REPORTABLE

CASE NO.: SA 53/2008

IN THE SUPREME COURT
OF NAMIBIA

In the matter between

and

CORAM: Shivute
CJ, Strydom AJA et Mtambanengwe AJA

Heard on: 31/10/2011

Delivered on:
03/04/2012

APPEAL JUDGMENT

MTAMBANENGWE, AJA:

[1] The appellants, as
plaintiffs in the Court below, claimed that a tacit contract of
partnership came into existence between them and respondent (as
defendant) after 15 January 2004 under which they practiced as
chartered accountants and auditors until respondent gave notice of
resignation with effect from 31 December 2005 (that date was, by
agreement, altered to 31 October 2005). The Court below (Namandje
AJ) granted absolution from the instance at the close of appellants’
case. It is against that order that this appeal lies.

[2] Appellants
particulars of claim, as amended, allege in paragraph 6 thereof:

“Subsequent to 15 January 2004,
the first and second plaintiff and the defendant, (the parties)
tacitly entered into a new partnership agreement with terms as set
out in Annexure ‘B’ (the new partnership agreement). …
The new partnership agreement was not signed, but the parties
implemented Annexure ‘B’ by acting upon it with full
knowledge of its contents.”

First appellant (Stier)
and respondent previously practiced as chartered accountants and
auditors in the firm Price Waterhouse where the former had become a
partner but not the latter. They both left that firm and established
a partnership of their own governed by a written agreement which they
both signed on 20 December 1996 (the Old Partnership Agreement). It
is common cause that the Old Partnership Agreement had ceased to
exist when the two partners invited second appellant (Vente) to join
them as a partner, and it is not disputed that in January 2001, as
Stier said, both he and respondent approached Vente to join them as a
partner, and the resultant agreement was based on the Old Partnership
Agreement; it was an oral agreement, the only changes made to the Old
Partnership Agreement being that, whereas formerly Stier owned 70% of
the interest (profit sharing) and respondent 30% the share holding
changed to 55% for Stier, 28% for respondent and 17% for Vente.

[3] Clauses 19 and 20 of
the Old Partnership Agreement, which became part of the oral
agreement, provided:

“19. If a partner shall cease
for any reason whatsoever to be a partner save as is specifically
authorised in advance by the Senior Partner, he shall not, directly
or indirectly, whether as principal or agent, for a period of 2 years
from the date upon which he ceases to be a partner ask for, or accept
business from clients who are clients of the firm at the date of his
ceasing to be a partner or who were clients within a period of twelve
months prior to the date upon which he ceases to be a partner.

20. Should any partner who leaves the
firm contradict 19 above, the remaining partners of the firm shall be
entitled, as an alternative to seeking an interdict against the
retiring partner, to claim from the retiring partner, who shall be
obliged to pay on demand, an amount equal to the gross fees charged
to that client or those clients for a twelve month period based on
the latest billings of the firm to that client in respect of services
rendered for an entire year.”

Appellants allege in
their pleadings that a tacit agreement replaced the oral agreement
and that after 15 January 2004 the parties conducted their affairs in
accordance with that alleged tacit agreement whose terms were
embodied in an agreement drafted by Stier and typed by respondent
(the New Partnership Agreement) but which was never signed by the
parties. The New Partnership Agreement, Annexure “B” to
the pleadings, provides, in clause 7 thereof, for the eventuality of
termination, in particular in clause 7(a) and (d) – termination
due to other reasons and says in clause 8(iii) thereof:

“(iii) In the case of 7 d only
the normal capital account is paid out within 6 months. The partner
(resigning) shall not be entitled to the payment of any business
value.

In this case the partner shall not,
directly or indirectly, whether as principal or agent, for a period
of 2 years from the date upon he/she ceases to be a partner ask for,
or accept business from clients who are clients from the firm at the
date of his/her ceasing to be a partner or who were clients within a
period of twelve calendar months prior to the date upon which he/she
ceases to be a partner.

Should any partner who leaves the
firm contradict this proviso, the remaining partners of the firm
shall be entitled, as an alternative to seeking an interdict against
the retiring partner, to claim from the retiring partner, who shall
be obliged to pay on demand, an amount equal to the gross fees
charged to that client or those clients for a twelve month period
based on the latest billings of the firm to that client in respect of
services rendered for an entire year.”

