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NOT REPORTABLE

SOUTH GAUTENG HIGH COURT, JOHANNESBURG

CASE NO: A5018/2011

DATE:27/03/2012

SAFIKA FOR OFFICE AUTOMATION LTD...................................APPELLANT

AND

NRG GESTETNER (PTY) LIMITED................................................RESPONDENT

JUDGMENT

SUTHERLAND J

Introduction

[1] The origin of this dispute is an agreement concluded between the parties about how the spoils of a lucrative state tender, RT3/2003GE, were to be divided up. The appellant was awarded an exclusive tender for the period June 2003 until May 2006 to supply photo-copiers to several state entities, including certain provinces, throughout the country. The respondent was the local importer and exclusive distributor of the particular copier specified in the tender and was therefore the sole source of that product. The appellant, consisting, ostensibly, of the husband and wife team, Mr and Mrs Albertus, lacked the organisational capacity to fully exploit the opportunity because it was Johannesburg-based and had no country-wide reach. It had an existing franchise or dealership agreement with the respondent which limited the territory in which it could trade to Gauteng, and with state entities who practised Black empowerment preferential procurement policies. The respondent had several other franchise agreements with independent traders all over the country which similarly limited their trading territories. The respondent was embarrassed by the conflict of interest which arose from supporting the appellant in respect of the state tender throughout the whole country and the necessary trespass that would cause on the exclusive trading territories of its other franchisees. Predictably, the dealers protested. The self-evident question arose: could a co-operative arrangement among the appellant and the respondent and the other franchisees resolve both the appellant’s capacity problem and the respondent’s conflict of interest problem?

[2] Arrangements were made to facilitate such collaboration. Written agreements were concluded in March 2004 between the appellant and the respondent. No agreement to which other dealers became parties was ever concluded. At most, they were informed of the terms, although some dealers claimed they were not. The heart of the controversy is about whether there were tacit terms in the agreement between the appellant and the respondent, and if so, what exactly the tacit terms of such agreement were. The fate of the appeal turns on the answer to that question.

[3] The trial was a messy and protracted affair. The case for the appellant, plaintiff a quo, changed materially throughout its duration, and several amendments were allowed. Ultimately, the Trial Court made findings about the terms of the contract, which findings held that the material tacit terms contended for were unproven. On the basis of the contract terms as found by the trial court, the respondent was held to have breached that contract on 21 occasions and caused the appellant damages in the sum of R206 156.76. The respondent has acquiesced in these findings. The appellant’s grievance against the Trial Court’s judgment is that the Trial Court was wrong not to find the existence of the tacit terms, and had it done so, the number of breaches would have been many more and the damages due to be awarded would have been immensely more. The Claim alleged damages of about R31 million.

[4] There are two categories of contestation that determine the appeal:

1. What were the tacit terms, if any, of the “dealer split agreement” of 2004? There are four tacit terms averred.

2. What is the correct interpretation of the express written terms relating to the proportionate profit share on each transaction, -

1. a straight 50/50 division; or

2. a split of 50/50 based on a ‘rental rate’ of 0,3865?

The Alleged Tacit Terms in the Dealer Split Agreement

[5] The fundamentals of the agreement were that the appellant would not endeavour to retain exclusivity of access to the several state entities outside of Johannesburg, its exclusive franchise area. Any franchisee in the country who could secure an order from a state entity would share the profit from such transactions. The respondent would facilitate the arrangements.

[6] The terms of the dealer split agreement averred in the pleadings, express and tacit, after amendments allowed during the trial, were:

“6. During March 2004 plaintiff and defendant concluded an agreement, the terms whereof are set out in annexure “B” as follows:

1. Plaintiff would take orders from and invoice the State for all photocopiers required by the State under tender RT3/2003GE, including orders for photocopiers outside Gauteng and it would order them from Gestetner;

2. Plaintiff would supply and install photocopiers required by the State in Gauteng;

6.3 Gestetner branches and dealers in areas outside Gauteng would supply and install photocopiers required by the State in their areas;

6.4 Profit/Turnover would be split 50/50 on the following basis:

6.4.1 Turnover, being the dealer price less 10% at which defendant supplied Item 3 of the RT3 Tender to plaintiff, would be allocated and credited 50/50 by defendant between the budgets of plaintiff and the dealer/branch with whom turnover was to be shared;

6.4.2 The dealer would be paid the split as agreed and reflected in the pricing schedule attached to the 2004 Agreement, irrespective of a fluctuation in the rental rate:

6.4.2.1 The split was calculated at 50% of the total profit calculated at a fixed rental rate of 0.03865;

6.4.2.2 The fixed rental rate of 0.03865 was to apply to each copier supplied and some peripherals supplied with each copier;

