Swaziland Sugar Association v Swaziland Food Processors (Pty) Ltd (4 of 1996) [1996] SZSC 2 (1 January 1996)

Jurisdiction: Eswatini
Citation: Swaziland Sugar Association v Swaziland Food Processors (Pty) Ltd (4 of 1996) [1996] SZSC 2 (1 January 1996)
Media Neutral Citation: [1996] SZSC 2
Court: Supreme Court of eSwatini
Case number: 4 of 1996
Judgment date: 1 January 1996
Language: English
Type: Judgment
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1

IN

THE COURT OF APPEAL OF SWAZILAND

HELD

AT MBABANE

CASE

NO. 4/1996

In

the matter between:

SWAZILAND

SUGAR ASSOCIATION Appellant

and

SWAZILAND

FOOD PROCESSORS (PTY) LTD Respondent

CORAM:

KOTZE

J P

STEYN

J A

TEBBUTT

J A

JUDGMENT

DELIVERED ON

Respondent

sought the following relief in the Court a Quo:

which is, in fact, a final warning to Respondent in the following

terms:

"Ref:

5/118

Swaziland

Food Processors

PO

Box 2590

MBABANE

Dear

Senator Temple CONDITIONS OF SALE OF SUGAR

12

I

wish to once again confirm the conditions under which the Association

sell (sic) sugar to customers in Swaziland and which are as follows;

<ol>

<li>

Wholesalers

- for domestic consumer market.

<li>

Manufacturers

- for use in process of manufacture.

<li>

Blenders

- for use in blended products for sale to manufacturers who use the

blend in their finalproduct.

<li>

Exporters

- for sole, direct export to Mocambique.

</ol>

From

the above it is clear that raw sugar may not be sold or traded in

Swaziland except as outlined above.

We

have become aware of a very active 'secondary' market in sugar in

Swaziland, resulting from certain customers breading their conditions

of sale with the Association by selling raw sugar to persons or

companies who are not customers of the Association and who mainly

export this raw sugar to South Africa.

We

have obtained evidence that your organisation is selling, or has

recently sold, raw sugar in contravention of your contract with the

Association.

13

This

letter is a final warning against such sales of raw sugar. Should the

Association obtain any further evidence of such breach of contract,

your allocation will be cancelled without further notice and with

immediate effect.

We

value your custom and urge you to operate within the conditions of

sale to avoid any drastic action against your organisation.

Yours

faithfully

P

F DE BEER

FINANCIAL

MANAGER"

It

is not necessary to cite Respondent's reply to this letter. It is

Annex. D dated the 2nd August 1995. In essence Respondent's reaction

is to say that it needs the evidence "so as i could follow up on

the issue..." The reply states further"... that I need this

evidence so that I am able to take action if necessary, for all I

know somebody could be doing it fraudently as has happened in the

past."

This

correspondence was followed by a meeting of the parties on the 4th

August 1995. On the same day Respondent follows its response up with

a letter which reads as follows:

"Mr

A Calhoun

14

General

Manager

Swaziland

Sugar Association

MBABANE

August

4 1995

STRICTLY

WITHOUT PREJUDICE

Dear

Mr Calhoun

I

thank you and your management for the time spent with me on Friday

and for the amicable way in which the discussions were held.

I

have attempted to investigate what happened insofar as the issue

regarding the raw sugar is concerned, but unfortunately it has proved

very difficult ascertaining the truth or otherwise of this matter.

To

attempt to control this practice, (if it has been happening), i have

personally instructed by staff that in future all orders must first

be sanctioned by me before they are placed with the Sugar

Association.

Subject

to the discussions held with Mr Folker, we are prepared to release

the following quota to assist the Sugar Association through its

current predicament.

15

This

is based on the understanding that this is done in good faith and

will in no way effect our negotiations for quotas next year. It must

also be noted that we have released this quota on the basis that this

sugar will be used for the purpose it is meant for and not shipped

out in its raw form.

