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[2014] ZAWCHC 8
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Woolworths (Pty) Ltd v P Christodoulou And Sons Textiles and Another (A391/2012, 3541/2012) [2014] ZAWCHC 8 (10 February 2014)
THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Appeal Case No:
A391/2012
Trial Case No: 3541/2012
In the matter
between:
WOOLWORTHS (PTY)
LTD
..............................................................................
............
APPELLANT
and
P CHRISTODOULOU &
SONS TEXTILES CC
...........................................
FIRST
RESPONDENT
PAULOS
CHRISTOUDOULOU
.................................................................
SECOND
RESPONDENT
Coram: HLOPHE JP &
SAMELA & ROGERS JJ
Heard: 31 JANUARY 2014
Delivered: 10 FEBRUARY
2014
JUDGMENT
ROGERS
J:
Introduction
[1]
The appellant, the
well-known retailer Woolworths, was the defendant in the court below.
The respondents were the plaintiffs. The
first respondent (‘PCS’)
operated a Woolworths franchise store in Kokstad. The second
respondent (‘Christodoulou’)
is the sole member of PCS.
Woolworths asserted that the franchise agreement would expire on 23
September 2013. The respondents,
relying on various alternative
causes of action, sought relief in the court below in terms of which
PCS would be entitled to continue
operating the franchise store until
30 April 2019.
[2]
On 12 June 2013 the
trial judge found for the respondents on the basis of rectification.
Woolworths appeals to a full bench with
the leave of the trial judge.
On appeal Mr Fagan SC, leading Ms E van Huyssteen, appeared for
Woolworths and Mr Pillemer SC, leading
Mr A Christison, appeared for
the respondents.
[3]
The respondents’
counsel, in their heads of argument, addressed only the cause of
action based on rectification (the ground
upheld by the trial judge),
and this was the only ground that Mr Pillemer developed at the
hearing. The ultimate question on appeal
is whether PCS, as the first
plaintiff in the court below, discharged the onus of proving its
entitlement to rectification. The
only witnesses at the trial were
Christodoulou and his wife (for the plaintiffs) and Ms Dawn Pottier
for Woolworths.
The
facts
[4]
On 21 August 1998 a
franchise agreement in respect of a Woolworths store in Kokstad was
concluded between Woolworths, PCS and Christodoulou
(the latter as
surety for PCS). The commencement date of the agreement was 23
September 1998. The agreement had an initial period
of 10 years (ie
until 23 September 2008). PCS had an option to extend the franchise
for a further five years (ie until 23 September
2013), such option to
be exercised not later than 12 months prior to the expiry of the
initial period (ie by 23 September 2007).
Although the franchise
agreement was formulated in terms which would ostensibly have
permitted PCS to sell both textiles and food,
it seems to have been
understood that the store would initially be confined to textiles,
and that food would only be introduced
with Woolworths’ further
approval.
[5]
By the time the
franchise agreement was concluded the premises from which the store
was to operate had been identified and they
were identified in the
franchise agreement. Clause 33 of the franchise agreement stipulated
that Woolworths would, in collaboration
with PCS, negotiate the lease
of the premises with the landlord but that PCS would conclude the
lease entirely at its own risk.
[6]
Clause 34.2 contained a
standard non-variation clause. In terms of clause 34.4 the parties
undertook, in the implementation of the
agreement, to observe the
utmost good faith and they warranted that in their dealings with each
other they would neither do anything
nor refrain from doing anything
which might prejudice or detract from the rights, assets or interest
of the other of them.
[7]
The lease agreement had
a commencement date of 1 October 1998 although it was only signed on
27 September 1999. The lease had an
initial period of 10 years. PCS
had options to extend the lease for three further periods of five
years each. Woolworths negotiated
the lease with the landlord and was
also a party in respect of certain rights and obligations pertaining
to Woolworths.
[8]
The Kokstad store was a
success. During 2006 or 2007 Christodoulou began to give thought to
introducing food into the store and
had discussions with Woolworths
in that regard. On 11 October 2007 Mr Barnard, Woolworths’ head
of franchise operations,
informed PCS that Woolworths agreed in
principle to the introduction of food into the Kokstad store. In the
meanwhile, the date
by which the option to extend the franchise
agreement for five years should have been exercised (23 September
2007) came and went.
This seems to have been overlooked on both
sides.
[9]
On 30 October 2007 an
addendum was concluded to the lease agreement. In terms of the
addendum the ground floor area of the leased
premises was extended by
300 m
2
.
The landlord agreed to contribute R1,5 million towards the
alterations. The addendum set out revised terms as to the basic
monthly
rent and additional turnover rent. The parties also agreed,
by way of the addendum, that the period of the lease would be
extended
for a 10-year period as from 1 March 2008 (ie until 1 March
2018) and that PCS would have the right to extend the lease for a
further
five-year period (ie until 1 March 2023). This was only a
modest adjustment to the original lease terms, under which PCS would
have had the right, by way of its three options, to extend the lease
until 1 October 2023.
[10]
Pursuant to clause 33
of the franchise agreement, Woolworths was involved in negotiating
the addendum to the lease and co-signed
it in regard to the rights
and obligations pertaining to Woolworths.
[11]
Woolworths had not yet
given final approval for the introduction of food into the Kokstad
store by the time the first lease addendum
was signed.
Christodoulou’s evidence was that the area of the premises
would have been extended by way of the addendum, regardless
of
whether or not food was introduced.
[12]
The fact that PCS had
failed timeously to extend the franchise agreement seems to have come
to light in about August 2008. On 28
August 2008 PCS formally
resolved to exercise the option and delivered written notification in
that regard to Woolworths. On 8
September 2008 Woolworths replied,
noting that the exercise of the option was late but advising that
after due consideration Woolworths
agreed to extend the franchise
agreement for a further period of five years on the same terms and
conditions as the current franchise
agreement. PCS was advised that
the agreement would thus expire on 23 September 2013.
[13]
Various viability
studies were undertaken by PCS to demonstrate to Woolworths that the
introduction of food into the store would
be viable. The evidence as
to when that was done and as to the evolving content of the viability
studies was vague. It appears
that at one stage Woolworths regarded
PCS’ projections as unreasonable. In April 2009 Christodoulou
sent Woolworths’
Mr N Acker various figures which Acker
apparently thought were too optimistic. On 21 April 2009 Acker sent
an internal email to
his seniors Messrs Susman and Thomson to which
he attached a revised viability in which he adjusted certain figures.
He expressed
the view that Christodoulou ‘can make money from
this venture – projected IRR of 14.7%’. Thomson responded
to
Acker and Susman on 24 April 2009, saying that he was happy with
the proposal, adding: ‘Can you get him [Christodoulou] to
accept these numbers as his best estimates? Please keep these
viability numbers close at hand in case we ever get into a
profitability
debate.’ There was no evidence as to whether
Acker’s revised figures were subsequently shared with
Christodoulou. (The
email exchange in question was evidently not in
the plaintiffs’ possession, since it was the subject of late
discovery by
Woolworths.)
