Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk [2014 ] 1 All SA 517 (SCA) PDF

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interpretation case, very helpful....

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BothmaBathoTransport(Edms)BpkvSBothma&SeunTransport(Edms)Bpk [2014]1AllSA517(SCA) Division:

SUPREMECOURTOFAPPEAL

Date:

28November2013

CaseNo:

802/2012

Before:

KKMTHIYANEAP,CHLEWIS,RPILLAY,JBSHONGWEandMJD WALLISJJA

Sourcedby:

PZachia

Summarisedby:

DPCHarris .Editor'sSummary.CasesReferredto.Judgment.

ContractInterpretationApproachtointerpretationConsiderationmustbegiventothelanguageusedinthelightof theordinaryrulesofgrammarandsyntax;thecontextinwhichtheprovisionappears;theapparentpurposetowhichit isdirectedandthematerialknowntothoseresponsibleforitsproductionStartingpointisthewordsofthedocument, whichareconsideredinthelightofallrelevantandadmissiblecontext,includingthecircumstancesinwhichthe documentcameintobeing. Editor'sSummary Therespondentwasafamilycompanyhandeddownbyafathertohissons.Dividingupthebusiness,oneofthe sonsretainedtherespondentwhiletheotherestablishedtheappellant.Individingtheoriginalbusinessbetween them,thebrothershadtodealwithatankfarmwhichtherespondentwashiringfromathirdparty("Omnia").In termsofarenewedleaseagreementsignedin2005,therespondentwouldhavetheuseofthreetankswitha totalcapacityofsome15000cubicmetres,andtheappellantwouldhavetheuseofsixtankshavingatotal capacityofsome11800cubicmetres.AlthoughtheleasewasbetweenOmniaaslessorandbothrespondentsas lessees,Omniawishedtodealwithonlyoneofthem.Accordingly,theleaseprovidedthatOmniawouldinvoicethe respondentfortheentirerentaldueundertheleaseinrespectofallninetanks,andthattheappellantwouldhave theexclusivemanagementandcontroloverthetankfarm.Itwouldhavetoenterintoaseparateagreementwith therespondentonhowtodealwiththemanagementandhandlingcosts.Italsoundertooknottorecovermore fromtherespondentinrespectofrentaloftanksthanthelatterwasobligedtopaytoOmniaunderthelease. Eachofthepartiesletitstankstoathirdparty. Thepresentdisputearosefromtheseparateagreementsconcludedbetweentheappellantandrespondentin relationtotheallocationandrecoveryofexpensesincurredintheoperationofthetankfarm.Theappellant contendedthatonaproperinterpretationoftherelevantclauseintheagreementinquestionitwasentitledto receivetheentirebenefitfromanincreaseintherentalpaidbytheparty("FFSRefiners")towhomitletitstanks. TheHighCourt'srejectionofthatsubmissionledtothepresentappeal. Theappellant'scontentionwasthatonaproperinterpretation,therelevantclauseintheagreemententitleditto renderaninvoicetoFFSforR190000eachmonthandthattherespondentwouldbeguaranteedanamountof R55000permonth.IftherentalspayablebyFFSincreased,theinvoicestheappellantrenderedtoFFSwouldbe adjustedbysuchincrease,inotherwordsbythegrossamountoftheincrease.Ontheotherhand,therespondent argued Page518of[2014]1AllSA517(SCA)

