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Not Reportable

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE LOCAL DIVISION – PORT ELIZABETH                                                                

Case No:  3329/2013

In the matter between:

WELFIT ODDY (PTY) LTD                                                                   Applicant

and

FOURCEE INFRASTRUCTURE EQUIPMENTS

PVT. LTD                                                                                       Respondent

JUDGMENT

REVELAS J:

Introduction

[1] The applicant seeks an order for specific performance of what it contends are the respondent’s outstanding obligations pursuant to an agreement, the validity of which is disputed by the respondent.  In terms of the agreement, which terms were varied from time to time, the applicant agreed to manufacture and deliver 1200 tank containers to the respondent at an agreed price.  The respondent contends that it is not bound by the agreement as it did not agree to its terms and therefore declined to append its signature thereto. It argued that the common intention of the parties was that if the written instrument was not signed by both parties, no agreement was concluded between them.  In addition, the respondent argued that the agreement was subject to a suspensive condition that the respondent had to provide a letter of credit to the applicant, and was unable to fulfil that requirement.    

[2] The applicant, in response, argued that the respondent was estopped by its conduct from relying on the aforesaid defences to escape its obligations under the agreement, alternatively that the respondent agreed tacitly to its terms. The impugned written instrument is referred to as Individual Agreement No 1056-2, or the second agreement below.

[3] The applicant proceeded by way of notice of motion to obtain the relief it seeks. The application was heard on 19 June 2014. Goosen J, upheld the respondent’s objection that the matter could not be resolved on the papers, particularly since the learned judge was of the view that the resolution of the dispute before him encompassed consideration, not only of the conduct of the parties as evidenced by the large body of correspondence between them, but also as to what transpired and was specifically agreed at certain meetings held during 2011 and 2012. Consequently, the matter was referred for the hearing of oral evidence. At the hearing, the applicant lead the evidence of two witnesses, namely Mr Wilfred Allen, its commercial director (the deponent to the founding affidavit) and Mr Cees Van Der Burg, the chief executive officer of Buhold Industries B.V. and the majority shareholder (95,7%) in the applicant. The respondent closed its case without calling any witnesses. The precise ambit of the relief sought in the applicant’s amended notice of motion will be referred to later herein.

Background

[4] The applicant is a company based in Perseverance, Port Elizabeth, and it manufactures transport related equipment and more particularly, intermodal tank containers which are designed for the purpose of transporting fluids in particular, by road, rail and sea or river.   The respondent, a company based in Mumbai, India, specializes in the transport of liquids, such as non-petroleum oil and lubricants, fatty acids, palm oil, molasses, chemicals and other similar products, which are transported in tank containers of the kind manufactured by the respondent.

[5] During 2010 the respondent made enquiries regarding the applicant’s products, whereafter Mr Santosh Deshpande, the respondent’s chief operations officer, visited the applicant’s premises in Port Elizabeth and business discussions began with regard to the respondent’s intention to purchase of tank containers from the applicant.

[6] On 7 September 2010 and pursuant to further negotiations, the respondent accepted the applicant’s offer of 11 August 2010, to supply 270 standard container tanks of 25 000 litre capacity at USD 21 110.00, ex works per tank container. This lead to the conclusion of Individual Agreement No 1056-1 (or “the first agreement”) and a Master Container Purchase Agreement (“the master agreement”). Both agreements were concluded by the parties on 30 September 2010.

[7] The master agreement governed all business concluded between the parties and the further individual agreements entered into pursuant to the master agreement, each providing for an order placed by the respondent with the applicant for a specific number of container tanks.  It is common cause that the parties entered into two further individual agreements, also concerning the manufacture and sale of container tanks.  According to the applicant, three such agreements were therefore entered into namely: Individual Agreement No 1056-1, (or the first agreement) referred to above. Thereafter in September 2011, Individual Agreement No 1056-2, (the impugned written instrument) and Individual Agreement No 1056-3, were concluded. The three individual agreements were subordinate to the master agreement which contained the following the material terms:

7.1    The applicant and the respondent would in the future enter into agreements for the sale and purchase of tank containers;

7.2    The price delivery and specification of the tank containers agreed to in writing to the applicant and the respondent at the time each individual agreement has been concluded;

7.3    The applicant would sell and make delivery or and make available for delivery tank containers at prices in accordance of particulars and details as set out in each individual agreement;

7.4    The tank containers would be delivered by the applicant in accordance with the particulars and details set out each individual agreement annexed to the master agreement;

7.5    Ownership of each tank containing only passed to the respondent against payment of the purchase price. Risk, however, passed to the respondent against delivery;

7.6    Notwithstanding any of the terms in the individual agreements, the respondent accepted that the tank containers may not be released until the applicants’ invoices were paid in full by the respondent;

7.7    The applicant warranted that each tank container would be free from defects in design, workmanship and materials. The applicant also  guaranteed that it would replace and refit any components of any tank container discovered to be defective in respect of the aforesaid and in respect of which written notice is given to the applicant within three years after the dates in such tank container is accepted, subject to certain provisions;

7.8    Each tank container was to be certified by an independent inspection authority acceptable to the respondent, in compliance with the International Standards Organisation Technical Committee Recommendations;

[8] Certain other conditions were agreed to in the master agreement with regards to the value added tax legislation in South Africa and it was also agreed that the governing law would be the South African law and any litigation which might ensue from a breach of any of the terms and conditions of the master agreement, had to be adjudicated in South Africa.