[14]
On 12 May 2009
Woolworths’ real estate committee resolved to approve the
introduction of food into the Kokstad store.
[15]
According to
Christodoulou, PCS invested about R5 million in the expansion of the
Kokstad store. He did not say over what precise
period the capital
expenditure was incurred and how much of the expenditure related to
the introduction of food and how much would
have been incurred in any
event in relation to the extension of the area of the store.
Documentation relating to the expenditure
was not produced at the
trial. The viability study of April 2009 seems to have envisaged
capital expenditure of R1,29 million,
of which the greater part
(R1,15 million) related to the introduction of food.
[16]
The latter part of 2009
was a busy period in which the extension and refurbishment of the
store was undertaken with a view to a
grand opening which in the
event occurred on Thursday 3 December 2009.
[17]
On 2 October 2009 a
second lease addendum was concluded. The commencement date of the
second addendum was 1 May 2009. The main purpose
of the addendum
seems to have been to modify the period of the lease, presumably to
accommodate delays in the opening of the new
store. The lease term
was extended for a 10-year period as from 1 May 2009 (ie until 30
April 2019), with an option to extend for
a further five years (ie
until 30 April 2024). There was a slight alteration to the basic rent
and turnover rent.
[18]
According to
Christodoulou, the days immediately preceding the official opening on
3 December 2009 were hectic and stressful, particularly
as he and his
wife needed to oversee the proper ordering and delivery of perishable
goods, something in which they did not yet
have much experience. A
team from Woolworths arrived on 1 and 2 December 2009 to provide
assistance. Among the Woolworths team
were Zoe Rylands (divisional
manager of the franchise team) and Pottier (who was responsible for
providing support to franchisees
in respect of systems, finance and
administration).
[19]
Rylands brought with
her from Cape Town a draft addendum to the franchise agreement. There
was no evidence as to who within Woolworths
prepared this document.
Rylands’ mandate was to procure the signatures of PCS and
Christodoulou and to take the document
back to Cape Town for
signature on behalf of Woolworths. There was a factual dispute at the
trial as to when the draft was handed
to Christodoulou and whether he
read it prior to signing. I shall return to that dispute presently.
It is common cause that he
signed the document on his own behalf and
on behalf of PCS on the morning on Friday 4 December 2009 in the
presence of Pottier
and the latter’s colleague Mike Hargreaves.
Pottier then took the document with her back to Cape Town, where it
was signed
on behalf of Woolworths by Susman and Thomson.
[20]
The addendum to the
franchise agreement dealt mainly with the introduction of food into
the store. There were detailed provisions
regarding the fees payable
by PCS to Woolworths on food turnover and regarding the sale of food
stock by Woolworths to PCS. However,
the addendum also dealt with the
period of the franchise. The preamble to the addendum recorded, among
other things, that Woolworths
had agreed that food stock could be
sold by the franchise business, that Woolworths had agreed that the
franchise agreement would
be extended for a period of five years
beyond the initial 10-year period, and that the parties wished to
amend the franchise agreement
in order to reflect the terms and
conditions upon which food stock would be sold and to record the
five-year renewal. In regard
to duration, clause 3 of the addendum
provided that the commencement date of the franchise agreement in
respect of food would be
3 December 2009; that the franchise
agreement would endure until 23 September 2013; and that the right of
renewal contained in
clause 7.2 of the original agreement was
deleted. (The plaintiffs could thus not succeed in the relief they
sought in the court
below unless they could escape from the
provisions of the addendum regarding duration.)
[21]
The full correspondence
between the parties during 2010 and 2011 which led to the issuing of
summons on 24 August 2011 was not placed
before the trial court. It
appears that Woolworths adopted a policy at that time of bringing
franchise arrangements to an end and
operating such stores as
so-called corporate stores (ie stores owned and operated by
Woolworths itself). Reference is made in other
documentation to a
letter sent by Woolworths to franchisees in that regard on 21
September 2010 in which it expressed its wish
to buy back the
businesses of the franchisees in question. According to
Christodoulou, he did not have a copy of the franchise
addendum he
had signed and he thus asked Woolworths to let him have a copy. He
thought this was in about November 2010.
[1]
[22]
Correspondence then
took place between Woolworths and Coastal Accounting, a firm of
accountants appointed by Christodoulou to assist
him in valuing the
Kokstad business. Only the Coastal Accounting letters were adduced as
exhibits. Reference was made in a Coastal
Accounting letter to an
earlier letter sent by Woolworths to Christodoulou on 29 March 2011.
On 11 May 2011 Coastal Accounting
replied on Christodoulou’s
behalf, requesting Woolworths to submit an offer for the purchase of
the Kokstad business, apparently
as foreshadowed in the Woolworth’s
letter of 21 September 2010. Coastal Accounting said that
Christodoulou was anxious to
finalise negotiations on the sale of the
business ‘to meet the offer deadline of 30 June 2011’.
Coastal Accounting
recorded Christodoulou’s view as being that
the Kokstad store offered excellent value for money and that
Christodoulou would
give serious consideration to an offer in the
vicinity of R40 million plus stock.
[23]
Woolworths apparently
replied on 15 June 2011, offering only R9,1 million. Coastal
Accounting responded to that offer on 24 June
2011. The writer said
that Christodoulou’s main concern with the offer of R9,1
million was that the settlement value of finance
raised by
Christodoulou for the food department amounted to R5,2 million, so
that acceptance of the Woolworths offer would leave
PCS with only
R3,9 million. Coastal Accounting set out various criticisms of
Woolworths’ methodology for valuing the Kokstad
business. A
counter-proposal was made. The writer said that if he did not hear
from Woolworths ‘I will have no option but
to advise my client
to instruct his attorney to institute rectification procedures as
indicated’. This suggests that some
mention had been made prior
to 24 June 2011 of rectification though it is unclear on the evidence
when this was. (In the light
of this uncertainty, I am hesitant to
place reliance on Mr Fagan’s submission that an adverse
inference should be drawn from
Christodoulou’s supposed failure
to complain about the terms of the addendum when he was supplied with
a copy during November
2010.)
[24]
On 22 July 2011
Woolworths apparently wrote a letter to Coastal Accounting in which
its offer remained at R9,1 million but the date
for accepting the
offer was extended to 29 July 2011. On 28 July 2011 Coastal
Accounting replied, stating that Christodoulou wanted
to continue
trading in the store. It was noted that the current franchise
agreement ended in September 2013 but that there were
disputes about
the termination date. It was recorded that Christodoulou would be
seeking rectification: ‘An addendum to the
franchise agreement
was entered into instead of a new franchise agreement with a
termination date coinciding with the extended
lease for the store.’
