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[2011] ZAWCHC 570
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Any Name 451 (Pty) Ltd v Capespan (Pty) Ltd (9922/2005) [2011] ZAWCHC 570 (23 September 2011)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case
No. 9922/2005
Before:
The
Hon. Mr Justice Binns-Ward
In
the matter between:
ANY
NAME 451 (PTY)
LTD
Plaintiff
and
CAPESPAN (PTY)
LTD
Defendant
JUDGMENT
DELIVERED ON 23 SEPTEMBER 2011
BINNS-WARD J:
[1]
The plaintiff has sued the defendant in this action for orders
(i) directing the defendant to render an account, duly supported
by vouchers, in respect of the ‘performance of the defendant’s
mandate for the marketing and sale of the citrus fruit
of Chance
Brothers and Club Champion during the 2002 season and the allocation
and/or appropriation by the defendant of all proceeds
from such
sale’; (ii) a debatement of that account and (iii) payment to
the plaintiff of ‘such amounts as the defendant
has
appropriated and / or failed to pay to the bank, Chance Brothers or
Club Champion, in breach of its obligations under the Chance
Brothers’ new production loan agreement and the Club Champion
new production loan agreement’, together with interest
thereon
a tempore morae
.
[2]
Chance Brothers (Pty) Ltd and
Club Champion Investments (Pty) Ltd (hereinafter referred to, when
convenient, as ‘the companies’)
were two entities which
carried on business farming citrus, mainly grapefruit, in the
Nkwalini Valley
[1]
in KwaZulu-Natal. The companies were sometimes collectively
referred to as ‘the Chance Group’, after the family
which, in one manner or the other, appears to have held the
proprietary interest in them. As a consequence of intractable
financial difficulties, the companies were finally wound up in
December 2002. The plaintiff company, Any Name 451 (Pty) Ltd,
has founded its claims in the current action on cessions of rights in
its favour executed in August 2005 by the liquidators of
Chance
Brothers (Pty) Ltd (in liquidation) and Club Champion Investments
(Pty) Ltd (in liquidation), respectively, and by Nedcor
Bank Ltd
(‘Nedcor’). Nedcor was Chance Brothers’
banker. It is ‘the bank’ referred to
in the
aforementioned relief sought by the plaintiff. Subsequently
renamed Nedbank, Nedcor was often referred to by that
name in the
evidence and in some of the relevant documentation.
[3]
The defendant, Capespan (Pty)
Ltd (often referred to in the evidence as ‘Outspan’
[2]
),
is a company well known in South Africa as a marketer of fresh fruit
produce. It is common cause that the defendant had
marketed the
citrus produced for the export market on the companies’ farms
during the 2002 season, as indeed it had in the
preceding seasons.
[4] At the commencement of the trial a
direction was given in terms of rule 33(4) that certain issues should
be tried and determined
separately from, and before the remaining
issues in the action. The direction was formulated as follows:
It
is directed that the following issues be determined separately, and
before the remaining issues in the action:
1
The
question as to the existence, nature and content of the alleged
contractual relationships between the companies, Nedbank
and the defendant,
respectively, insofar as they bear on the alleged duty by the
defendant to provide an improved accounting
[3]
in respect of the
marketing and sale of citrus fruit of Chance Brothers (Pty) Ltd and
Club Champion Investments (Pty) Ltd during
the 2002 season
2
To the extent, if at all, that it is not already
comprehended by paragraph 1 of this ruling, the issue of the
basis on which
the defendant may have been obliged to allocate and/
or appropriate the proceeds of the aforementioned sales.
3
The competence or validity of the cessions upon
which the plaintiff asserts its standing in this action.
4
To the
extent that the issue may arise out of the allegations in para 20
of the plaintiff’s particulars of claim, the
question whether
such claim as Nedbank may have enjoyed against the companies or
against the defendant was ceded to the plaintiff.
[4]
In
the reasons which prefaced the making of the ruling in terms of
rule 33(4), it was emphasised, however, that nothing in
the
expression of the court’s identification of the issues for
separate determination should be understood in any way to
derogate
from the manner in which those issues had been defined in the
pleadings.
[5]
It became evident during the testimony of Mr Christopher
Chance - the erstwhile managing director of the companies,
whose
interests currently appear to be represented by the plaintiff - that
he considered that Capespan had, in the context of its
contractual
relationship with the companies, withheld monies which it should have
paid over to the companies and that it had failed
to credit the
companies with the benefit of certain rebates and discounts which it
had secured in respect of the cost of exporting
the fruit produced on
the companies’ farms in the 2002 season. The further
accounting sought was required in order
to confirm and quantify the
claim that Mr Chance believed that the companies had had against the
defendant in this connection.
Exacting the payment of this
claim was of course the ultimate object of the plaintiff’s
action. There is, however,
no general principle of law that
when one party does not know how much he is owed by another he can
call upon the latter to render
an account; see
Rectifier and
Communication Systems (Pty) Ltd v Harrison and Others
1981 (2) SA
283
(C) at 287 fin – 288B.
[6]
In order to establish an
entitlement to a statement of account, as claimed, the plaintiff had
to prove either (i) that the defendant
had been obliged in terms of a
relevant fiduciary duty to account the companies in the manner
sought, or (ii) that the defendant
was contractually bound to
the companies to render such an account, or (iii) that there was
a statutory obligation on the
defendant to render the account;
[5]
see
Absa Bank Bpk v
Janse Van Rensburg
2002 (3)
SA 701
(SCA) at para 15;
Maitland
Cattle Dealers (Pty) Ltd v Lyons
1943 WLD 1
at p. 19 (per Millin J). No magic attaches
to the expression ‘fiduciary duty’. The existence
of a fiduciary duty, and its nature and extent, are questions of fact
to be adduced from a thorough consideration of the substance
of the
applicable relationship and any relevant circumstances which affect
the operation of that relationship. Furthermore,
the existence
of a fiduciary relationship can be an incident of a contract - agency
affords a typical example – and thus
there is scope for an
overlap between categories (i) and (ii) aforementioned. The
terms of a contract may therefore create
and define the nature and
extent of a fiduciary relationship or duty,
[6]
including the extent of any attendant duty to account. In the
current matter the plaintiff relied on the contractual relationship
between the companies and the defendant – broadly characterised
by it during the trial as one of agency, or of ‘trust’
–
as the basis for the alleged duty on the defendant to provide an
improved accounting. The focus was therefore on
the
identification of the applicable contract(s) and the pertinent terms
thereof.
[7]
The particulars of claim and the plea, as well as the trial
particulars, have been the subject of multiple amendments on both
sides. It is relevant to summarise the evolution of the
plaintiff’s claim in the pleadings from the time summons was
issued in 2005 to the form in which it was finally couched after
various amendments effected on 18 April 2011, some weeks
after
the commencement of the trial in early March 2011. That
evolution demonstrates an initial reliance by the plaintiff
on the
marketing agreements concluded between the companies and the
defendant in 1999 (to which I shall refer as ‘the 1999
marketing agreements’) to found the alleged duty on the
defendant to account to the companies. The 1999 marketing
agreements were also expressly referred to in the deeds of cession on
which the plaintiff’s claim to standing is founded,
which were
executed in 2005, at a time when any claims which the companies may
have had against the defendant in respect of the
2002 citrus season
were in danger of becoming extinguished by prescription. The
evolving history of the pleadings further
demonstrates a subsequent
casting about for alternative bases for the alleged duty after a
subsequently occurring external event
- in the form of a full bench
judgment of this court in other proceedings between the parties -
exposed the initially pleaded foundation
as legally untenable for the
plaintiff’s purposes.
[8]
The terms of the two 1999 marketing agreements were identical in all
respects material for present purposes, and comprised the
content of
a
pro forma
contract document used generally by the defendant
in its dealings with fruit producers. Because of their
centrality to the
commercial relationship between the companies and
the defendant, and notwithstanding the plaintiff’s subsequent
allegation,
introduced some years after the institution of
proceedings, that their terms did not govern the export of the citrus
produced by
the companies in 2002, it is convenient to describe at
this stage how the 1999 marketing agreements worked. As will
become
apparent, the wording of the contracts might have been better
considered in some respects. Nevertheless, their substantive
import was clear enough.
[9]
In terms of the 1999 marketing agreements the defendant was granted
the right of first refusal for the marketing and distribution
of the
companies’ fruit products throughout the world for the duration
of the agreements. The fruit products subject
to the agreements
were oranges and grapefruit in the case of Chance Brothers; and
oranges, grapefruit and lemons in the case of
Club Champion. In
context it was evident that the fruit products in question were those
of the respective suppliers which
met the quality requirements and
standards laid down from time to time by the defendant and had been
passed for export by the Perishable
Products Export Control Board (a
statutory body).
[10]
The 1999 marketing agreements
provided (in clause 4.1) that ownership of the fruit delivered
by the companies to the defendant
under the agreements for export
passed to the defendant upon acceptance by the latter of physical
delivery of the fruit from the
companies. Consequently, in
contracting with the ultimate purchasers of the fruit, the defendant
acted as principal and sold
its own property. In consideration
for the producer transferring ownership of the fruit to the defendant
in terms of the
1999 marketing agreements, the producer obtained a
participatory interest in the pertinent ‘consignment accounts’
to
which the defendant allocated the proceeds of the sale of the
fruit, and from which it funded the ‘advance payments’
to
which producers were entitled under the marketing agreements.
[7]
[11] The agreements provided (in
clause 3) for the accounting for and payment of the proceeds
(inclusive of advance payments)
of the sale of the fruit as follows:
3.
ACCOUNTING AND PAYMENT OF PROCEEDS TO THE SUPPLIER
3.1
[The defendant]
will create and administer
Consignment Accounts of the type specified in paragraph D of the
front page hereof for the Products delivered
to it, which accounts
will be trust accounts administered on behalf of the Supplier or
groups of suppliers who have agreed to deliver
Products falling
within the specification of Products for the different Consignment
Accounts.
3.2
The scope and definition of each Consignment Account and the
specification of the Products falling within each such Consignment
Account and the procedure to be followed in administration of such
Consignment Accounts will be determined by
[the defendant]
.
3.3
After delivery of the Products and within fourteen (14) days of
receipt of intake documentation by
[the defendant]
,
[the defendant]
will advance the Supplier a
minimum of sixty percent( 60%) of the Supplier’s pro-rata
portion of the projected Net Proceeds
of any Consignment Account in
which the Supplier participates in the form of an advance payment.
