IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
JUDGMENT
Not Reportable
Appeal case no: A77/2025
Court a quo case no: 7722/2020
In the matter between:
GRIMMS CC
t/a ATLANTIC COMMERCIAL DIESEL SERVICES Appellant
and
STOCKLOG CC Respondent
Coram: Nuku J et Miller AJ
Heard: 29 August 2025
Delivered: 15 December 2025
ORDER
1. Paragraph 1 of the order in the court a quo is replaced with the following:
“1. The defendant is liable to pay the plaintiff the sum of
R200 081.41.”
2. The appellant is liable for 75% of the costs of this appeal, such costs to
include the costs of counsel on scale A.
JUDGMENT
_____________________________________________________________
Miller AJ (Nuku J concurring):
Introduction
[1] The respondent is a supplier of maritime parts. The appellant was the
respondent’s customer.
[2] The respondent, as plaintiff in the court a quo, instituted an action
against the appellant, as defendant, for payment of R457 945.60 plus interest
at 2% per month a tempore morae until the date of payment.
[3] The respondent’s claim was based on an agreement that the
respondent alleges was concluded between it and the appellant on 8
November 2019 (“the agreement”).
[4] The agreement was for the purchase of two DN40 angle valves (and
associated export license) and other marine parts (“the other marine parts”) for
the total purchase price of R1 017 656.89 (inclusive of VAT).
[5] Clause 5.8 of the agreement provided that a “… 45% cancellation fee
will be imposed once the order is confirmed” (“the penalty clause”).
[6] The appellant denied the agreement. The respondent claimed that this
constituted a repudiation of the agreement, cancelled it and claimed 45% of
the total purchase price in terms of the penalty clause.
[7] In the court a quo the appellant denied the agreement and, in the
alternative, claimed that the penalty fell to be reduced in terms of the
Conventional Penalties Act, 15 of 1962 (“the CPA”) on the basis that it was out
of proportion to the prejudice suffered by the respondent.
[8] The court a quo granted judgment in favour of the respondent. In
essence, the court a quo upheld the agreement; found that a penalty of 45%
of the purchase price in respect of the two DN40 valves (and export license)
was not out of proportion and therefore did not fall to be reduced in terms of
the CPA; and that the penalty of 45% of the purchase price in respect of the
other marine parts fell to be reduced in terms of the CPA to an amount equal
to “…work done as given in evidence but not on the purchase price”.
[9] The court a quo did not quantify the penalty in respect of the other
marine parts.
[10] The appellant now appeals against the whole of the judgment of the
court a quo on two main grounds: first, that the court a quo erred in finding that
the parties concluded the agreement and second, in the alternative, that court
a quo erred in failing to reduce the penalty in terms of the CPA.
[11] The appeal was out of time. The appellant applied for condonation. The
application was not opposed. There was good cause for the delay in noting the
appeal. We condoned the late filing of the appeal.
[12] We deal with each of the grounds of appeal in turn.
The agreement
The facts
[13] The relevant facts pertaining to the agreement upon which the
respondent relies for its cause of action are simply stated. They are as follows:
13.1 Under cover of an email of 7 November 2019, the respondent
sent the appellant four quotations and the respondent’s terms and
conditions.
13.2 In an email of 7 November 2019, the appellant accepted one of
the abovementioned quotations and told the respondent that the
appellant would get back to the respondent by the end of the day
regarding the remaining three quotations.
13.3 In an email of 8 November 2019, the appellant, represented this
time by Mr Dillan Carelse (“Mr Carelse”), accepted the three remaining
quotations.
13.4 Under cover of an email of 14 November 2019, the respondent
sent the appellant its tax invoices and order confirmations.
13.5 The abovementioned exchange of emails, including the
quotations and the acceptance thereof, contain all the essential terms
of the parties’ agreement.
13.6 In an email of 6 December 2019, the respondent dema nded
payment from the appellant.
13.7 In a letter attached to an email of 9 December 2019, the appellant
asked the respondent to revisit the amounts in its quotations.
13.8 In an email of 13 January 2020, the respondent told the appellant
that it could not give the appellant better pricing. The exchange of emails
on 9 December 2019 and 13 January 2020 regarding the price has no
legal relevance given that the agreement was concluded at an earlier
date.
13.9 The appellant subsequently repudiated the agreement and the
respondent cancelled it for such repudiation.