[25]
Negotiations broke down
at this point, and on 11 August 2011 Woolworths’ real estate
committee resolved that the Kokstad store
would operate as a
corporate store as from 23 September 2013.
[26]
The plaintiffs issued
summons on 24 August 2011. The plaintiffs’ particulars of claim
were amended from time to time. The
version on which the case was
ultimately tried was the fourth iteration of the particulars of
claim.
The
signing of the franchise addendum
[27]
The plaintiffs’
case for rectification was based on the inferences which they claimed
were properly to be drawn from the facts
I have briefly summarised
above. There was only one area of significant factual dispute, namely
the circumstances in which Christodoulou
came to sign the franchise
addendum. It is convenient to deal with that question now.
[28]
Christodoulou’s
version in chief was that Rylands handed him the addendum on Thursday
3 December 2009 and said he needed to
sign it. He was too busy
(because of the opening) to deal with it and he thus left it on his
desk.
[2]
On the Friday morning Pottier insisted that he sign the document
before she left, otherwise Woolworths would not permit the store
to
continue operating. She told him that the addendum contained terms
relating to the introduction of food. He tried to telephone
his
attorney but could not reach him. He then signed the document without
reading it. He added that he was dyslexic.
[29]
In cross-examination he
changed his version in one respect, claiming that Rylands had not
given him the document on 3 December 2009
but had handed it to
Pottier because he was too busy to deal with it, and that Pottier had
given him the document on 4 December
2009 when she required him to
sign it.
[3]
[30]
Mrs Christodoulou
confirmed that the run-up to the official opening 3 December 2009 was
a hectic period for her husband and her
and that they were getting
very little sleep. She recalled that after the opening on 3 December
2009 Rylands said to Pottier before
she left that Pottier needed to
get the contract signed by Christodoulou. She was also present when
her husband signed the addendum
on 4 December 2009. She claimed that
the document was handed to Christodoulou by Pottier, that her husband
asked what it was, that
Pottier said that it was a contract, that her
husband tried to contact his lawyer without success, that he asked
Pottier what was
in the document and she told him it concerned food
commissions, and that he then signed it without reading it. Although
she said
in chief that the document was handed to her husband by
Pottier, she agreed in cross-examination that she could not say
whether
Rylands had handed him the document previously.
[31]
Rylands was not called
to testify on behalf of Woolworths. Pottier’s evidence was that
her understanding from Rylands was
that the latter had given the
draft to Christodoulou on Wednesday 2 December 2009. Rylands left
Kokstad after the opening of the
store on Thursday 3 December 2009.
Pottier testified that she was instructed by Rylands to ensure that
she (Pottier) did not leave
Kokstad without getting the signed
document from Christodoulou. Pottier eventually pinned Christodoulou
down during the morning
of Friday 4 December 2009, and he signed the
document in his office at the store in her presence. Her evidence was
that she did
not give the document to Christodoulou that morning; he
already had it. It was in an open envelope on his desk. He did not
ask
for an opportunity to read through it with his attorney. He
signed the document without any indication of anger or unhappiness.
She confirmed that he did not read through the document on that
occasion (though he did initial each page). She had not said that
the
store would be closed down if he did not sign it but she did tell him
that she was under instructions to bring the signed addendum
back to
Cape Town.
[32]
Despite various
criticisms advanced on behalf Woolworths as to Christodoulou’s
credibility, the trial judge thought that he
and his wife were honest
witnesses. She accepted that he signed the agreement without reading
it and that he would not have signed
it if he had been aware that it
recorded an expiry date of 23 September 2013. She did not make any
specific finding as to when
Christodoulou received the document,
though if she found Christodoulou and his wife to be honest witnesses
she must have rejected
Pottier’s testimony that Christodoulou
already had the document by the time she (Pottier) pressed him to
sign it.
[33]
I do not understand
Woolworths to have claimed that Rylands or Pottier specifically told
Christodoulou that the franchise addendum
dealt, among other things,
with the period of the franchise or that it had an expiry date of 23
September 2013. There is no indication
that either Rylands or Pottier
had any responsibility for the preparation of the document. They were
in essence messengers. Furthermore,
on Woolworths’ version
there was no particular reason to make the period of the franchise
agreement a point of discussion.
According to Woolworths, PCS had in
August 2008 belatedly exercised the option contained in the original
franchise agreement, thus
extending the initial period by five years.
Woolworths had on 8 September 2008 notified PCS that it agreed to the
belated extension.
According to Woolworths, the addendum –
insofar as it dealt with duration – was simply recording the
effect of the
agreed extension. From Woolworths’ side,
therefore, the important aspects of the addendum were those dealing
with the franchise
fees payable in respect of food and the terms
governing the supply of food by Woolworths to the franchisee.
[34]
Although Rylands was
not called as a witness, there was an important passage in Pottier’s
cross-examination on which the trial
judge did not remark and which
concerns a matter on which Pottier was able to give direct evidence.
Pottier had earlier testified
that she had been told by Rylands that
Christodoulou had told her (Rylands) on 3 December 2009 (when she was
pressing him for the
signed document) that he was halfway through
reading it. Mr Gordon SC (who appeared for the plaintiffs at the
trial) was attempting
to establish that what Rylands told Pottier was
hearsay. Her reply was that on the evening of Wednesday 3 December
2009 Rylands
and she had dinner with Christodoulou at their
guesthouse. On that occasion, so she testified, and as they were
parting at the
end of evening, Rylands reminded Christodoulou to
ensure that he signed the addendum before the next morning, to which
he replied
that he was halfway through the document. Mr Gordon asked
whether she heard that conversation, to which she replied; ‘Yes,
because Zoe – it was a loud conversation’. Her evidence
that such a conversation took place at the guesthouse was not
challenged; it was not put to her that she was fabricating. If this
evidence was truthful, it is important not only to establish
that
Christodoulou had the document for several days but also that he had
read enough of it to see what it said concerning duration.
[35]
The trial judge did not
specifically find that Pottier was an unsatisfactory witness. She and
Christodoulou apparently discovered
during the visit that they had a
family connection, and the interaction between them was friendly.
Pottier had no reason to bamboozle
Christodoulou nor was it suggested
to her that she had done so. Since nothing adverse was said by the
trial judge regarding Pottier’s
demeanour, a factual finding
required an assessment of other matters bearing on credibility,
including inconsistencies, contradictions
and inherent probabilities
(
Stellenbosch
Farmers’ Winery Group Ltd & Another v Martell et Cie &
Others
2003 (1) SA
11
(SCA) para 5).
