Total Lesotho (Pty) Limited v Hanyane (C. OF A. (CIV) NO. 12/2003 )

Media Neutral Citation: 
[2003] LSHC 121
Judgment Date: 
10 October, 2003

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C. OF A. (CIV) NO. 12/2003

IN THE COURT OF APPEAL OF LESOTHO


In the matter between:

TOTAL LESOTHO (PTY) LIMITED APPELLANT

and

LETSOSA HANYANE RESPONDENT


Damages based on loss of profit - paucity of evidence

produced - exceptional circumstances entitling court

to assess quantum on available material


Held at Maseru


CORAM: Steyn, P.

Grosskopf, J.A.

Melunsky , J.A.


JUDGMENT


MELUNSKY J.A.:


[1] The appellant carries on business as a supplier of petroleum fuels and related products to retail outlets in Lesotho. One such outlet was a filling station in Maseru known as High School Motors owned by the respondent. He undertook to purchase the appellant's products pursuant to an oral agreement entered into between the parties during September or October 1996. In terms of the agreement, which was for an indefinite period, the appellant undertook to supply its products to the respondent within 24 hours of each order and the respondent agreed to sell the appellant's products only and to pay for the goods on delivery.


[2] The respondent conducted his business on premises leased to him by a Mr. Ahmed but the storage tanks and fuel pumps on the property were owned by the appellant. The respondent commenced trading during or about November 1996 and everything appears to have run smoothly until September 1997. During this period the respondent sold the products at the maximum retail prices fixed for fuel by the Minister responsible for energy. Those prices were M2.08 per litre for petrol and M2.03 per litre for diesel. From about the last week of September, however, the respondent reduced his selling price to M2.00 per litre for both fuels.


[3] The appellant's marketing manager in Lesotho, Mr. van Straaten, considered that it was illegal for the respondent to sell fuel below the fixed maximum price. He told this to the respondent and insisted that the respondent should increase his selling price to the maximum


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amount determined by the Minister. The respondent, however, maintained that it was lawful to sell fuel at any price below the maximum. He refused to increase his prices. The impasse could not be resolved. Van Straaten decided to prevent the respondent from selling fuel and on his instructions the appellant's employees locked all of the fuel pumps at High School Motors on 29 September 1997. The respondent's business operations at that outlet effectively came to an end on that date. He sued the appellant in the High Court for damages, which represented his alleged loss of profits. The amount claimed was M946 649.24 assessed at the date of summons, together with a further amount of M3879.71 per day thereafter "until such time as that (appellant) will have unlocked the pumping machines." The learned Chief Justice awarded the respondent damages in the sum of M236 662.31 together with interest at the rate of 18.5% per annum from 29 September 1997 to date of payment and costs. The appeal to this Court is against the quantum of damages only, for the appellant accepts that it is liable to compensate the respondent for the loss that he actually established. Moreover the appellant now accepts, for the purpose of this case, that the sale of fuels below the maximum selling price was not unlawful.


[4] It is necessary to refer to events subsequent to 29 September. Van Straaten testified that on 9 October he instructed a Mr. Khali to unlock the pumps. He had hoped that this would lead to the resolution of the dispute but his attempts to contact the respondent proved fruitless. Khali, who was in hospital at the time of the trial and unable to testify, reported to van Straaten that all of the pumps, save for two, had been unlocked. The two pumps that remained closed had apparently had fresh locks put on them. Van Straaten went to High School Motors some time later and confirmed that all of the pumps were open apart from the two that remained locked.


[5] The respondent told the trial court that after the closure of the pumps he returned to his home town, Mokhotlong, where he had another business. During November he received a message that one of the diesel pumps at his Maseru business had been unlocked. On 5 November he moved the High Court for an order on motion directing the appellant to unlock the pumps. The appellant opposed the application, an attitude that might seem to be inconsistent with van Straaten's effects to unlock the pumps a month earlier. However the opposition appears to have been based on the grounds that the appellant maintained that, while it was legally entitled to have closed the pumps, it was still willing to do business with the respondent. The respondent's application was eventually granted on 8 March 1999, some sixteen months after the application was launched. At that stage, however, the matter had become academic because during September 1998 the filling station premises, including the fuel pumps, were extensively damaged as a result of widespread civil unrest. In


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consequence the lease between Ahmed and the respondent came to an end.


