THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 624/10

In the matter between:

ASHCOR SECUNDA (PTY) LTD
Appellant

and

SASOL SYNTHETIC FUELS (PTY) LTD
Respondent

Neutral citation:
Ashcor Secunda (Pty) Ltd v Sasol Synthetic Fuels (Pty) Ltd

(624/10) [2011] ZASCA 158 (28 September 2011)

Bench:
BRAND, PONNAN, CACHALIA, SHONGWE JJA and PLASKET AJA

Heard:

1 SEPTEMBER 2011
Delivered:

28 SEPTEMBER 2011
Corrected:

Summary:
Contract – interpretation of - one party's repudiation may entitle the
other party to withhold performance - distinction between implied
and tacit terms – no room for importing implied or tacit terms in
conflict with terms that the parties have expressly agreed upon.

______________________________________________________________________

ORDER
______________________________________________________________________

On appeal from:
South Gauteng High Court (Johannesburg) (Claasen J sitting as
court of first instance).

The appeal is dismissed with costs, such costs to include those consequent upon the
employment of two counsel.
______________________________________________________________________

JUDGMENT
___________________________________________________________________

PONNAN JA (BRAND, CACHALIA, SHONGWE JJA and PLASKET AJA
concurring):

[1] Fly-ash is a pozzolan that reacts with water and lime to form a cementitious
material. It enhances the properties of mortars and concretes resulting in significant
improvements to the mix, strength and durability of the end product. The respondent,
Sasol Synthetic Fuels (Pty) Ltd (Sasol), manufactures synthetic fuel from coal. As part
of its synthetic fuel production process Sasol operates a series of coal-fired boilers in
Secunda to generate its own electricity. A by-product of that coal burning process is fly-
ash. To prevent its emission into the atmosphere, Sasol initially caused the fly-ash to
pass over a series of electro-magnetically charged plates. Those plates were vibrated
periodically causing the fly-ash to fall into fields of hoppers — massive bins. Those bins
converged into four-sided funnels, where the ash accumulated. From there it was
extracted by a system known as the hydro-vac system - water was used to create a
vacuum to suction the ash out of the hoppers. The ash, once extracted, was carried
mixed with the water to waste sites. But that proved to be an expensive and
environmentally hazardous process. And so Sasol chose in addition to implement an

alternative fly-ash extraction system known as the Fly-Ash Plant (FAP). It consisted of a
blower system and two nitrogen systems connected in the fields for three of the boilers.
That system enabled the fly-ash to be extracted and stored in silos for commercial
exploitation.

[2] The appellant, Ashcor Secunda (Pty) Ltd (Ashcor) sought to commercially exploit
the fly-ash extracted via the FAP. To that end it concluded a written agreement with
Sasol, which, to the extent here relevant, provided:
'1.
LEASE PERIOD
This lease shall take effect 30 days after the Fly Ash Recover Plant is repaired and made
operational. The lease period shall continue for a period of 4 (four) years and 11 (eleven) months.

. . .
2.
RENTAL
2.1
ASHCOR shall pay SASOL rental in the amount of R20 000 (VAT excluded) per month.

VAT is to be paid by ASHCOR. Rental shall be inclusive of water, electricity and nitrogen.

SASOL reserves the right to review the supply of said commodities in the event of

extension of ASHCOR's activities on the premises. SASOL furthermore reserves the right

to review the monthly rental amount in the event that it costs SASOL in excess of R150

000 to make the Fly Ash Plant operational.
. . .
3.
USE OF PREMISES

3.1
ASHCOR shall use the premises only for the operation of a Fly Ash Plant and for the

purpose for which it was designed and for no other purpose, without the written consent

of SASOL. Operation of the PREMISES shall be conducted in strict accordance with

SASOL's requirements. The Fly Ash Plant is coupled to Boilers 7, 8 and 9 and fly ash

shall only b[e] drawn from these three boilers.

. . .
5.
GUARANTEES

5.1
SASOL does not guarantee that the PREMISES are suitable for the use indicated in

clause 3.1 and shall not be responsible to ensure that said PREMISES become suitable

for the use indicated in said clause.

5.2
SASOL does not guarantee either the quantity or quality of ash produced by the Fly Ash

Plant and shall not be liable in the event of said plant not rendering either the quantity or

quality of ash expected by ASHCOR.

. . .