[36]
As to inherent
probabilities, it was Rylands who had the primary mandate to obtain
signature of the addendum. It is inherently probable
that if she
arrived at Kokstad on 2 December 2009 (as Pottier, who arrived the
previous day, testified) she would have given the
document to
Christodoulou on that day or at very least on 3 December 2009. After
all, Woolworths wanted the addendum signed before
the new store
opened. Even if Christodoulou was very busy and did not have time
immediately to read the document, it would have
been natural for
Rylands to hand it to him so that he could look at it in his own
time. There was no suggestion that Rylands was
reluctant that he
should have time to consider it. Pottier’s evidence, that
Christodoulou was already in possession of the
document when she
pressed him to sign it on 4 December 2009, thus accords with the
inherent probabilities.
[37]
There was also an
important contradiction between Christodoulou’s oral evidence
and the further particulars furnished on the
plaintiffs’
behalf. In a request for trial particulars Woolworths asked why
Christodoulou had not read the addendum before
signing it. I doubt
that this was a permissible question to ask by way of trial
particulars but that is neither here nor
there because the
plaintiffs chose to reply fully. The reply was that Woolworths had
sent a team of employees to Kokstad to assist
with and attend the
official opening on 3 December 2009; that on 2 December 2009 Rylands
had handed a copy of the addendum to Christodoulou;
that he had not
seen it prior to that time; that he was unable to attend to the
addendum either on 2 or 3 December 2009 because
he was preoccupied
with final preparations for the opening; that on 4 December 2009
Pottier had insisted that he sign the addendum
before her departure
and had intimated that if he did not do so PCS would not be entitled
to continue with its new food and groceries
line; that Christodoulou
was exhausted from preparing for the opening and asked for an
opportunity to read the addendum with his
attorney; that Pottier
refused such opportunity; and that Christodoulou then signed the
addendum without having read it.
[38]
The version given in
trial particulars, namely that Rylands gave Christodoulou the draft
addendum 2 December 2009, accords with
the inherent probabilities and
is consistent with Pottier’s version but not with the evidence
Christodoulou gave at the trial.
Christodoulou accepted that he had
consulted with his legal representatives and could not provide a
satisfactory explanation for
the discrepancy between the trial
particulars and his oral testimony. When the contradiction was put to
Mrs Christodoulou, she
said that her husband was the sort of person
who got ‘very confused … he’s almost like a
stunned mullet’.
[39]
Then there is the
contradiction between the evidence which Christodoulou gave in chief
and in cross-examination as to when the document
was handed to him.
In chief he said Rylands gave it to him on 3 December 2009 and that
he put it on his desk whereas in cross-examination
he changed his
version and said that Pottier had given him the document on 4
December 2009. There was an overnight adjournment
between his
evidence in chief and this part of his cross-examination. The changed
version accorded with the version to which his
wife subsequently
testified.
[40]
The trial particulars
are relevant to another contradiction in Christodoulou’s
version. He accepted under cross-examination
that Pottier had not
refused him an opportunity to read the addendum in conjunction with
his attorney. His evidence was that when
she pressed him for
signature on the morning of 4 December 2009 he telephoned his
attorney on several occasions but the latter
was not available. It
was certainly not the case that Pottier insisted that he sign the
document without reading it. Pottier conveyed
to Christodoulou that
her instructions were to bring the signed document back to Cape Town
and that the signing of the addendum
was necessary in order for PCS
to sell food from the Kokstad store. She testified that if
Christodoulou had refused to sign the
document on the Friday because
of the absence of his attorney, she would not have had authority to
close the store. That would
have been a matter for senior management
in Cape Town. It strikes me as somewhat implausible that the store
would or could have
been shut down merely because Christodoulou
wanted a day or two more to discuss the draft with his attorney.
Pottier thought that
closure would have been most unlikely because it
would have damaged the Woolworths brand to close a store which had
just opened.
[41]
Whether Christodoulou
in fact sought an opportunity to telephone his attorney before
signing the document is not altogether clear.
That was certainly the
evidence of Christodoulou and his wife. However, in cross-examination
Mr Fagan put to Christodoulou that
Pottier would testify
inter
alia
that he had
not asked her for an opportunity to read over the addendum with his
attorney and that she had not refused any
such request. He put,
further, that Pottier had been under the impression that he had
already read the document. Christodoulou’s
response was that he
had indeed asked for an opportunity to read through the document with
his attorney. In chief Pottier confirmed
that Christodoulou had not
requested an opportunity to read through the document with his
attorney, and she made no mention of
his leaving the office to
telephone his attorney. This aspect was not taken up with her in
cross-examination. In the circumstances,
and although it is possible
that at some stage Christodoulou tried to phone his attorney, the
evidence does not satisfactorily
establish that this occurred with
Pottier’s knowledge during the course of her meeting with
Christodoulou.
[42]
There are other aspects
of the matter on which Christodoulou’s credibility was called
into account. He testified at one point
in cross-examination that he
had consulted on numerous occasions with Mr Dickson SC, the senior
counsel who drafted the first particulars
of claim. However, when,
after the overnight adjournment, he was tested on the differing
versions advanced in the various particulars
of claim version, he
said that he had only consulted with Mr Dickson once for half an
hour. His explanation for the contradiction
was that he ‘wasn’t
thinking clear yesterday’. When asked in cross-examination
about the allegations contained
in the second particulars of claim,
he confirmed that he had consulted with Mr Seggie SC and Mr
Christison, the new counsel who
drafted those particulars. He was
then shown the affidavit he had made in support of an amendment
application to introduce the
third particulars of claim, in which
affidavit he confirmed an averment by his new attorney that he had
not consulted directly
with the counsel who drafted the previous
particulars of claim. (His new attorney could only have made that
allegation on Christodoulou’s
instructions.) When asked why he
had not told the truth in the affidavit, he said he could not
remember whether he had even read
it before signing.
[43]
It was for the
plaintiffs to prove their case on a balance of probabilities. Insofar
as it is germane to the outcome of the case,
I do not think the
plaintiffs proved on a balance of probability that Christodoulou only
received a copy of the addendum on the
morning of Friday 4 December
2009 when Pottier pressed him to sign it. I think it more probable
than not that he received the document
from Rylands on Tuesday 2
December 2009. If that is the more probable version, one would have
to conclude that Christodoulou’s
evidence, that he only
received the document 4 December 2009, was a discreditable attempt to
strengthen his claim for rectification.
And if his evidence lacked
credibility on that point, it also calls into question his claim that
he did not read the document (or
did not read enough of it to know
what it said regarding duration). It is important to emphasise, in
that regard, that the fact
that he read the document or some of it is
not merely an inference from the fact that he had it in his
possession and later signed
it; there is also Pottier’s direct
evidence as to what Christodoulou said to Rylands in her presence on
the evening of 2
December 2009.
