Gourlay v Canoa Kwazulu Natal (Pty) Limited t/a Canon Office Automation (AR 305/07) [2007] ZAKZHC 30; [2008] 2 All SA 194 (N) (2 November 2007)

THE HIGH COURT OF

SOUTH AFRICA

NATAL PROVINCIAL

DIVISION

CASE NO. AR 305/07

In the matter between:

JOHN GOURLAY APPELLANT

and

CANOA KWAZULU NATAL (PTY)

LIMITED

T/A CANON OFFICE

AUTOMATION RESPONDENT

________________

APPEAL

JUDGMENT delivered on 02 November 2007

SWAIN, J

[1] It is common cause on the evidence led in the Court a quo, that the parties concluded the agreement being annexure “A” to the respondent’s particulars of claim. In terms of this agreement which, it was common cause was concluded on 11 July 2005, the appellant acknowledged that he was indebted to the respondent in the sum of R136,419.00 “in respect of gross sales commissions before SA income tax, as per the 2005 incentive proposed by Roland Desmond Reardon in his capacity as Managing Director of Canoa KwaZulu Natal (Pty) Limited”. The agreement went on to provide that in the event of the employment of the appellant being terminated before 28 February 2006, the appellant would repay this amount immediately. The evidence places this agreement in the following historical perspective:

[2] A proposal was presented during March/April 2004 by the respondent, to the appellant in his capacity as a sales representative for the respondent, to enable the appellant to earn additional commission on sales generated by the appellant.

[3] The respondent’s case was that this offer was rejected by the appellant. The appellant however maintained that the offer was never withdrawn and that he in fact had accepted it.

[4] The respondent, by letter dated 24 February 2005, repeated this offer with the important rider, namely, that the amount would be paid on 01 March 2006 only if the appellant was still employed by the respondent on this date. The appellant did not accept the terms of this letter, because he was of the view that this amount was due to him in terms of the proposal that had previously been made during 2004.

[5] It is against this background that the agreement in issue was concluded on 11 July 2005 and as a result of which the payment was made to the appellant. The appellant resigned from his employment with the respondent in September 2005 and consequently the respondent sought repayment of the amount from the appellant.

[6] The defences raised by the appellant to the respondent’s claim for enforcement of the agreement were:

a) The respondent owed this amount to the appellant in terms of the offer made in 2004, consequently the amount paid was not a loan, and the appellant was not entitled to repayment.

b) Alternatively, if the agreement was found to be a valid acknowledgment of debt by the appellant, then the appellant was subjected to undue influence by the respondent in signing the agreement and was consequently not bound by its terms.

c) Further alternatively, the terms of the agreement are vague and contradictory and are consequently void and unenforceable

[7] It seems to me however, that what the evidence reveals is that the parties compromised their dispute by concluding the agreement upon which the respondent sues. It is common cause that the agreement was concluded to enable the appellant to receive payment before 01 March 2006, in terms of the offer of the respondent dated 24 February 2005. In addition, the undisputed evidence of Mr. Gibb, on behalf of the respondent, was that if the appellant was still employed by the respondent on 01 March 2006, the appellant would have received payment, even if he did not sign the agreement. Consequently, before the agreement was concluded the appellant maintained that he was entitled to payment in terms of the offer made in 2004, whereas the respondent maintained that the appellant had never accepted this offer.

[8] As stated by Mullins, J. in

Hamilton v van Zyl 1983 (4) SA 379 (E) at 383 F – H

“a compromise need not necessarily however follow upon a disputed contractual claim. Any kind of doubtful right can be the subject of a compromise …….. delictual claims are for example frequently the subject of a compromise. Nor need the claim be even prima facie actionable in law. A valid compromise may be entered into to avoid even a clearly spurious claim, and defendants frequently, for various reasons, settle claims which they know or believe the plaintiff will not succeed in enforcing by action”.

In this regard the following passage in the evidence of the appellant is particularly instructive

“So the only issue is Canon said to you, ‘You are not entitled to this because you never accepted our offer, but what we will do is we will pay it to you but we want you to work for us for another year.’ That’s what Canon said to you, do you agree with that? --- Pretty much, yes.

Ja, that was the only issue, you knew that? --- No, the argument was between myself and Canon whether I was entitled to it or not.

Yes, and that argument was settled with Canon saying to you, ‘We will pay it to you, but we will only pay it to you at the end of the 2006 financial year,’ you knew that? --- Yes, and budget had been used and I knew that that wasn’t correct”

It is clear from this passage that the appellant understood that the object of the parties in concluding the agreement, was to settle the dispute between them.

[9] It is clear that a compromise is a substantive contract which exists independently of the causa which gave rise to the compromise. Like any other contract, defences to an action based on such compromise may be raised, such as duress. A defendant is not however entitled to rely on defences relating to the motives which induced him to agree to the compromise, or to the merits of the dispute which it was the very purpose of the parties to compromise.

