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IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the consolidated matters between:
CASE NO 18404/1981
PUTCO LIMITED Appellant

and

TV & RADIO GUARANTEE COMPANY

(PROPRIETARY) LIMITED . Respondent

CASE NO 18488/1981

TV & RADIO GUARANTEE COMPANY

(PROPRIETARY) LIMITED Cross Appellant

and

PUTCO LIMITED Cross Respondent

CASE NO 9937/1981

PUTCO LIMITED Appellant

and

TV & RADIO GUARANTEE COMPANY

[PROPRIETARY] LIMITED Respondent

2/
2.

CASE NO 5165/1982

TV & RADIO GUARANTEE COMPANY

(PROPRIETARY) LIMITED Appellant

and

PUTCO LIMITED First Respondent

ALBINO CARLEO Second Respondent

BUSADVERT (PROPRIETARY) LIMITED Third Respondent

J J MULDER .' Fourth Respondent

CASE NO 5585/1982

TV & RADIO GUARANTEE COMPANY

(PROPRIETARY]" LIMITED" Appellant

and

PUTCO LIMITED Respondent

CORAM KOTZé, JOUBERT, TRENGOVE, VILJOEN, JJA,

et SMALBERGER, AJA

HEARD : 12 MARCH 1985

DELIVERED : 10 SEPTEMBER 1985

J U D G M E N T VILJOEN, JA

I have read the judgment of Smalberger AJA.

While/...:.

3.

While I am, for the reasons which follow, unable to agree that the second notice dated 23 September 1981 (annexure "B B") of termination of the temporary interim arrangement dated 9 August 1976 (annexure "C") is a valid notice, I am of the view that the first notice (annexure "0") is a good notice. I consequently agree with the result of his judgment. The agreement, annexure "C", is quoted in full in the report of the decision of the Court a quo, see Putco Ltd v TV & Radio Guarantee Co 1984 (1)

SA 443 (W) ("the report") at 446 G - 447 B. The

communication concerned, although stating to be

"binding upon both of us" was, in terms, "intended

to be a temporary interim arrangement" and the parties

confirmed/

4.

confirmed that, "in due course, a detailed agreement will be concluded between us as a result of the negotiations which we have been conducting." In spite of the negotiations referred to and further negotiations over a period of approximately five years, the parties were unable to agree on the details of a final agreement. It can be inferred, however, that both parties were, at the time annexure "C" was drafted, confident that such agreement would be concluded within a short space of time. The reference to the "negotiations which we have been conducting" creates the impression that the details to be incorporated in the final agreement had by then already been fairly well settled. No reference to negotiations which

were/

5
were to follow was made. The words "in due course" conveys the firm impression that the parties were of the view that the final detailed agreement would follow shortly after annexure "C". The parties never contemplated that the arrangement would founder. In this light the final paragraph which makes provision for the withdrawal of putco from the temporary interim arrangement on certain conditions must be construed. This paragraph was, in my view, intended to be applicable only if one of the contingencies referred to should arise while the detailed agreement was still pending and consensus still potentially attainable. It was not intended to apply if a point should be reached when it is sought, as in the present

case/
6

case, to cancel the interim arrangement on the ground that the parties have failed, after the lapse of a reasonable period, to reach consensus.
I agree with the view expressed by the learned Judge and by Smalberger, AJA in his judgment that Putco was entitled to terminate the agreement recorded in annexure "C" on reasonable notice but I do not agree that the inquiry as to what would be a reasonable notice depends upon what the parties contemplated. It is simply a matter of determining what would be a reasonable notice under the circumstances prevailing at the time of the notice - regard being had, of course, to the development which had legitimately taken place during the period within

which/

7.

which the parties were still hoping and striving to

reach a detailed agreement. For the reasons set out

in the report at 454C - 455E and particularly at

D - E on the latter page, I agree that annexure "B B"
was not a reasonable notice.

As I have indicated at the commencement of

this judgment I am of the view, however, that annexure

"0" is a good notice. I disagree with the learned

trial Judge's finding ( and in this respect I am in

full agreement with Smalberger AJA) that the sentence

in annexure "O", cited at 452 H of the report, rendered

the notice equivocal. Annexure "O" does not suffer

from the defect which the learned Judge found at

454 F to be fatal to annexure "B B". It is true that

no/

8.

no fixed date for termination of the agreement
was specified but that was impossible because the terms of the various contracts entered into by Afmed with advertisers differed. These terms were, however, objectively determinable. I have therefore come to the conclusion that the sentence referred to had not introduced any equivocation into the notice.
The further question is whether the sentence, "Please therefore take notice that, with effect from ] July 1981 our buses will not be made available to your company for advertising purposes in the placing of new advertisements," was, under the circumstances proved to have prevailed at the time of the notice,

unreasonable/

9
unreasonable. Annexure "0" is dated 26 May 1981 and it is common cause that this letter only reached TV on 2 June 1981. It was, therefore, a notice two days short of the full calendar month of June. I point out, however, that Moolman, the main shareholder and director of TV had notice on 28 May 1981 that Putco was cancelling the contract. Button, a chartered accountant, who had joined Putco in July 1979, testified as follows in this regard:

"M'Lord, I had a phone call from Mr Moolman on the morning of the 26th of May, stating that he'd heard that we intended changing our advertising agents and asking me whether there was any truth in this and I informed him that we were in fact cancelling the contract and that 1 would be forwarding him a copy of the letter that day."