The
rectification claim
The
pleadings
[44]
In the first
particulars of claim the plaintiffs referred to the franchise
agreement and the addendum to the franchise agreement,
and to the
lease agreement and to the first lease addendum. The plaintiffs then
alleged that prior to the conclusion of the franchise
addendum it was
the parties’ common intention that the duration of the
franchise would correspond with the duration of the
lease as amended
by the lease addendum, namely to 28 February 2018, and that PCS would
have a right (as in the lease agreement)
to extend the franchise
agreement by a further five years (ie to 28 February 2023). The
plaintiffs claimed rectification of the
franchise addendum to reflect
this alleged common intention. The first particulars of claim did not
mention the second lease addendum
– Christodoulou had either
overlooked it or failed to instruct his legal team as to its
existence.
[45]
After the issue of
summons, the plaintiffs’ attorneys asked Woolworths’
attorneys not to file a plea until the plaintiffs’
legal team
had had an opportunity to review the particulars of claim. In
November 2011 the plaintiffs filed amended (second) particulars
of
claim, authored by new counsel. These particulars, which still did
not refer to the second lease addendum, advanced two causes
of action
in the alternative. The first cause of action was that, upon the
execution of the first lease addendum on 30 October
2007, a tacit
option contract came into existence between Woolworths and PCS in
terms of which the latter would have an option
to extend the
franchise agreement to 28 February 2018, such option to be exercised
no later than 12 months prior to 23 September
2013; that the
plaintiffs had believed, when signing the franchise addendum, that
they were exercising this tacit option; and that
the franchise
addendum should thus be rectified in the manner alleged in the first
particulars of claim. The alternative cause
of action repeated the
allegation of a tacit option contract but sought to get around the
franchise addendum not through its rectification
but by alleging
that, due to a reasonable unilateral error on the part of the
plaintiffs, the franchise addendum was not binding
on them, and by
giving notice in the amended particulars of claim that PCS now
exercised the tacit option.
[46]
The probable
explanation for the change of tack is this. PCS on 28 August 2008 had
belatedly exercised the five-year option contained
in the original
franchise agreement and Woolworths had on 8 September 2008 agreed to
that extension. PCS had belatedly exercised
this option nearly 11
months after the conclusion of the first lease addendum, which was
evidently the event to which the plaintiffs,
in their first
particulars of claim, linked the coming into existence of the alleged
common intention that the franchise should
be extended to 28 February
2018. The existence of the alleged common intention in October 2007
did not sit comfortably with the
belated exercise by PCS in August
2008 of its option to extend the franchise only until 23 September
2013 (and not 28 February
2018). The second particulars of claim thus
introduced the notion of a tacit option (which allegedly came into
existence on 30
October 2007) to extend the franchise beyond 23
September 2013, with the signing of the franchise addendum allegedly
being the
act whereby the plaintiffs had intended to exercise the
tacit option.
[47]
By the time the third
particulars of claim were filed in May 2012 the plaintiffs’
legal team had become aware of the existence
of the second lease
addendum. The third particulars followed the same pattern as the
second, save for the refinement that, with
the conclusion of the
second lease addendum on 2 October 2009, the terms of the tacit
option allegedly concluded on 30 October
2007 were said to have been
varied so as to allow PCS to extend the franchise agreement to 30
April 2019 and so as to afford a
further option to extend the
franchise agreement to 30 April 2024.
[48]
The fourth and final
particulars of claim were delivered in April 2013, shortly before the
commencement of the trial. These particulars
of claim retained the
main cause of action and the alternative cause of action contained in
the third particulars of claim. However,
a further alternative cause
of action was added which asserted, with reference to various alleged
facts, that an ‘independent
tacit agreement’ had come
into force that the franchise agreement would be extended to 28
February 2018, alternatively that
the franchise agreement was (or
became) subject to an implied term that it would be so extended. In a
supplementary request for
trial particulars Woolworths enquired when
the independent tacit agreement had allegedly been concluded. The
reply was 1 March
2008 (being the commencement date of the first
lease addendum concluded on 30 October 2007).
[49]
As noted, the
plaintiffs’ counsel in the appeal relied only on rectification.
No argument was advanced in support of an alleged
tacit option
contract or an alleged independent tacit agreement. This in itself
represents something of a departure from the primary
case advanced in
the particulars of claim, because in the particulars of claim the
main cause of action (which was the one by which
rectification was
claimed) linked the claim for rectification to the alleged tacit
option contract and alleged that the plaintiffs
had intended to
exercise the tacit option when signing the franchise addendum.
However, there was an allegation that ‘regardless
of the
option’ it was the parties’ common intention, prior to
the conclusion of the franchise addendum, that its duration
would be
identified with the duration of the lease (namely 30 April 2019 with
a right of further extension to 30 April 2024), so
as a matter of
pleading I accept that the plaintiffs could rely on rectification
independently of the alleged tacit option contract.
Nevertheless, it
is not without significance that the plaintiffs’ primary
allegation was that a tacit option contract was
concluded on 30
October 2007 and varied on 2 October 2009 and that in signing the
franchise addendum the plaintiffs intended to
exercise the tacit
option as varied. Mr Pillemer did not seek to support that primary
case. From Christodoulou’s evidence
it is plain that he
subjectively never thought in terms of a tacit option nor did he
believe when he signed the franchise addendum
that he was exercising
an option.
The
legal test
[50]
In order to obtain
rectification it was necessary for the plaintiffs to establish on a
balance of probability that the parties had
a common intention, when
they executed the franchise addendum, that the addendum should record
the alleged extension of the franchise
agreement but that because of
a common error it failed to do so. (Rectification is also possible
where one party fraudulently tricks
the other into signing a document
which does not reflect the ostensible common intention but the
plaintiffs’ counsel disavowed
any allegation of fraud on
Woolworths’ part.)
[51]
Although it is not
necessary for a plaintiff to allege and prove an antecedent agreement
to which the written recordal failed to
give effect, De Wet CJ
observed in
Meyer v
Merchants’ Trust Ltd
1942 AD 244
that ‘proof of an antecedent agreement may be the
best proof of the common intention which the parties intended to
express
in their written contract, and in many cases would be the
only proof available’ (at 253). I understand the distinction to
be this. Parties may reach an antecedent agreement (whether or not,
on its own, it would be enforceable, having regard to any applicable
statutory or contractual formalities), and then record it in writing.
The antecedent agreement would then be the evidence of the
common
intention as to what the document was meant to contain. However,
parties may through a process of negotiation work their
way towards
the conclusion of a written contract, with the signing of the
contract being the only act by which either of them
intended to
signify assent. In such a case there would not be an antecedent
agreement, but one of the parties might nevertheless
be able to prove
the common intention of the parties as to the terms to which they
meant to assent.
