Wynn's Car Care Products (Pty) Ltd. v First National Industrial Bank Ltd. (469/89) [1991] ZASCA 34; 1991 (2) SA 754 (AD); (26 March 1991)

IN THE SUPREME COURT OF SOUTH AFRICA APPELLATE DIVISION

In the matter between

WYNN'S CAR CARE PRODUCTS (PROPRIETARY)LWITED AppellantandFIRST NATIONAL INDUSTRIAL BANK LIMITED Respondent

CORAM : JOUBERT, HEFER, KUMLEBEN, GOLDSTCNE JJA et KRIEGLER AJA.

HEARD : S MARCH 1991.

DELIVERED : 26 MARCH 1991.

JUDGMENT HEFER JA.2. HEFER JA:This appeal is against a judgment of the Wit-watersrand Local Division directing the appellant to pay the respondent an amount of R506 508,35 with interest and costs. Leave to appeal was granted on petition to the Chief Justice.Respondent is the cessionary of the lessor's rights under an agreement of hire entered into in writing between the appellant and CICS Bureau (Pty) Ltd ("CICS") on 1 August 1985. In terms of the agreement CICS let to the appellant certain computer equipment for a period of five years at a monthly rental of R9 000 escalating at the rate of 12½ % per annum. Relying on appel-lant's failure to pay the rentals for December 1987 and a clause in the agreement providing for the acceleration of all amounts payable, whether due or not, in the event of appellant's default in the punctual payment of the rent, the respondent claimed the rentals for the full period

3. of the lease.It is not necessary to analyse all the issues raised ín the pleadings since it emerged at the hearing of the appeal.that there are only two decisive questions. The agreement of hire was expressíy made conditional upon the conclusion between the parties of an agreement of maintenance and an agreement of computer services. (These agreements will henceforth be referred to as the "main-tenance agreement" and the "services agreement" respec-tively. They were concluded on the same day on which the agreement of hire was signed.) Appeilant's case is that the three agreements ie the agreement of hire, the maintenance agreement and the services agree-ment, as well as a written quotation submitted by CICS before the agreements were entered into, are all indivi-sible parts of a single integrated transaction; and that its obligation to pay rent in terms of the agree-ment of hire is reciprocal to CICS's obligation to4. maintain the equipment in terms of the maintenance agree-ment and to supply and maintain an on-line computer ser-vice in terms of the services agreement, which, it is alleged, CICS repudiated or failed to fulfil. The first question is whether there is indeed the reciprocity of obligations for which the appellant contends. If this question, and the second question (which will be discus-sed later), are decided against the appellant the appeal falls to be dismissed.

It is not inappropriate to be remínded that the exceptio non adimpleti contractus - which is essen-tially the appellant's defence - presupposes the exis-tence of mutual obligations which the parties intend to be performed reciprocally, the one being the inten-ded exchange for the other (Ese Financial Services (Pty) Ltd v Cramer 1973(2) SA 805 (C) at 809 D-E: De Wet and Yeats, Kontraktereg en Handeisreg, 4 ed 177). Since their intention is to be sought primarily in the terms

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of the agreement (Rieh and Others v Lagerwey 1974(4) SA 748 (A) at 761 in fin) the enquiry turns in any pat-ticular case on the interpretation of the agreement (BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979(1) SA 391 (A) at 418 B).

Appellant's counsel submitted that the inten-tion of the contracting parties in the present matter should not be determined merely from the terms of the agreement of hire, but from the terms of the three agree-

ments considered as a whole. The crux of his argument is that the agreement of hire is only one of the parts of a more comprehensive transaction which is of such a nature that it must be inferred that the appellant's ob-ligation to pay rent was intended to be reciprocal to CICS's obligations in terms of the other two agreements. Basically the argument amounts to this: The appellant required a computer service. Instead of acquiring a system of ïts own it entered into a transaction with6. CICS in terms whereof the latter would install and main-tain modems, printers and other equipment at appellant's branches in various parts of the country which would be connected to CICS's main frame where the processing of data would be done. Without proper maintenance of the equipment and access to the main frame, and unless CICS performed the processing services for which it contrac-ted, the equipment installed in the branches would be useless. This justifies the inference of reciprocity between the obligations undertaken in the various agree-ments.

The argument fails to appreciate the clear distinction between separate agreements which are,for practical and commercial considerations, linked and in-terdependent and those agreements which the parties in addition wish to be reciprocal in the legal sense. The transaction plainly involved more than the lease of the equipment and it is clear that the system would be inope-7. rative and the equipment of no use to the appellant un-less CICS performed in terms of the maintenance agree-ment and the services agreement. But that i s not the end of the matter. The transaction was a multi-face-ted one. It was for the parties to decide how they would formalise every aspect of their relationship. They elected to do so in three separate and distinct agreements and unless the terms of the agreements con-sidered as a whole clearly evince the intention that there would be reciprocity between the obligations un-dertaken in each, there is no room for an interference to that effect.

The first indication of the parties' inten-

tion is in Clause 13 of the agreement of hire. It

reads as follows:

"This Agreement is the sole rental agreement between the parties hereto. CICS and the customer shall not be responsible for any un-dertakings, representation or warranty given orally or otherwise which is not specified in this Agreement.."

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Clause 13 must be read with Clause 21.1 which is in the following terms:

"Without derogating from anything aforesaid, the Customer declares that it has not been induced or influenced to enter into this Ag-reement and does not rely in entering into this Agreement on any statement of CICS, whet-iher related to the Equipment, or any aspect of this Agreement, and gives no warranties to the Customer in connection with the Equipment. All warranties implied by common law are expressly excluded from this Agreement. Provided that the provisions of this Clause shall not be construed so as to release CICS from any obli-gationsin térms of the Maintenance and Compu-ter Services Agreements, the conclusion of which are conditions precedent to the conclu-sion of this Agreement."