6.4.2.3 The fixed rental rate of 0.03865 was orally agreed between the parties represented by R Albertus and W Green / J Van Niekerk in November/December 2003 at the offices of the plaintiff;

6.4.2.4 The contents of the pricing schedule were orally agreed upon between the parties represented by R Albertus and J Van Niekerk during February 2004;

6.4.2.5 The 2004 Agreement fixed, confirmed and reduced to writing the agreed rental rate of 0.03865 and the contents of the pricing schedule and the pricing schedule was incorporated by reference into the 2004 Agreement;

6.4.2.6 The rental rate of 0.03865 was applied and implemented to the profit split by defendant and plaintiff before and after the 2004 Agreement was concluded;

6.4.2.7 Alternatively, the split would be 50/50 of the total profit.

6.5 Ownership of photocopiers supplied and installed by other dealers and branches would be split 50/50 between such (sic) them and plaintiff at the end of the rental period.

7 The following are implied, alternatively tacit terms and/or undertakings of the agreement:

7.1 Defendant would continue to comply with its written undertaking of 9 September 2002;

7.2 Defendant would procure and ensure the compliance of other dealers, with the terms and conditions of the agreement, including those terms applicable to them, and including the participation of other dealers in the supply of Item 3 on the RT3 Tender in accordance with the agreement;

7.3 Defendant would take measures, including using its relationship with other dealers and its dealer network, to ensure that other dealers and its branches in their areas solicit orders for the supply and installation of photocopiers from the State under tender RT3/2003GE;

7.4 Defendant would take measures to ensure that orders from the State for the supply and installation of at least 2000 photocopiers would be secured and/or procured nationally including in areas outside of Gauteng under the RT3/2003GE tender;” [Emphasis supplied]

[7] Albertus is the alter ego of the appellant. Van Niekerk is a senior manager of the respondent.

[8] Reference to the undertaking of 9 September 2002 is to a letter submitted by respondent to the State in support of the tender bid and was a requirement of the bid in which the respondent gave an assurance that it would give full backing to the appellant in fulfilling the tender obligations.

[9] Reference to Annexure “B” is to the written part of the alleged agreement. It was constituted by two documents. They provided:

Document 1:

“Safika’s new discounted price will be pricing as at 1^st March 2004 less 10% and shall remain in force for the duration of contract RT3/2003 – item no 3. The above pricing is subject to the fluctuation of the rand/euro and will be passed onto Safika. The costs if transportation to our dealer outlets will be for Gestetner’s account.

PRETORIA AREA

SAFIKA DEALS1

1. All deals secured by Safika in Pretoria will be collected and installed by Safika.

2. Safika will keep all the profit from these orders.

3. Safika will obtain ownership of these units at the completion of the rental period.

4. Safika will continue to service their existing base in Pretoria and all additional units they secure from contract number RT 3/2003 - Item 3.

5. Safika will not procure any other business in Pretoria apart from contract RT 3/2003 - Item 3.

PRETORIA DEALS

1. All deals secured by Gestetner Pretoria will be installed by Gestetner Pretoria.

2. Profit and Turnover on these deals will be split 50/50 with Safika e.g. (R6 681) = R3 341. Please see attached pricing schedule for peripheral split.

3. Gestetner Pretoria will obtain ownership of these units at the completion of the rental period.

Gestetner Pretoria will invoice Safika for the profit. Payment 30 days from installation date. Gestetner Pretoria to ensure they obtain the original order, (made out to Safika) plus the Certificate of Acceptance and forward these to Safika.

All orders to be made out to Safika, should this not happen, payment will not be made. Safika to place all orders with Gestetner. These procedures and pricing pertain to the State Tender number RT3/2003, Item number 3”

Document 2:

“Safika’s new discounted price will be pricing as a 1^st March 2004 less 10% and shall remain in force for the duration of contract RT3/2003 – item no 3. The above proving is subject to the fluctuation of the rand/euro and will be passed onto Safika. The costs if transportation to our dealer outlets will be for Gestetner’s account.

“RULINGS ON STATE TENDER SPLIT (All other Dealer Areas)

SAFIKA DEALS

1. All deals obtained by Safika will be installed and serviced by the dealer.

2. Safika will pay installation commission on these units.

3. Safika will keep all the profit from these deals.

DEALER DEALS

1. All deals secured by the dealer will be installed and serviced by the dealer.

2. There will be no installation commission on deals secured by the dealer.

3. Profit and Turnover on these deals will be split 50/50 with Safika e.g. (R6 681) = R3 341. Please see attached pricing schedule for peripheral split.

4. All service revenue will go to the dealer.

5. Ownership of the units will be split 50/50 between the dealer and Safika at the end of the rental period.

Safika will not actively canvas or deliver in other areas what so ever. Should Safika need to visit a department in a dealer area, the dealer principal must accompany Safika on this visit.