5.5
SASOL shall grant ASHCOR the period from the commencement date of this

AGREEMENT until 28/02/1998 to establish the economic viability of the Fly Ash Plant,

with regards to the quantity and quality of fly ash delivered by it. Economical viability is

dependent on the recovery of a month average of 8 500 tons of fly ash which conforms to

the EN450 and ASTM standards.

5.6
ASHCOR shall on 28/02/1998 inform SASOL, in writing, whether it intends to proceed

with; or cancel the AGREEMENT, in which event a 3 (three) month's written notice must

be given to SASOL.'

[3] Ashcor caused summons to be issued against Sasol for damages in the sum of
R303 903 000 (alternatively R179 957 000) together with interest and costs. In it Ashcor
contended that Sasol had breached the agreement in that it had failed to repair and
make the FAP operational. In the alternative Ashcor alleged that as a result of an error
common to the parties, both parties had signed the written agreement in the bona fide
but mistaken belief that it recorded the true terms of the agreement between them.
Ashcor accordingly sought an order rectifying the agreement.

[4] The matter proceeded to trial before C J Claasen J in the South Gauteng High
Court. At the commencement of the trial a separation order in terms of Uniform Rule
33(4) issued by agreement between the parties. It required the resolution of all issues
relating to the contractual terms and the liability and rights flowing therefrom ―
whatever that might mean. All other issues, including the question of damages, were
postponed sine die. That notwithstanding, the trial, which commenced during April 2005,
ran for no less than 18 court days. On 22 January 2010 and at the close of Ashcor's
case the learned Judge absolved Sasol from the instance with costs.

[5] The matter is one of interpretation. A useful starting point is the following trite
proposition: where the language of a contract is clear and unambiguous the court must
give effect to the intention of the parties as expressed in the contract however harsh or
unreasonable that may appear to be (see Scottish Union & National Insurance
Company Ltd v Native Recruiting Corporation Ltd 1934 AD 458 at 465). According to
the golden rule of interpretation the language in a document is to be given its

grammatical and ordinary meaning unless this would result in some absurdity or
repugnancy or inconsistency with the rest of the instrument (See Coopers and Lybrand
& others v Bryant 1995 (3) SA 761 (A) at 767). According to Greenberg JA in Worman v
Hughes & others 1948 (3) SA 495 (A) at 505
‘It must be borne in mind that in an action on a contract, the rule of interpretation is to ascertain, not what
the parties’ intention was, but what the language used in the contract means, i.e what their intention was
as expressed in the contract. As was said by Solomon J in van Pletsen v Henning (1913, A.D., p 82 at p.
89): “The intention of the parties must be gathered from their language, not from what either of them may
have had in mind.”. . . ’

[6] It follows that to the extent that evidence was adduced on that aspect of the
case, it was plainly inadmissible. And to the extent that the court below relied on that
evidence for its interpretation of the agreement, it erred. For, as Harms DP pointed out
in KPMG Chartered Accountants (SA) v Securefin Ltd & another 2009 (4) SA 399 (SCA)
para 39:
'First, the integration (or parol evidence) rule remains part of our law. However, it is frequently ignored by
practitioners and seldom enforced by trial courts. If a document was intended to provide a complete
memorial of a jural act, extrinsic evidence may not contradict, add to or modify its meaning . . . . Second,
interpretation is a matter of law and not of fact and, accordingly, interpretation is a matter for the court and
not for witnesses . . . . Third, the rules about admissibility of evidence in this regard do not depend on the
nature of the document, whether statute, contract or patent . . . . Fourth, to the extent that evidence may
be admissible to contextualise the document (since "context is everything") to establish its factual matrix
or purpose or for purposes of identification, "one must use it as conservatively as possible" . . . . The time
has arrived for us to accept that there is no merit in trying to distinguish between "background
circumstances" and "surrounding circumstances". The distinction is artificial and, in addition, both terms
are vague and confusing. Consequently, everything tends to be admitted. The terms "context" or "factual
matrix" ought to suffice.'