The last sentence of Clause 21.1 is misleading. Although

framed in that form, it is not a true proviso since itdoes not relate to anything said earlier. But what isof significance, is that it is expressly limited to theprovisions of Clause 21.1 itself - "the provisions of

this Clause shall not be construed so as to releaseCICS from any obligations ". The so-called proviso

9. does not derogate from the terms of Clause 13 and can only be reconciled with the latter on the basis that, although CIC would be obliged to perform in terms of

the maintenance agreement and the services agreement,

its failure to do so could not stand in the way of enforce-ment of its rights under the agreement of hire.

Clause 10 of the agreement of hire is in even

moré explicit terms. It reads as follows:

"The Customer shall not be entitled for any reason whatsoever to withhold any payment due in terms of this Agreement nor shall it be en-titled to set off against any rentaís payable in terms hereof, any present or future claim which the Customer may have against CICS from whatever cause."

The services agreement contains a similar provision viz:

"Under no circumstances shall the Customer have the right to set-off against any amounts owing by it under the Agreement any amount which it alleges is due to it by CICS from any cause whatsoever and the Customer shall not have the right to withhold payment of any amount due to CICS for any reason whatsoever." These two provisions remove any doubt which

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may otherwise have existed as to the parties' intention. Their effect is plainly that there is no reciprocity be-tween appellant's obligation to pay the rentals and CICS's obligation to perform in terms of the maintenance agree-ment.

The agreements contain other indications poin-ting the same way but I do not find it necessary to men-tion them since the provisions referred to appear to me to be decisive.

It will be noticed that I did not refer to the terms of the quotation in arriving at this conclu-sion. I did not do so because, firstly, there is no indication that it was ever accepted, secondly, it was superseded by the formal agreements and, thirdly, it is of no real assistance. It does reveal that what CICS offered the appellant was a "package deal inclu-sive of hardware and standard monthly processing" and to that extent it serves to confirm that the transac-

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tion involved more than the lease of the equipment. But otherwise nothing material emerges from its terms. Appellant's counsel referred us to Schedule III of the quotation where it is said that there would be a "basic charge of R9 000,00 per month (subject to an annual es-calation of 12l/2 % ) which will be in the form of a processing charge for the volumes of transactions and masterfiles....." and that the monthly rental of tbe equipment amounting to Rl 060 would bé included in the "basic charge". I do not know what relevance this has. As already mentioned the quotation was superseded by the fórmal agreements and the amount of R9 000,00 escalating as aforesaid is reflected in the agreement of hire as ren-tal for the equipment.

Having dealt with the first of the two questions on which the outcome of the appeal depends, 1 turn to the second one.

Appellant pleaded that

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"(i) Clause 10 of Annexure 'A' (ie the agree-ment oí hire) is unconscionable and in-compatible with the public interest and therefore contrary to public policy and void ab initio.

(ii) The said clause 10 is not severable from

the remainder of the agreement and accordingly the whole of annexure 'A' is void ab initio."

The trial court rightly rejected this defence.

As I understand appellant's argument it is that clause

10 is unconscionable and incompatible with the public

interest and contrary to public policy since it effec-

tively precludes the appellant from raising CICS's fai-

lure to comply with its obligations in terms of the ot-

her agreements as a defence to a claim for rentals and

compels it to pay the rentals without the beneficial

use of the equipment. There is no substance in the

argument. That the appellant is precluded from raising

CICS's failure to comply with its obligations in termsof the maintenance agreement or the services agreementas a defence to a claim for rentals in terms of the

13. agreement of hire is due,, not to the provisions of clause 10, but to the fact that the parties entered into three separate agreements between which therê is no reciprocity. There is nothing to prevent the appellant from proceeding against CICS in terms of the maintenance agreement and the services agreement. That a claim against CICS cannot be fruitfully pur-sued (it i s alleged in the plea that CICS has stopped trading after transferring all its assets to another com-pany) is irrelevant since the validity of clause 10 can-not be adjudicated upon in the light of an unforeseen subsequent eventuality. The provision may at first blush

appear to be harsh but harshness as such does not afford a contracting party the right to resile from his bargain. There is a readily identifiable reason for the inclusion of such a provision in the agreement of hire. Clause 9 entitles CICS to cede its rights to "any other person" and obliges the appellant to make all payments to the

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cessionary if so required. (There is no similar provi-sion in the maintenance agreement or in the services ag-reement . ) The inference is irresistible that clause 10 was inserted, if not solely then at least partially, for the purpose of facilitating a cession. Viewed in this light particularly clause 10 is clearly not against the public interest.In conclusion two matters must be mentioned. The first relates to certain evidence led at the trial and the other to the order of costs. At the trial the appellant led the evidence of its financial director at the time the agreemen.ts were entered intp but who did not sign any of them although he had taken pert in some of the negotiations. The purpose of the evidence ap-pears to have been to present the court with the so-called surrounding circumstances. In this court appel-lant's counsel was unable to show us how the evidence assisted his case. The surrounding circumstances can

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in any event only be resorted to in cases where the in-

tention of the parties does not emerge with sufficient

clarity from the agreement itself. This is not such

a case and it is unnecessary to deal with the evidence.

The trial court awarded the respondent its

costs on the attorney-and-client scale in terms of a

provision in the agreément of hire. Counsel were ag-

reed that costs should be awarded on the same scale

in the event of the appeal being dismissed.The result is that the appeal is dismissed with costs which shall include the costs pertaining to the employment of two counsel and shall be taxed on the scale as between attorney and client.

J J F HEFER JA JOUBERT JA ) KUMLEBEN JA ) CONCUR GOLDSTONE JA ) KRIEGLER AJA )