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IN THE HIGH COURT OF SOUTH AFRICA

(ORANGE FREE STATE PROVINCIAL DIVISION)

Case No.: 2869/2003

In the matter between:

HANDY CASH BK t/a KGOTSOFALANG Applicant

CASH LOANS

And

MATJHABENG MUNISIPALITEIT Respondent

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CORAM: EBRAHIM, J

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HEARD ON: 16 OCTOBER 2003

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DELIVERED ON: 23 OKTOBER 2003

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The crisp issue in this application is whether or not the agreement between the parties is one in perpetuity as opposed to merely one for an indefinite period.

It is possible for parties to stipulate for a contract in perpetuity. See TRIDENT SALES (PTY) LTD v A H PILLMAN & SON (PTY) LTD 1984 (1) SA 433 (W). This case deals with a full exposition of the English and South African law on the terminability of contracts of unspecified duration. See also PUTCO LTD v TV & RADIO GUARANTEE CO (PTY) LTD, and other related cases, 1985 (4) SA 809 (A), and GOLDEN LIONS RUGBY UNION AND ANOTHER v FIRST NATIONAL BANK OF SA LTD 1999 (3) SA 576 (SCA).

The parties in this matter entered into a contract on 7 June 2001 in terms of which the applicant, a money lender, agreed with the respondent, a municipality and employer, that monthly payments in respect of loans granted by the applicant to the employees of the respondent would be deducted by the respondent from the relevant employees’ salary and paid over to the applicant.

Subsequent thererto monies were loaned and advanced by the applicant to employees of the respondent and the respondent made the necessary deductions from the relevant employees’ salaries.

It is common cause that the respondent was paid an administration fee by the applicant in respect of administration costs which it incurred in making the necessary deductions from the relevant employees’ salaries and paying it over to the applicant.

On 28 January 2003 the respondent gave notice to the applicant’s then attorneys of record terminating the said agreement

In a letter dated 31 January 2003 applicant’s attorneys of record responded that the agreement could not be unilaterally terminated.

The dispute between the applicant and the respondent centres around the interpretation of two clauses in the agreement, namely clause 4 and clause 5, which reads as follows:

“4. DURATION OF AGREEMENT

This agreement will commence on the date of signature hereof and will continue and remain in full force and effect for an indefinite period until:

4.1 Kgotsofalang Cash loans gives notices of termination of this agreement.

5. CONSEQUENCES OF TERMINATION

It is agreed that notwithstanding the termination of this Agreement, for whatsoever reason or by whomsoever party to this agreement, the Employer shall not be exonerated from its duty to continue to make salary deductions in respect of those Employees who have obtained loans from Kgotsofalang Cash loans prior to the date of termination of this Agreement. In this regard the parties specifically agree to continue with the procedure that was followed between them in terms of clause 3.5 during the duration of the agreement.”

Applicant’s contention is that its agreement with the respondent is one in perpetuity and that respondent has no right to withdraw from the agreement on reasonable notice. In support of their contention they argue that the word “until” in the preamble to clause 4 and the provisions of 4.1 indicate that the agreement is in perpetuity and that respondent cannot give notice.

Respondent contends that the words “termination of this agreement for whatever reason or by whomsoever party” in clause 5 of the agreement introduced an ambiguity into the agreement.

Firstly, in order to property interpret the effect of clause 4, it is necessary to examine the position at common law of this agreement absent 4.1. Quite clearly but for clause 4.1 the contract would be for an indefinite period and as such terminable on reasonable notice by either party.

The applicant’s contention must necessarily involve the argument that the wording of clause 4.1 removes the right that the respondent would otherwise have had to give a reasonable period of notice. This argument overlooks the wording of clause 4.1 which gives the applicant the right to give notice of termination.

The mere inclusion in the agreement of a specific circumstance for termination, that is notice by the applicant, does not necessarily exclude termination by reasonable notice on the part of the respondent.

See PUTCO LTD supra

Secondly, the respondent relies on the GOLDEN LIONS RUGBY UNION case. In my view this reliance is misplaced. In that case the Court had to deal with two clauses creating obligations which the Court a quo had held to be in perpetuity. On appeal the Court held that the second clause was not to be in perpetuity. The first such clause which was held to be in perpetuity expressly stated it was to be in perpetuity.

In clause 4.1 the words “indefinite period” are expressly used and not the words “in perpetuity”. I find accordingly that the agreement was one for an unspecified duration and not one in perpetuity.

Thirdly, it is common cause that the agreement between the applicant and the respondent is the applicant’s agreement and any ambiguity as to whether the words “an indefinite period” means just that or “in perpetuity” as applicant contends must therefore be interpreted contra preferentem. The applicant, who drew up the agreement, could easily have used the words “in perpetuity” to remove any doubt or ambiguity as to the duration of the agreement. The respondent contends that ambiguity has been introduced by clause 5 on account of the wording referred to above. In view of the interpretation which I have given to clause 4, there is no ambiguity in clause 5. It merely provides for the continuing obligations which survive the termination of the agreement, for respondent to make deductions in respect of loans extant at the date of such termination.

Accordingly, in my view it is competent for the municipality to terminate the agreement by giving reasonable notice. What is reasonable depends on the circumstances of each case. On the papers before me the applicant has not challenged the reasonableness of the period of notice given by the respondent and accordingly it must be found that notice has been properly given to applicant to enable it to make alternative arrangements. In argument it was submitted before me by the respondent’s counsel that the effective date of cancellation given by the respondent was 1 September 2003. I find accordingly that applicant has been given proper notice in which it could make further loans which would still qualify for repayment by deduction by the respondent after termination of the agreement.

In the circumstances the application must therefore fail and I make the following order:

1. The application is dismissed.

2. The applicant is ordered to pay the respondent’s costs.

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S. EBRAHIM, J

On behalf of applicant: Adv. N. Snellenburg

Instructed by:

Honey & Partners Inc.

On behalf of respondent: Adv. M.J. Möller

Instructed by:

Israel & Sackstein

/scd