THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no: 668/2013
Not Reportable
In the matter between:

AIR TRAFFIC AND NAVIGATION SERVICES     APPELLANT
COMPANY

and

CHRISTIAAN DAVID ESTERHUIZEN                               RESPONDENT

Neutral citation:  Air Traffic and Navigation Services v Esterhuizen (668/2013)
[2014] ZASCA 138 (25 September 2014)

Coram:
Lewis, Tshiqi, Theron and Wallis JJA and Fourie AJA

Heard:

5 September 2014

Delivered
25 September 2014

Summary: Contract – Interpretation – Contract must be interpreted by
determining the parties’ intention having regard to its context and purpose –
sensible meaning to be attributed.
Contract of employment – Fixed term contract – Termination by resignation
before the expiry of the fixed term constitutes a breach.

_________________________________________________________________
ORDER
_________________________________________________________________
On appeal from: North Gauteng High Court, Pretoria (Tuchten J sitting as
court of first instance):
1 The appeal is upheld with costs, including those of two counsel.
2 The order of the high court is set aside and replaced with the following:
‘The defendant is ordered to pay to the plaintiff:
(a) the sum of R427 843;
(b) interest on this amount at a rate of 15.5 per cent per annum, calculated from
the date of summons to the date of payment.
(c) costs of suit.’
_________________________________________________________________
JUDGMENT
_________________________________________________________________
Theron JA (Lewis, Tshiqi and Wallis JJA and Fourie AJA concurring):

[1] At issue in this appeal is the liability of the respondent, Mr Christiaan
David Esterhuizen, to the appellant, Air Traffic and Navigation Services
Company, for breach of contract, following upon the premature termination of
his employment with the latter.

[2] The appellant is the sole provider of air traffic, navigation and associated
services within South Africa. The company’s operations include the training of
licenced air traffic controllers and technical staff. The company has, over a
number of years, experienced a significant outflow of air traffic controllers to
other air traffic navigation service providers (especially in the Gulf region),
which do not train specialist technical staff, but instead attract trained staff from
companies such as the appellant, by paying extremely competitive rates. The

appellant introduced a scheme, called the retention scheme, to retain key and
critical skills. The evidence was that the appellant had spent vast sums of money
training its staff, and suffered significantly when staff, once trained, leave the
company. It suffered, both in terms of its capital investment in training staff and
in the smooth operation of the company.

[3] The retention scheme functioned by way of offering a substantial
financial reward to eligible employees, for as long as they remained in the
appellant’s employ for the agreed period, whilst at the same time acting as a
deterrent to premature resignations. The total benefit payable in terms of the
scheme to each employee was calculated in advance, based on projected
increases and paid to employees monthly. Employees had a choice of whether or
not to participate in the scheme.

[4] The respondent had initially been employed by the appellant from 1994
until 1999. In 2006 the respondent (once again) became employed by the
appellant as a Principal Air Traffic Controller. The employment contract
concluded between the parties stipulated that after the expiry of the three
months’ probationary period, either party could terminate the agreement on one
month’s notice.

[5] The respondent elected to participate in the retention scheme and to this
end, on 10 April 2007, the parties entered into a written agreement recording the
terms of the respondent’s participation in the scheme. The material terms of the
agreement were that: (a) the respondent would receive monthly retention
payments in addition to his normal remuneration as an incentive to remain in the
employ of the appellant; (b) the respondent agreed to remain in the appellant’s
employ for a fixed term of four years from 1 April 2007 to 31 March 2011;  and
(c) the respondent’s employment contract would be amended to reflect the terms

of the agreement: more particularly, the notice period would be substituted with
a clause preventing the termination of employment by either party during the
fixed term. The agreement also provided for the consequences that would follow
upon a breach of its terms.

[6] On 30 May 2008, the respondent tendered his resignation, effective from
the end of June 2008. By letter dated 30 May 2008, the appellant asserted that
such resignation constituted a breach of the retention agreement and called upon
the respondent to remedy the breach within seven days, failing which it might
cancel the agreement and claim payment of all amounts already paid under the
agreement, alternatively, the outstanding balance ‘in terms of the remainder of
the agreement’. The respondent did not withdraw his resignation and the
appellant cancelled the agreement. The benefit the respondent would have
derived under the scheme over the four year period amounted to R584 162. As
at the date of his resignation, he had been paid R156 319.

