Baines Motors v Piek

• Jurisdiction: South Africa
• Judge: Centlivres CJ, Schreiner JA, Van Den Heever JA, Hoexter JA and Fagan JA
• Judgment Date: 13 December 1954
• Hearing Date: 08 November 1954
• Court: Appellate Division

B Schreiner, J.A.:

The issues in this appeal appear from the judgment of my Brother HOEXTER. I shall refer to the parties as 'the seller' and 'the buyer'.

C Taken at its face value clause 12 entitled the seller in certain events, including breach by the buyer, either to enforce the contract and sue for the whole balance of the purchase price, whether already due or not, or to cancel the contract. If he cancelled, the clause purported to entitle him to retake possession of the vehicle and recover arrear instalments, and in addition to recover damages under any or all of D three heads, namely, injury to the vehicle, depreciation and loss on resale, to be calculated in a stated way. And clause 6 also gave the seller the right to retain any payments which the buyer might have made under the contract.

Having regard to the maximum that might be recovered by the seller and E also to the fact that the remedies, while they were available on the happening of some events that were not breaches of the contract at all, were also available in the event of any failure, however trivial, by the buyer to perform his part of the contract, it is clear that these provisions taken in their totality were of a generally penal nature. This was indeed not in dispute.

F The buyer's case is that once that is the position the seller must be confined to such remedies as he would have in the absence of any special agreement. Having cancelled the agreement for breach he is only entitled to redelivery of the vehicle, against return of the amounts paid by the buyer, and to such damages for the breach as he can prove. He is not G entitled to retain instalments already paid and also recover possession of the vehicle. The buyer accordingly pleaded that the seller's claim to do those two things was bad and, since the seller has, according to the pleadings, retained the vehicle, he must repay the instalments, for which the buyer counterclaims. On the buyer's case it was unnecessary for him to pay the arrear instalments but, that having been done, the issues are thereby narrowed.

H The seller meets this case by excepting because, he says, though the buyer would have been justified both in his plea and in his counterclaim if one were compelled to have regard to the sum total of the remedies given by the contract to the seller on cancellation, this is not

Schreiner JA

the true position. For the remedies are severable, so that the seller is entitled to select so much of the total as would not be penal and enforce that part. In particular, if what the seller selects amounts to no more than recovery of the vehicle sold and retention of what the A buyer has paid in respect of the purchase price, this is simply a lex commissoria which can be enforced even if it operates penally.

That the actual claim of the seller is wholly within the field of the lex commissoria is not open to question, and it follows that, if that claim can be made despite the fact that it rests upon provisions of the contract which form part of a penal totality, the mere fact that there is such a penal element cannot be set up by the buyer and the exceptions B to the plea and the counterclaim should have been upheld. (Mineworkers Union v Prinsloo, 1948 (3) SA 831 at pp. 849 et seq. (A.D.); Tobacco Manufacturers Committee v Jacob Green & Sons, 1953 (3) SA 480 at p. 488 (A.D.).)

C I agree with my Brother HOEXTER that the question of severability is crucial. The point was dealt with very briefly in the judgment of the Transvaal Provincial Division, RAMSBOTTOM J. merely stating that in his view the provision in clause 12 for cancellation and other rights is one and indivisible.

D In the common class of case, where a sum, fixed or ascertainable in terms of the contract, is as it stands a penalty, no question of severability can arise; to introduce it the Court would have to recast the contract. So, in Cooden Engineering Co. Ltd v Stanford, 1953 (1) Q.B. 86, the question was whether a clause entitling the hire-seller to a single sum, being the total balance due under a hire purchase E agreement, was a penalty or not, and the question of severance was not considered. But here there is at least no difficulty from a grammatical point of view, for the penal totality consists of a number of verbally separate items. I do not think, however, that grammatical severability is a sufficient test. Let us suppose that in a contract the sum of £1,000 was payable to A by B on a breach by B leading to cancellation, F and that this sum would clearly be a penalty, but that a sum of around £200 or £300 might be a genuine pre-estimate of damages. One could provide grammatical severance in at least two ways. It could be stipulated that, on breach by B and cancellation by A, B should pay (i) £100; and (ii) £100 and so on, making ten items in all totalling £1,000. G Or one could stipulate that B should pay £100, or, alternatively, £200 or, alternatively, £300 and so on up to £1,000. It seems to me that these arrangements, though constituting grammatical severances, would be useless for their purpose. The Court would still be making a contract for the parties if it picked out any stage in the first arrangement at which to stop or if it selected any of the alternatives in the second H arrangement. The merely verbal severance would provide the Court with no guide as to the real intention of the parties and the Court would disregard the severance and leave A to prove his damages.

