This
is an appeal against the decision of the High Court dismissing with
costs the appellant's claim for delivery of two hundred heifers and
two hundred steers.
The
background to this matter is as follows;
At
the relevant time, Nuanetsi Ranch (Pvt) Ltd (“the respondent”)
was one of the largest cattle breeders in the country. During 2003,
the respondent experienced acute cash flow problems as a result of
which a decision was taken, by management, to dispose of some of the
cattle in order to raise money. On or about 7 May 2003 the respondent
entered into a written agreement with the appellant in terms of which
the respondent sold to the appellant a total of four hundred cattle
consisting of two hundred heifers and two hundred steers. The
purchase price was agreed at Z$450 per kilogram for the heifers and
Z$500 per kilogram for the steers.
The
appellant paid the agreed deposit of Z$15 million on 8 May 2003. In
terms of the agreement, the balance of the purchase was payable “on
Monday 12 May 2003 or after the animals have been weighed and
delivered whichever occurs later.”
The
cattle were not weighed by 12 May 2003, and, consequently, the
balance was not paid by that date.
In
June 2003, the respondent then advised the appellant that it could
collect one hundred and twenty steers which the respondent said was
equivalent to the deposit of Z$15 million previously paid.
At
the hearing of the matter before the court a quo, the court found
that the cattle had been weighed on 16 May 2003, and, that although
the appellant had been advised of this fact no payment had been
forthcoming despite numerous visits and telephone calls by the
respondent's Managing Director. The court also found that the
respondent had cancelled the contract and that it had done so by
implication. Consequent upon these findings, the court a quo
dismissed the appellant's claim with costs.
It
is against this order that the appellant has appealed to this Court.
In
its grounds of appeal, the appellant has raised various issues. These
are that the court a quo erred:
(1)
In finding that the cattle were weighed on 16 May 2003 and that the
appellant was advised of this fact and the need to pay.
(2)
In finding that the respondent cancelled the contract between the
parties by implication.
(3)
In not making a finding whether the respondent placed the appellant
in mora.
(4)
In declining to grant the appellant an order of specific performance.
I
propose to deal with the first two grounds together as they are
inter-related and arise from the same set of circumstances.
There
is a dearth of evidence as to what happened exactly after the payment
of the deposit of Z$15 million was made. The respondent says the
cattle were weighed on 16 May 2003 after which the appellant was then
advised of the fact. How the appellant was advised was never
clarified during the trial.
The witnesses who gave evidence for the respondent told the court a
quo that the invoice was faxed to the appellant.
A
copy of the fax slip was, however, not produced to confirm this.
The
witnesses further told the court that the invoice had been sent by
fax and the original by post and that one Betty Mudenge had done so.
Betty Mudenge was not called to testify to this fact.
At
the end of the day, therefore, all that was before the court a quo
was an unsubstantiated claim that an invoice had been forwarded to
the appellant on or about 16 May 2003.
On
the basis of such evidence, the court a quo had no basis for finding
that the invoice was forwarded to the appellant on or about 16 May
2003 and that the appellant, having seen the invoice, failed or
refused to pay. Clearly, there was no such evidence before the court
a quo.
There
was evidence, however, that there were numerous visits and telephone
calls by the respondent's Managing Director to the appellant's
offices. I agree with the trial court that the cattle were in fact
weighed at some stage and that, as a result, the respondent's
Managing Director then made numerous calls in order to get payment.
It
is unlikely that the respondent's Managing Director would have
behaved in such a fashion if in fact the cattle had not been weighed.
However, it is unclear when he made the calls or paid visits to the
appellant's offices.
The
evidence on record shows that what next happened was that the
respondent wrote to the appellant on 12 June 2003. In that letter,
the respondent advised the appellant that the deposit it had paid was
equivalent to one hundred and twenty steers and that an invoice to
that effect was attached to that letter. The letter was received and
responded to by Mr D G Lupepe, the appellant's Managing Director.
In his response, Mr Lupepe accepted the one hundred and twenty steers
but rejected the suggestion that there should be a fresh quotation in
respect of the remainder of the cattle.
I
am prepared to find, on the evidence, that the cattle must have been
weighed and the appellant notified on an unknown date but before 12
June 2003. The appellant, it is common cause, did not pay.
The
question that now arises is whether the contract was properly
cancelled.