thattheclausemeantthattheappellantcouldrecoveraprorataproportion,calculatedontherelativetank capacityusedbyeachofthem,oftheoperatingexpenses,increasedbyanadministrationfeeupliftoftenpercent oftheexpenses,subjecttoacapofR190000.Iftherentalsthatitrecoveredincreasedordecreased,thecap wouldbeadjustedbyalikepercentageincreaseordecrease. HeldInterpretationistheprocessofattributingmeaningtothewordsusedinadocument,havingregardtothe contextprovidedbyreadingtheparticularprovisionorprovisionsinthelightofthedocumentasawholeandthe circumstancesattendantuponitscomingintoexistence.Considerationmustbegiventothelanguageusedinthe lightoftheordinaryrulesofgrammarandsyntax;thecontextinwhichtheprovisionappears;theapparent purposetowhichitisdirectedandthematerialknowntothoseresponsibleforitsproduction.Therefore,the startingpointisthewordsofthedocument,whichareconsideredinthelightofallrelevantandadmissiblecontext, includingthecircumstancesinwhichthedocumentcameintobeing. Applyingthoseprinciplestothepresentmatter,theCourtfoundthattheinterpretationcontendedforbythe appellantthatonaproperinterpretationoftherelevantclause,itwasentitledtopaymentoftheincreaseinthe amountoftheinvoicesrenderedtotheclientoftherespondent,wasnotcorrect. Theappealwasdismissedwithcosts. Notes ForContractsee: .

LAWSASecondEditionReplacement(Vol5(1),paras370508)

. .

Christie,RHTheLawofContractinSouthAfrica(6ed)DurbanLexisNexis2011 Kerr,APrinciplesoftheLawofContract(6ed)DurbanLexisNexis2002

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Judgment WALLISJA: Introduction [1] Therespondent,SBothma&SeunTransport(Edms)Bpk("Bothma&Seun"),wasoriginallyafamilycompany establishedbyafatherandhandedontohissons,Louis,PelhamandTertius.Louisdied,andin2005Pelham andTertiuswenttheirseparateways.PelhamretainedBothma&SeunandTertiusestablishedtheappellant, BothmaBathoTransport(Edms)Bpk("BothmaBatho").Individingtheoriginalbusinessbetweenthemthey hadtodealwithatankfarmsituatedinStanderton,whichBothma&SeunwerehiringfromOmniaKunsmis Bpk("Omnia")underacontractexecutedin1999,butpredatingthatdate.In2005,anewleaseagreement wasconcludedwithOmniatowhichbothBothma&SeunandBothmaBathowereparties.Itprovidedfor Bothma&Seuntohavetheuseofthreetanks,numbers1,2and3,withatotalcapacityofsome15000cubic metresandforBothmaBathotohavetheuseofsixtanks,numbers4to9,havingatotalcapacityofsome 11800cubicmetres.InreturntheybecameobligedtopayrentaltoOmniaonamonthlybasis. [2] AlthoughbothBothma&SeunsandBothmaBathowerepartiestothelease,Omniaonlywishedtodealwith oneofthem.Accordingly,theleaseprovidedthatOmniawouldinvoiceBothmaBathofortheentirerentaldue undertheleaseinrespectofallninetanks,andthatBothmaBathowouldhavetheexclusivemanagement andcontroloverthetankfarm.ItwouldhavetoenterintoaseparateagreementwithBothma&Seunson howtodealwiththemanagementandhandlingcosts.ItalsoundertooknottorecovermorefromBothma& SeuninrespectofrentaloftanksthanthelatterwasobligedtopaytoOmniaunderthelease.Inaddition, Bothma&Seunsweretobegivenfreeaccesstothefacilitytostoreproductinitstanksandtoaccompany clientsthere.Inpractice,BothmaBatholetitstankstoSasolandBothma&SeunletitstankstoFFSRefiners. [3] ThepresentdisputearosefromtheseparateagreementsconcludedbetweenBothma&SeunandBothma BathoinrelationtotheallocationandrecoveryofexpensesincurredintheoperationoftheStandertontank farm.Twosuchagreementswereconcluded,thefirstinsettlementofanarbitrationbetweenthepartiesand thesecondinsettlementofsubsequentlitigationbetweenthem.BothmaBathocontendsthatonaproper interpretationoftherelevantclauseinthesecondagreementitwasentitledtoreceivetheentirebenefitfrom anincreaseintherentalpaidbyFFSRefinerstoBothma&Seunduringtheperiodfrom1July2008to28 February2009.Thatclaimwasdisputed.ItwasdismissedbyHanckeAJPatfirstinstanceandtheappealis withhisleave. Thecontracts [4] Itisconvenienttostartwiththefirstagreementdealingwiththeallocationandrecoveryoftheoperating costsofthetankfarm.Itwas Page520of[2014]1AllSA517(SCA)