[52
]
In the present case, so
it seems to me, the plaintiffs need to rely on an antecedent
agreement in order to establish the alleged
common intention. There
was no negotiation surrounding the franchise addendum in December
2009 (or at all). The plaintiffs’
own case placed the coming
into existence of a common intention on 30 October 2007/1 May 2008
(when the first lease addendum was
concluded or came into effect) and
the variation of that common intention on 2 October 2009 (when the
second lease addendum was
concluded). In essence, the plaintiffs’
case is that the parties tacitly agreed at these times that the
franchise agreement
should be extended to correspond with the varied
periods of the lease agreement. The plaintiffs saw the need to claim
rectification
of the franchise addendum not so much because the
addendum was the only source of an extended franchise period but
rather because
the terms of the addendum stood in the way of what
they claim had already been tacitly agreed. Put differently, if no
franchise
addendum had been concluded in December 2009, the
plaintiffs would simply have relied either on the alleged tacit
option contract
or the alleged independent tacit agreement.
[53]
The question is thus
whether the antecedent tacit agreement was proved (though it would
not make much difference whether one referred
to an antecedent tacit
common intention rather than an antecedent tacit agreement).
[54]
Where a party who seeks
rectification claims that the common intention (whether by antecedent
agreement or otherwise) was tacitly
formed, there is no reason not to
apply the same test as is used to infer a tacit contract. The test
for a tacit contract has been
stated in slightly different ways in
leading cases. In
Standard
Bank of South Africa Ltd v Ocean Commodities Inc
1983
(1) SA 276
(A) Corbett JA said that in order to establish a contract
‘it is necessary to show, by a preponderance of probabilities,
unequivocal conduct which is capable of no other reasonable
interpretation than that the parties intended to, and did in fact,
contract on the terms alleged’, ie it must be proved ‘that
there was in fact consensus
ad
idem
’
(292B-D). In his later judgment in
Joel
Melamed and Hurwitz v Cleveland Estates (Pty) Ltd
[1984] ZASCA 4
;
1984
(3) SA 155
(A) the learned judge of appeal, after describing this as
‘the traditional statement of the principle’, referred to
another possible test, namely that a court may hold that a tacit
contract has been established ‘where, by a process of
inference,
it concludes that the most plausible probable conclusion
from all the relevant proved facts and circumstances is that a
contract
came into existence’ (at 165B). Corbett JA did not
find it necessary to resolve the question but in an
obiter
dictum
said the
following:
‘
While
it is perfectly true that in finding facts or making inferences of
fact in a civil case the court may, by balancing probabilities,
select a conclusion which seems to be the more natural or plausible
one from several conceivable ones, even though that conclusion
is not
the only reasonable one, nevertheless it may be argued that the
inference as to the conclusion of a tacit contract is partly,
at any
rate, a matter of law, involving questions of legal policy. It
appears to be generally accepted that a term may not be tacitly
imported into a contract unless the implication is a necessary one in
the business sense to give efficacy to the contract (see
Van
den Berg v Tenner
1975
(2) SA 268
(A) at 276H-277B and the cases there cited). By analogy it
could be said that a tacit contract should not be inferred unless
there
was proved unequivocal conduct capable of no other reasonable
interpretation that the parties intended to, and did in fact,
contract
on the terms alleged.’
[55]
In Christie
The
Law of Contract in South Africa
6
th
Ed the learned author suggests a synthesis of these two tests,
drawing on three relevant principles, namely [i] that the
general rules for reasoning by inference in civil cases ought to be
applied as far as possible to maintain consistency; [ii] that
offer and acceptance should be ‘unequivocal, ie positive and
unambiguous’; and [iii] that the test for finding
a tacit
contract should not differ materially from the test for finding a
tacit term in a contract, because the question in each
case is
whether agreement can be inferred from the proved facts and
circumstances. His synthesis is that in order to establish
a tacit
contract ‘it is necessary to prove, by the preponderance of
probabilities, conduct and circumstances which are so
unequivocal
that the parties must have been satisfied that they were in
agreement. If the court concludes on a preponderance of
probabilities
that the parties reached agreement in that manner it may find the
tacit contract established’ (at 87-89). This
test has been
adopted in several cases (see, for example,
Landmark
Real Estate Pty Ltd v Brand
1992
(2) SA 983
(W) at 985I-J and
Sewpersadh
& another v Dookie
2008
(2) SA 526
(D) para 27). On the other hand, in
Muller
v Pam Snyman Eiendomskonsultante (Edms) Bpk
[2000]
4 All SA 412
(C) Comrie J expressed a preference for the traditional
test (at 419a-c).
[56]
In
Residents
of Joe Slovo Community, Western Cape v Thubelisha Homes & Others
(Centre on Housing Rights and Evictions and another,
amici curiae)
2010 (3) SA 454
(CC) the Constitutional Court applied the preponderance of
probability test mentioned by Corbett JA in
Joel
Melamed supra
in
answering the question whether a person was occupying land with the
‘consent’ of the owner but the two competing
tests were
not discussed and I doubt in the circumstances that the
Constitutional Court intended to resolve the point . In
Konsult
One CC v Strategy Partners (Pty) Ltd
[2013]
ZAWCHC 55
Davis AJ made the following observation (para 128):
‘
The
preponderance of probabilities test, as formulated in
Joel
Melamed
,
does not refer to unequivocal conduct which indicates
consensus
ad idem
.
This omission should not, in my view, be allowed to obscure the fact
that tacit contracts, like any other, require proof of an
unequivocal
offer and acceptance, and that the parties reached consensus. This
appears clearly from the following pithy summary
by Heher JA of the
Court’s task in determining whether or not a tacit contract has
been proved, which neatly synthesizes
and encapsulates both tests:
[4]
“‘
This
appeal is about an alleged tacit agreement. As in all such cases, the
court searches for the evidence of manifestations of
conduct by the
parties that are unequivocally consistent with consensus on the issue
that is the crux of the agreement and,
per
contram
,
any indication which cannot be reconciled with it. At the end of the
exercise, if the party placing reliance on such an agreement
is to
succeed, the court must be satisfied, on a conspectus of all the
evidence, that it is more probable than not that the parties
were in
agreement, and that a contract between them came into being in
consequence of their agreement. Despite the different formulations
of
the onus that exist (see the discussion in [
Joel
Melamed
]
at 164 G – 165G; and RH Christie & V McFarlane
The
Law of Contract in South Africa
6 ed at 88 – 9) this is the essence of the matter.”’
The judgment of Heher JA from which Davis AJ quoted
(
Butters v Mncora
2012 (4) SA 1
(SCA)) was a minority judgment
though the point of difference between the minority and the majority
concerned the facts rather
than the law.