[4] At 92F-G Harms JA in
Gordon Lloyd Page & Associates v Rivera and Another
2001(1) SA 88 referred to the formulation of the test to be
applied by a trial court when absolution is applied at the end of a
appellant’s case as appears in Claude Neon Lights (SA) Ltd v
Daniel 1976(4) SA 403 (A) at 409G-H:

“…(W)hen absolution from
the instance is sought at the close of plaintiff’s case, the
test to be applied is not whether the evidence led by the
plaintiff establishes what would finally be required to be
established, but whether there is evidence upon which a Court,
applying its mind reasonably to such evidence, could or might (not
should, nor ought to) find for the plaintiff. (Gascoyne
v Paul and Hunter 1917 TPD 170 at 173; Ruto Flour Mills
(Pty) Ltd v Adelson (2) 1958(4) SA 307 (T).” (My
underlining.)

Harms JA went on to
explain at 92H- 93A:

“This implies that a plaintiff
has to make out a prima facie case – in the sense that
there is evidence relating to all the elements of the claim –
to survive absolution because without such evidence no court could
find for the plaintiff (Marine & Trade Insurance Co Ltd v Van
der Schyff 1972(1) SA 26 (A) at 37G-38A; Schmidt Bewysreg 4^th
ed at 91-2). As far as inferences from the evidence are concerned,
the inference relied upon by the plaintiff must be a reasonable one,
not the only reasonable one (Schmidt at 93). The test has
from time to time been formulated in different terms, especially it
has been said that the court must consider whether there is ‘evidence
upon which a reasonable man might find for the plaintiff’
(Gascoyne (loc cit)) – a test which had its origin in
jury trials when the ‘reasonable man’ was a reasonable
member of the jury (Ruto Flour Mills). Such a formulation
tends to cloud the issue. The court ought not to be concerned with
what someone else might think; it should rather be concerned with its
own judgment and not that of another ‘reasonable’ person
or court. Having said this, absolution at the end of a plaintiff’s
case, in the ordinary course of events, will nevertheless be granted
sparingly but when the occasion arises, a court should order it in
the interest of justice.”

[5] In Gordon’s
matter supra at 95I – 96A Harms JA also set out
the test where a tacit agreement is alleged, as follows:

“Since this case is concerned
with the test for absolution at the end of a plaintiff’s case I
am obliged somewhat to restate the ordinary test for proof of tacit
contract (Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd;
Joel Melamed and Hurwitz v Vorner Investment (Pty) Ltd 1984(3)
SA 155 (A) at 164G – 165G; cf Samcor Manufacturers v
Berger 2000(3) SA 454 (T)). It was, at that stage, at least
necessary for the appellant to have produced evidence of conduct of
the parties which justified a reasonable inference that the parties
intended to, and did, contract on the terms alleged, in other words,
that there was in fact consensus ad idem.”

In South African
Railways and Harbours v National Bank of South Africa Ltd 1924 AD
704 at 715 Wessels JA stated:

“The Law does not concern itself
with the working of the minds of parties to a contract, but with the
external manifestation of their minds. Even therefore if from a
philosophical standpoint the minds of the parties do not meet, yet,
if by their acts their minds seem to have met, the law will, where
fraud is not alleged, look to their acts and assume that their minds
did meet and that they contracted in accordance with what the parties
purport to accept as a record of their agreement. This is the only
practical way in which Courts of law can determine the terms of a
contract.”

[6] Discussing the
question of silence as acceptance, Christie, in The Law of
Contract in South Africa 5^th ed, referred, at p 66, to
the principle that “quiescence is not necessarily
acquiescence”, but went on to state:

“Silence may, however, amount to
acceptance of an offer in circumstances which give rise to a ‘duty
to speak’ if the offeree is not prepared to accept the offer.
Wessels in paras 270 – 271 has been taken by the courts as
authoritative:

‘But if there is a legal duty
upon me to speak and I refrain from doing so, the Court will presume
that I assented. … Thus, if a merchant writes to his constant
correspondent that he will forward to him certain goods at a certain
price unless he hears from him to the contrary, and the addressee
receives the letter but neglects to reply, the Court may well
consider that silence in such a case gives consent. … The
course of dealing between such merchants will legitimately lead the
offeror to conclude that his correspondent would reply in case he
rejected the offer, and the Court will infer that if the offeree had
not intended to accept he would have answered that he did not want
the goods.

