Otto

							                     FORM A
      FILING SHEET FOR EASTERN CAPE JUDGMENT

                                      ECJ NO: 035/2005

PARTIES: CAREL LODEWYK OTTO VS PATRYS FARMING


REFERENCE NUMBERS –
   Registrar: 1258/04

DATE DELIVERED: 3 MAY 2005

JUDGE(S): JONES J

LEGAL REPRESENTATIVES –
Appearances:
    for the State/Applicant(s)Appellant(s): M LOWE
    for the accused/respondent(s): IJ SMUTS & G SELIKOWITZ



Instructing attorneys:
    Applicant(s)/Appellant(s): WHEELDON RUSHMERE & COLE
    Respondent(s): WHITESIDES
                                                                                        2

Not reportable



In the High Court of South Africa
(Eastern Cape Division)                               Case No 1258/04
                                                      Delivered:

In the matter between


CAREL LODEWYK OTTO                                    Plaintiff/Respondent


and


PATRYS FARMING (PTY) LTD                              Defendant/Excipient

JUDGMENT


SUMMARY:               Exception – whether fraudulent non-disclosure is properly
alleged – whether duty to disclose is properly alleged – whether inducement to
contract is properly alleged - whether the pleading is excipiable because the
allegations of fraud are in conflict with the terms of the contract induced by the fraud.


JONES J:



[1]    On 22 October 2003 the plaintiff entered into a written agreement with

the defendant for the lease of herd of dairy cows for a period of 4 years. The

cows were delivered to the plaintiff. He commenced farming with them on his

farm in the Somerset East district, and, in doing so, he mixed them with his

existing dairy herd. According to the plaintiff, cows from the leased herd had

been infected with the Streptococcus agalactiae bacteria (‘SAG’) which

spread through his whole herd, causing him financial loss. He instituted legal

proceedings against the defendant with a view to the recovery of damages.
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[2]       The plaintiff formulated his claim on the basis of an allegedly

fraudulent, alternatively negligent non-disclosure of the SAG infection. The

defendant excepted on the ground that the allegations are vague and

embarrassing, alternatively that they fail to make out a valid cause of action.

In summary, the defendant’s complaints are

         that the plaintiff relies on misrepresentations, without alleging that

          these misrepresentations induced him to contract;

         that the plaintiff is precluded from relying upon the misrepresentations

          by the terms of the written agreement of lease;

         that evidence of the alleged misrepresentations will be inadmissible at

          the trial;

         that acknowledgements made in the agreement alleged by the plaintiff

          and attached to his pleadings contradict allegations made in the

          pleadings, which makes them vague and embarrassing;

         that no or insufficient allegations are made to ground a legal duty to

          make disclosure;

         that the essential elements for a claim based on fraud are not alleged.



[3]       During the course of argument Mr Lowe, for the plaintiff disavowed any

reliance on a cause of action based upon a negligent misrepresentation.

Indeed, it was common cause that on the facts presently alleged, a case

based on negligence cannot be sustained. Mr Lowe’s concession has bearing

on the alternative allegation in paragraph 16.2 of the particulars of claim. That

paragraph reads:
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       ‘In failing to advise the plaintiff of the true facts with regard to the aforesaid
       dairy cows the defendant acted deliberately, alternatively with gross
       negligence’.


Mr Lowe somewhat half-heartedly relied on the wording of certain authorities

of times gone by to suggest that in the context of fraud the phrase ‘gross

negligence’ can have a meaning similar to dolus eventualis, and, for that

reason, the pleading is not objectionable. My view is that this gives rise to

ambiguity in the wording of the particulars of claim which could lead to

prejudice, and that an exception directed at the alternative allegation of gross

negligence would probably have been well taken1. There is however no

exception to that allegation and I need say no more about it. I note however

the plaintiff’s disavowal of reliance on alleged negligence as part of his cause

of action.



[4]    Mr Lowe’s argument is that the plaintiff’s case is not based on

misrepresentation, whether fraudulent or otherwise, but on fraudulent non-

disclosure. In order to make out a cause of action his pleadings must allege a

false representation by the defendant in the form of non-disclosure of the true

facts where there is a duty to disclose them, which fraudulently (dolus directus

or dolus eventualis) and with intent to deceive induced the plaintiff to act on

the strength thereof to his prejudice.2 In the context of pleading this case, this

translates into the following averments:

             1. that the defendant was aware of the material defect, ie. SAG, in

                the cows;


1
       S v Myers 1948 (1) SA 375 (AD) 382-384
2                                               th
       Harms, Ambler’s Precedents of Pleadings 6 ed 183/4
                                                                                  5


          2. that he was under a duty to disclose that defect to the plaintiff;

          3. that he intentionally failed to do so in order to induce the plaintiff

              to enter into the contract;

          4. that his non-disclosure of the true facts induced the plaintiff to

              enter into the agreement; in other words, had proper disclosure

              been made the plaintiff would not have entered into the

              agreement;

          5. that as a result of his entering into and performing the

              agreement, SAG from the leased cows spread throughout the

              plaintiff’s dairy herd, causing him financial loss.

The particulars of claim are not a model of clarity. But while they do not spell

out precisely each of these allegations, my opinion is that they are all to be

found in the pleading.



[5]    The notice of exception makes the general averment that the plaintiff

has failed to allege the necessary requirements for fraud to sustain a cause of

action. In advancing this ground in argument, Mr Smuts has submitted on

behalf of the defendant that there is no allegation that the non-disclosure was

in respect of matter which was material to the contract. It is so that the

particulars of claim do not use the word ‘material’. But there can be no doubt

from the allegations in paragraphs 10. 3 to 10.6 and 11 of the particulars of

claim, which describe the effect of SAG on a herd of dairy cattle, that this

defect is material to a contract for the lease and delivery cows to a dairy

farmer.3 This criticism is without substance.


