Gollach & Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Wessels JA, Jansen JA, Kotzé JA, Miller JA and Trengove AJA
• Judgment Date: 22 November 1977
• Hearing Date: 23 September 1977
• Court: Appellate Division

Miller, J.A.:

The question in this appeal is whether the Court a quo (Durban and Coast Local Division - KRIEK, J.,) wrongly refused to grant A orders claimed by the appellant for (i) cancellation of an agreement concluded on 20 July 1972 by the appellant and the five respondents and (ii) repayment by the respondents of the sum of R10 000 paid to them by appellant, in terms of such agreement, "in full and final settlement" of claims arising from business dealings between the parties. It is the B appellant's contention that the orders ought to have been granted, with costs.

The appellant company has its registered office in Johannesburg. At the time of institution of action in this case, it had for many years been engaged in business transactions with the several respondents, all of which are members of the Tiger Oats Group of Companies. Except where it is necessary to refer to the respondents individually in this judgment, I C shall refer to them collectively as "the Group". In the main, so far as this case is concerned, the business transacted by the parties related to the export of wheaten bran products. The appellant would supply wheaten bran to first respondent (Universal Mills and Produce Company (Pty.) Ltd - referred to herein as "Universal Mills") which would convert such bran D into pellets for export purposes. The third respondent (Durban Bulk Shipping (Pty.) Ltd - "Durban Bulk") would load the pellets, in bulk, into ships and the second respondent (Imex (Pty.) Ltd - "Imex") would fulfil the functions of a shipping agent in relation to the exporting of the products. It is not necessary to describe the functions of the fourth and fifth respondents, Delmas Milling (Pty.) Ltd. and Jacob Frankel Ltd., E which will be referred to, respectively, as "Delmas" and "Jacob Frankel". Inevitably, as a result of the various transactions, from time to time the appellant was indebted to certain members of the Group while other members thereof were indebted to appellant. This was the situation during 1972, when certain debits passed by Imex against appellant in respect of freight F charges were in dispute. There were also disputes concerning debits passed by Durban Bulk in respect of alleged "short weight" and by Universal Mills concerning storage and bag handling charges. Imex and Durban Bulk ceded their disputed claims against appellant to Universal Mills, which at that time was indebted to appellant. On 24 May 1972 Universal Mills sent a G cheque to appellant for R2 303,02 in "full and final settlement" of the consolidated accounts, in relation to appellant, of itself, Durban Bulk and Imex. In arriving at a balance of R2 303,02 in favour of appellant, Universal Mills deducted from the total of its own then indebtedness to appellant, the disputed claims of Durban Bulk and Imex, which had been ceded to it. The appellant accepted the cheque without prejudice to its H rights, for it did not agree that the amount represented the true extent of the debt.

Shortly thereafter, early in June, Delmas instituted action against the appellant in the Witwatersrand Local Division for payment of R26 816,84. On 5 June appellant's attorneys addressed a letter to the Group's attorneys, in which (i) the claim made by Delmas was disputed; (ii) it was contended that it had been agreed that all transactions between the appellant, on the one hand, and all the members of the Group, on the

Miller JA

other hand, would be consolidated "into a single account for purposes of settlement"; (iii) it was contended that under such consolidated account, an amount of R7 004,99 was due to appellant; and (iv) an invitation was extended to the Group

A "to attend a round table conference in order that the constituent items of the consolidated account may be examined and verified in an effort to attain finality without the necessity for costly and protracted litigation".

Little time was lost in arranging such a meeting, which took place in B Johannesburg on 13 June. It was agreed at that meeting that a further meeting would be held after exchange of invoices and other "documentation", including

"a detailed reconciliation of all debits and credits on the Tiger Oats Group account",

to be furnished by the appellant. After further correspondence and interchange by the parties of invoices and other documents, the second C meeting was held on 20 July 1972. That meeting was attended by Mr. Arthur Gomperts, his son, Phillip, and Mr. S. Kadish (representing the appellant), by A. Wolman and I. Cohen (representing the Group) and by appellant's attorney (Kruger) and the Group's attorney (Myers). It was at that meeting that the agreement referred to in the opening paragraph of D this judgment was concluded. The essence of the agreement, which was recorded and confirmed in a letter dated 21 July addressed by appellant's attorneys to the Group's attorneys, was that Delmas was to withdraw the action instituted against the appellant in the W.L.D. and that appellant was to pay R10 000 to the Group "in full and final settlement of all claims howsoever arising", as at 20 July 1972 between the appellant and E the Group. The appellant's cheque for that amount was enclosed with the letter and was accepted by and duly paid for the benefit of the Group.