3.4
As soon as practicable after the total quantity of Products delivered
to
[the defendant]
for sale through a particular
Consignment Account has been sold,
[the defendant]
will
determine the Net Proceeds of that Consignment Account and, after
deducting advance and interim payments already made, pay
the balance
due to the Supplier participating in such Consignment Account pro
rata in proportion to the quantities and quality
of Products
delivered by the Supplier to
[the defendant]
for
sale through that Consignment Account.
[The defendant]
will endeavour to make such final payments within 60
days of closure of each Consignment Account.
3.5
[The defendant]
will be entitled to increase or
decrease any amount due to the Supplier with an amount calculated by
[the defendant]
in accordance with an evaluation
programme established by
[the defendant]
for this
purpose, or in accordance with the actual quality of the Products
upon delivery to
[the defendant]
customers, where
such quality leads to a reduction of value of the Products as a
result of latent, inherent or progressive defects.
3.6
[The defendant]
will adjust any amount due to the
Supplier by any cost or expense incurred by
[the defendant]
or
its agent which in the discretion of
[the defendant]
should
not be shared by all Suppliers participating in a specific
Consignment Account on an equal basis.
3.7
The Supplier will abide by the outcome of the audited and approved
Consignment Accounts.
[12]
‘
Consignment Account
’ was specially defined to
mean ‘
Differential trust accounts each administered on
behalf of the Suppliers, as the case may be, who agree, by their
selection in paragraph
D of the front page hereof, to deliver
Products in accordance with the specifications of such accounts.
’
(Paragraph D of the front page of the
pro forma
contract
document provided for the supplier to select a type of ‘consignment
account’, namely either (i) an own consignment
account, (ii) a
syndicated account or (iii) a group account. Both
companies selected an ‘
own consignment account
’.
[13]
‘
Net proceeds
’ was defined in the 1999 marketing
agreements to denote ‘
Gross proceeds less the costs incurred
by
[the defendant]
in the marketing of the Products and
[the defendant’s]
commission
’ as stated on the
front page of the contract document (in each case 7%). ‘
Gross
proceeds
’ was defined to mean ‘
The proceeds
received by
[the defendant]
in respect of the sale of the
Products, wherever marketed and without any deduction whatsoever.
’
[14]
The defendant’s commercial objective in concluding the 1999
marketing agreements was the generation of income.
It would
retain a commission of 7 per cent of ‘
the total FOB
Proceeds of the Supplier for all products marketed in terms of the
’
agreements. ‘
FOB Proceeds
’ was defined to
mean ‘
The Gross Proceeds less Overseas Costs and CIF Costs
’.
[15]
It is not possible to properly understand clause 3 of the 1999
marketing agreement without an insight into the manner in which
the
fruit producers and the defendant practically did business in terms
of the standard form contract. Seen in that context
it is
apparent that the expression ‘consignment account’ bore
two connotations. One related to a ‘consignment
account’
determined by the defendant and the other related to a ‘consignment
account’ stipulated by the producer
by selection of one of
three options provided in Part D of the front page of the contract
document. Confusingly to the uninformed
reader, the expression
is used in both senses in clause 3.1 of the contract.
[16]
To explain: The first of the two aforementioned connotations of
‘consignment account’ related to the composition
of a
consignment of fruit for export. The defendant was responsible,
in terms of clause 3.2 of the contract, for determining
the character
of each such consignment. This was done with reference to
defined characteristics such as the type and size
of the individual
items of fruit, its date of ripening and so forth. The scope
and definition of the consignments thus determined
and the
specifications - including issues such as the nature of packaging to
be used - of the fruit that were to comprise them
were fixed by the
defendant with regard to market demands and requirements, which
varied according to the geographic location of
the markets in which
the fruit was to be disposed of and, in some cases, the specification
of individual end-customers. The
variables were such that
during the 2002 season some approximately 15000 such consignments
would have been individually determined
by the defendant in the
ordinary course of its business.
[17]
A contracted producer having fruit available that was compliant with
the characteristics determined for a particular consignment
account
would deliver such fruit to the defendant. (The 1999 marketing
agreements provided for the drawing up of business
plans by the
defendant in co-operation with the producer. The business plans
were intended, to the contracting parties’
mutual advantage, to
coordinate production by the suppliers with the defendant’s
anticipated requirement for fruit.)
The fruit thus delivered
would be pooled with fruit supplied by other producers meeting the
same scope, definition and specification,
and treated as a batch (or
consignment) by the defendant for export purposes. Each such
consignment would be separately accounted
for in the defendant’s
books, hence the ‘consignment account’. All
expenses incurred in connection with
the disposal of the fruit in the
consignment would be debited to the consignment account. The
advance payments made to producers
as provided for in terms of clause
3.3 of the contract would also be debited against each contributing
supplier’s individual
account in the consignment account.
[18]
The producers whose fruit was
included in the consignment would each have an interest in the
consignment account proportional to
their respective individual
contribution.
[8]
After the fruit subject of the particular consignment account had
been sold, the proceeds would be credited to the consignment
account
and the credit balance, assuming the account was in credit after the
receipt of the proceeds, would be paid to the producers
who had
participated in the consignment
pro
rata
their participation,
less the commission and the advance payment debt due by them to the
defendant, and subject to any individual
adjustments effected by the
defendant in terms of clauses 3.5 and/or 3.6.
[19]
Payments to producers would be made by the defendant to the
consignment account stipulated by the producer in Part D on the
front
page of the pro forma contract document, which is the second of the
aforementioned connotations of the expression ‘consignment
account’. Producers could choose to be accounted to
individually, in a syndicated account, or in a group account.
(Chance Brothers and Club Champion had chosen to be accounted to
individually.) The consignment account referred to in Part
D of
the front page of the contract document thus was an account of the
individual producer, a group account of related producers,
or an
account operated by a syndicate of producers, as selected in each
case, in terms of clause 3.1, by the contracting supplier
[20]
The consignment accounts administered by the defendant were, as
mentioned, treated separately in the defendant’s books.
The defendant segregated the consignment accounts, referred to by the
defendant’s chief financial officer as the defendant’s
‘trading accounts’, from the accounts maintained in
respect of what he described as ‘the corporate side’
of
its business. Two sets of ledgers were kept; one for the
consignment (or trading) accounts, and the other for the corporate
business. The funding for advance payments to producers (in
terms of clause 3.3) would be provided from the defendant’s
corporate funds and debited as loans in the relevant consignment
accounts. The funding by the defendant of the expenses incurred
to export and sell the fruit would be treated in the defendant’s
accounts in an equivalent manner to the advance payments.
The
flow of funds to the defendant’s corporate account in respect
of the export of consignments of fruit would comprise only
the
repayment of the aforementioned loans (including, I assume, the
interest payable to the defendant in terms of clause 6.4)
and
expenses and the commissions stipulated in the applicable marketing
agreements between the defendant and the fruit producers.
[21]
In the words of the group financial director of the Capespan Group,
Mr Andrew De Haast, ‘both of [the aforementioned
ledgers] are
part of [the defendant’s] balance sheets, so if one looks at
the…balance sheet the collective of the
two ledgers comes into
form. It will be reflected in [the defendant’s] balance
sheet; they are definitely both Capespan
ledgers’. This
makes it clear that amounts standing to the credit of producers in
the respective consignment accounts
did not constitute funds
belonging to the producers, but merely amounts in which the defendant
was, subject to clause 3 of the
(1999) pro forma marketing agreement,
liable to pay to the producers. Fruit in any number of
different consignment batches
might be exported together in a single
shipment. The defendant, by reason of the volumes of fruit
which it exported, was
frequently able to obtain bulk rebates (or
discounts) from carriers in respect of freight charges. The
defendant had its
own professionally designed systems in place for
determining how such rebates should be accounted for between the
various consignments
included in the affected shipments. The
defendant’s accounts were maintained in a manner which made its
trading transactions
amenable to verification by audit process.
[22]
If the fruit concerned failed
to realise as much as had been estimated for the purpose of the
calculation of the advance payments
referred to in clause 3.3 of the
marketing agreement, the relevant consignment account could well
reflect a claim by the defendant
against the supplier, instead of an
amount due by it to the supplier. This makes it clear, I think,
that the use of the term
‘trust accounts’ in clause 3.1
of the marketing agreement is incorrect, certainly in the strict
sense of the legal
concept of a trust, as indeed is evident when one
construes the provision in the context of clause 3 read as a whole.
Any
credit balance in the so-called trust accounts constitutes the
disposable proceeds of the realisation of the defendant’s
property. The defendant holds those funds for itself and
administers them in a manner so as to facilitate the discharge of
its
obligation to pay to the suppliers what is due to them. Despite
some language which might on a superficial and insufficiently
contextual consideration suggest otherwise, the contractual scheme
creates a means of determining and effecting payment of the
defendant’s indebtedness to the suppliers in terms of the
contract, or, in cases in which the disposal of the fruit does
not go
propitiously, of determining the supplier’s indebtedness to the
defendant; it does not establish an entrustment of
property to be
administered by the defendant for the benefit of the producers.
Indeed, KPMG, the defendant’s external
auditors, confirmed as
much in a letter written on 14 November 2002, in respect of the
defendant company’s compliance
with the rule of the Fresh
Produce Exporters’ Forum (‘FPEF’) that funds in
respect of which exporters were liable
to producers should be held in
an appropriately segregated manner.
[9]
[23]
Reverting then to the evolution of the pleaded claim: After the
institution of the current proceedings in 2005, matters
were left
somewhat in suspense while the parties to the action concentrated
their attention on separate, but in a sense related,
litigation
connected with an arbitration claim that had been instituted by the
companies against the defendant in 2001. The
arbitration claim
was one for compensation for damages alleged to have been caused to
the companies by a breach, during the 2001
citrus season, by the
defendant of its obligations under the 1999 marketing agreements.
[24]
The arbitration was variously referred to by the protagonists as ‘the
fruit fly claim’ or the ‘out of protocol
claim’.
It arose out of the rejection, due to fruit fly infestation, of a
considerable quantity of grapefruit delivered
by the companies to the
defendant in mid 2001 for export in terms of the 1999 marketing
agreements. In their statement of
claim in the arbitration the
companies referred to the written notice of termination of the 1999
marketing agreements, dated 22 September
2000, which they had
purported to give in circumstances that I shall describe later,
without making it clear whether they contended
it had been effective
or not. They alleged, in para 13 of the statement of
claim, ‘
Notwithstanding the Claimants’ Notice of
Termination dated the 22
nd
September 2000….,
the respective Claimants and the Defendant conducted themselves at
all material times thereafter on the
basis that a marketing agreement
was in force between them in respect of the 2001 seasons on the terms
and conditions which included
those pleaded in paragraphs 6, 7, 8, 9,
10 and 11 above, and that they continued to do business on the terms
and conditions contained
in the said agreement.