All dealers will invoice Safika for the profit. Payment 30 days from installation date. Dealers ensure they obtain the original order, (made out to Safika) plus the Certificate of Acceptance and forward these to Safika.

All dealers to invoice Safika for service. Payment 30 days from invoice of meter reading.

Dealers will be proactive and communicate with the Departments to speed up payment of meter readings.

No orders must be made out to the dealer, should this happen you will not be paid.

All orders to be made out to Safika. Safika to order the units from Gestetner.

These procedures and pricing pertain to the State Tender number RT3/2003, Item number 3

The above procedure applies to all Gestetner Branches.”

The reference to a pricing schedule is to a list that was eventually accepted to be an annexure to these agreements and was to read together with it.

[10] The enquiry into the existence of the alleged tacit terms must proceed on the basis that such terms are not inconsistent with the written terms, and are necessary to give effect to the purpose of the agreement. In doing so, regard is to be had to the context or factual matrix relating to the conclusion of the agreement.

[11] These principles of law are well established:

In Anglo Operations Ltd v Sandhurst Estates (Pty) Ltd 350 (SCA), the Court issued the reminder:

“A tacit term is an unexpressed provision of the contract which is based on the common or imputed intention of the parties and which is inferred from the express terms of the agreement and the surrounding circumstances (Alfred McAlpine case at 531H-532F). In order to establish whether a tacit term is to be imported, regard must first be had to the express terms of the agreement and then to the surrounding circumstances. A tacit term must be consonant with the rest of the agreement and should not conflict with any express term (Van den Berg v Tenner 1975 (2) SA 268 (A) at 274A - B, 276H - 277C).

In Delfs v Kuehne & Nagel (Pty) Ltd 1990 (1) SA 822 (A), the court addressed the notorious bystander test:

“ The legal nature of an implied term and the principles to be applied in deciding whether one has been satisfactorily proved in a particular case were thus enunciated by the present Chief Justice in Alfred B McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 531H-533B:

'In supplying... an implied term the Court, in truth, declares the whole contract entered into by the parties. In this connection the concept, common intention of the parties, comprehends, it would seem, not only the actual intention but also an imputed intention. In other words, the Court implies not only terms which the parties must actually have had in mind but did not trouble to express but also terms which the parties, whether or not they actually had them in mind, would have been expressed if the question, or the situation requiring the term, had been drawn to their attention. ...

The distinction between terms implied by law and implied terms based upon the actual or imputed intention of the parties to the contract was emphasised in Minister van Landbou-Tegniese Dienste v Scholtz 1971 (3) SA 188 (A) at 197, and reference was there made to Salmond and Williams Contracts 2nd ed at 24, 36 and 37, in which the expression "implied term" is used to denote the former and the expression "tacit term" to describe the latter. ... It is not a matter of great moment what terminology is adopted but in the interests of continuity I shall use the expressions "implied term" and "tacit term", as defined by Salmond and Williams. ... The Court does not readily import a tacit term. It cannot make contracts for people; nor can it supplement the agreement of the parties merely because it might be reasonable to do so. Before it can imply a tacit term the Court must be satisfied, upon a consideration in a reasonable and businesslike manner of the terms of the contract and the admissible evidence of surrounding circumstances, that an implication necessarily arises that the parties intended to contract on the basis of the suggested term.... The practical test to be applied - and one which has been consistently approved and adopted in this Court - is that formulated by Scrutton LJ, in the well-known case of Reigate v Union Manufacturing Co 118 LT 479 at 483:

"You must only imply a term if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that you can be confident that if at the time the contract was being negotiated someone had said to the parties: 'What will happen in such a case?' they would have both replied: 'Of course, so-and-so. We did not trouble to say that; it is too clear.' This is often referred to as the 'bystander test'." '

(In the light of what is said on the terminology, I shall henceforth refer to the 'implied' term under discussion as a 'tacit term'.) A similar statement on the correct approach to the recognition of a tacit term is to be found in Techni-Pak Sales (Pty) Ltd v Hall 1968 (3) SA 231 (W) at 236 - 7:

' ... The Court has no power to supplement the bargain between the parties by adding a term which they would have been wise to agree upon, although they did not. The fact that the suggested term would have been a reasonable one for them to adopt or that its incorporation would avoid an inequity or a hardship to one of the parties, is not enough. The suggested term must, in the first place, be one which was necessary as opposed to merely desirable, to give business efficacy to the contract; and, what is more, the Court must be satisfied that it is a term which the parties themselves intended to operate if the occasion for such operation arose, although they did not express it.... That does not mean, in my view, that the parties must consciously have visualised the situation in which the term would come into operation.... It does not matter... if the negotiating parties fail to think of the situation in which the term would be required, provided that their common intention was such that a reference to such a possible situation would have evoked from them a prompt and unanimous assertion of the term which was to govern it.'

