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IN THE HIGH COURT OF SOUTH AFRICA
NORTHWEST DIVISION – MAHIKENG
CASE NO: 3205/19
In the matter between: -
VCED MAINTENANCE GROUP (PTY) LTD PLAINTIFF
and
PHOENIX TANKS (PTY) LTD DEFENDANT
JUDGMENT
DIBETSO-BODIBE AJ
Reportable: YES/NO
Circulate to Judges: YES/NO
Circulate to Magistrates: YES/NO
Circulate to Regional Magistrates: YES/NO
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INTRODUCTION
[1] This is an action for damages based on breach of contract
concluded between the Plaintiff, VCED Maintenance Group (Pty)
Ltd and the Defendant, Phoenix Tanks (Pty) Ltd. The Defendant’s
legal representative has since withdrawn as an attorney of r ecord
after the Defendant’s Plea and Counterclaim had duly been filed.
The Defendant failed to appear on the date of trial and Mr Vermier
Donfack, Director of the Plaintiff adduced evidence quantifying the
extent of damages allegedly suffered as the result of the breach of
contract.
THE PLEADINGS
[2] The Plaintiff’s claim for damages emanates from an “express,
alternatively tacit, further alternativ ely implied terms of the oral
contract” entered into with the Defendant during March 2018 as
follows:
[2.1] “The Plaintiff will order from the Defendant who would in turn
provide to the Plaintiff a Sectional Steel Galvanized Tank,
[2.2] The Plaintiff would pay an amount of 50% of the total purchase
price of the Sectional Steel Galvanized Tank, as a deposit
(which deposit is to be used to cover the costs of the
manufacturing of the tank), once the Defendant issued the
Plaintiff with a tax invoice (the tax invoice represented the
written part of the contract between the Plaintiff and the
Defendant for purposes of this action,…
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[2.3] Subsequent to the manufacturing, delivery at a site to be
advised and successful installation of the tank by the
Defendant, the full purchase price, for the Sectional Steel
Galvanized Tank would be payable,
[2.4] Until the full purchase price has been paid, the ownership of
the Sectional Steel Galvanized Tank would remain the
property of the Defendant.’’
[3] The Defendant in its Plea admitted all of the above -mentioned
averments by the Plaintiff, however, in the Counter claim the
Defendant in a very illusive manner claimed from the Plaintiff the
sum of R87 324.00 alleging that “ the Plaintiff breached the terms of
the agreement, in that it cancelled the agreement without making
payment of the full purchase price, which breach in the form of
repudiation, was a material breach of the contract. As a result of the
Plaintiff’s breach, the Defendant suffered damages in the amount of
R87 324.00 which constitutes the remainder of the purchase price,
which the plaintiff failed and refused to pay.
[4] This is untenable, the Defendant having admitted in its plea that the
Plaintiff was supposed to tender 50 % (R87 324.00) of the total
purchase price upfront for the manufacturing and installation of the
Sectional Steel Galvanized Tank (the Tank) and only then would the
outstanding balance become payable.
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EVIDENCE OF MR DONFACK
[5] Mr Donfack testified that he is the Managing Director of the Plaintiff,
VCED Maintenance Company since 2014. He met Mr Jordaan, the
Sales Manager , in the employ of the Defendant , Phoenix Tank
Company, when he was looking for the procurement of the Tank.
The Defendant agreed to manufacture the Tank for the Plaintiff on
condition that the Plaintiff pay 50% of the total purchase price to
enable the Defendant to purchase material for the manufacturing of
the Tank. The 50% deposit also covered the installation of the Tank.
The installation of the Tank would also be subject to approval by an
engineer. The payment of the balance of the purchase price would
become payable only after the installation of the Tank.
[6] The Defendant did invoice the Plaintiff and the latter paid the 50%
deposit of R87 324.00 in accordance with the invoice. The Plai ntiff
expected the Tank to be installed at the site in Rustenburg in two
months. Mr Jordaan would occasionally pass at the site and would
say that the Tank is being galvanized. He further testified that he
was under pressure of performing as the project was supposed to
be completed by 26 June 2018. He visited the Defendant’s office in
Brits and also sent several emails concerning undue delays
regarding the installation of the Tank but the Defendant failed to
perform part of his obligation. On 11 February 2019 the Defendant
sent the Plaintiff an email wherein it promise to refund the Plaintiff
the 50% deposit and based on that promised the Plaintiff went
ahead and ordered the Tank from another Company, ABECO, in a
short period of time and had to pay the full purchase price upfront .
