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[2000] ZASCA 81
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Datacolor International (Pty) Ltd. v Intamerket (Pty) Ltd. (2/99) [2000] ZASCA 81; 2001 (2) SA 284 (SCA); [2001] 1 All SA 581 (A) (30 November 2000)
IN
THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
REPORTABLE
Case
number : 2/99
In the
matter between :
DATACOLOR
INTERNATIONAL (PTY) LIMITED
Appellant
and
INTAMARKET
(PTY) LIMITED
Respondent
CORAM
: Vivier, Nienaber, Scott, Zulman JJA, Mthiyane AJA
HEARD
: 16 November 2000
DELIVERED
: 30 November 2000
Summary
:
Anticipatory
breach of contract - objective test for repudiation - whether certain
letters amounted to an unlawful repudiation or
merely to an offer to
negotiate a termination - election to cancel by conduct - not
communicated to the guilty party by the innocent
party but by a third
party
________________________________________________________________
JUDGMENT
________________________________________________________________
NIENABER
JA/
NIENABER JA
:
[1] Repudiation has sometimes been
said to consist of two parts: the act of repudiation by the guilty
party, evincing a deliberate
and unequivocal intention no longer to
be bound by the agreement, and the act of his adversary, “accepting”
and thus
completing the breach. So for example Winn LJ remarked in
Denmark Productions
Ltd v Boscobel Productions Ltd
[1969]
1 QB 699
at 731F-732A:
“
Where A and B are parties to
an executory contract, if A intimates by word or conduct that he no
longer intends, or is unable, to
perform it, or to perform it in a
particular manner, he is, in effect, making an offer to B to treat
the contract as dissolved
or varied so far as it relates to the
future. If B elects to treat the contract as thereby repudiated, he
is deemed, according
to the language of many decided cases, to
‘accept the repudiation’ and is thereupon entitled (a) to
sue for damages
in respect of any earlier breach committed by A
and
for damages in respect of the repudiation, (b) to refrain from
himself performing the contract any further.”
Both the analogy and the language of
offer and acceptance, a legacy from England, have on occasion been
deprecated by this court.
The better view is that repudiation is a
breach in itself (
Tuckers
Land and Development Corporation (Pty) Ltd v Hovis
1980 (1) SA 645
(A) at 653B-G per Jansen JA); that the “intention”
does not in truth have to be either deliberate or subjective (
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou
1978 (2) SA 835
(A) at 845A-846G per Rabie JA) but is simply
descriptive of conduct heralding non- or malperformance on the part
of the repudiator;
and that the so-called “acceptance”,
although a convenient catchword, does not “complete” the
breach but
is simply the exercise by the aggrieved party of his right
to terminate the agreement (
Stewart
Wrightson (Pty) Ltd v Thorpe
1977 (2) SA 943
(A) at 953E-H per Jansen JA). This case, and the
outcome of the appeal, is concerned with both “parts” of
repudiation:
whether the appellant improperly repudiated the
agreement between the parties (par 16 to 25 below) and if so whether
the respondent,
in response, properly cancelled it (par 26 to 34
below). It also demonstrates how a wrong perception of the true
nature of repudiation
might lead to false conclusions (par 36 below).
[2] During 1987 the parties concluded a distributorship
agreement. The appellant, then known as Instrumental Colour Systems
Ltd
or ICS, was a company based in the United Kingdom. It appointed
the respondent, a South African company based in Sandton, as its
exclusive distributor for the sale of computerised equipment for the
matching, measuring and dispensing of colour. I shall refer
to the
appellant as the plaintiff and to the respondent as the defendant.
In terms of the agreement the plaintiff was entitled
to resell the
defendant’s products in certain specified areas in Southern
Africa and Mauritius. The plaintiff also provided
the defendant with
a certain Colour Match Prediction System which was to be used as a
demonstration system.
[3] For a number of years the arrangement worked well
and both parties prospered from it. But in 1991 the plaintiff, then
known
as ICS-Texicon Limited, was taken over by a Swiss conglomerate
sometimes referred to as the Eichoff Group. The Eichoff Group
eventually also took over another concern operating in competition
with the defendant in Southern Africa, known as ACS-Datacolor,
whose
managing director was one Bill Gosling. The Eichoff Group was intent
on restructuring and rationalising its interests in
Southern Africa.
It had to decide upon a distributor. The person designated to make
that decision was a certain Willi Cornelius.
[4] During early June 1991 a director of the defendant,
one Steve Mayer, travelled to Frankfurt to meet him. Mayer put the
defendant's
case to Cornelius and was informed by him that a decision
would be taken within a week or so as to whether the defendant or
Gosling’s
company would be appointed as the local distributor
of the plaintiff's products. Mayer stated in evidence that he was
not sanguine
about the outcome of his meeting with Cornelius. His
apprehension proved to be well-founded. On 17 June 1991 Cornelius
telephoned
Mayer to inform him that the decision had gone against the
defendant. He was told that the defendant would in due course
receive
an official notification to that effect.
[5] On 25 June 1991 the defendant received two
telefaxes, both signed by one Hill. They arrived at more or less the
same time.
Since the outcome of the appeal in large measure turns on
the impression conveyed by these two documents they are quoted in
full.
The one dated 24 June 1991, RW8, was a telefax from
"Datacolor-ACS-ICS", the text of which reads:
“
RE: Termination of
Distributorship Agreement with ICS Texicon
Dear Steve,
Along with this fax is an official letter of termination
of our Distributorship Agreement with Intamarket. The original is
being
sent by registered post.
As it has been found necessary to take this unfortunate
decision I would have thought you would like to terminate the
Agreement
as soon as possible. With this in mind I feel sure we can
agree a mutually convenient date in the near future and come to some
arrangement regarding the stocks you hold (including the demo.,
unit).
Let me have your thoughts on this matter at your
earliest convenience.
Kind regards,
(sgd) Barry Hill”
The other, RW9, seemingly the “official letter”,
was from ICS-Texicon Limited and dated 25 June 1991. It read:
“
Dear Sirs
Distributorship Agreement with ICS-Texicon Limited
Further to your discussion with my colleague, Mr
Cornelius, I regretfully have to confirm the termination of the
Distributorship
Agreement between Intamarket (Pty) Limited and
ICS-Texicon Limited.
We would like to thank you for your support in the past
and wish your organisation success in the future.
Yours faithfully
(sgd)
Barry R T Hill
Operational Controller.”
[6] Significantly neither of these two communications
contained any reference to clause 16 of the agreement of 1987 which
read:
“
16.
