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MEDSCHEME HOLDINGS (PTY) LTD AND ANOTHER v BHAMJEE 2005 (5) SA 339 (SCA)

2005 (5) SA p339

Citation 2005 (5) SA 339 (SCA)

Case No 214/2004

Court Supreme Court of Appeal

Judge Zulman JA, Cameron JA, Nugent JA, Cloete JA and Jafta JA

Heard May 3, 2005

Judgment May 27, 2005

Counsel A Subel SC (with him R du Plessis) for the appellant.H J de Vos SC for the defendant.

Annotations Link to Case Annotations

Flynote : Sleutelwoorde

Contract - Consensus - Duress - Economic duress - Principle of economic duress yet to beaccepted in our law - No principled reason why threat of economic ruin should not, in appropriatecases, be recognised as duress - Such cases rare, however - Not unlawful in competitive economyto cause economic harm or even economic ruin to another - Hard bargaining not equivalent ofduress.

Evidence - Witnesses - Credibility - Demeanour of witnesses - Assessment of witness's evidenceon basis of demeanour, without regard for wider probabilities, constituting misdirection.

Headnote : Kopnota

English and American cases both recognise that economic pressure may, in appropriate cases,constitute duress that allows for the avoidance of a contract. That principle has yet to beauthoritatively accepted in our law. While there would seem to be no principled reason why athreat of economic ruin should not, in appropriate cases, be recognised as duress, such casesare likely to be rare. For it is not unlawful, in general, to cause economic harm, or even tocause economic ruin, to another, nor can it generally be unconscionable to do so in acompetitive economy. In commercial bargaining the exercise of a free will (if that can ever existin any pure form of the term) is always fettered to some degree by the expectation of gain orthe fear of loss. Hard bargaining is not the equivalent of duress, and that is so even where thebargain is the product of an imbalance in bargaining power. Something more would need toexist for economic bargaining to be illegitimate or unconscionable, and thus to constituteduress. (Paragraph [18] at 346A - D.)

An assessment of the evidence of a witness on the basis of demeanour - the application ofwhat has been referred to disparagingly as the 'Pinocchio theory' - without regard for widerprobabilities, constitutes a misdirection. Without a careful evaluation of the evidence that wasgiven (as opposed to the manner in which it was delivered) against the underlying probabilities,


little weight can be attached to the credibility findings of a trial court. (Paragraph [14] at 345A -C.)

Cases Considered

Annotations

Reported cases

Arend and Another v Astra Furnishers (Pty) Ltd 1974 (1) SA 298 (C): referred to

Arter v Burt 1922 AD 303: dictum at 306 applied

Body Corporate of Dumbarton Oaks v Faiga 1999 (1) SA 975 (SCA): dictum at 979I applied

Broodryk v Smuts NO 1942 TPD 47: referred to

CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 (CA): referred to

2005 (5) SA p340

Dimskal Shipping Co SA v International Transport Workers' Federation (The Evia Luck (No 2)([1992] 2 AC 152 (HL) ([1992] 1 Lloyds Rep 115): referred to

Malilang and Others v MV Houda Pearl 1986 (2) SA 714 (A): distinguished

National Education Health and Allied Workers Union v Public Health & Welfare SectoralBargaining Council (2002) 23 ILJ 509 (LC): criticised

President of the Republic of South Africa and Others v South African Rugby Football Union andOthers 2000 (1) SA 1 (CC) (1999 (10) BCLR 1059): dictum in para [79] applied

S v V 2000 (1) SACR 453 (SCA): compared

Santam Bpk v Biddulph 2004 (5) SA 586 (SCA): dictum in para [16] applied

Van den Berg & Kie Rekenkundige Beamptes v Boomprops 1028 BK 1999 (1) SA 780 (T):dictum at 795E - 796A applied.

Case Information

Appeal against a decision of the Transvaal Provincial Division (R D Claassen J). The factsappear from the reasons for judgment.

A Subel SC (with him R du Plessis) for the appellant.

H J de Vos SC for the defendant.

In addition to the authorities cited in the judgment of the Court, counsel for the parties referredto the following:


Afrox Healthcare Bpk v Strydom [2002] 4 All SA 125 (SCA) at 136 - 7

Alec Lobb (Garages) Ltd and Others v Total Oil GB Ltd [1983] 1 All ER 944 (Ch) at 960

Allie v Foodworld Stores Distribution Centre (Pty) Ltd and Others 2004 (2) SA 433 (SCA) at442I - 443G

Armstrong v Magid and Another 1937 AD 260 at 273 - 4

Bank of Lisbon & SA Ltd v De Ornelas and Another 1988 (3) SA 580 (A) at 580, 606, 609 - 10,615

Barnard v Barnard 2000 (3) SA 741 (C) at 753 - 4

Benkenstein v Neisius and Others 1997 (4) SA 835 (C) at 845C - J, 845H

BOE Bank v Van Zyl 1999 (3) SA 813 (C) at 824G - 825A, 825D - F, 826G - I

BOE Bank v Van Zyl 2002 (5) SA 165 (C) at 178G - 179G, 179H - 180H

Bowditch v Peel & Magill 1921 AD 561 at 573

Brisley v Drotsky 2002 (4) SA 1 (A)

Brummer v Gorfil Brothers Investments Ltd en Andere 1999 (3) SA 389 (SCA) at 420F

Burger v Central SAR 1903 TS 571 at 578

De Beer v Keyser and Others 2002 (1) SA 827 (SCA) at 837C - E

Du Plooy v National Industrial Credit Corp Ltd 1961 (3) SA 741 (W) at 745 - 6

Durban's Water Wonderland Ltd v Botha and Another 1999 (1) SA 982 (SCA)

George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A)

Hendricks v Barnett 1975 (1) SA 765 (N)

Hofer and Others v Kevitt NO and Others 1998 (1) SA 382 (SCA) at 388E - G

Houtappel v Kersten 1940 EDL 221 at 224 - 5

Ilanga Wholesalers v Ebrahim 1974 (2) SA 292 (D) at 297

2005 (5) SA p341

Jans Rautenbach Produksies (Edms) Bpk v Wijma 1970 (4) SA 31 (T) at 33, 34G - H

Johannesburg Country Club v Stott and Another 2004 (5) SA 511 (SCA)

Kapp v TC Valuta (Pty) Ltd 1975 (3) SA 283 (T)


Kilroe v Bayer 1915 CPD 717 at 720

Kruger v Sekretaris van Binnelandse Inkomste 1973 (1) SA 394 (A) at 410E

Lloyds Bank Ltd v Bundy [1974] 3 All ER 757 at 765

Lombard v Pangola Sugar Milling Co Ltd 1963 (4) SA 860 (A) at 863B - H

Machanick Steel & Fencing v Wesrhodan 1979 (1) SA 265 (W) at 271B - H, 272B

National Westminster Bank plc v Morgan [1985] AC 686

Notaris v Rex 1903 TS 484

Occidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and the Sibotre)[1976] 1 Lloyds Rep 293 at 335

Pao On and Others v Lau Yiu Long and Others [1979] 3 All ER 65 (PC) at 635 - 6

Paragon Business Forms (Pty) Ltd v Du Preez 1994 (1) SA 434 (SE) at 439A - D, 439F, 441

Patel v Grobbelaar 1974 (1) SA 532 (A) at 533 - 4

Preller v Jordaan 1956 (1) SA 483 (A) at 490A - C, 503E - H

R v Mohammed 1929 AD 58 at 67

Salter v Haskins 1914 TPD 264 at 266

Savvides v Savvides and Others 1986 (2) SA 325 (T) at 330B

Shepstone v Shepstone 1974 (1) SA 411 (D)

Sievers v Bonthuys 1911 EDL 525 at 532

Silver Garbus & Co (Pty) Ltd v Teichert 1954 (2) SA 98 (N) at 105C - D

Steiger v Union Govt 1919 NPD 75 at 81

Stellenbosch Farmers' Winery Group and Another v Martell et Cie and Others 2003 (1) SA 11(SCA) at 14I - 15D

Union Government (Minister of Finance) v Gower 1915 AD 426 at 434

Universe Tankships Inc of Monrovia v International Transport Workers Federation (TheUniverse Sentinel) [1980] 2 Lloyd's Rep 523 (CA) at 530 - 1, 541; [1982] 2 All ER 67 (HL) at 75- 6, 88 - 9

National Education Health and Allied Workers Union v Public Health and Welfare SectoralBargaining Council and Others (2002) 23 ILJ 509 (LC)

Wells v South African Alumenite Co 1927 AD 69 at 72


Christie The Law of Contract 4th ed at 360, 361

Hawthorne 'The Principle of Equality in the Law of Contract' 1995 THRHR 157

Joubert General Principles of the Law of Contract at 117

Van der Linden Koopmanshandboek 1.15.1

Van der Merwe et al Kontraktereg Algemene Beginsels 1994 at 94 and 1094

Voet Commentarius ad Pandectas 2.14.19; 4.2.11; 4.3.1.2.

Cur adv vult.

Postea (May 27).

2005 (5) SA p342

Judgment

Nugent JA:

[1] Dr Yusuf Bhamjee - the respondent in this appeal - graduated from the Medical University ofSouth Africa in 1989. After completing his internship he joined Dr Karim in general practice inKinross and two years later he took over the practice. Most of Dr Bhamjee's patients wereemployees of Sasol and their dependants, who benefited from one or other of two medical aidschemes operated by Sasol. Although his patients were far from affluent, the practice, said DrBhamjee, was very lucrative.

[2] It was because the practice was costing the schemes more than comparative practices inthe area that it came to the attention of Medscheme (the second appellant, which is asubsidiary of the first appellant, but the distinction between the two companies is not material)which is an administrator of medical aid schemes. It administered, amongst others, the twoSasol schemes, which were once racially divided. The members of Oilmed were Sasol's black,generally lower-earning, employees. Other employees belonged to Sasolmed. (The twoschemes have since been combined.) Most of Dr Bhamjee's patients were beneficiaries ofOilmed.

[3] On two occasions - first on 23 June 1998 and then again on 17 February 2000 - Dr Bhamjeeacknowledged himself to be indebted to Medscheme for the repayment of portion of themoneys that he had claimed from and been paid by the schemes. On the first occasion heacknowledged himself to be indebted in the sum of R350 000, which he paid in instalments overabout two years. On the second occasion he acknowledged himself to be indebted in the sumof R588 000. When that acknowledgment of debt was signed it was anticipated that portion ofthe debt would be set off against moneys that Dr Bhamjee had claimed from but not yet beenpaid by the schemes, and that the balance would be paid in instalments, and those terms wereincorporated in the document. It is not disputed that that acknowledgment of debt, and itsrelated undertaking, was conditional upon its terms being approved by the schemes, which didnot occur. (The point was overlooked when the present proceedings were commenced.)


[4] Soon after the second acknowledgment of debt was signed the Sasol schemes decided thatthey would no longer accept claims made upon them directly by Dr Bhamjee. Instead, he wouldbe required to recover his charges from their members, who would in turn be reimbursed bythe schemes to the extent of prescribed tariffs. The result was disastrous for Dr Bhamjee. Itseems that most of Dr Bhamjee's patients preferred to consult practitioners whose chargeswere recoverable from the schemes directly and his practice soon collapsed.

[5] That seems to have been what prompted Dr Bhamjee to dispute the validity of the twoacknowledgments of debt, alleging that they were signed under duress. He sued Medscheme inthe Pretoria High Court for declarations that they were void, for recovery of the moneys that hehad paid, and for recovery of the moneys that were retained by Medscheme

2005 (5) SA p343

NUGENT JA

for set-off against the second acknowledged debt. In addition to resisting Dr Bhamjee's claims,Medscheme counterclaimed for recovery of the balance of the second acknowledged debt(after deducting the moneys that were to be set off). Dr Bhamjee's claims succeeded andMedscheme's counterclaim was dismissed (by Claassen J). Medscheme now appeals with theleave of the Court a quo.

[6] In general terms, an undertaking that is extracted by an unlawful or unconscionable threat ofsome considerable harm, is voidable. 1(1) The harm with which Dr Bhamjee alleges he wasthreatened was economic harm, the nature of which emerges from the relationship that existedbetween Dr Bhamjee and the schemes.

[7] A medical aid scheme is an association of its members who contribute (their contributionsmight be augmented by contributions from their employer) to a fund from which their medicalexpenses are defrayed. Often the member will pay, or incur liability to pay, the provider of themedical service, and will be reimbursed by the scheme to the extent of a prescribed tariff. Orthe scheme might choose to accept claims directly from service providers, which holds outadvantages for members and for service providers alike. But that entails some risk to thescheme. Clearly the scheme will be unable in practice to verify each of what will often benumerous claims. The avoidance of excessive or fraudulent claims will thus depend largelyupon the integrity of the service provider. On the other hand the discretion to accept claimsdirectly also affords considerable bargaining power to the scheme when dealing with thoseservice providers who depend for their economic survival upon their claims being paid by thescheme.

[8] Dr Bhamjee was one such service provider. And it was the assertion by Medscheme of thatbargaining power, so he alleges, that constituted what he complains of as duress. It occurred inthe circumstances that follow.

[9] Medscheme offers to the schemes that it administers, at an additional cost, what wasreferred to as a 'managed health care' service, which enables the costs being incurred by thescheme to be monitored and controlled. One of the techniques that is used to monitor costs isthe comparison of a medical practitioner's cost-profile against the average cost-profile of


comparable practices. If there are material discrepancies steps will be taken to investigate andif possible reduce or eliminate the discrepancies, first by alerting the practitioner to thediscrepancies, then by referring the matter to the practitioner's professional body, and then bydirect discussion with the practitioner. Ultimately the scheme might exercise its discretionagainst accepting claims from the practitioner directly with the effect that its members will bediscouraged from using the services of that practitioner to the overall benefit of members.

2005 (5) SA p344

NUGENT JA

[10] During 1998 Dr Bhamjee's claims profile came to the attention of Medscheme andultimately a meeting was arranged with him to discuss the matter. The meeting was held on 23June 1998. Medscheme was represented by Mr Daylan Moodley, who was employed byMedscheme as a Senior Manager: Provider Profiling. (Mr Moodley said that the meeting wasalso attended by Mr Deva Moodley but that is not material.) The function of Mr Moodley'sdepartment was not directed towards detecting or investigating fraud or other dishonestabuses (that was the task of another department) but rather towards monitoring thecost-effectiveness of service providers and taking steps to contain those costs.

[11] Much of what occurred at the meeting is in dispute. What is not in dispute is that MrMoodley had before him Dr Bhamjee's claims profile for a period of three months and acomparative profile of the average claims of comparable practices in the area. Mr Moodley saidthat his principal concerns were Dr Bhamjee's average cost-per-patient, which was substantiallyhigher (about 50%, or R110 per patient) than the average cost of comparable practices, and thefrequency of repeat consultations. Mr Moodley calculated that the cost to the schemes of DrBhamjee's practice over the preceding six months was roughly R400 000 higher than the costwould have been had the services been provided by the average comparable practice in thearea (calculated at R110 per patient for an average of 600 patients per month) and he told DrBhamjee that the schemes were considering terminating direct payments to him. He said thatDr Bhamjee became perturbed and asked whether the schemes would reconsider the matter ifhe repaid at least part of the excess. Mr Moodley told him that that was a matter for the decisionof the schemes. Dr Bhamjee then signed the first acknowledgment of debt, which Mr Moodleyundertook to put before the schemes' trustees. A day or two later he discussed the matter withthe chairman of the schemes' trustees, who accepted Dr Bhamjee's offer.

[12] Dr Bhamjee's account of the meeting was that Mr Moodley said that he (Dr Bhamjee) wasearning too much, that he was dispensing expensive medicines, that he had been instructed todemand from Dr Bhamjee repayment of all his earnings in excess of R150 000 per month forthe past six months, and that if he refused the schemes would terminate direct payments. Hesaid that Mr Moodley then calculated his alleged excess earnings to be about R370 000 butsaid that, as a favour, he would reduce it to R350 000. Dr Bhamjee said that in desperation,and in fear that his practice would collapse if the threat was carried out, he signed theacknowledgment of debt. At the end of the meeting, he said, Mr Moodley warned him that directpayments to him would be terminated immediately if he discussed the matter with an attorney.

[13] The learned Judge in the Court a quo rejected the evidence of Mr Moodley (as he rejected


the evidence of all Medscheme's principal witnesses) and accepted that of Dr Bhamjee. Hisassessment of their evidence was based on their demeanour, and on what were said to bediscrepancies in their evidence, none of which seem to me to be material.

2005 (5) SA p345

NUGENT JA

[14] It has been said by this Court before, but it bears repeating, that an assessment ofevidence on the basis of demeanour - the application of what has been referred todisparagingly as the 'Pinocchio theory' 2(2) - without regard for the wider probabilities,constitutes a misdirection. 3(3) Without a careful evaluation of the evidence that was given (asopposed to the manner in which it was delivered) against the underlying probabilities, whichwas absent in this case, little weight can be attached to the credibility findings of the Court aquo. Indeed, on many issues, the broad credibility findings, undifferentiated as they were inrelation to the various issues, were clearly incorrect when viewed against the probabilities.

[15] But on the critical issues of fact the discrepancies are in any event not material. Clearly DrBhamjee must have signed the acknowledgment of debt in the belief that his failure to do soplaced the future of his lucrative practice at risk. Whether his belief was induced by a threatmade directly or only by implication is of no consequence. The question is only whether thedirect or indirect threat constituted duress as it is understood in law.

[16] There can be no quibble with the finding of the learned Judge that the threatened harmwas imminent. But his finding that the threat was unconscionable, and therefore constitutedduress, was based on two interrelated grounds that were both incorrect.

[17] The learned Judge said that the situation in which Dr Bhamjee found himself was 'not onewhere [Dr Bhamjee] really gained anything by conceding to [Medscheme's] threats'. That is notcorrect. Dr Bhamjee had everything to gain: if he agreed to repay the money he would be ableto continue what until then had been a lucrative practice. The learned Judge also said that DrBhamjee was simply 'obtaining what was his in any event'. That was also incorrect. Dr Bhamjeewas not entitled to insist that the schemes continue supporting his practice by accepting hisclaims directly. It was within their discretion to do so or not. (It was suggested in argument thata contractual right to receive direct payment had accrued to Dr Bhamjee by past conduct butthat takes the matter no further: Even if he enjoyed such a right it clearly did not extend inperpetuity and was capable of being terminated by the schemes.)

2005 (5) SA p346

NUGENT JA

[18] English 4(4) and American 5(5) law both recognise that economic pressure may, inappropriate cases, constitute duress that allows for the avoidance of a contract. As pointed outby Van den Heever AJ in Van den Berg & Kie Rekenkundige Beamptes v Boomprops 1028 BK1999 (1) SA 780 (T), that principle has yet to be authoritatively accepted in our law. 6(6) Whilethere would seem to be no principled reason why the threat of economic ruin should not, inappropriate cases, be recognised as duress, such cases are likely to be rare. (The point is


underlined by the dearth of English cases in which economic duress was found to haveexisted.) 7(7) For it is not unlawful, in general, to cause economic harm, or even to causeeconomic ruin, to another, nor can it generally be unconscionable to do so in a competitiveeconomy. In commercial bargaining the exercise of free will (if that can ever exist in any pureform of the term) is always fettered to some degree by the expectation of gain or the fear ofloss. I agree with Van den Heever AJ (in Van den Berg & Kie Rekenkundige Beamptes at 795E- 796A) that hard bargaining is not the equivalent of duress, 8(8) and that is so even where thebargain is the product of an imbalance in bargaining power. Something more - which is absentin this case - would need to exist for economic bargaining to be illegitimate or unconscionableand thus to constitute duress.

[19] The bargain in the present case was in any event not a particularly hard one. Theschemes, in the interest of their members, were entitled to encourage members to consultpractitioners whose costs were reasonable, and to refrain from consulting others. The bargainthat they struck with Dr Bhamjee had the effect merely of demanding, as a condition for thecontinuation of their relationship, that Dr Bhamjee's charges, including those that had alreadybeen incurred, were consistent with those of comparable practices. Contrary to the finding ofthe Court a quo Dr Bhamjee had no right to insist that the schemes continue supporting him onother terms. No doubt Dr Bhamjee made the trade-off - and then paid the acknowledged debtover the following two years - precisely because he considered it to be economically worthwhile,even though he would no doubt have preferred not to have been required to make it.

2005 (5) SA p347

NUGENT JA

[20] The second acknowledgment of debt has its origin in a telephone call that was made toMedscheme about 16 months later (in October 1999) by a former associate of Dr Bhamjee withwhom he had fallen out. In a signed statement the informant told Medscheme, amongst otherthings, that Dr Bhamjee had been submitting false and inflated claims to the schemes, and thathe purchased and repackaged medicines that had been stolen from state hospitals. (After thecommencement of the action the informant retracted the allegations and in giving evidence atthe instance of Dr Bhamjee he repeated that the allegations were untrue.)