’ The
clauses of the 1999 marketing agreements pleaded in paragraphs 6, 7,
8, 9, 10 and 11 of the statement of claim
were clauses 1.1, 4.1, 4.3,
6.1, 6.2, 8.2.2, and 15. (The reference to arbitration had
presumably occurred in terms of clause
13 of the agreements.)
It was also apparent that the companies must have been accounted to
in respect of the proceeds of
the fruit delivered by them to the
defendant in terms of clause 3 of the marketing agreements. It
is therefore apparent from
the manner in which the arbitration claim
was formulated that the companies contended that their relationship
was governed either
by the 1999 marketing agreements; alternatively,
an agreement tacitly relocating those agreements.
[25]
The arbitration proceedings had been interrupted by the intervening
liquidation of the companies. The plaintiff company
took
cession of the arbitration claim from the liquidators and sought to
have itself substituted as the claimant in the arbitration.
The
defendant resisted the substitution relying on a clause in the 1999
marketing agreements which prohibited a cession of rights
under the
agreements. The relevant provision in the 1999 marketing
agreements was referred to variously by counsel and the
witnesses
during the trial as ‘the non cedability clause’ or the
‘
pactum de non petendo
’. It appeared as
clause 16 of the 1999 marketing agreements and provided: ‘
Save
as herein expressly otherwise provided, neither this Agreement nor
any part, share or interest therein nor any rights or obligations
hereunder may be ceded, assigned, or otherwise transferred without
the prior written consent of the other party, provided that
[the
defendant] shall
have the right to cede, assign or transfer this
Agreement, either in whole or in part, to an associate or subsidiary
company of
[the defendant]
without the consent of the
Supplier.
’ In his replying affidavit in the
application for the substitution of the plaintiff for the companies
as the claimant
in the arbitration proceedings, Mr Christopher Chance
did not dispute the incidence of the non-cedability clause to the
contractual
relationship between the companies and the defendant in
2001. He argued, however, that the liquidation of the companies
had
‘the effect that vis à vis the liquidators, clause
16 of the marketing agreements is to be regarded as
pro non
scripto
’. That argument was rejected by a
full bench of this court (per Thring J; Allie and Waglay JJ
concurring) in
Capespan (Pty) Ltd v Any Name 451 (Pty) Ltd
2008 (4) SA 510
(C). An application by the plaintiff for
special leave to appeal against the adverse decision of the full
bench was refused
by the Supreme Court of Appeal.
[26]
The defendant had also relied
on the non-cedability clause in its plea in the action. The
plaintiff, consistently with its
position in the arbitration matter,
alleged in its replication that the non-cedability clause was not
binding on the liquidators
of the companies.
[10]
Mr
Muller
SC, who appeared for the plaintiff together with Mr
Melunsky
,
conceded, however, as he had to, that the full bench judgment is
binding on this court, and dispositive of the action, if the
business
transacted between the companies and the defendant in the 2002 season
had been governed by the terms of the 1999 marketing
agreements.
[27]
Thus the effect of the judgment of the full bench was that the
plaintiff’s claim in the current action, also founded,
as it
was at that stage, on a cession of the companies’ alleged
rights under the 1999 marketing agreements, could not be
prosecuted
on that basis. The plaintiff thereafter looked elsewhere –
that is outside the 1999 marketing agreements
- to found the alleged
right of the companies to the type of accounting sought from the
defendant in the action. In terms
of a succession of amendments
to its particulars of claim – several of them effected after
the commencement of the trial
- the plaintiff alleged that the
defendant’s mandate for the marketing and sale of the
companies’ citrus fruit in the
2002 season and the associated
duty to account was in the December 2001 production loan agreements,
alternatively in the so-called
November 2000 agreements, further
alternatively, in tacitly concluded marketing agreements which were
not subject to any prohibition
on the cession of rights. I
shall elaborate later on these allegations to the extent necessary.
[28]
Indeed, the plaintiff, having initially relied on the 1999 marketing
agreements, then alleged that those agreements had been
terminated
before the commencement of the 2002 citrus season. It alleged
that the 1999 marketing agreements were cancelled
by agreement at the
end of September 2000; alternatively, with effect from the end of
September 2001, pursuant to written notice
of termination given by
the companies on or about 29 September 2000; further
alternatively, on 8 November 2000, upon
the conclusion of what
were labelled in evidence as ‘the November 2000 agreements’
or the acceptance of ‘the
grapefruit offer’. The
defendant denied that the 1999 marketing agreements had been
cancelled, but alleged that in
any event, even were it to be held
that they had been, the companies’ produce continued to be
marketed during the 2002 season
in accordance with the terms and
conditions of the marketing agreements, as amended or affected by the
November 2000 agreements
and by the new production loan agreements
concluded between the respective companies and the defendant in
December 2001.
The defendant’s alternative contention
therefore rested, in substance, on an alleged tacit relocation of the
1999 marketing
agreements.
[29]
Owing to its potentially
dispositive nature, it is sensible to consider the question of the
alleged termination of the 1999 marketing
agreements first. The
1999 marketing agreements provided (in clause 2) for an annual
duration with effect from their respective
commencement dates (30
September 1998 and 1 October 1998), subject to notice of
termination being given by either party at
least one month prior to
the anniversary date. In the event of notice of termination not
being given, as aforesaid, the agreements
were to continue from year
to year until one of the parties gave the other written notice of
termination in accordance with clause
2 thereof.
[11]
The clause bears quotation in full; it provided: ‘
This
Agreement shall commence on the date indicated in paragraph A of the
front page hereof and terminate on the first anniversary
of such
commencement provided that one of the Parties has given notice of
such termination to the other at least one (1) month
prior to such
anniversary date. In the absence of such notice this Agreement
will continue from year to year until one of
the Parties gives the
other written notice of termination, provided that the notice period
will commence on 1 September, immediately
following such notice, and
will terminate on 30 September of that year unless otherwise agreed.
’
[30]
The evidence established that
at a meeting of the defendant’s directors on 22 September
2000, Mr Christopher Chance read
out a statement informing the
defendant’s board of the intention of the members of the
Nkwaleni Alliance to cancel their
marketing agreements with the
defendant and to enter into negotiations with the defendant for the
conclusion of new marketing agreements.
The Nkwaleni Alliance
was an association of citrus growers in the Nkwalini Valley in
KwaZulu-Natal, to which the companies belonged,
and in which
Mr Chance played a leadership role. It was evident from
the content of Mr Chance’s statement
that the growers’
complaint was that then extant agreements were too one-sided in
favour of the defendant. In particular,
the growers wished to
introduce a regime in terms of which the defendant, as the marketer
of the citrus produced by them, would
be committed to payment to the
growers of no less than the lowest price in the range of prices that
it had forecast that fruit
packed and delivered in a particular week
would realise, even if the fruit were sold below such price.
The growers were dissatisfied
with the situation which prevailed, by
which they were induced to pack and deliver fruit on the basis of
price forecasts given
to them by the defendant, only to discover,
after the fruit had been sold, that the range of prices actually
realised was considerably
lower. In the 2000 season the
disparity between forecast prices and realised prices resulted in
many suppliers having from
their own funds to repay part of the
moneys paid to them by the defendant as advance payments in terms of
clause 3.3 of the standard
form contracts used for the 1999 marketing
agreements.
[12]
[31]
The statement by Mr Chance to the board meeting was not intended in
itself to constitute notice of termination within the meaning
of the
contracts. Formal written notice of termination was given by
Mr Chance on behalf of each of the companies by
telefax on
29 September 2000. The notice letter, which was dated
22 September 2000, read as follows:
Chance
Brothers (Pty) Ltd and Club Champion Investments (Pty) Ltd hereby
give Capespan notice on (sic) the termination of our existing
marketing agreement (sic) with Capespan and wish to proceed,
immediately, via the Nkwalini (sic) Alliance of Capespan Growers,
to
re-negotiate a new agreement.
[32]
On its face, the terms of the cancellation letter were amenable to
construction either as notice of a purported immediate cancellation,
which would have constituted a repudiation of the 1999 marketing
agreements – it will recalled that they stipulated that
at
least one month’s notice of termination to be given before
1 September in any year and to become effective on the
following
30
th
day of September – or as notice of the
termination of the agreements with effect from 30 September
2001.
In my judgment it is evident from the context, however,
that the termination letter sent by Mr Chance on the companies’
behalf
to the defendant was intended to be of immediate effect and
that it was so understood by the recipient. It was intended to
place the defendant in the position in which it would be put to the
choice between concluding replacement agreements on terms more
favourable to the members of the Nkwaleni Alliance, or losing their
business. Mr Chance’s intention in writing
the
termination letter was confirmed in a letter by him to his fellow
directors of Chance Brothers, dated 29 September 2000.
Reporting on recent events and in the lead up to a scheduled meeting
with representatives of the defendant on Monday, 2 October
2000,
he stated:
In
the interim, all Capespan growers in Nkwalini, including ourselves,
have cancelled their contracts, so as to be in a position
to
re-negotiate new contracts for next season
[i.e. April –
October 2001]
.
Indeed,
Mr Chance confirmed in his evidence at the trial that it had been the
companies’ intention to notify the defendant
of their
cancellation of the 1999 marketing agreements with immediate effect.
[33]
That the director of citrus division of the defendant, Mr Chandler,
understood the letter in the manner in which Mr Chance
had intended
is evident from his urgent and pressing attention to resolving the
situation, including, amongst other things, cancelling
a planned
overseas marketing-related trip. This much is evident from a
letter written by Chandler to Chance, in the latter’s
capacity
of chairman of the Nkwaleni Alliance, dated 13 October 2000.
In the letter, Mr Chandler stated ‘
I…wish to
advise that I am currently investigating the contents of your
statement tabled at the Outspan Board on 20
th
September
and associated correspondence, so as to be able to deal with these
issues in an appropriate way
’. The documentary
evidence shows that Mr Chandler was conscious that Mr Chance
was influential with growers
in Nkwalini Valley area. In the
circumstances it was understandable why the defendant should have
reacted by endeavouring
to save the situation by resolving underlying
issues of dissatisfaction amongst the growers, rather than by
pointing out to Mr Chance
that his purported termination of the
companies’ marketing agreements with immediate effect
constituted a repudiation
[34] It is evident from the
defendant’s acknowledgement of the notice of termination given
by the companies that it was agreeable
to entering into negotiations
for the conclusion of replacement marketing agreements. The
defendant proposed, however, that
negotiations for a new marketing
agreement should stand over until after a meeting already scheduled
to take place with the members
of the Nkwaleni Alliance at Shakaland,
Nkwalini, in early October 2000, had occurred. On the evidence,
and notwithstanding
Mr Chance’s evident belief to the contrary
at the time, it would appear that the companies were the only members
of the Alliance
to have purported to give notice of the termination
of the marketing agreements with the defendant before the meeting at
Shakaland.