The Agreements

[9] Mr Allen’s undisputed testimony was that the master agreement was the overall agreement and that the individual agreements related mainly to price, specification, quantity and price.  The first individual agreement concluded between the parties, Individual Agreement No 1056-1 referred to above, envisaged the manufacture of 270 (two hundred and seventy) 25 000 litre container tanks, at the purchase price of USD 21 110.00 ex works, to be delivered between December 2010 and April 2011, at the rate of 90 container tanks per month. It is not necessary to repeat the specifications which were of a highly technical nature herein. (The term “ex works”, frequently used by the parties in their negotiations, according to Mr Allen, conveys that the respondent was liable for the costs of transporting the container tanks from the applicant’s premises in Port Elizabeth to the harbour, and from there to India).

[10] The second agreement, Individual Agreement No 1056-2, envisaged the manufacture and supply to the respondent of 1200 standard tank containers of 25000 litre capacity at an individual price of USD 23000,00, to be delivered at the rate of 100 tanks per month starting in January 2012, the final batch to be delivered in December 2012.  According Mr Allen, this agreement was concluded in 27 September 2011 and recorded in Individual Agreement No 1056-2, which the respondent did not sign, probably due to an administrative oversight.  The respondent contends it was a deliberate refusal to sign.

[11] Individual Agreement No 1056-3, or the third agreement, provided for the manufacture and supply to the respondent 100 sulphuric acid tank containers of 24000 litre capacity.  This agreement was also forwarded to the respondent for signature, and also not signed by the respondent.  Initially the aforesaid 100 sulphuric acid tanks formed part of the 1200 tanks ordered in terms of the second agreement.  The following month on 5 October 2011 Mr Deshpande advised Mr Allen that the respondent wanted “the applicant to make these 100 in addition to the 1200.”  Hence the third agreement’s existence.   

[12] Even though Individual Agreement No 1056-1 was signed by both parties and Individual Agreement No 1056-3 no, both parties fully discharged their contractual obligations in terms of these two agreements. In other words, 370 (270 plus 100) container tanks were manufactured by the applicant according to specification, delivered and paid for by the respondent in terms of the second and third agreements, albeit that the payments were consistently late.

[13] According to Mr Allen, the only problems experienced by the applicant with regard to its business relationship with the respondent was to secure timeous payments. Certain defects in the first consignment of container tanks relating to faulty thermometers and oil stains were remedied after the respondent had pointed them out.  The relevant tanks were repaired in Singapore and the applicant paid for the repairs. Mr Allen conceded that the respondent’s complaints in this regard were legitimate and made the point that it also served as an indication that the respondent’s employees had no difficulty in communicating any problems they experienced in their business relationship with the applicant. The parties were in constant communication with each other, either by e-mail or telephonically.

[14] It is common cause that the respondent had also taken delivery of, and paid for 699 tank containers, apart from the 370 tank containers referred to in the first and third agreements.  Mr Allen testified that the 699 tank containers were delivered in terms of the second agreement and a balance of 501 tank containers (1200 minus 699) were still to be delivered to and paid for by the respondent in terms of this agreement when the respondent repudiated the agreement in 2013.  The respondent disputed that the 699 tank containers had been purchased from the applicant in terms of the second agreement. The respondents’ case is that the master agreement contemplated the conclusion of several individual agreements for specific orders of tank containers to be concluded by the parties in writing, as expressly stipulated, and would be entered into on an ad hoc basis, and consequently the 699 tanks were not delivered in terms of the second agreement, particularly since there was no such agreement.

[15] Mr Allen testified further, that of the 501 container tanks, 132 had already been manufactured when the respondent, through its chairperson, Mr Rajesh Lihala, adopted the stance in May 2013, some twenty months later, that there had been no contract between the parties, the delivery and payment in respect of 699 tanks notwithstanding. 

[16] The applicant sold the 132 tank containers already referred to, to mitigate its damages. 40, 8 and 84 containers were respectively sold.  Mr Allen explained that the applicant would have earned USD 23 000,00 per tank had it not been for the respondent’s repudiation of the contract.  It then had to sell the aforementioned 132 tanks at a loss of USD 6000 per tank (USD 1000,00 accounts for changing the outer appearance of the tank to accord with the change in ownership).  It therefore no longer pursues it claim for payment to those tanks in the amount of USD 3,036 million, but claims only the interest as from the due dates for payment agreed with the respondent (April, June and July 2013) and set out in its amended notice of motion wherein the applicant seeks orders as follows:

“1.      The respondent pay to the applicant interest on the sum of USD 3 036 000.00 (three million and thirty-six thousand United States Dollars) at the prevailing legal rate of 15.5% per annum as follows:

1.1         On the sum of USD 1 932 000.00 (one million, nine hundred and thirty- two thousand United States Dollars) from 10 April 2013 to date of final payment, alternatively, to 26 August 2014;

1.2         On the sum of USD 920 000.00 (nine hundred and twenty thousand United States Dollars) from 30 June 2013 to date of final payment, alternatively, to 26 August 2014;

1.3         On the sum of USD 184 000.00 (one hundred and eighty-four thousand United States Dollars) from 31 July 2013 to date of final payment, alternatively, to 26 August 2014;

2.       The respondent is to perform all its outstanding obligations in terms of the agreement concluded in terms of the annexures “WA 14” and “WA 15”, alternatively Individual Agreement No. 1056-2 (annexure “WA 21” to the applicant’s founding affidavit), as varied from time to time in writing as read with the Master Container Purchase Agreement by:

2.1     Taking delivery of the remaining 301 (three hundred and one) tank containers as and when manufactured by the applicant.

2.2     Paying to the applicant a purchase price of USD 23 000.00 (twenty three thousand United States Dollars) for each tank container manufactured by the applicant, in terms of the preceding sub-paragraph, within 48 (forty- eight) hours of receipt of the bill of lading in respect thereof.

2.3     Taking delivery of 200 (two hundred) maxi tank containers (27 500 litres) as and when manufactured by the applicant; and

2.4     Paying to the applicant a purchase price of USD 25 000.00 (twenty-five thousand United States Dollars) for each tank container manufactured by the applicant, in terms of the preceding sub-paragraph, within 48 (forty- eight) hours of receipt of the bill of lading in respect thereof.

2.5     The Respondent pay the costs of the applicant such costs to include the costs of 2 (two) Counsel”. 

[17] The respondent argued that the relief sought is not competent as prayer 2 is premature in that the container tanks referred to are non-existent at this point.  The order is for specific performance.  If for some reason, not attributable to the respondent, the tanks are not manufactured, the respondent would not be obliged to pay for them.  The complaint is therefore unfounded.   

[18] The terms of the second agreement upon which the applicant relies, are those contained in the Master Agreement, read together with the terms in the Individual Agreement (1056-2) and two e-mails, Annexures “WA14” and “WA15” to the founding affidavit, which were respectively (according to the applicant), an offer made by the applicant dated 26 September 2011, and an acceptance thereof dated 27 September 2011. The applicant argues that these two e-mails constituted the agreement between the parties and that Individual Agreement No 1056-2 is the formal recordal of that agreement. 

[19] The respondent disputed that the parties ever intended that the two e-mails (Annexures “WA14” and “WA 15”) would constitute a contract and if so it would have been attached to the master agreement as provided for in the latter agreement itself.

[20] Since the applicant seeks to enforce the respondent’s obligations arising from those two e-mails of 26 and 27 September 2011, it is necessary to set out what preceded them.  Certain negotiations regarding the manufacture of further sales of tank containers commenced in May 2011 and continued until July 2011, and ultimately culminated in a meeting at the Michelangelo Hotel in Sandton, in Johannesburg on 21 September 2011.

[21] The meeting was attended by Mr Allen for the applicant, and four employees of the respondent, namely Messrs Rajesh Lihala (chairman), Vinay Singh (managing director), Santosh Deshpande (chief operations officer) and Sundeep Ramgharia (chief financial officer). The minutes of this meeting was signed by all present and the following was recorded:

(a)        That respondent placed an order with applicant for 1200 standard tank containers as per the specifications applicable in terms of Individual Agreement No 1056-1.

(b)        The respondent agreed to a selling price of USD 23 000 per tank container to be delivered ex works.

(c)         The respondent would provide the applicant with a confirmed Letter of Credit issued by a “first class” bank to secure payment; and

(d)        The applicant would immediately purchase stainless steel required for the execution of the agreement.

[22] On 26 September 2011, Mr Allen wrote to Mr Deshpande, confirming the agreement reached at the meeting in Johannesburg.  This communication was the e-mail from Mr Allen, containing the terms proposed by the applicant (“WA14”), to which the respondent agreed in its e-mail sent the following day (“WA15”).  As both parties rely on “WA14” for different purposes, it is cited below: 

“I have attempted, through the points below, to provide an accurate summary of our discussions and agreements last week in Johannesburg.  If there are any points that you do not agree with or would like to add, then please do so through return mail.

·         Fourcee have placed an order on Welfit Oddy to supply 1200 of 25 000 Goal T 11 tank containers generally as per the specification for the previous 270 of units supplied in 2011.  Delivery will be 100 tanks per month starting in January and running through to December 2012.  The January/February months will average 100 tanks as per month by prior email correspondence with Santosh.

·         Fourcee require Fort Vale fittings to be provided on the new tank container order.  Welfit Oddy are concerned with the cost increase from moving from Perolo to Fort Vale but will reopen negotiations with Fort Vale.

·         The selling price agreed for the containers is US$ 23 000.00 ex-works.  The selling price shall remain at this level, irrespective of the outcome of the Fort Vale pricing discussions.