[21] Medscheme's special investigations unit, under the management of Ms Van Zyl,commenced an investigation of Dr Bhamjee's claims. An analysis of his claims for the period 1January 1998 to 30 September 1999 reflected features that were consistent with the allegationthat false claims had been submitted. Amongst other things it reflected an abnormal number ofconsultations, that Dr Bhamjee would have to have seen over 100 patients a day on occasions(and on one day 172 patients), that some of the procedures that were claimed for were unusualfor that type of practice, that medicines were prescribed more frequently than normal, and that25 accounts submitted by Dr Bhamjee purported to have been issued before the treatment wasadministered. It also reflected that claims for medicines amounted to R1 289 289 of which R829599 had been paid by the schemes.

[22] Ms Van Zyl reported the findings to the chairman of trustees of the Sasol schemes andthey agreed that a meeting should be held with Dr Bhamjee. Payment of claims that had been


submitted by Dr Bhamjee but had not yet paid would meanwhile be withheld.

[23] Ms Van Zyl (and others) met with Dr Bhamjee on 19 January 2000 and expressed herconcerns. Clearly she was not satisfied with his explanations. When asked for his patient filesDr Bhamjee said that he kept none. (He said that the only record of patients was the record hehad on his computer.) Dr Bhamjee was also asked to produce the invoices for his purchase ofmedicines, which he undertook to do. After the meeting Dr Bhamjee went in search of theinvoices only to discover, so he alleged, that some of his files were missing from one of hissurgeries. (He surmised that the files must have been stolen about a month earlier.) Henevertheless submitted to Medscheme those invoices that he had in his possession, whichreflected the purchase of medicines by Dr Bhamjee during 1999 and 2000 for R110 472.

[24] A manual that is issued by the pharmaceutical industry reflects the recommendedwholesale and retail prices of medicines. (The schemes pay for medicines at the recommendedretail price.) The mark-up from the recommended wholesale price to the recommended retailprice is generally 50%. Applying that percentage mark-up, the recommended retail price of themedicines reflected on Dr Bhamjee's invoices ought to have been no more than R165 000. Thatwas about R663 000 short of the amount that had been paid to Dr Bhamjee for medicines overthe relevant period.

2005 (5) SA p348

NUGENT JA

[25] At another meeting held on 17 February 2000 Ms Van Zyl confronted Dr Bhamjee with theapparent shortfall, for which he offered various explanations. The explanations that he offered,either at the meeting or in his evidence, were that the discrepancy was to be accounted forpartly by the missing invoices, partly by the acquisition of medicines from the estate of adeceased uncle for which he had no invoices, partly by what he referred to as 'deals' that hewas given by pharmaceutical sales representatives (by which he meant that he was given freemedicines which he dispensed at the recommended retail price), and partly by the acquisition ofgeneric medicines from wholesalers at far below the recommended wholesale price with theresult that his mark-up (when claiming at the recommended retail price) was 1 000% or moreand not 50%.

[26] Ms Van Zyl also confronted Dr Bhamjee with the fact that his claims reflected that he hadseen as many as 172 patients on one day (that number, as it turned out, ought to have been167) which Dr Bhamjee explained on the basis that he worked extremely long hours.

[27] Clearly Ms Van Zyl was still not satisfied with Dr Bhamjee's explanations, for which therewas no independent corroboration, because she insisted that he repay some of the moneys thathad been paid to him. At first she wanted him to repay what she believed was anunsubstantiated charge for medicines (which she calculated, in the manner I have described,to be about R663 000). Adopting an alternative approach she calculated that if Dr Bhamjee hadseen an average of 40 patients a day - which would have been closer to the norm - at anaverage charge of R150 per patient his average monthly earnings would have been R126 000and not R175 000 (a difference of R49 000 per month). Calculated on either basis she believedthat Dr Bhamjee must have overcharged about R588 000 during the preceding year and she


wanted that amount to be repaid.

[28] Dr Bhamjee's account of the meeting was that Ms Van Zyl was adamant that if he failed topay that amount the schemes would refuse to continue accepting his claims. Whether Ms VanZyl issued that threat expressly (which she denied) is again not material. It is clear from thetenor and the purpose of the meeting that the threat was at least implicit in what she said. (DrBhamjee alleged that there were also other threats but there is no suggestion that those allegedthreats induced him to act as he did and they are not relevant.) Dr Bhamjee thereupon signedthe acknowledgment of debt, and agreed that portion of the debt could be set off againstmoneys that had been claimed but had not yet been paid, and that the balance would be paid ininstalments.

[29] Again the Court a quo found that Dr Bhamjee was placed under an unconscionable threatthat amounted to duress. Again I disagree. It is quite apparent that Ms Van Zyl believed that DrBhamjee had been cheating the schemes and it was for that reason that she sought therepayment. Bearing in mind the allegations that had been made by the informant (which had notbeen retracted at that stage and which there

2005 (5) SA p349

NUGENT JA

was no apparent reason not to believe), the information that had emerged from the claimsanalysis (which tended to support the allegations), and the absence of any independentcorroboration for Dr Bhamjee's explanations, some of which were themselves improbable, shehad adequate grounds for that belief. There can be no suggestion, in those circumstances, thatMs Van Zyl was overreaching Dr Bhamjee by attempting to extract moneys from him that sheknew were not due. What resulted was no more than a settlement of the parties' respectivecontentions, prompted by legitimate commercial considerations that fell far short of duress.

[30] But what was overlooked by both parties when the action was tried, and even when theappeal was argued in this court, is that the evidence established that the proposal made by DrBhamjee was in any event conditional upon its acceptance by the schemes, which did notoccur, and on those grounds no enforceable obligations came into existence in the first place.Counsel for Medscheme conceded, correctly, that although that was not the basis on which thetrial was conducted, the matter was fully explored in the evidence, and Medscheme'scounterclaim must be dismissed on that ground. But it does not follow that Dr Bhamjee's claimfor payment ought to have succeeded. Nor ought it to have succeeded even if his undertakingswere void on the grounds of duress. Medscheme was not obliged to pay the claims that DrBhamjee had submitted, and that were to be set off against the acknowledged debt. Thosedebts, if they were incurred at all - which was not established by the evidence - were incurredby Dr Bhamjee's patients and not by Medscheme. No foundation having been laid for DrBhamjee's claim for payment, either in the pleadings or the evidence, that claim should properlyhave been dismissed.

[31] The appeal succeeds with costs including the costs of two counsel. The order of the Courta quo is set aside and the following is substituted:


'1. The claims are dismissed with costs.

2. The counterclaim is dismissed with costs.'

Zulman JA, Cameron JA, Cloete JA and Jafta JA concurred.

Appellant's Attorneys: Werksmans Inc, Sandton; Israel Sackstein Matsepe Inc, Bloemfontein.Respondent's Attorneys: Jaffer Attorneys, Pretoria West; Honey Attorneys, Bloemfontein.

CONSOL LTD t/a CONSOL GLASS v TWEE JONGE GEZELLEN (PTY) LTD AND ANOTHER2005 (6) SA 1 (SCA)

2005 (6) SA p1

Citation 2005 (6) SA 1 (SCA)

Case No 483/02

Court Supreme Court of Appeal

Judge Howie P, Brand JA, Cloete JA, Heher JA and Van Heerden AJA

Heard November 13, 2003

Judgment November 28, 2003

Counsel W R E Duminy SC (with him S P Rosenberg) for the appellant.R G Goodman SC for the respondents.



Contract - Interpretation - Particular situations - Distinction between recital and operative part ofcontract - In determining whether matter constitutes recital or operative part of contract, necessaryto consider whether matter, if indeed operative, creating antithesis with other matter in contract, eg,by imposing obligation upon party, while other matter exonerates him from breach of that obligation- Words like 'while' or 'whilst', when serving as introduction signifying no more than 'notwithstandingthat', often indication that matter to which they relate being recital.

Contract - Interpretation - Incorporated terms - Master contract, providing standard terms for furthercontracts between parties - Standard terms thereupon incorporated in further contract - However,incorporated terms to be construed as part of further contract, with reference to circumstancesexisting as at time of conclusion of further contract.

Contract - Interpretation - Specific words and phrases - Duty to manufacture goods according tosupplier's 'standard manufacturing procedures and techniques' - Meaning of 'standard' - Wordcapable, especially when used as noun, of meaning 'measure to which others conform' or 'degreeof excellence for particular purpose', ie, as synonymous with 'yardstick' or 'benchmark' - Dependingon context, and where used as adjective, also capable of meaning 'normal', 'usual' or 'regular' -


Latter meaning applicable in above phrase.

Contract - Interpretation - Rules of interpretation - Contra proferentem rule - Only applicable wheredifficulty experienced in resolving ambiguity.

Contract - Terms of - Exemption clause - Conditional exemption clause - Clause embodyingcontractual undertaking capable also of being precondition for operation of indemnity clause -However, indemnity clause

2005 (6) SA p2

construed as unconditional, if to require performance of undertaking as precondition for indemnitywould undermine scheme of indemnity and give rise to glaring inconsistencies.

Contract - Terms of - Exemption clause - Exclusion of seller's liability under any 'implied warranty ofquality' - Whether clause excluding seller's liability for consequential damage, flowing from latentdefects in goods sold - Such liability imposed by law, and thus jurisprudentially inappropriate todescribe basis of liability as 'implied warranty' - However, seller's liability for latent defects invariablyand ordinarily described as being derived from 'implied warranty' - Thus, parties having intendedalso such liability to be covered by indemnity - Purpose of indemnity to exclude liability not expresslyundertaken, and proper interpretation therefore excluding both tacit term as to quality and termimplied by law.

Contract - Terms of - Implied and tacit terms - Tacit terms - When to be inferred - Officiousbystander test - Content of - Bystander's question to evoke prompt and unanimous assertion ofsuggested term from both contracting parties, failing which term not implied - If difficulty or doubtexisting about what term should be, or how far it extends, not possible to say parties clearlyintended anything at all.

Contract - Terms of - Implied and tacit terms - Tacit terms - Specific instances - Exemption clausein favour of supplier of goods operating extremely harshly on purchaser of defective goods -Application of officious bystander test - Likely that even supplier, if asked by bystander, wouldagree to further term ameliorating effect of exemption clause - However, not possible to say thatsupplier and purchaser would have proposed same further term - No scope for introduction of tacitterm to overcome harsh effect of exemption.

Headnote : Kopnota

In determining whether matter in a contract constitutes a mere recital or, on the other hand, isan operative part of the contract, which gives rise to rights and obligations, it may be necessaryto consider whether that matter, if indeed it were operative, would create an antithesis withother matter in the contract; as, for instance, by imposing a particular obligation upon a party,while the other matter exonerates him from any breach of that obligation. Words such as 'while'or 'whilst', when in context they serve as an introduction signifying no more than'notwithstanding that', are often an indication that the matter to which they relate is merely of anintroductory nature. Examples of provisions in which these considerations have led to thefinding that matter is of a non-operative, introductory nature, are cases where a contractprovides that 'while' a party undertakes to exercise reasonable care in performing a particularobligation, he will not be liable for loss or damage resulting from the negligent performance ofthat obligation. (Paragraphs [12], [13], [14], [15], [16] and [17] at 8G - 10C, paraphrased.)


Where parties enter into a master contract, which contemplates the conclusion of, andestablishes standard terms for, further contracts between them (in casu a supply agreementwhich contemplated sales thereunder from time to time), the standard terms are incorporatedinto those further contracts. The terms so incorporated must thereupon be construed as a partof the further contracts, with reference to the circumstances which prevail at the time of theirconclusion. Thus, where in casu the supply agreement imposed upon the supplier an obligationto manufacture its goods according to its

2005 (6) SA p3

'standard manufacturing procedures and techniques', and several sales were thereafterconcluded between the parties, that obligation was incorporated into the sales, but its contenthad to be determined with reference to what the supplier's standard procedures and techniqueswere at the time of each sale, and not at the time of the formation of the supply agreement. Tohold otherwise would be to place the supplier in the impossible position either of having to applyin perpetuity its standard procedures and techniques, as they were at the time of the formationof the supply agreement, or of having to seek the other party's approval each time it tried toimprove or change them. (Paragraphs [8], [29] and [30] at 7A and 13E - 14A paraphrased.)

The word 'standard' (in the abovementioned phrase 'standard manufacturing procedures andtechniques') is capable, especially when used as a noun, of meaning 'a measure to whichothers conform' or 'a degree of excellence for a particular purpose', ie, as synonymous with 'ayardstick' or 'a benchmark'. However, depending on the context, and also where it is used as anadjective, it is also capable of meaning 'normal', 'usual' or 'regular' (which was the appropriatemeaning in casu). (Paragraph [31] at 14B - F, paraphrased.)

A term in a contract may, in principle, serve the dual roles of (1) embodying the contractualundertaking of a party and of (2) operating as a condition precedent to his right to rely on anindemnity. However, whether that is the case depends on the intention of the parties to thecontract concerned, as it appears from a proper interpretation of the written language used bythem. As a matter of construction it ought to be possible to read in a phrase such as 'providedthat' or 'on the understanding that', as an introduction to the undertaking. A cogent factor,which weighs heavily against the suggestion that an indemnity is conditional upon anundertaking, arises when it appears that to require performance of the undertaking as acondition precedent to reliance on the indemnity would not only undermine the whole schemeand purpose of the indemnity, but also give rise to glaring inconsistencies. (Paragraphs [37],[40], [41] and [42] at 16A - C, 16F - J and 17D, paraphrased.)

The contra proferentem rule of construction only comes into play where difficulty is experiencedin resolving an ambiguity. Where the express provisions of the contract are clear, the rulecannot be invoked. (Paragraph [49] at 18H - I.)

The test for establishing the existence of a tacit term in a contract is the so-called 'bystandertest', according to which the term will be imported if the bystander's question, 'What will happenin such a case?' would have elicited from both contracting parties the reply, in relation to thesuggested term, 'Of course, so and so will happen; we did not trouble to say that; it is too clear.'Over the years our courts have, through refinement, enhanced the practical functionality of the


test. Thus, it has been held that the inference of a tacit term can only be justified if thebystander's question would have evoked a prompt and unanimous assertion of the suggestedterm from both contracting parties: If one of the parties would have sought some clarification orsome time to consider before giving an answer, the term does not pass the bystander test. Afurther refinement is that if there is difficulty or doubt as to what the term should be, or how far itshould be taken, it is obviously difficult to say that the parties clearly intended anything at all.Thus, where in casu it appeared that an exemption clause in favour of the supplier of goodsoperated extremely harshly on the purchaser of defective goods, so that it was likely that eventhe supplier, if asked by a bystander, would have agreed to a further term ameliorating itseffect, but it could not

2005 (6) SA p4

be said that the supplier and the purchaser would have proposed the same further term, therewas no scope for the introduction to their contract of a tacit term which might overcome theharsh effect of the exemption. (Paragraphs [50]-[51] at 18I/J - 20A, paraphrased.)

It is a principle of our law of contract that merchants who sell goods of their manufacture, or inrelation to which they publicly profess to have attributes of skill and expert knowledge, are liablefor consequential damage caused to the purchaser by reason of a latent defect in the goods.The seller's liability for latent defects is imposed by law, and does not depend on anycontractual consensus between the parties. From a jurisprudential point of view, therefore, itmay be inappropriate to describe the basis of this liability as an implied warranty. Nonetheless,a seller's liability for latent defects has invariably been described as being derived from animplied warranty. Indeed, in ordinary legal parlance one of the best-known examples of what ismeant by an 'implied term' is the seller's 'implied warranty against latent defects' in contracts ofsale. Thus, where the terms of an indemnity clause exclude liability for any 'implied warranty ofquality', it must be accepted that the parties intended the exclusion to pertain to this mostcommonly known 'implied warranty' as well. The purpose of such a clause is to exclude liabilitynot expressly undertaken, and its proper interpretation therefore excludes both a tacit term asto quality as well as a term implied by law. (Paragraphs [56]-[59] at 20G - 21G, paraphrased.)

The decision in Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd and Another 2002(6) SA 256 (C) ([2002] 1 All SA 517) reversed in part and confirmed in part.

Cases Considered

Annotations

Reported cases

Alfred McAlpine and Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A):dicta at 531E - G, 532C - G and 533A - B applied

Botha v Coopers & Lybrand 2002 (5) SA 347 (SCA): dictum at 359G - J applied

Ciba-Geigy (Pty) Ltd v Lushof Farms (Pty) Ltd en 'n Ander 2002 (2) SA 447 (SCA) ([2002] 2 AllSA 525): dictum at 465G - 466H (SA) applied


Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd and Another 2002 (6) SA 256 (C)([2002] 1 All SA 517): reversed in part and confirmed in part on appeal

Desai and Others v Greyridge Investments (Pty) Ltd 1974 (1) SA 509 (A): dictum at 522H -523A applied

Elgin Brown & Hamer (Pty) Ltd v Industrial Machinery Suppliers (Pty) Ltd 1993 (3) SA 424 (A):distinguished

First National Bank of SA Ltd v Rosenblum and Another 2001 (4) SA 189 (SCA) ([2001] 4 AllSA 355): distinguished

Greyling v Fick 1969 (3) SA 579 (T): dictum at 580G - 581B applied

Hackett v G & G Radio and Refrigeration Corporation 1949 (3) SA 664 (A): dictum at 667applied

Kroonstad Westelike Boere Ko-operatiewe Vereniging Bpk v Botha and Another 1964 (3) SA561 (A): dictum at 571G - 572A applied

Minister of Education and Culture (House of Delegates) v Azel and Another 1995 (1) SA 30 (A):distinguished

Phame v Paizes 1973 (3) SA 397 (A): referred to

Reigate v Union Manufacturing Co (Ramsbottom) Ltd and Elton Cap Dyeing Co Ltd [1918] 1 KB592 (CA) (118 LT 479): dictum at 605 (KB) (483 (LT)) applied

Sentrachem Ltd v Prinsloo 1997 (2) SA 1 (A): dictum at 17H - 18D applied

2005 (6) SA p5

Techni-Pak Sales (Pty) Ltd v Hall 1968 (3) SA 231 (W): dictum at 236H - 237A applied

Union National South British Insurance Co Ltd v Padayachee and Another 1985 (1) SA 551 (A):compared and applied

Van der Westhuizen v Arnold 2002 (6) SA 453 (SCA) ([2002 4 All SA 331): dictum at 470A - E(SA) applied

Wilkens NO v Voges 1994 (3) SA 130 (A): dictum at 137A - D applied.

Case Information

Appeal and cross-appeal against a judgment of the Cape Provincial Division (Blignault J). Thefacts appear from the judgment of Brand JA.

W R E Duminy SC (with him S P Rosenberg) for the appellant.

R G Goodman SC for the respondents.


Cur adv vult.

Postea (November 28).

Judgment

Brand JA:

[1] The issues in this matter turn on the interpretation of a written agreement between theparties. The appellant (Consol) is a manufacturer of glass products, including wine bottles. Thefirst respondent (Twee Jonge Gezellen) produces wine and sparkling wine at its estate nearTulbagh in the Western Cape. The second respondent, Mr N C Krone Junior (Krone), is ashareholder in and director of Twee Jonge Gezellen.

[2] Since 1991, Twee Jonge Gezellen has from time to time purchased bottles for its wineproduction from Consol. These purchases were governed by the terms of a general supplyagreement ('the supply agreement'). The terms of the supply agreement were contained inConsol's standard credit application form which was signed by Krone on behalf of Twee JongeGezellen in August 1991. At the same time Krone bound himself as surety and co-principaldebtor to Consol for the payment of all amounts owing to it by Twee Jonge Gezellen.

[3] During 1999 Consol instituted action against Twee Jonge Gezellen and Krone in the CapeHigh Court. Its claim was for the purchase price of wine bottles sold and delivered to TweeJonge Gezellen during 1998. Apart from a relatively minor discrepancy in relation to the amountthereof, Consol's claim was not disputed. The issues which arose for determination relate toTwee Jonge Gezellen's claim in reconvention.

[4] As will shortly be described in more detail, an important part of Consol's defence to the claimin reconvention was founded on the exemption and limitation provisions contained in theso-called 'claims clause' of the supply agreement. At the commencement of the trial 10 issueswere identified by agreement between the parties for separate and prior adjudication, all ofwhich arose from the terms of the claims clause. The remaining issues stood over for laterdetermination. Immediately prior to judgment one of the 10 issues was, again by agreementbetween the parties, excluded from the preliminary adjudication. In a judgment since reportedas Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty)

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Ltd and Another 2002 (6) SA 256 (C) ([2002] 1 All SA 517), the Court a quo (Blignault J) foundin favour of Twee Jonge Gezellen on six of the remaining nine issues. Consol's appeal isdirected against these findings. The other three issues were decided against Twee JongeGezellen. The cross-appeal by the latter is against the findings on two of these issues. Both theappeal and the cross-appeal are with the leave of the Court a quo.

[5] Twee Jonge Gezellen's claim in reconvention, which eventually gave rise to the preliminaryissues arose from the sale to it, during 1996 and in terms of the supply agreement, of 29 720sparkling wine bottles. The bottles were used by Twee Jonge Gezellen for the production of its


1994 vintage Krone Borealis sparkling wine, which was produced in accordance with a methodknown as cap classique or méthode champenoise. This method is characterised by a secondfermentation of yeast in the bottled wine after the primary fermentation in tanks.

