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IN THE HIGH COURT OF SOUTH AFRICA
(ORANGE FREE STATE PROVINCIAL DIVISION)
Case No.: 2869/2003
In the matter between:
HANDY CASH BK t/a KGOTSOFALANG
CASH LOANS
Applicant
And
MATJHABENG MUNISIPALITEIT
Respondent
___________________________________________________________
CORAM:
EBRAHIM, J
___________________________________________________________
HEARD ON:
16 OCTOBER 2003
___________________________________________________________
DELIVERED ON:
23 OKTOBER 2003
___________________________________________________________
The crisp issue in this application is whether or not the agreement
between the parties is one in perpetuity as opposed to merely one for an
indefinite period.
It is possible for parties to stipulate for a contract in perpetuity. See
TRIDENT SALES (PTY) LTD v A H PILLMAN & SON (PTY) LTD
1984 (1) SA 433 (W). This case deals with a full exposition of the
English and South African law on the terminability of contracts of
unspecified duration.
See also PUTCO LTD v TV & RADIO
GUARANTEE CO (PTY) LTD, and other related cases, 1985 (4) SA
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809 (A), and GOLDEN LIONS RUGBY UNION AND ANOTHER v
FIRST NATIONAL BANK OF SA LTD 1999 (3) SA 576 (SCA).
The parties in this matter entered into a contract on 7 June 2001 in terms
of which the applicant, a money lender, agreed with the respondent, a
municipality and employer, that monthly payments in respect of loans
granted by the applicant to the employees of the respondent would be
deducted by the respondent from the relevant employees’ salary and paid
over to the applicant.
Subsequent thererto monies were loaned and advanced by the applicant to
employees of the respondent and the respondent made the necessary
deductions from the relevant employees’ salaries.
It is common cause that the respondent was paid an administration fee by
the applicant in respect of administration costs which it incurred in
making the necessary deductions from the relevant employees’ salaries
and paying it over to the applicant.
On 28 January 2003 the respondent gave notice to the applicant’s then
attorneys of record terminating the said agreement
In a letter dated 31 January 2003 applicant’s attorneys of record
responded that the agreement could not be unilaterally terminated.
The dispute between the applicant and the respondent centres around the
interpretation of two clauses in the agreement, namely clause 4 and clause
5, which reads as follows:
“4.
DURATION OF AGREEMENT
This agreement will commence on the date of signature hereof
and will continue and remain in full force and effect for an
indefinite period until:
4.1
Kgotsofalang Cash loans gives notices of termination of
this agreement.
5.
CONSEQUENCES OF TERMINATION
It is agreed that notwithstanding the termination of this
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Agreement, for whatsoever reason or by whomsoever party to
this agreement, the Employer shall not be exonerated from its
duty to continue to make salary deductions in respect of those
Employees who have obtained loans from Kgotsofalang Cash
loans prior to the date of termination of this Agreement. In
this regard the parties specifically agree to continue with the
procedure that was followed between them in terms of clause
3.5 during the duration of the agreement.”
Applicant’s contention is that its agreement with the respondent is one in
perpetuity and that respondent has no right to withdraw from the
agreement on reasonable notice.
In support of their contention they
argue that the word “until” in the preamble to clause 4 and the provisions
of 4.1 indicate that the agreement is in perpetuity and that respondent
cannot give notice.
Respondent contends that the words “termination of this agreement for
whatever reason or by whomsoever party” in clause 5 of the agreement
introduced an ambiguity into the agreement.
Firstly, in order to property interpret the effect of clause 4, it is necessary
to examine the position at common law of this agreement absent 4.1.
Quite clearly but for clause 4.1 the contract would be for an indefinite
period and as such terminable on reasonable notice by either party.
The applicant’s contention must necessarily involve the argument that the
wording of clause 4.1 removes the right that the respondent would
otherwise have had to give a reasonable period of notice. This argument
overlooks the wording of clause 4.1 which gives the applicant the right
to give notice of termination.
The mere inclusion in the agreement of a specific circumstance for
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termination, that is notice by the applicant, does not necessarily exclude
termination by reasonable notice on the part of the respondent.
See PUTCO LTD supra
Secondly, the respondent relies on the GOLDEN LIONS RUGBY
UNION case.
In my view this reliance is misplaced. In that case the
Court had to deal with two clauses creating obligations which the Court a
quo had held to be in perpetuity. On appeal the Court held that the
second clause was not to be in perpetuity. The first such clause which was
held to be in perpetuity expressly stated it was to be in perpetuity.
In clause 4.1 the words “indefinite period” are expressly used and not the
words “in perpetuity”. I find accordingly that the agreement was one for
an unspecified duration and not one in perpetuity.
Thirdly, it is common cause that the agreement between the applicant and
the respondent is the applicant’s agreement and any ambiguity as to
whether the words “an indefinite period” means just that or “in
perpetuity” as applicant contends must therefore be interpreted contra
preferentem. The applicant, who drew up the agreement, could easily
have used the words “in perpetuity” to remove any doubt or ambiguity as
to the duration of the agreement.
The respondent contends that
ambiguity has been introduced by clause 5 on account of the wording
referred to above. In view of the interpretation which I have given to
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clause 4, there is no ambiguity in clause 5. It merely provides for the
continuing obligations which survive the termination of the agreement,
for respondent to make deductions in respect of loans extant at the date
of such termination.
Accordingly, in my view it is competent for the municipality to terminate
the agreement by giving reasonable notice. What is reasonable depends
on the circumstances of each case. On the papers before me the
applicant has not challenged the reasonableness of the period of notice
given by the respondent and accordingly it must be found that notice has
been properly given to applicant to enable it to make alternative
arrangements. In argument it was submitted before me by the
respondent’s counsel that the effective date of cancellation given by the
respondent was 1 September 2003. I find accordingly that applicant has
been given proper notice in which it could make further loans which
would still qualify for repayment by deduction by the respondent after
termination of the agreement.
In the circumstances the application must therefore fail and I make the
following order:
1.
The application is dismissed.
2.
The applicant is ordered to pay the respondent’s costs.
______________
S. EBRAHIM, J
On behalf of applicant:
Adv. N. Snellenburg
Instructed by:
Honey & Partners Inc.
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On behalf of respondent:
/scd
Adv. M.J. Möller
Instructed by:
Israel & Sackstein