Titaco Projects (Pty) Ltd v AA Alloy Foundry (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Eloff JP, Heher J and Labe J
• Judgment Date: 05 May 1995
• Citation: 1996 (3) SA 320 (W)
• Docket Number: A5006/95
• Hearing Date: 28 April 1995
• Counsel: C H J Badenhorst for the appellant. M v R Potgieter for the respondent.
• Court: Witwatersrand Local Division

Heher J:

This is an appeal from a judgment of a single Judge who, after hearing the evidence of both parties on an issue separated under Rule 33(4) of the Rules of Court, granted absolution from the instance in respect of the plaintiff's alternative claim. F

On 11 June 1989 at Johannesburg the plaintiff concluded a written agreement with Purity Ferrochrome (Pty) Ltd for the design, supply, erection and commissioning of furnaces for a ferrochrome smelter at Rustenburg. Included in the goods to be supplied were 48 contact shoes, the purpose of which was, according to the evidence, to G conduct electricity from secondary bustubes (conductors) through electrodes into an electric arc furnace.

The plaintiff subcontracted the manufacture of the contact shoes to the defendant, 'cast and complete machined and tested, as per your drawing'. Essentially, the shoes were to be made of brass. H

The contact shoes were supplied and delivered by the defendant to the plaintiff in January 1990. The plaintiff installed them at the plant. They were in service by July 1990.

Cracking occurred in the contact shoes in consequence of which Purity Ferrochrome rejected them. (Because of a takeover or reconstruction, the interests of Purity I devolved on a company called Consolidated Metallurgical Industries, which will hereinafter be referred to as CMI.) A dispute arose between CMI and the plaintiff as to the cause of the problem, the former contending for defects in the materials and the latter relying on operational shortcomings. At the same time the dispute was carried over to the plaintiff and the defendant since the plaintiff was, not J

Heher J

A unnaturally, looking to protect itself in the event of CMI's view proving to be justified. By November 1991 all the parties had consulted experts and obtained reports. It appears from the evidence that the plaintiff had become convinced that it could no longer 'defend the indefensible' and was satisfied that the susceptibility to cracking was probably due to lead content in the brass which exceeded the specifications.

B The plaintiff's alternative claim against the defendant was founded upon the conclusion of an alleged agreement of settlement, its repudiation by the defendant and the plaintiff's acceptance of that repudiation. The damages which the plaintiff suffered in consequence of that breach amounted, so it was alleged, to R399 383,84.

The formulation of the relevant paragraphs in the alternative claim was as follows: C

'31.

At a meeting held on 27 November 1991, the plaintiff (represented by Messrs Wilson and Smidt) conveyed the following settlement proposal to the defendant (represented by Messrs Bray and Smith) which CMI (the new owner of Purity) D had indicated they would find acceptable as a compromise of the claim resulting from the defective contact shoes:

31.1

31 cavity copper contact shoes should be supplied free of charge to Purity or alternatively a cash equivalent of R476 000 be paid;

31.2

the old contact shoes (the defective ones supplied by the defendant) to be returned to defendant, free of charge, and for defendant to recover any E value therefrom for themselves;

31.3

if the option to provide new contact shoes is selected, CMI/Purity would prefer eight contact shoes to be provided as soon as possible and the F balance to be replaced evenly over a two year period.

32.

The aforesaid settlement proposal was confirmed in writing on 6 December 1991 in a letter written by Mr Wilson of the plaintiff to the defendant for the attention of Mr Bray.

33.

On 9 December 1991, the defendant represented by Mr M Smith, wrote to the G plaintiff, for the attention of Mr Wilson, in regard to the letter of 6 December 1991 and confirmed that the defendant was agreeable in principle to the proposals of that letter.

34.

On 7 February 1992, the defendant represented by its managing director, Mr E F Bray, reconfirmed the defendant's acceptance of the settlement referred to H above by way of a letter of that date in which Mr Bray stated the following:

"With regard to our meeting (27-11-91) regarding the status of contact shoes supplied by yourselves to Purity Ferrochrome, and your subsequent letter dated 06-12-1991 refers.

We have already agreed to the resupply of 31 contact shoes in I copper over a period of two years, with the first eight contact shoes being supplied as soon as possible after receiving your advice to do so.