Nienaber JA in Wilkins NO v Voges [1994] ZASCA 53; 1994 (3) SA 130 (A) held that:

“ The paramount issue is the alleged tacit term. A tacit term, one so self-evident as to go without saying, can be actual or imputed. It is actual if both parties thought about a matter which is pertinent but did not bother to declare their assent. It is imputed if they would have assented about such a matter if only they had thought about it - which they did not do because they overlooked a present fact or failed to anticipate a future one. Being unspoken, a tacit term is invariably a matter of inference. It is an inference as to what both parties must, or would have, had in mind. The inference must be a necessary one: after all, if several conceivable terms are all equally plausible, none of them can be said to be axiomatic. The inference can be drawn from the express terms and from admissible evidence of surrounding circumstances. The onus to prove the material from which the inference is to be drawn rests on the party seeking to rely on the tacit term. The practical test for determining what the parties would necessarily have agreed on the issue in dispute is the celebrated bystander test. Since one may assume that the parties to a commercial contract are intent on concluding a contract which functions efficiently, a term will readily be imported into a contract if it is necessary to ensure its business efficacy; conversely, it is unlikely that the parties would have been unanimous on both the need for and the content of a term, not expressed, when such a term is not necessary to render the contract fully functional. The above propositions, all in point, are established by or follow from numerous decisions of our Courts (see, for instance Rapp and Maister v Aronovsky 1943 WLD 68 at 75; Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A); Delfs v Kuehne & Nagel (Pty) Ltd 1990 (1) SA 822 (A)).’”

[12] Upon that footing, the alleged tacit terms are addressed in turn.

Tacit Term no 1: (paragraph 7.1 of the Claim)

[13] The term pleaded, as phrased above, is the first difficulty with the appellant’s argument. To couch a term of an agreement to be an obligation to ‘continue’ to comply with an alleged “undertaking” of two years earlier offers no concrete content to the term. Secondly, the letter is not addressed to the other contracting party; rather it is addressed to the State Tender Board. The Board wanted an assurance from the bidder that the bidder had a reliable source of supply. Such a letter was a procedural requirement of a valid bid. Nothing about the letter hints that the respondent intended it as an undertaking to the appellant. The critical text in the letter reads: “Should Safika be chosen as a supplier NRG Gestetner SA (Pty) Ltd will back them up fully around the country”. Indeed, this text does not suggest anything more than that the respondent would give routine support in the ordinary course of business. It is correct that the representation extended to the whole country which exceeded the pre-tender arrangements between the appellant and the respondent, but it cannot mean anything more than that the respondent would supply the appellant to enable it to fulfil any order that was placed wherever that might be. At the time the letter was written there could have been no contemplation of the 2004 dealer split agreement.

[14] An earlier stance taken by the appellant that an obligation to solicit sales could be derived from this text was prudently abandoned on appeal. On appeal the appellant further emasculated the term by its concession that it amounted to no more than an obligation to render service when required. Even if such a term on those terms existed, there is not a smidgen of a hint that it was breached.

[15] The Trial Court held the letter was a mere letter of comfort, a conclusion manifestly correct when evaluated as to its timing and its function.

[16] Thus, it is held that the case for the first tacit term fails.

Tacit Term No 2 ( Paragraph 7.2 of the Claim)

[17] The critical aspect of the pleaded term is that the respondent would “procure and ensure” conduct on the part of persons who were not parties to the agreement. The vagueness of the phraseology is a clue to its intrinsic poverty as a proposition, and why it should fail for want of clarity alone. The appellant contended that the reach of this term excludes an obligation to force dealers to sell or solicit sales. On that footing, it is hard to grasp what is left of any notion of an obligation. Was the respondent to beg? How might the respondent sanction mutineers if it had no policing powers? On appeal the content of this term, notwithstanding its expansive articulation, was pared down to a duty to tell the dealers about the dealer split agreement and to tell the appellant if any one or more dealers chose not to participate. This pale duty, thus described, affords no platform for a contractual obligation to procure and ensure anything.