The

quota we agree to release is:

75

tonnes Brown Swaziland Food Processors

75

tonnes Brown Matsapha Prepackers

25

tonnes VHP Swaziland Food Processors

I

have instructed my management and staff to be on the look out for any

raw sugar passing through the border. If they find this to be

happening, the information they collate will be passed on to

yourselves for appropriate action.

The

issue of the white sugar is that i understand you are convicting us

for an issue neither of us can prove inconclusively (sic). I have

spoken to my management and they are of the opinion that we would be

able to release 150 tonnes white to assist the Association through

their current crisis.

I

trust this meets with your approval and confirm that our quotas up to

March 1995 stand as follows:

16

250

tonnes white Swaziland Food Processors

30

tonnes white Matsapha Prepackers

575

tonnes VHP Swaziland Food Processors

This

will come up for re-negotiation in March 1996 and will in no way be

jeopardised by our current commitment to assisting the Association

and the country as a whole.

Yours

faithfully

SENATOR

M TEMPLE

cc.

SENATOR O M DLAMINI

MR

A T DLAMINI"

This

letter however crossed a letter of the Appellant dated 7th August

1995. It reads as follows;

"Ref.

Conf 7 August 1995

17

Sen.

M Temple

Swaziland

Food Processors

Matsapha

Dear

Sen. Temple,

I

would like to thank you for the useful discussions we had on Friday

4th August.

The

situation now stands, as I understand it, that you will Investigate

the occurrence that we brought to your attention. In the meantime

your white sugar allocation will be reduced from 400 tonnes per month

to 100 tonnes per month. The 100 tonnes per month that you will

continue to draw will be in respect of your manufacture of castor and

icing sugar.

I

look forward to a speedy resolution of this matter so that we can ail

return to an amicable business relationship.

Yours

sincerely

A

D Colhoun

GENERAL

MANAGER"

It

is clear from this correspondence that there is a dispute as to what

occurred at the meeting of the 4th August 1995. Appellant alleges

that pending the investigation, the Respondent's allocation will be

reduced. The latter offers a voluntary reduction in its

18

allocation

of white sugar of 150 tonnes per month. Further correspondence

between the parties followed. It is not necessary to refer to these

letter. Ultimately both parties consulted their lawyers. On October

9, 1995 Respondents attorneys write as follows;

"1.

We write to you on the instructions of our client Swaziland Food

Processors (Proprietary) Limited, concerning your unilateral decision

to reduce our client's allocation of white sugar from 400 tonnes per

month to 100 tonnes per month as from August of 1995.

2.

As previously pointed out to you by our client in the correspondence

which we have perused your aforesaid action is unlawful in that:

a)

there exists a contract between yourselves and our client in terms

whereof you undertake to supply it with 400 tonnes of white sugar as

from 1st April 1995, to 31st March 1996;

b)

you do not claim that such reduction in supply is in any way related

to the non-availability of such sugar;

c)

your aforesaid unilateral decision was taken without affording our

client the opportunity of a hearing whereat such allegations as you

might have against it could be answered;

19

d)

we understand that in fact there is no evidence against our client

which

would establish that our client is in breach of the agreement between

yourselves and which would give you the right to take such action.

In

fact it would appear from what little our client knows of the matter

on which you appear to base your unilateral decision that the

information in your possession amounts to nothing more than rumours

and unsubstantiated allegations.

3.

Our client persists in its denial that it is in breach of the

conditions of the aforesaid agreement between it and your

association.

4.

In the circumstances we have been Instructed to call upon you to

reinstate our client's full white sugar allocation of 400 tonnes per

month retrospective to 1 st August 1995, and to give us your

undertaking that you will not again unilaterally reduce such

allocation."

As

can be seen from this letter Respondent alleges that it did not

breach the agreement and that Appellant has failed to furnish it with

evidence that it has done so. On the next day, Appellant's attorneys

reply in the following terms: (I only cite that portion of the letter

which is relevant)

20

2.1

On 15 March 1995 your client was in writing allocated 400 tonnes per

month of white sugar, 75 tonnes per month of brown sugar and 600

tonnes per month of VHP sugar for the 1995/96 season commencing on 1

April 1995 and ending on 31 March 1996. Your client was specifically

advised that due to the current drought situation prevailing in

Swaziland that it reserved the right to supply your client less than

the allocated tonnages in the event of drought and other factors

coming into play.

