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Datacolor International (Pty) Limited v Intamerket (Pty) Limited (2/99) [2000] ZASCA 82; 2001 (2) SA 284 (SCA) (30 November 2000)

REPORTABLE

Case No 2/99

IN THE SUPREME COURT OF APPEAL

OF SOUTH AFRICA


In the matter between:

DATACOLOR INTERNATIONAL (PTY) LIMITED Appellant
and

INTAMARKET (PTY) LIMITED Respondent


CORAM: VIVIER, NIENABER, SCOTT, ZULMAN JJA et MTHIYANE AJA
HEARD: 16 NOVEMBER 2000
DELIVERED : 30 NOVEMBER 2000

J U D G M E N T

SCOTT JA/...

SCOTT JA:
[1] I have had the privilege of reading the judgment of my brother Nienaber. I agree with the legal principles set out therein but regret that I am unable to agree with the construction he places on the two letters said by the respondent to constitute a repudiation of the contract between the parties. As this is a minority judgment I shall state the reasons for my dissent as shortly as possible.
[2] The essential nature of the inquiry is clear enough. Do the letters, which it is common cause must be read together, fairly interpreted exhibit a deliberate and unequivocal interpretation no longer to be bound? (See for eg OK Bazaars (1929) Ltd v Grosvenor Buildings (Pty) Ltd and Another 1993 (3) SA 471 (A) at 480 I - 481C.) By the time the letters were written the contract between the parties had been in force for more than three years. In terms of clause 16 (a) either party therefore had the right to terminate it subject only to the requirement of giving not less than 12 months written notice. An unequivocally expressed intention to terminate the contract would not on its own amount to a repudiation. It would have to be clear that the intention was to terminate the contract in breach of its provisions, i e without written notice of not less than 12 months, or for that matter a shorter period agreed upon by the parties.
[3] It is convenient to quote both letters which were telefaxed to the respondent at about the same time. They are dated respectively 24 and 25 June 1991. I shall refer to the first as the “covering letter” and the second as the “official letter”.

“24 June 1991
RE: Termination of Distributorship Agreement with ICS Texicon
Dear Steve,
Along with this fax is an official letter of termination of our Distributorship Agreement with Intamarket. The original is being sent by registered post.

As it has been found necessary to take this unfortunate decision I would have thought you would like to terminate the Agreement as soon as possible. With this in mind I feel sure we can agree a mutually convenient date in the near future and come to some arrangement regarding the stocks you hold (including the demo., unit).

Let me have your thoughts on this matter at your earliest convenience.
Kind regards ”


“25 June 1991

Dear Sirs
Distributorship Agreement with ICS-Texicon Limited

Further to your discussion with my colleague, Mr Cornelius, I regretfully have to confirm the termination of the Distributorship Agreement between Intamarket (Pty) Limited and ICS - Texicon Limited.

We would like to thank you for your support in the past and wish your organisation success in the future.
Yours faithfully”

