THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:  882/2013

NON-REPORTABLE

In the matter between:

X-PROCURE SOFTWARE SA (PTY) LTD

APPELLANT

and

SUTHERLAND, TERRY LINDA

RESPONDENT

Neutral citation:
X-Procure Software (Pty) Ltd v Sutherland (882/13) [2014]
ZASCA 196 (28 November 2014)
Coram:
Maya, Leach, Willis and Saldulker JJA and Mocumie AJA

Heard:
18 November 2014

Delivered:
28 November 2014

Summary:
Interpretation of a written contract – claim for commission - context
and also the need for a sensible and businesslike result required an
interpretation that commission would be payable – appeal dismissed
with costs.

ORDER

On appeal from: South Gauteng High Court, Johannesburg (Boruchowitz J sitting
as the court of first instance)

The appeal is dismissed with costs.

JUDGMENT

Willis JA (Maya, Leach and Saldulker JJA and Mocumie AJA concurring):

[1] The appellant, the defendant in the high court, appeals with the leave of that
court. The high court had granted judgment in favour of the respondent. The high
court found that there was an amount due to her as commission, arising from a
written agreement concluded between the parties on 9 October 2003, and granted its
order accordingly. The sum awarded was R447 873. Judgment included interest
thereupon and costs.

[2] The respondent had sued for specific performance, which was alleged to
have been the payment of commission due to her from advertising agreements
which she had concluded on the appellant’s behalf with the appellant’s customers.
The respondent had based her action on a term of this written ‘Outsource Sales
Agreement’ (the agreement), clause 10 of which provides as follows:

‘X/procure [the appellant] shall effect payment to the marketer [the respondent] of an amount
equal to 20% of the gross amount payable to X/procure less any commission payable to
advertising agencies for and in respect of each advertising agreement concluded solely by
reason of the efforts of the [the respondent] pursuant to and in terms of this agreement.’ (My
emphasis.)

[3] The agreement terminated on 31 March 2004 as a result of disagreements
between the respondent and Mr Dirk Odendaal, the founder, majority shareholder
and executive chairman of the appellant. In her particulars of claim, the respondent
alleged that she had been entitled to the amount of her claim by reason of various
advertising agreements which had been concluded on behalf of the appellant solely
by reason of her efforts. The appellant’s case was that the only advertising
agreements which had been concluded solely by reason of the respondent’s efforts
had been two agreements concluded between the appellant and pharmaceutical
companies known respectively as ‘Beyers Health Care’ and ‘Roche’. The appellant
averred that the amount due to the respondent, arising from these agreements was
R35 248.62.

[4] After various preliminary skirmishes between the parties, which included a
later abandoned claim in reconvention by the appellant, the respondent reduced her
claim to the amount awarded to her by the high court: viz R447 873.

[5] The case turns on whether the clause in paragraph 2 above is to be
interpreted so as to mean that the respondent was entitled to commission only on
contracts which she concluded on behalf of the appellant with new customers or
whether it applied to renewals or extensions of existing contracts with the appellant
and its customers as well. The appellant contended that, by reason of the fact that
there had been pre-existing advertising agreements with certain of the appellant’s
customers, renewals or extensions thereof could not be regarded as having been
concluded ‘solely by reason of the efforts of’ the respondent.

[6] By reason of the fact that there is disagreement over whether the expression
‘solely by reason of the efforts of’ is ambiguous, and whether there can therefore be
a departure from the parol evidence rule, it is necessary first to deal with the
question of whether there is ambiguity in the expression.

[7] As a contract is a bilateral juristic act (there must, at the very least, be a
meeting of two minds, even if one and the same person acts in different capacities),
no contract can ever come into being solely as a result of the efforts of one person,

except if that person is acting in different capacities.1 Inasmuch as it is common
cause that a contract had indeed come into being between the parties, the use of the
word ‘solely’ in the clause is inherently ambiguous. This type of ambiguity in question
has been described as a ‘latent ambiguity’ in Delmas Milling Co Ltd v Du Plessis,2
which has been followed in innumerable cases since then. Referring to Delmas
Milling, the trial court used this term to describe the expression that was in
contention between the parties. Having referred to the Oxford Dictionary, the trial
court took a similar view regarding the ambiguity of the word ‘solely’ in this context.

[8] Where the language of a written contract is ambiguous, extrinsic evidence is
admissible in order to construe its meaning, by reference to its ‘context’ or the
‘factual matrix’ in which the contract was concluded.3 Moreover, the apparent
purpose to which the contract was directed may be considered when interpreting it.4
The high court therefore correctly admitted and had regard to extrinsic evidence in
order to determine what was probably in the minds of the parties when the
agreement was concluded.

[9] Relevant to the interpretation of the agreement is the definition of ‘advertising
agreements’, which is as follows:
‘the standard form agreements used and prescribed by [the appellant] from time to time to
contract with manufacturers, wholesalers and distributors of pharmaceutical products
stipulating the terms and conditions in terms whereof [the appellant] sells advertising space
on [the appellant] to such manufacturers, wholesalers and distributors of pharmaceutical
products.’
Implicit in the use of the words ‘from time to time’ in this definition is that existing
agreements between the appellant and its customers could be varied.