The ensuing peace was short-lived indeed. On 26 July the appellant's attorneys wrote to the Group's attorneys to the effect that it had been brought to appellant's notice by its auditors that the appellant's books F reflecting the state of its account with Universal Mills contained three duplicated credits in favour of Universal Mills - one for R88,40, another for R537,47 and the third for R10 406,46 - a total of R11 032,33. It was contended in the letter that the agreement for payment of R10 000 was concluded on the footing that all items in the analyses and G reconciliations furnished by the parties for purposes of the meeting on 20 July and which were "not specifically challenged" were to be assumed to be correct and that, therefore, the errors in appellant's books having now been discovered, "a common mistake existed" at the time of conclusion of the agreement. In consequence thereof (so it was said in the letter), the H Group having received credit in the appellant's books for R11 032,33 to which it was not entitled, the agreement, concluded as it was on the assumed correctness of such books, was "void" and the Group was required to pay the appellant the sum of R11 032,33 and "to confirm that the settlement in question stands varied accordingly". The Group rejected these contentions, clearly intimating at the same time that any action which the appellant might institute for recovery of the amount would be defended. The appellant in due course issued summons against Universal Mills only, by which it claimed payment of various sums, totalling some R20 000. No mention of the agreement of 20 July was made in the

Miller JA

particulars of claim, but Universal Mills pointedly raised that agreement in its plea, alleging that the claim now preferred by appellant had been "compromised" in terms of the agreement set forth in the letter of 21 July 1972. Thereafter, appellant from time to time gave notice of amendment of A its pleadings, now reducing its claim to R11 000, then increasing it to R46 000. (I give round figures, as nothing turns upon the exact amounts of these claims.)

Eventually, as a result of discussions at a pretrial conference on 25 October 1974, appellant undertook to file new particulars of claim against B the five members of the Group, who consented to being joined as defendants. It was also expressly agreed that such new particulars would "be limited to the issues whether the admitted settlement" between appellant and the Group "was not a valid and binding agreement of settlement" or was "capable of being avoided or set aside or has been C validly cancelled". It was also agreed that, in the event of the appellant succeeding on such limited issue (i.e. if it succeeded in having the settlement agreement set aside), the only relief it would be afforded in consequence thereof (save for any order as to costs and interest) would be that the status quo ante as at the morning of 21 July 1972 would be restored and the Group would be obliged to refund the R10 000 paid to it. D The appellant duly filed new particulars of claim, setting out the grounds upon which it alleged that the agreement fell to be set aside. Issue was joined and the matter went to trial, with the result I have already mentioned.

The effect of the grounds set out in the new particulars of claim for the relief sought by appellant, may be thus stated:

(1)

E At the time of the agreement the appellant and the Group both laboured under the mistaken but reasonable and bona fide belief that figures furnished by appellant were correct, or alternatively, that Universal Mills was indebted to appellant in a sum which was less by R11 032,33 than in truth was the case at that date.

(2)

Alternatively to (1) above:

F prior to conclusion of the settlement agreement, the Group represented to appellant that figures furnished by appellant were correct; the appellant relied upon the truth of such representation, which was made by the Group with the intention of inducing appellant to act upon it and enter into the settlement agreement; the representation was false to the knowledge of the G Group.

(3)

Alternatively to (2) above:

the Group was at all material times aware of the fact that figures furnished by appellant from its own books were not correct, or, alternatively, that Universal Mills was indebted to appellant in a H sum which was greater by R11 032,33 than appeared to be the case; the Group knew that appellant had no knowledge of the errors in its (appellant's) books; the Group also knew that if appellant had knowledge of the errors in its own books it would...