Detailed Case Notes: Gerolomou Constructions vs. Van Wyk

Case Overview

• The case involves an appeal against a magistrate's decision regarding payment for subcontracting work.
• Parties: P Gerolomou Constructions (Pty) Limited (Appellant) and Derrick van Wyk (Respondent).
• The plaintiff (Van Wyk) claimed payment for work done on the Nan Hua Temple in Bronkhorstspruit.

Background Facts

• Oral Agreements: The plaintiff was to design and install the four highest corners of the Nan Hua Temple, constructed from wood.
• Trial Dates: The trial began on 4 November 2004 and resumed on 8 August 2005.
• Legal Representation: Both parties initially had legal representation, but the plaintiff proceeded as a layman after his attorney withdrew on 8 August 2005.
• The defendant's initial lawyer also withdrew but was replaced.
• Magistrate's Findings: The magistrate ruled in favor of the plaintiff, finding him to be a credible witness and rejecting the defendant's defenses.
• The magistrate upheld three of the plaintiff's claims, along with interest and costs.

Key Issues on Appeal

• The appeal focuses on issues arising from paragraphs 4.2.2 and 4.3 of the appellant's plea, which concern a final payment and its implications.

Appellant's Plea

• Paragraph 4.2.2: Claims the plaintiff accepted a final payment of R19 291,70 in full and final settlement in October 2002. Referenced document "DW3" as proof of signed acceptance.
• Paragraph 4.3: Asserts that the plaintiff was paid according to annexure "DW3".

Plaintiff's Reply

• The plaintiff admits signing the contract but claims it's not binding due to undue influence.
• Grounds for Undue Influence:
  1. The defendant gained influence over him.
  2. This influence weakened his resistance and made his will malleable.
  3. The defendant used this influence unconscionably to secure an agreement that:
     • a) prejudiced him.
     • b) he would not have entered into freely.
• The plaintiff alleges damages of R104 280, 40 due to the defendant's undue influence.

Trial Basis

• The trial proceeded on the understanding that the "full settlement document" was a settlement agreement.
• The court notes that the defendant (on whom the onus lay) did not intend the "full settlement document" to constitute an agreement of any kind.

Plaintiff's Evidence

• The plaintiff testified that he signed the document under compulsion.
• Negotiations: He sought to negotiate the payment of retention money of R49 523, 54.
• He was under pressure to pay his workers and depended on the defendant's payment to do so.
• Meeting on 16 October 2002: The plaintiff, Nicholson (plaintiff's foreman), and Kruger (defendant's project manager) met at the site.
• Kruger presented a draft of the full settlement document, stating the defendant had raised contra charges.
• Kruger told the plaintiff he would not receive any money unless he signed the document.
• The plaintiff protested that the document was unfair, but Kruger insisted on the signature for any payment.

Analysis of the Full Settlement Document

• Document Description: The document is headed "Final account for Derek van Wyk".
• It lists retained money, totaling R48 523,54, and contra charges of R29 231, 84 for damages and removal of materials.
• The final balance after deductions is R19 291,70.

Concluding Statement

• The document concludes with a statement where Derek van Wyk accepts the payment of R19 291-70 in full and final settlement of all claims on the Nan Hua Temple.

Contract Formation Analysis

• The court emphasizes that a contract requires an offer and acceptance.
• The court finds no indication that the defendant made any offer at all.
• The document was presented so that the plaintiff would not get what the defendant admitted was due to the plaintiff unless the plaintiff in his turn signed an admission that he owed the defendant what the defendant was demanding in respect of contra charges.
• The plaintiff signed to obtain payment of what was admitted owing, not to settle the dispute over contra charges.
• The defendant was not led to believe that the plaintiff was accepting an offer of settlement made by the defendant and no issue of quasi-mutual assent arose.

Plaintiff's Characterization

• The fact that the plaintiff characterized the document as a contract in his reply, doesn't assist the defendant as the defendant did not assert a contract of compromise, it cannot be said that the defendant admitted that there was such a contract.

