Africa Solar (Pty) Ltd v Divwatt (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Nienaber JA, Olivier JA, Streitcher JA, Farlam JA and Nugent JA
• Judgment Date: 28 March 2002
• Citation: 2002 (4) SA 681 (SCA)
• Docket Number: 365/2000
• Hearing Date: 25 February 2002
• Counsel: W P de Waal for the appellant. N M Davis for the respondent.
• Court: Supreme Court of Appeal

Nienaber JA:

[1] The appellant is the manufacturer of, among other things, H70 model photovoltaic modules (also referred to as panels) that are E employed in the conversion of solar energy into electricity. The respondent purchased a large quantity of these modules from the plaintiff on the strength of the appellant's specifications as to their performance. It used them, amongst other things, in supplying and F installing water pumps for various of its customers in some of the more outlying parts of the country where conventional electrical power was either not available or too costly. The appellant sued the respondent in the Transvaal Provincial Division for payment of the G balance of the purchase price, viz R89 653,51 plus interest and costs. (I shall henceforth refer to the appellant as the plaintiff and to the respondent as the defendant.) The defendant withheld payment of the balance due because of an ongoing dispute that developed (and gathered momentum) between the parties about the performance of at least some of the panels. The defendant received diverse complaints H from various of its customers that their pumps failed to supply the rate of water which the defendant had promised them on the strength of the quoted specifications. The defendant alleged, but the plaintiff denied, that its panels were underpowered. The defendant did not, however, cancel the executed orders placed with the plaintiff. Instead it sought to boost the performance of the pumps by adding additional panels. When the plaintiff persisted in its I refusal to acknowledge the problem or to recall or repair the offending panels the defendant arbitrarily withheld half of the payment then due in order, so it was explained, to bring matters to a head. The broad issue between the parties in these proceedings is whether the panels were J

Nienaber JA

indeed defective. The narrow issue is whether the defendant was precluded by the terms of the agreement between them A from withholding payment and from pursuing a counterclaim for damages based on its alleged breach. That narrow issue is largely dependent on whether the plaintiff's standard conditions of trade (to which I shall refer simply as the standard terms) were incorporated into the agreement for the supply of the panels by the plaintiff to the B defendant.

[2] Both parties were initially anxious to avoid litigation and their respective technical directors, De Villiers on the defendant's side and Dr Venter on the plaintiff's side, agreed to submit samples of the allegedly underperforming panels to Prof Leitch, an expert from the University of Port Elizabeth, to conduct tests as to C whether the panels conformed to the agreed specifications. It remained an issue between the parties whether it was also agreed that the issue of the defendant's liability would be made dependent on the outcome of those tests. The tests conducted by Prof Leitch favoured the defendant. The defendant accordingly raised a special plea (to D which the plaintiff replicated a denial) that the action had been duly compromised.

[3] The pleadings in their final form revealed a multiplicity of sub-issues, mostly factual, that may conveniently be summarised as follows:

(a)

whether the action was compromised, as the E defendant alleged;

(b)

if not, the terms, express and tacit, of the agreement of sale between the parties and in particular whether, as the plaintiff alleged, the plaintiff's standard terms governed the sale;

(c)

whether a meaningful proportion of the panels supplied by the plaintiff to the defendant failed to measure up to the written specifications; F

(d)

depending on issues (b) and (c), whether the defendant was precluded (i) from withholding payment of the balance of the price otherwise owing in terms of the agreement, and (ii) from advancing a counterclaim for the losses it alleged it suffered.

[4] Not all of these issues were adjudicated by the trial Court (Jansen AJ). That is because the parties requested the Court, and G the Court agreed in terms of Rule 33(4) of the Uniform Rules of Court, to grant precedence to some of the issues before disposing of the remaining ones. The first major issue was whether the action had been compromised. The trial Court found against the defendant that it had not been compromised. Since the defendant has accepted that H finding no more need be said about it. The second issue, the crucial one, related to the terms of the agreement and more particularly whether the plaintiff's standard terms are of application. The third issue was formulated, somewhat elusively, as follows: I

'1.3 The implication of the terms of the agreement between the parties in particular:

(a)

Whether the defendant is precluded from raising a defence of non-payment due to an alleged defect in some of the solar panels; and

(b)

Whether the defendant is precluded by such terms from claiming damages in the nature set out in defendant's counterclaim.' J

Nienaber JA

This was interpreted by the parties to pose the question, assuming A the alleged defects in the solar panels to have been established, whether the defendant was entitled to rely on the exceptio non adimpleti contractus, regardless of whether or not the standard terms applied. It was accepted that if the standard terms did apply they would dispose of the defendant's counterclaim.