In order to get the replacement procedure started we therefore suggest that the originally supplied brass contact shoes be returned to J

Heher J

A us as soon as possible in order for us to be able to recover some of our costs when purchasing the new material required for resupply."

35.

On 9 March 1992 and again on 25 March 1992, the defendant, represented by Mr Bray (in the case of the first letter) and Mr M Smith (in the case of the second letter) repudiated the settlement agreement reached between the parties. B The defendant's repudiation of the settlement agreement was finally confirmed by Mr Smith, the works manager of the defendant, on 15 April 1992.

36.

The defendant's repudiation of the settlement agreement was accepted by the plaintiff, represented by Messrs Wilson and/or B G Smidt, and/or the plaintiff's attorney, during March to September 1992. Alternatively the repudiation is C hereby accepted.'

The defendant, in its plea to the alternative claim, admitted

(a)

that it was 'informed of certain settlement proposals in writing on 6 December 1991';

(b)

that the defendant's managing director signed a letter on 7 February 1992 which contained the information quoted in para 34 of D the particulars of claim.

The defendant specifically denied that the parties reached any settlement agreement. It pleaded, in the alternative and in the event of the Court finding that the parties concluded the agreement relied on by the plaintiff, that the agreement was conditional upon an acceptance by the defendant of the agreement or, alternatively, upon the E parties' agreement to the technical specifications to be applicable to the manufacture of the contact shoes to be manufactured. Since the defendant did not accept the agreement and neither did the parties reach agreement on the technical specifications, so the defendant pleaded, no agreement came into being or that which had been reached failed. F

As a further alternative, and upon the assumption of the Court finding that a settlement agreement had been concluded, the defendant pleaded that the plaintiff had repudiated that agreement by insisting that the defendant abide by material additional or different terms and conditions not previously agreed upon, and that the defendant had accepted G such repudiation and communicated its acceptance to the plaintiff. In a replication to the plea the plaintiff dealt with the averment that any settlement agreement which had been concluded had been conditional. It pleaded:

'It was agreed by the parties (represented by the persons as indicated in para 31 H of the plaintiff's amended particulars of claim) at the meeting of 27 November 1991 that the parties would, after a settlement had been successfully concluded, review and, to the extent necessary, amend the original manufacturing specifications which were to be drafted by the plaintiff's quality department.'

I The plaintiff went on to set out in some detail how it had invited discussions on modifications to the original specifications and quality assurance plans, how the defendant had prevaricated and finally repudiated the settlement agreement by failing or refusing to participate in discussions with the plaintiff to review and, to the extent necessary, amend the original manufacturing specifications. J

Heher J

A The Court a quo heard evidence directed to all the issues in the alternative plea. The learned trial Judge, after a careful analysis of the evidence, found that the probabilities for and against the conclusion of an enforceable agreement of settlement were evenly balanced. It therefore became unnecessary to investigate the aspects of repudiation relied on by either party. The learned Judge decreed absolution from the instance. B Because of his conclusion that there were substantial probabilities in favour of both parties, the learned Judge granted the plaintiff leave to appeal to this Court.

Counsel for the plaintiff has before us not only attacked the findings at which the Court a quo arrived, but has also sought to persuade us that we ought to venture upon the C field which the learned Judge eschewed and make findings in his client's favour on the alternative plea as a whole.

The witnesses called for the plaintiff at the trial were one Wilson, the plaintiff's technical director, and one Smidt, its group financial director in November 1991 and who, by the time of the trial, had become the group managing director. For the defendant, one D Smith, a director, and one E F Bray, its managing director, testified. There was little fundamental dispute as to the facts. As will be seen, the real differences lay in perception and interpretation. It has also to be borne in mind that the witnesses testified in March 1994 more than two years after the events. Accurate recollection of E detail could not therefore be expected. There was no criticism directed in this Court against the factual findings of the trial Judge. I quote in extenso from the judgment:

'On 22 July 1991 a meeting was held between the plaintiff and the defendant at which it was recorded that CMI was proceeding against the plaintiff in respect F of the allegedly defective contact shoes. The only remaining allegation in respect of which it was said that the contact shoes were defective was "the material specification".

On 24 July 1991 a meeting took...