TERM
AND TERMINATION
(a) This Agreement shall commence on the date of its
execution and shall (subject as herein provided) remain in force for
a period
of three years from that date and shall continue thereafter
unless or until terminated by either party giving not less than
twelve
months written notice to terminate to the other party expiring
on or at any time after the expiry of the said three year term.
PROVIDED THAT the Company shall have the right to
terminate this Agreement by notice in writing upon the happening of
any of the
following events:-
(i) If the Distributor fails to make any payment due
hereunder or is guilty of any breach, non-observance or
non-performance of
its obligations hereunder or any of them and does
not remedy the same (if it is capable of remedy) within thirty days
of notice
of such failure or breach being given by the Company.
(ii) If the Distributor ceases to carry on business or
is unable to pay its debts in the ordinary course of business or
enters into
liquidation (other than for the purpose of reconstruction
or amalgamation) or has a receiver or manager appointed over the
whole
or any part of its assets.
(iii) If the Distributor comes directly or indirectly
under the control of a company competing with the Company.
(iv) If the Distributor is in breach of any clause
within this Agreement.
(b) Upon termination of this Agreement by the Company
the Distributor subject to its contractual obligations for
maintenance shall
have the option to sell to the Company and the
Company shall be willing to purchase from the Distributor all the
Distributor’s
stock of the products including stock for
demonstration trial and exhibition purposes and peripherals and spare
parts for repairing
and maintaining the Products (“The
Inventory”). The price to be paid by the Company to the
Distributor for the Inventory:
(i) ...
(ii) ...
(c) The termination of this Agreement for any reason
shall be without prejudice to the rights and obligations of the
parties accruing
up to and including the date of such termination.”
[7] The defendant did not immediately respond to these
letters. What it did was to put out, within a few days, a circular
which
it distributed to its own clientele entitled “Important
agency announcement” (hereinafter referred to as “the
agency announcement”). It read as follows:
“Following the acquisition of ICS-Texicon by the
Eichoff Group last year, (this group now controls ACS-Datacolor and
ICS-Texicon)
a programme of rationalization is taking place within
the Group. One result of this is that Intamarket has decided to no
longer
represent ICS-Texicon and feels that the long term
monopolistic situation which has developed as a result of this
takeover, is
not in the long term interest of our company or the
South African market.
We are instead pleased to announce that we now have
been appointed official distributors for Spectrum International
Limited of
Calne, Great Britain.
Spectrum was founded some 7 years ago by its present
Managing Director, John van Zwietering, who was formerly MD of ICS.
It is
therefore hardly surprising that many of the principles upon
which ICS was based, survive and flourish at Spectrum.
Intamarket will now be in a position to respond rapidly
to any of your colour requirements at prices substantially below
those
of ICS with the added advantage of more user-friendly software.
At the same time there will be no compromise on quality and service.
...
We wish to confirm that Intamarket will continue to
support all of our valued maintenance customers and that absolutely
no problems
are expected in this regard.
Furthermore it will be no problem to support existing
customers on their present level of CS based software.
Demonstration systems will be available for your
evaluation in the near future and in this regard we wish to advise
that Keith
Parrott, formerly of ICS-Texicon, will be spearheading the
launch of the Spectrum International products on the South African
market
during his visit to this territory in July.
We would like to take this opportunity of expressing
our sincerest thanks to you, one of our valued customers, for your
past support
and wish to re-confirm our continued commitment in the
area of total colour management in the future.”
[8] The reference to Spectrum was a reference to a rival
company of the plaintiff’s which operated in the United
Kingdom.
Spectrum was anxious to enter into a relationship with the
defendant for the distribution of its products in South Africa.
Approaches
to the defendant had been made by Spectrum from about May
1991 but it was told by Mayer that the defendant had a commitment to
the plaintiff and that the defendant was accordingly not free to
enter into a relationship with Spectrum until its agreement with
the
plaintiff had come to an end. When the plaintiff's letters of
termination were received the defendant immediately turned to
Spectrum. Wachsberger and Mayer, the defendant’s directors,
testified that they were confident of cementing a new relationship
with Spectrum. They were obliged to approach Spectrum, so they
explained, as they needed a lifeline for the continued existence
of
the defendant. According to both of them an agreement with Spectrum
was only finalised after the agency announcement had been
circularised. This led to the first order being placed with Spectrum
in early July 1991.
[9] The agency announcement contained a number of
factual misstatements and can rightly be described as disingenuous.
Both the
defendant's witnesses were constrained in evidence to admit
as much. Their attempted justification was that it would seriously
have harmed their business to have admitted that they had been
“fired” and that it was necessary for them to reassure
their customers that the defendant would continue to serve them.
[10] A copy of the agency announcement was forwarded to
the plaintiff by Gosling (and not by the defendant) and received by
it on
28 June 1991. The plaintiff thereupon suspended execution of
all further orders to the defendant. On 19 July 1991 the plaintiff
reacted to the agency announcement. Its letter of that date reads:
“
Dear Sirs
Re:
Distributorship
Agreement dated 18
th
September 1987 and made between (1) Instrumental Colour Systems
Limited and (2) Intamarket (Pty) Limited (“the Agreement”
)
We wrote on 25
th
June, 1991 giving you the requisite twelve months notice of
termination pursuant to clause 16(a) of the Agreement.
We are now in receipt of a letter
dated 25
th
June, 1991 from you to a customer of ICS-Texicon and entitled
“IMPORTANT AGENCY ANNOUNCEMENT”. It is stated therein
that (a) you have decided no longer to represent ICS-Texicon and (b)
that you have been appointed distributors in South Africa
for
Spectrum International Limited. We are advised that by reason of
this letter and by your conduct you have:
1. wrongfully and in breach of the Agreement evinced an
intention to be no longer bound by the Agreement. This constitutes a
clear
repudiation by you of the Agreement which we are entitled to,
and hereby do, accept; and
2. that you are clearly in breach of express conditions
of the Agreement. We refer you in particular to clause 9 (a) and (b)
of
the Agreement.
We accordingly, notwithstanding that the Agreement has
determined by reason of your repudiation, hereby give you notice
pursuant
to clause 16(a)(iv) of the Agreement terminating the
Agreement, with immediate effect. We also give you notice that we
reserve
all our rights to recover from you damages for your breach of
contract.
We must remind you that on termination of the Agreement
certain restrictions remain on your selling and distributing products
in
the territory for the period of one year after the date of
termination of the Agreement. We refer you to clause 19 of the
Agreement.