If, therefore, from the business
relationship between the offeror and the offeree, the Court finds
that the circumstances are such that the offeree could reasonably and
fairly be expected to reply, then it may infer that by remaining
silent the offeree did in fact intend to accept.’”

[7] That
there was animus contrahendi in this case is borne out by what
Mr Strydom, appearing for the respondent, put to Stier in
cross-examination:

“…She will say that from
time, to time before January 2004 it was mentioned that an agreement
must be drafted. --- That is correct.

To stipulate the relationship to the
parties. --- And be signed by them.”

Stier
was asked further:

“But I want to go a step back.
This is from a practical point of view. You got the old agreement,
you effected changes and deleted certain things, you know how we do a
document. And then you asked for the defendant to type it. Now, at
that stage when you asked her to type it. Was anything said? Apart
from please type the document. Or can’t you remember? --- I
asked her to type the document and pass it to the partners for
comment. That is why it was given to us. Not to sign it, but to
comment on it.”

[8] It
is common cause that several weekly meetings were held by the
partners and, according to Stier’s evidence, no comments on
Annexure “B” (the document) were forthcoming from the
respondent or Vente. Vente said he was satisfied with the document;
the question of formalizing it by signing it came up several times in
such meetings but each time none of the partners had a copy with him
or her. Stier on being asked why he did not sign the document said
that he wanted the parties to do it together. The opportunities any
of the parties had to raise any complaint or suggest any amendments
or alterations to the document were said to be between 40 and 50
times, and Stier’s undisputed evidence was that this situation
went on for nearly two years. Vente’s evidence on the other
hand was that only some three or four months before respondent’s
notice of resignation (i.e 29 April 2005) did respondent say to him
she was unhappy with the document and was not going to sign it; he
then advised her to raise the issue with Stier. Respondent never did
that.

[9] It
is a fair assumption that respondent regarded the document as an
offer open for acceptance or rejection. I say so because her
actions, subsequent to the document being typed and distributed,
indicate that she considered it serious enough to consult a lawyer
friend of hers who advised her not to sign it; apparently only after
that did she mention to Vente that she was not happy with the
document and would not sign it. Vente’s evidence (undisputed)
was that he and respondent even met privately three or four times a
year. It was also Vente’s evidence that when it was said the
agreement must be formalized, and subsequently, respondent never
indicated that she had any problem with the document. The unsigned
agreement was, as Mr Strydom put it, a new dispensation. Respondent
did not even inform Stier what advice she got from her lawyer friend.
The new agreement repeated more or less the restraint provisions of
clauses 19 and 20 of the Old Partnership Agreement, in clause 8(iii)
thereof. Respondent had signed the old agreement and practiced under
it without any hint that she was unhappy with its provisions. When
she read the new agreement, one would have expected her to seize the
opportunity to voice her unhappiness or disagreement with it.

Mr
Strydom, who appeared for the respondent both in the Court below and
before us, dealt at length on the issue whether there was, in the
circumstances of this case, an unequivocal or unambiguous offer or
acceptance by Stier and respondent respectively – an approach
which Mr Heathcote, for the appellant, disagreed with. I think Mr
Heathcote was correct; the fact is that the new agreement was not the
“brainchild” of Mr Stier; it was a collective decision of
the partners that it be drafted. Hence, in my opinion, the classical
question of offer by one party and acceptance by the other(s) as a
basis of concluding a contract, strictly speaking did not arise in
this case.

[10] The
pleadings in paragraph 6 of the particulars of claim state in part:

“…The new partnership
agreement was not signed, but the parties implemented Annexure ‘B’
by acting upon it with full knowledge of its contents.”

In
her plea respondent admits, at least, that:

“She had knowledge of the
contents of Annexure ‘B’.”

and
that:

“The parties practised in
partnership as chartered accountants and auditors from 1 January 2001
to 31 October 2005.”

We
know that an oral agreement came into existence when Vente joined
first appellant and respondent in 2001. We know that the interest of
the parties since then became 55% for Stier 28% and 17% for
respondent and Vente respectively. We also know that the unsigned
agreement reflects those percentages. The question remains to be
answered, in the absence of any mention in the plea, under what
agreement did the parties continue to practice after 15 January 2004.
Respondent has to answer that question. This question arises in
light of the amendment to paragraph 6 of the particulars of claim to
read as already recorded above.

