HORNER INVESTMENTS CC GENERAL PETROLEUM INSTALLATIONS CC

Transcription

1 1 IN THE HIGH COURT OF SOUTH AFRICA (EASTERN CAPE DIVISION, GRAHAMSTOWN) Case No.3433/12 Dates heard: 12-15/11/13 (trial); 24 and 29/1/14 (heads of argument re amendment) Date delivered: 27/2/14 Not reportable In the matter between: HORNER INVESTMENTS CC Plaintiff and GENERAL PETROLEUM INSTALLATIONS CC Defendant Contract terms of oral agreement whether defendant repudiated, entitling plaintiff to cancel found on facts that term relied on by plaintiff to establish breach not part of contract, consequently that first basis for cancellation by plaintiff not established that second basis for cancellation, namely poor workmanship, not established as defective performance rectified before plaintiff cancelled that third basis for cancellation, refusal by defendant to move tank that it installed, not a repudiation because tank installed in correct position finally, no basis for a reduction in contract price for partial performance by defendant because cancellation by plaintiff not justified. JUDGMENT PLASKET, J: [1] This matter is a good illustration of the fact that, generally speaking, it is preferable for contracting parties to record their agreement in a considered and

2 2 carefully drafted document, rather than to rely on an oral agreement with all of the dangers of misunderstanding and imprecision created by the potential for differing perceptions arising as to what may have been agreed. 1 [2] The plaintiff trades as Grahamstown Motor Services. It conducts the business of a service station in Beaufort Street, Grahamstown, selling fuel and related products to the public. It was initially an Engen franchise but that agreement was cancelled. In October 2009, Engen engaged the defendant to de-commission the site by removing three underground fuel tanks, islands upon which fuel dispensers stood, fuel dispensers, related piping and installations. The defendant was also required to rehabilitate the site by filling in the holes where the tanks had been and laying concrete over the areas where installations had been removed. [3] As the plaintiff wished to continue to operate after the end of the Engen franchise, its sole member, Mr Terrence Horner, contacted the sole member of the defendant, Mr Oscar Mouton with a view to re-commission the site. An oral agreement was duly concluded between the plaintiff and the defendant, represented by Horner and Mouton respectively, in terms of which and I confine myself for the moment to what is common cause the plaintiff would pay the defendant R in advance and the defendant would obtain, refurbish and install fuel tanks on the site, along with the other equipment that would enable the plaintiff to trade as a service station. [4] It is also common cause that the plaintiff paid the defendant R , that tanks were obtained, refurbished and installed and that a certain amount of the work was done by the defendant before the breakdown of the relationship between the plaintiff and the defendant, and the eventual cancellation of the agreement by the plaintiff. [5] It is not in dispute that there were problems. Horner complained that the tanks were not installed to level. They were removed and re-installed by the defendant. A 1 As to the advantages of written contracts over oral contracts, see R H Christie and G B Bradfield Christie s The Law of Contract in South Africa (6 ed) at 109 (hereafter referred to as Christie).

3 3 dispute also arose concerning the position of one of the tanks, which I shall refer to below as the diesel tank. [6] At the outset of the trial I was asked to separate the merits from quantum of damages. I duly did so in terms of rule 33(4) of the uniform rules. After the matter had been argued and I had reserved my judgment, I was notified of the plaintiff s intention to amend its particulars of claim. The defendant did not object to the amendment, a consequential amendment to the defendant s plea was filed and it was agreed by the parties that the issue dealt with by the amendment did not require any further evidence to be led and could be dealt with by me on the basis of heads of argument being furnished by counsel, rather than by way of the hearing of oral argument. The amendment has now been pleaded to and the heads of argument have been filed. [7] The issues that arose for determination during the trial were: first, whether one of the terms of the oral agreement was that the re-commissioning of the site would be completed by the end of November 2009 and, if so, whether the defendant breached that term by failing to complete the work by then; secondly, whether the defendant breached the contract on account of its poor workmanship; and thirdly, whether the defendant breached the contract by placing the diesel tank in the incorrect position and then refusing to move it. The amendment introduced a further, alternative, issue namely whether the plaintiff was entitled to a reduction of the price that he paid on account of incomplete performance on the part of the defendant. [8] It is alleged by the plaintiff that the defendant breached the contract by failing to perform in terms of the contract in one or more of the ways listed above and that its failure amounted to a repudiation of the contract, entitling the plaintiff to cancel, which it did. 2 The defendant, on the other hand, denies repudiating the contract and 2 The term repudiation connotes, in this context, the evincing of a deliberate and unequivocal intention no longer to be bound by the agreement and constitutes a breach in and of itself which does not have to be accepted in order to complete the breach. (The acceptance of the repudiation is simply the exercise by the aggrieved party of his right to terminate the agreement.) See Datacolour International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) para 1. See too Street v Dublin 1961 (2) SA 4 (W) at 10A-C; Tucker s Land and Development Corporation (Pty) Ltd v Hovis 1980 (1) SA 645 (A) at 653B-E.