[4] The respondent’s contention was that the official letter had to be construed as expressing an intention to terminate the contract with immediate effect. The letter, of course, does not say this. It confirms the termination but makes no reference to the date from which the termination will take effect. Had the writer’s intention been to terminate the contract immediately one would ordinarily have expected this to be stated expressly. After all, expressions such as “we hereby terminate” or “the agreement is terminated forthwith” or “with immediate effect” are commonplace and are used by lawyers and laymen alike.
[5] The word “confirm” in the official letter is, furthermore, clearly a reference to what was said in the course of a telephone conversation between Mr Cornelius representing the appellant and the respondent’s Mr Mayer which took place about a week earlier, probably on 17 June 1991. It is common cause that on this occasion Mr Cornelius advised Mr Mayer that the appellant had decided that it would not continue with the respondent as its distributor in view of a Swiss company having taken over the appellant. Mr Cornelius said he would confirm the decision in writing. There was no mention of when the termination would take effect; the official letter did no more than confirm what had been said before.
[6] Thus far I have referred only to the official letter. If the two letters are read together, as it is common cause they must, then it is immediately apparent why no reference is made in the official letter to when the termination is to take effect. The reason is that this is dealt with in the covering letter. An ordinary reading of the covering letter makes it clear, I think, that what the writer was doing was simply inviting the reader to agree a date upon which the termination would take effect.
(7) If an analysis of the covering letter is necessary to justify my understanding of it, I venture the following. In the second paragraph the writer says: “... I would have thought you would like to terminate the Agreement as soon as possible. With this in mind I feel sure we can agree a mutually convenient date in the near future ...”. The final paragraph reads “Let me have your thought on this matter at your earliest convenience”. In my view there can be no doubt that the reference to the “mutually convenient date in the near future” (my emphasis) is a reference to a date on which the termination would take effect. This is wholly in conflict with the construction that the agreement had been terminated forthwith or that the official letter confirmed a termination that had already taken effect. In order to meet this point counsel for the respondent was compelled to argue that the reference to “a mutually convenient date in the near future” refers only to an arrangement regarding the stocks held by the respondent. The argument is founded on the words “and come to some arrangement regarding the stocks you hold ...” which follow the words “in the near future” in the sentence quoted above. Such a construction, I think, is contrived. It ignores the opening words of the sentence “with this in mind” which refer to the words in the previous sentence “you would like to terminate the agreement as soon as possible.”
[8] A further argument advanced on behalf of the respondent is that the need to come to an arrangement regarding the stocks would be unnecessary if the contract was to run another year. But this ignores what would be the obvious object of the covering letter, namely to invite the respondent to agree on an earlier date for the termination to take effect. In the event of an earlier date being agreed upon an arrangement regarding the stocks would have to be made.
[9] I am also unable to agree with the suggestion that the letters convey an unequivocal intention to terminate the agreement “forthwith” but subject to some sort of winding-down period during which the contract would in effect continue to operate. Such a construction, I think, would involve reading into the covering letter something which is simply not there. It would, in any event, be in conflict with the express terms of the letter. As I have attempted to show, the “mutually convenient date in the future” is an obvious reference to the date of termination. That being so, I can see no basis for construing the letter as communicating an intention to terminate the contract with immediate effect (or confirming that it has already been terminated) but subject to a sort of winding-down period.
[10] On behalf of the respondent much was made of the fact that the letters make no reference to a notice period. It was pointed out that as clause 16 (a) of the contract provides for “not less than 12 months” written notice there was no basis for construing the letters as giving notice as no notice period can be gleaned from either letter. Accordingly, so it was emphasized, the letters could not constitute the written notice contemplated in the contract. This, I think, is correct; but it does not follow that the letters therefore constituted a repudiation. The communication of an unequivocal intention to terminate coupled with an invitation to negotiate an earlier effective date of termination does not in my view amount to a repudiation. If, of course, no agreement was reached and the appellant insisted on a shorter notice period the position would be otherwise. It is also true that in a subsequent letter dated 19 July 1991 the appellant contended that it had given the requisite 12 months notice in its official letter. That it was wrong in this assertion is of no consequence. The interpretation of the letters is a question of law involving an objective test. (See for eg Highveld 7 Properties (Pty) Ltd and Others v Bailes 1999 (4) SA 1307 SCA at 1315 at E - G.)
[11] Finally it is necessary to observe that the letters in question contain no assertion of misconduct or a breach on the part of the respondent. In other words, no reason or purported reason is advanced for what would otherwise be a total disregard for the terms of the contract. In one of the judgments of the majority in the Court below it was suggested that the appellant may well have chosen deliberately to repudiate the agreement rather than have to put up with a disappointed distributor serving out a notice period. There is no basis for such a suggestion. Furthermore, the consequence of the appellant acting in bad faith in this way would be to deprive it of the benefit of the restraint of trade clause (cl 19) in the contract. This would be true both in England (where the contract was concluded) and in South Africa (Reeves and Another v Marfield Insurance Brokers CC and Another 1996 (3) SA 766 (A) at 773 C, 775 C - D) and such a motive cannot lightly be ascribed to the appellant.
[12] It follows that in my view the letters in question did not amount to a repudiation of the contract. I would accordingly have upheld the appeal with costs.


D G SCOTT