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IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO: A5016/2006

In the matter between:

LACO PARTS (PTY) LIMITED

t/a ACA CLUTCH Appellant

(Defendant in the court a quo)

and

TURNERS SHIPPING (PTY) LIMITED Respondent/Plaintiff

(Plaintiff in the court a quo)

J U D G M E N T

BORUCHOWITZ J:

[1] This appeal is principally concerned with the remedy of a party who has rendered performance under a contract which is void ab initio as a result of a fundamental mutual mistake.

[2] The respondent acts as a clearing and forwarding organisation. During 2001 it assisted a client, Self-Fit Seco (Pty) Limited (Self-Fit) to import 2 955 clutch parts into South Africa. Self-Fit was thereafter placed in liquidation. At that time Self-Fit was indebted to the respondent in an amount of approximately R74 000 in respect of unpaid shipping charges. The respondent also held certain of the imported parts in a bond store.

[3] In November 2001 the respondent, acting with the apparent consent of the liquidator of Self-Fit, offered to sell the clutch parts to the appellant. The negotiations between them commenced when Mr Cochrane-Murray the managing director of the respondent telephoned Mr Steinberg, a director of the appellant, to enquire whether the appellant, which specialised in the supply of brake and clutch parts in respect of light to heavy duty motor vehicles, would be interested in buying same. After a discussion Steinberg asked Cochrane-Murray to confirm the details by fax.

[4] On 12 November 2001 Cochrane-Murray sent a fax to Steinberg enclosing two invoices which reflected the parts sold by a foreign entity to Self-Fit, and certain bills of entry. The fax reads as follows:

‘Further to our today’s telephonic conversation regarding the shipment of Self-Fit [sic] clutch parts we presently have in Bond Store, attached please find the relevant documentation.

I will contact you in due course to determine your interest in purchasing the equipment accordingly.’

[5] Cochrane-Murray then phoned Steinberg to enquire whether he had seen the documents and whether the appellant was interested in acquiring the parts. He thereafter sent a second fax in the following terms:

‘I refer to our discussion regarding the above mentioned stock which we cun am [sic] able to provide you with an offer as follows:

Current value of goods cleared at today’s exchange rates and delivered to your premises R143 941.00 (VAT R18 267.00).

Our offer cleared and delivered to your premises R111 783.00 (VAT R146 …

Payment by fully negotiable Post Dated Cheques made out to Turners Airfreight …

R55 000.00 dated 31 January 2002

R56 783.00 dated 28 February 2002

I will contact you later today to determine your requirements accordingly.’

[6] Cochrane-Murray and Steinberg had a further discussion on or about 15 November 2001. The parties agreed on a purchase price of R110 000 to be paid by means of a single post-dated cheque, and later that day Cochrane-Murray wrote to the appellant in the following terms:

‘I refer to our telephonic discussion of today’s date and confirm our conversation as follows:

ACA Clutch agree to purchase the Self-Fit-Seco products as listed in our letter dated 12 November 2001 for R110 000.00. Payment will be by cheque, post dated to the 28 February 2001. Please note that the cheque should be made out to Turners Airfreight (Pty) Ltd and fully negotiable (i.e. the cheque should not be crossed or made non negotiable).

Please acknowledge this letter by return, confirming the above is in order. On receipt of your letter we will proceed with the clearance and deliver the product to your premises, as agreed.’

[7] On receipt of the above document Steinberg wrote the following in manuscript thereon: ‘Accepted subject to quantities as per faxed invoices being received by ourselves.’ He also signed his name and returned the document to the respondent. Cochrane-Murray confirmed in evidence that he had received and read Steinberg’s acceptance of the offer and advised him that the parts would be delivered in the next few days. The respondent thereafter delivered certain clutch parts to the appellant. The number of parts delivered is in dispute but nothing turns on this issue. The appellant says that it only received 670 parts whereas the respondent asserts that some 723 clutch parts were delivered.