If we do not receive your immediate confirmation that you
will (a) stop soliciting customers of ICS-Texicon and (b) you will
cease
acting as a distributor for Spectrum International Limited, we
will take vigorous steps to protect our rights and to enforce the
terms of clause 19 of the Agreement. We, in the meantime, reserve
all our rights against you in this regard.
Please acknowledge receipt of this letter.
Yours faithfully
(sgd)
B R T Hill
Operational Controller
for and on behalf of ICS-Texicon Limited.”
The first paragraph of the letter is controversial.
There is no mention in the earlier telefaxes of clause 16 of the
agreement.
It is an issue in this case whether the clause was simply
taken for granted by the plaintiff or whether the telefaxes, RW8 and
RW9, were sent either in ignorance or in deliberate disregard of the
clause. (Clause 9(a) of the agreement, referred to in the
letter,
prohibits the importation, selling or promotion of products similar
to those of the plaintiff; clause 9(b) is not apposite;
and clause
19 contains a restraint clause.)
[11] The plaintiff's letter was immediately followed up
by a letter from its attorneys, Clifford Chance, dated 22 July 1991,
which
was sent by pre-paid airmail post as required by clause 23 of
the agreement.
[12] The defendant's attorneys
eventually responded on 12 September 1999
inter
alia
as follows:
“
2.1 our client denies that your client’s
letter of 25 June 1991 (“the termination letter”) gave
our client the
requisite 12 months’ notice of termination as
required by clause 16(a) of the agreement;
2.2 clause 16(a) of the agreement expressly provides
that the agreement can be terminated by either party giving not less
than 12
months’ written notice to terminate to the other party;
2.3 the termination letter of 25 June 1991 merely
confirms your client’s termination of the agreement and makes
no reference
whatsoever to the requisite 12 months’ notice of
termination;
2.4 the original of the termination letter was preceded
by a telefax dated 24 June 1991 from our client to which was attached
a
copy of the termination letter. In the telefax your client
described the termination letter as ‘an official letter of
termination
of our distributorship agreement with Intamarket’
and went on to state the following -
“
As it has been found necessary to take this
unfortunate decision I would have thought you would like to terminate
the agreement
as soon as possible. With this in mind I feel sure we
can agree a mutually convenient date in the near future and come to
some
arrangement regarding the stocks you hold (including the demo.
unit)”;
2.5 your client’s aforementioned correspondence to
our client constituted a wrongful and unlawful repudiation by your
client
of the agreement, which repudiation our client accepted and as
a result our client cancelled the agreement and reserved its right
to
recover damages from your client, alternatively our client hereby
accepts your client’s wrongful and unlawful repudiation
of the
agreement and hereby cancels the agreement and reserves its right to
recover damages from your client as a result thereof;
2.6 it was only after receipt of your client’s
letters dated 24 and 25 June 1991 wherein they repudiated the
agreement that
our client prepared and distributed the letter of 25
June 1991 which was entitled “IMPORTANT AGENCY ANNOUNCEMENT”
to
which you make reference;
2.7 your client’s letter of 19 July 1991 is
clearly a contrived effort on the part of your client to endeavour to
remedy and
overcome its wrongful and unlawful repudiation of the
agreement constituted by its letters of 24 and 25 June 1991.”
[13] The plaintiff, known at the outset of the
proceedings as ICS-Texicon Limited but finally transformed as
Datacolor International
(Pty) Limited, instituted action against the
defendant in the Witwatersrand Local Division of the High Court for
the payment of
the purchase price of goods sold and delivered up to
June 1991. The claim was conceded in substance but was met on the
pleadings
by a counterclaim for damages in an amount exceeding the
plaintiff's claim. The focus of the case accordingly shifted to the
defendant's counterclaim for damages for breach of contract. With
the consent of all concerned the question of the quantum of the
counterclaim stood over until after the determination of liability.
[14] The matter came before Heher J. He concluded that
the two letters, properly construed, did not
“
exhibit a deliberate or unequivocal intention to
bring the agency agreement to an immediate end. Put another way, the
plaintiff
did not act in such a way as to lead the reasonable person
to the conclusion that it did not intend to fulfill its part of the
contract ...”;
moreover, and in any event, that the defendant had not
properly “accepted” the repudiation; and finally, that
the
defendant, by its own wrongful conduct in entering into an
agreement with, and in importing goods from Spectrum while its
agreement
with the plaintiff remained extant, had committed breaches
of contract entitling the plaintiff to cancel it, thereby
disqualifying
itself from “accepting” the plaintiff's
repudiation (if such it was) on 12 September 1991. In the result the
defendant’s
counterclaim was dismissed with costs.
[15] The defendant took Heher J's judgment on appeal to
the full bench of the Witwatersrand Local Division of the High Court.
Three
judgments were delivered. Flemming DJP and Lewis AJ upheld
the appeal and issued a declarator in the following terms:
“
It is found that the plaintiff repudiated the
contract as alleged in paragraph 7 of the counterclaim and that the
defendant was
accordingly entitled to cancel the contract, which it
did in fact do. The plaintiff is ordered to pay the costs of the
proceedings
before Heher J.”
Willis AJ dissented. He would have upheld the appeal
with costs. With special leave granted by this court the matter now
comes
before it.
Whether the plaintiff by its letters of termination
repudiated the agreement.
[16] “Where one party to a contract, without
lawful grounds, indicates to the other party in words or by conduct a
deliberate
and unequivocal intention no longer to be bound by the
contract, he is said to “repudiate” the contract ...
Where
that happens, the other party to the contract may elect to
accept the repudiation and rescind the contract. If he does so, the
contract comes to an end upon communication of his acceptance of
repudiation and rescission to the party who has repudiated ...”
(per Corbett JA in
Nash
v Golden Dumps (Pty) Ltd
1985
(3) SA 1
(A) at 22D-F).
This is the conventional exposition
of the operation of the doctrine of repudiation leading to rescission
with its emphasis on the
guilty party’s intention and the
innocent party’s acceptance. At the same time this court has
repeatedly stated that
the test for repudiation is not subjective but
objective (
Ponisammy
and Another v Versailles Estates (Pty) Ltd
1973
(1) SA 372
(A) at 387A-C;
Stewart
Wrightson (Pty) Ltd v Thorpe, supra,
at 953E-H;
Van
Rooyen v Minister van Openbare Werke en Gemeenskapsbou, supra,
at 845A-846G;
Tuckers
Land and Development Corporation (Pty) Ltd v Hovis, supra,
at 653B-G;
OK
Bazaars (1929) Ltd v Grosvenor Buildings (Pty) Ltd and Another
[1993] ZASCA 56
;
1993 (3) SA 471
(A) at 480I-481H;
Highveld 7 Properties (Pty) Ltd and Others v Bailes
1999 (4) SA 1307
(SCA) at 1315F-G; 1318A-E; 1318H-J). Thus it has
recently been said in
Metalmil
(Pty) Ltd v AECI Explosives and Chemicals Ltd
[1994] ZASCA 96
;
1994 (3) SA 673
(A) at 684I-685B:
“
It is probably correct to say
that respondent was
bona
fide
in its
interpretation of the agreement and that subjectively it intended to
be bound by the agreement and not to repudiate it.