[6] It is common cause that, unbeknown to Twee Jonge Gezellen, the inside surface of thesebottles had been treated by Consol, during the manufacturing process, with a gas called Freon134A. The purpose of this treatment was to combat a phenomenon known as 'bloom' whichsometimes occurs when bottles are placed in storage for periods in excess of three months. Itappears as a haze on the inside of the bottle, making it unattractive to Consol's customers.

[7] When the bottles were used for their intended purpose Twee Jonge Gezellen experiencedproblems during the second fermentation process. As a consequence of these problems, soTwee Jonge Gezellen alleged in its pleadings, it lost a large portion of its 1994 vintage KroneBorealis and sustained additional losses listed under various heads. According to the claim inreconvention the damages suffered as a result of these losses added up to more than R10m inall. Twee Jonge Gezellen's case is, in essence, that the problems which were experienced inthe second fermentation process of its 1994 vintage sparkling wine, and its consequent losses,must be attributed to Consol's use of Freon 134A during the manufacturing process. The claimis based on two alternative grounds. The main ground is Consol's alleged failure to comply witha provision of the claims clause that all bottles supplied 'are manufactured according toConsol's standard manufacturing procedures and techniques, utilising standard materials'. I willpresently return to this provision. As an alternative ground Twee Jonge Gezellen relies on theallegation that Consol was the manufacturer or merchant seller of the bottles concerned.

[8] As indicated, Consol raised a number of defences to the claim in reconvention that werebased on the provisions of the 'claims clause' in the supply agreement. Consequently, theprovisions of this clause form the focal point of the appeal. It is therefore necessary to set theseprovisions out in some detail. The clause reads as follows:

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'Claims:

All goods supplied are manufactured according to the company's standard manufacturing procedures andtechniques, utilising standard raw materials.

No claims shall be recognised by the company unless lodged within 21 days after receipt of goods. If goods aredamaged at the time of delivery the customer shall advise the customer's nearest sales office within twenty-fourhours of delivery.

No guarantee or warranty regarding supply or quality is given or implied unless specifically stated in writing by anauthorised company representative. Where any written warranty is given, the company's liability will be limited toreplacement of defective goods on proven non-compliance with the warranty or accepted specification. Under nocircumstances, with or without written guarantee or warranty, shall the company be liable for any consequentialloss or damage howsoever arising.

The customer shall have no claim for short delivery unless the quantity short delivered is endorsed on all copiesof a delivery note presented for signature. The company shall be the sole adjudicator in respect of all claims andany decision undertaken by the company in this regard shall be binding on the customer.'


[9] The formulation of the 10 preliminary issues arising from Consol's reliance on theseprovisions that were identified for separate adjudication is set out below. The paraphrasedanswer of the Court a quo on each issue which forms the subject-matter of the appeal and thecross-appeal, is indicated in parentheses:

'1. Whether in terms of the supply agreement, [Consol] was obliged to manufacture all bottles delivered to[Twee Jonge Gezellen] according to Consol's standard manufacturing procedures and techniques,utilising standard raw materials.(Yes, Consol did have such obligations.)

2. Whether the bottles [in question] were manufactured by [Consol] according to its standard manufacturingprocedures and techniques, utilising standard raw materials, in particular:

2.1 Whether at the time those bottles were made, internal treatment of cap classique bottles with Freon134A gas was part of the [Consol's] standard manufacturing procedures and techniques.(Yes, itwas.)

2.2 Whether when manufacturing those bottles [Consol] applied Freon 134A gas in accordance with itsstandard procedures or techniques.(By agreement between the parties, this issue was excludedfrom preliminary adjudication.)

2.3 Whether at the time the bottles were made, Freon 134A gas was a standard raw material for themanufacture of the bottles in question.(Yes, it was.)

3. If such bottles were not manufactured by [Consol] according to its standard manufacturing proceduresand techniques, utilising standard raw materials, whether [Consol] was entitled to rely on the furtherprovisions of the clause of the supply agreement headed 'Claims'.(No, in this event Consol would not beentitled to rely on the further provisions of the claims clause.)

4. Whether the provision of the supply agreement that all goods supplied were manufactured according to[Consol's] standard manufacturing procedures and techniques, utilising standard raw materials, is awarranty as contemplated in the aforesaid clause.(No, it is not such a warranty.)

5. Whether [Consol's] liability for the breach alleged by [Twee Jonge Gezellen]

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was limited to the replacement of bottles proven to have been defective. (No, Consol's liability is not solimited.)

6. Whether [Consol] was exempted from liability in the event of [Twee Jonge Gezellen] not having lodged itsclaim within 21 days of delivery of the bottles in question, or whether it was a tacit term of the supplyagreement that [Consol] would only be entitled to rely on the provision that no claim would be recognisedunless lodged within 21 days after receipt of the goods if the circumstances giving rise to the claim werereasonably apparent to [Twee Jonge Gezellen] within 21 days of receipt of the allegedly affectedbottles.(No, Consol was not exempted, because there was such a tacit term.)

7. Whether [Consol] was exempted from liability for [Twee Jonge Gezellen's] claim set out in para 3 of theclaim in reconvention [which rests on the basis that Consol was a manufacturer or merchant seller of winebottles] unless an authorised representative of [Consol] specifically guaranteed or warranted the relevantquality of the bottles in writing.(No, such a written guarantee or warranty was not a prerequisite forConsol's liability on this basis.)

8. Whether the damages claimed by [Twee Jonge Gezellen] constituted consequential loss or damage ascontemplated in the aforesaid clause of the supply agreement. (Yes, those claims are for consequential


loss.)'

[10] Consol's appeal is directed at the decisions of the Court a quo in respect of the first and thethird to the seventh preliminary issues. The cross-appeal is directed at the findings in relation toparts one and three of the second preliminary issue. As regards the eighth preliminary issue,the finding by the Court a quo to the effect that the damages claimed by Twee Jonge Gezellenwere consequential in nature, is not appealed against by the latter.

[11] I now proceed to deal with the preliminary issues presented for adjudication on appeal intheir numerical sequence.

The first preliminary issue

[12] For ease of reference, I will repeat the formulation of the issue. It is:

'Whether, in terms of the supply agreement, [Consol] was obliged to manufacture all bottles delivered to [TweeJonge Gezellen] according to [Consol's] standard manufacturing procedures and techniques utilising standardraw materials.'

The issue arises from the introductory sentence of the claims clause which provides that '(a)llgoods supplied are manufactured according to the company's standard manufacturingprocedures and techniques, utilising standard raw materials'. Twee Jonge Gezellen contendsthat this sentence imposed an obligation on Consol. Consol denies that this is so. The contraryposition for which it contends is that the sentence created no rights or obligations but that it ismerely a recital in the nature of a preamble or an introduction to the operative provisions of theclaims clause.

[13] Provisions are sometimes inserted in written contracts by means of recitals or preambleswhich create no obligations for any of the contracting parties. The purpose of such provisionsis, for example, to serve as an introduction to the rest of the contract or to record goodintentions or

2005 (6) SA p9

BRAND JA

pronouncements of good faith. The question whether a provision constitutes a mere recital, onthe one hand, or a contractual obligation, on the other, is dependent upon the intention of theparties. Such intention is to be found in the language of the stipulation itself, read in its propercontext and construed in accordance with the recognised tenets of construction. Consequently,an answer can rarely be transposed from one case to another unless their facts are almostidentical. Nevertheless, considerations underlying the decisions in comparable cases mayserve as useful guidelines.

[14] In First National Bank of SA Ltd v Rosenblum and Another 2001 (4) SA 189 (SCA) ([2001]4 All SA 355) the bank sought to protect itself against liability for damages by way of anindemnity clause in its standard contract. The clause (quoted in para [3] at 194C - D (SA))provided, inter alia, that

'(t)he bank hereby notifies its customers that while it will exercise every reasonable care, it is not liable for any


loss or damage caused to any article lodged with it for safe custody . . . whether the loss or damage is due to thebank's negligence or not'.

In Elgin Brown & Hamer (Pty) Ltd v Industrial Machinery Suppliers (Pty) Ltd 1993 (3) SA 424(A) the relevant part of the clause concerned (quoted at 427D - E) reads as follows:

'Whilst reasonable care will be taken to ensure that first class materials and workmanship will be used in theexecution of the contract IMS will not be liable for any loss or damages whatsoever, . . . due to . . . defective,faulty or negligent workmanship or material. . . .'

[15] In both cases this Court held that the provisions introduced by 'while' and 'whilst' in therespective clauses concerned, constituted no more than a recital which imposed no contractualobligation on the promisor. Broadly stated, both decisions appear to have been influenced bytwo central considerations. The first was that the provisions in issue were ushered in by'whilst/while', which is indicative of a mere introduction, signifying no more than 'notwithstandingthat'. The second consideration was that if the stipulations concerned were interpreted ascreating contractual obligations, such interpretation would result in a clear antithesis betweenthe introductory words and the operative parts of the indemnities (see Elgin Brown & Hamer(Pty) Ltd at 428C - 429B/D and First National Bank of SA Ltd at 198G - J (SA)).

[16] Based on the latter consideration, it was argued on behalf of Consol that, if the firstsentence of the claims clause is to be construed as imposing contractual obligations it wouldlikewise create an antithesis with the operative part of the indemnity clause. More particularly,this argument relied on the specific exclusion in the remainder of the clause of any 'guaranteeor warranty regarding quality'. I do not agree with this approach. The antithesis contemplated inthe two decisions of this Court would require that Consol is placed under a particular obligationbut, at the same time, exonerated from any breach of that obligation. The first sentence of theclaims clause could not produce this result. Even if the first sentence is understood to imposean obligation on Consol to ensure that its standard manufacturing procedures and techniquesare applied

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BRAND JA

and that it utilises standard raw materials, it would not create any warranty of quality withregard to the products themselves. If the use of standard procedures and materials resulted ina product of inferior quality that is what customers would have to accept. If customers wanted awarranty as to quality they would have to obtain one in writing as contemplated in the laterprovisions of the clause.

[17] With regard to the particular wording of the first sentence, it gives no indication, unlikewords such as 'while' or 'whilst' or 'notwithstanding', that it is of an introductory nature. Thesentence contains a positive statement of fact relating to matters which could, in their ordinarycontext, be expected to form the subject-matter of a contractual obligation undertaken byConsol.

[18] Significantly, in my view, other clauses in the same document are, in contradistinction tothe first sentence of the clause, indeed prefaced by 'while' or 'whilst'. So, for example, the


clause under the heading 'packing' begins as follows:

'Whilst the company will have regard under this heading, to any preference by the customer, the method ofpacking shall be determined by the company. . . . '

And under the heading 'Force Majeure' the document provides that:

'While the company will use every endeavour to execute orders in accordance with the terms and conditionsthereof, it will not be responsible for any delays or non-deliveries due to . . . circumstances over which it has nodirect control.'

In contrast with the first sentence of the claims clause, it is in my view quite clear from theordinary language used in these provisions that they were not intended to impose anycontractual obligation on Consol but to serve as a mere introduction to the operative parts thatfollow them. Though mindful of the fact that I am not dealing with the interpretation of a statute,it appears to be a fair inference that a deliberate change of expression in a carefully prepareddocument such as this was intended to indicate some change of intention on the part of thestipulator, ie Consol.

[19] In the final analysis one wonders why, if the provision under consideration was not intendedto impose any contractual obligation, such a recital would be necessary at all. What does itcontribute? It serves no introductory function and a customer could hardly derive any comfortfrom a 'promise' that Consol will apply its standard manufacturing procedures and utilisestandard raw materials if Consol is not bound at all by that promise. Consequently I find myselfin agreement with the decision of the Court a quo that the first sentence in the claims clausedoes impose a contractual obligation on Consol, which means that the appeal against thisdecision must fail.

The second preliminary issue

[20] The second preliminary issue raises two questions. Firstly, whether internal treatment ofcap classique bottles with Freon 134A gas was part of Consol's 'standard manufacturingprocedures and techniques'; and secondly, whether Freon 134A could be described as one ofConsol's 'standard raw materials' for the manufacture of these bottles as contemplated by thefirst sentence of the claims clause. The Court a quo decided

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both questions in Consol's favour. Twee Jonge Gezellen contends that these decisions werenot supported by the facts. A consideration of this contention consequently requires asomewhat more detailed analysis of the evidence.

[21] As indicated, Freon 134A was used for the prevention of a phenomenon called bloom.Bloom has always been a problem for Consol, particularly at its Bellville factory. The reasonwhy bloom formation is more prevalent in the Western Cape than in Gauteng, where Consol'sother three factories are located, has to do with the difference in climate between the two areas.About 1993, bloom took on what Consol regarded as alarming proportions. ConsequentlyConsol's technical experts were enjoined to do something about the problem. One of these


technical experts was Consol's laboratory services manager, Mr J Polasek who gave evidenceon behalf of Consol at the trial. At that stage, it had been known in the industry for quite sometime that formation of bloom could be prevented by neutralising the alkalinity of the insidesurface of newly manufactured glass bottles. The method for achieving this result, which hadalso been known for over thirty years, was to treat the inside of the bottles with afluorine-containing gas compound, called Freon. Amongst the glass manufacturers applyingthis method was a company in the United States of America, Owens Brockway. This companyis one of the two largest manufacturers of glass containers in the world. It also holds 19% ofthe shares in Consol. Because of this relationship, Owens Brockway and Consol have aso-called 'technical agreement', in pursuance whereof Owens Brockway renders technicalassistance to Consol on a regular basis.

[22] The Freon gas compound utilised by Owens Brockway for the internal treatment of glassbottles has always been Freon 152A. In 1993, when Consol decided that something had to bedone about the prevention of bloom Freon 152A was therefore the known remedy. Consol'sproblem was, however, that Freon 152A was virtually unobtainable in this country incommercially viable quantities. A solution to this problem was suggested in a memorandumprepared by one of Consol's technical personnel in February 1994 after a visit to the technicalcentre of Owens Brockway in Toledo, Ohio. According to the memorandum it had beenexperimentally established in the laboratories of Owens Brockway that Freon 152A could bereplaced in the internal treatment process with another fluorine-containing gas called Freon134A. Although Owens Brockway itself consistently used Freon 152A and had never substitutedFreon 134A for it, it is claimed in the memorandum that 'Freon 134A is a direct equivalent ofFreon 152A and is used to replace the CFC refrigerant in the automotive and industrial airconditioning industry'.

[23] As far as Consol knew Freon 134A had not been used by anyone else in the world for theinternal treatment of glass bottles. Because of its application in the refrigeration industry it was,however, more freely available than Freon 152A. Solely for reasons of availability, Consoltherefore decided to integrate the internal treatment system developed

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by Owens Brockway into the production lines of its Bellville factory but to adapt that system bysubstituting Freon 134A for Freon 152A.

[24] Treatment with Freon 134A was introduced in Consol's Bellville factory in about March1994. The cap classique bottles that eventually gave rise to Twee Jonge Gezellen's claim fordamages were manufactured in that factory during February 1996. By that time the system had,therefore, been in operation for almost two years. In the meantime Consol had installed asystem of internal treatment with Freon 134A into all but one of its other factories. Theexception was the factory at Clayville in Gauteng which manufactured beer bottles only. Sincebloom formation is associated with storage for periods in excess of three months and theturnover period of beer bottles is much shorter, it was unnecessary to treat these bottles for theprevention of bloom.


[25] Because internal treatment with Freon 134A, as opposed to Freon 152A, had not beenutilised at a production level before, the system at the Bellville factory was reviewed on aregular basis. Polasek was responsible for these reviews. The main purpose of the reviewswas to assess how successful the system had been in achieving the prevention of bloom. Fromthe reports filed by Polasek on his reviews of the Bellville system at regular intervals, it appearsthat Consol never really succeeded in applying Freon 134A to the inside of all manufacturedbottles on a consistent basis. So, for example, Polasek's report of 30 November 1994 stated:

'It is clear from recent observations at the factory and analysis that the bloom protection through Freon treatmentis lacking.'

And:

'The suspicion falls clearly on the choice of Freon as the major deviation from the [Owens Brockway] processmanual.'

[26] The technical difficulties giving rise to the problem of inconsistent treatment wereassociated with the way in which the Freon gas was physically injected into each bottle. Whatcontributed to the problem was the fact that Freon is an invisible gas. Operators on theproduction line therefore had no way of knowing whether every bottle actually received itsprescribed dose of the gas or was over- or undertreated. With Freon 152A this quality was,however, of lesser consequence than with Freon 134A. The reason is that Freon 152A isconsiderably more inflammable than Freon 134A. Because Freon 152A has a relatively lowpoint of combustion it creates an unmistakable blue flash when injected into the bottle. As aconsequence, the success or otherwise of a particular injection can be determined by operatorsthrough visual inspection. Freon 134A, on the other hand, does not create such a flash. On theproduction line this difference is of vital importance.

[27] The last available report by Polasek relates to a review which he did in July 1997. In thisreport he summarised the problems encountered with Freon 134A treatment as follows:

'There is a concern that internal treatment (IT; Freon treatment) of ware is inadequate to provide long-termprotection against bloom. . . .

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There is a perspective that IT application [with Freon 134A] is synonymous with bloom protection. This is a veryhopeful view. . . . The technology is thirty years old and our experience is three, with systems that have a largeelement of our own design and practice. . . . IT has never really worked at Bellville at all since its inception. Thereis in fact ample evidence that ware has been treated properly but not always consistently.

. . .

The overall finding is that IT application is still erratic, not much changed from what has been seen before andpointed out in earlier reviews.'

As the primary solution to the problem, Polasek recommended a 'switch to Freon 152A'.

[28] Towards the end of 1997, Freon 152A became more freely available in this country. In theresult, Polasek's recommendation that Freon 134A should be replaced with 152A in the internal


treatment system was ultimately implemented by Consol. In cross-examination Polasekconceded that Consol's use of Freon 134A never reached the stage where the results achievedwere considered to be satisfactory. He also conceded that Consol's use of Freon 134A was'part of a learning curve' and that this learning curve continued for the whole period duringwhich this gas was used, until the time when usage thereof was discontinued towards the endof 1997.

[29] Against this background I now turn to the questions raised by the issue underconsideration. The answer to the questions relating to both procedure and raw materialdepends, firstly, on whether the relevant 'standard' refers to the situation in 1991, when thesupply agreement was concluded, or to 1996 when the bottles were sold. Twee JongeGezellen's contention is that the enquiry is to be directed at Consol's 'standards' as they existedin 1991. Since it is common cause that in 1991 Consol used no Freon 134A at all it is apparentthat if this contention is held to be correct, the issue must be decided in Twee Jonge Gezellen'sfavour. However, I find myself in agreement with the finding by the Court a quo (at 273A - E)that this result could not have been intended by the parties. It must be borne in mind that thesupply agreement did not, in itself, constitute an agreement of sale. It contemplated that therewould be sales from time to time and provided that the standard terms set out in the supplyagreement would then be incorporated into these future sales. Accordingly, when the contractof sale pertaining to the bottles concerned was concluded in 1996, these predeterminedprovisions were embodied in the contract. Nevertheless, these provisions can only be construedas part of an agreement that came into existence in 1996.

[30] If Twee Jonge Gezellen's contention were to be upheld it would render Consol's positionimpossible. Its options would be either to apply in perpetuity its standard procedures and use itsstandard raw materials, as they were in 1991, or it would have to seek and obtain the approvalof Twee Jonge Gezellen and, presumably, of all its other customers, each time it tried toimprove or change its standard procedures or raw materials. I do not believe that the partiescould have intended their agreement to have these impractical results. The questions relating to

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Consol's standard procedures and to standard raw materials should therefore be determinedwith reference to the situation which pertained in 1996.

[31] I deal first with the question relating to standard procedures. Twee Jonge Gezellen's onecontention in this regard was that since, on Consol's own showing, it was never really satisfiedwith the results obtained with its Freon 134A treatment, it cannot be said that Consol everaccepted this treatment as its 'standard procedure'. This contention obviously involves 'standardprocedures' as conveying some criterion of quality. It therefore appears to be based on themisconception that the term 'standard' is used in the sense of a 'measure to which othersconform', or 'a degree of excellence for a particular purpose', ie, as synonymous with 'ayardstick' or a 'benchmark'. There is no doubt that the term 'standard' can have this meaning,particularly when used as a noun (see eg The Concise Oxford English Dictionary (2002)).However, I find myself in agreement with the Court a quo (at 274A - F (SA)) that this meaning


cannot sensibly be reconciled with the rest of the provision concerned. Read in the context ofthe provision as a whole, where the term 'standard' is used as an adjective and in conjunctionwith a reference to 'the company', a more appropriate meaning would appear to be the onegiven in eg Collins' Dictionary of the English Language (1979), namely to denote what is'normal', 'usual' or 'regular'. According to this interpretation, the first sentence of the claimsclause imposes no greater burden on Consol than to manufacture the bottles sold inaccordance with its normal and usual procedure. Another reason why the interpretationcontended for by Twee Jonge Gezellen is untenable, is that it would bring the undertakingcontained in the first sentence into conflict with the express provision appearing later in theclaims clause, that 'no guarantee or warranty regarding quality is given or implied'.

