Brief Summary

Contract — Hire agreement — Dispute regarding liability for damage to hired crane — Genrec Steel Structures (Pty) Ltd claimed damages for repair costs from LTA Mitec Ltd and Orbit Engineering (Pty) Ltd following crane damage during use — Genrec alleged oral agreement to hire crane to Orbit with Mitec's involvement — Mitec denied entering into any hire agreement — Court found that Genrec had established that the crane was hired to Mitec under its standard terms and conditions, and that Mitec was liable for the repair costs.

Comprehensive Summary

Summary of Judgment

Introduction

The matter was an appeal to the Supreme Court of South Africa (Appellate Division) concerning liability for the repair cost of a crawler crane that capsized and was badly damaged while being used on a construction site. The appeal turned primarily on factual questions about with whom the crane-hire contract was concluded and, in any event, whether the alleged contractual terms imposing liability for damage were proved.

The appellant was LTA Mitec Limited (“Mitec”). The respondent was Genrec Steel Structures (Pty) Ltd (“Genrec”), the owner of the crane. A further company, Orbit Engineering (Pty) Ltd (“Orbit”), had physically used the crane on site but was absolved from the instance in the court a quo at the close of Genrec’s case on the separated issues.

Genrec instituted action in the Witwatersrand Local Division in August 1992 against three defendants (including Mitec and Orbit). After multiple amendments to the pleadings, the trial court (Flemming DJP) determined certain issues separately under Rule 33(4), namely whether the contract of hire was concluded with Mitec or with Orbit, and what the terms of the contract were. The trial court found that Genrec had proved that it hired the crane to Mitec and that Genrec’s standard terms and conditions governed the hire. Mitec appealed with leave against those findings and the associated costs orders.

The general subject-matter of the dispute was whether Genrec could recover the alleged reasonable and necessary repair costs (R2 042 726,87) from Mitec, which depended on establishing (a) who the hirer was and (b) the existence and applicability of contractual provisions (whether Genrec’s standard terms or a pleaded tacit/implied term) placing responsibility for the crane’s damage on Mitec.

Material Facts

During 1989 the Matimba power station was under construction at Ellisras (then Transvaal). Certain steel gantries had to be erected, requiring a sophisticated and powerful crawler crane. Genrec owned such a crane, and Orbit used it for the erection work. Mitec had been instrumental in procuring from Genrec the crane’s use for Orbit, but the exact legal mechanism by which this was achieved became the core dispute.

On 26 August 1989 the crane capsized during use and was badly damaged. Genrec alleged the reasonable and necessary cost of repair to be R2 042 726,87. The occurrence of the accident and the fact of damage (and the pleaded amount) formed part of the overall background; however, the separated issues focused on the identity of the contracting party (Mitec or Orbit) and the applicable contractual terms.

A number of facts were common cause or not disputed. Mitec was a main contractor to Escom for parts of the project. A related company, Steeldale (Pty) Ltd, was the subcontractor responsible for erecting the gantry beams. Genrec was a subcontractor to another main contractor and also carried on business hiring out cranes. In earlier phases (phases 1 and 2) Orbit had hired a crane from Genrec for the gantry work without Mitec’s knowledge or involvement.

When phase 3 was imminent, Orbit again wanted to hire a crane from Genrec. There had been dissension between Genrec and Orbit from a prior hire, and Genrec indicated a lack of confidence in Orbit’s ability to pay hire charges. Genrec therefore was unwilling to make the crane available to Orbit unless Mitec placed an order. In consequence, Mitec provided Genrec with an order number. Because Mitec had no stationery of its own, it used a letterhead of another LTA group company, LTA Process Engineering (Pty) Ltd, and sent a facsimile stating: “order number for hire of crane for Orbit Engineering 156255/1978”. This led to Process Engineering being cited originally as a defendant, though Genrec later withdrew its action against it.

The critical disputed factual issue, as framed by the separation order, was whether Genrec hired the crane to Mitec (for Orbit’s use) or to Orbit (with Mitec merely providing comfort/security regarding payment). The trial court accepted Genrec’s version that Mitec was the hirer; the appellate court ultimately found Genrec had not discharged the onus of proving that conclusion on a balance of probabilities, and further held that, even on the assumption that Mitec hired the crane, Genrec did not prove that the terms relied upon to impose liability for damage formed part of the contract.

Legal Issues

The central legal questions were:

The first question was a question of fact (and inference from fact): whether, on a balance of probabilities, the crane-hire contract was concluded between Genrec and Mitec or between Genrec and Orbit.