4 4 pleads that the plaintiff was not entitled to cancel the contract. I turn now to a consideration of the issues that I have identified. [9] The method for determining whether the onus-bearing party the plaintiff in this case has discharged the onus is well-known. It requires the court to be satisfied on a balance of probabilities that his or her version is true and accurate and therefore acceptable, and that the other version advanced by the defendant is therefore false or mistaken and falls to be rejected ; and that, in essence, this requires the court to weigh up and test the plaintiff s allegations against the general probabilities. 3 [10] The evidence of both Horner and Mouton has been criticised in certain respects. I am satisfied, however, that nothing turns on questions of credibility in this case: the factual issues ultimately can and must be decided against the probabilities. [11] I turn now to a consideration of the relevant issues. Completion date [12] Horner testified that he wanted to have his service station operating by the beginning of December He knew that the defendant would de-commission the site during October 2009 and he then wanted the defendant to re-commission it during November He testified that it was a term of the agreement between him and Mouton that the re-commissioning of the site would start on 1 November 2009 and be completed by 30 November [13] Because of this, he placed advertisements in a local newspaper and had a sign made which he placed on the site advising customers that the plaintiff would be open for business in early December The sign stated: Dear Customers We are closed for upgrades from 1 October 2009 to early December We regret the inconvenience to you. Kind regards, Management 3 National Employers General Insurance Co Ltd v Jagers 1984 (4) SA 437 (E) at 440E-F.

5 5 (The sign appears in various photographs that are either part of the pleadings or the bundles handed in by the plaintiff and the defendant. No particular photograph shows all of the wording of the sign clearly, so one has to look at a number of photographs to piece the sign together.) [14] Mouton, on the other hand, denied that it was a term of the agreement that the project was to be completed by the end of November In the first place, he said, he would never have bound the defendant to such a term because the project could never have been completed in a month. Secondly, it made no sense to bind the defendant to such a term given factors such as the weather, over which the defendant would have no control, and which could make compliance with such a term impossible. Thirdly, the agreement required the defendant to source the equipment that had to be installed, to then refurbish it and only then to install it. This process could only start after the plaintiff had paid, which happened on 30 October In these circumstances, he did not and would never have committed the defendant to a completion date of the end of November [15] For the reasons that follow, I am of the view that Horner has not, on a balance of probabilities, established the term that he bears the onus of proving. [16] First, it is, in my view, significant that in the s that passed between Horner and Mouton prior to the beginning of November 2009, there is mention of the price, the work and the equipment to be installed but no mention of a completion date. This is indicative of no agreement having been reached on the issue. [17] Secondly, it seems to me, the reasons given by Mouton as to why he would not have agreed to the disputed term are eminently sensible and logical. It is improbable that in the face of the very real and obvious practical difficulties that Mouton foresaw, he would have agreed to the term. He has a great deal of experience in the petroleum installation business, as he testified that he has been the managing member of the defendant since [18] Thirdly, the sign that Horner placed on the site and he made much of this cannot avail him because it is clear from the photographs that it was in position by 7

6 6 October 2009, at least, which pre-dates the conclusion of the agreement: it was only on 14 October 2009 that Mouton gave Horner the price that was agreed upon. (The fact that both Mouton and the defendant s second witness, Mr Wayne Deysel, said that they never noticed the sign takes the matter no further, one way or the other.) At best for the plaintiff, the sign may have been an aspirational statement the expression of a hope that the disruption to the business would not last unduly long. [19] Fourthly, The plaintiff s own correspondence is largely incompatible with the assertion that a completion date of 1 November 2009 was agreed upon: there is no mention of a completion date (apart from a query that went unanswered) from Horner s first of 9 July 2009 until after the work had commenced when, on 17 November 2009, completion by the end of November 2009 was mentioned for the first time. [20] Consequently, I am of the view that the probabilities favour the defendant s version that no completion date was agreed to. The fact that the project was not completed by the defendant by the end of November 2009 is therefore not a breach of the contract. The defendant consequently cannot be said to have repudiated the contract on this account. That being so, the plaintiff was not entitled to rely on noncompletion of the project by 30 November 2009 to cancel the contract. [21] If I am wrong in my assessment of the evidence and the conclusion that I have arrived at, the evidence and the correspondence establishes that the plaintiff, by its conduct, waived whatever right it may have had to the project being completed by 30 November 2009, and accepted what would otherwise, on its version, have been late performance. Quality of workmanship [22] I turn now to the second issue, namely whether as a result of poor workmanship, the defendant breached the contract to the extent that this survived as a distinct basis for the alleged breach of the agreement.