[32] Twee Jonge Gezellen's further contention was that, even if 'standard' means 'normal' or'usual', Consol never reached the stage where it accepted Freon 134A treatment as its 'normal'or 'usual' procedure. In support of this contention, reference was made to the evidence fromwhich it appears that throughout the entire period, during which Freon 134A was used from1994 to 1997, the procedure was subject to constant review and change, and that the reasonfor these changes was because the treatment produced inconsistent results. In the end, soTwee Jonge Gezellen argued, Polasek conceded that, right until the time when Consol wasconstrained to give up the practice, it was still involved in an experimental process or 'learningcurve'. I cannot agree with this argument. In my view it is based on a non sequitur. Neither thefact that the procedure required constant amendment and change because the results wereinconsistent or otherwise unsatisfactory, nor the fact that Consol was eventually driven to giveup the procedure, justifies the conclusion that it was never adopted by Consol as its standardor normal procedure. On the contrary, by the time the offending bottles were manufactured in1996, Freon 134A had been used by Consol for a period of about two years in all its factories,bar one, as part of its normal

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and regular manufacturing process. The only factory where it was not used was where bloomwas not a problem. The procedure was consistent, though the results were not. Moreover, untilthe end of 1997, Freon 134A was the only gas used by Consol as a source of fluorine. In thecircumstances, there was no other treatment to combat bloom which presented itself as a'standard' procedure. I therefore agree with the finding by the Court a quo that, when the bottleswere manufactured in February 1996, treatment with Freon 134A was part of Consol'sstandard procedure, albeit that the results obtained were not uniform or satisfactory.

[33] This brings me to the next question, namely whether at the time that the bottles weremade, Freon 134A gas met the requirements of a 'standard raw material'. Twee JongeGezellen's submission in this regard was that, since the word 'company's' in the claims clausequalifies 'standard procedure' but not 'standard raw materials', it means that the latter must beof a more general standard than merely Consol's own standard. In view of the evidence that noone except Consol used Freon 134A, so Twee Jonge Gezellen argued, this material must failthe 'standard' test. Though the argument seems to derive support from a literal interpretation ofthe provision concerned, the problem which arises with such a literal interpretation is that it


would render the meaning of the provision so vague that it would become virtually meaningless.So, for example, a literal interpretation immediately invites the question whether therequirement is that Consol can only use raw material which is standard in the rest of the world.If so, Consol would be in breach if it used any locally available materials differing from thoseused in other parts of the world. Or would it suffice if the raw material used is standard in SouthAfrica? If so, would Consol then be entitled, for example, to use lime derived from sea shells inthe Western Cape (as it did in its Bellville factory) despite the fact that this source of lime wasnot used in the rest of the country? In the circumstances I am satisfied that the provision cannotbear its literal meaning.

[34] In the context of this case I find myself in agreement with the view expressed by the Courta quo (at 276A - C) that, if the use of Freon 134A qualifies as a standard procedure, then Freon134A, which constitutes an essential part of that same procedure, must necessarily qualify as astandard raw material. In the present context, the expression 'standard raw material' thereforedoes not create any additional requirement.

[35] In the circumstances, the second issue, in both its constituent parts, was in my view rightlydecided in favour of Consol and the cross-appeal cannot succeed.

The third preliminary issue

[36] It will be remembered that the third issue was formulated as follows:

'If such bottles were not manufactured by [Consol] according to its standard manufacturing procedures andtechniques, utilising standard raw materials, whether [Consol] is entitled to rely on the further provisions of theclause of the supply agreement headed ''Claims''.'

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[37] What will also be recalled is that Consol's undertaking to which reference is made,performs a dual function in Twee Jonge Gezellen's case. In the first place, the undertakingserves as the foundation on which its main claim for damages is based. The second role whichTwee Jonge Gezellen seeks to attribute to the undertaking is that of a condition precedent forConsol's right to rely on the indemnities contained in the remainder of the claims clause. Thereis no doubt that the undertaking can, in principle, perform the first function. It is the second rolewhich gave rise to the third issue.

[38] Perhaps as a result of the way in which the matter was argued before the Court a quo, thelearned Judge (at 279D - G) dealt with this issue essentially on the basis that it follows theanswer to the first issue as a matter of course. In the event, his answer in favour of Twee JongeGezellen on the first issue automatically attracted a similar response on the third.

[39] In this Court Consol's contention was that the first and third issues are not necessarilyinterlinked. In principle, I agree with this contention. The fact that the first sentence of theclaims clause is understood to be a contractual obligation, as opposed to a mere introductoryrecital, does not inevitably give rise to the inference that it also constitutes a precondition forConsol's reliance on the indemnities in the rest of the clause. There appears to be no reason in


principle why the two concepts cannot operate independently of each other.

[40] Twee Jonge Gezellen found authority for the existence of a preconditional interlink betweenthe two concepts in Minister of Education and Culture (House of Delegates) v Azel and Another1995 (1) SA 30 (A). In that matter this Court (at 33G - H) found the undertaking by the Ministercontained in the clause concerned (which is quoted at 33C - E) to constitute a precondition forhis reliance on the indemnities embodied in the rest of the clause. It is apparent, however, thatthe decision in that case was based entirely on the wording of the contractual provisionsinvolved. This is hardly surprising. The answer to a question such as this is dependent on theintention of the parties to the contract concerned, as it appears from a proper interpretation ofthe written language used by them. That, in my view, is precisely where the present case differsfrom Azel. Unlike the clause concerned in Azel, the clause in casu gives no indication, either inits language or in the way in which it is formulated, of a link between the undertaking and theindemnities. Purely as a matter of construction, there appears to be no room for the reading inof a phrase such as 'provided that' or 'on the understanding that', as an introduction to theundertaking in the first sentence of the clause (cf Azel at 33G - H).

[41] However, what weighs even more heavily against the interpretation contended for by TweeJonge Gezellen is that it will give rise to anomalous situations which could not, in my view, havebeen intended by the parties. The thrust of the indemnities which follow upon the undertaking isobviously to limit Consol's potential liability for claims by

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purchasers of its glassware. Broadly stated, they do so in three ways: Firstly, by imposing atime limit of 21 days after receipt of the goods within which claims must be made, failing whichConsol would not be liable. Secondly, by differentiating between the ordinary or normal situationwhere the purchaser buys standard bottles from the run of the production process and specialcases where a written warranty of quality is given. In the ordinary or normal situation, Consolexplicitly excludes any guarantee, express or implied, regarding quality. It can therefore not beheld liable for any deficiencies. In those cases where an express warranty of quality is given,liability is limited to replacement of the defective goods. The third way in which Consol seeks tolimit its liability is by providing that Consol shall not, under any circumstances, with or without awritten guarantee or warranty, be liable for any consequential loss or damage.

[42] If the undertaking in the first sentence is to be construed as a precondition for Consol'sreliance on these indemnities, it will not only undermine the whole scheme and purpose of theclause, but it will result in glaring inconsistencies. So, for example, if Consol is in breach of awritten guarantee, its liability will be limited to replacement of the goods. If, on the other hand, itfailed to comply with its undertaking in the first sentence, it will be exposed to liability forconsequential damages. Moreover, if the purchaser relies on breach of a written guarantee, butcan prove that at the same time Consol had failed to follow its standard procedures in themanufacture of the goods, Consol would lose all the protection that it derives from theindemnity clause. In this hypothetical case it would make no difference that Consol's deviationfrom its standard procedure had nothing to do with its non-compliance with the written


guarantee. Nor would it matter that there was no causal link between Consol's non-compliancewith its undertaking and the damages claimed.

[43] Contrary to the finding by the Court a quo, I am therefore of the view that the third issueshould have been decided in favour of Consol, which means that, on this issue the appeal mustsucceed.

The fourth and fifth preliminary issues

[44] For reasons that will soon be apparent, I find it convenient to deal with the fourth and fifthissues as one. They were formulated as follows:

'4. Whether the provisions of the supply agreement that all goods supplied are manufactured according to[Consol's] standard manufacturing procedures and techniques, utilising standard raw materials, is a ''warranty''as contemplated by the [claims] clause.

5. Whether [Consol's] liability for breach alleged by [Twee Jonge Gezellen] is limited to the replacement of bottlesproven to have been defective.'

Both these issues arise from the provision in the claims clause that:

'Where any written warranty is given, the company's liability will be limited to replacement of defective goods onproven non-compliance with the warranty. . . . '

[45] With reference to this provision, Consol argues that, since the words'any written warranty'are of wide import, they include the

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obligation imposed upon it by the first sentence of the claims clause. I do not agree with thisargument. The stipulation relied upon is preceded by the provision that:

'No guarantee or warranty regarding . . . quality is given or implied unless specifically stated in writing by anauthorised company representative.'

[46] Read in the context of the latter provision, it is apparent, in my view, that the provisionrelied upon by Consol does not refer to the undertaking in the first sentence of the claimsclause but to a 'warranty regarding quality' specifically given 'in writing by an authorisedcompany representative'. Since, apart from anything else, the undertaking in the first sentencedoes not constitute a warranty of quality (see para [16] above), it is clear that the fourth issueshould be decided in favour of Twee Jonge Gezellen. Since the determination of the fifth issueis dictated by the conclusion reached on the fourth issue, the decision of the Court a quo onboth issues should, in my view, be confirmed.

The sixth preliminary issue

[47] The sixth preliminary issue is:

'Whether [Consol] was exempted from liability in the event of [Twee Jonge Gezellen] not having lodged its claimwithin 21 days of delivery of the bottles in question, or whether it was a tacit term of the supply contract that[Consol] would only be entitled to rely on the provision that no claim would be recognised unless lodged within 21


days after receipt of the goods if the circumstances giving rise to the claim were reasonably apparent to [TweeJonge Gezellen] within 21 days of receipt of the allegedly affected bottles.'

[48] The issue arises from Consol's contention that it is exempted from liability because TweeJonge Gezellen had failed to lodge its claim within 21 days of delivery of the bottles concerned.It is common cause that the defects relied upon by Twee Jonge Gezellen would not have beenreasonably apparent to it within the 21-day period. In these circumstances, Twee JongeGezellen contends that Consol is precluded from relying on the 21-day provision by a tacit termof their agreement. According to the tacit term advanced by Twee Jonge Gezellen, Consolcould only rely on the 21-day provision if the circumstances giving rise to the claim would bereasonably apparent to Twee Jonge Gezellen within 21 days of receipt of the goods.

[49] The Court a quo decided this issue in favour of Twee Jonge Gezellen (at 278D), inter alia,on the basis of the contra proferentem rule. I do not believe, however, that any assistance canbe derived from this rule in resolving the present problem. The rule is one of construction and itonly comes into play where the difficulty lies in resolving an ambiguity. Such a difficulty does notarise in the present context. The express provisions of the contract are clear. The answer to thequestion raised by this issue is therefore not dependent on rules of construction but on whetherthe requirements for the existence of a tacit term have been met.

[50] The test for establishing the existence of a tacit term, which this Court has oftenrecognised and applied in the past, is the so-called 'bystander test' (see eg Alfred McAlpine &Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 533A - B; WilkensNO v

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Voges 1994 (3) SA 130 (A) at 137A - D; Botha v Coopers & Lybrand 2002 (5) SA 347 (SCA) at359G - J). The test has its origin in the following dictum by Scrutton LJ in Reigate v UnionManufacturing Co (Ramsbottom) Ltd and Elton Cap Dyeing Co Ltd [1918] 1 KB 592 (CA) (118LT 479) at 605 (KB) (483 (LT)):

'A term can only be applied if . . . it is such a term that it can confidently be said that if at the time the contractwas being negotiated someone has said to the parties: ''What will happen in such a case'' they would both havereplied, ''Of course, so and so will happen; we did not trouble to say that; it is too clear.'' Unless the Court comesto some such conclusion as that, it ought not to imply a term which the parties have not expressed.'

[51] Over the years the courts have, through refinement, enhanced the practical functionality ofthis test. So, for example, it was decided by Colman J in Techni-Pak Sales (Pty) Ltd v Hall1968 (3) SA 231 (W) at 236H - 237A that the inference of a tacit term can only be justified if thebystander's question 'would have evoked . . . a prompt and unanimous assertion of the term'from both the contracting parties. If the inference is that one of the parties would have soughtsome clarification or some time to consider before giving an answer, the tacit term suggestedwould not pass the bystander test. A further requirement that has developed appears from thefollowing statement by Trollip JA in Desai and Others v Greyridge Investments (Pty) Ltd 1974(1) SA 509 (A) at 522H - 523A:

'. . . I do not think that it is either clear or obvious which of those forms of the term should prevail, and hence


none of them can be implied. The reason is that the implication of a term depends upon the inferred or imputedintention of the parties to the contract . . . and

''once there is difficulty and doubt as to what the term should be or how far it should be taken it isobviously difficult to say that the parties clearly intended anything at all to be implied''.'

[52] In finding for Twee Jonge Gezellen on this issue, the Court a quo was influenced (at 278D(SA)) by the consideration that, without the suggested term, the 21-day clause could operateextremely harshly on the purchaser of bottles, in that he would be deprived of all redress in thecase of latent defects which he could not possibly discover within the 21-day period. That isundoubtedly so. It can accordingly be accepted with confidence that Twee Jonge Gezellen'sresponse to the bystander's enquiry regarding the existence of the suggested tacit term wouldhave been a positive one. That, however, is not the end of the enquiry. The further step is toestablish what Consol's response would have been. Consol's problem with the effect of thesuggested (tacit) term would in all likelihood have been that, once the defects are of a kind thatcannot reasonably be recognised within 21 days, there would be no time bar at all. ThoughConsol may well have conceded that the 21-day provision was to be amended or ameliorated ifthe circumstances giving rise to the claim were not reasonably apparent within 21 days, itcannot be assumed that Consol would have agreed to the suggestion that in thosecircumstances there would be no time limit at all. At best for Twee Jonge Gezellen, theinference could be that Consol would have asked for time to consider or that it would haveinsisted that in these circumstances the claim should at least be instituted within 21 days of thealleged problem

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having manifested itself. In these circumstances the tacit term suggested by Twee JongeGezellen cannot be inferred.

[53] The problems experienced by Twee Jonge Gezellen in establishing the tacit term for whichit contends are similar to those encountered by the insured in Union National South BritishInsurance Co Ltd v Padayachee and Another 1985 (1) SA 551 (A). In terms of the insurancepolicy concerned in that case, all claims under the policy had to be instituted within 12 monthsfrom the happening of the loss. Like Twee Jonge Gezellen, the insured, who had failed toinstitute his action within 12 months, sought to avoid the consequences of this contractual timebar by means of a tacit term. Upon application of the bystander test, this Court came to theconclusion that the inference of the tacit term contended for could not be justified. From thejudgment of Miller JA (at 560A - G) it appears that the considerations which led to thatconclusion were essentially the same as those which have persuaded me that the tacit termrelied upon by Twee Jonge Gezellen cannot be inferred. Accordingly, the sixth issue should, inmy view, be decided in favour of Consol, which means that, on this aspect, the appeal mustsucceed.

The seventh preliminary issue

[54] This issue is:


'Whether [Consol] is exempted from liability for [Twee Jonge Gezellen's] claim set out in para 3 of the claim inreconvention [which relies on the alternative basis that Consol was the manufacturer or merchant seller of thebottles concerned] unless an authorised representative of [Consol] specifically guaranteed or warranted therelevant quality of the bottles in writing.'

[55] The issue arises from the provision in the claims clause that

'no guarantee or warranty regarding . . . quality is given or implied unless specifically stated in writing by anauthorised company representative'.

[56] It will be remembered that Twee Jonge Gezellen relies, as an alternative basis for itsdamages claim, on the principle of our law of contract that merchants who sell goods of theirown manufacture or goods in relation to which they publicly profess to have attributes of skilland expert knowledge, are liable for consequential damages caused to the purchaser by reasonof a latent defect in the goods (see eg Kroonstad Westelike Boere Ko-operatiewe VerenigingBpk v Botha and Another 1964 (3) SA 561 (A) at 571G - 572A; Sentrachem Ltd v Prinsloo 1997(2) SA 1 (A) at 17H - 18D; Ciba-Geigy (Pty) Ltd v Lushof Farms (Pty) Ltd en 'n Ander 2002 (2)SA 447 (SCA) ([2002] 2 All SA 525) at 465G - 466H (SA)).

[57] Consol's contention is that since the basis of this claim amounts to an implied warranty ofquality it is expressly excluded by the aforementioned provision of the claims clause. TweeJonge Gezellen's answer to this contention is that, although the seller's liability for latent defectsis often loosely described as being derived from an 'implied warranty against latent defects',this is a misnomer because such liability is not dependent on any guarantee given by the seller,implied or otherwise. It is imposed upon the seller by law. Accordingly, so the argument went, itcannot be said that Consol's liability for latent defects is excluded by a

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provision which relates to 'implied warranties'.

[58] Though this argument by Twee Jonge Gezellen found favour with the Court a quo (at 278G- 279D), it is, to my mind, not well-founded. The statement that the seller's liability for latentdefects is imposed by law and is therefore not dependent upon any contractual consensusbetween the parties, is correct. As a consequence it might, from a jurisprudential point of view,be inappropriate to describe the basis of this liability as an implied warranty (see eg Phame(Pty) Ltd v Paizes 1973 (3) SA 397 (A) at 416H; De Wet en Van Wyk Kontraktereg enHandelsreg 5th ed at 342 - 3). That, however, is not really the issue. The real issue is what theparties intended when they referred to 'an implied warranty of quality' in their written agreement.In answering this question, it is to be borne in mind that the seller's liability for latent defectshas invariably been described, also by this Court, as being derived from an implied warranty. Infact, I venture to suggest that in ordinary legal parlance, one of the best-known examples ofwhat is meant by an 'implied term' is the seller's 'implied warranty against latent defects' incontracts of sale. (See eg Hackett v G&G Radio and Refrigeration Corporation 1949 (3) SA664 (A) at 667; Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration (supra) at531E - G; 532C - G.)


[59] In these circumstances it must, in my view, be accepted that when the parties agreed toexclude liability for any 'implied warranty of quality', they intended that exclusion to pertain tothis most commonly known 'implied warranty' as well (see also Greyling v Fick 1969 (3) SA 579(T) at 580G - 581B and compare the difference in the wording of the contract in Van derWesthuizen v Arnold 2002 (6) SA 453 (SCA) ([2002] 4 All SA 331) at 470A - E (SA)). Thepurpose of the clause is to exclude liability not expressly undertaken and its properinterpretation therefore excludes both a tacit term as to quality as well as a term implied by law.For these reasons, the seventh issue should be decided in favour of Consol, with the result thatthe appeal on this issue must succeed.

[60] In summary, I therefore hold the view that the appeal on issues 3, 6 and 7 should beupheld while the appeal on issues 1, 4 and 5, as well as the cross-appeal, must fail. As to thequestion of costs, Consol has been substantially successful in the appeal and it has succeededentirely in the cross-appeal. I can find no reason why costs should not, in both instances, followthe event. Moreover, since I consider that Consol was justified in instructing two counsel, Iintend to include these costs in the order that I propose to make.

[61] In the Court a quo, no costs order was made because the learned Judge thought it prudent(at 280E) to let all questions of costs stand over for later determination. Although Consol hasnow on appeal achieved a greater measure of success than in the Court below, there are stillsome outstanding issues which can, at least in theory, lead to further proceedings. In thecircumstances, I consider it wise not to interfere with the costs order by the Court a quo.

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[62] The following order is made:

(a) The appeal is upheld with costs, including the costs of two counsel.

(b) The cross-appeal is dismissed with costs, including the costs of two counsel.

(c) The findings of the Court a quo in regard to preliminary issues 1 to 7 are amended. Asamended the findings read as follows:

'Issue (1): In terms of the supply agreement, plaintiff was obliged to manufacture all bottles delivered tofirst defendant according to plaintiff's standard manufacturing procedures and techniques, utilisingstandard raw materials.

Issue (2) part 1: At the time when the bottles in question were made, internal treatment of cap classiquebottles with Freon 134A gas was part of plaintiff's standard manufacturing procedures and techniques.

Issue (2) part 3: At the time when the bottles were made, Freon 134A gas was a standard raw materialfor the manufacture of the bottles in question.

Issue (3): Even if the bottles were not manufactured by plaintiff according to its standard manufacturingprocedures and techniques, utilising standard raw materials, plaintiff would still be entitled to rely on thefurther provisions of the clause of the supply agreement headed ''Claims''.

Issue (4): The provision of the supply agreement that all goods supplied are manufactured according toplaintiff's standard manufacturing procedures and techniques, utilising standard raw materials, is not a


warranty as contemplated in the claims clause.

Issue (5): Plaintiff's liability for the breach alleged by first defendant is not limited to the replacement ofbottles proven to have been defective.

Issue (6): Plaintiff is exempted from liability in the event of first defendant not having lodged its claimwithin 21 days of delivery of the bottles in question.