The defendant’s written response to the
companies’ termination letter went as follows:
Re-negotiation of
Marketing Agreement with Capespan
Notice
to re-negotiate your Marketing Agreement with Capespan is accepted.
I
suggest that we postpone negotiations until after the meeting to be
held with Grapefruit growers on Monday, 2 October 2000
at
Shakaland, Nkwaleni.
I trust that you will
find this in order.
Yours sincerely
Craig Erichsen
Area
Manager: KwaZulu-Natal
The
defendant’s letter was notably silent on the issue of the
purported immediate cancellation by the companies of the 1999
marketing agreements. It certainly did not evidence any
agreement on the part of the defendant which could support the
plaintiff’s
allegation that a consensual cancellation of the
agreements occurred.
[35]
The upshot of the meeting between representatives of the defendant
and the members of the Nkwaleni Alliance in October 2000
was the
addressing by the defendant to the individual members of the alliance
of an offer (‘the grapefruit offer’),
which, upon
acceptance by the companies and most other members of the Alliance,
gave rise to the so-called ‘November 2000
agreements’.
The effect of the November agreements committed the companies to
making their grapefruit produce exclusively
available for marketing
by the defendant for the 2001, 2002 and 2003 seasons. That
commitment was given in consideration
for monetary settlements in
favour of each of the growers who accepted the offer to compensate
them, on an agreed basis, for the
shortfall between the realised
prices for grapefruit and the advance payments that had been made
during the 2000 season.
[36]
The standardised letter setting out the offer made by the defendant
to the members of the Nkwaleni Alliance in November 2000
was dated
8 November 2000. It read (not entirely sensibly in para 1
thereof) as follows:
Dear
Grower,
The
following sets out Capespan’s final offer to the Nkwaleni
Alliance and it should be signed and returned to me by all Growers
who wish to avail themselves of Capespan’s offer. In
order to bring this issue to finality, the offer should be accepted
by no later than 13.00 on Friday 10
th
November 2000.
This will enable our accounting department to process the settlements
and make payment as soon as possible.
A
copy of this offer will be forwarded to Craig Erichsen of our Durban
office, who will communicate directly with your individual
members.
Acceptance can take place by members signing below and faxing a copy
to Craig.
The
agreement is in respect of grapefruit supplied to Europe during the
current season, and is as follows:
1.
The
difference between the first advances (as set out below) and the
final payment to the Grower will not be recovered from the
Grower.
Marsh
Star Ruby
Count[13]
Final Payment
Count
Final Payment
32
R11.00
32
R14.00
35
R13.20
35
R15.00
40
R13.20
40
R17.00
45
R9.00
45
R16.50
50
R8.00
50
R14.50
55
R6.00
55
R10.00
48
R5.00
48
R4.71
56
R4.00
56
R3.10
64
R4.00
64
R3.10
2.
The Grower
will commit 100% of his grapefruit volume to Capespan over a
three-year period, i.e. 2001, 2002 and 2003. This
is not a
right of first refusal, but due to the exclusivity of this offer,
Capespan will endeavour to place the product in the
best paying
market, taking cognizance of market conditions from time to time.
3.
Any dispute arising from the performance of
Capespan in the 2000 season is considered fully and finally settled.
Our
offer to consider additional assistance to individual Growers in the
form of pre-season loans remains available to Growers who
satisfy
Capespan’s credit criteria.
I
trust that you find this acceptable and look forward to entering into
negotiations regarding a new marketing agreement so that
we may focus
on the 2001 season.
Yours
sincerely,
L.M.
Chandler
Executive
Director Citrus
[37]
In my judgment the express terms of the November agreements are
irreconcilable with their pleaded characterisation as substitutes
for
the 1999 marketing agreements. What the November agreements did
indeed contain were recordals of the defendant’s
willingness to
negotiate and agree upon the terms of replacement marketing
agreements with those producers who accepted the grapefruit
offer.
However, save to the extent set out in numbered para 2 thereof,
they had no effect on the subsisting agreements
between the defendant
and the growers, including the 1999 marketing agreement between the
defendant and the companies.
[38]
There is nothing in the evidence to suggest that the envisaged
negotiations ever occurred, or that the postulated new marketing
agreements were concluded, either with the companies, or with any
other members of the Nkwaleni Alliance. Instead, save for
the
implementation of the November offer, business proceeded as usual in
accordance with the marketing agreements in place between
the
defendant and the members of the Nkwaleni Alliance. In the case
of the companies, this may have been at least in part
because of the
emergency caused by the fruit fly infestation which resulted in the
rejection for export of a large part of the
companies’ 2001
grapefruit crop in July 2001. It is plain from the content of
correspondence exchanged between Mr Chance
and various members of the
management of defendant in July 2001 and the ensuing months that the
financial effect of the fruit fly
infestation jeopardised the
continuing existence of the companies. It is clear that it
resulted in a situation in which,
because of the resultant increase
in the degree of already entrenched financial dependence of the
companies on the defendant, there
could be no question but that the
companies’ fruit would, as a matter of business necessity or
survival, be marketed by the
defendant if the companies were to
remain operational into 2002. The incentive to the defendant to
assist to keep the companies
afloat was the hope that in the ensuing
season they might trade themselves out of difficulty and be able
redeem their significant
debt to the defendant company.
[39]
Having regard to its position
on the pleadings with regard to the 1999 marketing agreements, it is
somewhat ironical that during
2001 the defendant sought to justify an
increase in commission charges debited to the companies account from
the 7 per cent provided
in the 1999 agreements, to its ‘default’
commission rate of 9 per cent on the basis of an allegation made in
correspondence
[14]
that the 1999 marketing agreements had been cancelled at the end of
September 2000. Equally ironic, from a current perspective,
in
view of the allegation by the plaintiff (which currently represents
Mr Chance’s interests) that the 1999 marketing agreements
had
been cancelled in September 2000 or November 2000, was Mr Chance’s
refuting of that contention evidenced by his insistence
that the 7
per cent commission rate was still in place.
[15]
The true nature of the contracting parties’ business
relationship as supplier and marketing agent, respectively, in
the
period between the giving of notice on 29 September 2000 and the
end of September 2001, falls to be determined with regard
to the
terms of their agreements, however, and not by their conflicting
expressions of opinion. In this respect the non-variation
and
non-waiver provisions in clause 17.1 of the 1999 marketing
agreements
[16]
are significant.
[40]
The conclusion of the December 2001 production loan agreements
(referred to by the companies and the defendant as ‘the
fruitfly loan’) likewise affords no support for the contention
that the 1999 marketing agreements had been cancelled.
The
evidence indicated that it was the defendant’s policy, when
appropriate, to financially assist farmers who supplied it
with fruit
to produce the crop. The loans were advanced on the basis that
they would be recoverable against the moneys due
to the producers
after the fruit had been exported. The terms of the December
2001 production loan agreements concluded between
the companies and
the defendant confirmed that the companies had obtained funding from
the defendant on this basis in preceding
seasons, including the 2001
season, and that as at the end of the 2001 season the amounts owed by
the companies to the defendant
in respect of these loans had not been
fully repaid.
[41]
In the context of a
consideration of whether or not they evidenced that the 1999
marketing agreements had been cancelled, the only
provisions of the
2001 production loan agreements that are of interest are the
provision in each agreement that ‘[the company]
will
supply all of its fruit exclusively to Capespan until such time as
the new production loan has been repaid in full. The
manner in
which the fruit will be supplied and marketed by Capespan will be
dealt with in a Marketing Agreement to be negotiated
and agreed
between
[the company]
and
Capespan’
and the
related provision that ‘
The
Marketing
Agreement
will entitle Capespan to a commission equal to 9% of the selling
price of all fruit marketed and sold by Capespan for
and on behalf of
[the company]’.
[17]
Those provisions were clearly indicative of an intention by the
parties to put in place between them a contractual regime
which would
constitute a substitute for that which had previously subsisted
between them. The evidence shows, however, that
no such
replacement agreements were in fact concluded. Instead, all the
indications are that the marketing of the companies’
fruit in
2002 continued, as it had done in 2001, consistently with the terms
of the 1999 marketing agreements. The only difference
was that
in the 2002 season the defendant exacted a commission calculated at
nine percent of the FOB proceeds within the meaning
of that
expression as defined in the 1999 marketing agreements; in other
words at the increased rate to which the parties had agreed
in terms
of the December 201 loan agreements.
[42]
The defendant’s
management officials who gave evidence testified that the defendant
would not under any circumstances have
advanced production loans to
producers which were not bound to it in terms of marketing
agreements. That evidence was wholly
consistent with sound
business sense and the inherent probabilities. Moreover, the
scheme of loan redemption provided for
in the production loan
agreements could not find any basis for operation if the defendant
were not to be in a position to market
the companies’ fruit,
and substantially on the basis on which it had hitherto been
undertaken. The repayment provisions
in terms of the December
2001 agreements, predicated as they were on an entitlement by the
defendant to deduct R4 per carton from
advance payments and R5 per
carton from final payments due by it to the companies, were plainly
modelled to operate within the
context of the transactional scheme
reflected in clauses 3.3 and 3.4 of the 1999 marketing
agreements.
[18]
It is significant in that context that the defendant proceeded to
advance substantial amounts to the companies under the
December 2001
production loan agreements even before the commencement of the 2002
citrus season. Indeed, it became apparent
as early as the
beginning of January 2002, that the companies would require yet
further funding if they were to be able to survive
into commencement
of the 2002 marketing period.
[43]
Mr Chance testified that the new production loans made available to
the farming companies in terms of the agreements concluded
with the
defendant in December 2001 proved insufficient to satisfy the
requirements of Chance Brothers and Club Champion.
Consequently, on 11 January 2002, a further agreement was
concluded between the companies and the defendant, in terms of which
additional loan finance was made available to the companies by the
defendant. The agreement in respect of the additional
loans was
incorporated in a letter from the defendant to Mr Christopher Chance,
as representative of the so-called Chance Group,
dated 11 January
2002. Mr Chance counter-signed the letter in acknowledgement
and acceptance of the terms and conditions
set out in the letter.
The letter provided as follows:
Dear
Chris [Mr Chance],
I
am pleased to advise that your production loan facilities have been
approved for 2002 on the following basis:
Farm
Existing
Balances[19]
Fruit Fly loan
Additional
Total
Chance Brothers
1 374 532
1 100 000
1 174 661
3 649 193
Club Champion
1 293 835
800 000
1 597 507
3 491 342
The
following conditions be applied to these loans:
1.
