SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 20044/2014
Reportable

In the matter between:

NATIONAL HEALTH LABORATORY SERVICE             Appellant

and

MARIANA MAGDALENA LLOYD-JANSEN
VAN VUUREN

Respondent

Neutral citation:   National Health Laboratory Service v Mariana Lloyd-
Jansen van Vuuren (20044/2014) [2015] ZASCA 20
(19 March 2015).

Coram:
Mhlantla, Shongwe and Wallis JJA and Dambuza and Mayat
AJJA

Heard:
25 February 2015
Delivered: 19 March 2015
Summary: Contract – interpretation and application of employment
agreements
–
the
obligations
under
the
two
agreements
are
interdependent.

___

ORDER

___

On appeal from: Gauteng Local Division, Johannesburg (LJ van der
Merwe AJ sitting as court of first instance):

1 The appeal is upheld with costs.
2 The order of the high court is set aside and replaced with:
„(a) It is declared that the obligation recorded in clause 3.4 of the contract
concluded on 4 January 2006 continued to exist notwithstanding the
conclusion of the subsequent employment agreement dated 16 April 2010
between the plaintiff and the defendant.
(b) It is declared that the defendant is liable to the plaintiff pursuant to the
provisions of clause 3.4 of the initial contract.
(c) The defendant is ordered to pay the costs of suit as between party and
party.‟

___

JUDGMENT

___

Mhlantla JA (Shongwe and Wallis JJA and Dambuza and Mayat
AJJA concurring):

Introduction

[1] The present dispute arose from two separate agreements concluded
between the National Health Laboratory Service (the appellant) and Dr
Mariana Magdalena Lloyd-Jansen van Vuuren (the respondent). The
respondent, a medical practitioner, wanted to become a specialist
pathologist. In order to qualify as such one has to work as a specialist

trainee1 and hold a training post within the Department of Health or at a
health laboratory in South Africa. In January 2006 the appellant
employed the respondent as a junior registrar. The parties concluded an
agreement setting out the terms of the respondent‟s training and
employment (the initial contract).

[2] The provisions relating to training are found in clause 3 of the
initial contract. The respondent was required to complete her studies for
the M.Med degree within a period of five years, be attached to the
University of the Free State and be subject to some supervision and
assessment. The parties quantified the value of the training to be provided
by the appellant and agreed that if the respondent did not work for the
appellant for a period of two years after completion of her training and
qualification as a specialist, she would re-imburse the appellant for the
training costs incurred. This meant that she would either work for the
appellant for a period of two years or pay an amount of R2 million should
she resign earlier than the stipulated period.

[3] On 1 February 2006 the respondent commenced her duties as a
junior registrar. In 2008, she was promoted to the position of a senior
registrar. She completed her studies and training before the expiry of the
five year period stipulated in the contract.

[4] In April 2010 the appellant employed the respondent as a specialist
pathologist. A contract to that effect was concluded (the second
agreement). No reference was made in this contract to the respondent‟s

1 A specialist trainee in any one of the branches of medicine including pathology has to be registered at
a university for a master of medicine degree (M.Med). Only graduates in medicine (MBChB) who have
completed the prescribed intern period and who are registered with the Health Professions Council of
South Africa are allowed to register for the M.Med programme. A specialist trainee is referred to as a
registrar.

obligation to work for the appellant for two years or pay the amount of
R2 million if she left its employ before the expiry of the stipulated period.

[5] Four months later, in July 2010, the respondent resigned. The
appellant demanded payment of the amount of R2 million from the
respondent. She refused to pay contending that the second agreement was
silent on her obligation to pay or work for the appellant for two years and
that its conclusion had terminated the initial contract and with it the
obligation to repay this amount.

[6] As a result, the appellant instituted action in the South Gauteng
High Court, Johannesburg for payment of the amount of R2 million
together with interest and costs. The matter came before LJ van der
Merwe AJ. At the commencement of the trial the parties requested the
court a quo to separate the issues relating to liability from those relating
to quantum. The judge accordingly issued an order separating the merits
from the quantum. The parties presented him with a stated case on the
merits. Consequently, no evidence was led at the trial. The court a quo
had to determine whether the conclusion of the second agreement
between the appellant and the respondent on 16 April 2010 terminated the
appellant‟s rights contained in clause 3.4 of the initial contract.