Issue (7): Plaintiff is exempted from liability for first defendant's claim set out in para 3 of the counterclaimon the ground that no authorised representative of plaintiff specifically guaranteed or warranted therelevant quality of the bottles in writing.'

Howie P, Cloete JA, Heher JA and Van Heerden AJA concurred.

Appellant's Attorneys: Lionel Murray Schwormsted & Louw, Cape Town; Webbers,Bloemfontein. Respondents' Attorneys: Cliffe Dekker Fuller Moore Inc, Cape Town; McIntyreand Van der Post, Bloemfontein.

BAYER SOUTH AFRICA (PTY) LTD v FROST 1991 (4) SA 559 (A)

1991 (4) SA p559

Citation 1991 (4) SA 559 (A)

Court Appellate Division

Judge Corbett CJ, HEFER JA, KUMLEBEN JA, FRIEDMAN JA and PREISS AJA

Heard May 13, 1991

Judgment August 15, 1991



Negligence - Liability for - Negligent misstatement causing pure economic loss - Negligentmisstatement inducing contract - In principle, negligent misstatement inducing person to enter intocontract may, depending upon circumstances, give rise to delictual claim for damages at the suit ofperson to whom misstatement made - To avert danger of limitless liability and to keep cause ofaction within reasonable bounds, Court has duty to (a) decide whether, on facts of case, thererested upon defendant a legal duty not to make misstatement to plaintiff and whether defendant, inlight of circumstances, exercised reasonable care to ascertain correctness of statement; and (b)give proper attention to nature of misstatement and interpretation thereof, and to question ofcausation.

Headnote : Kopnota

(Per Corbett CJ; Hefer JA, Kumleben JA, Friedman JA and Preiss AJA concurring): In terms of


the decision in Administrateur, Natal v Trust Bank van Afrika Bpk 1979 (3) SA 824 (A) adelictual action for damages is available to a plaintiff who can establish (i) that the defendant, orsomeone for whom the defendant is vicariously liable, made a misstatement to the plaintiff; (ii)that in making this misstatement the person concerned acted (a) negligently, and (b) unlawfully;(iii) that the misstatement caused the plaintiff to sustain loss; and (iv) that the damages claimedrepresent proper compensation for such loss. In principle there is no good reason why, in therecognition of such a cause of action based upon negligent misstatement, any distinctionshould be drawn between a misstatement made which induces a contract and one madeoutside the contractual sphere. If justice requires a remedy for a negligent misstatement madeby and to persons who are not in any contractual relationship, then justice equally requires thatthere be a remedy for a negligent misstatement which is made by one contracting party to theother and which induces the contract. The law should provide adequate protection for personsinduced to contract by a negligent misstatement emanating from the other

1991 (4) SA p560

contracting party and not incorporated as a term of the contract; and in many instances this canonly be done by granting the party concerned compensation for consequential loss suffered asa result of the misstatement.

Accordingly and in principle, a negligent misstatement which induces a person to enter into acontract may, depending upon the circumstances, give rise to a delictual claim for damages atthe suit of the person to whom it was made. The circumstances will determine the vital issues ofunlawfulness and whether there is a causal connection between the making of themisstatement and the loss suffered by the plaintiff. In order to avert the danger of limitlessliability and to keep the cause of action within reasonable bounds, the Court has a duty to (a)decide whether, on the facts of the case, there rested upon the defendant a legal duty not tomake a misstatement to the plaintiff (or whether the making of the statement was in breach ofsuch duty and, therefore, unlawful) and whether the defendant, in the light of thecircumstances, exercised reasonable care to ascertain the correctness of his statement; and (b)give proper attention to the nature of the misstatement and the interpretation thereof, and to thequestion of causation.

The respondent was the lessee of three farms, one of which was Jasonskloof. The cultivatedland on Jasonskloof comprised eight vineyards and six 'other lands' on which cash crops wereraised. The vineyards and other lands were intermingled, and in some instances lay adjacent toone another. The proper maintenance of the vineyards required that weeds growing betweenthe vines be eliminated. From 1980, the weeds were eliminated by using herbicides sprayeddownwards from a boom attached to a tractor at knee-height. The time taken for the applicationof herbicide to the vineyards on all three farms by this method was approximately one month. In1985 the respondent decided to use a new product, 'Sting', marketed by the appellant, and tohave the herbicides sprayed onto his vineyards from the air by means of a helicopter. Duringthe spraying operation, which had taken place on 17 August 1985, certain amounts of Stinglanded on the onion and wheat crops growing on the other lands at Jasonskloof, causingsevere damage, quantified by agreement at R55 000.

The respondent instituted action against the appellant in a Provincial Division, claiming in


respect of the damage to his crops. One of the causes of action pleaded was that he had beeninduced to use Sting on his vineyards, applied from the air by helicopter, by an unlawful andnegligent misstatement made by certain of the appellant's employees, acting as the appellant'sauthorised representatives. The respondent had pleaded that the appellant's duly authorisedrepresentatives, one W and one T, acting in the course of their employment with the appellant,and in order to induce the respondent to enter into the contract for the supply and application ofSting to the respondent's vineyards, had represented to the respondent's manager, one L, andrespondent's son, both acting on behalf of the respondent, that Sting could suitably be appliedfrom the air by helicopter without causing damage to the cash crops on the adjacent land. Moreparticularly, T, as the appellant's authorised representative, had introduced Sting to farmers,including the respondent's authorised representative, L, at a meeting on 30 June by (a)representing that the best method of applying Sting was from a helicopter; (b) representing thatif Sting were so applied there would be a clear-cut line ('afsnylyn') which would prevent adjacentcrops being damaged by that method of application and that, although the cut-off line would notbe a straight line, it would be not more than three to five metres from the edge of the vineyardbeing sprayed; (c) representing that appellant would arrange everything with regard to suchapplication; and (d) failing to indicate any risk of damage to adjacent crops which could arisefrom application by helicopter, thereby representing that there was no such risk. It was arguedthat, by reason of the aforegoing representations, the appellant had been under a legal duty toensure that such representations were correct; and that the respondent had been induced toapply the Sting purchased by him by means of a helicopter, something he would not otherwisehave done. Since the representations had not been correct and since they had been a directand/or foreseeable cause of the damage suffered by the respondent, which damage had arisenbecause the appellant, in breach of the aforesaid legal duty, unlawfully and negligently hadmade the aforesaid representations without ensuring that they were correct and/or feasible, theappellant had

1991 (4) SA p561

been legally liable to compensate the respondent for the loss he had suffered. The actionsucceeded and damages in the agreed amount were awarded to the respondent.

On appeal, after finding that, in principle, an action in delict was available to a person who hadbeen induced to enter into a contract as a consequence of a negligent misstatement, the Court(per Corbett CJ; Friedman JA and Preiss AJA concurring) dealt with the following issues: (1)whether the appellant's representatives had made the statements attributed to them in therespondent's pleadings; (2) whether such statements had materially been false; (3) whetherthere had rested upon the appellant's representatives a legal duty to take reasonable steps toensure that the statements made were correct (this being pertinent to the question ofunlawfulness); (4) whether the appellant's representatives had failed to carry out that legal duty,ie had acted negligently in the making of the statements; and (5) if the appellant'srepresentatives negligently had failed in the carrying out of the legal duty referred to in (3)above, whether such failure had caused the respondent's loss.

As to the representation ((1) above), the evidence of L, the respondent's authorisedrepresentative, was that he had first heard about Sting early in 1985 when W had visited thefarm; and that on the respondent's instructions he had attended the farmers' meeting on 30


June 1985 at which T, the appellant's technical advisor in the area, had addressed the meetingon the merits of Sting, had stated that it could safely be sprayed from the air by helicopter andhad demonstrated its application and effectiveness by means of photographic slides. Withreference to one of the slides W had pointed to the cut-off line along the edge of the area ofapplication and had stated that the appellant had done tests to demonstrate how accuratelySting could be sprayed and controlled where there were adjacent crops. This latter point beingof particular importance with regard to Jasonskloof, L had asked W after the presentation whatthe maximum distance was over which damage could be expected outside the vineyard beingsprayed. T had reiterated that although it would not be a straight line, the cut-off line would beno more than three to five metres beyond the edge of the vineyard being sprayed. L regardedthis as the most important statement made that evening. T had also informed the farmers thatthe appellant would make all the necessary arrangements for the application of Sting byhelicopter, and that all that farmers would have to do would be to provide persons to act asmarkers for the guidance of the helicopter pilot during spraying operations. The respondentremained concerned about possible damage to cash crops lying adjacent to the vineyards atJasonskloof. W was therefore taken around the farm by L and was shown the cash cropsadjacent to the vineyards. W assured L that there was no cause for concern and reiterated T'sassertion that there would be a cut-off line of three to five metres from the edge of the vineyard.Furthermore, W stated that 'they' would be present at the spraying operation and would makeall arrangements. L had understood this to mean that the appellant's employees would be incharge of the entire spraying operation and would exercise control over the mixing of Sting andits application. The spraying operation took place on 17 August 1985, after W had checked thatweather conditions were fine and still. As far as L was concerned, W was in charge that day: hehad instructed L in regard to the transportation and placing of markers and the helicopter pilot inregard to the spraying operations. The respondent's son, who had been present at Jasonskloofthat morning, confirmed L's evidence in this regard.

Held (per Corbett CJ; Friedman JA and Preiss AJA concurring), as to the representation, that,in view of L's evidence, and in the absence of any evidence from T or W to controvert what Lhad said, the representation pleaded by the respondent had been established.

Held, further, as to whether the appellant's representatives had undertaken to supervise andcontrol the spraying operation (which the appellant had denied), that, although the evidencehad not established that the words 'supervise' and 'control' had expressly been used in thecontractual discussions, it had clearly been implicit in what had been said that the appellantwould supervise and control the operation.

Held, further, that the appellant's employees had, or had purported to have, know-how andexperience concerning the application of Sting from the air, whereas the respondent and hisemployees had none and had not been in a position to control the operation.

1991 (4) SA p562

Held, further, that, on the evidence, the role assumed and played by W had established that Whad in fact supervised the spraying operation.

Held, further, that the falsity of the representation could be deduced from the actual damage to


the cash crops (it being evident that, in order to cause the damage sustained, some of the Stinghad to have fallen up to 100 metres and more from the edge of the vineyards); from theevidence that the helicopter pilot had performed his duties satisfactorily; from the evidence ofthe agricultural meteorologist as to 'drift'; and from the concession by the appellant's expertwitness that the damage to the cash crops could be attributed to 'drift of some form or another'.

Held, further, that the following facts and circumstances had placed upon the appellant a legalduty, before making the representation, to take reasonable steps to ensure that it had beencorrect: (a) the contractual relationship between the parties and the fact that the representationhad been material and had induced the respondent to purchase the Sting and to contract tohave it applied from the air by helicopter; (b) the circumstances under which the representation,especially as to the 'cut-off line', had initially been made by T and repeated by W must havemade it obvious to them that the respondent would place reliance upon what he had been told,and that the correctness of the representation would be of vital importance to him and that if itwere incorrect the execution of the contract could cause serious damage to him; and (c) therepresentation had related to technical matters concerning a new product about which therespondent, as a lay customer, would necessarily have been ignorant and the appellant, asdistributor, would or should have been knowledgeable.

Held, further, that a failure by the appellant to take reasonable steps to ensure the accuracy ofits representations would consequently render its conduct unlawful.

Held, further, as to the issue of negligence, that, since it had appeared from the evidence of atechnical advisor in the appellant's employ that it was untrue that, in applying Sting from the air,there would be a definite cut-off line, and that, in fact, no tests had been conducted todetermine drift action in the case of aerial application, the appellant's representatives had hadno reasonable basis for making the representation and that their actions in so doing had beennegligent.

Held, further, as to causation, that it had clearly been established that, but for themisrepresentation made by the appellant's representatives, the respondent would not havecontracted for the application of Sting from the air by helicopter and would consequently nothave sustained damage to his cash crops caused by its aerial application. The appeal wasaccordingly dismissed.

The decision in the Cape Provincial Division in Frost v Bayer South Africa (Pty) Ltd confirmed.

Case Information

Appeal from a decision in the Cape Provincial Division (Hodes AJ). The facts appear from thejudgment of Corbett CJ.

L G Bowman SC (with him D J du Toit) for the appellant referred to the following authorities:As to whether a delictual action for damages on the grounds of a negligent misstatementinducing a contract is available, see Bayer South Africa (Pty) Ltd and W P Co-Operative Ltd vViljoen, unreported (Appellate Division, 28 September 1989); Herschel v Mrupe 1954 (3) SA464 (A) ; Hamman v Moolman 1968 (4) SA 340 (A) , especially at 348; Latham and Another vSher and Another 1974 (4) SA 687 (W) at 695-6; Administrateur, Natal v Trust Bank van Afrika


Bpk 1979 (3) SA 824 (A) ; Christie The Law of Contract in South Africa at 296-8; Kern Trust(Edms) Bpk v Hurter 1981 (3) SA 607 (C) , approved in Auto-Roma (Pty) Ltd v Farm EquipmentActions (Pty) Ltd 1984 (3) SA 480 (Z) at 486G-H; Lillicrap, Wassenaar and Partners vPilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 475 (A) ; Ericsen v Germie Motors (Edms) Bpk1986 (4) SA 67 (A) at 91E-G. As to the legal liability of a distributor, see Mackeurtan Sale ofGoods in South Africa 5th ed at 162-3; Holmdene Brick Works (Pty) Ltd v Roberts ConstructionCo Ltd 1977 (3) SA 670 (A) at 682, 683, 688;

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Kroonstad Westelike Boere Ko-operatiewe Vereniging Bpk v Botha and Another 1964 (3) SA561 (A) at 571. As to the respondent's alternative claim based on delict, see Lillicrap,Wassenaar and Partners (supra); Transvaal and Rhodesian Estates Ltd v Golding 1917 AD 18;Kriegler v Minitzer and Another 1949 (4) SA 821 (A) . As to respondent's further alternativeclaim based on contract, see Knowds v Administrateur, Kaap 1981 (1) SA 544 (C) ; Frank vBarclays National Bank Ltd 1983 (3) SA 619 (A) at 629 et seq; Schroeder v Vakansieburo(Edms) Bpk 1970 (3) SA 240 (T) ; Alfred McAlpine & Son (Pty) Ltd v Transvaal ProvincialAdministration 1974 (3) SA 506 (A) at 531-3; Christie (op cit at 156-62).

R S van Riet (with him Ms B van der Vyver) for the respondent referred to the followingauthorities (the heads of argument having been drawn by A J Nelson and Ms B van der Vyver):As to the claim based on breach of contract, see De Wet and Yeats Kontraktereg enHandelsreg 4th ed at 28; Christie The Law of Contract in South Africa at 20; Alfred McAlpine &Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at 526A-C. As to theclaim based on the fact that the appellant was a merchant vendor, see Kroonstad WestelikeBoere Ko-operatiewe Vereniging Bpk v Botha and Another 1964 (3) SA 561 (A) at 571E-H;Holmdene Brick Works (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670 (A) ;Mackeurtan Sale of Goods in South Africa at 51, 134; Bower v Sparks, Young and FarmersMeat Industries Ltd 1936 NPD 1; Vlotman v Buysell 1946 NPD 412; Spiers Brothers v MasseyHarris and Co (SA) Ltd 1931 NPD 377 at 382; Holden and Co v Morton and Co 1917 EDL 210at 216; Norman Purchase and Sale in South Africa at 358. As to the claim based on negligentmisrepresentation, see De Wet and Yeats (op cit at 43); Kern Trust (Edms) Bpk v Hurter 1981(3) SA 607 (C) at 613E-G; Herschel v Mrupe 1954 (3) SA 464 (A) ; Administrateur, Natal vTrust Bank van Afrika Bpk 1979 (3) SA 824 (A) at 833A-C; Greenfield Engineering Works (Pty)Ltd v NCR Construction (Pty) Ltd 1978 (4) SA 901 (N) at 916; Kerr Law of Contract at 210-13;Prosser Law of Torts 4th ed at 699; International Products Co v Erie Railway Co (1927) 56 ALR1377 at 1381; Hamman v Moolman 1968 (4) SA 340 (A) at 348D-H, 349E; Lillicrap, Wassenaar& Partners v Pilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 475 (A) at 500G-501H; Paradine vJane (1647) 82 ER 897; Peters, Flamman & Co v Kokstad Municipality 1919 AD 427; E GElectric Co (Pty) Ltd v Franklin 1979 (2) SA 702 (E) . As to the delictual claim based onnegligent conduct, see Lillicrap, Wassenaar & Partners (supra at 498C-D); the Administrateur,Natal case supra; Van Wyk v Lewis 1924 AD 438; Van der Walt Law of Delict at 70; Lee andHonoré SA Law of Obligations 2nd ed at 203 s 40(iii).


Cur adv vult.

Postea (August 15).

Judgment

Corbett CJ: During the period relevant to these proceedings the respondent, Mr Hamilton Hylton Frost, was thelessee of three farms in the Villiersdorp district known as Jasonskloof, Ratelsfontein and Kykuit The farmsJasonskloof and Ratelsfontein were registered in the name of a private company in which the respondent and hiswife held all the shares; while Kykuit belonged to respondent's son, Mr William Peter Frost

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('Frost Jnr'). The day-to-day management of the farms was entrusted by respondent, who livedat Kuilsriver, to Frost Jnr and Mr Lodewyk la Grange. La Grange looked after Jasonskloof andRatelsfontein and Frost Jnr managed Kykuit. Respondent, nevertheless, took an active part inguiding and supervising the farming operations and each Wednesday would travel toVilliersdorp in order to meet with Frost Jnr and La Grange on one or other of the farms. Atthese meetings the farming activities would be thoroughly discussed and decisions taken as tofuture action and the running of the farms generally. Nothing was done on the farms withoutrespondent's knowledge and approval.

This case is concerned particularly with the farm Jasonskloof. The property is 218 hectaresin extent. It has its own water supply and a number of storage dams are located on the farm.Portion of the farm consists of cultivated lands under irrigation. Some of these are laid out asvineyards; others are used for the raising of cash crops such as wheat and onions (forconvenience I shall refer to the latter as 'the other lands'). Viewed on plan, all these landspresent a patchwork. The lands differ greatly in size, but are mostly relatively small. There areeight separate vineyards and six other lands. The vineyards and the other lands areintermingled and in some instances lie adjacent, or virtually adjacent, to one another. Inevidence the Afrikaans term 'lappiesgrond' was aptly used to describe the general lay-out of thelands.

The proper maintenance of a vineyard requires that the weeds which grow between thevines should as far as possible be eliminated. This is undertaken every year during the monthsof July/August/September. In earlier days weed elimination was done partly by hand and partlyby using a disc plough, but more recently farmers have converted to the use of chemicalherbicides. Respondent did so in 1980. The herbicides are applied before the budding of thevines. The poison consequently kills the weeds but has no effect upon the vines. From the startrespondent applied the herbicide by means of an apparatus consisting of a boom, fitted withnozzles, attached to the front of a tractor and connected by a pipe to a tank containing theherbicide attached to the back of the tractor. The tractor moved through the vineyards and theherbicide was sprayed downwards by means of the boom from about knee-height. Theherbicide used was a mixture of Reglone and Gramaxone, produced by a manufacturer referredto in the evidence as 'FBC'. The time taken for the application of herbicide to the vineyards onall three farms by this method was approximately one month. This period included days when


the winter rains rendered the vineyards, or some of them, too wet for the tractor to operate.

In 1985, in circumstances which I shall describe in more detail later, respondent decided tochange to a new herbicide marketed by the appellant and known as 'Sting', and also to havethe herbicide sprayed onto his vineyards from the air by means of a helicopter. This was doneon 17 August 1985. In the course of this operation (this is common cause) certain amounts ofSting came into contact with onions and wheat growing on the other lands on the farmJasonskloof and severely damaged these crops. The resultant damages have been quantified,by agreement, in the sum of R55 000.

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Some time thereafter respondent instituted an action against appellant in the CapeProvincial Division, claiming damages in respect of the loss caused to his crops by the Stingherbicide. Four different (alternative) causes of action were pleaded, one of which was that therespondent had been induced to use Sting on his vineyards, applied from the air by helicopter,by an unlawful and negligent misstatement made by certain of appellant's employees, acting asappellant's authorised representatives. The matter came to trial before Hodes AJ, who found forthe respondent on this cause of action. He gave judgment in the agreed sum of R55 000 andgranted certain ancillary relief, including interest and costs of suit. With leave from the trialJudge appellant now appeals to this Court against the whole of the judgment and the orders forthe payment of damages, interest and costs.

Much of the argument before us focussed on the other alternative causes of action, butbecause of the view which I take of the matter it is not necessary to discuss them: I shallconcentrate on that based on negligent misstatement. In this regard respondent pleaded thatduring August 1985 respondent, duly represented by La Grange, and appellant, dulyrepresented by one P de Wet, concluded an oral agreement in terms of which (i) appellant solda systemic herbicide known as Sting to the respondent for the purpose of spraying all thevineyards on the farms Jasonskloof, Ratelfontein and Kykuit; (ii) appellant undertook to makeall the arrangements in order to apply the Sting from the air by means of a helicopter; (iii)appellant undertook to exercise the necessary supervision and control over the mixing andapplication of the Sting in order, inter alia, to ensure that cash crops on other lands were notdamaged; and (iv) respondent accepted responsibility for the purchase price of the Sting, aswell as the reasonable cost of its application, payment thereof to be made by the debiting ofrespondent's account with the local agricultural co-operative society. (In the event the total costof the Sting supplied appears to have been about R3 500.)