The pleadings
[14] The respondent pleaded , inter alia, that Mr Carelse represented the
appellant in concluding the agreement. This necessarily implies that Mr
Carelse had the necessary authority to conclude the agreement on the
appellant’s behalf.
[15] The appellant denied the agreement on the basis that Mr Carelse
lacked the necessary authority to conclude the agreement on behalf of th e
appellant and that it did not intend to conclude the agreement.
[16] In its replication, the respondent pleaded that the appellant was
estopped from denying Mr Car else’s authority to conclude the agreement on
the appellant’s behalf.
Did the agreement come into existence?
[17] It is clear from the contents of the emails referred to above that the
appellant evidenced an outward intention to conclude the agreement.
[18] In cases where a contracting party subsequently denies that it had the
requisite intention to conclude a contract, the test in Sonap Petroleum must be
applied to determine whether a contract came into existence.1
[19] As the SCA held, the decisive question i s this: “ did the party whose
actual intention did not conform to the common intention expressed , lead the
other party, as a reasonable man, to believe that his declared intention
represented his actual intention.”2
[20] The SCA also held that to answer this question, a three-fold enquiry is
usually necessary , namely, first, was there a misrepresentation as to one
party’s intention; secondly, who made that misrepresentation; and thirdly, was
the other party misled thereby?3
[21] The appellant’s evidence at t he trial was that it did not intend to
conclude the agreement. It follows that on the appellant’s version, it
misrepresented its intention to conclude the agreement when Mr Carelse
accepted the quotations. This answers the first two questions in
abovementioned enquiry.
1 Sonap Petroleum (SA) Pty Ltd (formerly known as Sonarep (SA) (Pty) Ltd) v Pappadogianis 1992
(3) SA 234 (A).
2 At p239I.
3 At p239J-240B.
[22] Given the unambiguous acceptance of the quotations by Mr Carelse,
there is no doubt that the respondent, as a reasonable person, was misled by
the appellant into thinking that the appellant was accepting the quotations and
thereby concluding the agreement.
[23] The application of the abovementioned test, which constitutes the
reasonable reliance theory for upholding a contract , is a sufficient and valid
basis to uphold the agreement.
[24] It is common cause that Mr Carelse previously acc epted quotations
from the respondent on behalf of the appellant. As per the signature to his
email, Mr Carelse is described as the “ Administrative Clerk: Order
Administration to Marine Spares Division”. It was not unreasonable for the
respondent to assume, particularly given the history of its dealings with Mr
Carelse, that he had the necessary authority to bind the appellant.
Furthermore, exchange of emails regarding the agreement were copied to the
principals of the appellant. They did not , at the time, raise any concern about
the conclusion of the agreement or ask the respondent’s representatives to
ignore Mr Carelse’s acceptance of the quotations as he lacked the necessary
authority to conclude the agreement.
[25] In our view, these facts evidence that the appellant held out that Mr
Carelse had the necessary authority to conclude the agreement . As a result,
Mr Carelse had the apparent or ostensible authority to conclude the agreement
on behalf of the appellant.
[26] Since Makate, apparent or ostensible authority is a form of implied
actual authority rather than what used to be known as agency by estoppel.4
[27] Two conclusions flow from what we have set out above.
4 Makate v Vodacom Ltd 2016 (4) SA 121 (CC) at para 45.
[28] First, the respondent has discharged its onus of establishing that the
agreement came into existence based upon its reasonable reliance of the
outward expression of the appellant’s contractual intention and Mr Carelse’s
actual authority to represent the appellant in concluding the agreement.
[29] The court a quo was therefore correct to conclude that the agreement
came into existence.
[30] It follows that the respondent was entitled to rely on the penalty clause.
[31] Second, the issues on the pleadings between the parties and the
submissions to this court relating to estoppel are not legally relevant to
determining the question whether the respondent was entitle d to rely on the
agreement and therefore the penalty clause.
[32] In the circumstances, the first ground of appeal must fail.
The CPA
[33] The appellant’s alternate ground of appeal was that the court a quo
erred in failing to reduce the penalty in terms of section 3 of the CPA on the
basis that it was out of proportion to the prejudice suffered by the respondent.
[34] After setting out the governing legal principles, we deal separately with
the two DN40 val ves (and associated export license) and the other marine
parts.