[8] There is a fundamental disagreement between the parties as to the subject-matter of the sale. Steinberg’s contention is that the appellant understood itself to be acquiring the parts reflected on the invoices (2 955 clutch parts) whereas Cochrane-Murray alleges that the deal was struck on the basis of the bills of entry, which reflect the balance of the shipment held in the bond store. Each contends for an agreement on different terms regarding the merx and the appellant has consistently refused to effect payment of the agreed purchase price until all of the parts which it says it purchased are delivered.

[9] As a consequence of the above, action was instituted by the respondent against the appellant claiming payment of the sum of R110 000 together with interest and costs. In its particulars of claim the respondent relies upon both a main and an alternative claim. The main claim is based on an allegation that the parties had concluded a partly oral and partly written agreement in terms of which the respondent sold to the appellant 723 clutch parts for R110 000 including VAT. In the alternative thereto it is alleged that if it is found that the parties were not ad idem regarding the subject-matter of the sale, then the agreement is void ab initio and the respondent is entitled to restitution of the delivered parts or payment of their value.

[10] In its plea to the main claim the appellant avers that the respondent agreed to sell and deliver to it 2 955 clutch parts for the sum of R110 000 including VAT. Delivery was to occur before 28 February 2002 and payment was to be effected once that happened. The appellant admits its refusal to pay the sum claimed but states that it is justified in so doing because the respondent has only delivered 670 parts. The appellant tenders to pay the purchase price upon delivery of the balance of the parts. In answer to the alternative claim the appellant reiterates its version of the agreement, maintains that the parties were ad idem on its terms and denies that the agreement is void ab initio.

[11] The trial judge (Tshiqi J) dismissed the main claim but upheld the alternative claim. The Judge a quo found that the parties were not ad idem as to the subject-matter of the sale, that there was no valid contract between the parties and that the parties ought to be restored to the position they were in at the time they contracted. The learned Judge also concluded that because the appellant had utilised the respondent’s incomplete performance by accepting delivery and selling parts that had been delivered, it was obliged to effect payment of the monetary value of the said goods and ordered the appellant to pay to the respondent the sum of R99 115,53 representing the monetary value of the clutch parts that had been delivered. The appellant appeals with leave of the trial court against the judgment and order.

[12] It was submitted on behalf of the appellant that the court a quo had erred in finding that there was dissensus between the parties and that it should have found that a contract had been entered into on the appellant’s terms. Alternatively, if the finding that there was no meeting of minds was correct, that there was no basis in law for the grant of restitutionary relief. The proper basis for relief would have been an enrichment action, a cause of action that was neither pleaded nor established in evidence.

[13] In my view the learned Judge a quo was correct in finding that no agreement had been concluded on the terms contended for by the respondent. On a subjective level the parties were at cross-purposes. As far as Cochrane-Murray was concerned the respondent had offered to sell to the appellant only those parts reflected on the bills of entry whereas Steinberg understood that the appellant was to acquire the quantities reflected in the two invoices that had been forwarded to it. The appellant’s acceptance did not coincide with the offer put and there was clearly a mutual error as to the subject-matter of the sale. If anything, Steinberg’s qualified acceptance amounted to a counter-offer and by implication a rejection of the respondent’s offer.¹

[14] It is unnecessary for present purposes to decide whether a contract came about on the appellant’s terms pursuant to an acceptance of the appellant’s counter-offer. Even if it were held that such contract had come about this would not have availed the respondent. Where there is partial performance of a contract involving a reciprocal obligation, the proper cause of action is a claim for a reduced contract price. See BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk² To invoke such remedy the respondent would have had to prove: (1) that the appellant had utilised its incomplete performance; (2) that circumstances exist making it equitable for the court to relax the reciprocity principle; and (3) what the reduced contract price should be, that is by how much the contract price should be reduced having regard to the cost of bringing the respondent’s performance into conformity with the contract. No attempt was made either in the pleadings or evidence to establish a cause of action on such basis. The monetary value which the trial judge awarded to the respondent did not constitute a reduced contract price as contemplated in the BK Tooling case supra as no account was taken of the purchase price that had been agreed and the number and value of the undelivered clutch parts.