2.2

Your client was sent a standard agreement which specifically set out

the terms and conditions relating to the purchase and supply of sugar

from ourselves.

2.3

In terms of your client's proposal, the sugar was allocated to your

client for blending and manufacturing purposes only and for no other

reason whatsoever.

2.4

In terms of the said standard agreement sent to you client, which

your client has refused and/or neglected to sign despite being

reminded to do so on 13 September 1995, it is specifically provided

that your client was not entitled to sell sugar in its pure form and

this had in fact applied to previous contracts entered into with your

client and your client was at all times aware of that provision.

21

2.5

On 9 June 1995 we wrote to your client reaffirming the conditions of

sale and advising your client that we were in possession of evidence

of the sale of pure white sugar to a third party in contravention of

the provisions of the agreement. Your client was issued with a final

warning and advised that if it again occurred that your client sold

pure sugar that your client's allocation would be cancelled without

further notice. We have in our possession the necessary proof

relating to that sale and your client never requested details

relating to the sale in question.

2.6

On 25 July 1995 we obtained proof of another incident of sale of pure

white sugar.

2.7

As a result thereof we met with your clients on 4 August 1995 when

your clients undertook to investigate the position. It was at that

meeting agreed to reduce your client's white sugar allocation from

400 tonnes to 100

tonnes

per month.

2.8

This agreement was confirmed to your clients in writing on 7 August

1995.

2.9

On 9 August 1995 we again wrote to your client and advised of a

further proof of sale of pure sugar and drew your client's attention

to the fact that the sale of sugar to your clients was for the

purposes of blending only.

22

2.10

By agreement between ourselves and your client's brown sugar

allocation was cancelled and the VHP allocation was reduced by 25

tonnes per month because of the drought situation in Swaziland.

3.

With respect, as in any commercial transaction, we were and are

perfectly within our rights to have withdrawn your client's

allocation completely because of the breach of the standard

conditions of sale which has occurred despite warnings having been

addressed to your client in writing."

There

the matter rested until towards the end of October 1995 it appeared

that Respondent was unable to meet it's obligations to Appellant, a

cheque for E200.000 having been dishonoured. A letter of demand was

sent to Respondent on 8 November 1995 in which payment of

E2.271.868.99 is demanded, On the 17th November Respondent initiated

the present proceedings by way of notice of motion.

The

issues that arise from the above are the following:

1.

Did Respondent commit a breach of contract by disposing of white

sugar in conflict with the terms of the agreement?

2.

Was there compliance with the terms of the contract which entitled

Respondent to invoke the provisions of par. 10.5 and

23

3.

Did par 10:5 entitle Appellant to reduce the allocation of sugar as

it did i.e. to honour the commitment to deliver but to reduce the

quantum to 100 tonnes per month for the rest of the period of the

contract.

The

Court a quo held that "the applicant had every right, under the

agreement, to expect notice of any alleged breach and a demand that

the breach be remedied within the seven day period". It held

that:

"the

respondents letter of 9 June did not amount to a notice under clause

10."

On

the question of the breach and whether there was evidence of the

breach and whether said evidence was furnished to the Respondent the

learned Judge says the following:

'The

present application was filed with the Registrar on the 20th November

1995. it is abundantly clear from the correspondence between the

parties which I have set out, that the respondent acted In a

high-handed manner in applying what it considered its rights under

the agreement with the applicant. The evidence which the respondent

claimed to have of instances when the applicant exported white sugar

to South Africa was never put to the applicant prior to the launching

of this application. The respondent's letter of the 9th June 1995 did

not refer to any specific instance of the export of white sugar by

the applicant. No details of any such export were given to the

applicant at the meeting of the 4th August 1995. The documents that

were given to the applicant at that meeting related to the

24

incident

of the 25th July 1995. Those documents standing alone as they did at

the time of the filing of this application did not constitute

evidence of a breach of the agreement between the parties by the

applicant. The applicant made this quite clear to the respondent in

the tetter from the applicant's attorneys dated 9th October 1995. No

further details were provided by the respondent."

