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[2018] ZASCA 69
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Premier Attraction 300 CC t/a Premier Security v City of Cape Town (592/2017) [2018] ZASCA 69 (29 May 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 592/2017
In
the matter between:
PREMIER
ATTRACTION 300 CC
t/a
PREMIER SECURITY
Appellant
and
CITY
OF CAPE
TOWN
Respondent
Neutral
citation:
Premier
Attraction 300 CC t/a Premier Security v
City
Of Cape Town,
(592/2017)
[2018] ZASCA 69
(29 May 2018)
Coram:
Majiedt,
Swain and Mbha JJA and D Pillay and Schippers AJJA
Heard:
7
May 2018
Delivered:
29
May 2018
Summary:
Contract
– interpretation – application to recover claims for
security services – appellant electing to abide
–
invoicing on respondent’s calculations of price escalations–
not communicating objection to alleged short
payment –
defences of waiver and prescription upheld.
ORDER:
On
appeal from:
High
Court of South Africa, Western Cape Division, (Davis J sitting as
court of first instance):
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
D
Pillay AJA (Majiedt, Swain and Mbha JJA and Schippers AJA
concurring):
[1]
This is an appeal against the judgment of Davis J in the High Court,
Western Cape Division, in which he dismissed the claim
of the
appellant, Premier Attraction CC t/a Premier Security (Premier) for
payment of R16 469 681.94 (the claim) but upheld the
claim for
payment of R 2 339 296.27 (the additional claim) against the
respondent, the City of Cape Town (the City).
The dispute
turns on the interpretation of a contract to determine the prices for
security services that Premier rendered to the
City. Relying upon the
defences of waiver and prescription the City resisted the claim. The
appeal in respect of the claim is with
the leave of this court. The
City did not cross-appeal against the award of the additional claim.
[2]
Turning to the facts, Premier tendered successfully to render
security services to the City for six years from 1 October 2008
to 30
September 2014. The contract prices for the first two years were
agreed. No dispute arose in relation to the pricing for
that period.
Price increases for subsequent years depended on whether the Minister
of Labour issued sectoral determinations for
the security industry as
contemplated in the
Labour Relations Act 66 of 1995
. If there were
increases Premier could apply to the City for a variation of the
prices.
[3]
The first period of the contract expired in September 2010. Triggered
by increases in the applicable sectoral determination,
Premier
applied for an increase for the second phase, being October 2010 to
September 2012. It submitted invoices based on its
interpretation of
the contract and calculation of the increases. The City disagreed
with Premier’s calculations and rejected
its invoices.
Believing that the City would not pay any amount if it claimed
payment on the basis of its own calculations, Premier
submitted
invoices based on the City’s calculations. Although Premier
disagreed with the City’s calculations, it did
not communicate
its disagreement to the City.
[4]
Notwithstanding Premier’s dissatisfaction this state of affairs
persisted in the next phase of the contract until September
2014. The
third phase of the contract commenced on 1 October 2014. No dispute
in relation to that phase arises in the appeal. However,
as the size
of the contract diminished by more than two-thirds of the previous
contracts, Premier faced the difficulties and risks
of retrenching
two-thirds of its workforce. Consequently, Premier found itself in
dire financial straits.
[5]
After the contract expired in September 2014, Premier communicated to
the City its intention to claim the alleged shortfall
for the first
time at a meeting on 9 December 2014. On 14 January 2015 it demanded
payment. By letter of 18 February 2015 the City
gave its reasons for
denying liability for any amounts.
[6]
On 24 June 2015 Premier notified the City of its claims in terms of
The Institution of Legal Proceedings Against Certain Organs
of State
Act 40 of 2002 (the Act). In the notice it conceded that it was ‘not
sent within six months of the debt becoming
due.’ It explained
that it had been in discussions with the City ‘in an attempt to
avoid litigation’; that the
City was apprised of the facts;
that the dispute turned on a contractual interpretation; and
consequently, that the City was not
prejudiced.
[7]
On 25 June 2015 Premier applied urgently to the high court for
payment of both claims. On 30 June 2015 it obtained an order
enrolling the dispute on the semi-urgent roll for 27 October 2015.
[8]
The high court dismissed the claim, holding that those amounts that
fell due between 1 September 2010 and 25 June 2012 had prescribed.
It
also found that Premier had waived its right to claim payment of the
shortfall. It reasoned that in the founding affidavit Premier
attested to generating invoices for amounts it believed to be
incorrect ‘for a considerable period without demur and
certainly
without any attempt to invoke rights which it might have
enjoyed … in particular … the arbitration clause.’
