Putco Ltd v TV & Radio Guarantee Co (Pty) Ltd and Other Related Cases

• Jurisdiction: South Africa
• Judge: Kotzé JA, Joubert JA, Trengove JA, Viljoen JA and Smalberger AJA
• Judgment Date: 10 September 1985
• Hearing Date: 12 March 1985
• Court: Appellate Division

Smalberger AJA:

The present appeals and cross-appeal lie F against two judgments of NICHOLAS J in the Witwatersrand Local Division. They centre around an agreement entered into in August 1976 between Putco Ltd (Putco), the owner of a large fleet of buses, and TV & Radio Guarantee Co (Pty) Ltd (IV), an advertising company, and the subsequent attempts by Putco to G terminate the agreement. The first of the judgments of NICHOLAS J, that relating to the merits of the dispute between Putco and TV, is reported at 1984 (1) SA 443 (W). The second, which relates to costs, is unreported.

The events leading up to, and giving rise to, the dispute between Putco and TV, are dealt with in the reported judgment H at 445 - 451 and need not be detailed herein. For the sake of convenience, however, and to facilitate understanding of the issues arising on appeal, a resumé of certain relevant facts is necessary.

It is common cause than an agreement was entered into between Putco and TV entitling the latter to the sole advertising rights in respect of Putco's buses. This agreement was embodied I in a letter dated 9 August 1976 drafted by TV's attorney and signed on behalf of Putco. This agreement was referred to during the trial and in the judgment of NICHOLAS J as annexure "C", but for the purposes of this judgment it will be referred to simply as "the agreement". The agreement (in which the references to "we" and "you" are to Putco and TV respectively) J reads as follows:

Smalberger AJA

A "Dear Sirs,

Re:

Exclusive Advertising Rights - Putco Buses

This letter serves to confirm that we have granted to your company (or its nominee) the sole and exclusive rights with regard to all buses operated by our company. The rights granted to you relate to the rental of the advertising space constituted by the interior and exterior of the buses and it B will be your sole and absolute responsibility to provide staff, running and management systems as well as supervision, signwriting and other activities relating to the exploitation of such advertising space.

The remuneration which will be payable to us by yourselves flowing from your exercise of the rights granted to you is set out in annexure 'A' hereto and we confirm that we will not conduct any advertising or marketing activities using the interior or exterior of the buses other than through yourselves.

C We undertake to allow you all reasonable access to the buses from time to time to ensure that the relevant advertising copy can be applied to the buses but it must be clearly understood that we will not in any way allow this to prejudice our normal operations and there can be no question of withdrawing a vehicle from scheduled trips in order to effect the provisions of what is contained in this letter.

This letter, although binding upon both of us, is intended to D be a temporary interim arrangement, and we confirm that, in due course, a detailed agreement will be concluded between us as a result of the negotiations which we have been conducting.

The purpose of this letter is to enable you to satisfy outside parties that you have been granted these exclusive rights and that there is a current binding arrangement between us, but we reserve to ourselves the right to withdraw from this arrangement should damage result to our image flowing from your E activities, or should our earnings at any time be insufficient from this scheme, or should the arrangement become administratively impracticable in regard to your ability to signwrite and maintain the advertising copy.

Yours faithfully,

Putco Ltd,

H M Kolbe F Deputy Managing Director."

(Annexure "A" provided for the payment by TV to Putco of an amount equal to 40% of the rental provided by each advertisement after deduction of certain commissions.)

During the period 1976 to 1981 various attempts were made by G Putco and TV to conclude the detailed agreement contemplated, including the preparation and exchange of several draft proposals for such an agreement, but to no avail. The result was that no detailed agreement was ever concluded. One such proposal was contained in a letter of 29 June 1979, referred to H at the trial and henceforth as annexure "K", which later gave rise to a contention by Putco that it constituted a binding agreement. This contention was abandoned by Putco at the commencement of the trial.

