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LL Case No. 8/1983 IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION In the matter between: MARTROSE ENTERPRISES (PROPRIETARY) LIMITED Appellant and DEREK KEITH EMBLIN Respondent CORAM: CILLIé, BOTHA JJA et SMALBERGER AJA HEARD: 6 NOVEMBER 1984 DELIVERED: 30 NOVEMBER 1984 JUDGMENT /BOTHA JA ... 2. BOTHA JA:- This appeal was set down for hearing on 6 November 1984. When the matter was called in Court on that date there was no appearance for or by the respondent. He had in fact not received notice of the date of hearing. Counsel for the appellant (having been requested in advance to do so) addressed us first on the question whether the appeal should be entertained on its merits, having regard to the facts I have mentioned. At the conclusion of the argument on that question the Court announced that it was prepared to entertain the appeal on its merits and argument proceeded on that basis. This Court decided to deal with the appeal on its merits because of certain exceptional features of the circumstances surrounding the respondent's default of appearance. It is necessary now to refer to those circumstances. I shall do so as briefly as possible. /The ..." 3. The judgment appealed against was delivered in the Witwatersrand Local Division on 21 December 1982, in an action instituted by the respondent as plaintiff against the appellant as defendant. Summons had been issued in May 1981 and the hearing of the trial took place during October 1982. Throughout the proceedings in the Court a quo the respondent was represented by a firm of attorneys in Benoni, Slomowitz, Dobie, Smith and Myburgh Inc, and their correspondent in Johannesburg, Mr David R Snaier, who acted as the attorney of record. The appellant's notice of appeal was served on Mr Snaier and on the Registrar of this Court on 13 January 1983. For a considerable period of time thereafter the respondent's aforementioned attorneys continued to act on his behalf in matters pertaining to the prosecution of the appeal. So, for instance, on 18 March 1983, Mr Slome, a member of the Benoni firm of attorneys, refused, on the respondent's behalf, to accede to a request by the appellant's /attorney ... 4. attorney to consent to an extension of the time in which the appellant was required to file copies of the record; on 15 June 1983 Mr Snaier accepted service on the respondent's behalf of an application by the appellant for condonation of the late filing of copies of the record; and on the same day Mr Snaier acknowledged receipt of two copies of the record and of notice to the Registrar that security for costs had been agreed upon. A firm of Bloemfontein attorneys, Messrs E G Cooper and Sons, was appointed to act on the respondent's behalf at the seat of this Court. Then, on 17 and 24 February 1984, a document headed "Notice of Withdrawal" was served on the Registrar of this Court and on the appellant's Johannesburg and Bloemfontein attorneys. It purports to be signed on behalf of the respondent's Benoni, Johannesburg and Bloemfontein attorneys, and in part it reads as follows: /"BE ... 5. "BE PLEASED TO TAKE NOTICE THAT SLOMOWITZ, DOBIE, SMITH & NYBURGH of .... Benoni and DAVID R SNAIER of .... Johannesburg and E G COOPER & SONS of .... Bloemfontein, hereby withdraw as Attorneys of Record for the abovementioned Respondent (Plaintiff a quo). AND TAKE NOTICE FURTHER that the Respondent's last known address is 123 Elsie Road, Bapsfontein, care of P O Box 17343, Hillbrow, 2038." In May 1984 the appellant's Johannesburg attor-ney attempted to serve a copy of the appellant's heads of argument and list of authorities on the respondent in compliance with the provisions of A D Rule 8 (1). He did so in two ways. First, he sent a copy of the documents by registered post to the respondent at the post office box number in Hillbrow mentioned in the notice of withdrawal quoted above. The envelope was returned by the post office, marked "Unknown", and bearing the legend: "Return to sender. Not for Box 17343". Secondly, he /despatched ... 6. despatched a copy of the documents to the Deputy Sheriff of Bronkhorstspruit with a request that they be served on the respondent at "123 Elsie Road, Bapsfontein", the other address mentioned in the notice of withdrawal. The Deputy Sheriff thereafter reported to the Registrar of this Court that the respondent could not be found at the address stated or elsewhere in Bapsfontein and that enquiries from a number of people and an estate agency in Bapsfontein revealed that the respondent was wholly unknown in that area. On 24 September 1984 the Registrar of this Court attempted to comply with the requirements of A D Rule 7 (1) by despatching by registered post an envelope containing a notice of set down of the hearing of the appeal on 6 November 1984, addressed to the respondent's erstwhile Benoni attorneys, but at the address of Mr Snaier in Johannesburg, as it appeared on a number of /documents ... 