Having ‘waived unequivocally whatever rights it might have
enjoyed’ the high court saw no point in ‘engaging
further’ to determine whether Premier had a claim for payment
of any shortfall.
[9]
As Premier succeeded partially in obtaining an order for the payment
of the additional claim, the high court awarded it 30 per
cent of the
costs incurred in respect of the main and additional claims, such
costs to include 30 per cent of the costs of two
counsel.
[10]
In this court Premier contended that the high court erred on the law
and facts in concluding that it had by its conduct waived
its right
to claim the contract prices it contended for; that it had not with
full knowledge of its right abandoned it expressly
or by conduct; and
that the City failed to plead and prove waiver. The contract
‘entitled but did not oblige Premier to raise
a dispute when it
arose.’ Instead ‘faced with the City’s breach of
the contract, it elected to abide by it.’
It insisted that
without full knowledge of its rights until it received its counsel’s
opinion in March 2015, it could not
have waived its rights. Hence the
high court had erred in finding that it had waived its rights to
claim the increases in the contract
price according to its own
calculations. Regarding prescription, Premier contended that in
accordance with the common law it was
entitled to allocate payments
to the oldest outstanding debt.
[11]
Waiver is a defence on a point of law that can be raised on the
facts, provided that whenever it is invoked the other side
has a fair
opportunity to respond.
[1]
All that the City had to do was to set out the facts adequately. It
did so as follows in the answering affidavit:
‘
18.
Throughout the duration of the contract period, Premier at various
intervals applied for and received
price increases in accordance with
the conditions of contract.
19.
Premier, at all relevant times accepted the price escalations offered
by the City.
20.
If Premier was aggrieved by the price escalation to which the City
was prepared to agree,
it ought to have declared a dispute as
provided for in the contract. It chose not to do so.
21.
By accepting the amounts paid to it by the City throughout the
duration of the contract
period, Premier signalled its acceptance of
the amended price escalations. It is therefore not open Premier now
to allege that
it did not agree to the price escalations. Premier at
no point issued a notice of breach to the City, nor did it declare a
dispute
or take such dispute to arbitration as provided for the
contract.’
[12]
In reply Premier admitted these averments but persisted that although
it received price increases from the City periodically,
they were not
in line with its interpretation of the contract. That
notwithstanding, Premier insisted that it had no option but
to accept
the price escalations offered by the City; but there was no agreement
about this. Premier continued to submit invoices
in accordance with
the City’s interpretation believing that had it submitted
invoices for amounts it contended for, the City
would not have
authorised payment to Premier.
[13]
Manifestly on these facts Premier had a fair opportunity to respond
to the waiver defence. The City gave clear
[2]
and proper
[3]
notice of its
intention in its affidavits to raise the defence of waiver.
[4]
No express waiver was necessary once such inference could reasonably
be drawn.
[5]
[14]
An intention to waive must be inferred reasonably; no one can be
presumed to have waived rights without clear proof.
[6]
The test for such intention is objective. Some outward manifestation
in the form of words or conduct is required; silence and inaction
will do when a positive duty to act or speak arises. Mental
reservations not communicated have no legal effect.
[7]
These elements of the test for waiver coalesced in Premier’s
reply.
[15]
The reply fortifies the finding that by accepting the price
escalations offered by the City Premier signalled its intention
to
waive its rights to claim payment on its own interpretation and
calculations of the contract prices. First, Premier had full
knowledge of its rights but failed to act positively to enforce them.
[8]
It knew that it had
claims for price increases whenever the sectoral determinations
increased remuneration for the security
industry. Promulgation of the
determinations alerted it to the amounts of the increases and enabled
it to calculate its claims.
Furthermore the claims were for the
alleged underpayment of invoices. So Premier knew that the payments
were not what they should
have been; that its claim lay against the
City; and that importantly, it could contest the City’s
interpretation by invoking
the dispute resolution mechanisms in the
contract. These circumstances imposed a positive duty upon Premier to
act to dispel any
inference of acquiescence that its silence might
suggest. Premier did not act.
[16]
Second, Premier’s financial circumstances compelled it to act
to enforce its rights. Premier knew that such increases
that the City
paid were insufficient to ensure compliance with the sectoral
determinations and private security industry laws;
that if the City
did not pay its claims it would have to absorb the shortfall; that if
it did not meet the shortfall it would not
only run into financial
difficulties but also risk criminal prosecution for violating
provisions of the sectoral determinations.