Respondent went on to plead (reading para 6 of the particulars of claim together with furtherparticulars given) that during the negotiations leading up to the conclusion of this contractappellant's duly authorised representatives, De Wet and a Mr H du Toit, acting in the course oftheir employment by appellant and in order to induce respondent to enter into the contract,represented to La Grange and Frost Jnr (both acting on behalf of the respondent) that Stingwas suitable to be applied from the air by means of a helicopter and that this could be donewithout causing damage to cash crops on adjacent lands. In particular (and without derogating


from the aforegoing) appellant's duly authorised representative, Du Toit, introduced Sting tofarmers, including respondent's authorised representative, La Grange, at a farmers' meetingheld at the Brandvlei Kelders, Worcester, on 30 June 1985 by:

(a) representing that the best method of applying Sting was from a helicopter;

(b) representing that if Sting was so applied there would be a clear cut-off line ('afsnylyn')which would prevent adjacent crops being damaged by this method of application andthat, although this

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cut-off line would not be a straight line, it would be not more than three to fivemetres from the edge of the vineyard being sprayed;

(c) representing that appellant would arrange everything with regard to such application;and

(d) failing to indicate any risk of damage to adjacent crops which could arise fromapplication by helicopter, thereby representing that there was no such risk.

In this way appellant's representative induced in respondent the reasonable expectation thatappellant was able to, and in fact would, take the necessary steps to ensure that adjacent cashcrops outside the cut-off line would not be damaged if Sting were applied by helicopter.

By reason of the aforegoing, so the pleading proceeded, appellant was under a legal duty toensure that these representations were correct and/or feasible; and respondent was induced toapply the Sting purchased by him by means of a helicopter, something he would not otherwisehave done. These representations were, however, not correct and/or feasible and they were adirect and/or foreseeable cause of the damage suffered by the respondent, which damagearose because appellant, in breach of the aforesaid legal duty, unlawfully and negligently madethe aforesaid representations without ensuring that they were in fact correct and/or feasible. Inthe premises the appellant was legally liable to compensate respondent for the loss thussuffered by him.

In its plea appellant made common cause with respondent as to the conclusion of a contractand the terms thereof, save that appellant denied and put in issue respondent's averment that itwas a term of the contract that appellant would exercise supervision and control over the way inwhich the Sting herbicide was to be applied, either to ensure that cash crops on adjoining landswere not damaged or for any reason at all. As to the alleged representations and theirconsequences, appellant pleaded a total denial; and, in the alternative, that in the event ofrespondent proving all the facts pleaded by it in regard to this alleged cause of action, appellantwould still not be liable in law to compensate respondent for its loss.

The issues raised are thus both factual and legal. I shall commence by dealing with thequestion of law. The decision of this Court in Administrateur, Natal v Trust Bank van Afrika Bpk1979 (3) SA 824 (A) established unequivocally that our law recognises a delictual action for


damages based upon a negligent misstatement which causes purely economic loss, ie asopposed to physical injury to person or property. In delivering the judgment of the Court,Rumpff CJ made it clear that this decision did not cover the case where the negligentmisstatement was made in a contractual context ('binne kontraktuele verband') and, withreference to the case of Hamman v Moolman 1968 (4) SA 340 (A) at 348, expressly left openthe question of delictual liability in such a case (at 830C and 834F).

Hamman v Moolman (supra) related to a misrepresentation made by the seller of certainimmovable property to the purchaser in the course of the negotiations leading up to the sale.The purchaser's claim for damages was founded, inter alia, upon the averment that themisrepresentation had been made negligently. In regard thereto Wessels JA, who delivered thejudgment of this Court, stated (at 348D-H):

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'It would seem that, in the field of contract, the making of honest but carelessly mistaken statements of fact oropinion can by no means be regarded as a modern phenomenon and peculiar to present-day circumstances.The incidence of such statements must surely have been noted and considered long before now, and the call tomodify "old practice and ancient formulae" could hardly be said to arise from any recently detected urgent need"to keep pace with the requirements of changing conditions". The existing law grants what appears to beadequate protection in the field of contract to a party to whom a misrepresentation is made. Thus a contractingparty may safeguard himself against loss by simply taking the elementary precaution of requiring the representorto guarantee the truth of his representations. Adequate remedies are available where misrepresentations aretainted with dolus, and in appropriate circumstances an aggrieved party is granted relief in the case of aninnocent misrepresentation. Although pure logic and the never-ending development and expansion of legal ideasdo not appear to be opposed in principle to a conclusion that in appropriate circumstances an action might bemaintained to recover pecuniary loss caused by honest but carelessly made verbal (or written)misrepresentations, there is as yet in our law no authoritative determination or generally accepted definition ofthe principles to be applied in deciding in what circumstances such an action will lie in the field of contract.'

Wessels JA nevertheless went on to say that even if it were to be assumed in favour of theplaintiff (the purchaser) that such a claim based upon negligence were available to him, it couldnot succeed on the facts because, inter alia, the evidence did not establish negligence on thepart of the seller.

This finding negativing negligence would seem to render the dictum in the quoted passagefrom the judgment obiter. Nevertheless, in Latham and Another v Sher and Another 1974 (4)SA 687 (W) at 695H-696A, Margo J considered the dictum to be

'. . . the clearest affirmation of judicial policy against the extension at this time of an action in delict throughnegligent misrepresentation inducing a contract'

and he concluded that there was no proper basis upon which that policy could be circumventedor disregarded. Consequently, though opining that there was much to be said in favour ofrecognising an Aquilian action for damages consequent upon a negligent misrepresentationinducing a contract, he dismissed such a claim in the case before him. This approach to thedictum in Hamman's case was followed in Du Plessis v Semmelink 1976 (2) SA 500 (T) at502H-503F.


In Kern Trust (Edms) Bpk v Hurter 1981 (3) SA 607 (C) the actionability of a negligentmisstatement inducing a contract again arose for consideration. After a full review of theauthorities, South African and foreign, the Court (Friedman J, Schock J concurring) concluded(at 616F-G):

'In my view, in the light of the clear recognition by the Appellate Division in the Administrateur, Natal case of anaction for damages for negligent misstatements outside the contractual field, there is no sound reason basedeither in principle or in logic, why an action for negligent misstatements inducing a contract, should not receivesimilar recognition. Such an action fits squarely within the confines of the lex Aquilia and, although the precisescope of the action will require definition, the existence of the action itself must, in principle, be acknowledged.'

1991 (4) SA p568

CORBETT CJ

I am in general agreement with this conclusion and with the reasons advanced in the judgmentof Friedman J for reaching it. At the risk of some repetition of what was stated in Kern's caseand in other judgments, I would sum up my reasons for so deciding as follows.

In terms of the case of Administrateur, Natal (supra) a delictual action for damages isavailable to a plaintiff who can establish (i) that the defendant, or someone for whom thedefendant is vicariously liable, made a misstatement to the plaintiff; (ii) that in making thismisstatement the person concerned acted (a) negligently and (b) unlawfully; (iii) that themisstatement caused the plaintiff to sustain loss; and (iv) that the damages claimed representproper compensation for such loss. (See also Siman and Co (Pty) Ltd v Barclays National BankLtd 1984 (2) SA 888 (A) at 911B-C.) The defendant may, of course, have some special defencein law, but the abovestated formulation represents in broad outline what a plaintiff must prove inorder to establish prima facie a cause of action on the ground of a negligent misstatement. And,as Rumpff CJ pointed out in the Administrateur, Natal case supra at 832H-833B, in order toavert the danger of limitless liability and to keep the cause of action within reasonable bounds, itis the duty of the Court (a) to decide whether on the particular facts of the case there rested onthe defendant a legal duty not to make a misstatement to the plaintiff (or, to put it the other way,whether the making of the statement was in breach of this duty and, therefore, unlawful) andwhether the defendant in the light of all the circumstances exercised reasonable care toascertain the correctness of his statement; and (b) to give proper attention to the nature of themisstatement and the interpretation thereof, and to the question of causation.

In principle I can see no good reason why in the recognition of such a cause of action basedupon a negligent misstatement any distinction should be drawn between a misstatement madewhich induces a contract and one made outside the contractual sphere. Obviously in both casesthe cause of action will be subject to the limitations and strictures mentioned in theAdministrateur, Natal case and summarised above so that the danger of limitless liability will beno more present in the one case than in the other. Indeed in many instances the contractualnegotiations between the parties and the subsequent conclusion of the contract will inthemselves provide the circumstantial matrix for a finding that there existed a legal duty uponthe party concerned not to make a misstatement to the other. If justice requires a remedy for anegligent misstatement made by and to persons who are not in any contractual relationship,then it seems to me that justice equally requires that there be a remedy for a negligent


misstatement which is made by one contracting party to the other and which induces thecontract.

I turn now to examine the dictum in Hamman's case supra. The opening remarks to theeffect that the making of 'honest but carelessly mistaken statements of fact or opinion' was byno means a modern phenomenon and peculiar to present-day circumstances and the referenceto the call to modify 'old practice and ancient formulae' were made with regard to a

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submission by the plaintiff's counsel who, citing the remarks of Innes CJ in Blower v VanNoorden 1909 TS 890 at 905, invited the Court to hold that the time has come

'where old practice and ancient formulae must be modified in order to keep touch with the expansion of legalideas, and to keep pace with the requirements of changing conditions'.

It is no doubt true that the making of negligent misstatements in the course of contractualnegotiations is not a peculiarly modern phenomenon, but at the same time I think that it must berecognised that the novelties and complexities of contemporary life have widened the potentialscope for misstatement and for the damage which it may inflict. And this causes me toquestion, with respect, the further statement (in the dictum) that the existing law grantsadequate protection to a contracting party to whom a misrepresentation is made. Take thepresent case by way of example. The purchase and sale of a chemical herbicide for applicationto a vineyard from a helicopter is essentially a modern type of transaction. If the law does notrecognise a delictual claim for damages for negligent misrepresentation, then it would seemthat in general the only relief accorded to the representee would be a contractual claim for theavoidance of the contract and restitution, including in an appropriate case an actio quantiminoris (see Phame (Pty) Ltd v Paizes 1973 (3) SA 397 (A) ). In the circumstances of this casea claim for restitution could have presented problems and would, in any event, have been coldcomfort to the respondent.

It is also true that, as stated in the dictum, a contracting party can safeguard himself againstloss by requiring the representor to guarantee the truth of his representation. This, with respect,seems to me to be a counsel of perfection. The realities of modern commercial life show thatmany laymen are not aware of such legal niceties and contract upon terms put forward by theother contracting party. In my opinion, the law should provide adequate protection for personsinduced to contract by a negligent misstatement emanating from the other contracting party andnot incorporated as a term of the contract; and in many instances this can only be done bygranting the party concerned compensation for consequential loss suffered as a result of themisstatement.

Finally, as the dictum in Hamman's case shows, the Court was there concerned about thepractical difficulties inherent in any extension of the law of negligence, as applied to conductcausing injury to persons or property, to honest but carelessly made misrepresentationscausing pecuniary loss; and these concerns appear to have caused the Court to adopt aconservative approach. In my opinion, this viewpoint has been overtaken and its relevance


largely ousted by the subsequent decision of this Court in the Administrateur, Natal case,which, as I have indicated, specifically dealt with the difficulties associated with the recognitionof a delictual action for damages on account of a negligent misstatement and indicated howthey could and should be overcome.

Before us appellant's counsel referred to the case of Lillicrap, Wassenaar and Partners vPilkington Brothers (SA) (Pty) Ltd 1985 (1) SA 475 (A) in which, so it was submitted, aconservative approach to the extension of remedies under the lex Aquilia was stressed; and tothe case of Ericsen v Germie Motors (Edms) Bpk 1986 (4) SA 67 (A) at 91E-G where, counsel

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said, the 'apparent conflict' between the Kern Trust case supra and the Lillicrap case was leftopen. The words, 'apparent conflict', are counsel's. The Court in Ericsen's case merely statedthat the plaintiff's advocate, in advancing a case based upon negligent misstatement inducing acontract, relied upon Kern's case and that defendant's advocate, in opposing it on legalgrounds, cited Lillicrap's case; and that because the misstatement had not been shown to benegligent it was not necessary to decide this legal issue. Lillicrap's case itself was concernedwith an entirely different issue, viz whether the breach of a contractual duty to performprofessional work with due diligence is per se a wrongful act for the purposes of Aquilianliability, with the corollary that if the breach were negligent damages could be claimed exdelicto. The Court decided, mainly for reasons of policy, that it was not desirable to extend theAquilian action to the duties subsisting between the parties to such a contract of professionalservice. Kern's case was not discussed in either the majority judgment or the minority judgmentin Lillicrap's case and I do not consider the latter case to constitute any impediment to therecognition of a cause of action founded upon a negligent misstatement inducing a contract.

For these reasons I hold that in principle a negligent misstatement may, depending on thecircumstances, give rise to a delictual claim for damages at the suit of the person to whom itwas made, even though the misstatement induced such person to enter into a contract with theparty who made it. The circumstances will determine the vital issues of unlawfulness andwhether there is a causal connection between the making of the misstatement and the losssuffered by the plaintiff. There is no ready formula for determining unlawfulness. Each casemust be decided on its own facts in the light of the principles discussed in the Administrateur,Natal case supra at 833B-834E. The principles for determining causation have been discussedby this Court in, for example, Siman & Co (Pty) Ltd v Barclays National Bank Ltd (supra) andInternational Shipping Co (Pty) Ltd v Bentley 1990 (1) SA 680 (A) at 694I-704A.

In Kern's case reference was made in the judgment to English and Commonwealth authorityon the point. I do not propose to discuss these cases. It suffices to say that a measure ofreassurance is to be gained from the fact that, prior to the introduction of the MisrepresentationAct of 1967, the English Courts had also given recognition at common law to an action fordamages in tort on the ground of a negligent misrepresentation inducing the conclusion of acontract; and that this is the trend of the development of the common law in Canada, Australiaand New Zealand. (See also Fleming The Law of Torts 7th ed at 610-11, and especially the


cases cited in note 28.)

In the light of the aforegoing principles the questions which arise in this case are:

(1) whether appellant's representatives made the statements attributed to them inrespondent's pleadings;

(2) whether these statements were materially false;

(3) whether there rested upon appellant's representatives a legal duty to take reasonablesteps to ensure that the statements made were correct (this being pertinent to thequestion of unlawfulness);

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(4) whether appellant's representatives failed to carry out this legal duty, ie actednegligently in the making of the statements; and

(5) if appellant's representatives did negligently fail in the carrying out of the legal dutyreferred to in (3) above, whether such failure caused respondent's loss.

I shall deal with each of these questions in turn, but before doing so I wish to make somegeneral observations about the evidence led at the trial.

The respondent himself gave evidence and the following persons were called as witnessesto support his case: Frost Jnr, La Grange, Mr J L Olivier, Mr J Myburgh and Mr M W Purcell.Frost Jnr did not have anything to do with the negotiation of the contract, but he was presentwhen the spraying operation took place on 17 August 1985. La Grange was respondent's mainwitness in regard to the negotiation and conclusion of the contract and the making of thealleged negligent misstatements. He also deposed to the spraying operation. Olivier was atechnical adviser in the employ of the appellant in 1985 and was based in Paarl. He gave expertevidence about herbicides, including Sting, their effectiveness, methods of application andmarketing. Myburgh is an agricultural meteorologist in the employ of the Department ofAgriculture and Water Affairs. He gave expert evidence on air movement in general, theconditions on Jasonskloof on 17 August 1985 and the likelihood of Sting having drifted duringspraying onto adjacent areas. Purcell, a chartered accountant who acted for respondent and hiscompanies, deposed to the business arrangements in regard to the farms. His evidence is nolonger of importance.

On appellant's side the only witness called was Dr J B R Findlay, a technical expert in thefield of herbicides in the employ of Monsanto SA (Pty) Ltd, a subsidiary of MonsantoIncorporated of the United States of America. Monsanto manufactures Sting and distributes itthrough the appellant. Dr Findlay deposed to the ingredients and qualities of Sting, its uses andthe methods appropriate for its application. Appellant's two representatives, Du Toit and DeWet, who played important roles in the negotiation and/or conclusion of the contract, were notcalled as witnesses. There is no indication that they were not available to give evidence.


I turn now to the questions posed above.

The representation (statement)

In evidence La Grange stated that he first heard about Sting early in 1985. His informantwas De Wet, who visited him on the farm. De Wet told him that Sting was cheaper thanGramaxone and Reglone, which he was using at the time. On the evening of 30 June 1985 andon instructions from respondent, La Grange attended a farmers' meeting at Brandvlei Keldersat which both De Wet and Du Toit were present. Du Toit, appellant's technical adviser in thearea, addressed the meeting on the merits of Sting and demonstrated its application andeffectiveness by means of photographic slides. He stated that Sting could safely be sprayedfrom the air by means of a helicopter and that this method was much quicker than applicationfrom the ground. With reference to one of the slides Du Toit pointed to the cut-off line along theedge of the area of application and stated that 'they' (meaning appellant) had done tests todemonstrate how accurately the herbicide could be sprayed and controlled

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where there were adjacent crops. La Grange, conscious of the fact that on the respondent'sfarms the vineyards were surrounded by cash crops, asked Du Toit after the slide presentationwhat the maximum distance was over which one could expect damage outside the vineyardwhich was being sprayed. With reference to the slide Du Toit assured him that, though thecut-off line would not be a straight line, it would not be more than three to five metres beyondthe edge of the vineyard. La Grange regarded this as the most important statement made thatevening. With regard to the modus operandi of application, Du Toit told the farmers that it wouldbe by means of a helicopter, that appellant would make all the necessary arrangements andthat all that the farmer had to do was to provide persons with flags in order to act as markers forthe guidance of the helicopter pilot during the spraying operation. That evening Du Toit gave noindication of any dangers inherent in the application of Sting from a helicopter.

La Grange thereafter reported on this presentation at a weekly Wednesday meeting on thefarm. Respondent's reaction was favourable, but he was somewhat concerned about thedanger of damage to cash crops, particularly in a certain portion of Jasonskloof, and it wasdecided to ask De Wet to come to look at conditions on the farm.

Shortly thereafter, at La Grange's invitation, De Wet came to Jasonskloof. La Grange toldhim that 'they' were interested in spraying their vineyards from the air with Sting. Quantities andcosts were discussed. De Wet was taken around the farm and shown the cash crops adjacentto the vineyards. La Grange asked his opinion as to the possibility of damage to these cashcrops. De Wet assured him that there was no cause for concern and he repeated Du Toit'sassertion that there would be a cut-off line three to five metres beyond the edge of the vineyard.He stated further that 'they' would be present at the spraying operation and would make all thearrangements ('alles reël'). La Grange understood this to mean that appellant's employeeswould be in charge of the whole operation and would exercise control over the mixing of theSting and its application.


On the evening of Friday, 16 August 1985 De Wet telephoned La Grange and told him thathe was coming to spray the following morning. At 6 am on the Saturday De Wet againtelephoned to find out about the weather. On being told that it was a fine, still day, heannounced that he was coming. In due course, he arrived, as also did a helicopter owned andoperated by Court Helicopters (Pty) Ltd. It was decided to commence with Ratelsfontein,followed by Kykuit and ending with Jasonskloof. As far as La Grange was concerned, De Wetwas in charge ('die leierfiguur') that day. He gave instructions to La Grange in regard to thetransportation and placing of markers and to the helicopter pilot in regard to the sprayingprocess. In this respect his evidence is confirmed by that of Frost Jnr who was present onJasonskloof on the Saturday morning and testified as follows:

'Did Mr De Wet at that time give you any indication as to the supervision and/or otherwise and his presence onthe farm at that time and during the spraying operation? - He said to me - well, as I understood it from him, hesaid, we've got nothing to worry about, that he will take care of everything.

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Right? - By that I understood - well, that was to see that - mixing of the poison, checking that the pilot would flycorrectly, apply it correctly and that there would be no damage.

Court: Did the discussion take place in the context of the possibility of damage? - That's correct.'

The Court a quo found that the representations pleaded by respondent had beenestablished. In view of the evidence of La Grange and the absence of any evidence from DuToit or De Wet to controvert what he said, this finding seems to me to be unassailable and I didnot understand appellant's counsel to question it in his oral argument.