It

would seem to me that the Court a quo held that there was an

obligation on the Appellant to furnish Respondent with evidence of

"instances when the applicant exported white sugar to South

Africa." and that such evidence "was never put to the

applicant prior to the launching of such application."

However,

the Court does not seem to have adjudicated upon the question as to

whether on the evidence before it a breach was in fact committed, but

rather that no such evidence was furnished to the Respondent, that

Appellant was obliged to do so and that it had failed to give

Respondent the requisite notice of the breach.

Whilst

the issue of due notice was argued before us by counsel for the

Respondent, it was not contended that there indeed was any obligation

on Appellant to furnish Respondent with evidence that a breach had in

fact been committed. That counsel was right in not pursuing such an

argument seems to me to be clearly correct. The issue was not whether

evidence of a breach was furnished but whether or not a breach had in

fact occurred. This seems to me to be the first issue which has to be

decided. The evidence before the Court a quo established the

following:

25

"Swaziland

sugar is approximately E300 000 per tonne cheaper than sugar produced

in the RSA. Respondent contends that "if South African

manufacturers were in a position to obtain Swaziland sugar, there

would be little incentive to set up sugar related manufacturing

industries in the Kingdom of Swaziland. The Respondent (Appellant

before us) as a mater of policy, wishes to promote the establishment

of local industries. This is a policy supported by the Ministry of

Commerce. The restrictions contained in clause 2 of the Agreement,

Annexure "A", is therefore designed to give effect to this

policy."

These

averments were not in fact disputed by the Respondent. It is also

clear from the evidence that as early as 9th May 1995 concern was

expressed by Appellant's concerning Respondent's financial viability.

On the 30th June 1995 Appellant states that"... the account of

SFP (Respondent) with the Association (Appellant) remains

problematic."

The

letter goes on to state:

"In

view of our past experiences we have no option but to cease all

deliveries of sugar to SFP until the amounts owed to the Association

have been paid in full. Thereafter, depending on guarantees provided,

SFP will be allowed to operate an account of a strictly 30 days basis

within the credit limit agreed with SFP. Failing the delivery of

suitable guarantees, all further purchases by SFP will be on a cash

with order basis."

26

Whilst

Respondent challenges the relevance of these allegations, there is no

real dispute that this correspondence reflects the attitude of, and

view held by, Appellant of Respondent's financial soundness and its

ability to meet its obligations to Appellant. Indeed, an objective

view of the testimony before us paints a picture of ongoing and grave

financial crises.

That

these facts are relevant is clear. In the first place Appellant

contends that the present application was launched only after letters

of demand of the 7th and 8th of November 1995 from Appellant were

received by Respondent and that it was this fact that prompted the

institution of these proceedings. It is also contended by Appellant

that Respondent's attempt to ascribe its financial situation to the

reduction in the allocation of white sugar cannot be sustained on the

evidence, inasmuch as its financial problems were already evident

some months previously. Finally, if Respondent's ship was sailing in

troubled waters, it would be more readily inclined to risk breaking

its contract and to seek a quick profit than if it were financially

stable.

A

careful reading of the affidavits filed on Appellant's behalf, the

correspondence and the evasive response of the Respondent, leaves me

in no doubt that even if there were an onus resting on Appellant to

prove that Respondent had indeed been a party to the export into the

RSA of white sugar in conflict with the terms of its agreement, it

had succeedeed in discharging such onus. The affidavits filed in this

regard by Messrs Mbuso Simelane and William Justice Dlamini that

pursuant to an order placed by Respondent a truck bearing

registration no. TDH968T (which i am satisfied must have

27

been

the same truck that loaded the sugar at Ubombo Ranches Mill by one JJ

Horn) transported 170 metric tonnes of sugar through the border post

at Oshoek/Ngwenya.