[17]
Counsel informed the court from the Bar that initially the losses
were about R1 million, an amount not so significant in the
nature of
such contracts that Premier could not carry the shortfall. Premier
also allegedly waited for the forthcoming sectoral
determinations to
assess whether the shortfall could be accommodated. These submissions
are inconsistent with Premier approaching
the high court for urgent
relief on the basis that it would have met ‘its financial
demise long before a trial can take place.’
Instead, they
confirm Premier’s election to abide by the City’s offer
and to carry the debt. If the alleged shortfalls
had not been onerous
initially, then subsequently it became increasingly so. Premier
lamented its inability to pay its taxes and
other statutory
commitments. As a business it had to act and to act quickly to stop
the haemorrhage.
[18]
Two cases that Premier referred to in order to disavow knowledge of
its rights do not assist it. In
Mohamed
[9]
the appellant was unaware of his right to claim protection against
the death penalty and did not have access to legal advice. By
contrast, Premier knew its rights and had access to lawyers if it
wanted legal advice. In
Greathead
,
abandoning a law point when counsel and client had not considered the
point until the appeal, was construed not to be a waiver
of
rights.
[10]
Rendering invoices
on Premier’s calculations was as conscious and deliberate an
act as depositing a cheque was in
Collen
v Rietfontein Engineering Works.
[11]
In both instances
acceptance of the other sides’ offers was by conduct.
[19]
Third, when faced with options – to contest or abide –
Premier elected to abide by the City’s calculations
of the
contract prices. Such election between bipolar options is a
waiver.
[12]
Premier waived one
right by choosing another right that was inconsistent with the
former.
[13]
Having approbated
it could not thereafter reprobate.
[14]
Its intention was manifestly inconsistent with the continuance of the
right, an inference the Court can reasonably draw from the
nature of
the conduct proved.
[15]
[20]
In these circumstances I find that the City discharged its onus of
proving on a balance of probability that Premier waived
its right to
claim prices on its interpretation and calculations of the
contract.
[16]
This finding
disposes of the appeal. For the sake of completeness I deal with the
defence of prescription.
[21]
The facts that support the waiver defence also support the case for
prescription. The debts became due as soon as Premier raised
and
submitted invoices in accordance with the payment procedures
prescribed in the contract. Those procedures had been concluded
for
claims arising from 1 October 2010 to 25 June 2012. Accordingly
those claims had expired by the time Premier served its
application
in June 2015.
[22]
By electing to abide by the City’s alleged breach Premier made
a deliberate choice from which it must be inferred that
it was aware
of its legal options. The Constitutional Court held in
Mtokonya
v Minster of Police
[17]
that the degree of
knowledge required under
s 12(3)
of the
Prescription Act 68 of 1969
did not include knowledge of the legal conclusions by the creditor
before a debt can be said to be due.
[18]
[23]
Moreover, Premier’s election to abide by the City’s
calculations and to carry the shortfall are inconsistent with
its
after the fact construction that it was entitled to allocate payments
to the most onerous (long standing) debt. It did not
state that it
had made these allocations, submitting merely that it was entitled to
do so. Prescription extinguished the
alleged shortfalls; a debt
cannot be revived on the expiry of the prescriptive period.
[19]
[24]
Counsel for the City urged us to also pronounce on the question of
condonation. He submitted that the high court had
not granted
condonation because it issued no order condoning Premier’s
non-compliance with the provisions of the Act. Without
such order it
was not competent for the high court to enter the merits of the
claims. Consequently, Premier had no right to any
remedy. It was
Premier’s duty to obtain an order granting condonation to
persist with this appeal. And, without an
order, the City in
turn was frustrated in pursuing a cross-appeal. Counsel concluded by
urging that it was incumbent on this court
to address every point in
issue in order to assist the Constitutional Court if it were to be
seized with a further appeal.
[20]
[25]
Counsel’s submission is an attack on the form rather than the
substance of the judgment. Although the high court did
not expressly
issue an order granting condonation, its intention to do so is
unmistakable from its judgment; it was ‘prepared
to grant the
necessary condonation.’ Any doubt about the high court’s
decision was clarified in its judgment refusing
leave to appeal in
which it described its response to the question of condonation as a
‘generous interpretation of the facts
applied to the law; that
is generous to Premier … ’
[26]
If condonation had not been granted then on the City’s
contentions, the entire order, including the order in favour of
Premier for payment of the additional claim, would also have been
open to a cross-appeal. The City did not challenge this part
of the
order. Had the City genuinely wanted to cross-appeal it could have
invoked rule 42(1)(b) of the Superior Court Practice
to cure any
ambiguity, error or omission. Having failed to adopt a sensible and
inexpensive approach, the City cannot now be allowed
to unravel the
entire judgment of the high court. The City has not cross-appealed. I
need say no more about condonation.