This fact does
not, however, preclude the conclusion that its conduct constituted
repudiation in law. Respondent was not manifesting
any intention to
conduct its relations with appellant and to discharge its duties to
appellant in accordance with what it was obliged
to do on an
objective interpretation of the agreement. In effect, it was
insisting on a different contract, however
bona
fide
it might have
been in its belief that it was not.”
Conceivably it could therefore happen that one party, in
truth intending to repudiate (as he later confesses), expressed
himself
so inconclusively that he is afterwards held not to have done
so; conversely, that his conduct may justify the inference that he
did not propose to perform even though he can afterwards demonstrate
his good faith and his best intentions at the time. The emphasis
is
not on the repudiating party’s state of mind, on what he
subjectively intended, but on what someone in the position of
the
innocent party would think he intended to do; repudiation is
accordingly not a matter of intention, it is a matter of perception.
The perception is that of a reasonable person placed in the position
of the aggrieved party. The test is whether such a notional
reasonable person would conclude that proper performance (in
accordance with a true interpretation of the agreement) will not be
forthcoming. The inferred intention accordingly serves as the
criterion for determining the nature of the threatened actual breach.
[17] As such a repudiatory breach may be typified as an
intimation by or on behalf of the repudiating party, by word or
conduct
and without lawful excuse, that all or some of the
obligations arising from the agreement will not be performed
according to their
true tenor. Whether the innocent party will be
entitled to resile from the agreement will ultimately depend on the
nature and
the degree of the impending non- or malperformance.
[18] The conduct from which the
inference of impending non- or malperformance is to be drawn must be
clearcut and unequivocal,
i e not equally consistent with any other
feasible hypothesis. Repudiation, it has often been stated, is “a
serious matter”
(cf
Ross
T Smyth & Co Ltd v T D Bailey, Son & Co
[1940] 3 All ER 60
(HL) at 72B;
Metalmill
(Pty) Ltd v AECI Explosives and Chemicals Ltd, supra,
at
685B-C), requiring anxious consideration and - because parties must
be assumed to be predisposed to respect rather than to disregard
their contractual commitments - not lightly to be presumed.
[19] Since the test is objective and the matter is to be
approached from the vantage point of the innocent party (in this case
the
defendant) it follows that evidence of Hill, the author of the
letters RW8 and RW9, as to what the plaintiff had in mind when he
drafted them, would have been irrelevant. By the same token the
evidence of the defendant’s witnesses, Wachsberger and Mayer,
as to what they understood by, and how they reacted to, the letters
was not irrelevant. But such evidence, although relevant,
would not
be conclusive since the approach is that a court, faced with the
enquiry of whether a party’s conduct amounted
to a repudiation,
must superimpose its own assessment of what the innocent party’s
reaction to the guilty party’s action
should reasonably have
been.
[20] Consistent with that approach it further follows
that a court in making its assessment must take into account all the
background
material and circumstances that should have weighed with
the innocent party. Such circumstances would in the present case
include:
i) the rumours that were current at the time that ICS
had been taken over by the Eichoff Group; that a restructuring and
rationalisation
of its commercial interests in Southern Africa was
imminent; and that there was a realistic possibility that the
defendant’s
distributorship might be terminated;
ii) the meeting which Mayer had with Cornelius in
Frankfurt early in June 1991 which left Mayer with the uneasy feeling
that the
defendant might have missed the boat;
iii) the telephonic conversation which Cornelius had
with Mayer on 17 June 1991 when the latter was informed that the
decision had
been taken “to go” with Gosling’s
company and that the defendant would in due course be formally
notified of
that decision. No mention was made in the course of that
conversation of a period of notice;
iv) and finally the two crucial letters, RW8 and RW9,
quoted earlier, which were telefaxed to the defendant, the one dated
24 June
1991 and the other 25 June 1991, both signed by Hill, both
reaching the defendant at more or less the same time, probably on 25
June 1991, and then forwarded by the plaintiff by registered post in
compliance with clause 23 of the agreement.
[21] Much debate was devoted in both courts below and in
this one as to the sense of, and the correlation between, these two
letters.
RW9 was “an official letter of termination”.
It was so described in the other letter, RW8 (addressed to “Dear
Steve”). As such RW9 would have been accorded, in the eyes of
a reasonable person standing in the defendant’s shoes,
at least
some precedence, in keeping with the plaintiff’s own ranking
thereof. Reading it on its own both its formal tone
and its contents
would have conveyed the message that the agreement between the
parties, far from continuing into the future for
at least another
twelve months, has been brought to an abrupt end. But of course the
reasonable reader would not have read the
letter in isolation. He
would have taken account of RW8 as well. RW8 is written in an
entirely different style and tone. While
I agree that the two
letters must be read together, each conveying its own separate
impression, I do not agree with the submissions
of plaintiff’s
counsel that they must be conflated into a single letter with a
reconstructed sequence of sentences. Ultimately
it remains a
question of what the reasonable reader in the defendant’s
position would have made of it; of the collective
and cumulative
impression created when the two letters are read in tandem.
[22] Various constructions have been placed on the two
letters when read in conjunction with one another. These may be
grouped
together as follows:
i) In terms of the letters “the plaintiff gave
notice to the defendant terminating the agreement with immediate
effect”.
That was the construction placed on them by the
defendant in its counterclaim which was initially admitted by the
plaintiff in
its plea thereto. During the cross-examination of the
defendant’s witnesses the plaintiff, however, sought an
amendment
which despite opposition was eventually granted. It is
quoted in the next sub-section.
ii) “The plaintiff avers that the letters ‘RW8’
and ‘RW9’ were intended to terminate the agreement
as
provided for in clause 16(a) with the requisite twelve months
notice”. This amendment was in line with the construction
earlier placed on RW8 and RW9 by the plaintiff in its letter of
cancellation of 19 July 1991, quoted in para 10 above.
iii) The letters served as due notice of twelve months
but with an open invitation to the defendant to negotiate a
reduced
period if that would suit its convenience. That would
seem to have been the interpretation favoured by Heher J.
iv) The letters “confirmed” the
plaintiff’s decision not to continue with the
defendant as its chosen distributor; otherwise they
represented nothing more than an invitation to the defendant to
negotiate a
premature termination of the agreement. As such the
plaintiff did not repudiate the agreement. That was the
interpretation advanced
on behalf of the plaintiff in argument before
this court.
v) The letters purported to terminate the agreement
forthwith, with the consequence that no further orders would be
executed by
the plaintiff; the plaintiff was nevertheless prepared
to allow the defendant time to close down their common business and
to
tie up loose ends such as the return of stock and the
demonstration model still in the defendant’s possession. That
was
essentially the effect of the evidence of Mayer and was the
interpretation advanced on behalf of the defendant in argument.