7. documents in the Registrar's file. It would seem that Mr Snaier had in the meantime moved from that address to another. In any event, the envelope was returned by the post office to the Registrar, with stamps on it indicating that the addressee had "left" and that delivery could not be effected. On 15 October 1984 (after the appellant's counsel had been notified that the Court would require argument on the question whether the appeal should be heard on its merits) the appellant's attorney filed with the Registrar an affidavit deposed to on 8 October 1984 by Mr Slome, referred to above, which reads as follows: 1. I am an Attorney of the Supreme Court of South Africa (Transvaal Provincial Division) duly admitted and practising as such as a director of Slomowitz, Dobie, Smith and Myburgh Inc. at 65 Bedford Avenue, Benoni (hereinafter referred to as 'the firm'). /2. ... 8. 2. The facts contained in this affidavit are within my personal knowledge. 3. I represented the Respondent, not only in the above appeal but in the trial and motion proceedings between the Appellant and him, ,and I continued to do so until the firm withdrew as the Respondent's Attorneys of Record in this appeal. 4. The firm withdrew as the Respondent's Attorneys of Record pursuant to instructions to do so given to me by the Respondent, who informed me that he could not afford to contest the appeal. The Respondent informed me further that, in so doing, he did not intend to concede the appeal. However, he did not intend to attend the hearing of the appeal or to argue same, either in person or by Counsel, but would leave the matter in the hands of the Court. 5. I am not in contact with the Respondent at present, nor is his present address known to me. I believe that he is somewhere in Zululand." On these facts it is clear that if this Court /declined ... 9. declined to dispose of the appeal on the merits, the only alternative would have been to postpone the hearing of it. But if that course was followed, it would have had the effect of depriving the appellant of its right to be heard in this Court, unless the appellant took steps to trace the present whereabouts of the respondent and thereafter, depending on the outcome thereof, to cause a fresh notice of set down to be served on him, or to approach this Court by way of a substantive application for directions as to a substituted form of service or other relief. The Court decided against burdening appellant with the necessity of taking such further steps in order to procure a decision on the merits of the appeal. In weighing up the interests of the appellant in having the appeal heard against the interests of the respondent in being notified of the date of the hearing of the appeal, the Court considered the contents of Mr Slome's abovequoted affidavit to be of decisive importance. /Paragraph ... 10. Paragraph 4 of Mr Slome's affidavit makes it quite clear why the respondent terminated his attorneys' mandate to represent him in matters relating to the appeal. There is, of course, no reason to doubt the correctness of the information supplied by Mr Slome, nor is there any reason to think that, in disclosing that information, Mr Slome breached any confidence reposed in him by the respondent. The Court is accordingly obliged to take cognizance of the information which has been placed before it. That information discloses that the respondent intentionally and deliberately terminated his attorneys' mandate to act for him in the appeal, upon the footing that he did not desire to be afforded the opportunity of being represented or being present himself at the hearing of the appeal. It is implicit in his instructions to Mr Slome that he did not expect to be notified /of ... 11. of the date of hearing. That being his attitude, considerations of fairness dictate that the appellant's right to have the appeal heard should not be frustrated or postponed because of the absence of notice of the date of hearing to the respondent, having regard also to the fact that his present whereabouts cannot readily be ascertained. It is conceivable that the respondent's attitude towards the appeal may have changed since the occasion of his instructions to Mr Slome, as deposed to by the latter, because of an improvement of his financial position or for some other reason. That possibility should not, however, carry any weight, for it was the respondent himself who deliberately severed the link of communication between himself, on the one hand, and the appellant and its attorneys, on the other, in connection with matters relating to the further prosecution of the appeal, and /if ... 12. if he wished to restore such link in order to be notified of the date of hearing of the appeal, it was incumbent upon him to take appropriate steps in that regard. This he has failed to do. I accordingly turn now to the consideration of the merits of the appeal. The appellant carries on business as a dealer in second-hand fork-lift trucks ("fork-lifts"). The respondent was formerly employed by the appellant as a salesman. He was paid a salary of R800 per month and a travelling allowance of R400 per month. In addition, he earned a commission on sales of fork-lifts effected by him. He stopped working for the appellant as from the end of March 1981. It was the events surrounding the termination of his association with the appellant at that time that gave rise to the litigation between /the ... 