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The appellant was the applicant. The application to amend was moved at the commencement of the trial. As will be seen, its object was to introduce an alternative defence to the respondent's main claim.
The trial judge found, however, that the proposed plea did not disclose a defence and, if granted, would, on this ground, be excipiable.
He therefore upheld the respondent's opposition to the amendment. In issue before us is the correctness of this decision. The trial is still pending. It is necessary to analyse the pleadings in a little detail.
The respondent's cause of action against the appellant is based on a contract of employment. The summons alleges that he first started working for the appellant in On 22 Marchthe terms of their relationship were reduced to writing.
They were contained in 3 a letter of that date written by the appellant to the respondent.
His "annual 4 remuneration package" was to be R subject to annual revision. In terms of clause 2 the contract "will be automatically renewed for a further period of five years unless notice of termination is given by the one party to the other at least six months prior to termination".
Then follows the clause on which this appeal turns. It is clause 3. The terms of the letter were accepted by the respondent. I return to the further allegations contained in the summons.
They make out the case that the respondent's concern, to which reference has been made, was not misplaced. He did not remain in the appellant's employment for the five year period provided for. Instead, his employment was prematurely terminated by the appellant with effect from 1 September The reason given by the appellant appears from a letter to the respondent dated 20 August It is that due to "the reorganisation" of the appellant, his position was being "made redundant".
Relying on it, the respondent's main claim is for payment of an amount of RThis, so it is alleged, represents the compensation due to the respondent for the unexpired portion of his five year contract, calculated according to clause 3.
An alternative claim, based on the appellant's personnel policy is for payment of R78The appellant's plea admits the alternative claim and tenders payment thereof. The plea to the main claim, however, raises various defences.
One is that the writer of the letter was not authorised to act on behalf of the appellant. Another is that the agreement was a fraud on it. The alternative plea which the appellant now wishes to advance seeks to invoke a further defence, viz the protection of the Conventional Penalties Act, 15 of The material part of sec 1 1 reads: It is on this section that the appellant relies.
Following from what has been said, two points need to be emphasised. The first is the obvious one that it is a prerequisite to the operation of sec 3 that the creditor's claim be based on a penalty stipulation Christie: The Law of Contract in South Africa.
Accordingly, unless clause 3 constitutes a penalty, it is not subject to moderation. The other is that on the wording of sec 1 1and especially "an act or omission in conflict with a contractual obligation", the liability of the debtor to pay must derive from a breach of contract Da Mata v Otto NO 3 SA A 9 at A.
Failing this, the stipulation relied on by the creditor would not qualify as a penalty. As the present case shows, this may give rise to a quaint state of affairs, namely a debtor who, in order to avoid or reduce liability, contends that he breached his contractual obligations.
But that is the effect of the Act The question before the court a quo was whether clause 3 is a penalty stipulation.
The answer was held to depend on its proper interpretation and, in particular, on whether the compensation provided for is payable in consequence of a breach by the appellant of its obligation to employ the respondent for five years as provided for in clause 1.
If so, the proposed plea was clearly good in law and the amendment should have been allowed.
It was decided, however see especially at C-E and Hthat the clause 10 afforded the appellant the right, in return for payment of the compensation provided for therein, to terminate the respondent's employment prior to the expiry of the five year period stipulated in clause 1; that in doing so, the appellant had therefore not committed any breach of contract; this being so, clause 3 was not a penalty stipulation; and, seeing the Act did not apply, the plea that the amount claimed by the respondent be reduced to nil in terms of sec 3 was thus not legally sustainable.
Before us, Mr Gauntlett, on behalf of the appellant, accepted that if this was so, the application to amend was rightly refused.At the heart of Sun Branding Solutions is a team of brand and packaging experts, drawn from five different specialisms but with one shared focus; creating the very brightest ideas for brands.
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