[18] The appellant’s argument on appeal sought to criticise the trial court for its commentary on the need for the dealers to believe they could make money out of participation as the quid pro quo for participation. The appellant contends that the evidence shows that the deal available was indeed lucrative. This criticism is misdirected. The plain point is that dealers had to volunteer and that would do so only is they caught the whiff of profit

[19] The evidence of some dealers about why they did not participate or why they would have participated if better informed, is unhelpful to interpret the agreement. The respondent was criticised for not telling the dealers. It is common cause that some communications by respondent to the dealers took place in contemplation of encouraging dealers to be active. The respondent invokes a conference of the dealers held to traverse the issue to rebut that submission about non-communication. Moreover, the appellants own reliance on Van Niekerk’s various requests to the dealers for activity reports, albeit to prop up the appellant’s contention of an obligation to ‘procure and ensure;’ compliance with the agreement, seems to snooker the notion that the dealers were, in general, kept in the dark by design. If, as a fact, they ignored the opportunity, that fact cannot demonstrate the breach of any obligation by the respondent.

[20] It is quite unapparent why such a term is necessary. The case must fail.

Tacit Term No 3. (Paragraph 7.3 of the Claim)

[21] This term also resorts to convoluted obfuscation in articulating itself. What can “taking measures” mean? Moreover, these “measures” are to aim at “ensuring” that persons who are not bound to a contract must solicit sales for which they will get a lesser return than other deals, because they must share the fruits of their labour. The contention falters whilst still in the starting box.

[22] The appellant argues that the agreement was dependent upon the dealers pulling their weight by soliciting sales. The appellant confuses the dependence of its business venture on the dealers’ participation with the scope and reach of the terms of its agreement with the respondent. If a critical mass of dealers had played along and generated sales, a pretty pot might have been amassed to share out, assuming of course that the real demand for the product existed, an aspect of the appellant’s case that was distinctly underdeveloped, and about which more is said later in this judgment. However, this notion is a far cry from an obligation arising tacitly on the respondent to “ensure” that this happy result occurred.

[23] When pressed to give concrete content to the word ‘measures’ reference was made to the further particulars furnished to the respondent.[ V3/168]. The particulars amount to a schedule of administrative and management functions of a day to day nature, which include the stipulations that the respondent should have requested of the dealers quarterly forecasts, imposed a specific budgeting requirement, ‘ensured’ that the dealers were canvassing custom, and tellingly, ‘ensure’ that the dealers used their ‘best endeavours’ to ‘promote’ sales. If the dealers failed to measure up after all this had happened, the appellant should have been allowed to sell to the State in the defaulters areas. If this is what ‘measures’ means, on pain of a breach of the agreement, it seems fantastical that such onerous obligations and the concomitant risk of breach were not expressly stated. Even more unlikely, is the proverbial bystander coming up with these stipulations.

[24] The alleged term is unclear, unnecessary, and unproven.

Tacit term No 4 (Paragraph 7.4 of the Claim)

[25] The idea that there was a tacit term that at least 2000 copiers would be sold during the tender period and that the respondent was obliged to take “measures” to “ensure” that outcome was only faintly persisted with on appeal. Instead the appellant contended that, the agreement, properly interpreted, provided that the appellant and respondent expressly ‘contemplated’ at least 2000 copiers would be sold. This latter afterthought does not improve the appellant’s case. It remains lacking in both clarity and certainty. If the contemplation was not in respect of assuming an obligation it serves no useful purpose.

[26] Moreover, that a commitment of such a concrete character could arise tacitly is resoundingly improbable. The high point of this thinking is no more than an aspiration expressed by Van Niekerk. There is nothing in the evidence to elevate the wishful thought into a term. The emphasis given to Van Niekerk’s familiarity with the market, past sales achievements and, indeed, his pivotal role in orchestrating sales campaigns may well explain his bullishness, but does not provide substance to the idea that he imagined, when he expressed confidence in sales of a minimum of 2000, that he was embracing a contractual obligation to deliver on that target or risk breaching the agreement. Even if the testimony of Magagula, purportedly an expert in the sales of office machines, warranted the high value attributed to it by the appellant, such testimony cannot establish a foundation for the contention that the parties necessarily understood or would have understood that they were incurring such an obligation. Moreover, the probabilities of business people committing to such a risk seem startlingly unlikely.

[27] The contentions about this tacit term must therefore fail.

The Formula for the profit split in the agreement

[28] The origin of the contention that the split was not a mere straight 50/50 on profit but rather a 50/50 split based on a factor of 0.3865 rental value, is the mention of that number in the pricing schedule. The schedule was, by the end of the trial, accepted by both parties as part of the agreement as recorded in documents 1 and 2 above, having been incorporated therein by reference. What the figure itself means is not explicit from the schedule itself or from the agreements.

[29] It was established by evidence that the factor is a device invented by lending institutions to calculate a discounted value for advance payments on lease agreements. The figure is a function of the prevailing interest rate. The higher or lower the interest rate fluctuates, so the figure in the factor fluctuates. The appellant’s case is dependent on an agreement, as evidenced in the documents, that this factor would remain constant throughout the three and half years of the tender period. (Para 6.4.2 of the Claim, cited in Para [5] above)This would be so even though the interest rate dropped, resulting in a singular advantage to the appellant and a corresponding disadvantage to the dealers or vice versa. The respondent contends that the commercial madness of such an agreement renders it unthinkable that a contracting party would gamble on a one-way movement of the interest rate. Of course, that probability could be displaced by evidence that the parties did agree to that arrangement. Is there any?