concludedon14February2007aspartofanoverallsettlementofissuesthatwereatthetimebeingdebated inanarbitration.Theclausedealingwiththeseissueswasclause7,whichreadsasfollows: "TenopsigtevandieStandertonStoortenksvanOmniasalBothmaBathoTransport(Edms)Bpkselfsykliënte faktureertenopsigtevandietenksdeurBothmaBathoTransport(Edms)Bpkgebruik.SBothmaenSeun Transport(Edms)BpksalselfvirsykliënteFFSfaktureertenopsigtevandiestoortenkswatBothmaenSeun Transport(Edms)Bpksekliëntevantydtottydgebruik.BothmaenSeunTransport(Edms)Bpksaldiepro ratauitgaweplus10%bestuursfooitenopsigtevandiebestuurvandiestoortenksoorbetaalbinnesewedae naleweringvanfaktuurvanBothmaBathoTransport(Edms)Bpkwelkeuitgawesooreenkomstigdie tenkkapasiteitpersentasiewatBothmaenSeunTransport(Edms)Bpksekliëntegebruikvantydtottyd."1

[5] Someaspectsofthisarrangementarereasonablyclear.BothmaBathowouldincurexpensesinthe managementofthetankfarmandthosecostswouldbedividedbetweenitandBothma&Seuninproportion tothetankcapacityofthetanksthattheyandtheirclientsrespectivelyused.Asthetanksallocatedto Bothma&SeunundertheleasewithOmniahadagreatercapacitythanthoseallocatedtoBothmaBatho,the latterwouldbearasmallerproportionoftheexpenses.Accordingtoaschedulereflectingtheperiodbetween MarchandSeptember2007Bothma&Seunbore57.34%oftheexpenses.Thesameschedulecoveringthe periodfromJanuarytoOctober2008reflectedthatitbore52.1%oftheexpenses. [6] Aproblemaroseintheimplementationofclause7ofthefirstsettlementagreementbecauseBothmaBatho, insteadoffurnishinganinvoicetoBothma&Seunfortheexpensesandadministrationfee,renderedan accountdirectlytoFFSRefiners,whopaidtheseaccountsanddeductedtheamountofsuchpaymentsfrom therentalthattheypaidtoBothma&Seun.Accordingtothelatter,thismeantthattheyhadnopredictable incomeandnocontroloverormeansofmonitoringtheexpensesraisedbyBothmaBatho.Theyclaimedthat moneyduetothemfromtherentaloftheirtankshadbeenwithheld.Alongwithotherclaimsthisformedthe subjectoflitigationagainstBothmaBatho.Thatisthelitigationthatleadtothesecondsettlementagreement embodyingtheclausethatgaverisetothiscase. [7] Thedisputedclauseappearedinanagreementunderwhichallclaimsbetweenthepartiesweresettled.This involvedapaymenttoBothmaBathobyBothma&SeunthatincludedanamountofR190000plusVATin respectofexpensesforthestoragetanksforOctober2007.Itwas Page521of[2014]1AllSA517(SCA)

agreedthatBothmaBathowouldnotinvoiceFFSRefinersfortheseexpensesforthatmonth.Itwasalso agreedthatapartfromthispaymentandtheamountspayableunderthedisputedclauseBothma&Seun wouldnotberesponsibleforanyadditionalexpensesinrelationtotheoperationofthetankfarm. [8] Theclauseinissuereadsasfollows: "6.