The additional loan will bear interest at prime
overdraft rate.
2.
It is accepted that the existing balances as
reflected above are the opening position and that you are fully
indebted for these
amounts and that your maximum indebtedness during
the year will not exceed the amounts reflected above.
3.
We will require guarantees from each farm for the
indebtedness of the other to Capespan.
4.
Funds are advanced to pay defined existing
creditors, i.e. we do not simply make a cash advance but settle
specific creditors as
verified by Capespan after consultations and
discussions with yourself.
5.
A 1% raising fee is levied to cover additional
monitoring costs on the additional loan amounting to R27 722.
Capespan will
consider refunding any unspent portion of this amount
to you at the end of the years, at our discretion.
6.
I [Mr Lance Chandler] participate in all Board
meetings and play an active role in the financial management of the
business.
In this regard I intend to attend four meetings
scheduled for Saturdays throughout this year. The raising fee
referred to
above will cover the costs. We will only recover
direct expenses and will not charge for any of my personal time.
7.
The advance of the loans is to be staggered over
the next five months until first advances start to flow (which should
enable us
to advance less than the above in total as we manage the
cash flow) in accordance with terms negotiated with creditors and
entirely
at the discretion of Capespan (Pty) Ltd.
8.
The conditions of the fruit fly loan and
undertaking by you, will, as far as possible apply to the additional
loan.
9.
You will institute financial and management
controls as recommended by Capespan and we will be entitled to
receive regular information
from you so as to assess your financial
position and minimize our risk as and when required.
10.
The
standard terms of our normal production loan (attached) will
apply.
[20]
11.
Should we lose the fruit fly claim, the full
amount of the claim is immediately repayable to Capespan (Pty) Ltd,
in terms of the
fruit fly loan agreement.
12.
Recovery rates regardless of the outcome of the
claim will be set out adjusted throughout the year to ensure that the
total loans
are repaid over a maximum of two years, with at least 50%
being repaid in this year.
13.
The commission rate of 9% for the current year is
confirmed.
14.
Existing securities in the form of cessions and
personal guarantees already in place will cover the full indebtedness
and if we
deem it necessary these may be updated or changed in order
to update the administration thereof.
15.
You will personally be involved in the affairs of
the farm to ensure GAP and sound financial practices, including no
further Capital
Expenses or expansion takes place throughout this
year.
16.
Further financial restructuring will take place
prior to the financial year end so as to improve the long-term
funding and strengthen
the financial position of the group, details
of which will be resolved between the parties in the long-term
interests of your Group.
17.
All parties will actively explore the sale of
Capespan’s investments in the pack houses.
18.
Capespan reserves the right to call for repayment
on demand should any of these conditions be in breach or should there
be any act
in bad faith between the parties which is detrimental to
either yourselves or to Capespan.
I
trust that this is acceptable to you and look forward to a successful
2002 in the interests of all parties.
Kindly
sign and return this fax to me as a matter of urgency so that we can
instruct payment.
Yours
sincerely,
L.M.
Chandler
CEO
Capespan Citrus
[44]
The terms of the January 2002 agreement make no reference to the
conclusion of a new marketing agreement. They were clearly
formulated on the basis of a common acceptance of a subsisting
contracted marketing relationship, it being confirmed, however,
that
the commission rate had been increased to nine percent. The
only source for that relationship was the 1999 marketing
agreements
and I have little doubt that Mr Chance appreciated as much at all
material times. It is that appreciation that
explains the
initial reliance by the plaintiff on the agreements in this action
and its persistence in that reliance even after
the defendant raised
the potentially vitiating issue of the non-cedability clause.
[45]
As an aside, because it is relevant only to the separate question of
the appropriation of the proceeds of the fruit, it is
also apparent
from clause 12 of the January 2002 agreement that a fixed rate of
recovery of the money advanced would not apply
and that the defendant
could effect recoveries to ensure that at least 50% of the total
amount outstanding by the companies to
the defendant would have been
repaid by the end of 2002. The agreement, in addition, provides
that the defendant will be
involved in managing the companies’
cash flow as part of its management of the incremental (or
‘staggered’) advances
to be made under the agreement.
All of this contradicts the assertion by Mr Chance on behalf of
the plaintiff that the
defendant was restricted to recoveries of R4
and R5 per carton as provided in terms of the December 2001
production loan agreements.
[46]
In the circumstances it seems
clear that the purported termination of the 1999 marketing agreements
by the companies was not accepted
by the defendant and was therefore
ineffectual.
[21]
Furthermore, no alternative, or replacement for the 1999 marketing
agreements was ever concluded. The contracted parties
continued, after September 2000, to do business with each other on
the basis they had done previously, save to the extent amended
in
terms of the November 2000 agreements. In the circumstances the
plaintiff has not established its allegation that the
1999 marketing
agreements were terminated. The action therefore falls to be
dismissed for failing at the first hurdle by
reason of the
non-cedability clause in the 1999 marketing agreements.
[47]
If I am wrong, however, and the 1999 marketing agreements were indeed
effectively terminated, as later alleged by the plaintiff
when
confronted with the effect of the full bench judgment, it would beg
the question as to the character and basis of the relationship
between the companies and the defendant in respect of the export of
the 2002 season citrus. In my view the undisputed facts
impel
the conclusion that business went on as before, save for the increase
in the defendant’s commission stipulated in the
December 2001
new production loan agreements and save for the effect of the further
agreements concluded between the parties during
the 2002 year,
commencing with the additional loan agreements concluded in January
2002. While the 2001 new production loan
agreements expressly
contemplated the conclusion of new marketing agreements, that was not
achieved. Indeed, apart from some
desultory correspondence
written by Mr Chance apparently with the object of initiating
discussions between the parties on
the content of the contemplated
new marketing agreements and the odd telephone call and a unilateral
consultation with the companies’
attorneys to which Mr Chance
alluded in his evidence, there was nothing even approximating
negotiation between the parties on the
terms of any contracts to
replace the 1999 marketing agreements. In the circumstances the
inference impelled by the conduct
of the parties is that, save in the
respects otherwise expressly agreed between them, the terms of the
1999 marketing agreements
were tacitly relocated.
[48]
That conclusion in turn begs
the question whether the provision prohibiting the cession of rights
lived on as part of the tacit
contract. As observed in
Golden
Fried Chicken (Pty) Ltd v Sirad Fast Foods CC and Others
[2002] 2 All SA 551
(SCA), at para 5, with reference to the
judgment in
Doll House
Refreshments v O’Shea and Others
1957 (1) SA 345
(T), a term of the previously subsisting contract
which is collateral, rather than ‘incident’, to the
essential subject
matter of the agreement in question does not
survive the lapsing of the previously subsisting contract when such
contract is tacitly
relocated. The enquiry falls to be
determined with regard to whether the term or provision in question
is intrinsic to the
contract that has been tacitly renewed. In
Doll House Refreshments
,
for example, a provision of a contract conferring an option to
purchase was held to be collateral to an agreement of lease for
which
the original expressly concluded contract had principally provided
and thus it did not survive the termination of the contract
and was
not incorporated in the subsequent agreement tacitly relocating the
lease. In
Tor
Industries (Pty) Ltd v Gee-Six Superweld CC and others
2001
(2) SA 146 (W), however, Wunsh J found that a covenant in
restraint of trade was incident to a contract of employment
and that
it thus also formed part of the tacitly relocated contract of
employment when the expressly concluded contract lapsed.
[49]
In the current matter I have concluded that the prohibition against
any cession of rights was incident to, rather than collateral
to, the
agreement in terms of which the defendant did business with the
companies in respect of the export of the citrus crop in
terms of the
1999 marketing agreements. Although the 1999 marketing
agreements did not create a relationship of agency between
the
companies, as principals, and the defendant, as agent, it resulted in
a situation in which it would be invidious were the defendant
to be
open to having to account to a party different to the one from which
it had obtained the fruit for the net proceeds.
The marketing
agreements had only one object or purpose; the regulation of the
relationship between the companies and the defendant
in respect of
the export of the citrus fruit produced on the companies’
farms. The inclusion in the agreements of a
prohibition against
a cession of rights was an integral part of the central subject
matter of the contracts. A number of
aspects of the contracts
afforded good reason for the inclusion of a non-cedability clause.
These included the contemplated
scope for the operation of set-off in
respect of the producers’ liability to the defendant in respect
of first, and interim
advances
vis à vis
the
defendant’s liability to the producers in respect of the final
payments; the right of Capespan to make adjustments; and
the
arbitration clause. The whole nature of the contractual
relationship established in terms of the 1999 marketing agreements
was one that contemplated the respective parties being tied together
on an inextricable basis throughout each season. On
the facts,
the existence of production loans given against discretionary
recovery rates is conduct by the parties post Sept 2001
consistent
with the tacit relocation of the provision. The defendant was
hardly likely to have agreed to make such advances
if it could not be
assured of the right to recover from the amounts in which it would
foreseeably itself later become due to pay
to the companies.
The factors to be taken into account in this respect materially
overlap with the considerations urged by
the defendant in respect of
the
delectus personae
relationship between the parties.
This is understandable because a finding that the prohibition against
cession was incident
to the essence of the contractual relationship
established under the 1999 marketing agreements, rather than just a
collateral term,
comes down, in substance, to a finding that the
contracts were subject to a mutual relationship of
delectus
personae
.
[50]
The conclusion that if the 1999 marketing agreements had been
cancelled, they were substantially tacitly relocated, makes it
unnecessary to discuss the plaintiff’s further alternative
allegation that if the agreements had in fact not been cancelled,
the
defendant was estopped from relying on them. I should perhaps
record, however, that I did not find any merit in the point.
There was no evidence that the defendant represented to the companies
that the marketing agreements had been cancelled. Even
if the
evidence of the letter by Mr Knoetze in September 2001 is accepted as
constituting such a representation, there is no evidence
that the
companies reasonably acted on it to their prejudice. The
evidence by Mr Chance that the companies would not have
entered into
the December 2001 production loan agreements if they had not believed
that the 1999 marketing agreements had been
cancelled is
unconvincing. On the contrary, it is clear that the companies
concluded the December 2001 production loan agreements,
and shortly
thereafter the January 2002 agreement, in order to endeavour to
survive the desperately adverse financial situation
in which they
found themselves at that stage. The companies required not only
the indulgence of the defendant in respect
of their failure to have
redeemed the outstanding balance owed on production loans advanced in
2000 and 2001, but, in the case
of Chance Brothers, also that of its
banker, Nedcor. The terms of the December 2001 production loan
agreements afforded that
indulgence.
