IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT, CAPE TOWN)
CASE NUMBER:						A519/2007

In the matter between:

and

JUDGMENT

Appellant sued the respondent for payment of the sum of R499 654,39, together with interest and costs in respect of the balance due to the appellant, arising from the sale and delivery of paraffin to the respondent. At the trial, the appellant's claim was conceded by the respondent. Judgment in favour of the appellant was granted, together with interest and costs. The respondent counterclaimed in the sum of R712 551,77, together with interest and costs in respect of damages   due   to   it   as   a   result  of   breaches   of   certain contractual obligations alleged to have been owed by the appellant to the respondent. The capital sum claimed by respondent was then amended to a sum of R687 770,51.

The counterclaim was essentially based upon an allegation that it was a tacit term of the agreement concluded between the parties, alternatively a term implied by law, that prior to the installation of an underground tank on the premises, the plaintiff would comply with all statutory requirements which may have been applicable, and that plaintiff had acted in breach of this term, thereby causing the defendant loss. The underground tank concerned the storage of paraffin.

1.	That the respondent had proved that it suffered a loss of business as a result of relocation.
2.	Respondent was entitled to damages constituted by rental, allegedly due and owing to the landlord of its former premises for the months of September, October, November 2005.
The respondent was entitled to damages constituted by the erection, design and manufacture of certain sign boards.
3.	In the alternative, and in the event that the court found that the respondent did prove he was entitled to claim the various damages, that he was, in addition to compensation of such loss, also entitled to claim for wasted wages paid by it in June 2005.

In an arbitration, respondent counterclaimed damages from the appellant, constituted by the excessive coal usage of the machines over their life, which was some 20 years. The arbitrator found that respondents had acted reasonably and properly in mitigating the damages by purchasing the superior machines, but found that the purchase of these machines was the overall pecuniary advantage to respondents. If the appellants had supplied them with machines complying with the contractual specifications, it would have been to the respondents pecuniary advantage to replace these with superior machines. Accordingly, the arbitrator found that the respondents had not suffered any damages.

When the matter finally reached the House of Lords, Viscount Haldane, LC stated the following:
"When in the course of his business (the plaintiff) was taking action arising out of the transaction, which action has diminished his loss, the effect in the actual diminution of the loss which he has suffered, may be taken into account even though there was no duty on him to act." at 69h.

The respondent had some three months prior to the critical events in the matter, entered into a further three year lease with the landlord, expiring on 29 February 2009.  The monthly rental payable in respect of the premises was R35 000,00, including VAT, and the extent of the leased premises was 750 square metres. As a result of the appellant's breach, the respondent was obliged to relocate. It required alternative premises in close proximity and at the same rental. The alternative premises were 1 400 square metres in extent, almost double the size of the previous premises. Revenue generated by the respondents for the year ending 2004, was some R11 million and the ratio of revenue to cost was 55%. The revenue generated by the respondents in the following year (2005), was of the order of R12 million and the ratio of revenue to cost was 52%. The revenue generated by the respondents in the year ending 2006 was R13 million and the ratio of revenue to cost was 55%. The revenue generated by the respondent in the year ending 2007 was some R17 million and the ration of revenue cost was 56%.

The problem with this submission, in my view, is at least twofold:

"The loss of profit claim was based upon evidence given by Mr Le Roux of actual production figures during the period in question, compared to expected or budgeted figures. It was apparent from the evidence that the production decreased significantly during the period June/July 2005, when compared to the actual production for previous years and compared to what had been planned. The loss of profit claim was thus based on the fact that fewer firelighters had been manufactured and that as a result fewer would be sold."

In uncontested evidence, Mr Le Roux, the director of respondent, placed the evidence before the court, regarding the record of units manufactured. Significantly, whereas in the period June 2003-4, 234 844 units had been manufactured and 224 125 were made in the comparative period 2004-5, the decline in 2005-6 for the same period until June, was 69 005. It was clear from the evidence of Mr Le Roux, that there had been a significant decline in the production of the units and further that respondents net profit before tax, had declined this during the relevant period. In this connection, the relevant figures are as follows, February 2004, R1 041 912,00, February 2005, R1 561 213,00, February 2006, R572 117,00, February 2007. R836 402,00.

This evidence was never placed in issue under cross-examination, and neither was the fact that during June and July 2005, a decline of 187 533 units of manufacture took place in comparison with the comparative period in the previous year. Mr Le Roux's calculation of the average production cost per unit was also never disputed. Hence, the calculation of the damages suffered because of the breach of agreement, cannot be contested, given the uncontested nature of the evidence.

"— Ek sien nie die relevansie van die grootte van die perseel of die invloed daarvan op die syfers nie.
U kon meer produksie... -— Nee dit is nie waar nie.
U het meer inkomste. —- Ons het meer produksie gehad, maar so het ons kapasiteit gehad by die ou perseel.
Ekskuus tog? — Ons het ook ekstra produksie-kapasiteit by die ou perseel gehad.
So die perseel het nie bygedra tot die vergrote omset nie. Dis hoekom u wil die tweede tenk he nie ne. Dis hoekom u wil die tweede tenk h§ daar by die eerste perseel, is dit korrek? — Dis reg, omdat ons nog kapasiteit daar gehad net.
Maar nou het u die kapasiteit daar by die nuwe perseel. — Dis reg, dieselfde.
En dis wat gehelp het om hierdie 17 miljoen bruto inkomste te kry, is dit korrek? Die grootte in die syfers hierso het te doen met die groei in die besigheid en omset. Ja en die nuwe perseel met meer kapasiteit het daarin gehelp ne. — Dit kon dit makliker gemaak het, maar ek sien nie *n direkte bydra nie."

What the evidence does reveal clearly is:
1.	That there was a written lease agreement between the respondent and the Jeremiah Trust, the owner of the property, in respect of the hiring of the particular premises
2.	That the respondent was obliged, on 13 June 2005, to stop production at those premises for the reasons I have already described.
3.	That new premises were procured on 1 July 2005 and pursuant thereto, respondent had to reinstall those premises so that production only began at the end of July 2005.
4.	That payment for July was made on 17 November and for August on 9 December 2005 and this is reflected in bank statements forming part of the record.
5.	That payment for September 2005 was effected on 25 January 2007 and that is also supported by bank statements.

2.	As the appeal substantially has failed, the appellant is ordered to pay respondent's costs pursuant to the prosecution of this appeal.