The legal principles
[35] The debtor (i.e. the appellant) bears the onus of proving that the penalty
is disproportionate to the prejudice suffered and the extent thereof.5
5 Steinberg v Lazard 2006 (5) SA 42 (SCA) at para 7.
[36] If the debtor succeeds in proving prima facie that the penalty ought to
be reduced, there is an evidentiary burden on the creditor (i.e. the respondent)
to rebut if it is possible for him to do so.6
[37] In order for a court to exercise its discretion to reduce a penalty it is not
necessary for the penalty to be outrageously excessive in relation to the
prejudice. What is contemplated “… is that the penalty is to be reduced if it has
no relation to the prejudice, if it is markedly, not infinite simally, beyond the
prejudice, if the excess is such that it would be unfair to the debtor not to reduce
the penalty; but otherwise if the amount of the penalty approximates that of the
prejudice, the penalty should be awarded.”7
[38] Whilst in most cases the monetary aspect will play an important rol e,
indeed the paramount role in deciding whether to reduce a penalty, l egally
cognisable prejudice in terms of section 3 of the CPA is wider than pecuniary
loss or damage. 8 The court will take into account everything that can
reasonably be considered to be harm or hurt, or be calculated to harm or hurt
a creditor or his prop erty, his person, his activities, his convenience or in any
way interferes with his rightful interests as a result of the debtor’s act or
omission.9
The DN40 valves (and associated export license)
[39] As stated above, the court a quo, in the exercise of its discretion, upheld
the penalty provision in so far as it applied to the two DN40 values.
[40] The total purchase price for the two DN40 values (and associated
export license) as per the agreement was R511 319.16 (R444 625.36 + VAT
of R66 693.80).
6 Smit v Bester 1977 (4) SA 937 (A) at 942D-F.
7 Western Credit Bank v Kajee 1967 (4) SA 386 (N) at 391B-D
8 Miele et Cie GmbH & Co v Euro Electrical (Pty) Ltd 1988 (2) SA 583 (A) at 587I.
9 Van Staden v Central South African Lands and Mines 1969 (4) SA 349 (W) at 352G-353A.
[41] The court a quo therefore found (albeit that it does not expressly state
as much) the appellant liable to pay the respondent the sum of R230 093.62 ,
being a penalty of 45% of the R511 319.16.
[42] The precise reasons for the court a quo’s decision are , unfortunately,
not clearly set out.
[43] Counsel for the appellant conceded in argument before us that the
following factors, based on the evidence led at the trial, are relevant to the
question whether the penalty fell to be reduced in terms of section 3 of the
CPA:
43.1 The DN40 valves were purchased from overseas and specifically
made for vessels in South Africa. As there is a limited market for such
goods, there is a risk that the valves may not be sold in future.
43.2 In any event, the respondent will now have to hold the values in
stock. This will negatively impact on the respondent’s cash flow. They
will have to be warehoused, which comes at a cost to the respondent.
43.3 The angle val ves have a shelf -life because the rubber
components do not last for longer than 5 years.
43.4 The appellant has to incur additional costs to service and
maintain the angle valves.
43.4 Given that the appellant has previously cancelled an order from
the respondent, the penalty served the legitimate purpose of deterring
the appellant from doing so with impunity in respect of the agreement.
[44] Subject to the qualification referred to below, these factors justify the
court a quo’s decision to refuse to reduce the penalty in terms of its equitable
discretion to do so in terms of section 3 of the CPA.
[45] The qualification is this. Whilst the respondent was clearly required to
levy VAT on the supply of the DN40 val ves and export license in terms of the
agreement, the receipt of the penalty from the appellant does not involve the
“supply” by the respondent of any goods or services in terms of section 7(1) of
the Value-Added Tax Act, 89 of 1991.
[46] If the respondent had received the purchase price in terms of the
agreement, it would have had to account to SARS for the “ output tax” of
R66 693.80. As there is no “ supply” in term of section 7(1) in respect of the
receipt of the penalty, the respondent would not need to account to SARS for
the R30 012.21 (being 45% of R66 693.80).
[47] It follows that R30 012.21 of the penalty bears no relation to the
prejudice the respondent has suffered as a result of the appellant’s repudiation
of the agreement. It also follows that the court a quo ought to have reduced
the penalty by the sum of R30 012.21 in terms of section 3 of the CPA.
[48] In the circumstances, the appeal succeeds and the penalty in respect
of DN40 values (and export license relating thereto) falls to be reduced by
R30 012.21 to R200 081.41.
