About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
1995
>>
[1995] ZASCA 3
|
|
Unit Inspection Co of SA (Pty) Ltd. v Hall Longmore & Co (Pty) Ltd. (191/93) [1995] ZASCA 3; 1995 (2) SA 795 (AD); (23 February 1995)
Case no: 191/93
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between:
THE UNIT INSPECTION CO OF SA (PTYl LIMITED
Appellant
and
HALL LONGMORE & CO (Pty) LIMITED Respondent
Coram:
JOUBERT,
SMALBERGER, NESTADT, F H GROSSKOPF et HOWIE JJA
Heard:
21 November 1994
Delivered:
23 February 1995
2
J U D G M E N T F H GROSSKOPF JA:
Pursuant to a contract concluded
in July 1989 the appellant agreed to provide certain technical inspection
services and quality control
to the respondent at agreed rates. These services
were required by the respondent in connection with its installation of
underground
steel piping at Mossel Bay. It is common cause that the appellant's
rates were subject to escalation as from 12 July 1989, The main
dispute between
the parties is whether May or July 1989 should have been used as the so-called
base date in calculating the escalation.
The parties agreed at a pre-trial conference that their respective
calculations of escalation were arithmetically correct, and that
if May 1989 was
the base date, as the appellant maintained, it would be entitled to judgment in
the sum of R142 144,53. If, on the
other hand, the respondent's contention was
correct, and July 1989 had to be used as the base date, the appellant would only
be entitled
to judgment in the
3
sum of R40 413,03. The significant difference between these two amounts was
due to the fact that between the months of May and July
1989 there had been a
substantial increase in the relevant indices used in calculating the
escalation.
The respondent in its plea unconditionally tendered to pay the appellant the
sum of R40 413,03, together with its party and party
costs to date of tender,
but the appellant did not accept this tender.
The matter was heard by Hartzenberg J in the Witwatersrand Local Division.
The learned Judge found that the base date was July 1989
and accordingly granted
judgment for the appellant in the sum of R40 413,03, (being the amount
tendered), together with costs up
to 11 March 1992 (being the date of the
respondent's tender). The appellant was ordered to pay the respondent's costs
incurred subsequent
to 11 March 1992. Leave to appeal was granted by the
Court
Two aspects were raised on appeal:
4
1.
What was the agreed base
date?
2.
Was the respondent's tender
sufficient to avoid further costs?
The terms of the
agreement concluded between the parties can be gathered primarily from
contemporaneous documents, while an alleged
subsequent variation of the
agreement depends largely on the contents of two letters. I shall consider some
of these documents.
On 17 April 1989, and in response to an invitation by the respondent, the
appellant submitted a written quotation to provide quality
control and other
technical services to the respondent in respect of its Mossgas onshore terminal
contract at Mossel Bay. Particulars
of the technical services, as well as
details of the respondent's quoted rates, were set out in a "schedule of rates".
The rates
made provision for radiographers at R2 475 per 45 hour week, magnetic
particle inspectors at R2 250 per 45 hour week, specified equipment
at a fixed
rate per week, and consumables at a price per unit. The "schedule of rates" also
contained certain "tender qualifications".
Paragraph 5.7 of these
5
qualifications provided for escalation in the following terms:
"5.7 Our quotation has been based on our quoted prices being subject to the
agreed Mossgas escalation agreement according to the SEIFSA
escalation index,
with the commencement being our quotation date."
(Emphasis supplied,)
The appellant's quotation of 17 April 1989 was not accepted, and the
appellant submitted a similar though not identical quotation
to the respondent
on 26 May 1989. The "schedule of rates" now also provided for quality control
inspectors and non-destructive testing
technicians at R2 925,00 per 45 hour
week. Paragraph 6.7 of the 26 May 1989 "tender qualifications" provided for
escalation in exactly
the same terms as paragraph 5.7 quoted above.