The
amendment was not opposed. In addition, among the circumstances
that, in my opinion, must be considered, are the following.

1. Respondent’s
   notice of resignation states in part, that she was resigning for
   “personal and health reasons”; she was not going to
   continue working in the audit profession and that after a three
   months break “in which time I plan to further advance my
   studies in the computer field I plan to work as a freelance
   consultant”.

   
   

2. Respondent’s
   lawyers’ letter dated 30 May 2005 to Mr Stier and Vente states
   in part.

   
   

“Our instructions are that our
client does not propose to continue practicing as an auditor but
rather to perform consulting services. Furthermore she has not
approached any of the clients of the partnership in order to solicit
their business, nor will she be doing so…”

3. Respondent’s
   letter to Stier Vente Associates, addressed to Bernhard (Vente)
   dated 24 November 2005 and written on a letterhead CH Chartered
   Accountant reads in part:

   
   

“My lawyer indicated in his
letter dated 26 May 2005 that I do not propose to continue practicing
as an auditor and that I would not approach any clients of the
partnership. … I have not approached any clients of the
partnership at all. But if clients approach me that is another
matter.”

4. The
   fact, according to Stier’s evidence, that during various
   meetings of the partners the signing of the unsigned agreement was
   discussed without the respondent raising any objection to indicate
   that she was not in agreement with the terms thereof.

   
   

5. When
   the respondent left the partnership she was paid the capital amount
   as was stipulated in clause 8 of the unsigned agreement.

   
   

(f) The letter by her
legal practitioner to the partnership, and her own letter to Vente,
referred herein before, wherein it was stated that respondent did not
intend to practice as an auditor and that she had not approached any
of the clients of the partnership to solicit their business, nor
would she do so, and that she was willing to forego payment in
respect of the goodwill of the partnership, are all issues which are
also covered by the provisions of the unsigned agreement, and in the
absence of any other explanation, may raise the reasonable inference
that respondent relied on these provisions of the unsigned agreement.

(g) Several letters to
respondent as “CH Chartered Accountant” from the
Institute of Chartered Accountants, and from her to the Institute of
Chartered Accountants show that by 15 August 2005, while she was
still working for the partnership, she had already started practicing
as an independent chartered accountant, several claims for fees for
services rendered all produced as exhibits tell the same story. The
relevant documents in this regard, produced in evidence, start with
page 6 and continue from page 13 to page 41 in appellant’s
bundle “A” in Volume 1 of the record.

My view is that
respondent has a duty to give an explanation as to what she was up
to; otherwise her silence alone, as Mr Heathcote submitted, is
sufficient to constitute an admission of the contract, “unless
satisfactorily explained” (see quote from McWilliams v First
Consolidated Holdings 1982(2) SA 1 (A) in Seeff
Commercial and Industrial Properties (Pty) Ltd v Silberman
2001(3) SA 952 (SCA) at 959F at para [19].

[11] In
analyzing the evidence, Mr Strydom relied on what he said was a
concession by Vente, inter alia, to advance the argument that
considering the evidence in its totality it cannot be said that an
unambiguous offer open for acceptance was made to the respondent or
even to the second appellant. First of all, as I have already
indicated, the decision that the unsigned agreement be drafted was a
collective decision of the partners, and the question whether it was
Stier’s offer to the others does not arise. Secondly in
referring to Vente’s evidence Mr Strydom’s written heads
of argument omit the clear evidence of Vente that the parties acted
on the unsigned document. To be fair the cross-examination of Vente
was itself not a model of clarity. Apparent contradictions were not
cleared up. For example he was asked; and answered as follows:

“When you got the document did
you see as a draft Agreement open for comment or as a final document
ready for signature --- I saw it as an Agreement of what is the basis
of what we have discussed two years or three years since I have
become a partner.

…

For clarity, when do you say this
agreement took effect, the new agreement? --- The written only when I
saw it, before it was only a verbal agreement.

Was to operate retrospectively up to
the 1^st of September rather 1^st of January 2001
that come into effect after he saw it. --- As far as I am concerned
the agreement can only be effective once you have signed it.