He said that Moolman suggested in the course

of the/

10
of the phone call that if that was the case he was going to telephone all the advertisers and cancel all the contracts forthwith. The letter was thereafter drafted and typed. It was sent off by express post the next morning. I am not suggesting that much turns on the fact that Moolman had notice before the end of May. I merely point out that if a month's notice was necessary, which in my view it was not, TV did have such notice.
The notice by Putco that its buses would as from 1 July 1981 not be made available for the placing of new advertisements thereon was not specifically relied upon by TV as not being adequate on the grounds held by Smalberger AJA to be so.

When/

11
When TV brought its application for an interdict against Putco it emphasized in its founding affi-
davit the expenses it incurred for the purposes of furthering and promoting putco's interests. It detailed a the following facts: TV financed and assisted Afmed by making available to the latter various services and staff at no cost or charge to Afmed; it made available to Afmed a business property in Albertskroon which it caused to be rebuilt at a cost of approximately R15 000 during 1977 in order to establish the premises which were utilised by Afmed as its head-quaters at a nominal rental; early in 1981 it caused these premises to be refurbished at a cost

of/
12. of more than R10 000; for expansion purposes it
purchased an adjoining property for a purchase price of R65 000; it paid for various items of equipment which it made available to Afmed at nominal cost; during 1978 it produced a cinematographic film to promote further sales and advertising on Putco's buses and in 1979 a second film was made at large cost to boost advertising sales and to promote the image of Putco; during 1980 it purchased a typical bus from Putco at a cost of R25 000; Afmed and TV incurred substantial expenses in the form of promotional activities and travelling and entertainment expenses; the staff of Afmed was increased and regional contact offices were established in Durban

and/

13.

and Cape Town. The overhead expenditure and disbursements required to be made by TV in Putco's interest were extremely high and TV's investment totalled a vast sum. Unless the applicant was allowed to continue with the sale of advertising and was assured that Putco would continue to make available its vehicles for the painting of such advertising, it was alleged, TV would, bearing in mind that the agreement between the parties was of indefinite duration, suffer grave and irreparable damage, totalling hundreds of thousands of rand. It was further submitted in the founding affidavit that, even if the respondent was entitled to cancel the agreement recorded in annexure "C" the period

of/

14.
of notice was clearly and eminently unreasonable regard being had to the contemplated duration of the agreement between the parties. In his answering affidavit, the deponent for Putco alleged that "from the very nature of the document on which TV seeks to rely, namely annexure 'C', it establishes
a 'temporary interim arrangement' which ---- was
finally brought to termination in, I submit, a reasonable period of notice of more than a full calendar month having been given in 'annexure '0'." He proceeded as follows: "In addition it is clear from annexure "0" that the respondent has also taken proper consideration of the outstanding obligations of the applicant relating to outstanding contracting

periods"./

15.

periods."
The affidavits referred to were made before annexure "B B" was sent to TV. In TV's pleadings prepared for the trial it was alleged that both notices ("0" and "B B") were unreasonable. In support of its claim referred to at 450 G - H of the report Putco alleged a that under the circumstances prevailing annexure "C" was terminable at will by it either summarily, alternatively upon reasonable notice of 3 weeks or 6 months. The three weeks period was presumably inserted to be on the safe side as far as annexure "0" was concerned. No other justification for this period was alleged. The 6 months notice was obviously a reference to annexure

"B B"./

16.

"B B". The evidence adduced on behalf of TV,
which was considerably whittled down by cross-examination, was in essence the same as that which appeared in the founding affidavit - it was similarly directed to establish that annexure "C" was entered into for an indefinite period, or, in the alternative, that the notices were unreasonable in view of the time spent and money invested by TV through Afmed in adver-tising on Putco buses. For this contention reliance was, both in the Court a quo and in this Court, placed on the decision in the matter of Decro-Wall International SA v Practitioners in Marketing Ltd (1971) All E R 216 (C A). Dealing with the second notice (annexure "B B")' the learned trial Judge referred to this case and cited

at/

17.

at 453 E - 454 A of the report several dicta from
it. One passage is from the judgment of Buckley L J who said that what is reasonable notice of the termination of any contract is largely a matter of personal opinion; the question must be answered in the light of all the surrounding circumstances. In that case, he said, defendants were undertaking to launch on the market a new product; they were unlikely to obtain substantial profit from the venture for a considerable time; and they were bound to devote much expenditure and trouble to the business. At 454 A - B of the report the learned trial Judge, although he did not decide that annexure "B B" was unreasonable on this ground, nevertheless remarked as

follows:

"Similarly/

18.