What appellant's counsel did question, however, was whether appellant's representativesever undertook to provide supervision and control over the spraying operation and whether DeWet in fact did exercise such supervision and control. (As I have indicated, this was also deniedon the pleadings.) In my view, insofar as it may be relevant to do so, these issues should bedecided in favour of the respondent. While it is true that the evidence does not establish thatthe words 'supervision' or 'control' were expressly used in the contractual discussions, it wasclearly implicit in what was said that appellant would supervise and control. La Grange was toldthat appellant would 'alles reël'; that the appellant's employees would be there on the day; andthat respondent merely had to supply the markers and had nothing else to worry about.Moreover, in fact appellant's employees had, or purported to have, know-how and experienceconcerning the application of Sting from the air, whereas respondent and his employees hadnone and were not in a position to control the operation. The uncontradicted evidence of LaGrange and Frost Jnr of the role assumed and played by De Wet on 17 August 1985establishes that the latter did supervise; and this strengthens the conclusion that this was hisagreed function.

Falsity of the representation (statement)

Appellant's counsel submitted that there was no, or insufficient, evidence to show that therepresentations made, or any of them, were false. I do not agree. What these representations,


in their cumulative effect, amount to is the following: that despite the presence of cash crops(vulnerable to Sting) on adjacent lands Sting could be applied to the vineyards from the airwithout danger to such cash crops because, when so applied, there was a cut-off line three tofive metres from the edge of the vineyard beyond which the Sting would not fall. And here Iwould state in parenthesis that this representation satisfied respondent because, apart fromone small land where special precautions would have to be taken, there was sufficient spacebetween the vineyards and adjacent lands to accommodate the strip alongside the vineyard upto the cut-off line. In my opinion, the falsity of this representation may be deduced from:

(1) the actual damage sustained by cash crops;

(2) the evidence that the helicopter pilot performed his duties satisfactorily;

(3) the evidence in regard to 'drift' given by Myburgh;

(4) the concessions made by Dr Findlay under cross-examination.

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As to (1), La Grange gave evidence as to the damage to adjacent cash crops whichbecame apparent some weeks after the spraying operation and which it is common cause wascaused by Sting then sprayed. The wheat turned yellow in elongated flame-like patches; andthe onion plants changed colour and became deformed. Reading La Grange's evidence inconjunction with the large-scale map of the farm and its lands (RSC 3), it is evident that tocause the damage which eventuated some of the Sting sprayed must have fallen up to 100metres and more from the edge of the vineyards into the adjacent lands.

As to (2), it was suggested in argument by appellant's counsel that this damage may havebeen caused by pilot error. There is no evidence to support this. On the contrary, theuncontradicted evidence of La Grange was that the pilot appeared to be doing his jobefficiently, that he flew about two metres above the vine trellises and that De Wet expressedcomplete satisfaction with the pilot's performance.

As to (3), Myburgh's evidence was to the effect that natural air turbulence and turbulenceoccasioned by the helicopter could cause some of the Sting herbicide released from the sprayapparatus to move upwards and to remain in suspension as small droplets for some time.Factors influencing how long such droplets would so remain in suspension would include thepresence of an inversion layer, the air temperature gradient, how high they were carried up intothe air in the first place, natural air turbulence, the size of the droplets, and the degree ofhumidity (which may also affect the size of the droplets). Myburgh further explained that evenon what appears to the layman to be a calm day there is a certain measure of air movement.The weather bureau regards air movement of one metre per second (3,6 km per hour) as'calm'; but even air movement of 0,5 metres per second would mean that in the space of oneminute the air would be carried a distance of 30 metres. This lateral air movement was referredto in evidence as 'drift'. Droplets of Sting held in suspension would tend to be caught up in andfollow this drift. In the light of these factors Myburgh stated that he would not be able to aver


that it would be safe to apply Sting to small vineyards where there were adjacent cash crops: itwas almost certain that some of the Sting would fall on the cash crops.

And as to (4), Dr Findlay conceded under cross-examination that the damage to the onionland could be attributed to 'drift of some form or another'. He also stated, both inevidence-in-chief and under cross-examination, that in his view 70 per cent of the farmvineyards could be safely sprayed from the air. It would follow that in his view 30 per cent of thevineyards could not safely be sprayed. It appears, however, that this was a 'calculated guess'because he had not seen four of the vineyards.

In all the circumstances, I am satisfied that the falsity of the representation was proved.

Legal duty (unlawfulness)

In my opinion the following facts and circumstances placed upon appellant, acting throughits representatives Du Toit and De Wet, a legal duty, before making the representation, to takereasonable steps to ensure that it was correct:

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(a) the contractual relationship between the parties and the fact that the representationwas material and induced the respondent to agree to purchase Sting and to contract tohave it applied from the air by helicopter;

(b) in the circumstances under which the representation, especially that aspect of itrelating to the so-called cut-off line, was initially made by Du Toit and later repeated byDe Wet, it must have been obvious to appellant's representatives that respondent wasplacing reliance on what was told him, that the correctness of the representation wasof vital importance to respondent and that if it were incorrect the execution of thecontract could cause him serious damage; and

(c) the representation related to technical matters concerning a new product about whichrespondent as a lay customer would necessarily be ignorant and appellant as thedistributor would, or should, be knowledgeable.

A failure on appellant's part to take reasonable steps to ensure the accuracy of itsrepresentation (ie negligence) would consequently render its conduct unlawful.

Negligence

According to La Grange, Du Toit stated at the farmers' meeting at Brandvlei Kelders thatthey (meaning the appellant) had done tests to establish how accurately spraying could be donefrom the air in the event of there being adjacent crops and that these had shown that there wasa definite cut-off line. The application of the herbicide could thus be controlled. It appears fromthe evidence of Olivier that this was untrue. At that stage no tests had been done to determinedrift action in the case of aerial application. This was not disputed by appellant.


In the circumstances the appellant's representatives had no reasonable basis for makingthe representation and their actions in doing so were negligent, to say the least.

Causation

This is not really in dispute. The evidence clearly establishes that but for themisrepresentation made by appellant's representatives respondent would not have gone in forthe application of the Sting herbicide from the air by helicopter and consequently would nothave sustained the damage caused by aerial application to his cash crops. There is thus adirect factual link between the misrepresentation and the loss suffered. By reason of the factsthat respondent was technically a lessee of the farms and that the crops did not become hisproperty until separated from the soil, there might be some debate in classifying respondent'sloss: whether it be damage to property or economic loss. But this is of no consequence. Ineither event respondent's claim is covered by the Aquilian action.

For these reasons I am of the view that the decision of the Court a quo was the correct one.

The appeal is dismissed with costs, including the costs of two counsel.

Friedman JA and Preiss AJA concurred.

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Judgment

Kumleben JA: I share the view that the appeal ought to be dismissed, but not on the groundthat there was a negligent misstatement. I do, however, agree with the conclusion that anegligent misstatement inducing a contract does give rise to a cause of action in thecircumstances, and for the reasons, stated in the majority judgment. To succeed on this causeof action the respondent had to prove that the allegations relied upon were incorrect statementsof existing fact or an expression of an incorrect opinion. For the purposes of this case thedistinction between these two forms of misrepresentation is immaterial.

The representations relied upon were first made by Mr Du Toit to farmers, including Mr LaGrange, at the meeting held at the Brandvlei Kelders and subsequently by Mr De Wet to LaGrange on the farm Jasonskloof. In substance they were the same. At Brandvlei Kelders DuToit, a technical adviser of the appellant, explained with the use of colour slides the aerialapplication of Sting by helicopter. In doing so, and in answer to questions, he said that it wascheaper than ground application by means of a tractor; that it was very safe; that tests hadbeen carried out to determine the accuracy of spraying by helicopter; that 'they' (Bayers) werein a position to control and supervise its application; and that if a vineyard is thus sprayed themaximum spread of the herbicide beyond the target would be three to five metres (the 'statedlimit'). This assurance was repeated by De Wet to La Grange at Jasonskloof:

'Hy het my verseker ek moenie bekommerd wees nie. Die maksimum skade sou wees drie tot maksimum vyfmeter, soos mnr Du Toit ook by die vergadering gesê het. Hy het gesê ons moenie bekommerd wees nie, hullesal alles reël, voor hy daar weg is.'


It was La Grange's understanding, on the strength of what De Wet had told him, that theappellant would supervise the spraying so that the stated limit would not be exceeded. As heput it:

'Dat hulle sal sorg dat hierdie produk op so 'n manier toegedien word op my plaas dat daar nie skade verder asvyf meter sou wees nie en dit is hoekom die vrae aan mnr Hein du Toit so gestel is en hy het geweet wat rondomdaardie blokke is.'

Thus the uncontradicted evidence fully substantiated the representations pleaded

'. . . dat die beste metode vir die toediening van die produk Sting vanuit 'n helikopter sou wees;

. . . dat indien Sting aldus toegedien word daar 'n duidelike afsnylyn sou wees wat sou verhoed het dataangrensende gewasse beskadig sou word weens hierdie metode van toediening, en dat alhoewel nie 'n reguitlyn nie, hierdie afsnylyn 'n maksimum van drie tot vyf meter vanaf die rand van 'n blok wingerd, wat aldus gespuitword, sou wees;

. . . dat verweerder alles sou reël met betrekking tot sodanige toediening'.

Against the background of this evidence it is to my mind clear that the assurance given inrespect of the stated limit could not have been intended to be, or understood to be, anunqualified one, namely that, whatever the circumstances, the stated limit would not beexceeded. If any of the listeners at the Brandvlei Kelders meeting had asked Du Toit whetherthis assurance held good should the application take place in windy conditions, or should Stingbe discharged from too great a height or with the ejecting

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nozzles not properly set, the reply would surely have been: 'Obviously not. I did not trouble tosay that; it is too clear.' The same answer would have been given by De Wet had La Grangeput any such question to him. It is to my mind not a case of Du Toit or De Wet failing to qualifyan absolute statement: the qualification is inherent. It is moreover confirmed by the stress laidon the fact that the appellant would and should supervise the operation. In the nature of thingsno reasonable limit could be assured in absolute terms. In the appellant's heads of argument itis submitted that 'the representation could only have been made in the context of the Stingbeing properly applied'. I agree. If the reasoning thus far is sound it follows that to prove thefalsity of the statement it must be shown that in favourable weather conditions and with properapplication and supervision the spray could not be contained within the stated limit.

The evidence makes it plain that Sting applied by helicopter could go beyond the intendedtarget and cause damage as a result of one or more of the following extraneous factors:weather conditions; air movement primarily caused by wind; application above the prescribedheight; incorrect adjustment of the spray nozzles resulting in smaller droplets thanrecommended; and incorrect application on the part of the pilot by failing to ensure that thespray mechanism is turned on and off at the appropriate times. Avoidance of damage due tosuch causes thus depends upon the knowledge and judgment of the supervisor and the skilland experience of the pilot. There was no direct evidence tendered - as one might haveexpected there to have been - to prove that Sting had an innate propensity to drift beyond the


stated limit if applied by helicopter. This is deduced from the evidence considered in themajority judgment under four heads. I turn to them.

(1) The damage as such cannot point to any inherent unsuitability in the product renderingits application by helicopter dangerous or ill-advised. The damage could as feasibly have beencaused by one or more of the extraneous causes to which I have referred.

(2) As stated in the majority judgment, no evidence was adduced indicating that lack ofproficiency on the part of the pilot caused (or contributed to) the damage. La Grange said thatDe Wet told him that he (De Wet) was satisfied from what he had seen of the aerial sprayingthat the pilot was carrying out this operation satisfactorily. This answer could only havereference to what De Wet had observed up until the question was put to him and there is noevidence to indicate at what stage this answer was elicited. Moreover, it would not necessarilyinclude confirmation that the spray nozzles were correctly set unless their setting could bedetermined from the ground whilst the actual spraying took place. In any event this answer canonly serve as proof that there was no pilot error if De Wet's expression of opinion is to beaccepted as accurate. In the circumstances, although not contradicted, I doubt that thisevidence of La Grange eliminates pilot error as a cause, or as the cause, of the damage.

(3) Mr Myburgh, a climatologist in the employ of the Department of Agriculture and WaterAffairs, was called as a witness by the respondent. He has both theoretical and practicalknowledge of air movement but in no way professed to be an expert in the field of aerialcrop-spraying. He

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visited Jasonskloof and other farms where such spraying had caused damage and saw avideo-tape recording of crop-spraying from a helicopter.

Various factors, he explained, influence the degree of air movement and the period duringwhich a droplet of herbicide (or any other particle for that matter) remains in suspension. Suchfactors are its size (and, as other evidence indicated, its density); the height at which it isreleased; wind; turbulence due to the upward movement of warm air and the operation of thehelicopter; and the relative humidity (the lower the degree of humidity, the greater the rate ofevaporation and the rate of decrease in the size of a droplet). Myburgh also said that there isalways some air movement even on what would normally be described as a calm day and thatthe Weather Bureau regards a day on which air movement does not exceed 1 metre persecond as a 'calm day'. I mean no disrespect in commenting that there is little in his testimonywhich really amounts to expert evidence. His contribution, the gist of which I have summarised,is largely a matter of common knowledge and inferences which any layman would draw. TheWeather Bureau's classification of what is to be regarded as calm weather with reference to airmovement has in my view no bearing upon an enquiry concerned with the movement of aparticular substance which was in suspension on a particular day.

Myburgh was also asked about the weather conditions on the morning in question,Saturday, 17 August 1985. He referred to the records kept at two weather stations more or less


on opposite sides of Jasonskloof and each about 15 kilometres from the farm. They wereequipped with a maximum and minimum thermometer and an instrument which records whatthe witness described as the 'windrun' over a 24-hour period. This device did not record thewind-speed at any particular time over such period. By use of these instruments records werekept of the maximum and minimum temperatures and the wind velocity over a 24-hour periodfrom 8 am to 8 am. Clearly these statistics could not possibly serve to prove the weatherconditions at the time of spraying on Jasonskloof. The same must be said of even more generalhearsay evidence led from this witness relating to what the weather forecast was at D F MalanAirport (some 80 kilometres from Jasonskloof) for the wind and weather conditions in theWestern Cape on that day.

In the course of his evidence Myburgh was asked to make some general observations onthis form of aerial crop-spraying. For instance, in his evidence-in-chief there was this exchangeof question and answer:

'Ek wil net vir u dit vra. Gestel mnr Myburgh in 1984 en/of vroeg in 85, is u geneem na 'n perseel toe wat gespuitword uit 'n helikopter soos wat ons dit gesien het op die Monsanto video en u is na aanleiding daarvan gevra uit'n weerkundige oogpunt, of mens hierdie produk uit 'n helikopter op klein lande waar daar aangrensendekontantgewasse is wat beskadig mag word, kan toedien, hoe sou u na aanleiding van wat u gesien het en ukennis as weerkundige, gereageer het op daardie navraag?

. . .

U Edele, ek sal baie bang gewees [het] om so 'n bewering te maak dat hy absoluut veilig sal wees.

Hoekom? - Omdat as die stof, wanneer hy op 'n plant kom kan skade aanrig, is die - kan 'n mens amperaanneem dat daar sal van die stof op nabygeleë plante te

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lande kom. Die omvang van skade sal dan net afhang van die konsentrasie, wat 'n mens nie sal kan voorspelmet baie groot sekerheid nie en dan ook die kragtigheid van die stof om dood te maak.

Mnr Nelson: Dan weersomstandighede self? - Wel, beslis weersomstandighede ja.'

And under cross-examination:

'. . . (D)ie hele strekking van my getuienis is dat daar altyd verwag sal kan word dat daar 'n mate van "drift" salvoorkom en dat 'n mens onder geen omstandighede kan sê dat omdat op daardie oomblik die "drift" so min wasdat dit nie saak gemaak het nie dit onder ander omstandighede so sal wees nie. I'm sorry? - Dit is die strekkingvan my betoog.

So what you are saying is because there is always the possibility of some drift, therefore you should never use ahelicopter to spray the fields? - Wel, jy kan nooit enige apparaat gebruik wat nie gunstig is of wat - laat ek dit sostel, 'n helikopter sal waarskynlik - hoe hoër jy die goed vrylaat soos ek netnou gesê het, hoe groter sal diewaarskynlikheid van "drift" wees maar dit het nie gegaan daaroor nie. Dit gaan as jy die - uit 'n helikopter waar jydit hoog vrylaat teenoor waar met 'n trekker waar jy dit laag vrylaat sal jou kans op "drift" minder wees - andersteom ek bedoel.'

Apart from the fact that, as I have said, he has no expert knowledge of crop-spraying, this sortof evidence in my opinion cannot carry weight.


In the result I do not consider that reliance ought to be placed on the evidence of thiswitness to prove that the statement was false.

(4) It remains to examine the evidence of Dr Findlay. He was the only witness called onbehalf of the appellant. After graduating he was employed as an entomologist by a Statedepartment involved with the registration of insecticides and the instructions and other details tobe stated on the labels of such products. At a later date he was employed by an Americancompany called Monsanto. It manufactured Sting, which was then supplied to the appellant,amongst other distributors. Sting was registered in March 1985 after certain tests on theeffectiveness and safety of the product had been carried out for about two and a half years.

Towards the conclusion of his evidence-in-chief Findlay was asked about the suitability ofapplying Sting to vines on Jasonskloof from a helicopter. It soon emerged that he had notcarried out the necessary investigation to be able to deal authoritatively with this aspect of thecase. His evidence is as follows:

'Mr Bowman: Right. Now if I were to ask you whether that farm that we went to see, Jasonskloof, whether therecommendation could suitably be made that its vineyards be sprayed by means of a helicopter, what would yousay? - Certainly I think the majority of it can. There're one or two areas that I think you would need to think veryclosely about. I wouldn't take the decision to. . . .

Well let's deal with it directly.

Court: You're just talking about vineyards now, right? The too much spray in the vineyards? - Well the areas thatwe saw that are marked yellow on the map of the farm.

Yes, those are vineyards, yes.

Mr Bowman: Can we deal with those areas with which you would have some difficulty. You have a reference tothe map which is behind you or as page 1 of the bundle - Right. I have a little one here, I assume it's the . . .

Which areas would you have some difficulty with making the recommendation for? - I think as previously wasmentioned I think where there're power lines and telephone lines, you know, that's always a problem in any aerialapplication see.

1991 (4) SA p580

KUMLEBEN JA

Court: Well nobody has really yet mentioned it being a problem. So you say there's a problem? - Well its notinsurmountable. And certainly I think that field No 2, that little one where there were - next to the river.

Mr Bowman: Next to the river? - River, where there were the big wattle trees and there were two power linescrossing. I wouldn't recommend that for spraying. . . .'

This evidence is to be read in conjunction with the map (RSC 3) on which eight vineyards andsix lands adjoining or close to them are depicted. Vineyard No 2 has five segments as shownon this map. This vineyard taken as a whole cannot be described as 'that little one': at leastthree others are smaller and three larger. His evidence suggests that he was referring to asegment, No 26 (0,3 hectares in extent), of this vineyard No 2. On further questioning by theCourt he said:

'So which was the other vineyard you were unhappy with? Because of power lines? - There's some corners


where, you know, there's telephone wires and power lines crossing, which I think you can't expect a helicopter toget in there.

Mr Bowman: Get into the corners or get into the vineyard as a whole? - I didn't see all the vineyards, the ones atthe top, the six, seven and eight, but I would guess that a helicopter could probably treat, I don't know, 70, 75 percent of the areas we saw excluding number two.

Court: So if you had your way you - forget anybody else now - you would say to them, we can do 70, 80 per centaerially? 70 . . .? - Ja, right. . . .

All right, roughly 70. - I hazard a guess on that.

Yes okay. Well nobody's holding you to any exactitude. Roughly 70 per cent, and the rest you must go and do byconventional methods. Is that what you would do? - You see that would be again determined by the pilot becausehe's going, as he's flying then he's going to say, well look, he can't get as close to that power line as he thoughthe could.'

And under cross-examination:

'Mr Nelson: Would you just turn to document No 1? - That's a map?

Yes. You indicated in your evidence that you would recommend that approximately 70 per cent of this farm besprayed from the air if you were making a recommendation. Is that correct? - By let's say a sort of calculatedguess. I haven't seen all the lands.'

(I emphasise.) The further questioning under cross-examination fails to elucidate his evidencebut certainly confirms that it was vague and speculative. The only reliable inference to be drawnis that Findlay had not really applied his mind to what vineyards or portions of a vineyard, if any,ought not to have been sprayed by helicopter due to the presence of obstructions such as treesand power lines. His evidence, as he more than once said or implied, was largely guesswork.When asked whether the damage could have been caused by spillage rather than drift he saidthat he would have expected the latter to have been the cause, but added:

'You know, I am not all that familiar with the pattern of the damage and all that, so I don't know that I am -whatever I say there is, I think, a bit speculative.'

But even on an interpretation of his evidence most favourable to the respondent it does notprove the falsity of the representation. It establishes at best that certain vineyards, or sectionsthereof, ought not to have been subjected to aerial spraying and that proper supervision on thepart of the appellant, or the exercise of sound judgment on the part of the pilot,

1991 (4) SA p581

KUMLEBEN JA

would have insured that this risk was not taken. The stated limit, as I have said, could neverhave been intended to apply if such obstructions obliged the pilot to discharge the Sting from anexcessive height.