The respondent did not accept the appellant's quotation of 26 May 1989
either, but Mr Pennock of the appellant and Mr Jordi of the
respondent met on
site at Mossel Bay on 11 July 1989. They had a further discussion over the
telephone on 12 July 1989 during which
6
Pennock confirmed that their tender was still valid. Pennock further agreed
to certain minor changes, and consented to Jordi's proposal
that the date 12
July 1989 be inserted in the escalation clause where it previously referred to
"our quotation date". The appellant
then
resubmitted its amended quotation to the respondent on 13 July 1989 "in
line with our conversation and agreements of the 12 July 1989". With
the exception of one small item the appellant's quoted rates remained the
same as before, but the "tender qualifications" were amended as a result
of the agreement reached during the telephone discussion. The escalation
clause became paragraph 6.6 and was altered to read as follows:
"Our quotation has been based on our quoted prices being subject to the
agreed Mossgas escalation agreement according to the SEIFSA
escalation index,
with the commencement being the 12 July 1989
." (Emphasis supplied.)
It is common cause that the appellant commenced providing its technical
services to the respondent in terms of their contract on about
7
13 July 1989.
The appellant requested the respondent on 26 July 1989
to
provide them with an official order number. The
respondent complied
with the request and issued purchase order no C 902-61
which was
unfortunately undated, but it must have been submitted to the
appellant
shortly after 26 July 1989. It contained the following as one of its
provisions:
"SEIFSA escalation will apply as from 12.7.89. Escalation index to be
agreed."
Up to that stage the parties had made no
mention of any particular "base date" in their discussions or in the
correspondence. According
to Jordi's evidence there was no need for the parties
to agree on a base date as the base date and the commencement date were the
same
in this case, ie 12 July 1989. Pennock did not testify at the trial, and there
was no evidence on behalf of the appellant to
controvert Jordi's evidence
regarding their telephone discussion on 12 July 1989, or to
8
suggest that the parties had agreed or would still agree on some
earlier
base date.
The Steel and Engineering Industries Federation of
South
Africa ("SEIFSA") had issued certain "SEIFSA
Formula Principles"
which were placed before the court a quo. In the section dealing with
"Escalation Dates" the document refers to a certain " Event 2" which is
described as "submission of tender". The date of submission of tender
is indeed the "quotation date". We know that the parties agreed that this
date was 12 July 1989. The "SEIFSA Formula Principles" further
provide:
"In this connection it should be understood that a contract is formed when an
offer is accepted, acceptance whatever its form starts
the contract period and
Event 2 above [ie submission of tender] starts the escalation period
because
the price tendered will have been based on costs known at the date of submission
of tender
." (Emphasis supplied.)
There was no direct evidence on behalf of the appellant
that
9
its quotation of July 1989 was not based on "costs known at the date of
submission of tender", or if it was not so based, why the
rates were not updated
when the quotation was resubmitted on 13 July 1989. In those circumstances, and
in the absence of any agreement
to the contrary, I fail to see why a base date
earlier in time than the date of submission of tender should be used in
calculating
the escalation. To use any earlier date would mean that the SEIFSA
indices of such earlier date would be used in calculating the
escalation, which
in turn would lead to an increased escalation and unfair adjustment of the
contract price.
If Pennock had been concerned about an increase in the costs since the
appellant's first quotation of 17 April 1989, one would have
expected him either
to have updated his quoted rates, or to have insisted on an earlier base date
when he had the telephone conversation
with Jordi on 12 July 1989. We know that
the quoted rates were not updated, and there is no evidence that Jordi agreed to
an earlier
base date at the time. The only date which was mentioned, was 12 July
1989.
10
In view of all the circumstances it seems to me that the parties agreed,
albeit tacitly, that 12 July 1989 would be the so-called
base date to be used in
calculating the escalation.
The next question is whether the respondent agreed to a variation of the
contract in this respect some eleven months later. On 18
June 1990 the
appellant's managing director, Mr MacDonald, signed a letter addressed to the
respondent. It is common cause that the
letter was drafted by Mr Pillay, who
joined the appellant as its accountant in July 1989. MacDonald did not testify;
Pillay did.