13. the parties. Some time prior to the end of March 1981 the appellant's sole director, Milligan, received information which caused him to believe that the respondent, acting in collusion with one Couling, was diverting to the latter, for his benefit, sales of fork-lifts that should have been effected by the respondent on behalf of and for the benefit of the appellant. Milligan consulted his attorney and as a result an application to Court for an interdict against Couling and the respondent was launched. The papers in that application were served on the respondent on 31 March 1981, at the appellant's offices. Milligan and his attorney were present. In the ensuing discussion the respondent demanded payment of the remuneration due to him for the month of March, but his demand was turned down. The respondent left and thereafter did not return to work. The further /course ... 14. course of the application need not be referred to. In his particulars of claim the respondent alleged that the appellant had wrongfully and unlawfully refused to pay him his salary and travelling allowance for March 1981, had wrongfully and unlawfully accused him of dereliction of his duties as an employee of the appellant (such accusation being false), had instituted certain legal proceedings against him, and had "in all" created a situation in which a continuation of the relationship of master and servant had become impossible. It was further alleged that "such conduct" on the part of the appellant constituted a repudiation of the contract of employment and that the respondent, as he was entitled to do, accepted such repudiation on 7 April 1981, thereby terminating the contract of employment. The respondent claimed, in respect of March 1981, payment of his salary (R800) and travelling /allowance ... 15. allowance (R400), and an account in respect of commission earned by him. (It became common cause at the trial that the commission earned by the respondent during March 1981 amounted to the sum of R603.) In addition the respondent claimed damages in lieu of notice in respect of April 1981, in an amount which was reduced at the trial to the sum of R800. In its plea the appellant admitted that the respondent had not been paid remuneration for his employment during March 1981, but pleaded (a) that by reason of the respondent's breach of contract he had disentitled himself to any such remuneration, and (b) that the respondent was indebted to the appellant in an amount exceeding that of the respondent's claim, in respect of damages which formed the subject matter of the appellant's counterclaim. The appellant denied that it had repudiated the contract. In its counter- /claim ... 16. claim the appellant alleged that the respondent had committed a breach of contract by wrongfully and unlawfully diverting potential custom or business from the appellant to Couling's company, and that in consequence the appellant had suffered damages in an amount of R7 800, payment of which was claimed from the respondent. In further particulars two instances of diversion of business were specified. For the sake of brevity I shall refer to them as the Liberty Box transaction and the Minarex transaction. It was alleged that the loss of profit suffered by the appellant in the former in-stance was R2 500 and in the latter R5 300. The trial Judge (VAN REENEN J) granted judg-ment in favour of the respondent, on his claim, for payment of an amount, in respect of March 1981, of R1 803 (salary, R800; travelling allowance, R400; and commis-sion, R603), and of an amount of R800 in respect of /April ... 17. April 1981, being damages in lieu of notice. On the appellant's counterclaim the trial Judge decreed absolution from the instance in favour of the respondent. The appellant was ordered to pay the costs involved in so far as the respondent's claims were concerned, and each party was ordered to pay his or its own costs in regard to the counterclaim. In regard to the respondent's claims it was not disputed on appeal that the respondent was correctly granted judgment in a total amount of R1 803 in respect of March 1981, subject only to the contentions advanced on the appellant's behalf in respect of the counterclaim and the possibility of set-off operating if the trial Judge's order in that regard were to be altered to one granting judgment on the counterclaim in favour of the appellant. It will be convenient to observe at this stage, however, that the respondent's entitlement to /the ... 18. the amount of R1 803 had not been conceded either in the appellant's plea or during the course of the trial. The latter fact appears from the heads of argument filed on behalf of the appellant and signed by counsel who appeared for it at the trial, but who did not appear in this Court. Counsel who appeared for the appellant in this Court very properly accepted the position as reflected in his predecessor's heads of argument. I shall revert to this point later, when dealing with the question of costs. In regard to the appellant's counterclaim, the trial Judge's order of absolution was based solely on the ground that - as he found - the appellant had not proved that it had sustained any damage as a result of the respondent's breach of contract. The issue to which most of the evidence at the trial was directed, viz whether or not the respondent had committed a breach /of ... 