·         Fourcee will have some flexibility to structure the tank payments – minimum US$ 22 200.00 for a maximum quantity of 600 tank containers.  The remaining 610 containers will then have a price of US$ 23 800.00 i.e. the average tank price over the year will be US$ 23 000.00.

·         Fourcee will provide Welfit Oddy, within a few days, a confirmed letter of credit issued from a first-class bank.

Based on the above agreements, Welfit Oddy will immediately purchase the stainless steel required for the contract.  Welfit Oddy will also proceed to hedge the currency.  Both of these events enable Welfit Oddy to fix the selling price for the contract

Welfit Oddy will draw up a contract for signature by both parties”.

[23] The following day, Mr Deshpande responded as follows in “WA15”:

“We are in agreement with all the points mentioned below.

Please go ahead and draft the contract”.

[24] The respondent strongly relied on the last sentence to strengthen its position that at this point, no agreement had been reached between the parties and only once the contract was drafted and signed by both parties, an agreement on the 1200 tank containers would have been reached.

[25] Individual Agreement 1056-2 was signed by the applicant on 10 October 2011 and forwarded to the respondent for its signature on 12 October 2011, but the respondent did not return a signed copy thereof. The material terms thereof were as follows:

25.1  The applicant would supply to the respondent 1200 standard tank containers (25 000 litres each) according to specification number CPA4433/8349/Fourcee/25/B/T11/4828;

25.2  The price would be USD 23 000.00 per tank container;

25.3  Payment would be required within 7 days of invoice and before delivery of the tank containers;

25.4  The respondent was to provide the applicant with a confirmed Letter of Credit to be issued by a “first class bank”;

25.5  The tank containers would be delivered ex works as per Incoterms 2000;

25.6  The monthly delivery schedule would take place as follows:

25.6.1       200 tank containers in January/February 2012;

25.6.2       100 tank containers in March 2012;

25.6.3       100 tank containers in April 2012;

25.6.4       100 tank containers in May 2012;

25.6.5       100 tank containers in June 2012;

25.6.6       100 tank containers in July 2012;

25.6.7       100 tank containers in August 2012;

25.6.8       100 tank containers in September 2012;

25.6.9       100 tank containers in October 2012;

25.6.10      100 tank containers in November 2012; and

25.6.11      100 tank containers in December 2012.

[26] The material terms of the third agreement were as follows:

26.1  The applicant would deliver to the respondent 100 sulphuric acid tank containers (16 000 litres each) according to Specification Number CPA1135/8351/Fourcee/16/G/T14/4924;

26.2  The price would be USD 23 000.00 per tank container;

26.3  Payment would be required within 7 days of invoice and before delivery of the tanks;

26.4  Delivery would be ex works as per Incoterms 2000; and

26.5  The monthly delivery schedule would be 50 tank containers in February 2012 and 50 tank containers in March 2012.

The Evidence

[27] Much of the evidence was common cause or not disputed, but because the conduct of the parties over an extended period is crucial to the determination of the crisp question, whether the second agreement was binding or not, it is necessary to deal with it in some detail. 

[28] Mr Allen repeatedly emphasized during his testimony, that the most important consideration in determining the price of the tank containers in each agreement, was the prevailing price of steel and the exchange rate.  Both were variable and therefore the price of the steel had to be “locked in” and the currency “hedged” in as the first priority so that production could commence immediately. The fixing of the purchase price and the conclusion of the agreement from a practical point of view, had to occur in very close chronological proximity. The actual agreements on these aspects were reached through correspondence by e-mail and then finally recorded in one written agreement.

[29] The case of the applicant was that the inability of the respondent to make payment timeously, led to considerable delays in the execution of the second agreement.  The respondent was, however, satisfied with the manner in which the applicant performed its obligations.  Because of the payment patterns of the respondent, the applicant required either a deposit or a letter of credit from the applicant as “insurance” (the word chosen by Mr Allen) against the respondent’s possible inability to make payments timeously or at all, given that the steel for the order had been bought and the currency hedged. 

[30] During September 2011, three banks contacted Mr Allen to make enquiries pertaining to the feasibility and state of international trade in the manufacturing and leasing of tank containers, as part of their due diligence exercise prior to issuing letters of credit to the respondent.  However, no letters of credit were forthcoming.  Mr van der Burg then made enquiries and was advised by Mr Singh that a company called General Atlantic Singapore Fund Pte. Ltd (“General Atlantic”) intended purchasing a large shareholding in the company.  Ultimately, during January 2012, this investment was made and the respondent’s balance sheet for March 2012 reflected that it was flush with cash, had a very substantial increase in share capital and held about USD 5 Billion in equity alone.  The respondent was, in the words of Mr van der Burg who explained the balance sheet: “a super rich company”.  After seeing the balance sheet in December 2012, when he met with Messrs Lihala Deshpande and Bavishi of the respondent in Mumbai, Mr van der Burg felt that there was no need even for a letter of credit.

[31] Mr Ramgharia continued to assure Mr Allen that the letters of credit were forthcoming and throughout the correspondence displayed a keen interest in the continuation of the business arrangements with the applicant.