On 26 May 1981 Putco wrote a letter to TV which purported to terminate the agreement. The relevant portion of this letter is the following:

I "We have decided to channel all future advertising upon our buses through a subsidiary of this company. Please therefore take notice that with effect from 1 July 1981 our buses will not be made available to your company for advertising purposes in the placing of new advertisements. Obviously all existing advertising upon our buses will be permitted to see out their relevant contracted periods for advertisements, subject of course to your continuing to honour your applicable obligations. To enable us to properly govern these advertisements, will you please furnish us with a full schedule J supported by copies of relevant advertising contracts, setting out details of the remaining period that the same still have to run.

Smalberger AJA

We trust that you will take the necessary action to notify your A above-mentioned associated companies of this notice and that it will consequently not be necessary for us to do so.

Will you please confirm this."

The letter was received by TV through the post on 2 June 1981, but it is common cause that Putco's intention to terminate the agreement was known to TV prior to the end of May 1981. B (Although I have referred to the letter as being written to TV, it was actually directed to Media Promotions (Africa) (Pty) Ltd, which was known as Afmed, a company which had been formed by TV for the specific purpose of selling advertising on Putco's buses. For the purposes of this judgment Afmed may be C equated to TV, and any communications between Putco and Afmed will be regarded as being between Putco and TV.)

After receipt of the letter of 26 May 1981 TV sought certain undertakings from Putco. When these were not forthcoming TV, by notice of motion dated 20 June 1981 (case No 9937/81), launched an urgent application for a final, alternatively, a temporary interdict against Putco aimed at safeguarding TV's rights under D the agreement, and restraining Putco from breaching any of its terms (the first interdict application). The basis for this application was that the letter of 26 May 1981 did not suffice effectively to terminate the agreement. On 29 June 1981 the parties agreed that, pending the hearing of the application, they would both be entitled to canvass for and sell new E advertising upon Putco's buses, subject to certain terms and conditions. This agreement also regulated the respective rights of the parties depending on which party was successful in the application.

The first interdict application was postponed from time to time, and lengthy affidavits were filed. It was finally heard F over a period offive days in September 1981. On 6 October 1981 an interim interdict was granted pending the determination of an action for a final interdict to be instituted against Putco by TV. The costs of the first interdict application were reserved for decision by the trial Court. The agreement of 29 G June 1981 was also made part of the Court's order.

In the meantime, on 23 September 1981, Putco had written a further letter to TV in the following terms:

"Insofar as the letter dated 9 August 1976 directed by our company to TV & Radio Guarantee (Pty) Ltd may in any respect still be considered to be operative in regard to your rights to procure advertising upon or in Putco buses (which we specifically deny to be the case as a consequence of and by H virtue of our letter of termination dated 26 May 1981, copy of which is annexed), this letter serves to record:

1.

That our earnings from the scheme have for some years been insufficient and inadequate and still remain insufficient both in respect of external and internal advertising in the buses as a direct consequence of your failure fully to exploit the potential field of advertising as well as your I failure to follow up expired contracts and to remit to us monies collected from advertising.

2.

That the arrangement had become and still is administratively impracticable in regard to your ability to signwrite and maintain the advertising copy.

3.

That consequently we hereby give you notice that we exercise our right to withdraw from the arrangement referred to in our letter of 9 August 1976 and that as from 1 April 1982 the arrangement between ourselves and TV Radio & Guarantee Co (Pty) Ltd and/or Media Promotions Africa J (Pty) Ltd (Afmed) will be regarded as cancelled and of no further force or effect.

Smalberger AJA

A Since judgment has been reserved by the Supreme Court (Witwatersrand Local Division) in case No 81/9937 on the question of the adequacy or otherwise of the notice given by us on 26 May 1981, this letter specifically serves as formal notice of cancellation of the arrangement between the parties concerned.

Naturally, if the Judge should determine in our favour that the arrangement was lawfully terminated at an earlier date, such earlier date will be the applicable date of cancellation."

B On 30 October 1981 Putco instituted action against TV (case No 18404/81) for a declaratory order relative to whether the agreement or annexure "K" constituted the effective contract between the parties, as well as for an order declaring the applicable agreement to have been cancelled by the letter C of 26 May 1981, alternatively the letter of 23 September 1981, further alternatively "an order declaring what would be reasonable notice in terms of the applicable...