[7] The court a quo was left unpersuaded by the appellant‟s submission
that the obligation recorded in clause 3.4 of the initial contract survived
the termination of the initial contract and continued to exist after the
conclusion of the second employment agreement between the parties. The
court rejected all of the appellant‟s contentions and held that the appellant
had the opportunity to incorporate the provisions of clause 3.4 of the
initial contract into the second agreement. The court further held that the

second agreement not only replaced the initial agreement, but also
expressly recorded that the second agreement constituted the whole
agreement between the parties. The court concluded that the parties had
agreed, by virtue of the provisions of the second agreement, that the
provisions of clause 3.4 of the initial contract no longer applied.
Therefore, the court a quo dismissed the appellant‟s claim. It refused
leave to appeal and this appeal is with the leave of this court.

[8] The issues on appeal concern the interpretation and application of
the two agreements and whether the second agreement replaced the initial
contract.

Contracts

[9] It is apposite at this stage to set out in detail the relevant terms of
these contracts. In this regard, I will commence with the initial contract
(the 2006 agreement), which also covered the training of the respondent.
It was concluded on 4 January 2006. The respondent was employed as a
junior registrar with effect from 1 February 2006. The relevant details
relating to training are set out in clause 3. The respondent was subject to
an annual performance review. Her progression to the next year was
subject to evidence of satisfactory progress. She was obliged to register
with the University of the Free State for the M.Med degree and write the
requisite examinations before the expiry of the five year period. She was
also obliged to register with the Health Professions Council of South
Africa (HPCSA).

[10] The contentious clause is clause 3.4 which reads:

„On completion of the requirements for registration as a specialist with the HPCSA
the employee shall continue to work for the NHLS as a specialist pathologist for a

period of two years following specialist registration. For the purposes of this
agreement, registrar training is deemed to be worth R2 million, irrespective of the
time spent in training, the sum of which shall be worked off over a full two-year
period (24 months). Should the employee complete the first full twelve months of this
period, the employee‟s indebtedness to the NHLS shall be reduced to 75% of the full
amount owing. Should the employee not complete the two-year post-specialist
registration working requirement, the employee shall pay back to the NHLS the
amount owing in a single lump sum prior to resignation. The employer may at its
discretion cancel the indebtedness of the employee at any time.‟

[11] The remainder of the clauses related to the terms and conditions of
employment, that is, the duties of the employee, remuneration, probation
period, restraint of trade and termination of employment. The termination
clause made provision for the unilateral termination of the agreement by
either party on one calendar month‟s written notice to the other party.

[12] In so far as the second agreement was concerned, this was
concluded in April 2010, when the respondent was appointed as a
specialist pathologist. She was required to provide proof, by 30 April
2010, that she had applied for registration with the HPCSA as a specialist
pathologist. No reference was made to the obligation recorded in clause
3.4 of the initial contract. The second agreement was broadly similar to
the initial contract, but excluded clause 3 which related to the training of
the respondent. The termination clause also made provision for the
unilateral termination of the agreement by either party on one calendar
month‟s written notice to the other party.

Interpretation

[13] Our law relating to the interpretation of documents has evolved
since the earlier approach enunciated in Coopers & Lybrand & others v

Bryant2 where it was held:
„The correct approach to the application of the “golden rule” of interpretation after
having ascertained the literal meaning of the word or phrase in question is, broadly
speaking, to have regard:
(1) to the context in which the word or phrase is used with its interrelation to the
contract as a whole, including the nature and purpose of the contract, as stated by
Rumpff CJ supra;
(2) to the background circumstances which explain the genesis and purpose of the
contract, ie to matters probably present to the minds of the parties when they
contracted…;
(3) to apply extrinsic evidence regarding the surrounding circumstances when the
language of the document is on the face of it ambiguous, by considering previous
negotiations and correspondence between the parties, subsequent conduct of the
parties showing the sense in which they acted on the document, save direct
evidence of their own intentions.‟ (Citations omitted.)