[51]
The plaintiff’s counsel submitted that in the context of the
parties’ indications of a desire or willingness to
negotiate
new marketing agreements it could not follow that if the 1999
marketing agreements had been terminated, the contracts
were
thereafter tacitly relocated. They contended that the marketing
agreements were instead replaced by tacit agreements
simpliciter –
as distinct from tacit relocations of the previously subsisting
agreements - without any provision therein of a prohibition against
a
cession of rights. This argument appeared to have been founded
on the following passage in the judgment of Harms JA
in
Golden
Fried Chicken (Pty) Ltd
, supra, at para 4: ‘
After
the termination of the initial agreement and prior to this letter the
parties (in the light of the facts recited) conducted
themselves in a
manner that gave rise to the inescapable inference that
both
desired the revival of their former contractual relationship on the
same terms as existed before
. Taken together, those facts
establish a tacit relocation of a franchise agreement (comparable to
a tacit relocation of a lease)…
’ (the underlining
replicates the emphasis, indicated in the same way, in the
plaintiff’s heads of argument).
The argument, as I
understood it, appeared to go that because it was evident that the
companies wished to replace the 1999 marketing
agreements with
something different (presumably with agreements with provision for
some degree of minimum price guarantee) and
the defendant had
indicated its willingness to enter into negotiations in that regard,
it could not be said that both sides desired
the revival of the
former contractual relationship on the same terms as had existed
before.
[52]
The argument is unsound in my view, and, if I have understood it
correctly, based on a contextual misreading of the quoted
passage
from
Golden Fried Chicken
. It overlooks that the
inference as to the conclusion of a tacit agreement is made with
regard to the external manifestations
of the parties’ conduct
and not the subjective workings of their minds. In the current
matter the contracting parties
continued behaving as before, even
while all along expressing a willingness, after successful
negotiations, to enter into a different
agreement. We know that
the contemplated negotiations were never held and the postulated
differently formulated marketing
agreements never concluded.
The current case is thus concerned with the nature of the parties’
subsisting contractual
relationships while the contemplated
negotiations to introduce a different regime remained in the offing.
The evidence shows
that in that period, including the 2002 citrus
season, business continued to be transacted between the companies and
the defendant
as it had been under the 1999 marketing agreements,
subject only to the amending effect of the November 2000 agreement
and the
commission rate increase agreed upon in the December 2001
production loan agreements and confirmed in the January 2002
agreement.
[53]
Although not strictly necessary
in view of the conclusions to which I have come as to the
non-cedability of the companies’
rights against the defendant,
there are two remaining issues which might usefully be addressed for
completeness, in case this matter
goes further. Those issues
are (i) the validity or efficacy of the cessions on which the
plaintiff relies and (ii) whether
the companies enjoyed a right
to claim a statement of account of the nature demanded by the
plaintiff in this action.
[22]
[54]
Treating with the first issue: The subject matter of the relevant
cessions, that is the cessions in favour of the plaintiff
by the
liquidators of the companies and by Nedbank, was identified in
essentially similar terms in each of the relevant instruments.
In the deed of cession executed by the liquidators of Chance Brothers
and Nedbank Ltd the ‘claim’ was defined as follows:
all claims of any nature
whatsoever or howsoever arising which the former directors [of] the
cedent [defined as Chance Brothers
Pty Ltd (in liquidation)] contend
that they have against [the defendant], which claims shall include
but not be limited to those
claims arising as a consequence of the
alleged breach by [the defendant] of the Marketing Agreement entered
into between it and
the cedent on or about April 29, 1999 and the
alleged breach by [the defendant] of the Tripartite Agreement entered
into between
it, the cedent and [Nedcor Ltd] on or about December 21,
2001.
[23]
[55]
The defendant contends that,
assuming the alleged cessions were competent (which, of course, it
denies), the cession agreements
upon which the plaintiff relies are
void for vagueness. In my judgment the defendant’s point
is well-taken. It
is evident that the determination of what has
been ceded is dependent on the contentions and allegations of the
former directors
of the companies in liquidation, or of the
liquidators of Club Champion. There is no evidence of what
those contentions were,
or as to when they were formulated, or as to
whether their precise import was known to the liquidators when they
purported to execute
the cessions. I do not think that terse
references in minutes of meetings between the liquidators and
representatives of
the defendant held long before the purported
cessions were effected provide the required evidence of the
directors’ contentions
in respect of alleged claims founded in
the 2002 season, as I understood the plaintiff’s counsel to
argue. The same
observation holds true for the vaguely recorded
content of the report of the managing director of Chance Brothers to
the liquidators
relied upon by the plaintiff’s counsel in this
connection.
[24]
The widely embracing connotation of the word ‘
all
’
also emphasised by counsel for the plaintiff in this connection is
not a panacea for the lack of evidence. In context,
the word
refers to all the claims which the former directors
contend
the companies had against the defendant, without identifying which
those are. As mentioned, the formulation of the basis
of the
claim against the defendant in this action has been through a number
of iterations in the course of numerous amendments
to the particulars
of claim. When the action commenced it was founded in the 1999
marketing agreements. When the judgment
of the full bench
rendered reliance on those agreements fruitless, the foundation of
the alleged claims was transferred to the
2001 production loan
agreements and then to the November 2000 agreements and finally to
tacitly concluded marketing agreements
which allegedly had taken the
place of the cancelled 1999 marketing agreements. Thus the
claims were ultimately asserted
on a basis entirely at odds with that
on which the action was commenced. No evidence was adduced of
the directors’
contentions, but it is difficult to conceive
that they could have been formulated in September 2005 in a manner
consistent with
the claims as finally pleaded during the trial in
2011. The cession of claims could only be premised on the
erstwhile directors’
contentions and allegations at the time
the cessions were purportedly effected; they could not relate to
contentions as yet unformulated
in September 2005. Moreover,
the liquidators would have needed to know what the relevant
contentions and allegations were
if they were to be able to form the
requisite intention to transfer the pertinent rights to the
plaintiff.
[56]
The plaintiff’s counsel submitted that the different iterations
of the claim in the pleadings did not affect the essence
of what had
been ceded (i.e. the claim for the allegedly unaccounted for proceeds
of the disposal of fruit produced on the companies’
farms in
the 2002 citrus season) and thus did not detract from the validity of
the cession. They relied in this regard on
the principles set
out in
Sentrachem Ltd v Prinsloo
1997 (2) SA 1
(A) at 15-16,
amongst other cases, in relation to the prescription of a claim in
the context of the amendment of pleadings.
According to those
principles a defectively pleaded, but nevertheless sufficiently
clearly identified, claim timeously pursued
by the institution of
proceedings before it has become prescribed is not extinguished by
prescription if the pleading is amended
to properly plead it only
after the applicable prescriptive period has elapsed. I am not
persuaded, however, that those principles
are applicable in the
context currently under consideration. In the current case what
the alleged debt by the defendant is
and the basis for its existence
depends on the contract which is alleged to have given rise to it, as
does the nature of any related
accounting to which the plaintiff
alleges an entitlement.
[57]
But quite apart from the
aforegoing considerations, which in my view are fatal to the efficacy
of the cessions, the subject matter
of the cessions was in any event
just too vaguely described for the agreements to be valid. In
this regard, as stated by
Van der Merwe
et
al
in
Contract
General Principles
(3
rd
edition) at p.460, the subject matter of a cession ‘
must
be described in such a manner as to be certain or ascertainable
’.
In Hutchison (ed)
The
Law of Contract in South Africa
(2009)
the point is made in the following terms ‘
...
the personal right or rights in question must be described in such a
way as to make the subject matter of the cession certain
or at least
determinable
’.
[25]
Certainty is necessary not only on the grounds of basic contractual
principle, but also because a cession of rights affects
the position
of the third party which is obligated to perform in terms of the
ceded rights. The third party should not be
at risk of
prejudice because of actual or potential uncertainty between the
cedent and the cessionary as to whether or not the
right in issue is
encompassed by the cession in question.
[58]
Furthermore, and in any event, no basis for a claim by Nedbank for a
statement of account by the defendant was established.
The only
contractual link between the defendant and the bank was to be found
in the December 2001 production loan agreement between
Chance
Brothers and the defendant, to which the bank was also a signatory
(the so-called ‘tripartite agreement’).
Nothing in
that agreement constituted the defendant as a debtor of Nedcor; the
agreement merely provided for certain payments to
be made by the
defendant to the bank either from the funds to be lent by it to
Chance Brothers under the agreement, or from funds
to which Chance
Brothers would otherwise have been entitled as final payments in
terms of its marketing agreement with the defendant.
In other
words, the December 2001 production loan agreement constituted the
defendant as Chance Brothers’ payment agent in
respect of the
redemption of identified debts owed by the latter to Nedcor.
(As to the apparent cession by the Chaunce Brothers
to Nedbank of the
proceeds of its crop
in securitatem debiti
, that would, of
course, have fallen away upon the liquidation, with Nedbank thereupon
becoming a secured creditor against the company
in liquidation; all
that Nedbank could cede to the plaintiff in 2005 was its secured
claim against Chance Brothers in liquidation.)
[59]
Turning to the second issue
mentioned in para [53]: There was frequent reference to
the defendant as the companies’
agent and, indeed, during the
currency of their relationship, the defendant was loosely described,
even by itself, as the companies’
export agent. It was in
the general principle that an agent has a duty to account to its
principal that the plaintiff also
sought to found the defendant’s
alleged duty to account to the companies. On a proper
consideration of their mutual
positions in terms of the 1999
marketing agreements it is clear, however, for the reason explained
earlier in this judgment,
[26]
that the label of ‘agent’ to characterise the defendant’s
legal relationship
vis à
vis
the companies was a misnomer.
[60]
The defendant’s counsel emphasised the distinction between the
loose sense in which the word ‘agent’ is often
employed
and its connotation in law. They supported their submissions in
this respect with the following quotations from
De Villiers &
Mackintosh
The Law of Agency in South Africa
3
rd
ed., which are apposite:
‘
[An agent is] a
person who has authority to act for and on behalf of another (called
the principal) in contracting legal relations
with third parties; the
agent represents the principal and creates, alters, or discharges
legal obligations of a contractual nature
between the latter and
third parties.’
