of the MRA. I agree. However, while that may possibly
ground a claim on another basis, it does not do so in respect of the
Provisions and it is the terms of the Provisions relied upon by the
plaintiffs are what must be considered. They do not cover this. They
relate to the 'contract' which is the MRA in it unamended form. as
superficially unattractive as that may be.
76.17. Given that the third defendant admits the quantum of the plaintiffs' loss
in this case, it follows as a matter of logical and legal necessity that the
third defendant must recompense the plaintiffs for this amount (i.e. the
amount that the plaintiffs expected they would receive from the first and
second defendants, in terms of the MRA, for the period of 60 months).
I disagree for the reasons set out above. Further, breach of different
aspects of the Provisions will not necessarily have the same
consequences insofar as the quantum of damages is concerned.
76.18. Furthermore, in the event of the Court upholding Toerien's counterc/aim,
this also constitutes a type of damage or Joss, incurred by the plaintiffs,
flowing directly from Oxbow's failure to have properly amended the MRA,
45
yet warranting and representing to the plaintiffs that the MRA as
amended was enforceable. Such loss or damage would also be for the
third defendant's account. The quantum of the first defendant's
counterclaim has also been admitted by the third defendant. Toerien's
counter claim is not upheld in this iudgment. This need not be
commented on further.
77. In short:
77.1. The following occurred:
77 .1.1. Oxbow represented to the plaintiffs that the deal with Toerien
was in the figures as contained in the discounting letter.
77 .1 .2. The plaintiffs understandably expected those figures to apply.
77 .1.3. The MRA was sent through with the same figures inserted by
means of handwriting and the crossing out of lower figures.
77 .1.4. That was invalid and the terms of the MRA were in the
unamended form.
77.2. However, in my view:
77 .2.1. The question in the claim against Oxbow is whether the
Provisions are breached by the aforegoing.
77.2.2. The question is not whether a representation was made
external to the ambit of those Provisions, such as in the
discounting letter or in the form of an invalid amendment.
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77.2.3. The ambit of those Provisions was in essence the terms of the
'contract', which has been found in this judgment to be the
unamended MRA, and the breach of the terms thereof.
77.2.4. It did not incorporate any terms not forming part thereof.
77.2.5. There was, accordingly, no breach of the Provisions for the
reasons set out in the analysis of the argument in respect
thereof above.
78. In even shorter terms, the claim against Oxbow is based on the Provisions which
in essence relate to the 'contract' and, because the 'contract' is the unamended
MRA, there is no breach of the Provisions.
79. I must confess that initially it did not occur to me there may have been a discord
between what was to be concluded on the facts and the law in regard to the MRA
and its terms, on the one hand, and what was covered by the Provisions, on the
other. It was while considering the matter prior to argument, during which I
considered the terms of Provisions against the MRA as unamended, that the
possibility thereof occurred to me.
80. The result on this issue in this judgment may not appear to be intuitive, fuelled
by what may be perceived to be fair. That contrary intuition, however, I found,
arises if one does not analyse the content of the Provisions and the terms of the
MRA as it exists in fact and law. As found in this judgment, those terms do not
include the Disputed Amendment. What was covered by the Provisions was the
'contract', which is the MRA as I have just identified it. To test this:
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80.1. One might consider what the situation would be, were the Provisions to
be found to cover the MRA with the invalid amendments as they are, in
the scenario where the figures were crossed out and new ones inserted
but no-one (including Sage) had initialled. The question would then be
whether that was covered by the Provisions. In that scenario, the
perception of unfairness and the contrary intuition weakens.
80.2. What about the scenario if only the total monthly rental amount, and not
the other figures, was crossed out and a new figure inserted with neither
party having initialled it ? I think that the answer can only present itself
in the negative, with contrary intuition very weak.
80.3. What about if the new figures were written on a separate piece of paper
which accompanied the MRA ? I think that the answer must present itself
in an even firmer negative, with contrary intuition all but absent.
The point and reason for this are that it is the 'contract' (i.e. its actual terms) which
the Provisions cover.
81. I therefore conclude that the plaintiffs have no claim against Oxbow, as pleaded.
82. This leaves the plaintiffs without a successful claim against any of the
defendants.
Conclusion
83. In the premise:
83.1. The plaintiffs' claim against the first and second defendants will be
dismissed.
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83.2. The plaintiffs' ·claim against the third defendant will be dismissed.
83.3. T he first defendant's claim in reconvention against the plaintiffs will be
dismissed.
84. As to costs, I am of the view that with plaintiffs and Toerien having been
unsuccessful in their claims against each other, it wou ld be appropriate in their
cases for neither of them to be awarded costs or to have costs awarded against
them. In regard to Ox bow, while it has been successful, the problem in this matter
arose originally because of its (and the plaintiffs') failure to properly prepare
and/or check the documentation relevant to this matter (the MRA) , core to their
businesses, and therefore, in the exercise of my discretion, there shall be no
awa rd as to costs in respect of the case between the plaintiffs and Oxbow . All
counsel agreed that scale B in terms of Rule 67 A should apply to any cost order
made. In the light of my finding in this paragraph, this is not applicable.
Order
85. The following order is granted:
1. The plaintiffs' claim against the first and second defendants is dismissed.
2. The plaintiffs' claim against the third defendant is dismissed.
3. The first defendant's claim in reconvention against the plaintiffs is dismissed.
4. The parties shall pay their ow n costs.
A Kantor
Acting Judge of the H igh Court