January 2020 | Contract, Litigation
Here’s another warning from our courts to make sure that all your contracts are properly drawn to reflect both accurately and fully what you have agreed to.
The problem with leaving anything out – or agreeing to something that isn’t then fully recorded in your contract – is a principle in our law known as “the rule of parol evidence”.
A recent SCA (Supreme Court of Appeal) decision illustrates the rule in action, and the facts will resonate with the many farmers, businesses and city dwellers facing empty dams in drought-stricken areas…
The water diviner and the “insufficiently yielding” borehole
- A fruit farm/wine estate accepted a quote from a contractor to drill a borehole.
- The contractor, having successfully used his water divining skills and over 20 years’ experience to locate a good drilling spot, quoted to drill on the basis of his standard “No Water, No Pay” policy. The farm accepted the quote with a modification requiring a drill to 70m (or 100m if no water was found at 70).
- The resultant 76m deep borehole yielded some 4,000 litres of water per hour – something which, as the Court put it, “would put a smile on the face of most farmers in this country”.
- Nevertheless, and despite the borehole “gaily being used by the [farm] to irrigate its orchards”, the farm refused to pay the drilling contractor a cent, arguing that the water yield was insufficient to meet the contractor’s agreed obligations.
- One long (and no doubt expensive) legal battle through the courts later, the fight ended up before the SCA.
- One of the farm’s defences to the claim (and the one relevant to this article) was its (hotly denied) insistence that the contractor had guaranteed a minimum water supply of 10,000 litres per hour.
Oral evidence disallowed – it’s the written contract that counts
- Bad defence, said the Court. A guarantee of water yield “is not what the agreement says, and to find that there was agreement on such a guarantee would breach the rule of parol evidence which prescribes that where the parties to a contract have reduced their agreement to writing, it becomes the exclusive memorial of the transaction; and no evidence may be led to prove its terms other than the document itself, nor may the contents of the document be contradicted, altered, added to or varied by oral evidence.” (Emphasis supplied).
- On that basis “the considerable volume of evidence led by both sides in regard to their negotiations and what their intention had been was all clearly inadmissible”. All that mattered was that the contract specified that payment was due if the borehole produced water and wasn’t “dry” – its actual yield was irrelevant.
- The farm also tried to rely on the “partial integration rule” whereby, when a contract is partially written and partially oral, evidence can be led to prove the oral part of the agreement. But, held the Court, that rule cannot be used to “contradict or vary the written portion” of the agreement – which is exactly what the farm was trying to do.
- End of that argument, so the farm must pay its borehole bill in full, plus legal costs.
The bottom line – make sure your contracts cover everything both clearly and comprehensively!
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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September 2019 | Delict and Civil Claims, Litigation
“Truth will out” (Shakespeare)
You are wondering whether you can win in court against an opponent where your two versions of what happened are totally at odds with each other.
How will a judge decide where the truth lies? It’s an important question because even though you know you are telling the truth, the court must base its decision on the evidence put before it. In other words, whether or not Shakespeare’s “Truth will out” will apply to your court case is going to depend on what evidence you have, and on how you present it.
A recent damages claim for fraudulent misrepresentation illustrates…
Selling R320k worth of Jaguar XF as a R1m XFR
- A dealership (owned by a close corporation) sold a “Jaguar XFR” to a buyer, who financed the purchase through a bank at a price of R985,139-29. Legally the sale was from the dealership to an intermediary, which then sold the vehicle on to the bank, which then sold it to the buyer on instalment sale.
- When the buyer failed to make payments due under the instalment sale agreement, the bank seized the vehicle from him. In the process it became aware that it was in fact a Jaguar XF, not the XFR reflected in all the documentation.
- That made a big difference to the bank because a Jaguar XFR5.0 V8 S/C is, the Court was told, a very different beast from its cousin the XF5.0 V8. What was most relevant to this case was that “the Jaguar XF is a considerably cheaper kind of Jaguar vehicle than the Jaguar XFR”.
- The bank cancelled its agreement with the intermediary on the grounds of misrepresentation and the intermediary had to repay the R985k to the bank.
- The intermediary then in turn tried to recover its losses from the dealership, which however refused to pay back a cent and refused to accept return of the vehicle. To reduce its losses, the intermediary sold the XF on for R275k, after which it sued the dealership for its net loss of R710k.