[7] The appellant caused summons to be issued out of the North Gauteng
High Court. Its main claim was based on a breach of the agreement. It claimed
payment of the sum of R427 843, being the monthly incentive amounts it would
have paid to the respondent for the period July 2008 until 31 March 2011, but
for the latter’s resignation. Although the appellant, in its amended particulars of
claim and in the alternative, claimed repayment of the retention amounts it had
already paid to the respondent, it did not pursue this claim at the trial. It
similarly did not pursue its alternative damages claim.

[8] The respondent raised a number of defences in his plea. Relying on clause
6.1 of the agreement, he alleged that if he resigned prematurely, he would be
indebted to the appellant only for the retention payments already paid to him.
He also alleged, inter alia, that clauses 6 and 10 of the agreement were mutually

destructive, alternatively, void for vagueness, further alternatively, that clause
10 constituted a penalty provision which was subject to the Conventional
Penalties Act 15 of 1965. This last mentioned defence was not pursued. The
high court (Tuchten J) dismissed the appellant’s claim with costs and the
appellant now appeals, with the leave of the high court.

[9] The question is essentially whether the respondent, in consequence of his
resignation, is liable to repay the incentive amounts the appellant would have
paid to him had he not resigned. That in turn is dependent on the interpretation
of the retention agreement. The intention of the parties, as it emerges from the
language they have used, is the determining factor in problems of contractual
interpretation. In North East Finance (Pty) Ltd v Standard Bank of South Africa
Ltd, Lewis JA stated that a court must ‘examine what the parties intended by
having regard to the purpose of their contract’.1 To determine the intention of
the parties, the nature, character and purpose of the contract must be established.
This is ascertained from the language used, read in its contextual setting and in
the light of any admissible evidence.2

[10] The purpose of the agreement is to be gleaned from the following clauses:
‘2.3. The Company is also committed to the growth of its capacity in order to ensure that it
will be able to handle the expected increase in aircraft movements and provide a seamless
world class service.
2.4. In order to ensure that the Company is able to grow its capacity to achieve its objectives
in clause 2.3 above, it is necessary to retain employees in certain job categories.

1 North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd 2013 (5) SA 1 (SCA) para 25.
2 Swart en ‘n ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C; Masstores (Pty) Ltd v Murray &
Roberts Construction (Pty) Ltd & another 2008 (6) SA 654 (SCA) para 23; KPMG Chartered Accountants (SA)
v Securefin Ltd & another 2009 (4) SA 399 (SCA) para 39; Ekurhuleni Municipality v Germiston Municipal
Retirement Fund 2010 (2) SA 498 (SCA) para 13; Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun
Transport (Edms) Bpk 2014 (2) SA 494 (SCA) para 12.

2.5. The Company has therefore designed the Scheme, which is applicable only to certain
employees in the Company, in terms of which the Employee will receive a Retention
Payment in addition to the Employee’s remuneration.
2.6. The Company and the Employee have therefore agreed to enter into this Agreement in
terms of which the Employee hereby freely and voluntarily agrees to remain in the
employment of the Company for the Fixed Term and to continue indefinitely thereafter.
2.7. In exchange for this undertaking, the Company will provide the Employee with a
Retention Payment which will result in the Employee enjoying additional financial
compensation.’
It was common cause between the parties that the purpose of the retention
agreement was to retain employees in certain job categories for fixed periods.

[11] The appellant’s main argument was that the premature unilateral
termination of the retention agreement by the respondent, by way of his
resignation, amounted to a breach. The breach accordingly triggered the
provisions of clause 10.2, in terms of which the respondent became liable to the
appellant, at the election of the latter, for repayment of what he had actually
received under the scheme or what he would have received had he continued in
the appellant’s employ for the fixed term. Clause 10, which deals with a breach
of the agreement and its consequences, provides:
‘10.1. If the Employee breaches any provision of this Agreement, the Company shall be
entitled, but not obliged, to give written notice to the Employee requiring the breach to be
remedied within 7 (seven) days of the date on which the notice was given to the Employee.
10.2. If the Employee fails to remedy the breach within 7 (seven) days of receipt of written
notice from the Company calling upon the Employee to do so, then without further notice, the
Company may:
10.2.1. Cancel the agreement and claim payment of all the amounts paid thus far in terms of
this agreement; alternatively claim the full balance then outstanding in terms of the remainder
of the terms of this agreement which will immediately become due and payable forthwith and
without demand to the Company.
10.2.2. … at its election proceed on the basis of this Agreement or on the basis of any other
cause of action.’