[23] Counsel for the plaintiff advisedly did not seek to
support the assertion in the plaintiff’s own amended pleadings
that
the letters constituted due notice in terms of clause 16(a). In
none of the prior conversations between Cornelius and Mayer, nor
in
the letters themselves, was there any mention of the clause. The
clause, moreover, did not provide for a notice period of twelve
months but for a notice period of not less than twelve months. RW8
and RW9 are entirely silent as to what the notice period was
supposed
to be and when it was supposed to expire. The view advanced in the
plaintiff’s own pleadings and correspondence
that due notice
was given can accordingly be dismissed as fanciful.
[24] The alternative submission
advanced on behalf of the plaintiff in argument can, in my view, also
not be upheld. The argument
went as follows: the official letter
RW9 refers back to the discussion with Cornelius. In that
conversation Cornelius informed
Mayer that the defendant was not the
chosen distributor. That simply meant that the defendant’s
distributorship would have
to come to an end. The official letter,
RW9, confirms that fact. But it is silent, as was the prior
notification of Cornelius,
as to how and when the distributorship
would be formally terminated. This aspect is dealt with in the
accompanying letter, RW8.
It expresses, first, the sentiment that
the defendant, now that the decision had been taken to end the
distributorship, would
doubtless prefer it to happen sooner rather
than later; and then it proceeds to invite the defendant’s
suggestions, in order
to achieve an amicable and mutually
satisfactory resolution to their relationship, as to the date when
the termination should take
effect. The two letters, far from
constituting a repudiation, were accordingly simply an invitation to
negotiate some date in
the future upon which the distributorship was
to come to an end. As such, so it was contended, it was comparable
to the terms
of the letter discussed in
Inter
Maritime Management SA v Companhia Portuguesa de Transportes
Maritimos EP
[1990] ZASCA 112
;
1990
(4) SA 850
(A) at 858G-I:
“
... in this respect we would welcome your
proposal as regards the best course of action in this respect, namely
the timing, payment
of disbursements connected with PISC commitments
as well as repayment of stock capital to IMM and CTM, in order to
safeguard the
interests of all parties involved.”
I have to disagree. The two situations are by no means
comparable. The supposed parallel ignores the official letter, RW9.
If
the plaintiff was merely intent on an open-ended invitation to
negotiate the end of their relationship, why send two letters?
Why
mark the one the “official letter”? Why thank the
defendant for its support in the past and wish it well for the
future? Mayer expected, after the telephone conversation with
Cornelius on 17 June 1991, a notice in terms of clause 16(a).
Instead he received the official letter (initially sent by telefax
and thereafter by registered post) and its companion piece, neither
of which referred to the clause. Both Mayer and Wachsberger
testified that they understood the letters to be a termination, to
take effect forthwith, without further notice. That is why, as a
matter of urgent priority, they immediately turned to Spectrum
to
preserve their client base. According to Mayer the first sentence of
the second paragraph of RW8 made little sense to him;
the second
sentence referred to a time for the disposal of stocks (including the
demonstration model) and such like matters.
Whatever doubts he may
have had on reading RW8, so he said, were dispelled by the terms of
the official letter, RW9, which made
it perfectly plain that their
relationship had come to an end. In my view that is precisely how a
reasonable reader of the correspondence
would have interpreted the
letters. The dominant notion which the letters convey was that the
distributorship had been irrevocably
terminated and that no further
orders for the plaintiff’s products would be executed; only
the actual winding-up of their
affairs remained open for discussion.
Much was made of the sentence in RW8 “... I would have thought
you would like to terminate
the agreement as soon as possible ...”.
Of course, the termination of the agreement was not a matter for
determination by
the defendant. The reasonable reader would in my
opinion regard that sentence as an expression of the author’s
belief that
the defendant would be pleased, rather than displeased,
now that the “unfortunate decision” had been taken to
terminate
the defendant’s distributorship, that their
relationship be brought to a prompt end. The following sentence
makes it plain
that the plaintiff is nevertheless prepared to be
accommodating towards the defendant if the latter should need more
time to attend
to matters that are still outstanding, such as the
disposal of unsold stock. There is not the slightest hint that the
plaintiff
was considering giving the defendant due notice in terms of
clause 16(a) should the defendant fail to come up with acceptable
counter-suggestions.
[25] In my opinion the two letters,
read together against the background of the prior exchanges between
the parties, would convey
to the reasonable person looking at the
matter from the perspective of the defendant that the termination of
distributorship was
a
fait
accompli
and that
no notice in terms of clause 16(a) would be forthcoming, regardless
of how the defendant responded to the invitation
contained in RW8.
The clear impression is that the plaintiff was indifferent to, and
did not propose to comply with, clause 16(a).
The dominant message
which the two letters conveyed was that the defendant would not enjoy
at least a further twelve months before
the agency agreement with
the plaintiff was brought to a conclusion. In my view that was
tantamount to an unequivocal intimation
on the part of the plaintiff
that it did not propose to perform its part of the agreement for the
remainder of the stipulated notice
period. As such it was a wrongful
repudiation of sufficient seriousness as to justify cancellation of
the agreement by the defendant.
Whether the defendant properly and timeously
exercised its election to cancel the agreement
[26] The defendant did not for the time being reply to
the letters of repudiation of 25 June 1991. Instead it directed all
its
energies in an effort to contain the damage done to its business
(by the plaintiff’s decision) by commandeering Spectrum
to its
cause and by circulating the agency announcement to its customers.