[10] The agreement also provides that:

1 See for example Vaal Reefs Exploration and Mining Co Ltd v Burger 1999 (4) SA 1161 (SCA) para
8; Van der Merwe v Nedcor Bank Bpk 2003 (1) SA 169 (SCA) paras 4 to 8.
2 Delmas Milling Co Ltd v Du Plessis 1955 (3) SA 447 (A) at 454G.
3  See Coopers & Lybrand & others v Bryant & others 1995 (3) SA 761 (A) at 768C-D. See also Van
der Westhuizen v Arnold 2002 (6) SA 453 (SCA) paras 22 and 23; Masstores (Pty) Ltd v Murray &
Roberts Construction (Pty) Ltd & another 2008 (6) SA 654 (SCA) para 7; KPMG Chartered
Accountants (SA) v Securefin Ltd & another 2009 (4) SA 399 (SCA) para 39; Potgieter & another v
Potgieter NO & others 2012 (1) 637 (SCA) para 24 and North East Finance (Pty) Ltd v Standard Bank
of South Africa Ltd  2013 (5) SA 1 (SCA) para 2.
4 See Communicare & others v Khan & another 2013 (4) SA 482 (SCA) para 31.

‘In addition to its other obligations under this agreement the marketer shall:
11.1 use its best efforts to promote, sell and service the products within the territory using
trained and qualified personnel;
11.2 be responsible for all costs and expenses related to its performance under this
agreement.’
It is significant that the promotion, sale and service of products is not qualified in any
way suggestive of the interpretation which the appellant has sought to place on the
agreement. The contrary is true. The word service is indicative of a continuing
relationship with an existing customer.

[11]  Clause 5 of the standard advertising agreement between the appellant and its
customers provides that:
‘This agreement shall thereafter commence on the date of signature thereof by or on behalf
of the parties and shall continue indefinitely until 6 (six) calendar months written notice of
termination is given by either party to the other, unless otherwise stated’.
Despite the seemingly indefinite nature of the advertising agreement, it refers also to
annexures thereto.  In these annexures are set out different products of the appellant
and the rates to be applied thereto. It was the evidence not only of the respondent
but also Mr Lewis, who had been the managing director of the appellant at the
relevant time, that the advertising agreements were often varied by adding to or
substituting previous annexures.

[12] In addition to the definition of ‘advertising agreements’ in the agreement
between the parties and the terms of clause 5  of the standard advertising
agreement, there are various other pointers to what must have been intended
between the parties when they entered into their agreement. These pointers are to
be found against the background that not only had the respondent been appointed to
market the appellant’s products that had been defined in the agreement as types of
‘advertising space’ known as ‘banners, browser pages, screen savers and linked
adverts’ but also the respondent’s remuneration of the appellant was derived entirely
from commission.

[13] The undisputed evidence of the respondent was that 90 per cent of her time
had been spent maintaining the appellant’s relationship with these existing
customers and it was as a result of the respondent’s sole efforts that existing
advertising agreements had either been renewed or extended. Furthermore, she had
to carry all the administrative expenses relating to the procurement of advertising
agreements herself, regardless of whether these related to new customers or
renewals or extensions of these agreements with pre-existing customers.  There was
no evidence that anyone else, within the appellant, was responsible for the renewal
or extension of agreements with these pre-existing customers. Self-evidently, the
renewal or extension of the agreements would not have occurred either
automatically or autonomously. As the trial court correctly observed:
‘It is highly improbable and makes unreasonable business sense to think that the
respondent would have expended all her financial and personal efforts in procuring
advertisements when she, on the version of the appellant, would not have been remunerated
at all in respect of these agreements.’

[14]  An analysis of the notes of the appellant’s negotiations with Bayer shows that
the appellant had introduced Bayer to its products prior to Bayer having had any
dealings or association with Bayer. Nevertheless, the appellant had remunerated the
respondent for agreements concluded between Bayer and the appellant between
September 2003 and June 2004, during which period the respondent had actively
participated in the negotiations. Similar considerations apply in respect of advertising
contracts concluded between the appellant and Roche.

[15] It is common cause that, during the currency of the agreement, the
respondent had received R109 002.37 from the appellant as commission for
concluding advertising agreements with these existing customers. This payment was
not made in a lump sum but on an ongoing basis. Tax was deducted on these sums
and made over to the South African Revenue Service. Mr Odendaal, who testified on
behalf of the appellant, said that these payments had been made ‘ex gratia’. In its
plea and in its affidavit resisting summary judgment, the appellant described these
payments as having been ‘overpayments’. No satisfactory explanation for this
discrepancy in versions could be given by Mr Odendaal when he was cross-
examined thereupon.

[16] Mr Lewis, the former operations manager of the appellant, who at one stage
in his evidence said that the sum of R109 002.37 was an ‘overpayment’, under
cross-examination later said that he did not know how the payments to the
respondent had been calculated as he had not been responsible therefore. He also
conceded under cross-examination that the respondent would have been entitled to
commission for new business which she had generated from existing customers of
the appellant. This is a clear indication that the appellant itself did not understand its
agreement with the respondent to be as it now purports to interpret it.