Finally, it ought to be mentioned that, perhaps because the amount of damages was not indispute, exact details of the extent and locality of the cash crops affected were not furnished.These facts cannot be determined from the record with any degree of accuracy. The damagewould appear to have been erratic rather than a general or reasonably consistent drift of the


herbicide beyond each vineyard and the stated limit on its perimeter. This, it would seem, lendssome support - I put it no higher - to the view that what I have referred to as extraneous factors,or one such factor, probably caused the damage.

The question of the falsity of the representation is dealt with in the following two paragraphsof the judgment of the Court a quo:

'It appeared from the evidence of Olivier, a former employee of defendant, and of Findlay, an expert in theemploy of Monsanto, the manufacturer of "Sting", who testified on behalf of defendant, that at no stage haddefendant carried out tests with a view to determining whether or not "Sting" could be applied accurately. Theone and only test application of this herbicide was done in 1984 on the farm of a Mr Wium, but this was notperformed with a view to ascertaining the accuracy whereunder or the circumstances in which it would be safe toapply the product aerially.

Drift damage is not uncommon and can occur even in calm conditions. This was borne out by the testimony ofFindlay and Myburgh, an agricultural meteorologist employed by the Department of Agriculture and Water Affairs.Findlay, who clearly has a great deal of expertise in this field, indicated that he would not have recommendedaerial application on 30% of the lands inspected by the Court during the inspection in loco. Furthermore, asappeared from the evidence of both Findlay and Myburgh, it is wholly inappropriate, and possibly evenirresponsible, to predict the extent of drift which will occur in a given instance with reference to the absence ofdrift in another area at another moment in time.'

As to the first paragraph, the fact that no tests were carried out takes the matter no further. Astatement that tests were conducted is not one of the representations pleaded. Apart from that,the failure to carry out tests beforehand cannot contribute to the conclusion that the stated limitassurance was false. As to the second paragraph, I have given my reasons for concluding thatthe falsity of the statement cannot be founded on the evidence of Findlay or Myburgh.

In the result I am unable to conclude that the factual basis has been laid for a cause ofaction founded on negligent misstatement.

One of the alternative causes of action relied upon by the respondent was breach ofcontract. The relevant pleadings in this regard are contained in two separate paragraphs of theparticulars of claim.

In para 3 the respondent alleges that in August 1985 he, represented by La Grange,entered into an (express) oral agreement with De Wet, acting for the appellant, in terms ofwhich the respondent undertook to buy Sting from the appellant for its application by helicopterto the vineyards on, inter alia, Jasonskloof; the appellant was to make all the necessaryarrangements in this regard; and it undertook to exercise the necessary supervision andcontrol, through its servants, over the mixing and application of the herbicide to ensure thatcash crops on the adjoining

1991 (4) SA p582

KUMLEBEN JA

lands would not be damaged. In return the respondent was to pay for the Sting used and thereasonable costs of applying it. Such payment would be made by debiting these costs to therespondent's account with his agricultural co-operative society, which would in turn make thenecessary payments on his behalf. In the plea the sale, supply and method of payment of the


Sting are admitted. However, it is alleged that the appellant undertook, on behalf of therespondent and as his agent, to arrange for its application by helicopter. The other averments inthis paragraph are denied.

In para 8.1. of the particulars of claim the respondent alleges, in amplification of theagreement pleaded, that the appellant expressly, or alternatively tacitly, warranted that Stingcould be applied by helicopter to the various vineyards on Jasonskloof without this method ofspraying causing damage to the existing cash crops on adjoining lands; and that the appellant'sstaff had the necessary skill and experience to ensure such safe application.

Thus, with some duplication, the term and warranty relied upon were (i) that the appellantundertook to supervise and control the proposed form of application in such a way as wouldensure that the adjoining cash crops were not damaged - at least not beyond the stated limit;and (ii) that the appellant warranted that Sting was a herbicide suited for aerial application byhelicopter and in particular that this method could be successfully used to spray the vineyardson Jasonskloof.

As to (i) above there can, in my view, be no doubt that the duty to supervise was a tacit, ifnot an express, term of their agreement; and that to supervise obviously means to do soproperly and effectively. Though the respondent was not a direct party to the agreement, hisunderstanding was that the appellant would control the way in which the herbicide was to beapplied: 'would do everything', as the respondent put it. According to La Grange at the meetingof the farmers and later on Jasonskloof, De Wet gave the assurance that the appellant wouldmake all the arrangements and supervise the operation, implicitly in a proficient manner. Whenthis question was canvassed in cross-examination the evidence of La Grange was to this effect:

'Bayer, dit wil sê mnr De Wet al weer, het dus nooit vir u gesê in terme, hy het nie die woorde gebruik, dat hulleenige beheer of kontrole sal uitoefen oor die toediening van die Sting nie? - Hy het vir my gesê hulle salteenwoordig wees, ek moet nie bekommerd wees nie en weer genoem hulle reël alles.

Maar wat u verstaan het met wat hy gesê het, is dat hulle daardie kontrole of beheer sal uitoefen? - Hulle sou naalles kyk.

Dit is wat u ook op bl 301 van die oorkonde gesê het, Bayer het vir my laat verstaan hulle reël alles. Wat ekverstaan as iemand vir my sê hy sal alles reël, as mnr Frost vir my sê, spuit Sting op Jasonskloof en ek sê virhom ek sal alles reël, dan word daar van my verwag dat ek honderd persent kontrole uitoefen oor hoe daardie gifgemeng en toegedien word in die wingerd en as daar enige fout is, dan sal ek die verantwoordelike wees wat ditgereël het. Dit was u verstand van die posisie, dit is nie wat mnr De Wet vir u gesê het nie? - Ek het aangeneemomdat ek hom die blok gaan wys het waar die gevaarstrook was, het hy my laat verstaan dat hulle deskundigesis in die gebied waar daardie produk neergesit word. . . .

Maar hy het nooit vir u gesê dat hulle, Bayer, die toesig en beheer oor die metode van die bespuiting sal uitoefennie?

1991 (4) SA p583

KUMLEBEN JA

Hof: Hy het dit in soveel woorde gesê, dit is eintlik die vraag? - Hy het dit kort maar kragtig gesê.'

That an undertaking to supervise was a term of their agreement is of course borne out by whatactually took place. De Wet supervised the operation throughout and La Grange, even had he


been asked to do so, lacked the necessary knowledge. All that La Grange was required to dowas to provide labourers as markers.

In my view the warranty ((ii) above) was likewise proved. La Grange explained that the mostimportant question asked at the farmers' meeting was whether there would be peripheraldamage since all the farmers present had vines interspersed with other crops. The assuranceof the stated limit was thus of vital concern to them. Later on the farm De Wet and La Grangeinspected the areas which were to be sprayed and De Wet was especially shown those landswhere there was no road separating a vineyard from an adjacent land with cash crops on it. Theassurance of the stated limit was again given. In Naude v Harrison 1925 CPD 84 at 90 it isstated that:

'We have to ascertain whether both parties intended to contract that the thing sold should be as represented,whether the seller intended to bind himself in law that the thing would comply with what he had stated, or at anyrate so acted as to estop himself from denying such intention. It is not sufficient that the purchaser relied on thestatement - that may be enough for a dictum, but not for a promissum - it must also be shown that the sellercontracted that the statement would be made good.'

The warranty was not expressly given in that at no stage did De Wet in so many words say thatthe appellant 'warranted' or 'guaranteed' that the stated limit would not be exceeded. What therespondent relied upon was a tacit term to that effect. The degree of proof required to prove atacit agreement, and a fortiori a tacit term or warranty forming part of an agreement, isdiscussed in Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel Melamed andHurwitz v Vorner Investments (Pty) Ltd 1984 (3) SA 155 (A) at 164G-165F:

'As to tacit contracts in general, in Standard Bank of South Africa Ltd and Another v Ocean Commodities Inc andOthers 1983 (1) SA 276 (A) it was stated (at 292B-C):

"In order to establish a tacit contract it is necessary to show, by a preponderance of probabilities, unequivocalconduct which is capable of no other reasonable interpretation than that the parties intended to, and did in fact,contract on the terms alleged. It must be proved that there was in fact consensus ad idem. (See generally Festusv Worcester Municipality 1945 CPD 186 at 192-3; City of Cape Town v Abelsohn's Estate 1947 (3) SA 315 (C) at327-8; Parsons v Langemann and Others 1948 (4) SA 258 (C) at 263; Bremer Meulens (Edms) Bpk v Floros &Another, a decision of this Court reported only in Prentice Hall, 1966 (1) PH A36; Blaikie-Johnstone v Holliman1971 (4) SA 108 (D) at 119B-E; Big Dutchman (South Africa) (Pty) Ltd v Barclays National Bank Ltd 1979 (3) SA267 (W) at 281E-F; Muhlmann v Muhlmann 1981 (4) SA 632 (W) at 635B-D.)"

This is the traditional statement of the principle, as is borne out by the cases cited; and it was accepted as beingcorrect by appellant's counsel. The correctness of this general formulation has nevertheless been questioned onthe ground that it would appear to indicate a higher standard of proof than that of preponderance of probability asregards the drawing of inferences from proven facts (see Christie The Law of Contract in South Africa at 58-61; cfalso Fiat SA v Kolbe Motors 1975 (2)

1991 (4) SA p584

KUMLEBEN JA

SA 129 (O) at 140; Plum v Mazista Ltd 1981 (3) SA 152 (A) at 163-4; Spes Bona Bank Ltd v Portals WaterTreatment South Africa (Pty) Ltd 1983 (1) SA 978 (A) at 981A-D). In this connection it is stated that a Court mayhold that a tacit contract has been established where, by a process of inference, it concludes that the mostplausible probable conclusion from all the relevant proved facts and circumstances is that a contract came intoexistence (see Plum's case supra at 163-4). It may be that in the light of this the principle as quoted above from


Standard Bank of SA Ltd v Ocean Commodities Inc (supra) requires reformulation. In this regard, however, thereis this point to be borne in mind. While it is perfectly true that in finding facts or making inferences of fact in a civilcase the Court may, by balancing probabilities, select a conclusion which seems to be the more natural orplausible one from several conceivable ones, even though that conclusion is not the only reasonable one,nevertheless it may be argued that the inference as to the conclusion of a tacit contract is partly, at any rate, amatter of law, involving questions of legal policy. It appears to be generally accepted that a term may not betacitly imported into a contract unless the implication is a necessary one in the business sense to give efficacy tothe contract (see Van den Berg v Tenner 1975 (2) SA 268 (A) at 276H-277B and the cases there cited). Byanalogy it could be said that a tacit contract should not be inferred unless there was proved unequivocal conductcapable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on theterms alleged. Be that as it may, this is not the occasion to resolve these problems. The point was not arguedand, on the view I take of the facts, it is not necessary to decide what real difference, if any, there is between theviewpoints outlined above or to express a preference for one or the other.'

The approach in Plum v Mazista Ltd has been endorsed by this Court in Mühlmann v Mühlmann1984 (3) SA 102 (A) , a judgment delivered on 30 September 1983 but only reported in the lawreports just short of a year later. On either approach I consider that the tacit warranty wasproved. The test is an objective one. Spraying by tractor was the conventional and safe methodhitherto used by farmers in that area on their vineyards. The saving in time and money gainedby converting to aerial spraying would never have been contemplated in the absence of aguarantee that, beyond that stated limit, any damage to other crops could and would beaverted. In the absence of any such warranty the danger of consequential loss, even as aremote risk, far outweighs the advantages of this proposed form of application. There can belittle doubt that this was fully realised by both parties when the assurance of the stated limit wasrepeatedly sought and given and when the agreement was concluded and carried out.

In considering the remaining question, whether there was a breach of the agreementpleaded, one must in the first place examine the position of the pilot. It was submitted on behalfof the appellant that he was the agent of the respondent or at least not the servant or employeeof the appellant for the purpose of the spraying operation. The evidence shows that he was adhoc its servant. In Ongevallekommissaris v Onderlinge Versekerings-Genootskap AVBOB 1976(4) SA 446 (A) at 456G-H it was stressed that

'. . . die kwessie van beheer gewoonlik die sterkste oorweging is by die beslissing van die vraag of 'n besondereverhouding dié van heer en dienaar is of nie, maar dat daar ook ander geldige oorwegings kan wees en dat elkebesondere geval in die lig van sy eie omstandighede beslis moet word'.

Everything points to the fact that the pilot was exclusively under the control of De Wet duringthe entire operation. He was under De Wet's

1991 (4) SA p585

HEFER JA

orders and exercised no independent judgment at any stage, though obviously in the carryingout of instructions his experience and skill as a pilot was involved. Neither the respondent norLa Grange had any part in the selection of the pilot. They did not know his identity, or even thename of the crop-spraying firm the appellant had engaged, until the helicopter arrived on thescene. Had the pilot been in any way their responsibility this would not have been the case. Thefact that the respondent was to pay for the costs of the spraying direct to the aircraft firm andthat such fee was not part of a composite charge made by the appellant is not in the


circumstances of any importance. In carrying out this operation the pilot was clearly on thesame footing as any person in the permanent employ of the appellant.

It remains to consider whether there was a breach of the term and warranty pleaded. Indiscussing the evidence in relation to the other cause of action (negligent misstatement) thepossible reasons for the damage to adjoining lands were listed. In sum, it could only have beencaused by Sting being inherently unsuitable for aerial spraying; pilot error, which would includethe incorrect setting of the nozzles; the unsuitability of the farm or portions of it to be sprayed inthat manner as a result of the layout of the lands and vineyards or the presence of obstructions;or lack of supervision on the part of De Wet, for instance, in allowing the spraying to take place,or to continue, in unfavourable weather conditions. Prima facie, in fact as a probability, one ofthese causes, or more than one, operating jointly or intermittently, must have been responsiblefor the damage. It was not for the respondent to attempt to identify the cause or causes inrespect of the damage to each adjoining land. This was, or ought to have been, within thepeculiar knowledge of De Wet or the pilot. Neither was called as a witness to explain theprecise cause or to suggest any other which would exonerate the appellant for what mustotherwise be taken to have been a breach of the agreement between the parties.

For this reason I agree that the appeal should be disallowed and with the order proposed inthe majority judgment.

Judgment

Hefer JA: Although I agree that a negligent misstatement in a contractual context is actionableas set out in the majority judgment, I concur in the judgment prepared by my Brother Kumleben.For the reasons stated therein, and for the additional ones that follow, I agree that the appealought to be dismissed with costs, including the costs of two counsel. My remarks will be limitedto the falsity of the representations relied upon in the claim based on negligent misstatement.

As stated in the majority judgment the cumulative effect of the representations was thatSting could be applied to a vineyard by means of a helicopter without endangering crops onadjacent lands because, when so applied, it would not fall beyond a line (the 'cut-off line') threeto five metres beyond the edge of the vineyard. What, in practical terms, the respondent had toprove was that it was physically impossible to contain the Sting released from the aircraft in theform of a fine spray within the area comprising the vineyard and the adjoining strip of land alongits edges up to the cut-off line.

1991 (4) SA p586

HEFER JA

There are two ways in which this could be proved. The first would entail expert evidence tothe effect that there is no way of controlling the lateral movement of the spray and thus tocontain it within the desired bounds. Another method would be to lay a sufficiently strong factualfoundation for an inference as a matter of probability that the representations were false. Thiscould be done, for example, by proving that Sting actually applied from a helicopter in perfectweather conditions by a competent pilot who performed the task skilfully and properly withsuitable equipment fell beyond the cut-off line despite all precautionary methods having been


taken.

Respondent seems to have selected the first method. Instead of proving that the weatherconditions were favourable he sought to establish through Myburgh that they were not; andinstead of proving that precautionary measures were taken, he sought to establish that thedirection or strength of the wind was not even tested. He did so presumably because he had analternative claim based on the negligence of appellant's employees in supervising the operationin which it was alleged, inter alia, that it was carried out in unfavourable conditions. Be that as itmay, it is clear that the meagre information about the way in which the operation was conducteddoes not justify an inference that the representations were false. The importance of the correctsetting of the nozzles on the helicopter boom through which the Sting was released is manifest;yet there is no evidence that they were properly set. And there is evidence that the risk of driftcould have been reduced by using an additive; yet we do not know whether such an additivewas used or not. In the absence of evidence on matters like these it cannot be said that there isa sufficiently strong preponderance of probability that the Sting fell beyond the cut-off linebecause it could not be contained in the target area.

This conclusion is not affected by the evidence about the way in which the pilot performedhis duties. Even if it were to be accepted that he did so satisfactorily there are still theshortcomings in respondent's case that I mentioned. But I share my Brother Kumleben'smisgivings about the cogency of the evidence in this regard. He refers in his judgment to whatappears to be the erratic pattern of the damage caused by the Sting to respondent's onions andwheat. Bearing this in mind and that some of the Sting fell about 100 metres from the edge ofthe nearest vineyard and even beyond some fairly high trees on a day on which there was nonoticeable wind, there is a serious question about the way in which the pilot performed hisduties.

I turn to the evidence of Mr Myburgh. His assertion that ''n mens amper kan aanneem datdaar sal van die stof op nabygeleë plante te lande kom' when Sting is sprayed from a helicopterin the vicinity of sensitive plants is based entirely on his knowledge that there is always somemovement of air in the atmosphere although it may not be noticeable. The following passagecontains a neat summary of his evidence:

'. . . (D)ie hele strekking van my getuienis is dat daar altyd verwag sal kan word dat daar 'n mate van "drift" salvoorkom en dat 'n mens onder geen omstandighede kan sê dat omdat op daardie oomblik die "drift" so min wasdat dit nie saak gemaak het nie, dit onder ander omstandighede so sal wees nie.'

1991 (4) SA p587

HEFER JA

This may be so, but his experience of actual spraying from the air is limited to one occasionwhen he attended a demonstration of water being sprayed from a helicopter and another onewhen he witnessed from a distance a wheat field being sprayed from a fixed-wing aircraft. He isnot aware that, as Dr Findlay testified, skilled pilots know how to handle drift; they know thatthey must allow for it and how to do so; at times they even 'drift' the substance being sprayedinto inaccessible places. At best for the respondent Myburgh's evidence suggests that somemargin should always be left for error. He was not asked to express an opinion on the extent of


such a margin nor on the sufficiency of the three to five metre margin of error for which therepresentations allowed. His evidence does not justify a finding that the representations werefalse.

Appellant's Attorneys: C K Friedlander, Kleinman & Shandling, Cape Town; John & Kernick,Johannesburg; Webbers, Bloemfontein. Respondent's Attorneys: Balsillie, Watermeyer &Cawood, Cape Town; McIntyre & Van der Post, Bloemfontein.


Endnotes

1 (Popup - Popup)

See, for example, Broodryk v Smuts NO 1942 TPD 47 at 53; Arend and Another v AstraFurnishers (Pty) Ltd 1974 (1) SA 298 (C) at 305H - 306C.

2 (Popup - Popup)

'. . . according to which dishonesty on the part of a witness manifests itself in a fashion thatdoes not appear on the record but is readily discernible by anyone physically present . . .' see AM Gleeson QC 'Judging the Judges' 53 Australian LJ 338 at 344 quoted in Tom Bingham TheBusiness of Judging: Selected Essays and Speeches (2000) Oxford University Press at 10.

3 (Popup - Popup)

See, for example, Body Corporate of Dumbarton Oaks v Faiga 1999 (1) SA 975 (SCA) at 979I.See too President of the Republic of South Africa and Others v South African Rugby FootballUnion and Others 2000 (1) SA 1 (CC) (1999 (10) BCLR 1059) in para [79]; Santam Bpk vBiddulph 2004 (5) SA 586 (SCA) in para [16]; H C Nicholas 'Credibility of Witnesses' (1985) 102SALJ 32 at 36 - 7 and cases there quoted including Arter v Burt 1922 AD 303 at 306; and in acriminal context see S v V 2000 (1) SACR 453 (SCA) at 455f - h.

4 (Popup - Popup)

See, for example, Chitty on Contracts vol 1 paras 7-011 to 7-015; Dimskal Shipping Co SA vInternational Transport Workers' Federation (The Evia Luck (No 2)) [1992] 2 AC 152 (HL)([1992] 1 Lloyds Rep 115) per Lord Goff of Chieveley at 165F - H (AC); CTN Cash and CarryLtd v Gallaher Ltd [1994] 4 All ER 714 (CA); M P Furmston Cheshire, Fifoot and Furmston'sLaw of Contract 14th ed at 340 - 3.

5 (Popup - Popup)

Restatement of the Law (Second) Contracts 2d vol 1 paras 175 and 176.

6 (Popup - Popup)

In Malilang and Others v MV Houda Pearl 1986 (2) SA 714 (A) this Court was bound to applyadmiralty law as administered by the English Courts and it considered the English law oneconomic duress in that context. In National Education Health and Allied Workers Union vPublic Health & Welfare Sectoral Bargaining Council (2002) 23 ILJ 509 (LC) the Court appearsto have overlooked the context in which the subject was considered by this court in Malilang.

7 (Popup - Popup)

See, for example, CTN Cash and Carry v Gallaher Ltd, footnote 4, in which a hard bargain washeld not to constitute duress.


8 (Popup - Popup)

See, too, Christie The Law of Contract 4th ed at 354.

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