[12] It was contended by the appellant that, in order to achieve the purpose of
the scheme (that the employee remain in its employ for the agreed period) that
in the event of a premature resignation, an employee could end up owing the
appellant an amount in excess of what he had actually received under the
scheme. According to the appellant, this was exactly what the parties sought to
achieve by clause 10.2.1 of the agreement. The election afforded to the appellant
by the clause achieves this. If the employee had served for more than half the
four year period the appellant could reclaim what had been paid up to the date of
the breach. If the employee had served less than half the four year period the
appellant could elect to claim the balance for the period outstanding.

[13] The respondent, on the other hand, contended that in terms of clauses 6
and 8 of the retention agreement, should he resign prematurely, he would be
indebted to the appellant only for the retention moneys already paid to him.
Clause 6, to the extent here relevant, provides:
‘Recovery of Retention Payments
6.1. It is hereby agreed that if the Employee’s services are terminated due to:
6.1.1. resignation;
6.1.2. misconduct;
6.1.3. poor work performance; or
6.1.4. failure to meet and retain the necessary professional accreditation and licensing (Rating
and Validation) to perform his/her own functions;
then the Employee shall … truly and lawfully be indebted to the Company for all the
Retention Payments already paid in terms of the Agreement . . . .’.

[14] Clause 8 sets out a framework for the repayment of the retention moneys.
Clause 6 is on the face of it inconsistent with clause 10. It appears to provide
that, should the respondent’s services be terminated due to resignation, he would
be obliged to repay only the retention moneys he had already received as at the
date of his resignation. The difficulty lies in understanding what is meant by the

respondent’s services being terminated due to resignation. The respondent
contended that resignation meant a unilateral act on his part and that the
provisions of clauses 6 and 10 were ambiguous and mutually destructive. He
argued that termination (by resignation), as provided for in clause 6, was not
intended to constitute a breach.

[15] The word ‘terminated’ in clause 6.1 is ambiguous: it may refer to
termination by virtue of a right to give notice under the agreement or a
deliberate breach by one party amounting to a repudiation of the agreement. In
this respect the agreement is incoherent and confusing, but clarity emerges when
one reads all four sub-clauses, from which it is apparent that the termination of
the employee’s services to which it refers is a termination at the instance of the
employer, ie, the appellant. If the word ‘resignation’ in clause 6.1.1 is taken to
encompass the situation where an employee has a bona fide reason to resign,
and such resignation is accepted by the employer, then clauses 6 and 10 can be
read together without any conflict. Where the resignation of the employee is
accepted by the employer, the repayment procedure set out in clause 8 would be
triggered.  This is the only interpretation which makes the agreement coherent,
particularly having regard to the primary purpose of the agreement, namely, to
retain the service of specialist employees such as the respondent.

[16] An interpretation to the effect that the word ‘resignation’ in clause 6.1.1
refers to a unilateral act by an employee and not a breach of the contract, would
lead to the absurdity that clause 10 of the agreement, which deals with any
breach of the contract, would be superfluous and in fact have no practical
meaning at all. This could never have been the intention of the parties. In the
exercise of interpreting documents, courts are slow to impute superfluity to a
document and an interpretation which has this effect should not readily be

accepted.3 The preferred approach is to give some effect rather than no effect to
the words.4 Wallis JA in Bothma-Batho pointed out that ‘[a] sensible meaning is
to be preferred to one that leads to insensible or unbusinesslike results or
undermines the apparent purpose of the document’.5 Having regard to the
purpose of the agreement, it is clear that it must be the appellant’s prerogative
whether or not to accept a resignation as termination as contemplated in clause
6.1 or consider it a breach under clause 10. It is evident from the letter dated 30
May 2008 that the appellant regarded the respondent’s resignation as a breach of
the retention agreement.