- The two versions of events given by the dealership and the intermediary were irreconcilable and the factual evidence heard by the Court was an interesting and complex mix of allegedly forged signatures, unsigned documents, the mysterious addition of an “R” badge to the vehicle, and a disclosure that the dealership had bought the vehicle for R320k just days before on-selling it for R985k.
How did the Court decide?
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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July 2019 | Litigation
“Surprise the enemy” (Sun Tzu in ‘Art of War’)
You suspect that someone you are suing (or about to sue) will destroy or hide vital evidence in their possession. Perhaps by shredding documents or deleting electronic records supporting your case, or perhaps by spiriting away computer hard drives full of incriminating information. You fear that if they get away with it your case will be dead, or at least compromised.
Fortunately our law has a strong and quick remedy for you – the “Anton Piller” order, by means of which the High Court can authorise a search for, and a seizure into safekeeping of, the relevant evidence until trial.
Surprise raids and fishing expeditions
This is a drastic and draconian remedy. For obvious reasons this is a “surprise raid” on the other party – giving advance notice to the other party of your court application would defeat the whole object.
Which means that the other party suffers an unannounced and substantial invasion of its privacy, leading to all sorts of disruption and potential damage to its business.
Which is why our courts have laid down strict requirements that you must comply with before you will be granted an order. A recent Supreme Court of Appeal (SCA) decision illustrates –
- A developer and seller of computer software wanted to sue a company it had dealt with for damages on the basis of alleged breaches of contract and for unlawful competition. It obtained in the High Court an Anton Piller order giving access to the Deputy Sheriff, independent attorneys and forensic specialists to search and seize “documents specified in the order, computer equipment or any other storage devices”. This order was subsequently set aside and the developer, attempting to have the order re-instated, approached the SCA for leave to appeal.
- The Court in refusing leave to appeal analysed and applied the requirements for an order to preserve evidence under three main headings. You must establish (prima facie, in other words “on first appearance” but not definitively at this stage) the following –
- That you have a cause of action against the other party, which you intend to pursue. The developer had, said the Court, established this.
- That the other party has in its possession “specific documents or things which constitute vital evidence in substantiation of [your] cause of action…” This, said the Court, required the developer to “identify the documents it sought to preserve with the necessary degree of specificity”. A “blanket search for unspecified documents or evidence, which may or may not exist, is not permitted”. You have to be specific.
The major flaw in the developer’s case was, said the Court, its failure in its affidavits to identify or specify which vital information was in possession of [the other party] that needed to be preserved. It proposed a “keyword” search to be used in searching the whole of the other party’s data base that was “invasive and a trawling expedition through every aspect of [the other party]’s business” including sensitive and confidential information to which it could not be entitled.
- That you have a “well-founded apprehension that this evidence may be hidden or destroyed or in some manner spirited away by the time the case comes to trial…” But in this case, said the Court, the developer had failed to show that the other party was untrustworthy or dishonest, plus it had “failed to set out any factual basis for an objective conclusion to be reached of the well-founded and reasonable apprehension that evidence would be concealed.”
- This particular order, held the Court, “involves a departure from the basic premise upon which Anton Piller orders are granted, namely that they are to preserve evidence, not search for it”, whilst its execution was “nothing but a fishing expedition” (emphasis added). The software developer could not succeed in re-instating its Anton Piller order.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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May 2019 | Company / Corporate / Compliance, Insolvency / Liquidation, Litigation
“Some people use one-half their ingenuity to get into debt, and the other half to avoid paying it” (George Prentice, newspaper editor and author)
You are owed a lot of money by a company that goes into business rescue. The business rescue plan provides for creditors like you to accept a dividend of only a few cents in the Rand in settlement of your debt. You stand to lose heavily.
But perhaps there’s hope yet – a director with assets has signed personal suretyship. Can the director now say “sorry, you adopted the business rescue plan so your claim no longer exists”, and refuse to pay you?
The directors’ defence
- A creditor was owed R6.5m for the lease of mining equipment to a company which was placed under business rescue. In terms of a business rescue plan approved by the creditor it was paid only a portion of its claim, losing its right to claim anything further from the debtor company.
- The two directors of the debtor had signed a deed of suretyship in terms of which they stood as co-sureties and co-principal debtors with their company for all amounts owing.