Yes? --- It’s a written one, not
a verbal one.

Ja. You testified that although the
agreement was not signed that was according to you the Agreement that
was in place is that correct? --- Yes

And this belief became stronger as
time went on? --- Yes.

Why did you consider it? Why did the
belief became stronger as time went on? --- Because none of the two
other parties complained against that.

…

Who made an unequivocal offer to you
to accept the agreement as that referring to the new agreement, who
made that offer to you? Who said to you listen here this is our
Agreement. Take it or leave it. Accept it or reject it. Who said
that? --- No one.

So there was never offer made to you
to accept or reject the agreement? --- No, it was just a
formalisation of what we did the whole time.

In that office the senior partner Mr
(Stier) made the important decisions is that correct? --- No, it’s
not correct. Most decisions, important ones are done collectively.

Apart from the negotiations you
referred way back when you started and the one when the percentage
was increased was there a negotiation that led up to the wording of
the new agreement? Do you follow? --- Not a physical negotiation.

Court: What do you mean? What do you
mean not physically negotiations? --- Not that we are sitting the
three persons around the table and negotiate through each paragraph
line by line.

But how did you negotiate? --- We
discussed it in broad terms before hand. That was our verbal
agreement before this we got this one.

…

Ja, but what things it ends in air
what you discussed. The terms, the exact of the Agreement or what
you missed on. I cannot speculate? --- It’s is very difficult
to say if it’s outlined, because when you have the Agreement
later in front of you, you will most probably you refer from the
agreement which hadn’t been signed at that time. And I want to
do that because I might be lying.”

With
respect, I sympathise with Vente under such cross-examination.

[12] Both
counsel in this matter accept the law as quoted in the judgment a
quo, both as to what needs to be proved to establish a tacit
agreement, and as regards the test for absolution from the instance.
The difference between them is the application of the law to the
facts and circumstances of this case. Mr Strydom supports the
reasoning of the learned Acting Judge a quo while Mr Heathcote
for the appellants does not, and in his written heads of argument
referred to a number of authorities in arguing that the appeal should
succeed; which authorities I proceed to enumerate:

(a) He makes the
statement that “Where the terms of the agreement (are) already
reduced to writing, like in this case, it is submitted that;

‘It follows of course that where
the parties are shown to have been ad idem as to the material
conditions of the contract, the onus of proving an agreement that
legal validity should be postponed until due execution of a written
document lies upon the party who alleges it.’”

See:
Woods v Walters 1921 AD 303 at 305.

In
essence this is what respondent, in so many words, seems to allege.
Mr Strydom laid a lot of emphasis on the fact that the document was
unsigned.

(b) Secondly, Mr
Heathcote referred to Lyndley on Partnership, 15^th
Edition p139, for the proposition that “An agreement for
partnership maybe evidenced by informal documents; as for an example
an unsigned memorandum or draft agreement acted on by the parties.”
Mr Strydom in his cross-examination of the appellants relied a great
deal on the fact that the document Annexure “B” was a
draft still to be formalized, meaning, apparently, signed. The
evidence does not clearly suggest that meaning alone.

(c) Mr Heathcote then
goes on to submit that the best which can be said for

respondent is that she
had a reservation in her own mind and quotes
Ι
Pieters and Company v Salomon
1911 AD 121 where it was said at 137:

“When a man makes an offer in
plain and unambiguous language, which is understood in its ordinary
sense by the person (to) whom it is addressed, and accepted by him
bona fide in that sense, then there is a concluded contract.
Any unexpressed reservations hidden in the mind of the promisor
are in such circumstances irrelevant.” (My underlining)

Mr
Strydom referred to a number of cases where it was emphasized that an
offer and an acceptance must be unequivocal direct or unambiguous.
In the circumstances of this case, I find nothing ambiguous or
equivocal in Stier having drafted and distributed the document to the
partners after it was admittedly agreed that an agreement be drafted,
a collective decision, as I have already said, “to stipulate
the relationship to the parties”. The unexpressed reservation
by respondent for nearly two years, after she typed the document and
had full knowledge of its contents, is a silence that speaks volumes
against her. It is trite that inaction or silence in law amounts to
an act, like the act of omission, particularly where you have a duty
to speak out. Mr Stier repeatedly said he expected comments to come
from his partners and concluded, in the absence of any such comments,
that the document was accepted by them. A chartered accountant is
not a simple unsophisticated person from the street.