[17] A contract of employment is generally entered into for a fixed period or
for an indefinite period. Where no date has been fixed upon which the contract
will terminate, it will continue indefinitely until terminated or will be terminable
by either party on the giving of notice.6 In such a contract, resignation is a
unilateral act permitted by the specific terms of the contract for bringing the
contract to an end.7 When the contract is for a fixed period, none of the parties
has the right to terminate the contract prior to the expiry of the fixed period.8
Cheadle AJ in Lottering v Stellenbosch Municipality9 endorsed this principle in
the following terms:
‘If the contract is for a fixed term, the contract may only be terminated on notice if there is a
specific provision permitting termination on notice during the contractual period – it is not an
inherent feature of this kind of contract and accordingly requires specific stipulation.’10
And later,

3 Portion 1 of 46 Wadeville (Pty) Ltd v Unity Cutlery (Pty) Ltd & others1984 (1) SA 61(A) at 70B-71A.
4 R H Christie and G B Bradfield The Law of Contract in South Africa 6 ed (2011) at 229.
5 Paragraph 10. Natal Joint Municipality Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para
26.
6 See generally M J D Wallis Labour and Employment Law para 33 at 5-10; Tiopaizi v Bulawayo Municipality
1923 AD 317; Lawsa 2 ed Vol 13 Part 1 para 94.
7 Lottering & others v Stellenbosch Municipality (2010) 19 LC and 12 BLLR 1306 (LC); 2923 (LC) (7 May
2010) para 20; Rustenburg Town Council v Minister of Labour & others 1942 TPD 220; Potgietersrust Hospital
Board v Simons 1943 TPD 269 at 274; Rosebank Television & Appliances Co (Pty) Ltd v Orbit Sales
Corporation (Pty) Ltd 1969 (1) SA 300 (T) at 302.
8 Lawsa para 94.
9 Supra.
10 Paragraph 14.

‘In a fixed term contract, a notice to bring the contract to an early end is a repudiation because
it does not in itself constitute a contractually permissible act of termination. Being a
repudiation, the employer has an election to hold the employee to the contract or to accept the
repudiation and cancel the contract.’11
This court has held that a premature termination of a fixed term contract of
employment gives rise to a claim for damages for breach of contract.12

[18] Clause 5 of the agreement is of particular relevance. In terms of this
clause the parties agreed to delete the clause dealing with the notice period in
the employment contract and replace it with a clause that the employment
contract ‘is not terminable by either party prior to the expiry of the Fixed-Term
Period’. The effect of this was that the respondent waived his common law right
to terminate the contract on notice and was precluded from resigning prior to the
expiry of the fixed term. In exchange for so waiving his right, he received
retention payments from the appellant.

[19] The respondent’s primary obligation was to remain in the employ of the
appellant for the fixed term. Clauses 2.6, referred to in paragraph 10 above, and
3.2.4, which provides that continued participation in the scheme is dependent on
the employee ‘remaining exclusively in the employ of the Company until the
expiry of the Fixed-Term’ support this conclusion.  The premature termination
of employment was contractually impermissible and amounted to a breach of
the respondent’s obligations under the retention agreement.

[20] The agreement was poorly drafted and contained conflicting provisions.
The high court pointed out that there were gaps in it. However, an examination
of the entire contract, having regard to its purpose, yields a clear meaning.13

11 Paragraph 20.
12 Fedlife Assurance Ltd v Wolfaardt 2002 (1) SA 49 (SCA) para 18.
13 Swart en ‘n ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) at 202C; Akasia Road Surfacing (Pty) Ltd en
‘n ander v Shoredits Holdings Ltd en andere [2002] 3 All SA 117 (A) para 7; Masstores Pty) Ltd v Murray

Bearing the purpose of the contract in mind, the words ‘remainder of the terms
of this agreement’ should be interpreted to refer to the remaining period of the
agreement and not the contractual provisions of the agreement, as found by the
high court. The interpretation by the high court rendered clause 10.2
meaningless, a consequence which should, if at all possible, be avoided.14 The
high court’s finding in this regard cannot be sustained.

[21] Finally, it was contended by the respondent that, at all material times
during the negotiation and conclusion of the retention agreement, it was agreed
between the parties that should the respondent resign before the expiry of the
fixed term, he would only be liable for repayment of the retention payments he
had actually received. In support of this contention he relied on a document
prepared by the appellant, titled ‘ATNS Retention Frequently Asked Questions’,
dated 16 March 2007. The evidence was to the effect that prior to the
introduction of the retention scheme, employees, including the respondent, had
certain concerns regarding the operation of the scheme. The appellant
subsequently prepared the ‘Frequently Asked Questions’ document. One of the
questions recorded in the document was, ‘What happens if I breach the retention
agreement?’ The recorded answer was: ‘If you [breach] the retention agreement
you will be required to pay back all monies earned as a result of your
participation in the retention scheme’.