[27]
and
‘
The specific
characteristic of agency in the legal sense is the authority
conferred on the agent to make binding contracts on behalf
of his
principal. An agent is sometimes defined as one who has authority to
act for another, but while such a definition may describe
persons who
do not possess the distinguishing characteristic referred to and are
nevertheless popularly termed ‘agents’
(such as, for
example, the ‘estate’ or ‘house agent’), it
is for legal purposes inexact. A person who has
authority to act for
another cannot be regarded in law as an agent unless that authority
covers the creation of contractual obligations
between his principal
and the third party. To the extent to which an ‘agent’ is
required to perform non-juristic acts
(i.e. acts which do not have
the effect of bringing his principal into legal relations with third
parties), he ceases to be an
agent and becomes a servant or
independent contractor… From this point of view an agent may
be defined as a servant or independent
contractor who brings his
principal into binding legal relations with third parties. His
capacity as agent exists in law only for
the time during which he is
representing his principal in the formation of contractual
obligations with third parties.’
[28]
[61]
As already noted, in terms of
the 1999 marketing agreements, the defendant was constituted the
owner of the fruit to be exported
upon delivery thereof to it by the
companies. In exporting the fruit and selling it abroad the
defendant was therefore contracting
with third parties on its own
behalf
qua
principal, and not as the companies’ agent. The fact that
the vitality and competitiveness of defendant’s business
enterprise depended on its dealing with the fruit to the maximal
financial advantage of its suppliers and the fact that it had
contracted to pay to the companies the net proceeds of the disposal
of the fruit did not detract from the feature that it was transacting
with third parties in respect of its own fruit, and not that of the
companies. In consideration for passing ownership of
the fruit
to the defendant, the companies obtained a claim against the
defendant, the sum of which fell by their agreement to be
calculated
with reference to the amounts credited to the pertinent consignment
accounts consequent upon the realisation of the
fruit. The
labelling of these consignment accounts as ‘trust accounts’
was also a misnomer. That much is
evident from the description
given elsewhere in this judgment
[29]
of the character and operation of the consignment accounts. The
resulting relationship between the companies and the defendant
was
therefore one of creditor and debtor; cf.
Absa
Bank Bpk v Janse Van Rensburg
2002 (3) SA 701
(SCA) at para 14 -16. The character
of the agreement between the parties which gave rise to it was an
innominate
contract.
[62]
I accept that the fruit
producers contracted with the defendant on the basis described,
understanding that the defendant was thereby
duty-bound to dispose of
the fruit to best advantage for the producer, and that the defendant
accepted that it was so duty-bound.
To that extent I can
understand the repeated references by the plaintiff’s counsel
to the notion that the companies had placed
their trust in the
defendant. In view of the conclusion to which I have come in
respect of the relevant terms of the contract,
it is unnecessary to
determine whether the duty on the defendant to account to the
producer that was undoubtedly an incident of
the contractual
relationship established in terms of the 1999 marketing agreements
was fiduciary or not. There was in any
event no dispute that
the contractual relationship which they created included a duty on
the defendant to account to the companies
and the evidence
demonstrated how it regularly did so in the ordinary course. In
the nature of the contractual relationship
it was inherently
foreseeable that the companies might query or dispute the calculation
of the amount due to them. Their
contracts with the defendant
provided for such an eventuality. The companies bound
themselves in such a situation to accept
the outcome of an audit and
approval of the relevant consignment account (see clause 3.7 of the
marketing agreements, quoted in
para [10], above). Clause
3.7 of the marketing agreements appears to me to be entirely
irreconcilable with the notion
of any duty to render a statement of
account of the nature claimed by the plaintiff.
[30]
[63]
Some accounting would be
necessary in terms of the parties’ contractual relationship.
The contract would require, for
example, that the companies be
informed of the gross proceeds of the realisation of the fruit in any
consignment in which fruit
supplied by them was included and in broad
terms of the costs incurred by the defendant in respect of such
consignment after it
had taken delivery of the fruit.
[31]
There was no suggestion in the evidence that an accounting at this
high level was not either routinely given, or available
on request.
Indeed all the indications are to the contrary. Although the
accounts given to suppliers by the defendant
in the ordinary course
disclosed costs only ‘below FOB level’, there is nothing
in the pro forma marketing agreement
that prevented the supplier from
obtaining information from the defendant as to the gross proceeds and
in general terms as to the
costs incurred in respect of the export
and sale of a consignment after the fruit had been delivered to the
defendant. The defendant
indeed admitted that it had a certain duty
to account.
[32]
It alleged that it had discharged this duty in the course of the
execution of the contract and in doing so had dealt reasonably,
and
apparently to the companies’ satisfaction at the time, with any
queries that the companies had raised. (Certainly
it was
apparent that a number of questions about the probity of the
defendant’s accounting to the companies raised by the
plaintiff
through the opinion evidence of an accounting expert, Ms Susan Dean,
apparently to lend some cogency to the plaintiff’s
allegation
that the accounting received by the companies had been incomplete and
insufficient, were allayed during cross-examination
of the witness
with reference to the accounts which had been rendered by the
defendant during the 2002 season.)
[64]
There were, however, many
logistical and business-related reasons for the defendant to not wish
to be bound to give a detailed accounting
supported by vouchers to
each and every one of its many suppliers, which is the quite
different nature of accounting sought by
the plaintiff in the action
made evident in the testimony of Mr Chance and the content of
annexure E to the particulars of claim.
[33]
Mr Strauss and Mr De Haast, senior and longstanding management
officials of the defendant, both testified as to the intensely
competitive nature of the fruit exporting business in the
post-deregulation era.
[34]
Both witnesses gave evidence about certain producers having taken
over some of the functions in the export chain previously
undertaken
by the defendant, with some large producers handling the export of
their fruit entirely by themselves. It would
not suit the
defendant’s business interests to allow its customers insight
into too much of the detail of the transactions
entailed in effecting
the exports. To do so would be tantamount to permitting a
potential competitor insight into confidential
business information.
[65]
Mr De Haast also explained that providing producers with vouchers of
the sort set out in annexure E to the plaintiff’s
amended
particulars of claim would in any event in many cases be
meaningless. In this respect the witness reiterated that
there
were almost invariably multiple participants in each consignment and
that any number of different consignments might be shipped
together.
Moreover, the manner in which the defendant might choose to ship
consignments, or parts of consignments, might
require the defendant
to apply a form of cost averaging when it calculated the costs
falling to be charged to each consignment
account for the purpose of
determining the final payments to which the growers participating in
the accounts should be entitled.
[66]
An example given by Mr de Haast in this regard was the need to
‘average’ the costs in a case in which during
a certain
period some product is shipped using conventional shipping methods in
which stevedoring is entailed, which is comparatively
expensive, and
other product is shipped in containers, in respect of which different
costs are incurred. An average cost
rate would be calculated by
the defendant to avoid arbitrary advantage or disadvantage to
participating producers dependant on
whether their cartons fell into
those shipped by the defendant using more costly or cheaper means, as
the case might be.
Giving a detailed accounting with reference
to a multitude of vouching invoices to each and every grower in
respect of such determinations
just would not be practicable
contended Mr de Haast, persuasively in my view. In such a
situation the safeguards that producers
would be entitled to would be
met by the assurance that objectively acceptable systems were in
place to ensure that costings were
fairly allocated to achieve a
determination of payments to consignment accounts that would be
amenable to objective scrutiny and
confirmation by independent audit.
[67]
In my view the 1999 marketing
agreements were expressly structured to provide growers with that
very form of assurance. Clause
3.7 of the marketing agreements
seems to me to have been especially included as a practical and
effective means to address the
needs and concerns of both the fruit
supplier and the defendant company in a situation in which the
supplier wanted to verify the
correctness of the calculation of any
payment due to it. In my judgment the sub-clause both provided
and delimited the supplier’s
contractual remedy in a situation
in which it might seek to suggest or assert that a consignment
account had not been properly
or correctly administered by the
defendant in the course of the execution of the contract. The
letter from the auditing firm
KPMG to the FPEF, referred to
earlier,
[35]
appears to confirm that the defendant had the required systems in
place in order for clause 3.7 of the 1999 marketing agreements
to
fulfil its intended purpose. The plaintiff’s counsel made
something of the evidence of Mr de Haast to the effect
that the
defendant would not allow an auditor appointed by a grower to do the
audit contemplated by clause 3.7. Whether Mr
de Haast’s
opinion as to the parties’ rights and obligations arising out
of the terse provisions of clause 3.7 was
sound or not is, however,
not an issue that arises for decision in the context of the
accounting sought by the plaintiff.
The plaintiff is not
seeking an audit report on the relevant consignment accounts.
(Similarly, the opinions expressed by
Messrs Latham and Zaayman as to
what they might have been entitled to if they had found themselves in
dispute with the defendant,
on which the plaintiff’s counsel
sought to rely in argument does not advance matters. Latham and
Zaayman were two citrus
growers in the Nkwalini Valley, who were
called as witnesses by the defendant. Their opinions do not
affect the import of
the written marketing agreement.)
[68]
Irrespective of whether or not the 1999 marketing agreements
subsisted in the 2002 season, or whether their provisions had
been
tacitly relocated, or whether the contractual relationship between
the defendant and the companies was regulated at the time
under some
other tacit contract, it is clear that the parties conducted
themselves in respect of matters of accounting and payment
in
accordance with clause 3 of the 1999 marketing agreements. The
incidence of clause 3.7 of the 1999 marketing agreements
rendered the
attempt by the plaintiff to impute certain provisions of the FPEF
code of conduct to determine the extent of the defendant’s
accounting obligations to the companies misguided in my view.
The code of conduct in any event stressed that the mutual rights
and
duties of producer and exporter fell in the ultimate analysis to be
determined by the terms of those parties’ applicable
contracts.
[69]
The companies did not seek an audit report in respect of any of the
consignment accounts; nor did either the liquidators or
the
plaintiff.
[70]
Before concluding I should
perhaps record that the subsequent amendments to the plaintiff’s
particulars of claim made it unnecessary
to treat with the fourth
issue formulated in the ruling made in terms of rule 33(4) quoted at
the outset of this judgment, other
than to the extent that I already
have.
[36]
[71]
In the result then, the action is dismissed with costs, such costs to
include the costs of two counsel.
A.G
BINNS-WARD
Judge
of the High Court
[1]
Apparently,
formerly known as the Nkwaleni Valley.
[2]
Capespan
was the product of a merger between two pre-existing statutory
marketing bodies known as Outspan and Unifruco, respectively.
[3]
By the commencement of the trial it was admitted by the plaintiff
that the defendant had in fact accounted to the companies regularly
during the execution of the relevant contracts. What the
plaintiff sought was an improved accounting, including in respect
of
the aspects set out in annexure E of the particulars of claim as
finally amended. The claim was pleaded thus in the
finally
amended particulars of claim in respect of Chance Brothers at
para 16A.3 and in respect of Club Champion at para 16B.3:
‘
Despite demand,
[the Defendant]
has failed
and/or refused adequately to account to
[Chance Brothers/Club Champion]
in
respect of the proceeds from the sale of its 2002 citrus crop, or
the allocation by the Defendant of such proceeds, or the
income and
expenses incurred by the Defendant on behalf of
[Chance Brothers/Club Champion]
in
respect thereof, in that it failed to provide any vouchers, other
supporting documents or explanations in the respects listed
in
annexure “E” hereto, in support of the accounts
rendered.