It
was the evidence of the respondent's Managing Director that the
cancellation was implied from the letter of 13 June 2003. In other
words, it was accepted that the respondent did not explicitly cancel
the contract.
In
its submissions, the appellant says cancellation by implication is
unknown at law. The respondent disagrees.
It
is clear that in its letter of 13 June 2003 the respondent was
suggesting that it was prepared to let the appellant take delivery of
one hundred and twenty steers against the deposit of $15 million
previously paid. The remark by the respondent that “if you need
more cattle, you are free to contact us and we give you a fresh
quotation” suggests that the respondent considered, at that stage,
that the contract was no longer in existence.
The
appellant's immediate reaction was that the contract was still in
force and that the respondent should comply with that contract.
The
position is now settled that:
“Notice
of cancellation must be clear and unequivocal and takes effect from
the time it is communicated to the other party…,.”
R
H CHRISTIE, The Law of Contract in South Africa, 3ed…,. See also Du
Plessis v Government of the Republic of Namibia 1995 (1) SA 603…,.
A
notice of intention to cancel must be such that the other party is or
ought to be aware of its nature, but it is not necessary to use the
word “cancellation.” The intention to cancel may be made
sufficiently clear in other ways; KERR, The Principles of the Law of
Contract, 4ed…,.
On
the evidence, the respondent did not cancel the agreement in clear
and unequivocal terms. Indeed, this is common cause. The respondent's
evidence was that the cancellation was implicit from its letter of 13
June 2003.
In
that letter the respondent wrote:
“Find
attached your receipt for the 120 steers which you purchased from
Nuanetsi Ranch. If you need more cattle, you are free to contact us
and we give you a fresh quotation.”
This
letter clearly implied that the contract was no longer in existence
and that if the appellant required to purchase more cattle a fresh
quotation would have to be provided.
Indeed,
the appellant understood the letter to mean that the contract was no
longer in existence, and, for that reason, wrote back to say that as
far as the appellant was concerned the contract was still binding.
The
question that now arises is whether, in law, a contract can be
cancelled by conduct. Although the appellant has submitted that
cancellation by implication is unknown to law, the question really is
whether cancellation can be by conduct.
In
Du Plessis v Government of the Republic of Namibia 1995 (1) SA 603…,
the Namibian High Court accepted that a summons claiming damages was
an implied notice of cancellation. The decision to cancel a contract
may also be by conduct – see KERR, Principles of the Law of
Contract, 4ed…,.
Indeed,
repudiation of a contract by the defaulting party may be by words or
conduct justifying cancellation by the aggrieved party; KERR,
Principles of the Law of Contract, 4ed…,.
If
the defaulting party can repudiate by words or conduct, surely, the
aggrieved party should be able to terminate the contract by conduct
too.
Suppose
that the defaulting party has evinced an intention to repudiate the
contract. Suppose too that the aggrieved party accepts such
repudiation, and, by his conduct, clearly evinces his view that the
contract has terminated. Would one not talk of termination in such a
case? The answer, in my view, is in the affirmative.
As
in all cases, the circumstances must be such that that is the only
reasonable inference that may be reached. In such a case, I would
have no difficulty in describing the contract as having been
terminated by conduct.
Considering
the circumstances of this case, I would have no difficulty in
concluding that the respondent's Managing Director was in fact
saying the contract had come to an end and that if the appellant
wished to buy more cattle, then it would have to enter into a new
agreement. I find, therefore, that the respondent did, in fact,
cancel the agreement although it did not do so expressly.
The
question that now falls for determination is whether the respondent
lawfully terminated the agreement, and, in particular, whether the
appellant had been placed in mora.
It
is clear from all the facts of the case that the respondent was in
financial dire straits and required payment as a matter of urgency.
Clearly, therefore, this was a contract in which time was of the
essence. However, since the cattle were not weighed by 12 May 2003,
no time had been fixed within which payment had to be made.
In
cases such as the present, the general rule is that:
“When
the contract does not fix a time for performance there can be no mora
ex re, only mora ex persona, so a demand by the creditor is necessary
in order to place the debtor in mora…,.”
R
H CHRISTIE, The Law of Contract in South Africa, 3ed…,.
The
view has been expressed in several decided cases that no demand is
necessary to place the debtor in mora when no time for performance
was stipulated but it is clear that immediate performance was
contemplated; R H CHRISTIE, The Law of Contract in South Africa,
3ed…,.