[15] The alternative claim was pleaded in the following manner:

’10. In the event that this Honourable Court finds that the parties were not ad idem in concluding the aforesaid contract:

1. The agreement is void ab initio;

2. The Plaintiff is entitled to restitution of the delivered goods;

3. In the event that the Defendant is unable to return the delivered goods the Plaintiff is entitled to payment by the Defendant of a sum constituting the value of the goods;

4. The value of the goods is the sum of R110 000,00.’

[16] The alternative claim is in my view misconceived. It proceeds from the premise that the agreement is void ab initio. The authorities are clear that such premise cannot support a claim for restitutionary relief, whether in the form of restitutio in integrum or restitution of performance following upon cancellation of a contract. The object of restitutio in integrum is to put the parties to a contract that is retrospectively declared null and void ab initio, ie. a voidable contract, into the position in which they would have been had the contract not been concluded. It is of the essence of such remedy that there be a valid legal transaction which may be avoided by the Court declaring it void, ab initio. See Bonne Fortune Beleggings Bpk v Kalahari Salt Works (Pty) Ltd and Others;³ Davidson v Bonafede;⁴ Maseko v Maseko.⁵

[17] In Baker v Probert⁶ the Appellate Division (as it then was) finally settled the vexed question whether a claim for restitution following cancellation of a contract was contractual or enrichment. Its view that such claim was contractual was recently re-affirmed in Kudu Granite Operations (Pty) Ltd v Caterna Ltd⁷. A claim for a reduced contract price as comprehended in BK Tooling also presupposes the existence of a valid contract and is a distinctly contractual remedy.

[18] As is apparent from the abovementioned authorities restitutionary relief is a distinctly contractual remedy which presupposes the existence of a valid contract. Having found that there was no meeting of minds it was not open to the trial court to award restitutionary relief to the respondent. The only relief available to a litigant in that position is the rei vindicatio or an enrichment action. In the present matter no reliance could have been placed on the rei vindicatio as the owner of the clutch parts was the company in liquidation and not the respondent, and nor, as I will shortly demonstrate, was any attempt made to establish a claim based on unjust enrichment.

[19] Counsel for the respondent sought to justify the validity of the alternative claim. He submitted that the pleadings were perfectly adequate in the circumstances to alert the appellant to what was being claimed and constituted a valid cause of action. In the event that a contract is declared to be void ab initio an innocent party who has performed on an assumption as to the validity of that agreement is entitled to restitution of his performance. Reliance for this submission was placed on the following statement by A J Kerr in The Principles of the Law of Contract⁸:

‘What remedy is available if the contract based on a fundamental common mistake has been partly executed? In Dickinson Motors (Pty) Limited v Oberholzer 1952 (1) SA 443 A it was argued that the claim was a condictio indebiti but Schreiner JA, with whom Fagan JA concurred, took care not to restrict a present day court to the requirements of this remedy in Roman law. The court allowed repayment without any enquiry into the enrichment or otherwise of the Defendant at the time of action. This accords with the express statement in Lediker and Sache v Jordaan (1898) (5) OR 107 at 111 that the proper remedy is restitution, which in turn accords with the award of restitution and restitutionary damages in Van Der Westhuizen v James (1898) 5 OR 90.’

[20] Reliance was also placed upon the following dictum of Scott JA in Mackay v Fey NO and Another:⁹

‘It has frequently been said that the action for restitutio in integrum is a separate and distinct remedy and that it is not an enrichment action. See eg Davidson v Bonafede 1981 (2) SA 501 (C) at 510A-E where Marais AJ cites with approval De Vos Verrykingsaanaspreeklikheid in die Suid-Afrikaanse Reg 2ed at 144. However, under the influence of English law, which recognises restitutio in integrum as based on unjust enrichment, there has been over the years a general relaxation of the rule that a party seeking restitution must first be willing and able to restore what he or she received. See Daniel Visser ‘Unjustified Enrichment in Southern Cross: Civil Law and Common Law in SA editors Zimmerman and Visster at 536-537. Whether the need to make restitution is excused, either wholly or partially, will now depend upon considerations of equity and justice and the circumstances of each case; the occasions on which it will do so are not limited to a specified and limited number of exceptions. See Feinstein v Niggli 1981 (2) SA 684 (A) at 700G-701C where the cases are collected.’