[57]
Be that as it may, we
were not fully addressed on the matter and I do not think, for
purposes of the present case, that it is either
necessary or
desirable to express a final opinion on the correct test. What is
apparent, in my view, is that the courts have always
appreciated the
special difficulty which arises when a person asserts the existence
of a tacit contract. Where a contract is said
to have come into
existence through proven express exchanges (whether oral or written),
it is usually not difficult to decide whether
in law the exchanges
evidence an unequivocal offer and acceptance and thus the existence
of contract. Where the contract is said
to have come into existence
tacitly, it is generally more difficult to draw that conclusion. One
needs to guard against a finding
that, because it would have been
reasonable and fair for the parties to have reached the alleged
agreement if the matter had been
specifically discussed, they
therefore were in fact tacitly in agreement. The question is not even
whether they would probably
have reached agreement if the matter had
been raised but whether they were in fact in agreement though they
did not express it.
The same applies, in my view, to the question
whether there was the requisite common intention to found a claim for
rectification.
Assessment
[58]
Mr Pillemer put at the
forefront of his argument the fact that, prior to Woolworths’
giving its final approval for the introduction
of food into the
store, viability studies were done which projected costs, income and
profit over a 10-year period. This, taken
together with Woolworths’
conduct in negotiating the lease addendums, was said to give rise to
the inference that both parties
intended the franchise agreement to
be extended in line with the lease addendums.
[59]
As previously
mentioned, the only viability study adduced as an exhibit was the
modified study prepared by Acker in the latter part
of April 2009,
which reflected capital expenditure of R1,29 million, not the figure
of +R5 million which Christodoulou in his evidence
said had been
spent. The precise import of the viability study was not explained in
the evidence. It is not clear to me that the
viability study shows
that it would take 10 years for the capital expenditure to be
recovered. In general terms, though, both parties
seem to have
accepted that the expansion of the store and introduction of food
would only have made commercial sense if there was
an opportunity to
operate it for a period of about 10 years.
[60]
It would thus not have
been unreasonable for Christodoulou, before embarking on that
expenditure, to secure an extended period for
the franchise. One does
not know when he embarked on the expenditure. It seems likely to have
been in the period as from May 2009,
after Woolworths formally
approved the introduction of food into the store. The fact of the
matter is that he did not raise with
Woolworths an extension of the
franchise at that time. There is no indication that he thought about
it at all. If he had raised
the matter, I do not think it is possible
to be confident about how Woolworths would have responded. Woolworths
might have agreed
at that point (say, May 2009) to extend the
franchise agreement to correspond with the lease as amended by the
first addendum (ie
to 28 February 2018) or to match the 10-year
period of the viability study (ie to May 2019) or to some other date.
[61]
On the other hand,
Woolworths might have said that, while it was not in principle
against extending the franchise agreement, it
was unwilling at that
stage to commit itself. Christodoulou would then have needed to make
a judgement call as to whether to undertake
the expenditure in the
hope that in 2012/2013 he could negotiate an extension of the
franchise. In considering that question, he
may have had regard to
his own projections rather than those of Acker (which it is not clear
he ever saw). His own projections
were apparently more bullish. The
existing franchise as extended gave him just under four years from
the projected opening date
of the new store on December 2009.
Furthermore, Woolworths would presumably only have declined in
2012/2013 to extend the franchise
agreement if it wished to take back
the store itself. In that event, clause 28.1 of the franchise
agreement read with clauses 25.1
to 25.3 required Woolworths to pay
for fixed assets, stock, liquid assets and goodwill in accordance
with a prescribed methodology.
(It seems that Woolworths’ offer
of R9,1 million in 2011 represented its proposed payment for
goodwill, representing, according
to Christodoulou, 3,6 times the
business’ annual profit at that time. Woolworths would
additionally have been required to
pay for stock at cost plus fixed
assets at market value.)
[62]
It must also be
remembered that, if the question of an extension of the franchise
agreement had been raised in 2009, the parties
would have needed to
agree a good deal more than merely an extended date. I have indicated
that there are various possible contenders
as to what the extended
date might have been. Additionally, Woolworths would almost certainly
have wanted to review other terms,
including terms of the kind it
later included in the franchise addendum. In the absence of agreement
on these other matters, I
find it difficult to conclude that
Woolworths tacitly bound itself to an extended period for the
franchise.
[63]
There are other
objective facts to which regard must be had in assessing whether a
tacit consensus on the extension of the franchise
agreement was
reached. The first is that if this was the parties’ consensus,
one would have expected them to commit it to
writing, yet it is
common cause that this was not done at either of the times the
plaintiffs identified as being the occasions
on which the tacit
consensus came into existence (October 2007/March 2008 and October
2009) nor at the time PCS presumably embarked
on the capital
expenditure (around May 2009). Woolworths conducted its contractual
relations with franchisees on a formal basis.
The franchise agreement
was a very detailed document. No variation to the franchise agreement
was valid unless committed to writing.
Even if an extension of the
franchise agreement beyond its original term was not hit by the
non-variation clause (a proposition
for which
BLP
Investments (Pty) Ltd v Angel’s Precision Works (Pty) Ltd &
others
1987 (4) SA
308
(C) might provide some support), it seems most unlikely that
Woolworths would have left such an important matter to tacit
consensus.
In regard to the lease agreement, the extensions and other
alterations were formally negotiated by way of addendums. That would
have been the obvious time to conclude an addendum to the franchise
agreement if there was consensus on amended terms.
[64]
Another objective fact
is that when the extended and refurbished store was ready to open in
December 2009, Woolworths prepared an
addendum to regulate the
introduction of food, in which Woolworths stated that the franchise
agreement had been extended from 23
September 2008 to 23 September
2013 and would terminate on the latter date. Of course, this did not
necessarily mean that Woolworths
would refuse in 2012/2013 to
negotiate a renewal but it does indicate
prima
facie
that
Woolworths did not in 2009 regard itself as committed to the
franchise beyond 23 September 2013. The plaintiffs in argument
disavowed a contention that Woolworths deliberately inserted a wrong
date. The wording of the addendum in regard to duration would
thus,
on the plaintiffs’ argument, have to be attributed to a
bona
fide
mistake on
Woolworths’ part. However, the wording of the addendum does not
readily lend itself to that explanation. One is
not dealing with a
single date which might have been erroneously inserted. The preamble
recorded the factual basis for the changes
relating to duration,
namely that Woolworths had already agreed to extend the franchise for
a period of five years beyond its initial
term. Clause 3 of the
addendum gave effect to this by making certain changes to clause 7 of
the original agreement, among which
were the revised expiry date of
23 September 2013 and the deletion of clause 7.2 (which, if it had
remained, would have given PCS
an option to extend the franchise for
five years as from 23 September 2013). It is clear that the draftsman
of the addendum was
deliberately giving effect to the agreement
between the parties, by way of exchange of correspondence in
August/September 2008,
that the period of the franchise would be
extended for five years from 23 September 2008 to 23 September 2013.