- The creditor duly sued the directors for its shortfall of some R5.5m The directors’ defence was that they were not liable because –
- The suretyship entitled the creditor to go after them only for “any sum which after the receipt of such dividend/s or payment/s may remain owing by the Debtor.” (Own underlining).
- Nothing remained owing by the debtor which had been released from its debt by the business rescue plan.
In other words, argued the directors, nothing was owed by the debtor company, so they were liable for nothing.
- Not so, said the Court. That “would render the terms of the deed of suretyship nonsensical and militates against the very reason for a creditor obtaining security against the indebtedness of a debtor i.e. to mitigate the risk of the debtor being unable to fulfil its obligations due to inter alia business rescue.” The business rescue plan made no provision for the position of sureties and therefore “the liability of the sureties is in my view preserved. And while the debt may not be enforceable against [the company], it does not detract from the obligation of the sureties to pay in the circumstances of this case.” In other words, a surety’s liability is unaffected by the business rescue unless the plan itself makes specific provision for the situation of sureties.
- Bottom line – the directors must personally cough up the R5.5m (plus interest and costs).
Lessons for directors and creditors
The outcome here could have been very different had the wording of either this particular suretyship or the business rescue plan supported the directors’ defence.
Creditors – when securing your claim with a director’s suretyship check that you are fully covered in any form of business failure situation. And ensure that a business rescue plan specifically provides that its adoption does not release sureties.
Directors – when you sign personal surety understand exactly what you are letting yourself in for. And if you are unlucky enough to find yourself in the middle of a business rescue, actively manage your personal liability danger – particularly when it comes to the wording of the rescue plan.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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May 2019 | Litigation, Website of the Month
“Agree, for the law is costly” (wise old proverb)
The cost, delay and risk of contested litigation sometimes makes it sensible to rather try to resolve a dispute with mediation. Ask your lawyer for advice on whether your dispute is a suitable one, and if so be aware that in addition to the option of existing “private” mediation, you can refer a dispute to “court-annexed” mediation at selected magistrate’s courts around the country, either before or during a trial.
The list of courts offering mediation options expands greatly on 1 July 2019 – see the full list here.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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April 2019 | Delict and Civil Claims, General Interest, Litigation
“There’s no such thing as a free lunch” (Economist Milton Friedman)
In these days of online banking and electronic payment, it’s not uncommon to find out to your horror that you have made a payment to someone in error, either to the wrong recipient or in an incorrect amount. If that happens to you and the recipient refuses to pay you back, what can you do about it?
The other side of the coin of course is whether the recipient of an unexplained and unexpected bank account credit can safely go ahead and spend the windfall (the answer in a nutshell is very strong “no” – if there are indeed any free lunches in the world, this is unlikely to be one of them!).
A recent High Court judgment sets out the requirements for a claim based on “unjustified enrichment”.
A banking app duplicates payments of R861,940
- A couple were the happy beneficiaries of a malfunction in their bank’s “remote banking” app.
- In effect they received duplicate transfers into their two accounts totalling R861,940
- The bank duly sued them for return of the money on the basis that they had been “unjustifiably enriched” at its expense.
- Initially the couple denied that any duplication had taken place, but at trial they dropped their denial, claiming instead to have repaid the bank in cash.
- The husband’s story was that he had paid a bank employee, since deceased, who had put the cash into a safe “in case a claim was made”. He was unable to say how much money had been handed over, he could not give dates, and no receipts were requested or given. Nevertheless his evidence was accepted by the trial court and the bank’s claim failed.
- However on appeal to a “full bench” (a “full court” of three High Court judges, sometimes more), the husband’s version was rejected as “inherently improbable”, and the couple was ordered to repay the bank together with interest and legal costs.
What must you prove?
The requirements for an unjustified enrichment claim are –
- The recipient has in fact been enriched by receiving the money (it needn’t be money, it could for example be an asset of some sort)
- You have been “impoverished” by the transfer
- The recipient’s enrichment was at your expense
- The enrichment was legally unjustified.
Once the couple admitted receiving the money without a legal basis, held the Court, the onus shifted to them to prove that there was no enrichment. So their failure to prove repayment was the end of their case.
Don’t despair if the facts of your case don’t tie in fully with the above requirements – our law may have other remedies for you. Ask your lawyer for help.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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