This article is intended for any company that concludes agreements which refer to annexures which are required to be attached to the agreement. It uncovers the reasoning of the Supreme Court of Appeal in its determination on the validity of an agreement which refers to annexures that are not actually attached to the agreement.

In G Phadziri & Sons (Pty) Ltd v Do Light Transport (Pty) Ltd and Another (765/2021) [2023] ZASCA 16 (20 February 2023), the Supreme Court of Appeal (SCA) held that an agreement that refers to annexures which are not attached to the agreement is still valid and enforceable, despite the missing annexures.

The appellant G Phadziri & Sons (Pty) Ltd (Phadziri) and the first respondent, Do Light Transport (Pty) Ltd (Do Light), are bus companies offering public transport services in Vhembe, Limpopo. Phadziri provided public transport services on specific routes for which it was granted licences by the second respondent, the Limpopo Department of Transport (DoT).

Phadziri subsequently became unable to provide effective and reliable public transport services for, amongst other reasons, its aging bus fleet.

Phadziri, Do Light and the DoT subsequently concluded a tripartite agreement (the Agreement) in terms of which Do Light would act as a subcontractor to Phadziri, and provide public transportation services on certain routes identified as “Vleifontein and Maila to Makhado (Louis Trichardt) in terms of the timetable as attached as annexure 1, or as amended by agreement between the Department and Do Light” (Affected Routes). Annexure 3 of the Agreement was also incorporated by reference, which contained a fare timetable for cash journey tickets to be sold to passengers on the Affected Routes.

The Agreement was implemented for eight years until a dispute arose between the parties, in terms of which Phadziri argued, amongst other things, that annexures 1 and 3 were not attached to the Agreement and that the omission resulted in the Affected Routes not being identifiable, thereby rendering the Agreement void for vagueness.

The SCA, therefore, had to determine whether the omission of the annexures rendered the agreement not capable of implementation. In arriving at its decision, the SCA considered a number of previous judicial decisions, which gave rise to the following principles:

• when interpreting a contract, the court must consider the factual matrix; its purpose; the circumstances leading up to its conclusion; and the knowledge at the time of those who negotiated and produced the contract;

• our law inclines to preserving instead of destroying a contract which the parties seriously entered into and considered capable of implementation; and

• the conduct of the parties may provide clear evidence on how reasonable business persons construed a disputed provision in a contract; however, that this must not be understood as an invitation to harvest evidence of the conduct of the parties on an indiscriminate basis.

Having regard to the aforementioned legal principles, the court held that:

• Phadziri and Do Light were competitors, and Phadziri was at risk of losing its licences due to its inability to deliver effective services. It was, therefore, to Phadziri’s benefit that the Agreement was concluded;

• Phadziri was aware of the timetable and the Affected Routes that the licences applied to, and it was conceivable that Do Light would have known of the scheduled times and the Affected Routes when it was invited by Phadziri to be appointed as a subcontractor;

• the purpose for concluding the Agreement was to provide commercial efficacy to Phadziri, and to avoid the collapse of the public road transportation services on the Affected Routes;

• there is no doubt that the parties seriously entered into the Agreement and considered the Agreement capable of implementation; and

• the evidence of how the parties conducted themselves in implementing the Agreement for eight years without a dispute is relevant to determining how they understood their obligations, despite the missing annexures, and illustrated that the parties had a meeting of minds.

The SCA held that the Agreement was not void as a result of the missing annexures.

It is important to note that, in this case, the missing annexures referred to a timetable for the Affected Routes. The SCA held that these timetables were known to both parties because Phadziri had a timetable which it used in conjunction with its licences at the time that the Agreement was concluded. The SCA held that Phadziri knew of the ‘origin and destination points and significant intermediate locations along the route’, and that its suggestion that the routes were not known because the timetable was not attached to the Agreement was contrived.

This case is distinguishable from agreements which are unrelated to licences and which include references to annexures that contain information material to the agreement between the parties. It is, therefore, important for contracting parties to ensure that any written contracts are drafted clearly, and to address any elements of vagueness in a contract as soon as these become apparent. This is to avoid any allegation from a counterparty that the agreement may be void for vagueness.

Daniel Hart is a Partner and Faheema Rahim an Associate | Fasken

This article first appeared in DealMakers, SA’s quarterly M&A publication.

DealMakers is SA’s M&A publication.
www.dealmakerssouthafrica.com