This announcement was brought to the plaintiff’s
attention
almost immediately by Gosling on 28 June 1991. Hill agreed in
evidence that upon receipt of it he considered the distribution
agreement to be at an end. He instructed his staff to hold back all
prior orders placed by defendant. The plaintiff thereupon
seized
upon the agency announcement as a repudiation in itself entitling it
to cancel the agreement. This it purported to do by
its letter of 19
July 1991 which was followed up by a formal letter from its attorneys
dated 22 July 1991. The defendant’s
response was a lengthy
letter, dated 12 September 1991, from its attorney, reiterating that
the letters RW8 and RW9 constituted
a repudiation
“
which repudiation our client accepted and as a
result our client cancelled the agreement and reserved its right to
recover damages
from your client, alternatively our client hereby
accepts your client’s wrongful and unlawful repudiation of the
agreement
and hereby cancels the agreement and reserves its right to
recover damages from your client as a result thereof”.
In addition a number of other issues
relating to the dispute between the parties and its
sequelae
were aired.
[27] The plaintiff’s reading of
the situation may be summarised as follows: on the hypothesis that
the letters RW8 and RW9
constituted a repudiation, it denied that the
agency announcement qualified as an “acceptance” thereof;
instead it
was itself a repudiation which the plaintiff in turn
“accepted”, thereby pre-empting the defendant from
“accepting”,
by means of its attorney’s letter of
12 September 1991, the plaintiff’s own earlier repudiation.
This argument was
accepted in substance by Heher J but rejected by
the majority in the court
a
quo
. I agree with
the majority for the reasons that follow.
[28] The innocent party to a breach
of contract justifying cancellation exercises his right to cancel it
a) by words or conduct
manifesting a clear election to do so b)
which is communicated to the guilty party. Except where the contract
itself otherwise
provides, no formalities are prescribed for either
requirement. Any conduct complying with those conditions would
therefore qualify
as a valid exercise of the election to rescind. In
particular the innocent party need not identify the breach or the
grounds on
which he relies for cancellation. It is settled law that
the innocent party, having purported to cancel on inadequate grounds,
may afterwards rely on any adequate ground which existed at, but was
only discovered after the time (cf
Putco
Ltd v TV & Radio Guarantee Co (Pty) Ltd
and other related
cases
1985 (4) SA
809
(A) at 832C-D).
[29] In
Jaffer
v Falante
1959 (4)
SA 360
(C) at 362F-G it was stated:
“
Communication to the buyer of the seller’s
election would appear to be desirable so as to crystallise the rights
and position
of the parties to the contract. For it to suffice for
the seller merely to decide to cancel the contract without notifying
his
decision would leave the buyer in an invidious position. It
seems to me both on principle and on authority that this is not the
law.”
This statement has been approved by
this court in
Swart
v Vosloo
1965 (1)
SA 100
(A) at 105F-H and reiterated in
Miller
and Miller v Dickinson
1971 (3) SA 581
(A) at 587H-588A in the following terms:
“
In this Court it was not disputed on behalf of
the appellants that in law, in the absence of an agreement to the
contrary, a party
to a contract who exercises his right to cancel
must convey his decision to the mind of the other party and that
cancellation does
not take place until that happens.”
These
dicta
may create the impression that the decision to cancel must of
necessity be addressed by the innocent party to the guilty party.
That would doubtless be the usual situation. The point in the cases
cited was not whether the communication was conveyed by
the innocent
party himself but whether it reached the guilty party. None of these
cases was therefore concerned with the somewhat
less typical
situation where an unmistakable election to treat the agreement as at
an end is made by the innocent party but is
conveyed to the guilty
party, perhaps coincidentally, by someone else who is not the
innocent party’s agent. Until the
innocent party’s
election is brought to the attention of the guilty party there will
be no finality and hence uncertainty.
Such uncertainty is in any
event inherent in the reasonable
spatium
deliberandi
given
to the innocent party. Once he has declared his decision to cancel
it is, of course, in his own interest to ensure that
it is brought to
the attention of the guilty party lest the latter may retract his
repudiation, if that is his breach, thereby
pre-empting any purported
cancellation on his part (cf De Wet & Van Wyk,
Die
Suid-Afrikaanse Kontraktereg en Handelsreg,
5
th
ed, Vol 1, 216). But he is not obliged to do so. Since the election
to cancel, provided that it is unambiguous, need not be explicit
but
may be implicit, and since the cause for cancellation need not be
correctly identified and stated, it follows that the actual
communication of the decision to cancel, once made and manifested,
may be conveyed to the guilty party by a third party. In the
instant
case the defendant, by circulating the agency announcement, made its
attitude plain for all the world to see. It regarded
its agreement
with the plaintiff as having come to an end. That decision and the
defendant’s conduct pursuant thereto were
bound to come to the
plaintiff’s attention. On the facts of this case it is
accordingly of no significance that the agency
announcement was not
sent to the plaintiff by the defendant but by Gosling.
[30] A similar approach is apparent
in England. Thus it was said by Lord Steyn in
Vitol
SA v Norelf Ltd
[1996] AC 800
(HL) at 810G-811B:
“
My Lords, the question of law
before the House does not call for yet another general re-examination
of the principles governing
an anticipatory breach of a contract and
the acceptance of the breach by an aggrieved party. For present
purposes I would accept
as established law the following
propositions. (1) Where a party has repudiated a contract the
aggrieved party has an election
to accept or to affirm the contract:
Fercometal S.A.R.L.
v. Mediterranean Shipping Co. S.A.
[1989]
A.C. 788.
(2) An act of acceptance of a repudiation requires no
particular form: a communication does not have to be couched in the
language
of acceptance. It is sufficient that the communication or
conduct clearly and unequivocally conveys to the repudiating party
that
that aggrieved party is treating the contract as at an end. (3)
It is rightly conceded by counsel for the buyers that the aggrieved
party need not personally, or by an agent, notify the repudiating
party of his election to treat the contract as at an end. It
is
sufficient that the fact of the election comes to the repudiating
party’s attention, e.g. notification by an unauthorised
broker
or other intermediary may be sufficient.”
And again at 812D-E:
“
Similarly, in the different field of repudiation,
a failure to perform may sometimes be given a colour by special
circumstances
and may only be explicable to a reasonable person in
the position of the repudiating party as an election to accept the
repudiation.”
[31] According to the trial court the agency
announcement did not qualify as “an acceptance” of the
plaintiff’s
presumed repudiation. Several reasons were
advanced. The first was that the announcement did not purport to be
a reaction to
the plaintiff’s own repudiation. Secondly, the
defendant did not intend
“
that the circular should serve as a means of
communication of any standpoint which it may have adopted in relation
to the plaintiff’s
conduct in unlawfully terminating the
agreement. In the circumstances it is mere sophistry to contend
that the defendant informed
the plaintiff through the medium of
circular that it accepted the repudiation.”