[32] However, on 5 December 2011, Mr Allen expressed his concerns at the respondent’s inability to secure a letter of credit.  At this point the applicant had already purchased USD 13 800 000,00 worth of materials for the manufacture of the tank containers, entered into an exchange rate contract to fix the Rand US Dollar exchange rate, and had completed the first 118 tank containers valued at USD 2 700 000,00.

[33] Mr Ramgharia responded to Mr Allen’s letter of concern, advising that the legal documents were in the process of being drafted and would be ready within a week and the funds would be available within seven days thereafter.  In the interim, the applicant had furnished, as is its practice with all its customers, weekly status reports which recorded the total number of tank containers to be manufactured in terms of the relevant contract (1200), the number already manufactured, the completion of tank containers currently in production, and the number of and date when they would be available for delivery.

[34] On 20 December 2011, the first status report was sent to Deshpande and Singh and on every week thereafter.  At no stage in the ensuing eighteen months did either of them, or anyone else from the respondent protest that there was no agreement in respect of the 1200 tanks, which figure appeared weekly on the reports sent to them..

[35] At the end of December 2011, when the applicant had been closed for the December holidays, Ramgharia advised that the respondent’s transaction with General Atlantic had been completed and that funds would be available by 5 January 2012.  Ramgharia, despite further assurances regarding a letter of credit, made a proposal to Mr Allen on 18 February that the respondent should rather lease the tanks in question from the applicant.  Mr Allen expressed his inability to comprehend the alleged cash flow difficulties of the respondent after the enormous capital injection given by General Atlantic.  Several e-mails were exchanged in this regard.

[36] The respondent ultimately, never paid a deposit, or provided a letter of credit.  An alternative arrangement was reached between the parties regarding payment. Payment would be made within 48 hours of a copy of the bill of lading in respect of a particular consignment being despatched to the respondent. In March 2012, the applicant agreed to release the first 40 tank containers for shipping and a copy of the bill of loading in respect of the first 40 tank containers bound for India were forwarded to the respondent and payment was to be made within forty eight hours, thus due on 29 March 2012.   The funds were only received by the applicant on 5 April 2012, notwithstanding the respondent’s vastly improved financial position.

[37] In the interim, Mr Allen’s concerns increased, he advised Mr van der Burg who travelled to Mumbai and had a meeting with Messrs Ramgharia, Lihala, Deshpande and Girotra on 27 March 2012 about the on-going unsatisfactory position regarding payments for and delivery of the tanks. 

[38] At the meeting an undertaking was given on behalf of the respondent that financing for the delivery of the first 175 tank containers would be made within two working days of receipt of the bill of lading.  Mr van der Burg was assured that the respondent was in discussions with the banks for a potential debt raise of USD 20 million and the next lot of container purchases would be funded therefrom.  A sanction letter was expected on 10 April 2012.  On 18 April 2012, no such letter had arrived but another ship load of container tanks was requested by the respondent who undertook to pay within two days of the receipt of the bill of lading.  The applicant’s further concerns were met with Ramgharia’s response:  “Kindly put all your concerns to rest regarding the financing and payments.

[39] During May 2012 Ramgharia advised the applicant of two additional sources of funding totalling USD 15 million from a bank in Singapore, but on 22 May 2012 requested a delay in the production schedule after July, for a period of two to three months.  The reason given was the depreciation of the Indian currency.  Mr Allen advised that production could be stopped for three months as from August 2012 and the tank containers due in that period, be manufactured in the first quarter of 2013.

[40] Another 122 tank containers were due in India during the third week of July.  Ramgharia requested that the applicant agree to release the original bill of lading in respect of this consignment to avoid the respondent having to pay detention charges.  This would mean releasing the containers prior to payment therefore.  Given the respondent’s payment record, Mr Allen refused to exercise that option.  The pattern of late payments and assurances were continued with.  In September 2012 the status of the contract was that 177 tank containers would be shipped to the respondent.  Once it took place, 699 tank containers would have been shipped to the respondent and a further 106 had been scheduled to be built in 2012. The remaining 395 tank containers would be built in the first quarter of 2013.  The material to build them had already been purchased and the currency in respect of the 395 tank containers had been hedged.

[41] In the context of the aforegoing, when Mr Ramgharia, on 23 September 2012 enquired whether the remaining tank containers could be converted from standard tanks to tanks suitable of acid and edible oil, Mr Allen advised that to enter into new contracts would be premature.  The existing contract (the second contract) still had to be finalized.

[42] On 26 September 2012, Mr Ramgharia reaffirmed the respondent’s commitment to the applicant and their business arrangements. Once again he advanced several excuses for late payment and the inability to provide a letter of credit, these ranging from a depreciation of the Indian currency, the respondent’s diminished buying power as a result of First Rand Bank to lend the respondent USD 20 million. At this stage Mr Allen and Mr van der Burg were not aware of the extent of respondent’s extremely healthy financial position. The respondent, at this point was in no need of a loan from a bank to pay the applicant. Significantly, Mr Ramgharia also mentioned that the respondents Chinese suppliers had “in the last few months worked out an extraordinary pricing along with financing option for us”. 

