South Africa: High Courts - Gauteng

/

DATE: 31/10/06

NOT REPORTABLE CASE NO: 2006/8054

In the matter between:

ANVIL FINANCIAL SERVICES (PTY) LTD First plaintiff

REGENT INSURANCE COMPANY LTD Second plaintiff

and

NETSTAR (PTY) LTD

Excipient/Defendant

JUDGMENT

RABIE J:

[1 ]

In this matter the defendant filed an exception to the plaintiffs' particulars of

claim on the basis that it is vague and embarrassing. The defendant filed a notice in

terms of rule 23(1) of the uniform rules of court and in the notice based its attack on

four paragraphs of the particulars of claim. The exception to paragraph 5.8 of the

particulars of claim was, however, subsequently abandoned. The defendant

persisted with the attack on paragraph 8.2, 10 and 13 of the particulars of claim.

[2]

A brief overview of the particulars of claim and the salient facts of the case is

necessary. The plaintiffs claimed damages from the defendant in the amount of

R3 809 723.00 and R3 189 363.00 respectively, which the plaintiffs allegedly suffered

as a result of a breach of contract on the part of the defendant. Both the applicants

relied in their causes of action on the same written finance agreement entered into

between themselves and the defendant.

[3]

The defendant is a company which provides a service to the public for, inter

alia, the tracing and recovery of stolen or hijacked vehicles. In order to supply the

service, the defendant installs a so-called Netstar unit in the motor vehicle of a

subscriber. The subscriber then enters into a standard service agreement for a

period of three years. The monthly subscription fee is aimed at covering the initial

capital outlay in respect of the Netstar unit itself as well as the so-called monthly

airtime charges, which pertains to the service rendered by the plaintiff in respect of

the tracing and recovery of the vehicle concerned.

[4]

In order to supply a subscription package to the consumer without the

consumer having to pay for the initial capital outlay upfront, the two plaintiffs and the

defendant entered into the aforesaid financial agreement. In terms of the agreement,

the first plaintiff would provide the financing for the capital amount pertaining to every

installation in the vehicle of a consumer, and will also be responsible to bill the

subscriber and to collect the monthly subscriptions during the duration of the contract.

The role of the second plaintiff was to collect from the first plaintiff that portion of the

monthly subscription received from the subscribers which relate to the monthly airtime

charges supplied by the defendant, and to pay such amount over to the defendant.

The monthly airtime charges related to the service supplied by the defendant to the

consumer namely the tracking and recovery of stolen vehicles. For this service the

second plaintiff would receive a collection fee.

[5]

In paragraph 6.1.1 of the finance agreement, the parties further agreed as

follows:

"Netstar world market the products in accordance with the particular subscription price set out in

annexure C from time to time, including free fitment, and shall also procure that all potential subscribers

are made aware of the existence and availability of the subscription package as a method of financing

the products".

[6]

There seems to be a dispute between the parties regarding the exact meaning

and extent of paragraph 6.1.1 of the agreement, but, broadly speaking, it would

appear that according to this paragraph and the rest of paragraph 6, the defendant's

initial obligation was to make a potential subscriber aware of the availability of the

finance facility supplied by the first plaintiff. Thereafter, if the potential subscriber

indicates to the defendant that he is interested in the finance facility supplied by the

first plaintiff, the defendant would be obliged to require such a subscriber to sign the

prescribed agreement with the first plaintiff. It does not appear that every potential

user of the defendant's product is obliged to make use of the finance facility supplied

by the first plaintiff and in such an event, the aforesaid agreement between the parties

would not apply to such a user.

[7]

In paragraph 6 of the particulars of claim the plaintiff alleged that:

"On a proper interpretation of clauses 4 and 6 of the agreement, alternatively as an implied,

alternatively, tacit term of such agreement, the parties were obliged not to do anything to frustrate one

another's contractual rights or the proper performance of one another's contractual obligations."

[8]

It was common cause between the parties that the aforesaid agreement was

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lawfully terminated with effect of from 9 September 2004. The plaintiffs' claims

resulted from an alleged breach of the agreement during the eight-month period prior

to the termination of the agreement.

[9]

In paragraph 8 of the particulars of claim the plaintiffs described these

breaches. According to the plaintiff's these breaches were material and in paragraph

8.2 of the particulars of claim the breaches relevant to this matter was set out as

follows:

"It (the defendant) fitted hardware to subscribers' vehicles and concluded standard service agreements

with subscribers to render the services defined in the agreement, but prevented the first plaintiff from

financing any of the transactions, by failing to advise it that such hardware had been fitted to

subscribers' vehicles and/or that such standard service agreements had been concluded with

subscribers and/or that any such subscribers required financing of the transactions concerned,

alternatively itself financed such transactions".