[14] This court in Bothma-Batho Transport (Edms) Bpk v S Bothma &
Seun Transport (Edms) Bpk,3 reformulated the principles governing the
approach to interpretation as follows:
„Whilst the starting point remains the words of the document, which are the only
relevant medium through which the parties have expressed their contractual
intentions, the process of interpretation does not stop at a perceived literal meaning of
those words, but considers them in the light of all relevant and admissible context,
including the circumstances in which the document came into being. The former
distinction between permissible background and surrounding circumstances, never
very clear, has fallen away. Interpretation is no longer a process that occurs in stages
but is “essentially one unitary exercise”. Accordingly it is no longer helpful to refer to
the earlier approach.‟

2 Coopers & Lybrand & others v Bryant 1995 (3) SA 761 (A) at 768A-E.
3 Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494
(SCA) para 12.

Novation

[15] To the extent that the judgment of the court a quo was premised
upon novation, it is necessary for me to consider this aspect. There is a
presumption against novation because it involves a waiver of existing
rights. When parties novate they intend to replace a valid contract with
another valid contract. In determining whether novation has occurred, the
intention to novate is never presumed. In Acacia Mines Ltd v Boshoff,4
the court held that novation is essentially a question of intention.

[16] In Proflour (Pty) Ltd & another v Grindrod Trading (Pty) Ltd t/a
Atlas Trading and Shipping & another5 the court, when determining
whether the agreement resulted in a novation, referred to the decision of
Electric Process Engraving and Stereo Co v Irwin 1940 AD 220 at 226-
227 where the court said:
„The law on the subject was clearly enunciated as far back as 1880 in the well-known
case of Ewers v The Resident Magistrate of Oudtshoorn and Another, (Foord) 32,
where DE VILLIERS, C.J, said: “The result of the authorities is that the question is
one of intention and that, in the absence of any express declaration of the parties, the
intention to effect a novation cannot be held to exist except by way of necessary
inference from all the circumstances of the case.”‟
It follows that in order to establish whether novation has occurred, the
court is entitled to have regard to the conduct of the parties, including any
evidence relating to their intention.

[17] It was submitted before us, on behalf of the respondent, that both
contracts could not exist simultaneously. It was contended that clause 3.4
of the initial contract should have been incorporated into the second

4 Acacia Mines Ltd v Boshoff 1958 (4) SA 330 (A) at 337D.
5 Proflour (Pty) Ltd & another v Grindrod Trading (Pty) Ltd t/a Atlas Trading and Shipping & another
[2010] 2 All SA 510 (KZD) para 10.

agreement. In the circumstances of this case, novation had occurred and
the second agreement had replaced the initial contract in toto, so the
argument went.

[18] I do not agree with this submission. The interpretation contended
for by the respondent is contrary to the background circumstances of the
matter and the intention of the parties. In this regard, I respectfully
disagree with the reasoning of the court a quo. In applying the above
mentioned legal principles to the facts of this matter, it is evident that the
two contracts served different purposes. The initial contract was primarily
concerned with the training of the respondent. The parties agreed on the
value of the training so as to avoid any dispute should the respondent
resign after qualifying as a specialist. The first sentence in clause 3.4
conferred some rights and obliged both parties to perform. On the one
hand, the appellant undertook to employ the respondent upon qualifying
as a pathologist whilst she undertook to work for the appellant for two
years or to re-imburse the appellant if she did not do so. Clause 3.4 also
provided that irrespective of the time spent in training, which included
completion of the training in a shorter time period, the respondent
undertook to work for a further two years, failing that, to pay the amount
of R2 million to the appellant.

[19] Clauses 1.1 and 3.4 of the initial contract determined and regulated
any future employment relationship between the parties. The respondent
was obliged to recompense the appellant in respect of the moneys
expended towards her training, either by rendering her services to the
appellant for a specified period or by repaying the full amount spent on
her training. This is what the parties agreed to do and they concluded an
agreement to that effect. These undertakings are therefore binding on the

parties.

[20] It is common cause that the respondent received training with the
financial assistance of the appellant. The appellant complied with its
obligation by employing the respondent in April 2010. This is the
contract in terms of which both parties would perform in order to comply
with their obligations set out in clause 3.4. This agreement was purely an
employment contract of the respondent as a specialist pathologist. The
conclusion of the second agreement constituted the implementation of the
two-year employment obligation following registration of the respondent
as a specialist as undertaken in clause 3.4 of the initial contract. The
second agreement was accordingly a continuation of the initial contract,
in that the respondent was now employed as a specialist pathologist,
something envisaged in clause 3.4. This contract did not vary or cancel
the obligations imposed by the initial contract. In the result novation did
not occur. The indebtedness of the respondent in terms of the initial
contract could never be extinguished by the conclusion of the second
agreement.