3
       See for example Service v Pondart-Diana 1964 (3) SA 277.
                                                                                6




[6]    Next, Mr Smuts argued that the particulars of claim do not allege that

the plaintiff was induced to enter into the contract as a result of the non-

disclosure. Once again, the word ‘induced’ is not to be found in the pleading

and there is no specific allegation that the plaintiff would not have entered into

the contract had proper disclosure been made. But once again a reading of

the particulars of claim as a whole leaves me in no doubt that the pleading

contains the necessary allegation. The pleading alleges that the defendant’s

representative (Sher) knew at the time when he negotiated with the plaintiff

and entered into the agreement with him that the cows were or had recently

been infected with SAG (paragraph 12); that cows in that condition would not

be acceptable to any dairy farmer including in particular the plaintiff

(paragraph 10.3); that on the basis of the negotiations (which allegedly

included representations by Sher about the condition of the cattle and a failure

by him to disclose the SAG) the plaintiff entered into the contract of lease

(paragraph 14); and that the plaintiff suffered considerable loss as a result. In

my opinion, the only reasonable inference from these allegations is that the

non-disclosure was intended to and did induce the contract. Certainly, the

pleadings can reasonably be interpreted in that way. The defendant’s

argument to the contrary is contrived and without substance.



[7]    The remaining argument is that the plaintiff relies on allegations of

misrepresentation which he cannot properly make because they conflict

directly with the contents of the written agreement which was allegedly

induced by the fraudulent non-disclosure and which is also part of his
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pleading. The allegations and the agreement are mutually exclusive and

destructive, and, so the argument goes, no admissible evidence can be led to

support the allegations by reason of the parol exclusionary rule of evidence.

The pleadings are hence vague and embarrassing.



[8]    The pleading alleges that the defendant represented to the plaintiff that

it had a herd of good dairy cows for lease, that the cows were free of illness;

that their milk production was average; and that they were suitable for

incorporation in and had a high potential for contributing substantially to the

plaintiff’s farming operation. The agreement, on the other hand, provides for

an exclusion of any oral terms which are not part of the writing; that the

plaintiff had personally inspected the cows and was completely satisfied with

their condition; that the defendant had given no warranties, guarantees or

undertakings as to the quality of the cows or their fitness for the purpose for

which they were leased; that the defendant had not made any representations

of whatever nature to induce the plaintiff to enter into the agreement; and that

the cows were leased to the plaintiff voetstoots. It is apparent that the

allegations of representation made in the pleadings are contradicted by the

terms of the agreement which inter alia records that no representations were

made. This may have bearing on a cause of action based on the terms of the

agreement. But in my view, it is not a valid objection to a cause of action

which is not.



[9]    The terms and conditions in an agreement are not sacred and

inviolable just because they are reduced to writing. The writing regulates the
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rights of parties who seek to rely on the agreement for their relief because

they have chosen to be bound by it. But it does not necessarily predetermine

how they may formulate a different claim for different relief which is not based

on the writing. Here the relief is based on an alleged fraudulent non-

disclosure. In the nature of things a fraudulent non-disclosure can have

nothing to do with the subsequent written agreement except that the written

agreement is the result of the fraud. The relevance of the written agreement is

that it was concluded. Its terms may be additional evidence of non-disclosure:

self evidently, it does not contain what the plaintiff says ought to have been

disclosed, ie that the cows suffered from SAG. This would not, of course,

preclude a defendant from showing that he had nevertheless made the

disclosure, and a plaintiff would also be at liberty to prove that the disclosure

was not made without reference to the terms of the agreement. The fact of the

matter is that the plaintiff in this case does not rely on the terms of the

agreement for any purpose at all. They are not part of his cause of action.

They cannot preclude him from recovering damages based on fraud because

legal policy makes it impossible to contract out of liability for fraud.



[10]   The issue on exception is whether the pleadings can reasonably be

interpreted to make out a discernible cause of action; or, put another way,

whether the cause of action is rendered indiscernible by contradictions

between the allegations necessary for fraud on the one hand, and, on the

other, the contents of the document which was the result of the fraud. The

defendant’s difficulty with the logic of the plaintiff’s pleadings disappears once

it is understood that the representations alleged in the pleadings go to the
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issue of a duty by the defendant to make the disclosure about SAG, and not to

a remedy in contract which is precluded by the terms of the contract. Looked

at in this light, the defendant is able to make a sensible response to the

particulars of claim and they are therefore not vague and embarrassing.



[11]   I should make it clear that any pronouncement I make about the

relevance of material alleged by the plaintiff to his cause of action are made

solely for the purpose of determining the somewhat narrow question of an

exception. What I have to say should not impact upon matters which should

properly be determined on trial, such as the credibility of explanations for the

alleged contradictions. I would have preferred not to comment at all on the

admissibility of parol evidence because on trial other considerations may be

involved than simply the interpretation to be placed on an allegation in the

pleadings. Suffice it to say for present purposes that the effect of the parol

evidence rule is not to make the pleadings excipiable. For purposes of the

exception, evidence of what was said during negotiations is not concerned

with contradicting the terms of the agreement in contravention of the

exclusionary rule because the terms of the agreement are not in issue.



[12]   In the result the exception is dismissed with costs.




RJW JONES
Judge of the High Court
26 April 2005