[7] Reverting then to the agreement. Clause 1 states: 'This lease shall take effect 30
days after the [FAP] is repaired and made operational'. It is Ashcor’s case that the FAP
had never been rendered operational by Sasol. That, one would have thought, on the
plain language of the clause, would have been the end of the matter. But, says Ashcor,
Sasol had an obligation in terms of the agreement to repair and render the FAP
operational. That obligation, so the contention went, came into effect upon the signature

of the agreement and Sasol’s failure to do so constituted a breach of the agreement. In
my view any such obligation, if there be one, extended unconditionally to Sasol
expending no more than R150 000 (clause 2.1). As Claasen J correctly observed:
'Alternatively, even if it were accepted that Sasol was burdened with the contractual obligation to render
the plant operational, such duty was circumscribed by an outlay of R150 000 . . . in such circumstances
Sasol complied with its contractual obligation to spend the R150 000 for rendering the plant operational.
In the refusal on the part of Sasol to expend any further monies on the repair, alteration or modification of
the plant would not have established a breach of contract on its part.'

[8] It was Ashcor’s case that Sasol’s obligation in terms of the agreement was not
limited to R150 000. Even were that to be so, any such obligation as Sasol may have
had to perform beyond the R150 000 threshold, was conditional upon its exercise of a
right to review the monthly rental. It was common cause that Sasol had spent closer to
R 1 million on the plant. Clause 2.1 therefore entitled Sasol to review the monthly rental.
The undisputed evidence however was that Ashcor, whilst contending that Sasol had to
spend an indeterminate amount in making the FAP operational, flatly refused to pay an
increased rental. In those circumstances, given Ashcor’s refusal to perform, Sasol
would have been entitled to withhold its performance. For, as Nienaber J stated in
Moodley & another v Moodley & another 1990 (1) SA 427 (D) at 431C-H:
'In Erasmus v Pienaar (supra at 29 et seq) Ackermann J, while expressing reservations about the given
reason (that an unaccepted repudiation operates as a waiver of sorts), fully endorsed the notion that the
repudiation may release the aggrieved party all the same from taking measures which, in terms of the
agreement, he would otherwise have been obliged to take. The Court (at 29A read with 22J) accepted the
proposition (if I may be permitted to paraphrase) that the one party's repudiation, though not treated by
the other as a cause for cancellation, may nevertheless (i) excuse the latter from formal acts preparatory
to performance; and (ii) entitle him, in appropriate circumstances, to suspend his own performance until
the guilty party has reaffirmed his willingness and ability to fulfil his side of the bargain, provided that the
aggrieved party, to the knowledge of the repudiating one, remained ready, willing and able to perform his
part. The appropriate circumstances would be that the aggrieved party cannot proceed without co-
operation from the other or that the principle of mutuality of performance would entitle him, eventually, to
withhold his own performance.

The rationale for the rule was said to be (if I may again paraphrase) that a party to a contract ought not to
be allowed, by his own wrongful conduct, to advantage himself or to disadvantage his counterpart. To
permit the repudiating party to take advantage of the other side's failure to do something, when that

failure is attributable to his own repudiation, is to reward him for his repudiation; conversely, it would
disadvantage the other party to be obliged to make the effort and incur the expense of tendering a
guarantee or of performing some other act when such a step, because of the repudiation, has become
nothing but an idle gesture.'

[9] There was a further string to Ashcor’s bow. In addition to the aforementioned
express terms of the agreement Ashcor relied also on what it alleged were various tacit
alternatively implied terms. The only one relevant for present purposes being:
‘that repairing and making of the fly-ash recovery plant (meaning the fly-ash plant coupled to boilers 7, 8
and 9) operational, meant rendering it capable of recovering all the fly-ash that was produced by boilers
7, 8 and 9 and accumulated in the precipitator hoppers to which the fly-ash plant was coupled . . .’

[10] It is to that that I now turn. Terminology in this context is important. For, as Prof
Kerr observes, the employment of incorrect terminology leads to conceptual confusion
(A J Kerr 'Implied Provisions in Contracts: Is there to be a new role for the hypothetical
bystander? Conflicting Supreme Court of Appeal decisions' 2006 SALJ 195). In Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) at
532G-533A Corbett JA pointed out that the significance of the distinction between
implied and tacit terms is not merely academic. Corbett JA expatiated:
‘The implied term . . . is essentially a standardised one, amounting to a rule of law which the Court will
apply unless validly excluded by the contract itself. While it may have originated partly in the contractual
intention, often other factors, such as legal policy, will have contributed to its creation. The tacit term, on
the other hand, is a provision which must be found, if it is to be found at all, in the unexpressed intention
of the parties. Factors which might fail to exclude an implied term might nevertheless negative the
inference of a tacit term. . . The Court does not readily import a tacit term. It cannot make contracts for
people; nor can it supplement the agreement of the parties merely because it might be reasonable to do
so. Before it can imply a tacit term the Court must be satisfied, upon a consideration in a reasonable and
businesslike manner of the terms of the contract and the admissible evidence of surrounding
circumstances, that an implication necessarily arises that the parties intended to contract on the basis of
the suggested term.'