[30] The provenance of the schedule is itself contested. It was created prior to the agreement. The appellant makes much of the proof that it was downloaded at or about the time the agreement was concluded. The version shown in evidence was printed off a computer a month earlier. I am not sure that these circumstances help to establish anything useful. Moreover, the perfunctory reference to the schedule in the agreements does not suggest it was central to the parties’ dealings. Moreover, prima facie, the incorporation of the schedule is in respect of peripherals, that is, equipment accessories, not the copiers themselves. Lastly, the belated reliance on the factor is said to have been inspired by the ideas advanced in the supposed expert evidence of Magagula, and thus, so it must be inferred, it was not thought to be of significance by the appellant until attention had been drawn to it.

[31] The Trial court was persuaded that certain critical passages in the written agreement contradicted any idea of a split by reference to the factor. These passages were:

“ PRETORIA DEALS

2. Profit and Turnover on these deals will be split 50/50 with Safika e.g. (R6 681) = R3 341.

Please see attached pricing schedule for peripheral split.”

“DEALER DEALS

3. Profit and Turnover on these deals will be split 50/50 with Safika e.g. (R6 681) = R3 341.

Please see attached pricing schedule for peripheral split.” (Emphasis supplied)

[32] Significantly, the appellant had initially pleaded a straight 50/50 split, a fair averment echoed by these express words of the written agreement, cited by the Trial Court. The appellant, during the trial, was allowed to amend the claim to reflect the averments to allege what appears in paragraph 6.4.2 of the claim, cited in this judgment in paragraph [5] above. According to the respondent the effect of this revised formula is a de facto 67/33 split in favour of the appellant.

[33] The very fact of the belated amendment is advanced by the respondent to contend that the idea of the factor serving as a constant baseline was contrived, for had that been the understanding all along, it is improbable that it would have escaped attention and not been articulated from the outset of the litigation. The proposition seems to be well founded.

[34] There has been no satisfactory synthesis between the text of the written agreement which, on an ordinary reading, illustrates a straight 50/50 split and the cryptic figure of 38.65 perched atop the profit column in the price schedule. If, as is argued, the mention of the factor in the column means that the split was not a straight 50/50 but a different formula, why do the rest of documents not say so? Indeed in the schedule itself, all the line items appear to reflect a 50/50 split of profit too. The documents themselves yield no explanation or understanding.

[35] It was therefore necessary, by way of an enquiry into the context and factual matrix to try to divine the meaning of the text used in these documents. In this regard, Harms DP in KPMG Chartered Accounts (SA) v Securifin Ltd & Ano 2009 (4) SA 300 (SCA) at [39] has declared:

“First, the integration (or parol evidence) rule remains part of our law. However, it is frequently ignored by practitioners and seldom enforced by trial courts. If a document was intended to provide a complete memorial of a jural act, extrinsic evidence may not contradict, add to or modify its meaning (Johnson v Leal 1980 (3) SA 927 (A) at 943B). Second, interpretation is a matter of law and not of fact and, accordingly, interpretation is a matter for the court and not for witnesses (or, as said in common-law jurisprudence, it is not a jury question: Hodge M Malek (ed) Phipson on Evidence (16 ed 2005) paras 33-64). Third, the rules about admissibility of evidence in this regard do not depend on the nature of the document, whether statute, contract or patent (Johnson & Johnson (Pty) Ltd v Kimberly-Clark Corporation and Kimberly-Clark of South Africa (Pty) Ltd 1985 BP 126 (A) ([1985] ZASCA 132 (at www.saflii.org.za)). Fourth, to the extent that evidence may be admissible to contextualise the document (since 'context is everything') to establish its factual matrix or purpose or for purposes of identification, 'one must use it as conservatively as possible' (Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 455B - C). The time has arrived for us to accept that there is no merit in trying to distinguish between 'background circumstances' and 'surrounding circumstances'. The distinction is artificial and, in addition, both terms are vague and confusing. Consequently, everything tends to be admitted. The terms 'context' or 'factual matrix' ought to suffice. (See Van der Westhuizen v Arnold 2002 (6) SA 453 (SCA) ([2002] 4 All SA 331) paras 22 and 23, and Masstores (Pty) Ltd v Murray & Roberts Construction (Pty) Ltd and Another [2008] ZASCA 94; 2008 (6) SA 654 (SCA) para 7).