[27]
Regarding the preparation of the record, rule 8(8) and (9) of the
rules of this court require the parties to seriously and
genuinely
engage each other with a view to agreeing on the issues and portions
of the record relevant for the appeal. This
requirement is not
only a matter of costs and convenience for the court and the
litigants; it is also about maximising efficient
use of time and
other limited resources in the greater interest of dispensing
justice. Senior and junior counsel on both sides
could not possibly
have concluded that judges of this court, with calculator in one
hand, a magnifying glass in the other, would
trawl through 3764
invoices to determine pricing. The invoices were entirely
irrelevant in a case that turned on the interpretation
of a contract.
The City’s legal representatives were largely at fault in
refusing to accede to Premier’s legal representatives’
efforts to drastically reduce the size of the record. Legal
representatives are urged to implement rule 8 properly to avoid the
risk of being mulcted with costs.
[28]
In the result the following order is granted:
The
appeal is dismissed with costs, including costs of two counsel.
__________________
D PILLAY
ACTING
JUDGE OF APPEAL
APPEARANCES
Appellant:
S Kirk-Cohen
SC
C
Small
Instructed
by: Erasmus Ranchod &
Associates: Cape Town
Lovius
Block: Bloemfontein
Respondent:
A Katz SC
M
Adhikari
Instructed
by: Welgemoed Attorney:
Cape Town
Rosenhoff
Reitz Barry Attorneys: Bloemfontein
[1]
Erasmus
Superior Court Practice rule 6(5)(d)(ii) B1-45.
[2]
Borstlap
v Sbangenberg
en
andere
1974
(3) SA 695
(A) at 704 F-H.
[3]
Linton
v Corser
1952 (3) 685 at 696B.
[4]
Laws
v Rutherfurd
1924
AD 261
p263; Amler’s Precedents of Pleadings 8
th
edition p 384, relying on
Montesse
Township & Investments Corp (Pty) Ltd & another v Gouws NO
&
another
1965 (4) SA 373(A)
;
Greathead
v SA Commercial Catering and Allied Workers Union
[2000] ZASCA 142
;
2001 (3) SA 464
para 17.
[5]
Laws
v Rutherfurd
at
264.
[6]
Road
Accident Fund v Mothupi
2000
(4) SA 38
SCA para 15, 16,18 and 19.
[7]
Ibid.
[8]
Laws
v Rutherfurd
p263;
Mohamed
v President of the RSA (Society for the Abolition of the Death
Penalty in South Africa intervening)
[2001] ZACC 18
;
2001 (3) SA 893
(CC) para 61-67;
Greathead
v SA Commercial Catering and Allied Workers Union
para 17.
[9]
Mohamed
& another v President of the RSA (Society for the Abolition of
the Death Penalty in South Africa intervening)
[2001] ZACC 18
;
2001 (3) SA 893
(CC) para 61-67.
[10]
Greathead
v SA Commercial Catering and Allied Workers Union
para 17.
[11]
Collen
v Rietfontein Engineering Works
1948 (1) 413 at 429-430.
[12]
Moyce
v Estate Taylor
1948
(3) SA 822 (A) 829.
[13]
Feinstein
v Niggli & another
1981(2)SA
684(A) at 698G-H.
[14]
Administrator,
Orange Free State & others v Mokopanele & another
[1990] ZASCA 69
;
1990
(3) SA 780
AD at 787 G-H.
[15]
Hepner
v Roodeport-Maraisburg Town Council
1962 (4) AD 772
at 778H.
[16]
Ibid.
[17]
Mtokonya
v Minster of Police
2017 (11) BCLR 1443
CC para 62.
[18]
Ibid
para 51.
[19]
Protea
International (Pty) Ltd v Peat Marwick Mitchell & Co
[1990] ZASCA 16
;
1990
(2) SA 566
(A) at 568 I–569 A.
[20]
Serengeti
Rise Industries (Pty) Ltd & another v Aboobaker NO & others
(845/2015)
[2017] ZASCA 79
;
2017 (6) SA 581
(SCA) (2 June 2017);
S
v Jordan and others (Sex Workers Education an Advocacy Task Force
and Others as Amici Curiae
2002 (6) 642; 2002 (11)BCLR 1117 para 6 and 21.