[11] That we could only be dealing with a tacit term in this case is evident from the
following dictum of Brand JA in South African Forestry Co Ltd v York Timbers Ltd 2005
(3) SA 323 (SCA) para 28:

'Unlike tacit terms, which are based on the inferred intention of the parties, implied terms are imported
into contracts by law from without. Although a number of implied terms have evolved in the course of
development of our contract law, there is no numerus clausus of implied terms and the courts have the
inherent power to develop new implied terms. Our courts' approach in deciding whether a particular term
should be implied provides an illustration of the creative and informative function performed by abstract
values such as good faith and fairness in our law of contract. Indeed, our courts have recognised
explicitly that their powers of complementing or restricting the obligations of parties to a contract by
implying terms should be exercised in accordance with the requirements of justice, reasonableness,
fairness and good faith . . . Once an implied term has been recognised, however, it is incorporated into all
contracts, if it is of general application, or into contracts of a specific class, unless it is specifically
excluded by the parties . . . It follows, in my view, that a term cannot be implied merely because it is
reasonable or to promote fairness and justice between the parties in a particular case. It can be implied
only if it is considered to be good law in general. The particular parties and set of facts can serve only as
catalysts in the process of legal development.'

[12] Clause 5.1 of the agreement expressly and unambiguously disavowed an
obligation on Sasol to render the FAP fit for purpose. But even were it to be accepted
that 'operational' meant 'fit for design purpose', that could hardly mean able to extract all
the ash, as such a construction would mean that Sasol was obliged to ensure that the
FAP was capable of rendering a certain quantity of fly-ash.  That though would fly in the
face of the express disavowal in the agreement by Sasol of any guarantee relating to
the quantity or quality of the fly-ash to be produced or rendered by the FAP (clause 5.2).
Furthermore, such a construction would be irreconcilable with the 'walk away regime'
created by clauses 5.5 and 5.6 of the agreement, which gave to Ashcor an exit right in
the event that the FAP was assessed by it to be incapable of delivering a certain quality
and monthly quantity of fly-ash.

[13] Given the express terms of the agreement there plainly can be no room for
importing the alleged tacit term asserted by Ashcor. For, as Trengrove JA put it in Robin
v Guarantee Life Assurance Ltd 1984 (4) SA 558 (A) at 567C-D:
‘A tacit term cannot be imported into a contract in respect of any matter to which the parties have applied
their minds and for which they have made express provision in the contract. As was said by Van Winsen
JA in SA Mutual Aid Society v Cape Town Chamber of Commerce 1962 (1) SA 598 (A) at 615D:

“A term is sought to be implied [a tacit term in the terminology of Alfred McAlpine] in an agreement for the
very reason that the parties failed to agree expressly thereon. Where the parties have expressly agreed
upon a term and given expression to that agreement in the written contract in unambiguous terms, no
reference can be had to surrounding circumstances in order to subvert the meaning to be derived from a
consideration of the language of the agreement only.”
(See also Pan American Airways Incorporated v SA Fire and Accident Insurance
Company Ltd 1965 (3) SA 150 (A) at 175C.)

[14] The court below accordingly correctly found that the obligation upon which
Ashcor's case rested did not exist and its order absolving Sasol from the instance can
therefore not be faulted.

[15] As to costs, Ashcor submits that Sasol should have excepted to its summons as
failing to disclose a cause of action. Accordingly, so the submission went, Sasol should
only have been entitled to costs as on exception. In Algoa Milling Company v Arkell and
Douglas 1918 AD 145 at 159 Innes CJ stated:
'The declaration as drafted disclosed no cause of action, and should therefore have been excepted to.
Had that been done, there would have been a speedy end of the litigation and the heavy costs
subsequently incurred would have been unnecessary. The defendants, therefore, will be entitled to such
costs in the court below as would have been incurred had they excepted to the declaration.'
But, as Greenberg JA made plain in Cohen v Hayward 1948 (3) SA 365 (A) at 374:
'I do not think, however, that it was the intention of the Court in the cases quoted to lay down an inflexible
rule which would deprive the Court of its discretion in regard to costs and disentitle it, in a proper case,
from departing from the Rule.'