[36] Did the appellant by way of evidence about the factual matrix dispel the miasma that cloaked the meaning of the formula and its relevance to the kind of split intended? The Trial Court held there was none.

[37] What the appellant on trial sought to do was to bolster its contentions about the factor being an agreed constant, by introducing an amendment to aver prior oral agreements between the parties, represented by Albertus for the appellant and Van Niekerk and Austin for the respondent (para 6.4.2.2 of the Claim cited in Para [5] above). The appellant was permitted to lead evidence of two earlier agreements on this factor, both denied outright by the respondents. Why it was necessary to agree twice is a difficulty that the appellant’s arguments have not cured. Significantly there is no paper trail whatsoever.

[38] In my respectful view, the Trial Judge erred in allowing the evidence to be led, even provisionally, a decision that seems to have stemmed from undue generosity on its part. The Trial court however later held that such evidence was inadmissible, relying on the dictum of Boruchowitz AJA in Affirmative Portfolios CC Transnet Ltd t/a Metrorail [2008] ZASCA 127; 2009 (1) SA 196 (SCA) at 201A-B [13]:

“The appellant is precluded from relying on the alleged oral agreement by of the so-called 'parol' evidence or 'integration' rule. The oral agreement for which it contends would have been entered into before the signing of the written agreement and also contains terms which are at variance therewith. It is a well-established principle that where the parties decide to embody their final agreement in written form the execution of the document deprives all previous statements of their legal effect.”

[39] This conclusion by the Trial Judge is contested by reference to the remarks of Malan JA in Engelbrecht & Ano v Senwes Ltd 2007 (3) SA 29 (SCA at [7]). After citing the oft invoked passage from Coopers & Lybrand v Bryant [1995] ZASCA 64; 1995 (3) SA 761 (A) at 767E-768E, Malan JA stated:

“The intention of the parties is ascertained from the language used read in its contextual setting and in the light of admissible evidence. There are three classes of admissible evidence. Evidence of background facts is always admissible. These facts, matters probably present in the minds of the parties when they contracted, are part of the context and explain the 'genesis of the transaction' or its 'factual matrix'. Its aim is to put the Court 'in the armchair of the author(s)' of the document. Evidence of 'surrounding circumstances' is admissible only if a contextual interpretation fails to clear up an ambiguity or uncertainty. Evidence of what passed between the parties during the negotiations that preceded the conclusion of the agreement is admissible only in the case where evidence of the surrounding circumstances does not provide 'sufficient certainty’.” (Footnotes omitted)

[40] Plainly, this decision is no authority for the proposition that evidence of ‘prior agreements’ can be introduced to contribute to an argument that what was earlier agreed in some way determines what the parties recorded in the contested agreement. Moreover, resort to the negotiations pertinent to the contested agreement is permissible only when the prior enquiries have been exhausted in pursuit of resolving an ambiguity. In the present case it is not ambiguity that plagues the interpretation but rather unintelligibility.

[41] Counsel for the respondent drew our attention to certain English cases that address the propriety of admitting evidence about the parties’ previous negotiations and agreements. Chartbrook Ltd v Persimmon Homes Ltd & Others [2009] UKHL 38, per Lord Hoffmann, at esp [14][20][21] [37] [38][43] [44] [45] [46]; Investors Compensation Scheme v West Bromwich Building Society [1998] 1 ALL ER 98 (HL) at 114-115; Bank of Credit and Commerce International SA v Ali & Others [2001] ULHL 8 at [8] [78] [79]. These authorities are sceptical of the utility of such forays into the history of the litigants’ negotiations. Significantly, what is made crystal clear is that the centrepiece of interpreting a written contract is an enquiry into the words used. The purpose of examining the context and factual matrix is to grasp the meaning of the words on the page, not to divine the inward and invisible thoughts of the litigants. Because that is the purpose of the enquiry, information about the outward and manifest conduct of the parties, and about what they knew or, on the probabilities, must have known is what is to be fetched to be laid upon the table for scrutiny. A suffusion of an enquiry about a justification for a rectification to mend a wrong recordal and an enquiry into what the written agreement means, is not to be countenanced.

[42] In my view the exclusion of the testimony was wholly appropriate. The Trial Court could hardly have held otherwise as such testimony is so manifestly illegitimate, even if it were not at odds with the probabilities, a point taken by the respondent with some vigour. Indeed, given the dealers intense haggling and resolve to settle for nothing less than 50/50, why might a de facto 67/33 split have mollified them? Lastly, the dealers’ participation had to be won and bought; the critical leverage was not with the appellant.