Per Mullins, J. in Hamilton’s case supra at page 383 H – 384 B

[10] In the present case the appellant contended that he had concluded the agreement because he knew that it was the only way he would be paid before 01 March 2006 and he needed the money for his forthcoming wedding. The appellant also contended because the amount was owed to him, it was never a loan and consequently he was not bound by the agreement which reflected it as such.

[11] These “defences” to the enforceability of the agreement, attempt to rely upon the motives which induced the appellant to conclude the agreement, as well as the merits of the dispute which the parties sought to compromise. They therefore cannot be sustained.

[12] When I raised the issue of whether the agreement was a compromise with Mr. Phillips, who appeared for the appellant, he submitted that the respondent had never pleaded a compromise and could not rely upon this now. I disagree. The respondent pleaded the agreement and sought to enforce its terms in the Court a quo. It was not necessary for the respondent to allege that the agreement had compromised a dispute between the parties. This formed no part of the respondent’s cause of action.

[13] It seems to me however, that had the parties correctly analysed the effect of the agreement, namely that it had compromised the dispute, a great deal of the evidence led in the Court a quo could have been avoided. In the words of Mullins, J. in Hamilton’s case supra at page 384 B – C

“had these principles been appreciated by the parties in the present case, a great deal of time occupied by evidence relating to the existence or non-existence of a pre-existing legal cause of action or liability by defendant to the plaintiff could have been avoided.”

[14] Turning to the defence of undue influence. As pointed out above, the appellant stated that he had signed the agreement because it was the only way he would get paid. He added that if he did not sign the agreement, the respondent would know he was leaving the respondent’s employ and would then obstruct his ability to earn commission until he left. It is clear however, that this latter aspect, namely that the respondent would obstruct the appellant’s ability to earn commission, was a fear which the appellant says he held. He never alleged that such a threat had emanated from any of the respondent’s representatives. The mere fact that the respondent would only make payment to the appellant before 01 March 2006, on condition that the appellant was still in the employ of the respondent at that date, and the appellant accepted such a condition in order to obtain earlier payment, does not in my view constitute undue influence entitling the appellant to declare the agreement voidable. The onus is on the appellant to show that he was induced by the undue influence to enter into the contract.

Katzenellenbogen v Katzenellenbogen & Joseph

1947 (2) SA 528 (W) at 541

[15] I am fortified in this view by the conduct of the appellant in the months preceding his signature of the agreement. It is clear that the appellant knew from 24 February 2005 that the respondent was prepared to pay him the amount in dispute on 01 March 2006, provided he was still in the respondent’s employ at that stage. The

appellant said he was told it could not be paid earlier because it had not been budgeted for, which he did not believe and therefore he continued to fight for it. A couple of months later, he mentioned referring the dispute to the CCMA and also said he had no option but to look for legal advice. However, he continued to negotiate with the respondent, because he did not want to involve lawyers and the CCMA because that would affect his job with the respondent. He agreed that the threat of taking legal action arose at the end of April 2005. Before the agreement was signed in July 2005, he stated that he complained on numerous occasions and said he was not happy and would not accept the terms contained in the letter dated 24 February 2005. He agreed that the respondent never changed its position from the proposal it had made in February 2005. He stated that it was suggested to him that if he was not prepared to sign the agreement, the only reason would be if he was planning on leaving his employ with the respondent. The appellant’s evidence in this regard is of importance

“So at the time I didn’t say or have a date when I was going to leave Canon, so I was not being dishonest at all.”

However the appellant also stated that by August 2005

“I intended to leave and I was definitely going to work towards it”

The appellant was asked whether he wanted to leave the respondent, because there were rumours to that effect and he replied that

“……I didn’t see myself staying at Canon forever and a day and there were reasons for that with past history”

In my view, this is not the conduct of one who is induced by the undue influence of the other contracting party to conclude the agreement. The appellant had a considerable period in which to consider the offer of the respondent, and delayed accepting it for several months. What in fact influenced the appellant to accept the offer was that he needed the money for his forthcoming wedding and he did not see why he had to borrow this money from another source, when he believed that the respondent was holding money which belonged to him.

[16] Turning to the final issue, namely whether the agreement is void for vagueness. It is trite that the general approach of Courts to questions of vagueness is to seek reasons to uphold a contract, rather than to destroy it. Although the agreement is not a model of

clarity, I am satisfied that it clearly conveys the essence of the agreement between the parties, namely that the amount of R136,419.00 is paid to the appellant on condition that he is still employed by the respondent on 28 February 2006. If he is not, he is obliged to repay that amount with interest.

[17] For the above reasons, the appeal cannot succeed. The order I make is the following:

The appeal is dismissed with costs.

_____

SWAIN, J.

I

AGREE

RALL, A.J.

Appearances ../

Appearances:

For the Appellants : Adv. Phillips, D.

Instructed by : Larson Falconer Inc.

C/o Mason Inc.

Pietermaritzburg

For the Respondent : Pearce, T. (Attorney)

Instructed by : Pearce Lister & Co.

C/o Stowell & Co.

Dates of Hearing : 29 October 2007

Date of Judgment : 02 November 2007