[43] Mr Ramgharia gave assurances to the effect that the respondent had a USD 10 000 000,00 line available which would “cover future purchase obligations”.  The reference to Chinese suppliers is significant as it is the applicant’s main competitor.  The applicant submitted in the founding affidavit that the respondent had found itself in a position to obtain cheaper tank containers than it was contractually bound to pay the applicant and is the reason why it subsequently repudiated the agreement. This suspicion was borne out by subsequent events.

[44] On 25 October 2012, when the applicant enquired about the shipping arrangements regarding the 177 tank containers (the last 177 of the first 699 tanks), Ramgharia wrote of “head-winds” facing the respondent and wanted to postpone delivery.  The aforesaid situation caused Mr van der Burg to make another trip to India.  He met with Messrs Lihala, Deshpande and Bavishi.  Undertakings were given that the respondent would pay for and take delivery of:

(i)     The 177 containers tanks by 30 November 2012; and

(ii)    The balance of 501 tank containers as from 1 April 2013.

[45] The respondent requested the applicant to consider reducing its selling price for the remaining 501 tank containers by between USD 1500,00 and USD 1700,00 per tank container.  The aforesaid was recorded in a minute signed by all the parties.

[46] The undertakings given were not honoured by the respondent.  Mr Bivishi, who had thus far hard played no part in the execution of the contract, notified the applicant that payment would be made as soon as the respondents board approved the payment, (not a condition of the agreement), and the approval was apparently given on 28 December 2012, and only after several communications between Mr van der Burg and the respondent’s employees. Payment was eventually made in respect of 150 tank containers on 6 February 2013. 

[47] The remaining 27 tank containers had by this time already arrived in Antwerp, Belgium and the copies of the bill of lading in respect of them had already been dispatched to the respondent on 21 January 2013, but no payment was forthcoming.  Mr Allen wrote to Mr Lihala concerning this long outstanding payment.  Mr Lihala was also reminded of the remaining 501 tank containers which still had to be supplied under the second agreement, of which 84 were ready for delivery.

[48] In the same communication, Mr Lihala was also notified that the applicant was unable to reduce its selling price.  Payment for the 27 containers was made on 21 February 2013.  The continuous struggle to extricate payments from the respondents despite its undertakings, prompted another meeting between Messrs van der Burg, Allen and Lihala in Noordwijk, (a suburb of Amsterdam) in the Netherlands on 7 March 2013. 

[49] The parties met, had discussions at a restaurant and came to another agreement pertaining to the remaining 501 container tanks.  They agreed that the 84 tanks ready for delivery would be delivered early in April 2013, and payment effected in the manner previously adopted, that is, within two days of the receipt of the bill of lading.  In respect of the remaining 417 tanks it was agreed that 217 would be delivered to the respondent between May 2013 and February 2014 with payment to be made within two days of receipt of a copy of the bill of lading, as per the usual arrangement. The remainder of 200 standard tanks would be replaced with 200 tank containers with 27 500 litres capacity (Maxi container tanks) at the price of USD 25 000,00 to be delivered between July 2013 and February 2014 (the selling price was variable, depending on specifications).  The agreement reached was signed by Messrs Lihala and van der Burg.  

[50] When by 8 May 2013, despite numerous calls and e-mails, the respondent had still not taken delivery of the 84 containers, Mr Allen wrote to the respondent’s head of international trade, Mr Ray Indrajit who sent a request to the applicant three days later to “please bear with us”. 

[51] When Mr Allen addressed his frustrations to Mr Lihala, he was accused of threatening him (a somewhat baseless accusation) and when Mr Allen refuted that he made threats but asked for a detailed response regarding his concerns, Mr Lihala responded that there had never been a contract pertaining to the 501 containers.  This stance was repeated in response to a letter written by the applicant’s attorneys demanding payment in the sum of USD 3 276 108,00 in respect of 132 tank containers which had been manufactured but not delivered to date.  In the same letter the applicant tendered performance in respect of its remaining obligations under the contract.

[52] On 27 October 2013 the applicant’s attorneys received a reply from the attorneys for the respondent, Messrs Somandy and Associates. They repeated that there was no contract between the parties, but conveyed that the respondent sought an amicable solution with the applicant to be negotiated pertaining to the price of the containers.  Noteably, mention was also made that a Chinese supplier had made the respondent a better offer.  The applicant notified the respondent that it was bound by the second agreement and the agreement concluded in Noordwijk and insisted on payment for the 132 tank containers and specific performance (to take delivery of and make payment) of the remaining 501 tank containers still to be manufactured.

[53] The applicant attached certain of the respondent’s tank containers in Belgium and the Netherlands on 4 November 2013 in terms of two court orders it had obtained in the two countries against payment of security.  The High Court of Rotterdam granted the order on one further condition, namely that the applicants claim in the main action be instituted within twenty eight days of the first attachment being executed.

Discussion

[54] The answer to the question, whether both parties considered themselves bound by the second agreement in respect of the 1200 containers or not, is to be found by examining the facts.