In the third place the agency announcement only came to
the plaintiff’s attention by chance. And finally it was said:
“
I do not agree that communication of ‘an
acceptance’ by an unauthorised third party can be effective
where the acceptor
has not intended that result actually or
constructively.”
The authority relied on is
Read
Bros (South Africa) Ltd., v Fischer Bearings Co. Ltd.
,
1943 AD 232
at 241 which was a case dealing not with the “acceptance”
of a repudiation but with the acceptance of an offer.
[32] Counsel for the plaintiff on being pressed advanced
a not dissimilar argument. To qualify as “an acceptance of
repudiation”
the conduct (if I may paraphrase the submission)
must have been an act of communication calculated to come to the
attention of
the guilty party and must have been recognisable as a
response to the repudiation.
[33] In my view both the approach of
the trial court and the comparable argument of counsel for the
plaintiff sought to graft the
requirements of an acceptance of an
offer onto the “acceptance” of a repudiation. The
analogy has been stated in
Stewart
Wrightson (Pty) Ltd v Thorpe
1977 (2) SA 943
(A) at 952E-954B to be false. The approach,
moreover, cannot be reconciled with the established law that the
manifestation of
the election to cancel may consist of conduct and
need not correctly identify its cause.
[34] Counsel for the plaintiff readily acknowledged that
if the additional requirements for cancellation formulated on by him
and
described in paragraph 32 above were not part of the law, the
agency announcement would qualify as a competent act of cancellation.
That concession, in my view, was properly made. The agency
announcement was at odds with a continuation of the agreement by the
defendant. As such it constituted, to the knowledge of the
plaintiff, a clear and unequivocal manifestation by the defendant of
its attitude that, in response to the plaintiff’s letters of
termination, the contract was finally at an end.
[35] In my opinion it must be accepted that the
plaintiff repudiated the agreement by its two letters, RW8 and RW9,
and that the
defendant in retaliation elected to treat the agreement
as having come to an end. Those two conclusions effectively dispose
of
the appeal.
Whether the defendant was precluded from cancelling
the agreement in terms of its letter of 12 September 1991
[36] I propose nevertheless to add a
few words about the conclusion reached by the trial court, supported
by counsel for the plaintiff,
that the defendant (on the assumption
that RW8 and RW9 did constitute a repudiation and that a reasonable
time for its “acceptance”
had not yet elapsed by 12
September 1991) was precluded from exercising its assumed right of
cancellation. The reasoning, in a
nutshell, was this: on that
postulate the defendant failed to “accept” the
plaintiff’s repudiation by 19 July
1991 when the plaintiff
lawfully cancelled the agreement; consequently the defendant’s
purported cancellation in September
1991 was out of time and out of
order. The plaintiff’s letter of 19 July 1991 was a lawful
cancellation (so it was contended)
because the defendant, having
failed to “accept” the plaintiff’s prior
repudiation, itself committed breaches
of that agreement entitling
the plaintiff to cancel it. Those breaches were, first, the agency
announcement, secondly, the deal
which the defendant struck with
Spectrum and thirdly, the importation of goods early in July in
contravention of clause 9(a) of
the agreement. The short answer to
the entire line of reasoning is of course that the defendant did not
fail to “accept”
the repudiation: the agency
announcement qualified as such, for all the reasons mentioned in
paragraphs 26 to 34. But even assuming
in favour of the plaintiff
that the defendant, subsequent to the plaintiff’s repudiation,
itself breached the contract in
a manner which would have entitled
the plaintiff to cancel it, it is not the complete answer which the
plaintiff is seeking. One
party, having repudiated a contract,
cannot retroactively nullify it as a potential cause of action by
taking advantage of the
opposite party’s later breach and
cancelling the contract before the opposite party thought of doing
so. Assuming for the
moment that the defendant’s agency
announcement constituted not an act of cancellation but a wrongful
breach in itself, the
plaintiff’s cancellation on 19 July 1991,
bringing the contract to an end, would undoubtedly have foiled any
attempt by the
defendant to cancel it on 12 September 1991. There
was no longer a contract in existence capable of cancellation. The
defendant
would have lost the right to cancel but would it have
affected either party’s cause of action for damages arising
from the
other’s breach? I would have thought not. As it was
said in
State
Trading Corporation of India Ltd v M Golodetz Ltd (Now
Transcontinnental Affiliates Ltd)
[1989]
2 Lloyd’s Rep 277 (CA) at 287:
“
On the assumption that both parties were in
breach of condition, so that each of them could have treated the
other as having wrongfully
repudiated, neither lost its right to
claim damages for breaches by the other irrespective of which of them
brought the contract
to an end.”
Elusive issues of causation may of course arise but
those can best be left for another case, another court and another
day. Even
on that basis, one that is perhaps the most generous to
the plaintiff, the defendant would not have been non-suited. The
defendant
would only have been non-suited if the act of repudiation
were wrongly assumed to be an offer of breach requiring an acceptance
to complete it as a cause of action. But that, as has been stated
earlier, cannot be regarded as a sound proposition of law.
The appeal is dismissed with costs.
...........................
P
M NIENABER
JUDGE
OF APPEAL
Concur
:
Vivier JA
Zulman JA
Mthiyane AJ
SCOTT JA
/...
SCOTT JA
:
[1] I have had the privilege of reading the judgment of
my brother Nienaber. I agree with the legal principles set out
therein
but regret that I am unable to agree with the construction he
places on the two letters said by the respondent to constitute a
repudiation of the contract between the parties. As this is a
minority judgment I shall state the reasons for my dissent as shortly
as possible.
[2] The essential nature of the
inquiry is clear enough. Do the letters, which it is common cause
must be read together, fairly
interpreted exhibit a deliberate and
unequivocal interpretation no longer to be bound? (See for
eg
OK Bazaars
(1929)
Ltd v
Grosvenor Buildings (Pty) Ltd and Another
[1993] ZASCA 56
;
1993
(3) SA 471
(A) at 480 I - 481C.) By the time the letters were
written the contract between the parties had been in force for more
than three
years. In terms of clause 16 (a) either
party therefore had
the right to terminate it subject only to the requirement of giving
not less than 12 months written notice.
An unequivocally expressed
intention to terminate the contract would not on its own amount to a
repudiation. It would have
to be clear that the intention was to
terminate the contract in breach of its provisions, i e without
written notice of not less
than 12 months, or for that matter a
shorter period agreed upon by the parties.
[3] It is convenient to quote both letters which were
telefaxed to the respondent at about the same time. They are dated
respectively
24 and 25 June 1991. I shall refer to the first as the
“covering letter” and the second as the “official
letter”.