This
view does not appear to correctly reflect the law as it currently
stands. The present position is that:
“When
no time for performance is fixed but time is of the essence, the
debtor is not in mora and the creditor cannot cancel for
non-performance unless a proper demand for performance has been
made….,. The concept of time of the essence relates to the
consequences of a breach and not to the breach itself, so if no time
is fixed there can be no breach by non-performance, whether or not
time is of the essence, until the creditor has informed the debtor
when he maintains performance is due.” R H CHRISTIE, The Law of
Contract in South Africa, 3ed…,.
In
the present case it is clear that the appellant was never placed in
mora.
The
respondent proceeded to cancel the agreement but did not place the
respondent in mora. In the circumstances, the contract was not
lawfully terminated and therefore continued to subsist.
Having
come to the conclusion that the contract between the two parties
continues to subsist, the issue that falls for determination is
whether the appellant would, in the circumstances, be entitled to an
order of specific performance.
It
is not in dispute that the decision by the respondent to sell part of
its herd had been triggered by a precarious financial position that
the company found itself in. The stipulation in the agreement, that a
deposit of Z$15 million was payable immediately and the balance
within five days, underscored the urgency with which the respondent
treated the situation.
Whilst
it is unclear when the cattle were weighed and the date on which the
appellant was advised of this fact, there is nothing on record to
suggest that the appellant itself was in a hurry to perform its side
of the agreement. The appellant does not appear to have done much
after the payment of the deposit.
In
June 2003, the respondent advised the appellant that if it wanted
more cattle then a fresh quotation would be prepared. The appellant
objected to this, maintaining that a valid contract was still in
existence. What this meant was that the appellant wanted to buy the
cattle, some three months later, at the contract price of Z$450 per
kilogramme for heifers and Z$500 for steers.
This
Court can take judicial notice of the fact that inflation has been a
problem in our economy for some time - including the year 2003.
Indeed, on two occasions, the monetary authorities have had to slash
zeros from our currency to enable financial transactions to continue.
A price of Z$450 or Z$500 per kilogram weight of beef in 2003 would
have been a trifling sum in 2005 when the High Court was called upon
to adjudicate over the dispute.
Were
specific performance to be granted, the effect would be that the
appellant would take delivery of 280 heifers and steers for a very
small amount of money. In other words, the appellant would be
entitled to take possession of a herd of cattle worth a considerable
sum of money for which it would have paid virtually nothing. In these
circumstances, specific performance cannot be granted.
The
general rule is that:
“Prima
facie, every party to a binding agreement, who is ready to carry out
his own obligation under it, has a right to demand from the other
party, so far as it is possible, a performance of his undertaking in
terms of the contract;” per INNES JA in Farmers' Cooperative
Society v Ben 1912 AD 343…,.
An
order of specific performance is, however, at the discretion of the
court and there are circumstances in which a court may refuse to
grant an order of specific performance. The discretion is:
“[not]…,
completely unfettered. It remains, after all, a judicial discretion
and from its very nature arises from the requirement that it is not
to be exercised capriciously nor upon a wrong principle; Ex parte
Neethling (supra at 335). It is aimed at preventing an injustice; for
cases do arise where justice demands that a plaintiff be denied his
right to performance – and the basic principle, thus, is that the
order which the court makes should not produce an unjust result which
will be the case, e.g. if, in the particular circumstances, the order
will operate unduly harshly on the defendant.” Per HEFER JA in
Benson v South Africa Mutual Life Assurance Society 1986 (1) SA 776
(A)…,.
The
contract that gave rise to the proceedings in the High Court was
entered into in May 2003. That was more than two years before the
High Court gave its decision and almost six years to the time this
Court will determine the appeal. Naturally, a lot has happened since
the signing of the agreement. There is a somewhat unsubstantiated
suggestion by the respondent, in its heads, that it no longer had
steers of the
age and weight required by the appellant. Most importantly, however,
as this Court has found, an order of specific performance would no
doubt operate unduly harshly on the respondent and would undoubtedly
result in the appellant being unjustly enriched at the expense of the
respondent. The finding of the court a quo to this effect cannot be
impugned. Whilst accepting that the agreement was not lawfully
terminated an order of specific performance would not, in these
circumstances, be appropriate.
In
the circumstances, the appeal cannot succeed.
It
is accordingly dismissed with costs.