Although Pillay did not take part in the discussions that led up to
the contract in July 1989, he testified that he was the one who
considered the
base date to be May
1989. And that was the base date he put forward in his letter of 18 June
1990, which reads as follows:
" YOUR ORDER NO. C 902-61
We refer to recent communications with regard to escalation on
the contract between our two companies and in particular
11
to the above order concerning the subject of escalation.
We have used the following SEIFSA escalation formula for the majority of our
Mossgas contracts and would recommend that this formula
be used for the work
being conducted at Mossel Bay."
The letter then
proceeds to set out details of the proposed formula, including the
following:
" 'Base Date' = May 1989 'Commencement Date' = July 1989".
The letter concludes:
"We shall be grateful if you will kindly confirm or propose some other
escalation formula in order that we can firm up
on
this aspect of the order."
It should be observed that the respondent was not asked to confirm Pillay's
"base date", or to propose another.
Jordi's reply dated 25 July 1990 was brief, and reads as follows:
12
"RE: ORDER NO C
902-61
We refer to your letter 18th June 1990 and would accept
SEIFSA escalation as follows:
Fixed Portion 25%
Labour Portion 75%
Labour Index Seifsa Table C-l Statutory Labour
Cost."
Jordi testified that he never agreed that the
base date should be May 1989 and that he initially said so in his draft of this
letter,
but later decided to omit it. This is borne out by the large gap in the
body of the letter between the last sentence and the name
of the respondent at
the end of the letter. According to Jordi the only aspect which stood over after
the respondent had placed its
order in July 1989 was agreement on the SEIFSA
indices to be used.
The appellant emphasized the fact that Jordi in his letter of 25 July 1990
failed to record his disagreement with Pillay's proposal
regarding a new base
date. Jordi's reasons for failing to mention this aspect may not be all that
satisfactory, but it does not follow
that his
13
silence warrants the inference which the appellant seeks to draw, ie
that
Jordi agreed to a variation of an important term of their agreement
of
July 1989. In considering whether such inference is reasonable
and
justified it should be borne in mind that it is highly unlikely that
the
respondent would have agreed to a variation of the base date which
would obviously have resulted in a substantial increase in escalation. I
find it equally unlikely that the appellant could have believed that mere
silence on the part of the respondent signified unqualified assent to a
term which would undoubtedly have been to the latter's disadvantage.
The appellant relies on the well-known dictum in
Smith
v
Hughes
(1871) LR 6 QB 597
at 607 in support of its argument:
"If, whatever a man's real intention may be, he so conducts himself that a
reasonable man would believe that he was assenting to the
terms proposed by the
other party, and that other party upon that belief enters into the contract with
him, the man thus conducting
himself would be equally bound as if he had
intended to agree to the other party's terms."
14
In applying this so-called doctrine of "quasi-mutual assent" Greenberg
J
observed as follows in the case of
Van Ryn Wine and Spirit Co. v
Chandos Bar
1928 TPD 417
at 423-424:
"It is for the Court in each case to have regard to all the circumstances and to
decide whether the person sought to be bound has
rendered himself liable by his
unreasonable conduct. And I think that in order to hold him liable on the
contract, the inference
that he was assenting to the terms proposed by the other
party must not only be reasonable, but must also be a necessary inference.
If
there are a number of reasonable inferences which may be drawn, including one of
assent, then the hypothetical reasonable man
is not entitled to select the
inference of assent and to disregard the
others."
(See also Christie
The Law of Contract
in South Africa
2nd ed 14-16,
23-28.)
In my view this is not a case where a reasonable man would have believed that
the respondent, by his mere silence, was assenting to
the drastic variation
which the appellant had proposed in his letter of 18
15
June 1990. Silence does not necessarily mean acceptance.