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According to him, the Plaintiff would not have approached ABECO
but for the Defendant’s non-compliance with the conditions of the
contract. This non -compliance, according to Mr Donfack, had a
negative impact on the Plaintiff’s reputation in that it failed to
complete the project by over six months after the deadline, a delay
which tremendously impacted on the Plaintiff financially as the
Plaintiff was penalised thereby in accordance with the procurement
conditions of the project.
[7] In its Pleadings, Plaintiff categorised damages for breach of contract
into three viz, repayment of the deposit paid to the Defendant
towards the manufacturing and delivery of the Tank, additional
damages suffered as a result of the breach and future loss of profit.
1ST CLAIM: REPAYMENT OF THE DEPOSIT PAID TO THE
DEFENDANT
[8] The Plaintiff alleged that the Defendant breached the contract in that
it failed: -
[8.1] To timeously man ufacture and deliver the Tank as per the
terms of the contract,
[8.2] As a result of the breach, which breach was material, Plaintiff
proceeded to cancel the contract,
[8.3] Despite due and proper demand, the Defendant failed and/or
refused to comp ensate the Plaintiff the sum of R87 324.00
being the amount paid as the deposit for the Tank.
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[9] “Where one party to a contract, without lawful grounds, indicates to
the other party in words or conduct a deliberate and unequivocal
intention no longer to be bound by the contract, he is said to
“repudiate” the contract…. Where that happen s, 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….” This is the conventional exposition
of the operation of the doctrine of repudiation leading to rescission
with its emphasis on the guilty party’s acceptance… the test for
repudiation is not subjective but objective….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 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 cri terion for determining the
nature of the threatened breach”1
[10] “….in law, in the absence of an agreement to the contrary, a party to
the contract who exercises his right to cancel must convey his
decision to the mind of the other party and that cancellation does
1 Datacolor International (Pty) Ltd v Intermarket (Pty) Ltd (2/99) [2000] ZASCA 81(30 November 2000)
(Datacolor) at para [16]
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not take place until that happens …. since the election to cancel,
provided that it is unambiguous need not be explicit …”2
[11] The Plain tiff was appointed as a service provide r for the
implementation of a project at Boitekong Community Health Centre
(CHC Project) and the installation of the Tank formed part of the
project. The Plaintiff’s deadline in terms of the procurement contract
was 26 June 2028. The Plaintiff contracted the Defendant to
manufacture and install the Tank. As per agreement between the
parties, the Plaintiff would pay 50% deposit of the purchase price
upfront for the Defendant to purchase the material for the
manufacturing and installation of the Tank. The remaining 50%
balance of the purchase price would become due and payable once
the Tank has been installed and certificate of compliance issued by
the engineer.
[12] The Plaintiff paid the 50% deposit of R87 324.00 towards the
manufacturing and installation of the Tank and as part of the
fulfillment of its contractual obligation s. On the other hand, the
Defendant failed to fulfill its obligations towards the contract. The
deadline for the implementation of the project came and passed and
the Defendant, having admitted in its plea that the 50% deposit was
for the manufacturing and delivery of the Tank, remained in default
thereof.
2 Datacolour ibid at para 29
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[13] According to the evidence of the Plaintiff’s witness, Mr Donfack, he
visited the Defendant’s offices in Brit s in an attempt to get the
Defendant to perform in accordance with the contract but to no avail.
On 28 January 2019 the Plaintiff’s attorneys forwarded a letter of
demand per email to the Defendant for the repayment of the 50%
deposit stating “ we act herein on behalf of VCED Maintenance
Group Pty Ltd…we confirm that our client ordered a sectional steel
galvanized tank from you for which you required a 50% deposit to
be paid. You subsequently issued a tax invoice to our client on 20
March 2018, with tax invoice number 12 074, in the amount of
R87 324.00, which is 50% deposit payable in respect of the tank.
Our client proceeded to pay the aforementioned amount to you on
22 March 2018. Copies of the tax invoice, as well as proof of
payment is attached hereto for ease of reference. It is our client’s
instructions that despite various requests, you have failed and/or
neglected to deliver the tank. Therefore, we demand repayment of
R87 324.00 to our client within 7 days from the date hereof, failing
which we will be left with no other choice than to proceed with legal
action against you, in which case we will claim the capital amount,
together with interest calculated from 22 March 2018, as well as
legal costs…. We trust that the above drastic action will not be
necessary and that we will receive your urgent co-operation in this
matter.”
[14] Subsequent to the letter of demand several emails were forwarded
to the Defendant as a follow -up and on 11 February 2019 the
Defendant responded to the Plaintiff’s attorneys stating “we confirm
that we received your correspondence. We are willing to refund the
deposit paid by VCED Maintenance. We will forward our refund
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proposal soon. On 19 February 2019 the Plaintiff’s attorneys
requested the Defendant to forward the proposal for the payment as
promised. On 19 February 2019 the Defendant responded stating
“…. We will pay the outstanding amount by not later than 31 March
2019.” When no payment was forthcoming, the Plaintiff instituted
action against the Defendant on 21 November 2019.