On

evidence which is largely undisputed, Appellant therefore dearly

established a prima facie case that Respondent was indeed involved in

the export of sugar obtained from the Ubombo Ranches Mill.

Some

point was made of the fact that counsel for Respondent only saw the

affidavit by Mr Dlamini at the hearing of the application and that

this was the reason why it had not been replied to. It is quite

clear, however, from the bound record prepared and filed by

Respondent's attorneys and which included the said affidavit, that

Respondent's attorneys were aware of the averments contained in

Dlamini's affidavit some days before the hearing in the Court a quo

and that had Respondent wished to dispute its contents it could have

done so.

However,

Dlamini's affidavit was merely a confirmation of and expanded upon

that of Simelane which was replied to by Respondent in what is in my

view an evasive and unsatisfactory manner.

In

fact the allegations of a breach were canvassed in correspondence and

in personal discussions over a considerable period of time. I

therefore find myself in respectful disagreement with the Court a quo

that Appellant "acted in a high-handed manner in applying what

it considered its rights under the agreement with the Applicant"

28

(Respondent

in this Court).

My

reading of the correspondence and of the affidavits leads me to

conclude that Appellant was at pains to try to "keep the peace"

as it were with Respondent. I say this because:

<ol>

<li>

It

knows as early as the 9th May 1995 that it has Respondent a customer

whose financial viability is suspect. On the 30th of June the

problematic nature of Respondent's account is once again adverted to

and credit arrangements are tightened.

<li>

In

the meantime and on the 9th of June 1995 Respondent's attention is

drawn to the fact that "raw sugar may not be sold or traded in

Swaziland contrary to the provisions of the agreement between the

parties." As is apparent from the other terms of the letter of

9 June cited above, Appellant issues a serious and final warning

that should any further breach occur "your allocation will be

cancelled without further notice and with immediate effect"

<li>

Despite

this notice, it is established on the evidence that Respondent on

the 20th July accepted an order for 170 tons of white sugar which

was on the 25th July loaded by the said JJ Horn pursuant to order no

431 submitted to Appellant by Respondent and on the same day

exported via the same vehicle out of Swaziland into the Republic of

South Africa.

</ol>

29

I

accordingly find that a breach having been established, Appellant was

legally entitled to exercise its rights under the contract. The next

question is did it do so lawfully and in accordance with its terms?

As

appears from what has been recorded above two points were raised in

this regard. The first is the following: Did the contract give

Appellant the right to reduce the quantum of the white sugar to be

delivered to Respondent or was it obliged to cease the delivery of

"all supplies of sugar" (my underlining). Secondly, was it

obliged to comply with the provisions contained in the preamble in

para

10.

of the agreement by giving 7 days notice and affording Respondent an

opportunity to remedy the breach and if so, did it comply with such

provisions.

At

first blush the terms of the contract seems to limit the right of the

Appellant to a cessation of "all supplies of sugar". This

could in my view not have been the intention of the parties. When one

considers the provisions of the legislation which confers exclusive

rights on Appellant to regulate and control the industry, when one

takes cognisance of the fact that no one can import or export sugar

other than the association or a person authorised by it, it seems to

me that it would be artificial to give a meaning to the agreement

that would limit the rights of the Appellant in the manner

postulated.

Indeed,

such an interpretation would defeat the very objective the

legislature had in mind, i.e. that industrial development via the

benefication of sugar would occur and that employment opportunities

would be created. If no discretion were to be conferred on Appellant

and it were obliged in all circumstances and in every case to cease

to supply all allocations of sugar it would result in the closing

down of industries with the loss of Jobs that would ensue: It is

common cause that the agreement is a standard one

30

applicable

to all those who enter into relationships with Appellant pursuant to

which sugar is purchased from and supplied by it and that these

consequences would follow if the agreement were to be held to confer

only a right to cease the supply of all sugar.

In

my view, therefore, counsel for Appellant is right when he contends

that "the greater includes the lesser" and that "all"

also comprehends "some".