[55] The facts as set out before, show that despite difficulties with timeous payments, both parties discharged their obligations in terms  of the second agreement since 27 September 2011 when “WA15” was sent to the applicant, confirming the agreement reached in Sandton on 21 September2011, regarding the manufacture, delivery and payment of 1200 tank containers.  The fact that “WA15” requested Mr Allen to “Please go ahead and draft the contract” does not convey, as the respondent would have it, that there was no agreement yet at that stage.  For twenty months after the Sandton agreement and the two e-mails of 26 and 27 September 2011, both parties discharged their obligations under the second agreement, the applicant by delivery of the container tanks in accordance with the delivery schedules agreed upon, and the respondent by taking delivery and paying for the tanks.

[56] The weekly status reports on the progress of the completion of the second agreement was a very clear indicator that the applicant was performing, not in accordance with ad hoc agreements, but in terms of the second agreement for the supply of 1200 container tanks.  Surely, if the respondent’s employees truly believed that the second agreement was not validly entered into and of no force and effect, they would have conveyed those views at the earliest opportunity and did not.  Instead, the respondent continued for twenty months to comply with the agreement as if it was bound thereby, by taking delivery of the tank containers and paying for them, albeit mostly late. If Deshpande or Singh had still been considering whether they wished the respondent to be bound by the second agreement, they would certainly have called a halt to the projected plans in the status reports.  Mr Allen had every reason to believe that there was an agreement (the second agreement) between the parties.  He was constantly given assurances that the respondent wanted delivery of the tank containers and was going to pay for them and in most instances did so.

[57] The respondent submitted that the second agreement was never implemented according to its terms and was in any event deviated from to the extent that it fell away and was replaced by ad hoc agreements, as a result of the external funding received by the respondent. It is common cause that new arrangements were made as to the time of delivery and payment, but there was always one contract for the 1200 tank containers at a fixed price.  The price only varied with regard to the 200 maxi tanks due to specification changes.  The second agreement did not fall away as a result thereof. Both parties always accepted that the last 501 tanks were to be delivered as part of the agreement in respect of the 1200 tanks, which is the second agreement. The respondent’s submissions in this regard tends to support the proposition that the respondent’s signature on the second agreement was not a requirement for its enforceability. Accordingly, the applicant’s assertion that Individual Agreement No 1056-2 was partially executed and that the respondent discharged a portion of its obligations in terms thereof, and not in terms of any ad hoc agreements, is quite correct.

[58] In the twenty months that followed the agreement reached on 21 September 2011, the parties conducted themselves as bound by that agreement.  The respondent’s repudiation of the contract and its belated reliance on the absence of its signature on the second agreement was purely for reasons of expediency: It had obtained a more lucrative offer from a supplier in China and was unable to accept it because it still had obligations under the second agreement. The record abounds with statements contained in the plethora of e-mails, which bear testimony to the fact that the respondent considered itself bound by the second agreement.

[59] It is also of significance in evaluating the respondent’s conduct that the second agreement was not the only one of its kind.  Both the first and third agreements (one signed by the respondent and the other not) were drafted and forwarded by the applicant to the respondent after a tender was made and written offers were accepted in writing, in both cases. That is how the parties did business.

[60] The tenders submitted by the applicant to the respondent before the individual contracts were concluded, also referred to the two most important considerations in determining the selling price, namely the purchase of the stainless steel to be used for manufacture, and the hedging of the currency in respect of each of the three individual agreements.  The respondent’s employees were fully aware of these considerations and the necessity for their proximity in time to the conclusion of an agreement, from the beginning.   The luxury of pondering whether or not to sign the second agreement and thus become a party thereto, after more than half of the contractual obligations had already been discharged by it under that agreement, was as a matter of law and practical considerations, not open to the respondent.

[61] Christie[1] in his discussion on the formalities of contracts, referred to Woods v Walters[2], where Innes CJ referred to a passage from Goldblatt v Freemantle[3], where it was observed that reducing an agreement to writing is not essential to contractual validity, although it is always open to the parties to agree that their contract shall be a written one, and in that case there will be no binding agreement or obligation until the terms have been reduced to writing and signed.  The learned judge, however, added thereto:

“It follows of course that where the parties are shown to have been ad idem as to the material conditions of the contract, the onus of proving an agreement that legal validly should be postponed until the due execution of a written document lies upon the party who alleges it”.

[62] In the absence of any witnesses to testify as to such a condition, the respondent has a difficulty in discharging that onus in the present proceedings.  It has also been held that a mutual undertaking to have an oral agreement reduced to writing and signed was insufficient to discharge the burden of showing that the oral agreement was not intended to be binding.[4]

[63] The construction which the respondent seeks to place on the requirement that the second agreement had to be signed by both parties to be enforceable, is not supported by the evidence.  The master agreement (in its preamble) only requires the agreement to be reduced to writing.  There is no express provision in “WA14” and “WA15” requiring that the agreement must be signed, the failure of which will result in an invalid agreement.

[64] In addition, “WA14” expressly states that the applicant would “immediately”, in view of the agreement reached, purchase the stainless steel and hedge the currency.  Quite plainly, there would be no point in buying steel and fixing the currency if the respondent’s agreement was only to be concluded on an uncertain date. Mr Allen’s interpretation that Individual Agreement No 1056-2 was the formal recordal, (for administrative requirements) of what was agreed between the parties prior to it being drafted, is in my view, correct. 

