Termination of contract: Sole discretion means sole discretion

December 1st, 2021
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MultiChoice Support Services (Pty) Ltd v Calvin Electronics t/a Batavia Trading and Another (SCA) (unreported case no 296/2020; 226/2021, 8-10-2021) (Schippers JA and Potterill AJA (Mbha JA and Phatshoane and Molefe AJJA concurring))

On 8 October 2021, the Supreme Court of Appeal (SCA) handed down judgment in the matter of MultiChoice Support Services.

The judgment was in respect of a consolidated appeal hearing of two interrelated appeals from the Limpopo Division of the High Court in Polokwane (LP). Both matters arose from MultiChoice’s termination of its agency and accredited installer agreements concluded with Calvin Electronics. The former agreement allowed Calvin Electronics to solicit subscriptions, collect subscription fees and activate customer accounts on behalf of MultiChoice; the latter permitted it to install MultiChoice’s equipment, for which it obtained access to its information technology (IT) systems.

October 2019 terminations

MultiChoice brought the contractual relationship to an end by using a widely framed discretionary termination clause in its agreements. However, this was met by a ‘flurry’ of litigation on the part of Calvin Electronics.

First, an urgent application was brought in the Limpopo Local Division of the High Court in Thohoyando, which was struck from the roll. Shortly thereafter, Calvin Electronics brought a review application in the LP, ostensibly under r 53, against the decision that MultiChoice had taken to terminate the agreements, as if the decisions were the exercise of public power. A few days after that ‘review’ application had been brought, Calvin Electronics brought another extremely urgent application to the court seeking interim interdictory relief, pending the resolution of the ‘review’ application.

On 26 November 2019, the court, per Makgoba JP, handed down an order, directing MultiChoice to reconnect the access of Calvin Electronics to the IT systems of MultiChoice and interdicting it from preventing Calvin Electronics from performing its obligations as a service provider under both agreements.

December 2019 terminations

Having complied with the interim interdict, MultiChoice discovered that there had been malfeasance on the part of Calvin Electronics and its employees, after the reconnection, causing MultiChoice to suffer substantial financial loss. The malfeasance included a fraudulent scheme by employees of Calvin Electronics who would connect end users to MultiChoice’s services, and then cash in directly from the end user, without MultiChoice ever receiving payment. MultiChoice terminated afresh on those new grounds of termination.

Shortly after the December terminations, MultiChoice brought an application in the Gauteng Local Division of the High Court in Johannesburg for a declaratory order that the agreements had been properly terminated based on the new grounds that had arisen after the granting of the interim interdict. The latter application was heard in Johannesburg shortly after Calvin Electronics had, in the wake of the fresh terminations and disconnection, in February 2020, approached the LP on an urgent basis for an order holding MultiChoice in contempt of the interim interdict of 26 November 2019. Phatudi J found that MultiChoice was in contempt of court without giving reasons, which order was appealed on the same day.

Considering the existence of the contempt order, the Gauteng Local Division of the High Court, per Campbell AJ, had been unwilling to grant the declaratory relief confirming the fresh terminations. However, the court did not dismiss it but postponed it until the appeal against the contempt order had been resolved.

When MultiChoice appealed the contempt order of Phatudi J, Calvin Electronics brought yet another urgent application in the LP under s 18 of the Superior Courts Act 10 of 2013 for the contempt order to be enforced immediately pending the appeal. The s 18 application was granted, per Tshidada AJ. MultiChoice then approached the SCA in terms of its automatic right of appeal in s 18(3) of that Act, the SCA in its view being the next highest court.

The SCA

The SCA found that MultiChoice had exercised its contractual right to unilaterally terminate the contracts in terms of a procedure to which the parties had specifically agreed. It was entitled to do so on any ground of cancellation specified in the agreements, including fraud on the part of Calvin Electronics. It stated further that the conclusion by the High Court that this ‘constituted contempt or that the imputations of fraud were premature, [was] incorrect’.

Furthermore, the SCA found that Calvin Electronics throughout had abused the process of court in that it used the procedures permitted by the rules of court for a purpose other than the pursuit of the truth, namely, to ensure access to MultiChoice’s systems without any legal basis. The SCA reasoned that the order of Makgoba JP, ‘the foundation of everything that followed’ was ‘erroneous in a number of respects’. It followed that neither the contempt order, nor that of the s 18 could stand.

The SCA allowed the appeals, overturning both orders of the LP and replacing them with two costs orders in favour of MultiChoice, both on the attorney-and-client scale – a huge victory for MultiChoice.

Mongezi Mpahlwa BCom (Law) LLB (UWC) is a legal practitioner at Cliffe Dekker Hofmeyr. Mr Mpahlwa was involved in the above matter.    

This article was first published in De Rebus in 2021 (Dec) DR 33.

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