(d) Mr Heathcote lastly
submitted, correctly, I must say, that the unsigned partnership
agreement did not stipulate what mode of acceptance will constitute
an agreement, and referred to Seeff Commercial and Industrial
Properties (Pty) Ltd v Silberman, supra, at para [19]
where the following was stated:

“In my view, the defendant did
not require or expect acceptance of its proposal as regards para 1 of
A1. The comment, however, clearly placed a duty on the plaintiff to
object to the proposal if he did not agree to it. The plaintiff’s
silence and his conduct in proceeding with the project constituted
acceptance of the said proposal and it was so understood by the
defendant. The evidence in this case brings the matter squarely
within the principle discussed above and expressed as follows by
Miller JA in McWilliams v First Consolidated Holdings (supra
at 10E):

‘I accept that “quiescence
is not necessarily acquiescence” (see Collen v Rietfontein
Engineering Works 1948(1) SA 413 (A) at 422) and that a party’s
failure to reply to a letter asserting the existence of an obligation
owed by such party to the writer does not always justify an inference
that the assertion was accepted as the truth. But in general, when
according to ordinary commercial practice and human expectation firm
repudiation of such an assertion would be the norm if it was not
accepted as correct, such party’s silence and inaction, unless
satisfactorily explained, may be taken to constitute an admission by
him of the truth of the assertion, or at least will be an important
factor telling against him in the assessment of the probabilities and
in the final determination of the dispute.’”

(e) Mr Heathocte
concluded his submissions by stating:

“22.7 Moreover, the respondent
must have seen the material differences, if compared with the old
agreement. It is submitted that the McWilliams – case
quoted above finds downright application given the fact that partners
owe good faith to each other. The defendant had to speak out,
particularly in circumstances where, in her presence, it was said
that the agreement should be signed. Yet, she did not do so until
she decided to resign.”

[13] I
agree with the above submissions and must repeat that Stier was asked
several questions in cross-examination, all of which putting to him
that all that he did was to ask respondent to type the unsigned
agreement; he repeated and emphasized that the other partners,
including respondent, were asked to comment on the new agreement,
that this went on for over a year, and that respondent had over fifty
opportunities when she could have expressed her unhappiness or
suggested any changes or alterations to the draft in areas she might
have had problems with. In the circumstances I find it was
reasonable for Stier to conclude, as he said in evidence, that the
agreement was accepted by respondent and Vente. I must also make it
clear that quite much of Mr Strydom’s criticism of the unsigned
agreement related to the interpretation of the agreement itself. In
this connection, it was pertinently said in Boerne v Harris,
1949(1) SA 793 (AD) at 799 that “…although a contract,
even if it be ambiguous, may be and generally is binding…”
Greenberg JA who wrote the judgment in that case, was referring to
the difference between the rules of interpreting a contract and those
of interpreting an offer. He further down on the same page stated:

“In regard to the difference in
the rules of interpretation to which I have referred, what I have
said about the binding force of an ambiguous contract is not, I
think, in dispute (see Halsbury, 2^nd ed, vol 7, secs. 458,
459).”

The
principle that in interpreting a contract the courts will endeavour
to give it validity is well known – ut res magis valeat quam
pereat, and is applicable both to oral and written
agreements. It is well to remember that the test for absolution is
not whether the evidence led by the appellant establishes what would
finally be required to be established and that the inference to be
drawn from the facts and circumstances of a case need not be the only
reasonable inference.

The
evidence raises at least a reasonable inference that the respondent,
who was aware of the terms of the unsigned agreement, was conducting
her affairs on those provisions. In the words of Harms, JA, in the
Gordon matter, supra, the appellant has made out a
prima facie case and is therefore entitled to put the
respondent to her defence.

[14] The
appeal succeeds with costs, including the costs of one instructing
and one instructed counsel. The Court a quo’s judgment
is altered to read that the application for absolution from the
instance is refused with costs, including the costs of one
instructing and one instructed counsel. The matter is referred back
to the trial Judge to deal with the matter further according to law.

____________________

MTAMBANENGWE
AJA

I
concur.

____________________

SHIVUTE
CJ

I
also concur.

____________________

STRYDOM
AJA