"Similarly in this case, TV & Radio led a great deal of evidence in order to show that TV & Radio and Afmed had expended much time, labour and money in establishing the procuring of advertising on Putco buses, and that they could not expect to gather the full fruits of their labours for a period to come."

I don't think the learned Judge found as a fact what he stated in the final phrase of this dictum. But if he did I disagree. I have perused the record very carefully and am not persuaded that TV did not gather substantial benefits over the period. In my view TV carried on, through Afmed, for five years, from 1976 to 1981, this business of selling advertisements to be painted on Putco buses and the evidence shows, in my view, that TV and Afmed indeed reaped

rich fruits; they were amply rewarded for their

expense/

19.
expense and troubles. There is, moreover, a further distinction on the facts between that case and the present one. In the Decro-Wall case there was between the parties an agreement of indefinite duration. What was lacking in that case was the failure of the parties to agree on the period of notice for purposes of termination. In the present case the agreement concerned was an "interim and temporary" one which the parties contemplated would in due course be replaced by a final detailed agreement.

Apart from the features of distinction between the two cases there is, in the present case, an absolute dearth of evidence as to the reasonableness or otherwise of the notice by Putco that it would not make its buses

available/

20.
available for advertising purposes in the placing of new advertisements with effect from 1 July 1981. (The date 15 July 198] appearing in the citation at 452 G of the report is a misprint.) The facts being peculiarly within their knowledge TV and Afmed could and should have adduced evidence in this regard. This Court should not, in my view, be astute to find in their favour on the available evidence. It would be largely speculation to do so. The evidence that was led on the issues referred to by me does not satisfy me that, at the least, the 28 days for TV to regulate its own affairs was unreasonable. The business of TV and its associated companies generally was advertising and even though Putco was the only

company/

21.

company in respect of which TV concerned itself with
advertising on buses, it may be assumed that TV would,
in view of the business of advertising on buses being
as lucrative as TV said it was, be eager to explore
other avenues in this regard if the arrangement with
Putco fell away. Moolman testified that TV decided in
a spirit of good faith that "we will not handle any
other advertising on any other bus fleets other than
Putco, even though pressured by Mr Archibald to do so."
Archibald was one of Putco's employees who served

for a while on the board of directors of Armed to

promote, in that capacity, the interests of Putco.
Moolman said there were opportunities of obtaining
other advertising contracts. They were asked by the

Pietermaritzburg/...

22.
Pietermaritzburg and East London Municipalities to
tender for their bus fleets and an approach was also made by the Corporation for Economic Development. Evidence that similar opportunities to fill the void created by the withdrawal of the Putco buses were not likely to present themselves was never advanced TV might have decided to retain the same salesmen who were active in selling advertisements on Putco's buses to explore such other avenues. There was no evidence on the number of employees who dealt with incoming new business only and it was only such employees who were in jeopardy of being dismissed. The number of the personnel who attended to the administration generally would have to be retained

because/
23. because management in respect of existing contracts

would not summarily come to an end. It would grind
to a slow halt and TV would have ample time to

consider, in the course of time, whether to discharge

any staff or not. The fixed capital assets like the

buildings used in connection with advertising on Putco's
buses could be sold or used for purposes of the activities

of the other associated companies. The value of the

properties must have appreciated considerably over the

years. The bus would have to be got rid of but a

decision to do so could have been taken very shortly

after receipt of the notice. The films would be a loss

but that would be so whether the notice was short or not.

The expense incurred in making the films was one of the

risks/

24.

risks TV ran should the temporary agreement be
terminated for failure by the parties to come to
a final agreement.

In my view, subject to one proviso, Putco
could have given TV summary notice of the unavailability
of its buses for purposes of painting thereon new
advertisements. To give TV notice that only at some
date in the future Putco's buses would not be made
available for the painting thereon of new advertisements
would imply that in that period TV could still procure
new business. It would be extremely difficult to frame

a notice in such a way as to reconcile and synchronise

the cessation of generation of new business with a

retrenchment of staff who may become redundant as a

consequence of such cessation. The proviso I have in

mind/

25.

mind is that time should he allowed for negotiations,
which had advanced to a stage where they would in
all likelihood in due course have resulted in a firm
agreement, to be proceeded with until a contract was
finally concluded. There was no evidence at all that there were such prospective contracts or, if there

were, that the notice which was in fact given was

insufficient for that purpose.

Annexure "O" was, in my view, prima facie

a reasonable notice and no evidence was adduced that

it was not. I conclude therefore that the learned

trial Judge should have found, in Putco's favour,

that it was a valid and reasonable notice.

JUDGE OF APPEAL

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