DiepartyekomooreendatvirsodanigetydperkaswatdieRespondentediereghetopdiegebruikvan(3) drietenksintermevandieooreenkomsmetOmniadanindaardiegevalsaldierespondentehullekliënt faktureervirdieverhuringvandietenkkapasiteitvandie(3)drietenkswattansR245000(BTWuitgesluit) bedra.DieApplikantesaldieRespondentesekliëntsodanigfaktureertenopsigtevandieproratauitgawes asookdieadministrasiefooivan10%datdieverhalingvandieRespondentesekliëntteenoordieRespondent niemeersalweesasdiebedragvanR190000(BTWuitgesluit)nie,metdienverstandedatindiendiefakture gelewervirdieverhuringvandietenkkapasiteitsouverhoogofverlaagdiefaktureringtenopsigtevandie uitgawesmetsodanigefluktuasieaangepassalword."2

[9] BothmaBathocontendedthatonitsproperinterpretationthisclauseentitledittorenderaninvoicetoFFSfor R190000eachmonthandthatBothma&SeunwouldbeguaranteedanamountofR55000permonth.Ifthe r en tals payablebyF F Sin c r eas ed,th einvo ic es Bo th maBath o r en der edto F F Sw ou ldbeadj u s ted ("aangepas")bysuch("sodanige")increase,inotherwordsbythegrossamountoftheincrease.Bothma& Seundisputedthis.ItpleadedthattheclausemeantthatBothmaBathocouldrecoveraprorataproportion, calculatedontherelativetankcapacityusedbyeachofthem,oftheoperatingexpenses,increasedbyan administrationfeeupliftof10%oftheexpenses,subjecttoacapofR190000.Iftherentalsthatitrecovered increasedordecreasedthecapwouldbeadjustedbyalikepercentageincreaseordecrease.Theparties joinedissueonthesecontentions. Interpretation [10] InNatalJointMunicipalPensionFundvEndumeniMunicipality,3thecurrentstateofourlawinregardtothe interpretationofdocumentswassummarisedasfollows: "Overthelastcenturytherehavebeensignificantdevelopmentsinthelawrelatingtotheinterpretationofdocuments, bothinthiscountryandinothers Page522of[2014]1AllSA517(SCA) thatfollowsimilarrulestoourown.Itisunnecessarytoaddundulytotheburdenofannotationsbytrawlingthrough thecaselawontheconstructionofdocumentsinordertotracethosedevelopments.Therelevantauthoritiesare collectedandsummarisedinBastianFinancialServices(Pty)LtdvGeneralHendrikSchoemanPrimarySchool.The presentstateofthelawcanbeexpressedasfollows:Interpretationistheprocessofattributingmeaningtothewords usedinadocument,beitlegislation,someotherstatutoryinstrument,orcontract,havingregardtothecontext providedbyreadingtheparticularprovisionorprovisionsinthelightofthedocumentasawholeandthe circumstancesattendantuponitscomingintoexistence.Whateverthenatureofthedocument,considerationmustbe giventothelanguageusedinthelightoftheordinaryrulesofgrammarandsyntax;thecontextinwhichthe provisionappears;theapparentpurposetowhichitisdirectedandthematerialknowntothoseresponsibleforits production.Wheremorethanonemeaningispossibleeachpossibilitymustbeweighedinthelightofallthese factors.Theprocessisobjective,notsubjective.Asensiblemeaningistobepreferredtoonethatleadstoinsensible orunbusinesslikeresultsorunderminestheapparentpurposeofthedocument.Judgesmustbealertto,andguard

against,thetemptationtosubstitutewhattheyregardasreasonable,sensibleorbusinesslikeforthewordsactually used.Todosoinregardtoastatuteorstatutoryinstrumentistocrossthedividebetweeninterpretationand legislation;inacontractualcontextitistomakeacontractforthepartiesotherthantheonetheyinfactmade.The 'inevitablepointofdepartureisthelanguageoftheprovisionitself',readincontextandhavingregardtothepurpose oftheprovisionandthebackgroundtothepreparationandproductionofthedocument."