[22] Mr Pieter Marais, called as a witness by the appellant, testified that the
question and answer document had been distributed prior to finalisation of the
contract and a consultative process was followed whereby the proposed standard
agreement underwent several changes, based on input received from employees
and the trade union. The respondent signed the retention agreement on 10 April

Roberts Construction (Pty) Ltd & another 2008 (6) SA 654 (SCA) para 23; Bothma-Batho Transport (Edms)
Bpk v S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494 (SCA) para 13.
14 See para 16 above.

2007 and that was the only contract that came into existence between the
parties. It is trite that when a person signs an agreement, he or she is taken to be
bound by the ordinary meaning and effect of the words which appear above his
or her signature (caveat subscriptor).15 The ‘Frequently Asked Questions’
document was misleading and may have constituted a misrepresentation.
However, the respondent did not plead misrepresentation and neither did he
seek rectification of the agreement.

[23] Order:
1 The appeal is upheld with costs, including those of two counsel.
2 The order of the high court is set aside and replaced with the following:
‘The defendant is ordered to pay to the plaintiff:
(a) the sum of R427 843;
(b) interest on this amount at a rate of 15.5 per cent per annum, calculated from
the date of summons to the date of payment.
(c) costs of suit.’

15 Burger v Central South African Railways 1903 TS 571 at 578; George v Fairmead (Pty) Ltd 1958 (2) SA 465
(A) at 472A; Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) para 1.

_____________
L V THERON
JUDGE OF APPEAL

APPEARANCES
For Appellant:

H Woudstra SC with P Le Roux Theron
Instructed by:
Hlatshwayo Du Plessis Van der Merwe
Nkaiseng, Pretoria
Symington & De Kok, Bloemfontein

For Respondent:

W F Wannenburg

Instructed by:
C R Bothma & Jooste, Pretoria
Peyper Sesele 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

25 September 2014

STATUS

Immediate

Air Traffic and Navigation Services Company v Christiaan David Esterhuizen
(668/2013) [2014] ZASCA (25 September 2014)

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

Today the Supreme Court of Appeal (SCA) delivered a judgment upholding the appeal by the
appellant, Air Traffic and Navigation Services Company and ordered the respondent, Mr CD
Esterhuizen to pay the appellant the sum of R 427 843 with interest at a rate of 15.5 per cent per
annum, calculated from the date of summons to the date of payment.

The issue before the SCA was the liability of the respondent to the appellant, following upon the
premature termination of his employment with the appellant based on a retention scheme, which
included a fixed term contract of employment.  The question was essentially whether the respondent,
in consequence of his resignation, was liable to repay the incentive amounts the appellant would
have paid to him had he not resigned.

The material terms of the retention agreement were that the respondent would receive monthly
retention payments in addition to his normal remuneration as an incentive to remain in the employ of
the appellant. The respondent agreed to stay in the appellant’s employ for a fixed term of four years
from 1 April 2007 to 31 March 2011.

On 30 May 2008, the respondent tendered his resignation and the appellant asserted that such
resignation constituted a breach of the retention agreement and called upon the respondent to
remedy that breach, failing which it would cancel the agreement and claim payment of all amounts
already paid under the agreement, alternatively, the outstanding balance in terms of the remainder of

the agreement.  The respondent did not remedy the breach and the appellant issued summons out of
the North Gauteng High Court, claiming the sum of R 427 843, being the monthly incentive amounts it
would have paid to the respondent for the period July 2008 until 31 March 2011.  The respondent
contended that at all material times during the negotiation and conclusion of the retention agreement,
it was agreed between the parties that should he resign before the expiry of the fixed term, he would
only be liable for repayment of the retention payments he had actually received.

On appeal, the SCA held that when the contract is for a fixed period, none of the parties has the right
to terminate the contract prior to the expiry of the fixed period. The court found that the respondent’s
primary obligation was to remain in the employ of the appellant for the fixed term and that his
premature termination of employment was contractually impermissible and amounted to a breach of
his obligations under the retention agreement.

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