Moreover,

it is clear that the generality conveyed by the use of the word "all"

can be confined by the context in which the word is used. See Re

Portal and Lamb 30 Ch.D.50 where it was held that the generality of a

devise of "all my lands" may be restricted by the context.

Thus e.g. in Doe d. Snape v Nevill 11 QB 466 it was held that "all"

meant, in the context in which it was used "all the residue".

(See Stroud's Judicial Dictionary 5th Ed.p.103)

I

am therefore satisfied that it clearly was the intention of the

parties when they agreed to adopt the standard agreement, that, even

though a breach of the terms of the contract may have occurred, the

Appellant could in its discretion, instead of ceasing to deliver all

of 400 tonnes of sugar, deliver a lesser amount.

As

appears from the summary of the contentions advanced and from the

ruling by the Court a quo the only outstanding issue is the question

as to whether the terms of the preamble to para. 10 of the agreement

obliged Appellant to notify Respondent of the

31

breach

and to give it 7 days notice to remedy such breach. Only if this

question is answered in the affirmative would one have to consider

whether Appellant did in fact or in substance comply with its terms.

Appellant's

contention in this regard was to point to its letter of the 9th of

June 1995 in which it advises Respondent that it holds the view that

Respondent is selling, or has recently sold raw sugar in

contravention of your contract with the association". This - so

it was argued on behalf of Appellant - was sufficient notification

making it clear that a breach of para. 2 of the agreement had

occurred. Due emphasis was placed on the terms of the penultimate

paragraph of this letter. I again record its terms. It reads:

"This

letter is a final warning against such sales of raw sugar. Should the

association obtain any further evidence of such breach of contract

your allocation will be cancelled without further notice and with

immediate effect."

Clearly

this notification did not call upon Respondent "to remedy the

breach". It would in my view have been entirely inappropriate to

have done so. The nature of the breach was not of such a kind as to

have permitted it being remedied. Once Respondent exported sugar to

South Africa in conflict with the agreement, such sugar is out of its

control. If called upon to remedy the breach, it could not do so. It

would have been as illegal for it to attempt to Import sugar as to

have exported it.

The

provisions concerning an opportunity to remedy the breach were

imported into the contract to deal with cases where it would be

possible for a party to do so, and time

32

(seven

(7) days) would be given to it to honour such an obligation. A

failure to comply with the provisions concerning payment as provided

for in par. 7 of the agreement would be a prime example of such a

breach to which this part of the introductory paragraph in clause 10

would apply.

It

is my view that the provisions concerning the opportunity to remedy

the breach and the notice period of 7 days to do so, have no

application to a breach of the kind that occurred in the case under

review. What Appellant did was both proper and reasonable. It gave

timeous warning to Respondent that it had committed a breach and it

detailed what the nature of the breach was. It cautioned Respondent

it that should it do so again it would invoke the terms of par. 10(5)

of the contract. Despite this "final warning". Respondent

once again breached the same fundamental term of the agreement.

Appellant

was fully justified in invoking the terms of para. 10(5) in the

manner in which it did.

Bearing

in mind the nature of the breach, the contents of the notice given

was required to be sufficient to inform it of the nature of the

breach committed. See West Car Properties v Young 1983(2) SA 188 (N).

Moreover the nature of the notice would depend on the terms of the

contract and the nature of the breach. See Godbold v Tomson 1970(1)

SA 61 (N), and Rautenbach v Venner 1928 TPD 26, where at p.30

Greenberg, J says: "And in construing the words setting out the

conditions, the object of the conditions will have to be considered

in order to assist in the question of construction."

33

For

these reasons the appeal succeeds. The order made by the Court a Quo

is set aside. In its place the following order is made: 'The

application is dismissed with costs." Respondent is ordered to

pay the costs both in the Court below and in this Court on the scale

as between attorney and client in accordance with the provisions of

par. 10.4 of the agreement. Such costs will include the costs of two

Counsel in both Courts.

J

H STEYN JA

I

agree.

G

P C KOTZE J P

I

agree.

P

A TEBBUTT J A

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