’
Annexure
E in relevant part went as follows:
The
supporting documentation required by the plaintiff as part of the
further accounting sought from the defendant was set forth
as
follows in annexure E to the finally amended particulars of claim:
1.
The Defendant’s
agreement(s) with local (South African) terminal operators,
including any agreements relating to rebates
and/or discounts.
2.
The Defendant’s
agreement(s) with shipping lines, including any agreements relating
to rebates and/or discounts.
3.
The Defendant’s
agreements with stevedores, including any agreements relating to
rebates and/or discounts.
4.
The Defendant’s
agreements with freight forwarders, including agreements relating to
rebates and/or discounts.
5.
Agreements
between the Defendant and transport service providers.
6.
Agreements
between the Defendant and inspection service providers (PPECB)
[the
Perishable Products Export Control Board, which is a statutory
body]
.
7.
Agreements
between the Defendant and Citrus SA and the Citrus Growers’
Association relating to levies payable by Chance
Brothers and Club
Champion (“the companies”) to those organisations.
8.
All source
documentation including invoices, statements and proof of payment,
in relation to packing materials paid for by the
Defendant in
relation to fruit packed.
9.
All agreements
between the Defendant and purchasers and/or importers of fruit
supplied by the companies.
10.
All
agreements for the provision of volume discounts, other discounts
and rebates payable by importers, customers or other entities
to the
Defendant.
11.
All
exchange rate contracts between the Defendant and bankers.
12.
All source
documentation evidencing overseas costs and contracts relating to
fruit supplied by the companies, including market
duties, importers’
commission, handling charges and freight and terminal charges.
13.
Any
agreement(s) between the Defendant and overseas (i.e. United
Kingdom, EU and Japan) terminal operators, including agreements
relating to rebates payable to the Defendant.
14.
A full and
proper description of and explanation for the expense line items
shown on the Defendant’s statements furnished
to the
companies, including individual supplies and/or expense types
aggregated in each line item, and all source documents pertaining
to
such entities.
15.
A full and
proper explanation and supporting vouchers of and for the deductions
reflected on the statements furnished to Club
Champion in respect of
the entries summarised in Table 4.3.1 of the export summary of Ms
Sue Dean.
16.
A full and proper
explanation and supporting vouchers of and for the deductions
reflected on the statements furnished to Club
Champion in respect of
the entries summarised in Table 4.3.2 of the export summary of Ms
Sue Dean.
[4]
At the
stage at which the ruling in terms of rule 33(4) was made, para 20
of the particulars of claim read as follows:
On
or about 29 September 2005 the bank in writing abandoned and
waived in favour of the Chance Brother’s (sic) liquidators,
all right title and interest which the bank may have had under and
in terms of the Chance Brothers new production loan agreement
(“
the
bank’s claim
”).
The
paragraph was later amended to read:
On
or about 29 September 2005 the bank, the Plaintiff and the
liquidators of Chance Brothers concluded a written agreement,
a copy
of which is annexure “DP18” to the Defendant’s
plea, in terms of which, inter alia, the bank ceded,
assigned and
made over to the Plaintiff all its right, title and interest in and
to the claim as defined in the said agreement
(“the bank’s
claim”).
[5]
Although there was passing reference in the evidence to the
Agricultural Produce Agents Act 12 of 1992, the plaintiff did not
rely at any stage of the much amended pleaded case on a statutory
basis for its claim.
[6]
See
Phillips v
Fieldstone Africa (Pty) Ltd and Another
[2004] 1 All SA 150
(SCA) at para 27 (citing
Bellairs
v Hodnett and Another
1978
(1) SA 1109
(A) at 1130F;
Robinson
v Randfontein Estates Gold Mining Co Ltd
1921 AD 168
at 180 and
Hodgkinson
v Simms
[1994] 3 SCR 377
(SCC); ((1995) 117 DLR (4th) 161) at p.38 of the pdf. copy of
the judgment accessible at
http://www.canlii.org/en/ca/scc/doc/1994/1994canlii70/1994canlii70.pdf
).
[7]
I agree
with the submission by the plaintiff’s counsel that the basis
for the transfer of ownership did not lie in a sale
by the companies
of their fruit to the defendant. But that does not detract
from the effectiveness of the transfer of ownership
of the fruit in
terms of the provisions of clause 4.1 of the 1999 marketing
agreements. Nor did the fact that the provisions
of the
agreements limited the defendant’s powers to deal with the
fruit detract from the effectiveness of the transfer
of ownership in
terms of clause 4.1.
[8]
A
producer’s participation in a particular consignment account
was determined with reference to the number of cartons supplied
by
it in the consignment as a proportion of the total number of cartons
comprising the consignment.
[9]
The KPMG
letter, addressed to the CEO of the FPEF, read:
Dear Mr Symington
FPEF requirements
This serves to confirm that
Capespan (Pty) Ltd has conformed with the requirements of the FPEF
in that:
1)
The bank accounts are in the name
of Capespan (Pty) Ltd but are separate from the normal company
accounts. These are however
not trust accounts.
2)
There is a clear audit trail
available on these accounts due to sufficient accounting systems
being in place.
Yours sincerely
KPMG Inc.
[10]
See
para 12.3 of the plaintiff’s replication which was
delivered on 13 June 2006.
[11]
The Club Champion 1999 marketing agreement carried a hand-written
endorsement, initialled by the parties’ representatives,
providing ‘
Minimum
Length of Contract 3 years
’,
but nothing was made of this by either party at the trial. The
2002 season fell outside the ‘minimum length’
period.
[12]
Clause 3.3 has been quoted in para [10], above.
[13]
The term
‘count’ denotes the size of the grapefruit concerned.
[14]
By Mr Chris
Knoetze (Key Account Manager) in a letter dated 25 September
2001.
[15]
In trial
particulars furnished by the defendant it was admitted that
commission based on a rate of 9 per cent had been recovered
from the
companies during the 2001 season. The fact that this
constituted an over-recovery is irrelevant in the context
of the
relief sought in the action, being an accounting for the performance
by defendant of its function as the companies’
marketing agent
during the 2002 season. The recovery based on a 9 percent
commission rate was reversed later in 2001 and
the commission rate
actually applied in that year was 7 percent, in line with that
stipulated in the 1999 marketing agreements.
Mr Knoetze’s
apparent apprehension that the marketing agreements had been
cancelled appears to have been based on
his understanding of the
effect of Mr Chance’s letter of cancellation, which he may
have construed without the advantage
of insight into the context.
There is no evidence that Mr Knoetze was involved in the events
of 2000. Indeed,
no-one who gave evidence at the trial
appeared to have known him.
[16]
Clause 17.1
provided:
No
waiver or variation of any of the terms and conditions of this
Agreement shall be binding or effectual for any purpose unless
expressed in writing and signed by both Parties hereto. Any
waiver shall be effective only in the specific instance and
for the
purpose given.
[17]
In the case of the production loan agreement concluded between
Chance Brothers and the defendant, it was provided that a copy
of
the marketing agreement to be concluded would be supplied to Nedcor,
which also subscribed as a party to the agreement.
[18]
Quoted in
para [11], above.
[19]
The
‘existing balances’ were the amounts owed by each of the
companies after the end of the 2001 season in respect
of previously
advanced production loans.
[20]
Mr Chance
testified that there was no attachment to the letter, but gave no
indication that he had requested insight into the
‘standard
terms’ before counter-signing the letter in acceptance.
[21]
In the
arbitration claim the defendant pleaded in its statement of defence
that ‘In terms of clause 2 of the marketing agreement,
“the
notice period will commence on 1 September, immediately
following such notice, and will terminate on 30 September
of
that year unless otherwise agreed”. In the circumstances
the notice furnished on 22 September 2000 only commenced
on
1 September 2001 and accordingly the marketing agreement was
extant at all material times.’ It will be apparent
that
apart from the conclusion that the marketing agreements remained
extant, the allegations are otherwise factually and legally
incorrect. The notice of termination would have had the effect
alleged in the statement of defence only if it had been
given in
terms of terms of clause 2. (The same observations hold true
in respect of the allegations in para 5A of
the finally amended
particulars of claim in the action.)
[22]
As to the
detail of which see note 3, above.
[23]
The ‘Tripartite Agreement’ was the deed of agreement
recording the contract in respect of the December 2001 production
loan by the defendant to Chance Brothers; Nedcor was the third
subscriber to the tripartite agreement.
The
deed executed by the liquidators of Club Champion did not contain a
reference to the contentions of the company’s erstwhile
directors, but defined the claim with reference to what ‘the
cedent’ (that is the company itself) contended it had
against
the defendant. There was no evidence to identify what the
company’s relevant contentions may have been.
The Club
Champion cession also included a reference to claims arising out of
the alleged breach by the defendant of the December
2001 production
loan agreement with that company. (Nedbank was not a creditor
of Club Champion.)
[24]
See Exh
A974 at A978 sv
Section
402(c) – Causes of the Failure of the Company
.
[25]
At p. 360, para 14.4.4.
[26]
At para 11.
[27]
De Villiers & Mackintosh
The
Law of Agency in South Africa
3
rd
ed p. 38.
[28]
Ibid pp. 39-41.
[29]
At
para [11]
-[22].
[30]
This conclusion would also apply even if the plaintiff’s
argument that the transfer of ownership provision were merely
‘a
device’ which should not be permitted to distract from the
true nature of the relationship between the companies
and the
defendant as one as between principal and agent. If one were
to accept this to be so, which I do not, clause 3.7
would still
regulate the extent of the agent’s duty to account in the
context of any query by the companies as to the extent
of their
entitlement against the consignment account.
[31]
Clause 8.1
provided ‘
The
Supplier will be entitled to price projections, market reports and
feedback on the marketing of the Products.
’
[32]
In answer to a question in the plaintiff’s request for trial
particulars the defendant admitted that in ‘
terms
of the Chance Brothers Marketing Agreement, Chance Brothers was
entitled to the details in relation to the specific market
to which
its fruit was sent and the price at which it was sold
’.
[33]
Annexure E
and the relevant paragraphs in the amended particulars of claim are
quoted in note 3, above.
[34]
Deregulation
of the fruit export industry occurred in about 1997. Prior to
deregulation, fruit exports had been regulated
by statute and
transacted exclusively through the medium of statutory bodies.
[35]
At para [22].
[36]
At
para [4].