7 7 [23] This issue can be disposed of briefly. It is so that Horner was, at various times, dissatisfied about the quality of the defendant s work. On each occasion, he raised his problems with the defendant s employees on site and often with Mouton too, via . His dissatisfaction centred predominantly on the difficulties in installing the tanks to level. [24] According to both Mouton and Deysel, this problem was overcome and Horner expressed himself to be satisfied with the result. It is not in dispute that the problems with the tanks were rectified. This was confirmed in a letter dated 21 January 2010 written by the plaintiff s attorneys to Mouton in which it was stated that while two of the three tanks had not been installed according to industry standards the problem had been resolved in that your workers removed the tanks against which the complaint had been levelled and re-instated them correctly. [25] In the result, the quality of the defendant s workmanship cannot avail the plaintiff as a valid basis for its cancellation of the contract. The position of the diesel tank [26] I turn now to the issue of whether the defendant placed the diesel tank in the incorrect position. [27] It is perhaps best to start with whether the defendant was provided with a plan by Horner because that issue took up some time in the trial but can be disposed of quickly. The defendant was provided with a document that Horner said was a plan but both Mouton and Deysel described as a sketch. [28] Mouton said that he had requested a plan but never received one. He required a detailed, official, scale drawing of the site indicating the positions of the installations as well as water and other pipes an approved plan. The sketch that he received was hand-drawn and not to scale. Mouton described it, rather uncharitably, as looking like it was drawn by a child and stated that it was not suitable as a construction drawing. It was, he said, useless for all practical purposes.

8 8 [29] I am in agreement with Mouton that the document was nothing more than a rough sketch of the layout of the service station, indicating more or less where the tanks had been located. [30] To a large extent, however, the debate about the plan (or sketch) is a red herring. I say this because it is clear from the evidence that the defendant was required by Horner, when it re-commissioned the service station, to place the three tanks, including the diesel tank, in exactly the same places from which the old tanks had been removed. This is exactly what the defendant did and it did not need a plan to do it. As the defendant had removed the tanks in October 2009 and began to install the refurbished tanks the following month, it could hardly have made a mistake as to their positions. A mistake is even more unlikely given the subterranean conditions in which the tanks were located: Mouton pointed out to Horner in an e- mail on 18 January 2010 that the area underground where there are no tanks has a very hard strong rock that will have to be broken in order to enlarge or relocate the tank. [31] The position of the diesel tank only became an issue when Horner discovered that it would interfere with the foundation for a canopy that he wished to have erected over the pumps. He then demanded of Mouton that the diesel tank be moved. Mouton took the view that, as the diesel tank had been placed correctly, if Horner wanted it moved, it would cost the plaintiff R excluding VAT. In other words, the moving of the diesel tank was another project requiring a separate agreement and, in the absence of agreement, the defendant would not move the diesel tank. [32] In my view, it is clear that, on the probabilities, the diesel tank was placed in the same position from which a similar tank had been removed in October That being so, the defendant had performed in terms of the contract. As it had placed the diesel tank in the correct position, its refusal to move the diesel tank was not a breach of the contract amounting to a repudiation and consequently cannot

9 9 justify the plaintiff s cancellation of the contract. Put somewhat differently, the defendant had not repudiated a valid obligation arising from the contract. 4 The amendment: reduction of the price [33] The amendment introduced an alternative claim to the main claim based on a repudiation by the defendant and a cancellation by the plaintiff. The plaintiff alleged that while it paid the defendant the full contract price in advance, the defendant had only performed partially when the contract was cancelled. The defendant had, the plaintiff alleged, only performed to the value of R and it was consequently entitled to recover the difference between what it had paid and this amount. [34] This claim can be disposed of shortly. It has to be grounded on a breach of the contract on the part of the defendant. I have already found that the plaintiff has not established a breach on the part of the defendant that amounted to a repudiation that, in turn, entitled the plaintiff to cancel the contract. In other words, the plaintiff cancelled the contract for no justifiable reason. The defendant was willing to perform its obligations and was doing so when the plaintiff cancelled the contract, thereby preventing the defendant from completing the work that it had undertaken to do, and was in the process of doing. To allow the plaintiff s claim for a reduction of the price would be to allow it to benefit from its own unjustified cancellation of the contract. The order [35] For the reasons set out above, the plaintiff s action is dismissed with costs. C Plasket Judge of the High Court 4 Ankon CC v Tadcor Properties (Pty) Ltd 1991 (3) SA 119 (C) at 125F-G.

10 10 Appearances Plaintiff: K Watt instructed by Wheeldon, Rushmere and Cole, Grahamstown Defendant: D Smith instructed by Whitesides, Grahamstown