Other marine parts
[49] As stated above, the court a quo reduced the penalty in respect of the
other marine parts to the costs of the work done by the respondent to date in
respect of these other marine parts. The court a quo did not quantify the
reduction in the penalty.
[50] The import of the court a quo ’s finding was that the appellant had
discharged its onus of establishing that the penalty fell to be reduced in terms
of section 3 of the CPA.
[51] The evidential burden then fell on the respondent to establish the facts
necessary to determine the extent of the work it had expended on the other
marine parts. The respondent did not do so.
[52] As the respondent did not cross-appeal, it accepted this finding.
[53] At the hearing of this appeal, the respondent’s counsel asked this court
to find that the appropriate penalty in respect of the other marine parts is 10%
of the purchase price thereof. There is no precise basis put up for this
reduction.
[54] We asked counsel for further submissions on whether this court had the
power to make such a finding in the absence of a cross -appeal by the
respondent.
[55] There is clear authority that a respondent seeking a variation of an order
on appeal is required to c ross-appeal (save perhaps in exceptional
circumstances where there is no prejudice to the appellant).10
[56] In substance, finding that the penalty should be reduced to 10% of the
purchase price appears to amount to a variation of the order granted by the
court a quo.
[57] It is not, however, necessary for us to determine this issue as there is
no cogent evidence on the record to support a finding that it is appropriate to
reduce the penalty to 10% of the purchase price of the other marine parts in
terms of section 3 of the CPA.
10 Gent v Du Plessis 2020 JDR 2865 (SCA) at para 16.
[58] In the alternative to a finding that the penalty in respect of the other
marine parts falls to be reduced to 10% of the purchase price, the respondent
requested us to remit the case back to the court a quo for clarification of her
order.
[59] Whilst we have the power to remit the case back to the court a quo in
terms of section 19(c) of the Superior Courts Act, 10 of 2013, our view is that
it is not in the interests of justice to do so.
[60] This is for two reasons.
[61] First, it is highly unlikely that the respondent will be able to lead any
cogent evidence of unrecoverable direct costs that it has spent on other marine
parts that enables a court to meaningfully assess the appropriate reduction in
the penalty.
[62] Second, doing so will take up scarce judicial resources and increase
costs that are out of proportion to the quantum of a penalty of 10% of the
purchase price of the other marine parts, which is in the region of R50 000.00.
[63] In the absence of any cogent basis to determine the extent of the
reduction in the penalty, we are left with little choice but to reduce the penalty
to zero.
Interest
[64] In his heads of argument, the appellant ’s counsel appears to suggest
that interest at the 2% per month as per the agreement forms part of the
penalty.
[65] This is not correct. The agreement contains an independent clause that
provides that the appellant was liable for interest at 2% per month from due
date until date of final payment. This applies to all amounts that would
otherwise have been due in terms of the agreement. It is not limited to the
payment of the penalty.
[66] The obligation to pay interest on overdue payments is not a “penalty” in
terms of section 1 of the CPA.
[67] We therefore have no basis to interfere with the order of the court a quo
regarding interest. On its proper construction, paragraph 2 of the order in the
court a quo obviously applies to the amount set out in paragraph 1 thereof (as
amended by this judgment).
Conclusion, costs and order
[68] For the reasons set out above, we have come to the following
conclusions:
68.1 The first ground of appeal fails.
68.2 The second ground of appeal succeeds to the extent that the
penalty in respect of the two DN40 valves (and export license) falls to
be reduced by an amount of R30 012.21 to R200 081.41 and the
penalty in respect of the other marine parts falls to be reduced to zero.
[69] The appeal has failed in part and has succeeded in part. In monetary
terms, the appellant’s success is limited in the context of the quantum of the
respondent’s overall claim. In the circumstances, our view is that it is
appropriate for the appellant to be liable for 75% of the costs of this appeal.
[70] In the circumstances, we make the following Order:
70.1 Paragraph 1 of the order in the court a quo is replaced with the
following:
“1. The defendant is liable to pay the plaintiff the sum of
R200 081.41.”
70.2 The appellant is liable for 75% of the costs of this appeal, such
costs to include the costs of counsel on scale A.
_____________________
MILLER AJ
Acting Judge of the High Court, Cape Town
APPEARANCES
Counsel for the Appellant: Adv. R de Wet
Instructed by: Dunsters Attorneys Inc.
Counsel for the Repondent: Adv. B Hansen
Instructed by: West & Roussouw Attorneys