The Suspensive Condition

[65] Mr van der Burg visited Mumbai in December 2012, after no letter of credit was forthcoming and many protestations were raised by Messrs Samgharia and Deshpande about difficulties with raising the necessary funds.  At the meeting he was shown a balance sheet which reflected the respondent’s considerable financial health and wealth.  Mr van der Burg concluded that there was actually no need for the letter of credit previously insisted upon by applicant.  In my view, the balance sheet also brings into question of the sincerity the early protestations.

[66] Although the suspensive condition was insisted upon by the applicant, it never became a suspensive condition of the relevant agreements reached and the respondent continued to make payments in terms of the second agreement, without furnishing a letter of credit. It was at best a condition insisted on by the applicant, for its own peace of mind, but which came to naught because other arrangements were made for payment. The presence of such a suspensive condition was never mentioned in the correspondence or the minutes of the meetings.  If there were such a suspensive term, the respondent would have certainly raised it far sooner than in the present litigation, particularly when the more advantageous business opportunities with the Chinese suppliers arose.

[67] The respondent is in any event estopped from relying on the defences raised by it.  The respondent’s continued reassurances to the applicant that payments were forthcoming, its actual payment for and continued acceptance of deliveries, constituted conduct on the part of the respondent, which amounted to a representation, which the applicant reasonably understood to mean that the parties were bound by the agreement in question, which is the second agreement relating to the 1200 tanks. 

[68]  The applicant, acting on the representation that the respondent considered itself bound by the second agreement, continued to manufacture tank containers, to its detriment. This situation arose because the respondent did not take delivery of 132 tank containers specifically designed for the respondent. The stainless steel to manufacture the remaining 50 tanks had already been purchased by the applicant and it was compelled to sell the tanks at a reduced price.

[69] In the circumstances, and based on the aforesaid considerations, the applicant is entitled to the relief it seeks. 

Interest

[70] The interest claimed in the notice of motion is from the dates when the respondent was in mora ex re being the three due dates for delivery and payment as agreed between the parties pertaining to the 132 tank containers which were manufactured and ready for delivery.  The interest which is to accrue as aforesaid is limited by the ‘in duplum’ rule which is no longer suspended in litigation.[5]  

Costs

[71] Goosen J reserved the costs of the application before him on 19 June 2014 for determination by the court hearing the oral evidence.  The respondent called not a single witness, having previously adopted the approach that the matter could not be resolved without the parties leading witnesses as to their intentions.  That being so, and the fact that the present hearing was determined in the applicant’s favour, based on Mr Allen’s testimony which accorded with the founding affidavit in all respects, the defendant must bear the costs of both applications. 

Order

[72] The following order is made:

1. The respondent pay to the applicant interest on the sum of USD 3 036 000.00 (three million and thirty-six thousand United States Dollars) at the prevailing legal rate of 15.5% per annum as follows:

1.1        On the sum of USD 1 932 000.00 (one million, nine hundred and thirty- two thousand United States Dollars) from 10 April 2013 to date of final payment, alternatively, to 26 August 2014 in respect of 84 container tanks;

1.2        On the sum of USD 920 000.00 (nine hundred and twenty thousand United States Dollars) from 30 June 2013 to date of final payment, alternatively, to 26 August 2014 in respect of 40 container tanks;

1.3        On the sum of USD 184 000.00 (one hundred and eighty-four thousand United States Dollars) from 31 July 2013 to date of final payment, alternatively, to 26 August 2014 in respect of 8 container tanks;

2. The respondent is to perform all its outstanding obligations in terms of the agreement concluded in terms of the annexures “WA 14” and “WA 15” as varied from time to time in writing as read with the Master Container Purchase Agreement by:

2.1        Taking delivery of the remaining 301 (three hundred and one) tank containers as and when manufactured by the applicant.

2.2        Paying to the applicant a purchase price of USD 23 000.00 (twenty three thousand United States Dollars) for each tank container manufactured by the applicant, in terms of the preceding sub-paragraph, within 48 (forty- eight) hours of receipt of the bill of lading in respect thereof.

2.3        Taking delivery of 200 (two hundred) maxi tank containers (27 500 litres) as and when manufactured by the applicant; and

2.4        Paying to the applicant a purchase price of USD 25 000.00 (twenty-five thousand United States Dollars) for each tank container manufactured by the applicant, in terms of the preceding sub-paragraph, within 48 (forty eight) hours of receipt of the bill of lading in respect thereof.

2.5        The respondent is ordered to pay the costs of the application inclusive of the costs of 19 June 2014, such costs to include the costs of two counsel. 

________________

E REVELAS

Judge of the High Court

 

Appearances

 

For the Applicant        

Adv SC Rorke SC & Adv K Williams

Instructed by Mike Nurse Attorneys

 

For the Respondent            

Adv CM Eloff SC

Instructed by Rushmere Noach Incorporated

 

Dates Heard:                              1, 2 & 4^th June 2015

 

Date Delivered:                           12 June 2015 

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