[10] As will more fully appear below, the defendant's exception largely related to the

last of the aforesaid alleged breaches, namely that the defendant breached the

agreement by itself financing transactions with subscribers instead of causing such

potential subscribers to be financed by the first plaintiff.

[11]

In paragraph 10 of the particulars of claim the loss allegedly suffered by the first

plaintiff is set out. The calculation of the loss is based on the number of service

agreements with subscribers which the plaintiffs allege they would have concluded

had it not been for the defendant's aforesaid breach of contract. In paragraph 12 of

the particulars of claim the loss allegedly suffered by the second plaintiff is set out and

this was calculated on the same basis as that of the first plaintiff.

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[12]

It is now necessary to turn to the notice of exception filed by the defendant.

The first ground of exception to be considered appears in the second paragraph of

the exception and relates to paragraph 8.2 of the particulars of claim. The following

is said in respect of paragraph 8.2 of the particulars of claim:

"To the extent that the plaintiffs in paragraph 8.2 of the particulars of claim read with paragraph 9 thereof alleged that the defendant breached the provisions of the agreement, annexure X1 to the

particulars of claim (read with the addendum thereto), by itself financing the transactions referred to in

paragraph 8.2 of the particulars of claim during the period February 2004 until of November 2004, such alleged conduct on the part of the defendant could, having regard to the provisions of clause 10.1 of

the agreement, annexure X1 to the particulars of claim, not have constituted a breach by the

defendant."

[13] The second and third grounds of the exception were directed at paragraphs 10

and 13 of the particulars of claim, which paragraphs both relate to the calculation of

the loss allegedly suffered by each of the plaintiffs. Regarding both these paragraphs

the defendant alleged that, having regard to clause 10.1 of the agreement, the

conduct of the defendant in concluding financial transactions itself, as set out in the

last part paragraph 8.2 of the particulars of claim, could not have and did not

constitute breaches of the agreement. In the result, so it was submitted by the

defendant, the quantification by the plaintiffs of their loss, as set out in paragraphs 10

and 13 respectively, is incorrect for the reason that it is based on the allegation that

the plaintiffs breached the provisions of the agreement, while, in terms of the

provisions of clause 10.1 of the agreement, the defendant was in fact entitled to

provide finance to subscribers itself.

[14]

It would appear, therefore, that all the grounds on which the exception by the

defendant is based, relate to only one question namely whether the defendant was

entitled to conclude financial transactions itself with new subscribers, or whether it

was not so entitled.

[15] On behalf of defendant it was submitted that clause 10.1 of the agreement

provided expressly that the defendant would not during a period of 12 months after

the signature of the agreement, i.e. until 13 May 2000, enter into a similar financing

agreement with persons other than the first or the second plaintiffs. Furthermore, that

after this embargo ceased to exist after the 12 month period, the defendant was free

to enter into similar financing agreements with persons other than the plaintiffs.

According to the defendant this catered for the type of case where a particular

subscriber required financing in respect of the defendant's product, but was not

prepared to conclude a finance agreement with the plaintiffs and required the

defendant itself to finance both the installation of the product and the supply of the air

time service.

[16]

It was accordingly submitted on behalf of the defendant that the agreement

allowed the defendant to conclude such finance agreements itself subsequent to 13

May 2000 (i.e. after the 12 month period) and that, consequently, the allegation in

paragraph 8.2 of the particulars of claim that such financing by the defendant itself

constituted a breach of the agreement, is irreconcilable with the terms of the

agreement. It was further submitted that the plaintiff's reliance on the alleged breach

of contract, as well as the quantification of the claims which relied on the same

allegations, was thus fatally flawed and unsustainable, thereby rendering the

particulars of claim excipiable.

[17]

It is well established that a pleading is "vague and embarrassing" if by reason

of the imprecise manner in which the facts are pleaded, the pleading lacks

particularity or the other party is "embarrassed" by being unable to plead issuably to

the allegations made. In Harms, Civil Procedure in the Superior Courts, paragraph

B23.4, it is stated that:

"An exception may be taken only when the vagueness and embarrassment strike at the root of the

cause of action pleaded, i.e., if the other party will be seriously prejudiced if the allegations remain."

[18] A few further general comments may be made. Firstly, the court should not

look too critically at a pleading. Unless the excipient can satisfy the court that there

is a real point of law or a real embarrassment, the exception should be dismissed.

Furthermore, exceptions are not generally the appropriate procedure to settle

questions of interpretation. The same applies to the pleading of implied and tacit

terms. In that regard, the test on exception is whether the trial court could (not

"should") reasonably imply the term alleged.