[5] What was accordingly excluded from consideration B at the preliminary stage of the trial was, first, a decision on the defendant's complaint that some of the panels were defective and secondly, following upon it, the quantum of the counterclaim.

[6] The trial Court found against the defendant, as stated earlier, on the compromise but essentially in its favour on the C remaining issues. On the second issue posed it was held that the plaintiff was represented by Mr Mac Micciarelli, Mr Joe Micciarelli and Mr Paolo Chiaccetti when the agreement between the parties was concluded (ie at the prior meeting between their respective representatives) and that the terms of the sale were as contended by the defendant, more particularly, that the 'express alternatively D tacit or implied terms' were:

'3.1

The panels would be used in conjunction with water pumps but these would not form part of the sale and would be fitted by the defendant or its agent(s);

3.2

Defendant would be granted 30 days credit from date of statement rendered by plaintiff; E

3.3

The panels would function in accordance with those given as samples as stated above and to those parameters and standards laid down in the plaintiff's specifications annexed marked DW2 in respect of the H70 modules and DW2a in respect of the H55 modules sold which formed the written portion of the agreement.'

Further express terms found were: F

'3.4

The guarantee as set out in para 3.3 would endure for ten years.

3.5

The price for the H70 solar panels was R1 133 and for the H55 R910.

3.6

The first order which would be placed would be for 500 H70 solar panels and 100 H55 solar panels.'

On issue 1.3 it was held as follows: G

'The implications of the terms of the agreement between the parties are:

(a)

The defendant may raise a defence of non-payment due to an alleged defect in some of the solar panels in terms of the exceptio non adimpleti contractus.

(b)

The defendant may claim damages in the nature set out in the defendant's counterclaim based on a contractual cause of action. H

(c)

No interest is payable on the payments which have been withheld until such time as the plaintiff has performed its obligations in terms of the agreement.'

In the result the trial Court held that the plaintiff's standard terms did not apply to the agreement between them. I

[7] With the leave of the trial Court the plaintiff appealed first to the Full Bench of the Transvaal Provincial Division and, when that appeal failed on a majority decision, it noted a further appeal, with special leave, to this Court.

[8] The major issue between the parties at this stage of the proceedings is whether the standard terms applied to the sale. That dispute arose in J

Nienaber JA

the following circumstances. During August 1993 a meeting took place between representatives of the two parties. I shall A refer to it as 'the prior meeting'. The defendant's representatives expressed interest in the H70 module which the plaintiff was then in the process of developing and which it was prepared to manufacture especially for the defendant. It was agreed that the plaintiff would provide five H70 sample panels free of charge to the defendant which the defendant would test for B functionality in tandem with water pumps. Shortly before delivery of the sample panels to the defendant was due to take place, a Ms Gerber telephoned Mr Pichulik, the defendant's financial director. She introduced herself to him as a bookkeeper and credit supervisor in the plaintiff's employ. Neither of them was present at the prior meeting. According to Pichulik she sought certain particulars from him about the defendant since the defendant was then still a C relatively new concern ('a start-up company', as Pichulik described it), about which the plaintiff, before committing five H70 panels valued at close to R5 000, required at least some information. It was therefore arranged that she would telefax a form for him to complete. According to him she said: D

'I will send you our standard form to please fill in in order to - from an administrative point of view that you know I'm cleared of this . . .'

and again:

'. . . she said she needed this to update her information because E of the unusual situation that we were not paying for those panels'.

Pichulik testified that a one-page document was received by him. It was headed 'Application for...