[15] The trail of events in casu are uncomplicated. The Defendant failed
to fulfill its part of its contractual obligations, repudiated the contract
and the Plaintiff accordingly rescinded the contract and proceeded
to claim damages for the breach of contract.
[16] “The right of a party to a contract to cancel it o n account of
malperformance by the other party, in the absence of lex
commissoria depends on whether or not the breach, objectively
evaluated is so serious as to justify cancellation by the innocent
party”3
[17] “…The test whether the innocent party is entitled to cancel the
contract because of malperformance by the other, in the absence of
a lex commissoria, entails a value judgment by the Court. It is,
essentially, a balancing of competing interests – that of the innocent
party claiming rescission and that of the party who committed the
breach. The ultimate criterion must be one of treating both parties,
under the circumstance s, fairly, bearing in mind that rescission,
3 Singh v McCarthy Retail Ltd (t/a MacIntosh Motors) (429/98) [2000] ZASCA 41 (14 September 2000)
(Singh) at para [12]
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rather than specific performance or damages., is the more radical
remedy….”4
[18] The repudiating act per se constitute a breach, it is the violation of
a fundamental obligation to honour the agreement and the Plaintiff
elected instead to rescind the contract and claim damages.
[19] In the premises, the Defendant failed to perform part of its
obligations towards the fulfillment of the contract. The Defendant’s
malperformance was so serious as to go to the root of the contract
thus entitling the Plaintiff to claim damages for the breach of the
contract being the refund of R87 324.00 plus interest from the date
of demand being 28 January 2019.
2ND CLAIM: ADDITIONAL DAMAGES SUFFERED AS A RESULT OF
THE BREACH
[20] The Plaintiff alleged in respect of this claim that as a result of the
malperformance on the side of the Defendant, it had to purchase a
Tank for the sum of R404 96 9.63 from another company, ABECO
and accordingly suffered damages in the tune of R230 321.62 being
the difference between the purchase price of the Tank from ABECO
and that of the Defendant which was the sum of R174 648.00.
[21] The Plaintiff failed to quantify the said damages but from the glimpse
of the invoices provided by the two companies, the description of
the product (the tank) is not the same let alone other specifications
4 Singh ibid at para [13] the SCA quoting from Van der Merwe et all (Contract General Principles 1st ed
1993 at 255).
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which affects pricing such as the quality of the product et cet era
which are not apparent on the face of the invoices. In respect of the
Defendant’s invoice, the description of the Tank is “Sectional Steel
Tank Galvanized 4. 88m x 2.5m x 2.4m. Volume of 29 00 L itres,”
whilst the description of the Tank from ABECO is “1 only Galvanized
ABECO pressed Steel Tank Size 4.88m x 2.44m (or 4* 2*2 panels)
with standard cover, and no division. 1 only 10m High Galvanized
Structural Steel Tower with walkway with Landing Platform
Including: Safety file, includes Walk way and Landing platform,
1xVortex, Extra connections, 29kl Elevated Fire and Domestic, Civil
works and Pipe Works: No , by others, Delivery and Erection: yes,
by ABECO”
[22] The only real evidence entitling the Plaintiff to damages is the fact
that it incurred more expenses when purchasing the Tank from
ABECO as a result of the Defendant’s failure to deliver the lesser
expensive Tank as was originally planned. This cannot be sufficient
justification to claim damages against the Defendant in relation to
the quantification and/or proof of damages generally as, it is trite that
the innocent party’s damages would be in the sum necessary to
place it in the position financially in which it would have been had
there been proper performance of the contract.
[23] The Plaintiff chose to purchase the Tank at more than double the
purchase price to that of the Defe ndant and cannot, in the
circumstances, succeed in its 2 nd Claim against the Defendant for
the payment of damages as alleged as no causal link between the
loss suffered by the Plaintiff (i.e. the additional expenses which were
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incurred by the Plaintiff) and the breach by the Defendant has been
established.
3RD CLAIM: FUTURE LOSS OF PROFIT
[24] In this Claim the Plaintiff alleges damages for future loss of profit as
follows:
[24.1] That as a result of the Defendant’s breach of contract the
Plaintiff suffered an estimated loss of future profit in the
amount of R105 535.24 which is calculated according to the
CHC procurement contract in that the Defendant failed to
deliver the Tank as per the contract.
[24.2] The work for the CHC Project was divided into two sections.