[19] According to the defendant's notice of the exception, the main thrust of the

exception is that having regard to the provisions of clause 10.1 of the agreement, the

defendant's conduct by itself financing the transactions, could not have constituted

a breach of contract by the defendant. During argument on behalf of the defendant

reference was also made to the whole of the written agreement which was annexed

to the particulars of claim and it was submitted that it does not contain a term which

prohibits the defendant, from itself financing subscribers. Consequently, so it was

submitted, the allegation in the particulars of claim is irreconcilable with the terms of

the agreement to which it referred. In these circumstances, so it was further

submitted, the particulars of claim are vague and embarrassing. It was further

submitted that the plaintiffs did not plead a tacit or implied term of the agreement

which prohibited the defendant from financing subscribers.

[20]

In regard to this last-mentioned submission it was submitted on behalf of the

plaintiffs that paragraph 6 of the particulars of claim in fact states that, on a proper

interpretation of the clauses 4 and 6 of the agreement, alternatively, as an implied,

alternatively, tacit term of such agreement, the parties were obliged not to do any

thing to frustrate one another's contractual rights or the proper performance of one

another's contractual obligations. I agree with this submission. Paragraph 6 opens

the door for an interpretation of the agreement as a whole in order to establish

whether the defendant was entitled to finance subscribers itself or not.

[21] As far as clause 10.1 of the agreement is concerned, it is clear from both the

heading of this clause as well as the contents thereof, that it pertains to exclusivity

and a restraint of trade. In my view, this clause has no direct relevance to deciding

the issue at hand. Furthermore, there does not appear to be any clause in the

contract which specifically provides for the right of the defendant to finance

subscribers itself or, for that matter, a clause which prohibits it from doing so. There

is also, in my view, no clause in the agreement which is on the face of it irreconcilable

with the notion that the defendant was not entitled to finance subscribers itself.

Consequently I cannot agree with the submission on behalf of the defendant

that the plaintiffs' particulars of claim assume an obligation on the part of the plaintiffs

which cannot be found in the agreement itself or, to put it differently, that the

particulars of claim is formulated in such a way that it contradicts, or is irreconcilable

with, the agreement which was annexed thereto.

[22] The question whether such a term, (tacit or implied), which prohibits the

defendant from financing subscribers itself, should be read into the written agreement,

or not, can only be answered by interpreting the agreement as a whole. It is trite that

the interpretation of a contract for such a purpose would entail a consideration of

background circumstances and, in some instances, of surrounding circumstances.

[23]

Consequently, a proper interpretation of the agreement between the parties

in casu, would only be possible after a consideration of the evidence to be presented

at the trial. For this reason an exception is not the manner in which this particular

dispute between the parties should be decided. As pointed out above, an exception

is generally not the appropriate procedure to settle questions of interpretation. This

is so, also as pointed out above, because in cases of doubt, or in cases where the

existence or otherwise of implied or tacit terms have to be decided, evidence relating

to the background and/or surrounding circumstances may be permissible to assist

with the interpretation of the agreement.

[24]

Having regard to the contents of the agreement and the particulars of claim I

am furthermore satisfied that, having regard to the test on exception, the trial court

could reasonably imply the term alleged by the plaintiffs namely that the defendant

was prohibited from financing subscribers itself.

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[25]

For all these reasons I am of the view that the exception to paragraph 8.2 of

the particulars of claim should not succeed. There can, in any event, be no prejudice

to the defendant if these allegations remain in the particulars of claim. The

allegations are neither vague, nor is the defendant embarrassed in its ability to plead

to the allegations.

[26]

Lastly I may mention the argument on behalf of the defendant in respect of a

prospective subscriber who requires financing but who does not want to be financed

by the first plaintiff. It was submitted that the parties could never have intended that

such a person should be compelled to be financed by the first plaintiff. Accordingly,

so it was submitted, the implied or tacit term proposed by the plaintiffs is irreconcilable

with the agreement as a whole. I do not agree with this submission. On the face of

the contract as it stands, nothing appears to stand in the way of such a person

obtaining finance from any other institution. Furthermore, and depending on the

evidence, a court might very well find that the intention of the parties was never to

prevent such "outside" financing but that it was contrary to spirit of the agreement and

the intention of the parties to allow the defendant to offer such financing itself and that

an implied or tacit term should therefore be read into the agreement to prevent the

defendant from undermining the whole purpose of the agreement by financing

subscribers itself. Consequently I am of the view that it cannot be excluded, as a

reasonable probability, that a trial court might on the evidence find that a tacit or

implied term in that regard can and should be read into the agreement.

[27] The further grounds of exception which relate more particularly to the

paragraphs in the particulars of claim dealing with the calculation of the damages

allegedly suffered by the plaintiffs, fall to be rejected for the same reasons.

[28] In the result the following order is made:

1.

The defendant's exception is dismissed with costs.