Transnet Ltd v Rubenstein

• Jurisdiction: South Africa
• Judge: Mpati DP, Zulman JA, Mthiyane JA, Cloete JA and Lewis JA
• Judgment Date: 01 June 2005
• Citation: 2006 (1) SA 591 (SCA)
• Docket Number: 238/2004
• Hearing Date: 13 May 2005
• Counsel: V Soni SC for the appellant. E Price for the respondent.
• Court: Supreme Court of Appeal

Lewis JA: C

[1] The principal issue in this appeal, and indeed the only one argued before this Court, is whether a tacit term should be read into a contract allowing either of the parties to terminate it by giving reasonable notice. The contract itself is not silent on the question of its duration. It states that it will come to an end on the happening of a future event - privatisation of the 'Blue Train', one D of the businesses of the appellant, Transnet Ltd.

[2] The respondent, Mr Leon Rubenstein, brought an urgent application in the Johannesburg High Court for various orders relating to a contract between him and Transnet, entitling him to the exclusive E right to operate a jewellery boutique on two trains, known as the Blue Train, operated by Transnet. The relief sought was a declaratory order that the contract was still in existence and that Rubenstein was entitled to operate the boutique until privatisation of the Blue Train; and that Transnet be interdicted from purporting to cancel the contract and from denying him access to the boutique. Alternatively, if the F Court were to find that the contract was terminable on reasonable notice, Rubenstein asked for an order that such notice be not less than six months.

[3] The Court of first instance decided that the contract was terminable on the giving of six months' notice, but ordered Transnet to pay only 50% of Rubenstein's costs. An appeal to the Full G Court (the High Court, Johannesburg) against both the order that the contract was terminable on notice, and against the costs order, succeeded. It is against the decision of the Full Court that this appeal lies with special leave of this Court. H

[4] It is common cause that the express terms of the contract are set out in a letter written to Rubenstein on 14 July 1999 by the operations manager of the Blue Train, and which is annexed to the founding affidavit. The letter deals, inter alia, with stock control, receipt of payments for items sold, accommodation on the trains for Rubenstein and his staff, shop facilities and the I determination of a management fee. The clause in issue, para (j) of the letter, states that the management fee will 'form the basis for the contract; the duration of which is to extend to the final date of privatisation'. (My emphasis.)

[5] It is also not disputed that Rubenstein ran the jewellery business on J

Lewis JA

the Blue Train successfully, making a profit not only for himself but also for Transnet. He discovered, however, in April 2001 A that Transnet had published invitations to tender for the operation of the jewellery boutique. He demanded that the invitations be withdrawn. His demand was ignored and he accordingly launched an urgent application for an interdict prohibiting Transnet from proceeding with any tender process. A rule nisi was granted calling on B Transnet to show cause why the interdict should not be made final.

[6] Before any final interdict could be granted, the parties embarked on negotiations to settle the litigation, and there was talk about entering into a new agreement. The rule was discharged, and Transnet was ordered to pay the costs. Rubenstein continued to run the C boutique, and the parties continued to talk about a more comprehensive contract. A draft produced by Transnet in October 2001 was considered unacceptable by Rubenstein. Transnet threatened Rubenstein that, if no new contract were concluded by 31 January 2002, it would give two months' notice of termination. It gave such notice on 14 February 2002, advising that Rubenstein's 'services' would be terminated with D effect from 15 April 2002. That prompted the urgent application currently under consideration.

[7] Transnet, as I have said, does not deny the existence or the terms of the contract alleged by Rubenstein. But in an affidavit filed E in support of the answering affidavit, a Ms Borotho, the executive manager of the division (Luxrail) which runs the Blue Train, it was alleged that the parties had 'accepted' that privatisation was due to take place by the end of 1999. When it became clear that that would not happen, 'the parties agreed to regulate the appointment and services provided by [Rubenstein] in terms of extensions'. In fact, there F were several internal memoranda of Transnet, annexed to Borotho's affidavit, that indicated that as far as Transnet was concerned, the contract required extension. But this was never communicated to Rubenstein, and before this Court it was not contended that the contract had come to an end, nor that Rubenstein's business or G services continued by virtue of any extension.

[8] Ponnan J, in the Court of first instance, came to the conclusion that the contract was terminable on notice, but that the period of notice given was inadequate. He made an order declaring that the notice of two months was 'unreasonably short' and that Transnet 'was obliged to give the applicant six months' notice of cancellation H . . . such notice to operate with retrospective effect to 14 February 2002'. The contract would thus terminate with effect from 15 August 2002. He ordered Transnet to pay only 50% of Rubenstein's costs, censuring the latter as being responsible for the urgency of the application. I

[9] The learned Judge of first instance reasoned as follows in regard to reading the contract subject to the right of the parties to terminate on reasonable notice:

'On a conspectus of the factual matrix before me, privatisation of the Blue Train has become an uncertain future event. It is quite clear that the perception J

Lewis JA

of the parties at the time that they contracted with each other was that privatisation would occur shortly A thereafter. A period of almost three years has since elapsed. That the contract would endure for as long as it already has, could not have been the common intention of the parties. It is thus reasonable to infer that they did not intend to bind themselves indefinitely, but rather contemplated termination by either party on reasonable notice. To hold otherwise would be to permanently bind them to each other and the contract when all they contracted for was a temporary B arrangement.'

[10] The appeal to the Full Court succeeded, as I have said. Gildenhuys J (Schwartzman and Willis JJ concurring) held that the implication of a term that the contract was terminable on reasonable notice was contrary to the express provision of the contract as to its duration. It was conceded by counsel for Transnet that the learned C Judge of first instance should not have substituted his view of what constituted reasonable notice for that of the parties, and thus no reliance was placed on the right to six months' notice.

[11] The Court a quo, in concluding that the contract was not terminable on notice, distinguished the case from Trident D Sales (Pty) Ltd v A H Pillman & Son (Pty) Ltd [1] and Putco Ltd v TV and Radio Guarantee Co (Pty) Ltd. [2] In both cases it was held that, where the circumstances of an agreement show that all that the parties intended was a temporary arrangement, but the contract was silent as to duration, it is reasonable to infer that they E contemplated termination on reasonable notice.

[12] That was the approach too of this Court in Amalgamated Beverage Industries Ltd v Rond Vista Wholesalers, [3] a decision reported after the judgment of the Full Court was handed down. In Amalgamated Beverage, the Court was asked to determine only whether reasonable notice had been given, the respondent having conceded that although F the contract was silent as to duration, it could be terminated on reasonable notice. Streicher JA said [4] that whether a contract, which is silent on its duration, is terminable on reasonable notice, is a matter of construction:

'The question is whether a tacit term to that effect should...