The second question was primarily a question of application of law to fact, with elements of evaluative inference: whether Genrec proved that its standard terms and conditions of hire formed part of the contract (whether by express agreement or by tacit incorporation), or alternatively whether Genrec proved a pleaded tacit or implied term that the crane would be returned in the same condition as when delivered (a term that would ground liability for the damage).

A further issue arose from the pleadings and amendments: whether Genrec’s manner of pleading an express oral agreement was compatible with reliance on tacit or implied agreement/terms, and how the late amendment during argument affected what Genrec could properly contend for. This issue concerned the relationship between pleadings and proof, and whether the pleaded case permitted reliance on a particular contractual mechanism (express versus tacit/implied).

Court’s Reasoning

The appellate court approached the appeal on the basis that it was concerned “principally with questions of fact”, and recognised the established principle that findings of fact by a trial court are not lightly disturbed. However, it held that the trial court’s primary factual finding (that Mitec hired the crane) was vitiated because the trial court failed to weigh important factors that manifestly required consideration. The appellate court stated that, where a judgment is silent on factors of such importance, it cannot simply be assumed that the trial court gave them proper attention. In those circumstances, the appellate court considered itself obliged to assess the recorded evidence afresh; if it could not reach firm conclusions on a balance of probabilities, the result had to be against the party bearing the onus of proof.

In identifying what the trial court failed to weigh, the appellate court emphasised the belatedness of Genrec’s allegation that the crane was hired to Mitec rather than Orbit. The initial particulars of claim (August 1992) alleged plainly that the crane was hired to Orbit on Genrec’s standard terms and conditions, and that such hiring was conditional upon Mitec or another LTA group company placing an order. The pleadings also distinguished between the alleged sources of obligations: Orbit’s alleged liability was tied to the standard terms and conditions, while Process Engineering and/or Mitec’s alleged obligations were framed as a tacit/implied term. A separate alternative cause of action was pleaded against Orbit alone, also consistent with Orbit being the hirer. It was only about a year later (August 1993) that Genrec sought to elevate an allegation that the crane was hired to Mitec as the primary case and to relegate the “hired to Orbit” version to an alternative.

The appellate court also treated as significant the absence, in a written report prepared shortly after the accident (14 September 1989), of a clear statement by Genrec’s projects manager (Kriedemann) that Genrec had hired the crane to Mitec rather than Orbit. Additionally, the court relied on aspects of Kriedemann’s cross-examination indicating that his objection to hiring to Orbit was essentially about assurance of payment, and that, once that concern was met (by payment in advance, a bank guarantee, or an LTA guarantee/order), Genrec would hire to Orbit. The court pointed to ambiguity and imprecision in his use of language, including the way he described agreement “to hire the crane to Orbit” as meaning that Orbit would make use of the crane, and noted that he had supplied the information for drafting Genrec’s summons and particulars, which aligned with the initial pleading that Orbit was the hirer.

Having reconsidered the record in light of these factors, the appellate court concluded that, although there was “a good deal to be said” for Genrec’s contention that it was more probable that Mitec hired the crane than that Orbit hired it with Mitec only undertaking to pay if Orbit did not, the probabilities and credibility features were not so clear from the record that it could be said Genrec had discharged the onus of proving, on a balance of probabilities, real or apparent consensus between Genrec and Mitec that Mitec would be the hirer.

The appellate court then held that Genrec’s claim against Mitec failed in any event on a further ground, making it unnecessary to decide authority questions and unnecessary to analyse the “hirer identity” issue in more detail. It reasoned that, even assuming Genrec had proved Mitec hired the crane, Genrec still had to prove, on a balance of probabilities, either that Genrec’s standard terms and conditions applied, or that there was a tacit/implied term that Mitec would cause the crane to be returned in the same condition as delivery.

On the incorporation of Genrec’s standard terms and conditions, the appellate court stressed that Genrec had pleaded, for most of the litigation, reliance on an oral agreement that the hire would be on Genrec’s standard terms and conditions; this was treated as negating reliance on tacit or implied agreement to that effect. The court endorsed the proposition that alleging parties orally agreed on something is incompatible with alleging they tacitly or impliedly agreed on it, referring to commentary on Rule 18(6) in Erasmus. It also described the late amendment during closing argument, at the trial judge’s urging, as inserting “alternatively tacitly” so that the entire agreement could be alleged to be tacit—an allegation not supported by the evidence and disavowed by Genrec’s counsel, who maintained instead that the contract was express and that a tacit term incorporated the standard terms.