19. of contract as alleged by the appellant, was firmly resolved in favour of the appellant by the trial Judge, who said the following in his judgment: "I now turn to the defendant's counterclaim, which is for damages based on the plaintiff's averred dereliction of duty. I find it unnecessary to deal with the factual allegations in detail. I am satisfied that the defendant has established that the plaintiff was in breach of the duty he owed to the defendant. I need but refer to the evidence given by Mr. T. du Bruyn which I accept. The probabilities favour his version of what had happened during the last week or so of February 1981. In addition, the plaintiff did not impress me as a truthful witness. He prevaricated at times and altogether made a poor impression. I have no doubt that the plaintiff was trying to promote the sales of the fork-shifts which Couling had come by in the expectation that he would benefit from these deals, and he clearly connived at Couling's attempts to subvert du Bruyn." Like the learned Judge, I find it unnecessary to enter upon a discussion of the evidence on this aspect of the case. For the purposes of this judgment it is sufficient /to ... 20. to say that, having studied the record with care, I am quite satisfied that there is no reason at all to doubt the correctness of the conclusion arrived at by the trial Judge in the passage of his judgment I have quoted. It follows from what has been said above that two matters call for consideration: first, whether the trial Judge's judgment in favour of the respondent for payment of R800 in respect of April 1981, being damages in lieu of notice, was correct; and secondly, whether the trial Judge was correct in finding that the appellant had failed to prove that it had suffered damage as a result of the respondent's breach of contract. As to the first point, the respondent's claim for payment of R800 in respect of April 1981 was a claim for damages based on alleged breach of contract, consisting in a repudiation of the contract by the appellant. /The ... 21. The conduct relied upon in support of the allegation of a repudiation was that Milligan had refused to pay the respondent his remuneration for March 1981 and had falsely accused him of a dereliction of his duties. The latter allegation was obviously the main ground of the respondent's complaint, but it cannot be sustained in view of the trial Judge's finding that the respondent had in fact acted in breach of his duties towards the appellant. In regard to the refusal to pay the respondent his remuneration for March 1981 Milligan testified that he explained to the respondent that payment was being withheld as against the loss of profit that the respondent had caused the appellant to suffer because of his unlawful conduct. The respondent gave a different version in his evidence, but in view of the trial Judge's adverse credibility finding against the respondent and the incidence of the onus in respect of /the ... 22. the alleged repudiation, there is no need to deal with it; Milligan's evidence on the point must be accepted. On that evidence the refusal to pay the respondent for March 1981 was part and parcel of the appellant's stance that the respondent had committed a breach of contract, and the validity of that stance having been upheld by the trial Judge, it would seem that there is something to be said for the view that the respondent's complaint in respect of the refusal to pay him for March 1981 also fell away. However, it is not necessary to pursue this line of enquiry, for there is a more obvious ground upon which this issue can be decided. The well-known test for deciding whether the conduct of a party to a contract constitutes a repudiation of it which entitles the other party, by accepting it, to put an end to the contract, is whether such conduct, fairly interpreted, exhibits a deliberate and /unequivocal ... 23. unequivocal intention no longer to be bound by the contract. The onus of proving that Milligan's conduct satisfied this test rested upon the respondent. On the evidence it is clear, in my view, that the respondent failed to discharge this onus. Milligan testified that he at no time intimated to the respondent that he was being dismissed from his employment, or that Milligan intended to dismiss him. This evidence was not controverted by the respondent. But Milligan went further: he said in his evidence that he did not wish the respondent's employment to be terminated; his sole object in bringing the interdict application and confronting the respondent with his dereliction of duties, was, as far as the respondent was concerned, to induce the respondent "to come clean", i e to acknowledge that he had been involved in a wrongful association with Couling to act to the appellant's detriment. Although Milligan did not testify in so many words that this /attitude ... 