Offer Analysis

• If the document were an offer, it's ambiguous.
• Ambiguity: The phrase "in full settlement" is analyzed using precedent (Christie, ABSA Bank Ltd v Van der Vyver).
• Depending on the context, it may effect a compromise or pay an admitted liability.
• Key Case: ABSA Bank Ltd v Van der Vyver: Analyzes the effect of the expression 'in full settlement'. The expression is not inherently ambiguous because it always serves to do no more, legally speaking, than import the condition that on acceptance the creditor has no further claim to any balance of the debt. But, as a matter of language, and with regard to the two different situations in which it is employed, it is a question of fact whether the payment made is intended to effect a compromise or to pay an admitted liability.
• Sending a cheque 'in full settlement' coupled with a denial of liability would almost certainly signify an offer of compromise. But there may be an offer of compromise if there is simply no admission of liability accompanying the payment. And one may have to do with an offer of compromise even if there is an admission of liability.

Defendant's Calculation

• The defendant calculated the balance by deducting the disputed contra charges from the admitted debt to the plaintiff.
• Defendant's Admission: The defendant admitted owing R19 291, 70.
• Hypothetical Offer: If the document was an offer, it implied:
  • The defendant offering to pay what they owe (according to their version) only if the plaintiff acknowledges the full amount of the contra charges.

Comparison with Precedent: Be Bop A Lula

• Case: Be Bop A Lula Manufacturing & Printing CC v Kingtex Marketing (Pty) Ltd - relates to a dispute over T-shirt quality and discounts.
• Distinction: In Be Bop A Lula, there was a genuine offer of compromise, while here, the defendant would not pay the undisputed amount without the plaintiff's admission of contra charges.

Conclusion on Offer

• The court concludes that the defendant's actions were not an offer to compromise but a conditional offer to pay only if the plaintiff made the demanded admission.

Undue Influence/Duress

• Assuming the full settlement document constitutes a contract of compromise, the court addresses undue influence.
• Onus of Proof: The plaintiff bears the burden of proving undue influence. Since the magistrate accepted the plaintiff's version, assessment is on the plaintiff's evidence.

Elements of Undue Influence

• Established Elements: The plaintiff must prove:
  1. The defendant gained influence over him.
  2. This influence weakened his resistance and made his will malleable.
  3. The defendant unconscionably used this influence to persuade him into a disadvantageous transaction that he would not normally have concluded (Patel v Grobbelaar)

Defendant's Influence

• Established: The defendant gained influence due to the plaintiff's financial pressure, the disparity in economic power, and awareness of the plaintiff’s inability to afford a protracted legal dispute.

Unconscionable Conduct

• The court refers to common law jurisdictions and the concept of acting unconscionably.
• The courts of common law jurisdictions have long exercised a power to set aside or otherwise mitigate contracts in which one party has acted unconscionably. Our courts do not of course have such powers but it is instructive to have regard to what a common law court would hold to be unconscionable.
• Commercial Bank of Australia Ltd v Amadio: A transaction is unconscientious if a party takes unfair advantage of their superior bargaining power or another's disadvantage (illness, ignorance, financial need).

Exploitation of Weakness

• Exploiting economic weakness is permissible in genuine settlements but not to withhold admittedly owed money for commercial advantage.
• Pacta Sunt Servanda: The principle of honoring agreements is tied to freedom and human dignity (Barkhuizen v Napier).
• Constitutional Rights: The defendant's conduct infringed upon the plaintiff's right to have disputes adjudicated fairly (Section 34 of the Constitution).

Ruling

• The court finds that the plaintiff established the element of unconscionability, entitling him to avoid the supposed compromise.
• The court would dismiss the appeal.

Final Order

• The appeal is dismissed.
• Date: 15 November 2010.
• Judges: NB Tuchten and RD Claassen.
• Appellant's Counsel: Adv JJ Bitter, instructed by Biccari Bollo Mariano Inc.
• No appearance for the respondent.