Section one had to be completed by 12 Decem ber 2017 and
section two had to be completed by 28 June 2018. Should the
applicable section not be completed on the specified date, the
Plaintiff would be penalised by 1.5 cent per R100 of the sub -
contract value of R3 517 841.36 which amounts to
R52 767.60 per section. Therefore, both sections were
penalised for R105 535.25.
[25] The procurement contract which was only signed by the Plaintiff on
02 March 2018 was a sub -contract for the Plaintiff to procure
services for the “take over and completion of mechanical
installations” under the main contract “Repairs and Renovation
Works at Boitekong CHC” (the CHC Project) under the contractor
GS Fencing and Construction.
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[26] The intended dates of completion of the sub -contract were
categorised into two sections. Section one had to be completed on
12 December 2017 whilst the completion date for section two was
27 June 2017 and the practical date of completion in terms of t he
principal Agreement was 27 June 2018. The penalty for non -
compliance with completion dates was 1,5 cents per R100 of the
value of the sub-contract of R3 517 841.86.
[27] It is not clear on the face of the procurement contract what the value
of each section was, however, what is critical is that although the
Tank is not been categorically specified, it would seem according to
the Plaintiff’s evidence that the installation of the Tank formed part
of the delivery of the sub-contract. It is equally not clear as to which
of the sections the delivery and therefore the completion date of the
Tank formed part.
[28] What is more difficult about the Plaintiff’s claim is the formula to
quantify the alleged damages. The Plaintiff alleges that since both
sections which forms the sub-contract as whole were not completed
in time and therefore penalised, the amount subtracted from the
value of the contract equals damages incurred as result a the
Defendant’s breach of contract to deliver the Tank and that those
damages should under the circumstances be quantified as future
loss of profit incurred but for the Defendant’s breach of contract.
[29] I cannot fathom this line of reasoning in relation to proof of damages
for loss incurred and/or future loss of profit. It is not clear from the
procurement contract what services formed part of “Mechanical
installations” apart from the Plaintiff’s testimony that the installation
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of the Tank formed part of the procurement contract. But the end of
it all is that the Defendant cannot for whatever reasons bear the
responsibility for the penalties incurred as a result of the late
completion of the services that were supposed to have been
delivered by the Plaintiff under the sub-contract. This, in my view, is
untenable.
[30] Where a party asserts that a breach of contract has caused it to lose
profit it would otherwise have made, the first question to ask is
whether or not on the particular facts that type of loss is recoverable
as a matter of law. Lost profits must be reasonably certain. In most
cases the goal of contractual damages is restorative. In other words,
the aggrieved party should be placed back in the position it would
have been had the contract not been breached. The restorative goal
requires a recovery for the loss of any consequential damages that
stem from the breach. Ultimately any argument addressing the issue
of damages must justify the calculus it advocates. Therefore, an
articulation of the underlying presupposition concerning the purpose
of awarding contractual damages is demanded.
[31] In casu, the alleged future loss of profit is not projected based on
the breach of contract between the parties but rather emanates from
the procurement contract between the Plaintiff and a third party. In
the circumstances, the Plaintiff failed to es tablish any casual
connection between the breach of contract and damages it allegedly
suffered. I am therefore not satisfied that the Plaintiff succeeded in
proving the damages allegedly suffered against the Defendant
under this Claim.
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COSTS
[32] The general rule in matters of costs is that the successful party is
entitled to be awarded costs and this rule should not be departed
from except where there are good grounds for doing so. The Plaintiff
has been successful in respect of the 1st Claim of breach of contract
against the Defendant and unsuccessful in respect of the other two
claims. The Plaintiff has requested for cost of suit on an attorney -
and- client scale but I am of the view that costs on an party and party
scale would be reasonable under circumstances.
ORDER
[33] I make the following order:
[33.1] The Defendant is ordered to pay the Plaintiff the sum of
R87 324.00 plus interest at the prescribed rate effective from
the date of demand being 28 January 2019 in respect of the
1st Claim.
[33.2] The Plaintiff’s 2nd and 3rd Claims are hereby dismissed.
[33.3] The Defendant is ordered to pay the Plaintiff’s costs on a
party and party scale.
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___________________________
O.Y DIBETSO-BODIBE
ACTING JUDGE OF THE HIGH COURT OF
SOUTH AFRICA NORTH-WEST DIVISION, MAHIKENG
Delivered: This judgment is prepared and authored by the Judge whose
name is reflected and is handed down electronically by circulation to the
Parties or their legal representatives by email and by release to SAFLII
DATE OF HEARING : 30 AUGUST 2023
DATE OF JUDGMENT : 14 JANUARY 2025
APPEARANCES
FOR THE PLAINTIFF : Adv JH Lerm
INSTRUCTED BY : Steenkamp Van Niekerk Attorneys
C/O Maree & Maree Attorneys
FOR THE DEFENDANT : No appearance