[43] A further aspect upon which the appellant leaned heavily was the notion that because in its direct dealings with the dealers, it consistently applied the factor in calculating the split, such ‘post-contracting’ conduct was proof of an agreement on that issue. In a rebuttal of the respondents contentions that it was illegitimate to examine the appellant’s later conduct, the dictum of Brand JA in Botha v Coopers & Lybrand 2002 (5) SA 347 (SCA) at 360 D – E [25] was flourished. What was stated there was:

“By beantwoording van die vraag wat waarskynlik die partye se antwoord op die buitestaander se tersaaklike vraag sou wees, laat die Hof hom hoofsaaklik lei deur die uitdruklike terme van die ooreenkoms en die omringende omstandighede ten tyde van kontraksluiting (sien byvoorbeeld South African Mutual Aid Society (supra op 606C) en Alfred McAlpine & Son (Pty) Ltd (supra op 531 in fine)). Dit is egter ook toelaatbaar om te kyk na die optrede van die partye na die sluiting van die ooreenkoms. Hierdie ondersoek is gerig op die vraag of die latere optrede van die partye versoenbaar is met die bewering dat die stilswyende term deel gevorm het van hulle kontrak. (Sien byvoorbeeld Wilkens NO v Voges (supra op 143C-D) en Christie (op cit op 196).)”

It seems that the appellant’s submission loses sight of the point that the enquiry is into how the parties treated one another, and if that common treatment or common approach is consistent or harmonious with the interpretation advanced. The commonalty of approach can offer corroboration of what both parties believed their obligations to be. There is, however, no substantiation of harmony between the appellant and first respondent on the meaning of the written agreement revealed in the evidence. If, in a given case, evidence shows that one party acted consistently with a particular viewpoint, it may well demonstrate bona fides, but not proof of a common intention. Measured against the weighty improbabilities of the respondent embracing the risk of a constant factor regardless of shifts in interest rates, no less than the appellant truly wanting to run that risk, there is not nearly enough to disturb the balance against such an inference.

[44] What is left? A written agreement that is unequivocal in its declaration of a straight 50/50 split. A claim that is belatedly amended to seize on a cryptic marginal note on a schedule that otherwise also speaks to a split on a 50/50 footing. Lastly, when reading the schedule with the agreements, the two references to the schedule which binds it to the agreements, both confine the impact of the schedule to the “peripherals split”. In my view, text that is plain and intelligible must prevail over what is obscure and incomprehensible.

[45] In the result, the Trial Court was not in error to reject the appellant’s case on the nature of the profit split.

The Damages: how many copiers were sold?

[46] The appellant is aggrieved that even on the footing of the Trial Court’s judgment, the damages awarded could be limited to 21 instances. It is contended that the respondent has concealed the truth about the number of the copies sold and that their non disclosure warrants an adverse inference that it sold more than it admits. Further, it is argued that weight should be placed on the evidence of Magagula and other dealers about their performances and expectations to conclude that on the probabilities, at least 2000 copiers were clandestinely sold, of which only 21 have been unmasked. The appellant appears to concede that the further steps that could have been taken to compel further and better disclosure from the respondent, and perhaps others, were not taken. In answer to this criticism of the failure to adduce evidence at the trial, the appellant argues that the Court of appeal ought to make the best of what evidence is before it.

[47] It seems to me that what the appellant expects of the Court of Appeal is too much. What falls to be adjudicated on appeal is the case placed before the Trial court. That a better case could have been mounted, with more or different evidence, is of no help on appeal; the Court of Appeal cannot repair forensic omissions in the presentation of the appellant’s case on trial.

[48] The plain fact is that the appellant was, for good reason or ill, not able to prove more breaches that were found by the Trial Court. Even if it was reasonable to suspect or to infer that, on the probabilities, there were more, they remain unproven.

[49] There is no case made out to re-visit the damages award.

The appeal against the costs award

[50] The appeal against the costs order was premised on success on the substantive issues addressed above. That has not been achieved. Moreover, interference with a costs order is not lightly undertaken. I am of the view that no grounds for interference have been shown.

The Order of the Court of Appeal

[51] The following order is made:

The appeal is dismissed with costs including the costs of two counsel.

____________________________________

ROLAND SUTHERLAND

JUDGE OF THE SOUTH GAUTENG

HIGH COURT, JOHANNESBURG

I agree:

____________________________________

TSOKA J

JUDGE OF THE SOUTH GAUTENG

HIGH COURT, JOHANNESBURG

/I agree: …

I agree:

____________________________________

KATHREE-SETILOANE J

JUDGE OF THE SOUTH GAUTENG

HIGH COURT, JOHANNESBURG

COUNSEL FOR APPELLANT JC PIETERSE

ATTORNEYS FOR APPELLANT MICHAEL ENGLAND INC

COUNSEL FOR RESPONDENT ANTONY THOMPSON SC

with JULIAN JOYNER

ATTORNEYS FOR RESPONDENT WEBBER WENTZEL

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