[6] The fundamental rule in regard to the award of contractual damages is that the plaintiff should be placed in the position he would have occupied had the contract been properly performed so far as this can be done by the payment of money and without undue hardship to the defendant (see Holmdene Brickworks (Pty) Ltd v Roberts Construction Co. Ltd. 1977 (3) SA 670 (A) at 687C). In this case it is common cause that the measure of damages is to be based on the profits that the respondent lost as a result of the appellant effectively closing down his business. There is no suggestion that the respondent could or should have obtained fuel from another source within a reasonable time (cf. Desmond Isaacs Agencies (Pty) Ltd. v Contemporary Displays 1971 (3) SA 286 (T) at 288 C-D).


[7] The respondent's evidence relating to the profitability of his business was most unsatisfactory. First, there was no evidence at all on the net profits of the business. His calculations were based on the alleged gross profits, without having any regard to considerable business expenditure, including items such as salaries and wages, rental and electricity. Second, his evidence concerning the quantity of fuel he purchased from the appellant and re-sold to his customers was improbable and substantially at variance with the records produced by


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the appellant. It is hardly necessary to state that a party who claims damages must establish his loss on a balance of probabilities and if he fails to do so, the court is entitled, if not obliged, to dismiss his claim. The present case is on the borderline and the respondent's claim is saved from dismissal mainly because all of his records relating to High School Motors were destroyed during the unrest of September 1998. Moreover, the appellant's counsel did not press for dismissal of the claim in argument in this Court. Indeed he accepted the respondent's calculation of gross profit per litre sold, although he strenuously disputed both the quantity of fuel which the respondent claimed he would have sold and the period over which the respondent computed his loss. In addition the appellant's counsel submitted that, despite the absence of direct evidence, the respondent's net profit could fairly be arrived at by reducing the gross profit by some 20%. In the exceptional circumstances of this case, it is reasonably possible to quantify the respondent's loss despite the lack of detailed evidence (cf Hushon SA (Pty) Ltdv Pictech (Ptv) Ltd and Others 1997 (4) SA 399 (SCA)at 412G - H).


[8] On the evidence placed before the trial court the respondent's gross profit may be calculated according to the following rates:


8 cents per litre on petrol 13 cents per litre on diesel 3 cents per litre on illuminating paraffin M1098.40 for each batch of brake fluids and oils ("sundries").


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According to the respondent, he reduced his prices below the maximum amount fixed by the Minister about a week before the pumps were locked. During this week his daily sales consisted of a full tank of petrol (23000 litres), a half tank of diesel (11500 litres), 767 litres of paraffin and half a batch of sundries. On these figures he claimed that his daily gross profit (less a deduction of R27.50 for "carriage inwards") amounted to M3879.71 made up as follows:


Petrol M1870

Diesel M1495

Paraffin M23.01

Sundries M549.20


[9] It will become apparent in this judgment that the court a quo erred in a number of respects. It accepted, without qualification, the respondent's daily gross profit figures set out above without having regard to the improbability of his evidence and to the actual fuel deliveries made to High School Motors during the month of September 1997, which matters are dealt with in para 10 below. Secondly, the learned Chief Justice, in arriving at the quantum, did not have regard to the respondent's business expenses. Consequently he failed to assess the respondent's loss on the basis of the net profit. Finally, he fixed the time over which the loss was to be computed as three months on the grounds that after that period other fuel retailers would likewise have reduced their prices and would thus have competed with the respondent on an equal basis. That approach pre-supposed that


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after a period of three months the respondent would have made no profit at all. That three months is in fact a reasonable period over which the loss should be computed (see para 14) is coincidental.


[10] There is no doubt that the respondent's evidence concerning the extent of his daily sales was grossly exaggerated. Van Straaten explained that having regard to the size of the respondent's premises, its situation, the number of pumps, the approximate time taken to supply a customer with fuel and various other factors, it would have been highly unlikely that the respondent could have sold the quantities of fuel which he claimed to have done. More significantly, the appellant's records show conclusively that the appellant supplied the respondent with only 24000 litres of petrol during the whole of September 1997, 12000 litres each on 12 September and 22 September. No deliveries of other products occurred during this period. There were only four fuel tanks on the premisses and the respondent could not have held vast reserves of products on hand.