[11] ThatstatementreflecteddevelopmentsinregardtocontractualinterpretationinMasstores(Pty)LtdvMurray &RobertsConstruction(Pty)Ltdandanother;KPMGCharteredAccountants(SA)vSecurefinLtdandanotherand EkurhuleniMunicipalityvGermistonMunicipalRetirementFund.4Ireturntoitandtothosecasesonlybecause wehadcitedtousthewellknownandmuchcitedsummaryoftheearlierapproachtotheinterpretationof contractsbyJoubertJAinCoopersandLybrandandothersvBryant,5that: "Thecorrectapproachtotheapplicationofthe'goldenrule'ofinterpretationafterhavingascertainedtheliteral meaningofthewordorphraseinquestionis,broadlyspeaking,tohaveregard: (1)

tothecontextinwhichthewordorphraseisusedwithitsinterrelationtothecontractasawhole,includingthe natureandpurposeofthecontract...;

(2)

tothebackgroundcircumstanceswhichexplainthegenesisandpurposeofthecontract,ietomattersprobably presenttothemindsofthepartieswhentheycontracted...; toapplyextrinsicevidenceregardingthesurroundingcircumstanceswhenthelanguageofthedocumentison thefaceofitambiguous,by

(3)

Page523of[2014]1AllSA517(SCA) consideringpreviousnegotiationsandcorrespondencebetweentheparties,subsequentconductoftheparties showingthesenseinwhichtheyactedonthedocument,savedirectevidenceoftheirownintentions."

[12] ThatsummaryisnolongerconsistentwiththeapproachtointerpretationnowadoptedbySouthAfrican courtsinrelationtocontractsorotherdocuments,suchasstatutoryinstrumentsorpatents.6Whilstthe startingpointremainsthewordsofthedocument,whicharetheonlyrelevantmediumthroughwhichthe partieshaveexpressedtheircontractualintentions,theprocessofinterpretationdoesnotstopata perceivedliteralmeaningofthosewords,butconsiderstheminthelightofallrelevantandadmissible context,includingthecircumstancesinwhichthedocumentcameintobeing.Theformerdistinctionbetween permissiblebackgroundandsurroundingcircumstances,neververyclear,hasfallenaway.Interpretationisno longeraprocessthatoccursinstagesbutis"essentiallyoneunitaryexercise".7Accordingly,itisnolonger helpfultorefertotheearlierapproach. Discussion [13] Clause6haditsgenesisinclause7oftheearliersettlementagreementthatprovidedfortheapportionment ofthecostsofoperatingthetankfarmbetweenBothmaBathoandBothma&Seun.Therewasnodispute aboutthewaythiswastobedonebyproratingtheexpensesinproportiontotherelativetankcapacityof whicheachpartyenjoyedthebenefit.TheonlyissueinregardtocalculationoftheshareofBothma&Seun relatedtothemanagementfee.BothmaBathosaidthatthiswastobecalculatedontherentalpayableto Bothma&SeunbyitsclientFFS.However,itisplainfromclause7oftheoriginalsettlementagreementthatit wastobecalculatedasaproportionoftheexpenses("dieproratauitgaweplus10%bestuursfooi").That languagewassimplyincapableofbeingconstruedasrequiringthattheadministrationfeebecalculatedasa percentageoftherentalsreceivedbyBothma&Seun. [14] Therewasnothinginthebackgroundorcontextofthesecondsettlementagreementandclause6dealing withtheadministrationfeetosuggestthatthepartieshadinmindamendingthebasisuponwhichitwasto be Page524of[2014]1AllSA517(SCA)

calculated.Theirfocuswasonotherissuesentirely,moreespeciallythosearisingfromBothmaBatho's practiceofinvoicingFFSdirectly,whichwasplainlycontrarytotheprovisionsofclause7oftheoriginal settlement...