24. attitude of his was conveyed to the respondent, it is inherently probable that that would have been the case. And, indeed, this is borne out by passages in the respondent's own evidence. In the course of being crossexamined about the events on 31 March 1981 (which was a Friday), after service of the papers in the interdict application on him, the respondent gave the following evidence: "And do you recall that you asked, "Am I fired?" --- No, I don't recall that. Didn't you say that? ---- I can't recall that. And that Mr. Milligan replied to you and said, no? --- Yes, in fact, that Mr. Milligan asked me to report for work at eightthirty on Monday morning. THE COURT: I am sorry, you ...? ----not then - not then he didn't, no. No, MR. SAPIRE: But the point is, do you remember at that time? --- No, actually to be quite honest, I wouldn't say - I /couldn't ... 25. couldn't remember it because everything was in very much of a quandary at that time." The clear impression left by this evidence is that the respondent was asked by Milligan to continue in his employment, and this is confirmed by a later passage in his cross-examination, when he was asked whether he spoke to Milligan between 31 March 1981 and 1 May 1981: "Between those dates? -- Oh yes. Some where between - following the service of the application I had spoken to Mr Milligan, and, in fact, he actually asked me to return to his employ. -- He did? --- Yes." In all probability this discussion took place before the respondent purported to accept Milligan's alleged repudiation on 7 April 1981, for on this date the respondent's attorney wrote a strongly worded letter /to ... 26. to Milligan, and it is most unlikely that the latter would only thereafter have asked the respondent to return to his employment. On this evidence, then, the respondent failed to prove a repudiation of the contract by Milligan, and it follows that the appeal must be allowed in regard to the trial Court's judgment for the respondent in the sum of R800 as damages in lieu of notice. I turn now to the question whether or not the appellant proved that it had suffered damage as a result of the respondent's breach of contract. I shall deal first with the Minarex transaction. The appellant's case was that the respondent sold a fork-lift belonging to Couling to the Minarex company, while a suitable fork-lift of the appellant's was available to be sold, thereby causing the appellant to suffer a loss of the /profit ... 27. profit it would have made on a sale of its own forklift to Minarex. I agree with the trial Judge that the appellant failed to prove its damages in this transaction, but for entirely different reasons. (I do not propose to deal with the reasons of the learned trial Judge.) When Milligan gave evidence about this transaction, he said that the appellant's fork-lift which was available in its stock, and which would have suited the requirements of Minarex, represented by one Boss, was a model called a Hyster H40H. His evidence was quite definite and consistent in this respect, and the figures he supplied in support of his calculation of the loss of profit suffered by the appellant (e g in regard to the cost of acquisition, the cost of refurbishing, the re-sale price) were all pertinently related to that particular machine. Later, /Boss ... 28. Boss was called as a witness on the respondent's behalf. He described the fork-lifts which he saw amongst the appellant's stock, before he decided to buy the fork-lift belonging to Couling. Inter alia he saw a fork-lift that was probably a petrol machine (but not an L P gas machine) and that he might have bought were it not for the high price quoted for it by the respondent, and also another machine that was "in pieces", i e not ready for delivery. He could give no further detailed description of these two machines. Thereafter Milligan was re-called by the appellant's counsel. He then proceeded to say that the fork-lift which was "in pieces" was actually a diesel-powered Hyster H40H, which would not have met Boss's requirements. The fork-lift which was avail-able for sale and which would have suited Boss's re-quirements perfectly, Milligan said, was a Hyster H60H /L P gas ... 29. L P gas machine. He was quite emphatic about that. From the above summary of the evidence of Milligan it is apparent that he was utterly confused about the identity of the fork-lift which, on the appellant 's case, the respondent should have sold to Minarex. In view of his later evidence regarding the H60H fork-lift, the figures he used originally in order to calculate the loss of profit on a sale of the H40H fork-lift cannot serve as a basis for assessing the appellant's loss of profit in this transaction. The evidence as a whole is too confused and inconclusive to allow of any judgment being given in the appellant's favour regarding the Minarex transaction. The position is different in regard to the Liberty Box transaction. Liberty Box was in the pro-cess of buying a particular fork-lift of the appellant's, which had in fact already been delivered. The /respondent ... 