[21] Lastly, it was submitted on behalf of the respondent that the
termination clause in the second agreement was in conflict with clause
3.4 of the initial contract. Any reliance on this clause is misplaced.  It has
to be borne in mind that the notice period was a standard term. The
argument loses sight of the fact that both agreements contained the
termination clauses and these were identical. There is nothing peculiar in
having such a term. The only logical conclusion is that the respondent
could terminate the agreement subject to the provisions of clause 3.4.

[22] It follows that clause 3.4 of the initial contract is still in operation
and that the indebtedness of the respondent towards the appellant remains
notwithstanding the conclusion of the second agreement. This clause
could only be cancelled by the appellant and this was not done. The
appeal must therefore succeed.

[23] In the result the following order is made:
1 The appeal is upheld with costs.
2 The order of the high court is set aside and replaced with:
„(a) It is declared that the obligation recorded in clause 3.4 of the contract
concluded on 4 January 2006 continued to exist notwithstanding the
conclusion of the subsequent employment agreement dated 16 April 2010
between the plaintiff and the defendant.
(b) It is declared that the defendant is liable to the plaintiff pursuant to the
provisions of clause 3.4 of the initial contract.
(c) The defendant is ordered to pay the costs of suit as between party and
party.‟

__________________
NZ MHLANTLA

JUDGE OF APPEAL

APPEARANCES:

For Appellant:
R Ram

Instructed by:

Shepstone & Wylie Attorneys, Sandton

Matsepes Inc, Bloemfontein

For Respondent:
S Snyman

Instructed by:

Snyman Attorneys, Houghton

Honey Attorneys, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

19 March 2015

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment.

National Health Laboratory Service v Mariana Magdalena Lloyd-Jansen Van Vuuren
(20044/2014) [2015] ZASCA 20

MEDIA STATEMENT

Today, the Supreme Court of Appeal (SCA) upheld an appeal against a decision of the Gauteng
Local Division, Johannesburg.

The issue before the SCA was whether the conclusion of an employment contract between the
appellant and the respondent had the effect of novating (i.e. completely extinguishing) a previously
concluded training and employment contract, with the result that all rights and obligations arising from
that previous contract would also be extinguished.

The respondent, Ms van Vuuren, was a medical doctor who, as part of the process of further
qualifying as a specialist pathologist, in 2006 entered into a training and employment contract (the
initial contract) with the appellant, the National Health Laboratory Service. The initial contract set out
the respondent’s training regime and required her, once she had qualified as a pathologist, to work in
that capacity for the appellant for a period of two years.  The contract further provided that should she
fail to work for this period, she would reimburse the appellant for the expenses incurred in her
training. This amount was quantified in the contract as R2 million.

In 2010, the respondent qualified as a pathologist, and the appellant employed her in that role in
terms of a new employment contract (the second contract).  This second contract made no mention of
the obligation to work for the appellant for two years or the R2 million penalty in the event she
resigned earlier than the stipulated period.  After four months, the respondent resigned and refused to

pay the penalty, contending that the conclusion of the second contract had terminated the initial
contract including the penalty provision.

The appellant then instituted action in the Gauteng Local Division, Johannesburg for payment of the
R2 million.  The high court, ruling on the merits, found in favour of the respondent.

On appeal, the SCA held that this was a matter of interpretation of the two contracts. This court noted
that the contracts must be interpreted in the light of all relevant and admissible context, including the
circumstances in which the documents came into being. The SCA also referred to an established
principle that novation will never be presumed by the court.

Upon consideration of whether the requisite intention to novate could be inferred from all the available
evidence, the SCA rejected the respondent’s interpretation on the basis that it was contrary to the
background circumstances of the contracts. This court held that it was evident that the contracts
served different purposes and could exist simultaneously and without conflict.  Thus it was held that
novation had not occurred.

In the result, the SCA upheld the appeal and set aside the order of the high court. It issued a
declarator that the obligation recorded in clause 3.4 of the contract concluded on 4 January 2006
continued to exist notwithstanding the conclusion of the employment agreement dated 16 April 2010
between the appellant and the respondent. The court further declared the respondent liable to the
appellant pursuant to the provisions of the relevant clause.

-- ends ---