[17] It is obvious that renewals or extensions of existing contracts between the
appellant and its existing customer could not be self-generating. The decision to
renew would depend, inter alia, on the following: the historical effectiveness of past
advertising arrangements, budgets, experience of the appellant’s competitors and
the introduction of new products and/or the discontinuance of other by the customer.
The decision would also depend on the building of relationships between the
appellant and its customers which would include advice and guidance from the
appellant’s representative. It is in this regard, that the contribution from the
respondent would have played a significant role.

[18] The appellant’s case was that the only commission to which the appellant
had become entitled was an amount of R35 248.62. It was not in dispute that the
appellant had paid the plaintiffs an amount of R139 746.63 in respect of various a
commissions. This, the appellant claimed, was an overpayment. In its counterclaim
the appellant claimed the difference between these two amounts. This claim was
later abandoned by the appellant.

[19] In proving the aggregate of her claim the respondent relied on an exhibited
schedule of contracts, for each individual item of the claim. Although she was cross-
examined in general terms about her claims, most of the individual items were not
disputed. Cross-examination focused on whether she could correctly assert that the
contracts were concluded ‘solely’ as a result of her efforts. The arithmetic of the
schedules was not in question. The respondent stood up well under cross-
examination. There was no reason to disbelieve her. The concessions that the

respondent made under cross-examination and that were seized upon by counsel for
the appellant in an attempt to show that she had admitted that these contracts had
not been concluded solely by her on the appellant’s behalf did not, in the context in
which they were made, detract from her essential version of events. That account of
affairs is that, without her efforts the appellant, would in all probability, not have
secured the renewal or extension of contracts as it did.  The trial court correctly held
that each extension or renewal relating to contracts concluded with existing clients
constituted a new advertising agreement.

[20] Accordingly, the trial court cannot be criticised for having accepted the
respondent’s version. The trial court also correctly found that, as the respondent’s
contentions in respect of the interpretation of the agreement had prevailed over
those of the appellant, she had succeeded in proving her revised claim for R447 873.

[21] The trial court relied strongly on the decision of this court in Natal Joint
Municipal Pension Fund v Endumeni Municipality5 to conclude that not only context
but also the need for a sensible and businesslike result required an interpretation
that commission would be payable in respect of new sales in respect of advertising
agreements concluded not only between the appellant and its new customers, but
also existing customers. In reaching this conclusion, the trial court relied on the
following facts:
(a)
the respondent had been remunerated purely on a commission basis;
(b)
by a huge margin, most of her time had been spent maintaining the
appellant’s relationship with these existing customers;
(c)
it was as a result of the respondent’s sole efforts that existing advertising
agreements had either been renewed or extended;
(d)
the respondent had to carry all administrative expenses relating to the
procurement of advertising agreements herself;
(e)
she had, during the currency of the agreement, received commission for
concluding advertising agreements with these existing customers;

5 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18.

(f)
the ‘internally contradictory’ evidence of Mr Odendaal  and Mr Lewis, as to
whether the payments for commission had been made ‘ex gratia’ or were
‘overpayments’;
(g)
the improbability and absurdity that the parties could have intended the clause
in contention to have the interpretation which the appellant wishes now to
have place on it.

In my opinion, the reasoning of the trial court cannot be faulted.

[22] The following order is made:
The appeal is dismissed with costs.

_______________________
N P WILLIS
JUDGE OF APPEAL

APPEARANCES:

For the Appellant:
M D Cochrane
Instructed by:
Harris Billings Attorneys, Johannesburg
c/o Honey Attorneys, Bloemfontein

For the Respondent:
A R G Mundell SC
Instructed by:
Van Zyl Hertenberger, Johannesburg
c/o Kramer Wehmann & Joubert Inc, 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

November 2014

STATUS

Immediate

X-Procure Software SA (PTY) LTD (882/2013)
Please note that the media summary is for the benefit of the media and does
not form part of the judgment.

Today the Supreme Court of Appeal (SCA) dismissed an appeal against the order
obtained by the respondent in her favour in the high court, in terms of which the
appellant was required to pay her R447 873, including interest thereupon and costs.
The respondent had claimed specific performance in terms of a so-called ‘outsource
sales agreement’ concluded between the parties.

Ultimately the appeal turned on the interpretation of the phrase ‘solely by reason of
the efforts of’ the respondent, as contained in paragraph 2 of the agreement, the
ambiguity thereof and, as a result, whether a strict application of the parol evidence
rule was to be followed in this particular instance.  While the appellant contended
that the respondent was entitled to commission payable in terms of contracts
concluded only by the recruitment of new customers as a result of the efforts of the
respondent, her version was that she was entitled, in addition, to commission in
respect of existing customers retained as such due to her sole efforts and in respect

of which there had been renewals or extensions of contracts with existing customers
of the appellant.

The SCA contended that no fault could be found in the trial court’s reasoning. The
SCA decided that context and the need for a sensible and businesslike result
required an interpretation that commission would be payable not only in respect of
advertising agreements concluded between the appellant and its newly recruited
customers, but also to renewals and extensions of agreements with existing
customers.