“
24 June 1991
RE: Termination of Distributorship Agreement with ICS
Texicon
Dear Steve,
Along with this fax is an official letter of termination
of our Distributorship Agreement with Intamarket. The original is
being
sent by registered post.
As it has been found necessary to take this unfortunate
decision I would have thought you would like to terminate the
Agreement
as soon as possible. With this in mind I feel sure we can
agree a mutually convenient date in the near future and come to some
arrangement regarding the stocks you hold (including the demo.,
unit).
Let me have your thoughts on this matter at your
earliest convenience.
Kind regards ”
“25 June 1991
Dear Sirs
Distributorship
Agreement with ICS-Texicon Limited
Further to your discussion with my colleague, Mr
Cornelius, I regretfully have to confirm the termination of the
Distributorship
Agreement between Intamarket (Pty) Limited and ICS -
Texicon Limited.
We would like to thank you for your support in the past
and wish your organisation success in the future.
Yours faithfully”
[4] The respondent’s contention was that the
official letter had to be construed as expressing an intention to
terminate
the contract with immediate effect. The letter, of
course, does not say this. It confirms the termination but makes no
reference
to the date from which the termination will take effect.
Had the writer’s intention been to terminate the contract
immediately
one would ordinarily have expected this to be stated
expressly. After all, expressions such as “we hereby
terminate”
or “the agreement is terminated forthwith”
or “with immediate effect” are commonplace and are used
by lawyers
and laymen alike.
[5] The word “confirm” in the official
letter is, furthermore, clearly a reference to what was said in the
course of
a telephone conversation between Mr Cornelius representing
the appellant and the respondent’s Mr Mayer which took place
about
a week earlier, probably on 17 June 1991. It is common cause
that on this occasion Mr Cornelius advised Mr Mayer that the
appellant
had decided that it would not continue with the respondent
as its distributor in view of a Swiss company having taken over the
appellant. Mr Cornelius said he would confirm the decision in
writing. There was no mention of when the termination would take
effect; the official letter did no more than confirm what had been
said before.
[6] Thus far I have referred only to the official
letter. If the two letters are read together, as it is common cause
they must,
then it is immediately apparent why no reference is made
in the official letter to when the termination is to take effect. The
reason is that this is dealt with in the covering letter. An
ordinary reading of the covering letter makes it clear, I think,
that what the writer was doing was simply inviting the reader to
agree a date upon which the termination would take effect.
(7) If an analysis of the covering
letter is necessary to justify my understanding of it, I venture the
following. In the second
paragraph the writer says: “... I
would have thought you would like to terminate the Agreement as soon
as possible. With
this in mind I feel sure we can agree a mutually
convenient date in the near future ...”. The final paragraph
reads “Let
me have your thought on this matter at your earliest
convenience”. In my view there can be no doubt that the
reference to
the “mutually convenient date
in
the near future
”
(my emphasis) is a reference to a date on which the termination
would take effect. This is wholly in conflict with the
construction
that the agreement had been terminated forthwith or that the official
letter confirmed a termination that had already
taken effect. In
order to meet this point counsel for the respondent was compelled to
argue that the reference to “a mutually
convenient date in the
near future” refers only to an arrangement regarding the stocks
held by the respondent. The argument
is founded on the words “and
come to some arrangement regarding the stocks you hold ...”
which follow the words “in
the near future” in the
sentence quoted above. Such a construction, I think, is contrived.
It ignores the opening words
of the sentence “with this in
mind” which refer to the words in the previous sentence “you
would like to terminate
the agreement as soon as possible.”
[8] A further argument advanced on behalf of the
respondent is that the need to come to an arrangement regarding the
stocks would
be unnecessary if the contract was to run another year.
But this ignores what would be the obvious object of the covering
letter,
namely to invite the respondent to agree on an earlier date
for the termination to take effect. In the event of an earlier date
being agreed upon an arrangement regarding the stocks would have to
be made.
[9] I am also unable to agree with
the suggestion that the letters convey an unequivocal intention to
terminate the agreement “forthwith”
but subject to some
sort of winding-down period during which the contract would in effect
continue to operate. Such a construction,
I think, would involve
reading into the covering letter something which is simply not there.
It would, in any event, be in conflict
with the express terms of the
letter. As I have attempted to show, the “mutually convenient
date
in the future
”
is an obvious reference to the date of termination. That being so, I
can see no basis for construing the letter as communicating
an
intention to terminate the contract with immediate effect (or
confirming that it has already been terminated) but subject to
a sort
of winding-down period.
[10] On behalf of the respondent
much was made of the fact that the letters make no reference to a
notice period. It was pointed
out that as clause 16 (a) of the
contract provides for “not less than 12 months” written
notice there was no basis
for construing the letters as giving notice
as no notice period can be gleaned from either letter.
Accordingly, so it was emphasized,
the letters could not constitute
the written notice contemplated in the contract. This, I think, is
correct; but it does not follow
that the letters therefore
constituted a repudiation. The communication of an unequivocal
intention to terminate coupled with an
invitation to negotiate an
earlier effective date of termination does not in my view amount to a
repudiation. If, of course, no
agreement was reached and the
appellant insisted on a shorter notice period the position would be
otherwise. It is also true that
in a subsequent letter dated 19 July
1991 the appellant contended that it had given the requisite 12
months notice in its official
letter. That it was wrong in this
assertion is of no consequence. The interpretation of the letters is
a question of law involving
an objective test. (See for
eg
Highveld 7
Properties (Pty) Ltd and Others v Bailes
1999 (4) SA 1307
SCA at 1315 at E - G.)
[11] Finally it is necessary to
observe that the letters in question contain no assertion of
misconduct or a breach on the part
of the respondent. In other words,
no reason or purported reason is advanced for what would otherwise be
a total disregard for
the terms of the contract. In one of the
judgments of the majority in the Court below it was suggested that
the appellant may well
have chosen deliberately to repudiate the
agreement rather than have to put up with a disappointed distributor
serving out a notice
period. There is no basis for such a suggestion.
Furthermore, the consequence of the appellant acting in bad faith in
this way
would be to deprive it of the benefit of the restraint of
trade clause (cl 19) in the contract. This would be true both in
England
(where the contract was concluded) and in South Africa
(
Reeves and Another
v Marfield Insurance Brokers CC and Another
[1996] ZASCA 39
;
1996 (3) SA 766
(A) at 773 C, 775 C - D) and such a motive cannot
lightly be ascribed to the appellant.
[12] It follows that in my view the letters in question
did not amount to a repudiation of the contract. I would accordingly
have
upheld the appeal with costs.
D
G SCOTT