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Traxys Africa Holdings LTD and Another v Westbrook Resources Ltd (509/2020) [2021]] ZASCA 122 (23 September 2021)

7 December 2021

On 23 September 2021 the SCA handed down judgment in which it dismissed an appeal by Traxys (formerly Metmar) and upheld the cross-appeal by Westbrook to a judgment of the full bench of the Gauteng Local Division of the High Court.

The facts of the case
During the period from August to November 2008, Traxys Africa Holdings (PTY) Ltd (Metmar) and Westbrook Resources Ltd (Westbrook) concluded agreements for the supply of three jigs for Westbrook’s mineral refining operation in Croatia. A dispute arose during the execution of the agreements in respect of the responsibility to commission the jigs. Westbrook instituted action proceedings against Metmar in the Gauteng Local Division of the High Court claiming for damages arising inter alia from Metmar’s failure to commission the jigs.

The issue of determination
The court had to determine the terms of the agreements between the parties and specifically, the party obliged to commission the jigs.

The arguments before the trial court
Westbrook claimed that the parties, duly represented, concluded a partly oral and partly written agreement whose material express, implied or tacit terms entailed that: Metmar undertook to sell and deliver to Westbrook three metal recovery plants, or jigs, as well ancillary equipment; (b) Metmar undertook to commission the jigs at the mining site (in Croatia) on delivery or within a reasonable time thereafter; (c) payments would be made by Westbrook to Metmar in accordance with the written part of the agreements, contained in three pro forma invoices; and (d) the purchase price of each jig was $450 000, totaling $1 350 000 for the three jigs.

Westbrooks pleaded that Metmar delivered the jigs but breached the agreements by failing to commission the jigs on delivery or within a reasonable time thereafter. Consequently, it paid all amounts due to Metmar in terms of the agreements except for the final payments payable on the commissioning of the jigs. It alleged that, as a consequence of the breach, the timeous completion of its operations was affected, and it suffered damages comprising loss of profit and incurred additional costs.
Metmar disputed Westbrook’s claim in respect of the material terms of the agreement. It pleaded that the written part of the agreement was that the equipment and its price were as reflected in the pro forma invoices. It argued that Westbrook and De Beer had agreed to attend to the commissioning of the equipment on site at their own cost and risk without its assistance or involvement. Metmar denied that the delivery of the equipment was a term of the agreement.

The trial court’s findings and the appeal to the full bench
The court found in favour of Westbrook. It held that the evidence before it proved the existence of a partly oral and partly written agreement that obliged Metmar to commission the jigs and issued a declaratory order that Metmar was liable for whatever damages Westbrooks could prove. Both parties were aggrieved by the court order’s failure to address the issues raised by them and the court’s misdirection in respect of the issues of determination. As a result, they applied for leave to appeal and to cross-appeal to the full bench.

The full court considered the separated issues [issues of determination]. It agreed with the court a quo’s decision that Metmar was obliged in terms of the agreement to commission the jigs. However, it merely dismissed the appeal with a cost order and did not issue a substantive order concerning its findings on the issues. Consequently, the parties applied for special leave to appeal to the SCA.

The SCA’s determination of the issues
The parties agreed to file on the same basis as the applications in the full bench to ensure that the separated issues are dealt with. The court clarified that there were in fact three agreements between the parties for the three jigs supplied. It stated that Westbrook could only successfully claim against Metmar if the questions posed for determination were responded to in its favour and set out in the order – which the courts below failed to do.

On the agreements, the SCA stated that the written part of the agreement was contained in the pro forma invoice thus not in dispute. The contention lay with the evidence of the oral agreements. Metmar argued that the evidence presented before the court on the oral agreement was contrary to the parol evidence rule.
In deciding the matter, the court agreed with the trial court’s findings on the terms of the oral agreements between the parties. It found that the probabilities favoured Westbrook’s argument that Metmar had undertaken the obligation to commission all three jigs.

In determining whether the evidence presented before the court on the oral agreements were contrary to the parol evidence rule, the court stated that there is a need to modify the rule in instances where agreements are partly written and partly oral. It further stated that the modification gives rise to the application of the partial integration rule which was set out in Affirmative Portfolios CC v Transnet Ltd t/a Metrorail as follows:

“The parol evidence rule applies only where the written agreement is or was intended to be the exclusive memorial of the agreement between the parties. Where the written agreement is intended merely to record a potion of the agreed transaction, leaving the remainder as an oral agreement, then the rule prevents the admission only of extrinsic evidence to contradict or vary the written portion without precluding proof of the additional or supplemental oral agreement.”

On the application of the rule, the court found that the written aspects of the agreements dealt with delivery, purchase price and payment whilst the oral aspect dealt with the commissioning of the jigs. It held that the evidence of the oral arguments was not contrary to the partial integration rule as it did not contradict or vary the terms of the written agreement but supplemented it.
The court dismissed the appeal and upheld the cross-appeal, both with costs. Additionally, it set aside the order of the full bench and made an order that responded to the separated issues.

This case reaffirms our courts’ position in respect of the application of the parol evidence rule. The court was correct in its application of the rule in this matter as it encapsulates an approach that is relevant to a partly oral and partly written agreement. The evidence pointed to agreements that were partly oral and partly written, thus Metmar’s reliance on the parol evidence rule which is applicable in cases where the parties intended the written agreement to be “an exclusive memorial of the transaction” was incorrect.

As an aside and probably of great importance, the case encourages the need for awareness in respect of agreements. Parties must be mindful of the terms they are agreeing to both on paper and orally as the undertakings given in an attempt to maintain a contractual relationship may result in binding obligations.