[65]
Another important
consideration is the exchange of correspondence just mentioned. The
plaintiffs’ primary pleaded case was
that the tacit
understanding for the extension of the franchise (whether framed as a
tacit option, a tacit extension or a common
intention) came into
existence with the conclusion of the first addendum on 30 October
2007. It was an important part of the plaintiffs’
case at the
trial that the understanding between the parties was that the period
of the franchise would mirror the period of the
lease agreement.
Reference was made in that regard to a Woolworths mission statement
which Christodoulou had received in advance
of signing the original
franchise agreement and to certain discussions he had with
Woolworths’ representatives when he expressed
an interest in
taking up the franchise. This explains why, in formulating the tacit
understanding, the plaintiffs alleged in the
particulars of claim
that the understanding was initially for an extension to 28 February
2018 and then to 30 April 2019, and why
they alleged that the
understanding incorporated options to extend the franchise in a way
which mirrored the options in the first
and second lease addendums.
PCS’ conduct, in August 2008, in belatedly exercising the
option contained in the original franchise
agreement is plainly
inconsistent with the primary understanding alleged by the
plaintiffs. Christodoulou would not in August 2008
have exercised an
option to extend the franchise to 23 September 2013 if by then (as
the plaintiffs alleged in the particulars
of claim) the tacit
understanding was that the lease would be extended to (say) 28 of
February 2018. If anything was to be recorded
by an exchange of
correspondence, it would have been the prior tacit understanding
rather than the original option which had been
rendered irrelevant.
[66]
The plaintiffs
attempted, in their second particulars of claim, to get around this
difficulty by re-formulating the tacit understanding
as a tacit
option contract. However, and apart from the fact that
Christodoulou’s evidence did not support that alternative
construction, it is not simply a matter of legal formulation. The
question is what was actually intended. The advancing of materially
different formulations of what was alleged to have been tacitly
agreed, even in the alternative, calls into question whether anything
can be said, with the requisite degree of confidence, to have been
tacitly agreed at all (cf
Wilkins
NO v Voges
[1994] ZASCA 53
;
1994 (3)
SA 130
(A) at 143C-E, where a similar point was made in regard to
tacit terms).
[67]
Mr Pillemer did not
press the argument that the period of the franchise agreement
necessarily had to mirror that of the lease agreement.
As a fact, the
periods of the franchise and lease agreements as initially concluded
did not coincide exactly. Importantly, clause
23.2 of the franchise
agreement specifically contemplated that the franchise agreement
might expire by the effluxion of time prior
to the lease agreement.
Clause 23.2 provided that if that happened PCS would, if so required
by Woolworths, cede and delegate its
rights and obligations under the
lease to Woolworths or sublet the premises to Woolworths on the same
terms as contained in the
lease.
[68]
I have not thus far
taken into account the events of 2-4 December 2009. Even if my
conclusions on the factual disputes concerning
those events were
disregarded, and even if one assumed in favour of the plaintiffs that
Christodoulou only received the franchise
addendum on Friday 4
December 2009 and signed it without reading it, I do not think it was
proved that there was a tacit understanding
at that time that the
duration of the franchise agreement would be amended to accord with
the lease agreement as varied. That could
only have been the tacit
understanding if such an understanding had come into existence some
time previously, and for the reasons
I have explained I do not think
that was proved. In particular, I do not think it was proved that
Woolworths had the intention
alleged. It is doubtful, to my mind,
whether even Christodoulou on 4 December 2009 expected the addendum
to contain revised terms
as to duration. His version was that he
signed it after being told that it dealt with food, turnover,
commission structures and
so forth. His evidence was somewhat
equivocal as to whether he thought the addendum would say anything
about duration. If he actually
thought about that question, it would
not have taken him a moment to check what the addendum said on
duration. That would not have
required the advice of his attorney.
[69]
However, and if my
earlier conclusion is right that Christodoulou probably had read
enough of the franchise addendum to see what
it said as to duration,
that would on its own be fatal to the plaintiffs’ case. In
support of that particular conclusion,
and in addition to what I have
already said, it seems somewhat unlikely that Christodoulou would
have signed, sight unseen, an
addendum which he knew dealt with
important commercial matters such as franchise fees and the terms on
which PCS was to purchase
food stock from Woolworths. The trial judge
thought that Christodoulou would not have signed the addendum if he
had been aware
what had said on duration. If that were correct, one
would have to conclude that Christodoulou did not read the addendum
at all.
But I am less confident than the trial judge was on the
question as to how Christodoulou would have reacted if he read what
the
addendum said on duration. I do not find it implausible that he
assumed, incorrectly as it turned out, that Woolworths would in
due
course agree to an extension of the franchise. It must be remembered,
in that regard, that the formulation of the addendum
did not mean
that the franchise would not be renewed; that would simply be a
matter for later agreement.
Good
faith and Ubuntu
[70]
Mr Pillemer did not
spend much time on the good faith clause or on the concept of Ubuntu
as applied to the law of contract. He accepted
that neither the good
faith clause nor Ubuntu provided a basis for holding a party bound to
terms which might seem fair and reasonable
but to which such party
had not in fact agreed.
Conclusion
[71]
For all the reasons
stated above, I would uphold the appeal with costs and replace the
trial judge’s order with one dismissing
the plaintiffs’
action with costs, including those attendant on the employment of two
counsel.
HLOPHE JP:
[72]
I concur. The appeal is
upheld with costs, including those attendant on the employment of two
counsel. The order made by the trial
court on 12 June 2013 is set
aside and replaced with the following order: ‘The action is
dismissed with costs, including
those attendant on the employment of
two counsel.’
SAMELA J
[73]
I concur.
______________________
HLOPHE
JP
______________________
SAMELA
J
______________________
ROGERS
J
APPEARANCES
For Appellant:
Mr E Fagan SC & Ms E van Huyssteen
Instructed by:
Edward Nathan Sonnenberg
ENS House
1 North Wharf Square
Lower Loop Street
Cape Town
For Respondents:
Messrs M Pillemer SC &
A Christison
Instructed
by:
Lewellyn
Cain Attorneys
c/o
Fairbridges
16
th
Floor, Main Tower
Standard
Bank Centre
Heerengracht
Cape
Town
[1]
The trial judge said in her judgment that
Christodoulou called for a copy of the addendum after receipt of
Woolworths' letter
of 20 September 2011. That is erroneous. The
summons was issued on 24 August 2011, by which stage the plaintiffs
clearly already
had the franchise addendum. Christodoulou's evidence
was that he called for a copy of the franchise addendum after
receipt of
Woolworths' letter of 21 September 2010 and thought he
had done so towards the end of 2010, in about November.
[2]
Record 5/437.
[3]
Record 6/553-555.
[4]
Butters
v Mncora
2012 (4) SA 1
(SCA) at para
34.