[21] The attempt to rely on the aforementioned passage in Kerr’s The Principles of the Law of Contract is in my view misplaced. The learned author was there dealing with the effect of a common mistake on the contract. The instant case is one involving a mutual mistake. Common mistake differs from mutual mistake in a very fundamental way. Parties who are mutually mistaken are by definition not ad idem (subject however to the application of the doctrine of quasi-mutual assent). Parties who are commonly mistaken are by definition ad idem and the effect of the mistake on the contract must necessarily be decided on different principles.¹⁰ The case of Dickinson Motors (Pty) Ltd v Oberholzer¹¹ involved an incidence of common rather than mutual mistake. The court found on the facts that it was unnecessary to be overly specific about which condictio ought to have been pleaded by the plaintiff. Neither Dickinson Motors nor Mackay v Fey is authority for the proposition that restitutio in integrum is available in circumstances where there is no underlying contract. The view expressed by Scott JA in Mackay’s case would appear to be obiter. It is in any event settled law that where there is no contract the appropriate remedy is to be found in unjust enrichment.¹²

[22] Counsel for the respondent, relying on a dictum in Davidson v Bonafede¹³, submitted further that a plaintiff is not obliged or required to attach a label to his cause of action; all he need do is satisfy the court that the facts pleaded and proved entitle him to the claims which he makes. To adopt this approach would in my view blur the distinction between a claim for restitution and an enrichment claim. Although there is no general action based on enrichment in South African law there are certain general requirements for any action based on enrichment which have to be satisfied.¹⁴ These are: (a) whether the appellant was enriched; (b) whether the respondent was impoverished; (c) whether the appellant’s enrichment was at the expense of the respondent; and (d) whether the enrichment was unjustified (sine causa). The need to establish these four requirements was endorsed in McCarthy Retail Ltd v Shortdistance Carriers CC¹⁵ and Kudu Granite Operations.¹⁶

[23] There is evidence that an associated company of the respondent Turners Airfreight (Pty) Ltd had a warehouse and shippers lien over the goods arising from credit terms extended to Self-Fit to facilitate the importation of the clutch parts. The fact that the respondent was not owner of the goods and that its said associated company had a lien over the goods would clearly have been relevant in order to determine the nature and extent of the respondent’s impoverishment and whether the appellant was in fact enriched at the expense of the respondent. These are aspects that should have been pleaded and canvassed in evidence. The obvious reason why they were not is because the respondent at no time understood its alleged claim against the appellant to be based on unjust enrichment. In fact at the trial counsel for the respondent expressly disavowed any reliance on unjust enrichment as a cause of action.

[24] In the circumstances the respondent’s alternative claim should have been dismissed and the respondent absolved from the instance.

[25] For these reasons I would uphold the appeal.

[26] The following order is granted:

1. The appeal is upheld with costs.

2. The order of the court a quo is set aside and replaced with an order of absolution from the instance with costs.

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P BORUCHOWITZ

JUDGE OF THE HIGH COURT

I agree:

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F R MALAN

JUDGE OF THE HIGH COURT

I agree:

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S E WEINER

ACTING JUDGE OF THE HIGH COURT

COUNSEL FOR APPELLANT ADV R H PEARSE

INSTRUCTED BY KNOWLES HUSAIN LINDSAY INC

COUNSEL FOR RESPONDENT ADV H B PITMAN

INSTRUCTED BY GARY JANKS ATTORNEYS

DATE OF APPEAL 15 May 2007

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