[11] Of course it does not follow that the respondent's monthly petrol sales amounted to only 24000 litres per month. It is not known how much petrol the respondent had on hand when the final delivery was made on 22 September but it is improbable that all of the petrol tanks were then empty. However, from the evidence before the trial court, it may be accepted that the tanks were empty for practical purposes when


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the pumps were locked on 29 September. What is uncertain is how much petrol, in addition to the 12000 litres, the respondent sold during the final week of business but it was conceded by the appellant that this could have amounted to 3000 litres. This was a fair and reasonable concession and in the absence of any reliable figures it may be assumed that during the week 22 to 29 September the respondent would have sold 15000 litres of petrol.


[12] The quantities of other fuels sold during the same period is even more uncertain and it is possible to do little more than to apply the ratios adopted by the appellant. These were not specifically in issue and appear to provide a fair reflection of how the sales of diesel, paraffin and sundries correlate to petrol sales. On this basis it will be accepted that diesel sales amounted to one half of petrol sales, that paraffin sales amounted to no more than 5% of petrol sold and that approximately one batch of sundries was sold for each 46000 litres of petrol.


[13] It is equally difficult to assess the period over which the respondent's loss of profits should be assessed. On behalf of the appellant it was submitted that the period should be limited to eleven days - from 29 September to 9 October when some of the pumps were unlocked. At that time, according to the appellant's argument, the respondent abandoned the filling station as he had left Maseru and could not be


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contacted. I cannot agree with this submission. After 29 September the filling station was closed and some, if not all, of the respondent's employees were discharged as the respondent was unable to sell fuel and there was no purpose in his keeping on a full work-force. That he had no intention of abandoning the filling station is obvious from the institution of an application in early November to compel the appellant to re-open the pumps so that he could resume trading.


[14] The respondent's counsel conceded that by January 1998, at the latest, the respondent was aware of the partial unlocking of the pumps and of the appellant's willingness to resume supplying him with fuel. After that date he made no effort to communicate with van Straaten who made it clear that the appellant remained keen to do business with the respondent and it is probable that with the latter's co­operation the relationship would have been restored. This being so, the respondent cannot complain that the appellant refused to supply him with fuel from January 1998 onwards. Any loss that he might have incurred subsequent to that date has not been proved to have been due to the appellant's conduct in closing the pumps and cutting off the supply some three months earlier. It would therefore be fair and reasonable to assess the respondent's damages over a period of three months.

[15] The way is now clear for a calculation to be made of the respondent's


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gross loss. The calculation is no more than an estimate which I trust is reasonable and fair to both parties. The respondent must accept responsibility if the amounts arrived at err in favour of the appellant, for it was his own unreliability that has played some part in making an accurate estimation impossible. I assume, what appears to me to be reasonable, that had the appellant not locked his fuel pumps, the respondent would have sold, on a monthly basis, 60 000 litres of petrol, 30 000 litres of diesel, 3000 litres of paraffin and 1 1/3 batches of sundries. Over three months this would lead to a gross loss of M30,762 made up in the following way:


180 000 litres of petrol at MO.08 per litre. M14,400

90 000 litres of diesel at MO.13 per litre 11,700

9000 litres of paraffin at MO.03 270

4 batches of sundries at M 1,098 per batch 4,392


[16] It is clear that a precise calculation of the net profit is also impossible. As mentioned in para 6 above the appellant's counsel was content to apply deduction of 20% from the gross profit to arrive at this figure. This is not an unreasonable estimate, having regard to the nature of the respondent's business. The result is that the respondent's damages are determined at M24,610. As the claim is for unliquidated damages the respondent is entitled to interest only from the date of judgment and not from the earlier date determined by the learned Chief Justice.


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[17] Although the respondent has established an entitlement to damages, the quantum has been greatly reduced on appeal. The appellant has therefore achieved substantial success in this Court. This being the case there is no reason why the respondent should not pay the costs of appeal.


[18] The following order is made:


  1. The appeal succeeds with costs;

  2. The order of the court a quo is set aside and is replaced

with the following:


  1. Payment of M24,610;

  2. Interest thereon at the legal rate from date of judgment to date of payment;

  3. Costs."


Delivered at Maseru this 10 th day of October 2003.


L S MELUNSKY

JUDGE OF APPEAL

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STEYN P:


I concur


PRESIDENT GROSSKOPF JA:


I concur


F H GROSSKOPF JUDGE OF APPEAL


For the Appellant : Mr. PJ Loubser, instructed by Webber Newdigate

For the Respondent : Mr. Ntlhoki


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