Assuming without deciding that the pleadings (original or amended) permitted Genrec’s contention, the appellate court held that the evidence did not establish tacit incorporation of Genrec’s standard terms. It relied on the absence of prior dealings between Mitec and Genrec from which knowledge of those terms could be inferred, and it rejected the idea that other LTA group companies’ prior dealings fixed Mitec with knowledge. It emphasised that Genrec provided Mitec with no written documents reflecting or incorporating standard terms for signature or acknowledgement, and that Genrec did nothing to alert Mitec to the existence of such standard terms. The court rejected any analogy to “ticket” cases. It also held that any general concessions about industry practices fell short of proving that, in this instance, Genrec’s particular terms applied—especially where the very “normal procedure” described in evidence (presentation and acceptance of conditions when the crane arrives) did not occur before the accident.

The appellate court further held that Orbit’s knowledge of Genrec’s standard terms (derived from prior hires) could not be imputed to Mitec merely because Mitec may have hired “in lieu of” Orbit. The court cited authority indicating that a third party’s knowledge cannot arbitrarily be attributed to another contracting party in this way. It also held that the absence of tariff discussion did not support tacit acceptance of uncommunicated, onerous terms; at most it suggested acceptance of Genrec’s usual tariff or a reasonable rate, particularly because Mitec was indifferent to tariff details where Orbit would ultimately bear the cost.

Turning to Genrec’s alternative reliance on a tacit/implied term that the crane would be returned in the same good order and condition, the appellate court applied the test for a tacit term: the enquiry is not whether the term would have been reasonable, but whether it was so obvious that it went without saying, or whether both parties would have agreed to it if asked at the time. The court held that it could not safely be said both parties would have assented to an absolute term of that breadth, and it was reasonably conceivable that Mitec would have limited responsibility to damage attributable to its own actions or employees. Accordingly, the existence of such a tacit term was not proved.

Outcome and Relief

The appeal was upheld with costs, including the costs of two counsel.

The judgment of the trial court was altered and replaced with an order of absolution from the instance with costs, including the costs of two counsel.

No substantive relief for Genrec’s repair-cost claim was granted against Mitec, because Genrec failed to discharge the onus on the separated issues necessary to found such liability.

Cases Cited

Van Aswegen v De Clercq 1960 (4) SA 875 (A).

Micor Shipping (Pty) Ltd v Treger Golf and Sports (Pty) Ltd and Another 1977 (2) SA 709 (W).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

Uniform Rule of Court 33(4).

Uniform Rule of Court 18(6).

Held

The court held that the trial court’s acceptance of Genrec’s version that Mitec hired the crane was undermined by the failure to weigh materially significant factors, including Genrec’s own initial pleadings alleging hire to Orbit, the belated shift in Genrec’s pleaded case, the content of contemporaneous documentation, and aspects of Genrec’s principal witness’s concessions.

The court further held that, even on the assumption that Mitec was the hirer, Genrec did not prove that its standard terms and conditions were incorporated into the contract (whether expressly or tacitly), because Mitec had no established knowledge of those terms, received no notice of them, and could not be fixed with Orbit’s knowledge of them.

The court also held that Genrec did not prove the pleaded alternative tacit/implied term that the crane would be returned in the same condition as delivered, because it could not be concluded that both parties would necessarily have assented to an unqualified and absolute obligation of that nature.

LEGAL PRINCIPLES

A court of appeal may interfere with factual findings where the trial court’s conclusion is vitiated by a failure to consider factors of material importance; where the appellate court cannot reach firm conclusions on the record, the result must follow the allocation of the onus of proof, and the party bearing the onus fails if the probabilities are not shown to support its case.

A pleading that parties orally agreed to a term is treated as incompatible with reliance on a tacit or implied agreement to the same effect; the way a case is pleaded may delimit how terms can be established and argued, particularly where express agreement is alleged as the primary basis.

Incorporation of standard terms and conditions into a contract is not established merely because such terms are common in an industry; absent prior dealings or proper notice/communication of those terms to the other party, a court will not readily infer tacit acceptance of uncommunicated and potentially onerous conditions. A third party’s knowledge of standard terms cannot be imputed to another party simply because the latter contracted in the former’s stead.

A tacit term is not imported because it would be reasonable; it must be shown, on the evidence, that the term was so obvious that it went without saying, or that the parties would have agreed to it had the issue been raised at the time of contracting.

LTA Mitec Ltd. v Genrec Steel Structures (Pty) Ltd. (258/94) [1995] ZASCA 153 (29 November 1995)