There are cases where a party's failure to reply to a
letter,
and therefore his silence, may be taken to constitute an admission by
him
of the truth of an assertion contained in such letter. (See
McWilliams
v First Consolidated Holdings (Pty) Ltd
1982(2) SA
1(A) at 10E-H;
and see also
Benefit Cycle Works v Atmore
1927 TPD 524
at 530-1;
Hamilton v Van Zyl
1983(4) SA 379(E) at 388E-H; Hoffmann
and
Zeffertt
The South African Law of Evidence
4th ed
180-1.) But this
is not such a case. When Pillay wrote his letter of 18 June
1990 he
never asserted that it was a term of the agreement concluded between
the
parties that May 1989 would be the base date. At best for the
appellant
Pillay recommended a formula in his letter of 18 June 1990,
proposing
that the base date should be May 1989. This is how Pillay himself
later
explained his letter of 18 June 1990 in his subsequent letter of 4
April
1991. The appellant in its particulars of claim in fact described the
letter
of 18 June 1990 as an offer. Inasmuch as the appellant's letter of
18
16
June 1990 did not contain any statement that May 1989 was the agreed base
date, the respondent's silence could hardly have been interpreted
as an
acknowledgement by the respondent that May 1989 was indeed the agreed base
date.
In my judgment the appellant has failed to show that there had been any
variation of the July 1989 agreement in terms whereof May
1989, and not July
1989, was to be used as the base date in calculating escalation. The appeal on
the first aspect must therefore
fail.
With regard to the second aspect the
appellant submitted that the Court a quo erred in ordering the appellant to pay
the respondent's
costs from date of tender instead of allowing the appellant its
full costs. The appellant's contention was that the respondent's
tender was not
a proper tender and that it was accordingly ineffective to avoid an order for
costs.
The respondent's tender was pleaded in the following terms in paragraph 12.5
of its plea:
17
"As to the balance of R40 413,03 the defendant unconditionally tenders to pay
the said sum to the plaintiff together with the plaintiff's
party and party
costs to date of tender."
This was an unconditional
tender by the respondent to pay the appellant a specified sum of money together
with costs to date of tender.
It was not suggested that the respondent was not
able to pay forthwith on acceptance.
The main submission on behalf of the appellant was that the tender was not an
"offer to settle" as provided for in Rule 34 of the
Rules of the Supreme Court,
and that the Court a quo should accordingly not have had any regard thereto.
Whilst the offer was not
in terms of Rule 34, I cannot agree that it had no
effect. An offer to settle need not be made in terms of the rule, and if
otherwise
sufficient, it will protect a defendant from further costs. (Cf Harms
Civil Procedure in the Supreme Court
P at 435; Erasmus
Superior Court
Practice
Bl-239.) It was pointed out by Trollip J in
Foord v Lake and
Others. NN O
18
1968(4) SA 395(W) at 398 F-H:
"As no money was paid into Court in the present case, the
Rule [Rule 34]
clearly had no application to the defendants'
offer of compromise. Mr Mostert
contended, however, that
the Rule provided the only way in which a valid
offer of
compromise could be made in a money claim. I do not
agree. The
procedure therein prescribed is obviously the
usual and most effective one,
but the Rule does not purport
to be exhaustive, it does not expressly or
impliedly exclude
other forms of offer of compromise being made and
relied
upon without any payment into Court. After all, the
question of
costs is also an issue, and can be an important
issue, in an action, in
respect of which the Court has to
exercise its discretion; any fact that has
a bearing on that
discretion is, therefore, relevant, admissible and can
be
relied upon; and thus any offer of compromise, whatever its
form, made
in order to secure complete or partial immunity
from costs, would obviously
fall into that category "
Rule 34 was substantially
amended in 1987 and the practice of actual payment into Court was abolished.
(See Harms P1 at 435; Erasmus
B1-239.)
In
Odendaal v Du Plessis
1918 AD 470
this Court
19
considered the Roman-Dutch authorities and concluded that our practice
is
based rather upon that of the Courts of Holland than of England.