In such circumstances it seems to me that the position is not unlike those restraint of trade cases in which too wide an area has been

Schreiner JA

subjected to the restraint. In Putsman v Taylor, 1927 (1) K.B. 637, there were three areas of restraint and it was apparently assumed that the total of the three areas would have been unreasonably extensive. It was held, however, that the restraint in respect of each area was severable and in respect of the one in question in the case it was reasonable and enforceable. Reference was made by TALBOT, J. at p. 644 to Mallan v May, 152 E.R. 967, where a covenant not to A

'carry on the profession of a surgeon-dentist, etc., in London, or any of the towns or places in England or Scotland, where the plaintiffs, or the defendant on their account, might have been practising before the expiration of the said services'

was held to be bad in respect of the areas other than London, but to be B good and severable in respect of London. Now in these cases there was clearly more than grammatical severability. The three areas in Putsman v Taylor were areas where in somewhat differing circumstances the employer might justifiably fear unjust competition, while in Mallan v May it was clear that London stood on a different footing from the other towns and places where the employer's business might be carried on. But C if a restraint clause, which might reasonably extend to one county but not further, listed cumulatively all the counties of England by grammatically separate sub-clauses, and there was no good reason for holding that any particular county should be regarded as the area to which the restraint was really intended to apply, I do not think that a D court in England - or mutatis mutandis a court in South Africa - could properly use the principle of severance in aid of the party claiming to enforce the restraint. For, despite the grammatical severance, the covenant would really cover the whole of England just as if that had been its form, and by severing the court would be making a E new contract for the parties. (cf. Williston on Contracts (revised ed. vol. V sec. 1659).)

I may add that on the question of severance I do not find that the analogy between the restraint of trade cases and the present problem is too remote to be useful. It seems to me that there is a rough correspondence between excessive width in the restraint cases and excessive relief in the penalty cases. Severability often arises when F there is a bad part of a contract and a good part, but in both of the above-mentioned classes of case the badness consists of the totality being so unreasonable as to be impermissible.

Applying these considerations to the present case it seems to me that, in regard to the events that would bring the remedies into operation, G there is both grammatical and notional severance, so that there is no difficulty in holding that the remedies apply to a case where, as here, the buyer has made default in paying instalments of the purchase price. In regard to the remedies themselves the grammatical severance is clear. All that the seller is claiming is the right to cancel and regain possession under clause 12 and to retain payments under clause 6. H Notionally, too, those remedies appear to me to be distinct from the other named remedies, that is to say, the right to recover arrear instalments and the right to claim the several forms of damages.

For these reasons I feel compelled to disagree with the view of the Transvaal Provincial Division that the provisions of clause 12 are not

Van den Heever JA

severable. If the clause is severable the plea of penalty and the consequential counterclaim are not valid, for, as I have indicated, what is being claimed by the seller is in itself properly claimable, as amounting to no more than a lex commissoria. I agree with my Brother HOEXTER that the appeal should be allowed and the order made which A appears in his judgment.

Judgment

Van Den Heever, J.A.:

I have had the advantage of reading the judgment prepared by my Brother HOEXTER, in this matter. I have come to the same conclusion but for different reasons and wish as briefly as possible to state them. I say 'as briefly as possible' because this branch of 'a B virile living system of law' is in a state of flux and has thrown up some embarrassing sports in its evolution.

It was not argued before us that either...