30. respondent, by means which need not be detailed, wrongfully caused that sale to fall through and instead sold to Liberty Box a fork-lift belonging to Couling. The appellant's machine was returned to its stock, where it remained still when the trial was heard. There is no difficulty with regard to the identity of this machine. Milligan in his evidence supplied figures of the cost of acquisition, the cost of refurbishing and the sale price, which were not challenged, and which showed that the appellant suffered a loss of profit in this transaction amounting to R1 899,84 (allowing for the commission that would have been earned by the respondent if the sale had been allowed to go through). The trial Judge disallowed the appellant's claim for damages in respect of the Liberty Box transaction on the sole grounds that the appellant was still in possession of the fork-lift in question and that /there ... 31. there was no evidence that the machine had since depreciated in value or that it could not be sold. With respect to the learned Judge, I have no doubt that this approach was unsound. On the facts of this case, the criterion of market value is not appropriate in considering the appellant's claim for damages. It was clearly established by Milligan's evidence that forklifts of the kind in question were freely available in the market for the purposes both of acquisition and of re-sale by the appellant. Buying and selling at a profit was the essence of the appellant's business. Clearly it was in the contemplation of both the appellant and the respondent that if the latter committed a breach of contract by frustrating the sale of a fork-lift in stock the appellant would suffer a loss of profit, and for that loss the respondent is liable to compensate the appellant. It is no answer to the appellant's claim that it has the fork-lift available /for ... 32. for sale to another prospective customer at the same profit, for ex hypothesi, if the sale to Liberty Box had gone through, the appellant would have obtained another machine for sale to another customer, thus obtaining a profit in both transactions instead of one only. It follows, therefore, that judgment should have been granted in favour of the appellant on its counterclaim in the sum of R1 899,84, and that the appeal must be allowed in this respect also. In the result the orders issued by the trial Judge will be altered so that the respondent will be granted judgment on the main claim in an amount of R1 803,00 and the appellant will be granted judgment on the counterclaim in an amount of R1 899,84, in effect leaving a balance of R96,84 payable by the respondent to the appellant. This result will, of /course ... 33. course, carry with it the costs of the appeal. It remains to deal with the costs of the ac-tion in the Court a quo. Counsel for the appellant argued that those costs should be awarded to the ap-pellant if - as has now been found - it succeeded in establishing a balance in his favour. I do not agree with this argument. Counsel's argument would have carried weight if the appellant had in its plea con-ceded its indebtedness to the respondent in the sum of R1 803 and prayed merely that that sum should be set off against the amount for which judgment would be granted on the counterclaim. But this was not the tenor of the appellant's plea. As pointed out earlier, the respondent's entitlement to the amount of R1 803 was not conceded in the plea nor even during the course of the trial. The respondent was accordingly compelled to pursue the enforcement of his right to the amount of /R1 803 ... 34. R1 803 throughout the trial. Moreover, the appellant succeeded in respect of one part of its counterclaim only, while failing in respect of the other. In all these circumstances I do not consider that the mere fact that it succeeded in establishing a balance in its favour entitles the appellant to an award of the costs of the action. Taking into account all the circumstances, I am of the view that a fair order would be that each party is to bear his or its own costs of the action. The order of the Court is as follows: 1. The application for condonation of the late filing of the record is granted. The appellant is to bear the costs occasioned thereby. 2. The appeal is allowed with costs. /3. ... 35. 3. The orders made by the Court a quo are set aside and there is substituted therefor the following orders: (a) Judgment is granted in favour of the plaintiff on the main claim for payment of the sum of R1 803,00. (b) Judgment is granted in favour of the defendant on the counterclaim for payment of the sum of R1 899,84. (c) The amount mentioned in paragraph (a) is set off against the amount mentioned in paragraph (b), with the effect that the defendant is entitled to payment by the plaintiff of the balance of R96,84. (d) The plaintiff and the defendant are each to pay his or its own costs of /the ... 36. the action. A.S. BOTHA JA CILLIé JA CONCUR SMALBERGER AJA