Innes CJ
observed as follows at 477:
"The authorities then come to this, that though the strict rule of Dutch
practice contemplated that a debtor should protect himself
by judicial deposit
in addition to tender, yet there were many cases in which oblatie alone afforded
protection, more especially
if made in judicio. And oblatie standing alone would
retain the characteristics which attached to it when it formed part of the whole
process and was followed by payment into Court. It would be an offer to
discharge the obligation, and would be made, therefore, in
full satisfaction of
the claim. This is borne out by reference to the forms of pleading given in the
books."
It appears from the judgment (at 477) that
oblatie alone was, under certain circumstances, recognized as effective in Dutch
procedure,
and that "the complete machinery of consignatie ['met opene Beurse en
klinkende Gelde'] seems never to have been used in our Courts."
(I am not here
referring to the now abolished practice of actual payment into Court in terms of
the Rules of Court.)
20
The following further observations were made by Innes CJ at 478:
"As already remarked, the rule that a tender should be unconditional was
recognized in Holland. Tender was akin to payment, and no
condition to which the
creditor had a right to object could be coupled with the one any more than with
the other. Strictly regarded,
an offer made 'in settlement' or 'in full
settlement' is conditioned upon the creditor abandoning the balance of his
claim. The offer
is made upon terms that he shall admit its sufficiency; it can
only be accepted on such admission, and it is therefore conditional.
But
regarded in the light of Roman-Dutch law the condition is inherent in the very
nature of the tender, and is sanctioned by the
procedure of the Courts. It is
not, therefore, a condition to which the creditor can object, and it does not
destroy the validity
or operative effect of the
tender."
In
Odendaal's
case the plaintiff
claimed a lump sum of £5 000 as damages for assault and defamation. The
plea admitted the assault, but denied
the slander, and tendered £ 100 in
settlement of any damage sustained. The trial Court found that defamation as
well as assault
had been proved, but awarded £100 as compensation in
respect
21
of both injuries. The plaintiff was awarded his costs up to date of tender,
but he had to pay all costs incurred thereafter. The plea
in that case alleged a
tender to the plaintiff of
"the sum of £100 with costs, in settlement of any damages he might have
suffered, which sum defendant says is ample and sufficient
for the purpose of
meeting plaintiffs claim, and he is still prepared to pay, as he hereby offers
again to do."
The decision of the trial Court in
Odendaal's
case was upheld on appeal. It was to the effect that the
tender by the defendant protected him from liability to pay the costs incurred
after the date of tender in the event of the plaintiff not recovering more than
the amount tendered. In my view the tender in the
present case is no different,
except that it is more explicitly unconditional.
It has, however, been held that if a defendant wishes to avail himself of a
tender in order to disavow liability for costs, the tender
should be pleaded.
This was of course done in the present case. The
22
offer was made in judicio.
(Naude v Kennedy
1909 TS 799
at 808-9;
Foord's
case,
supra
, at 398H-399A;
De Beer v Rondalia
Versekeringsk
orporasie van SA Bpk 1971(3) SA 614(0) at 616B-C.)
Counsel for the appellant also referred us to
B & R Investments (Pty)
Ltd v Laubscher
1951(2) SA 567(T), and
Boland Bank Bpk v Steele
1994(1) SA 259(T) at 265D-266D. The latter case dealt with a conditional offer
to pay which was not made in judicio, and can therefore
clearly be distinguished
on the facts. To the extent that any views on the law expressed in the former
case are at variance with
those stated in
Odendaal's
case,
supra
,
they must be regarded as incorrect.
In my judgment the respondent's tender as pleaded was a valid one, and
sufficient to protect it from further costs. The appeal on
the second point
should therefore also fail.
The appellant applied for condonation for the late filing of a power of
attorney. The application was granted, but the appellant has
to pay the costs of
such application.
23
The appeal is dismissed with costs.
F
H GROSSKOPF
Judge of Appeal. Joubert JA Smalberger JA Nestadt JA Howie JA (Concur