[16] It bears noting here that all of the evidence that was unnecessarily led was led by
Ashcor as the plaintiff. Moreover, Ashcor sought an order of rectification the effect of
which would have been to radically alter the import of clause 5.2 of the agreement. As
to the rectification Claasen J recorded:
'It is necessary to state that counsel for the plaintiff . . . abandoned any reliance on the pleaded
rectification. He did so during argument after the close of the plaintiff's case.'

In its heads of argument filed with this court Ashcor sought to resuscitate it. But from the
bar in this court, when pressed, counsel was once again constrained to abandon any
reliance on rectification.
Claasen J held:
'The plaintiff's final contention that costs as on exception should be awarded to the defendant if its
contentions are upheld is untenable. The defendant was unable to take exception in the face of
allegations entitling the plaintiff to rectification of the contract. The abandonment of the rectification claim
only occurred during final argument after the plaintiff had closed its case. The defendant cannot therefore
be faulted for having failed to take exception to the causes of action as pleaded by the plaintiff.'
I can find no fault with the approach of the learned judge. Moreover, given the manner
in which the case was pleaded, it would have taken a very bold judge to decide the
matter on exception.

[17] It follows that the appeal must fail and it is accordingly dismissed with costs, such
costs to include those consequent upon the employment of two counsel.

_________________
V M  PONNAN
JUDGE OF APPEAL

APPEARANCES:

For Appellant:

M Baslion SC

R S Willis

Instructed by:

Webber Wentzel Attorneys

Johannesburg

Naudes

Bloemfontein

For Respondent:

W H G van der Linde SC

F A Snyckers

Instructed by:

Cliff Dekker Hofmeyr Inc

Johannesburg

Phatshoane Henny 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

28 September 2011

STATUS

Immediate

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

Ashcor Secunda (Pty) Ltd v Sasol Synthetic Fuels (Pty) Ltd
(624/10) [2011] ZASCA 158 (28 September 2011)

Media Statement

Today the Supreme Court of Appeal (SCA) dismissed an appeal by Ashcor Secunda (Pty) Ltd
(Ashcor) against an order by the South Gauteng High Court absolving Sasol Synthetic Fuels
(Pty) Ltd (Sasol) from the instance at the close of Ashcor's case.

Fly-ash is a pozzolan that enhances the strength and durability of mortars and cement when
mixed with it. It is a by-product of the coal burning process used by Sasol as part of its
synthetic fuel production process. To prevent its emission into the atmosphere Sasol had
developed a fly-ash extraction system known as the Fly-Ash Plant (FAP). Ashcor wished to
commercially exploit the fly-ash. To that end Ashcor concluded a written agreement with
Sasol.

Ashcor caused summons to be issued against Sasol for damages. Ashcor contended that
Sasol had breached the agreement in that it had failed to repair and make the FAP
operational. In the alternative Ashcor alleged that as a result of an error common to both the
parties, they had signed the written agreement in the mistaken belief that it recorded the true
terms of the agreement. Ashcor accordingly sought rectification of the agreement.

The SCA held that it was trite that where the language of a contract is clear and unambiguous
the court must give effect to the intention of the parties as expressed in the contract. Clause 1
of the agreement states that the lease would take effect 30 days after the FAP was repaired
and made operational. It was Ashcor’s case that that had never happened. On the plain
language of the clause that ought to have been the end of the matter.  Ashcor however

contended that Sasol had an obligation in terms of the agreement to repair and render the
FAP operational.  The SCA found that the court below had correctly held that even if it were
accepted that Sasol was burdened with a contractual obligation to render the FAP operational
such a duty was circumscribed by an outlay of R150 000 in terms of clause 2.1 of the
agreement. It was common cause that Sasol had indeed expended in the region of R 1
million.

Ashcor relied further on various tacit alternatively implied terms in addition to the express
terms of the agreement.  The court made it clear that it was important to distinguish between
implied and tacit terms and that this distinction was not merely academic. Implied terms are
imported into contracts by law, a standardised term amounting to a rule of law which the court
will apply unless expressly excluded.  A tacit term on the other hand is a provision which must
be found in the unexpressed intention of the parties. The SCA held that given the express
terms of the agreement there could be no room for importing the alleged tacit terms asserted
by Ashcor.

The SCA found that the obligation upon which Ashcor's case rested did not exist and the
order absolving Sasol from the instance with costs could not be faulted.

The appeal was accordingly dismissed with costs.

--- ends ---