A burning issue
THE DIVERSIFIED Imperial Group is at loggerheads with NCS Resins, a subsidiary of chemicals group Sentrachem, over a warehousing contract. Sentrachem was delisted from the JSE after being acquired by US-based Dow Corporation in 1997. The dispute is likely to result in Imperial shelling out around R15,5m in damages.
At the centre of the row is a warehousing contract signed in August 2000. IWL Warehousing & Logistics, a division of Imperial Group, undertook to provide warehousing and transport services to NCS Resins. Unfortunately, in March 2002 there was a fire at IWL Warehousing & Logistics’ warehouse in Wadeville, Gauteng, resulting in the destruction of and damage to NCS Resins’ property.
NCS Resins decided to sue Imperial Group for its loss. The Johannesburg High Court ruled in favour of NCS Resins but
granted Imperial leave to appeal. However, the Supreme Court of Appeal dismissed the Imperial Group’s case with costs, including that of its two counsels.
Imperial Group declines to comment, claiming that the matter is still sub judice.
NCS Resins is likely to ask for a new trial date to be heard at the Johannesburg High Court, which would deal with the quantum of the claims related to the matter. However, NCS Resins is still in discussions with its lawyers concerning whether to take the matter back to court. Should the dispute go back to court, NCS Resins will continue to contend that the loss at the Wadeville warehouse was a result of Imperial Group’s negligence and breach of contract. It will sue for the breach of the warehousing contract.
The High Court and Appeal Court dealt with the issue of who should bear the risk of fire according to the warehousing contract signed by Imperial Group and NCS Resins. During the case Imperial argued that, on a proper construction of the contract, NCS Resins and not Imperial bore the risk of loss by fire at the warehouse.
Surprisingly, the Appeal Court says that the contract itself is divided into chapters that deal with a complex business relationship between Imperial and NCS Resins covering a wide range of activities, including transport, warehouse stock rotation, inventory management, decanting and the use of computer programmes.
Part of the court judgment read: “The language used appears to be that of businessman rather than lawyers. It is not particularly well drafted. Clauses are frequently out of place and the impression created is that an initial draft was subsequently altered by the insertion of additional provisions. The words ‘damage’ and ‘damages’ are used interchangeably and often incorrectly.”
Imperial Group relied on clause 11.6 of the contract, which it alleges imposes the risk of damage by fire on NCS Resins. The clause reads: “NCS will insure its stock against fire and natural disasters at their cost whilst in the IWL (Imperial) warehouse.”
The Appeal Court dismissed that argument by arguing: “A fire caused by a breach of contract on the part of Imperial was not covered by the 11.6 clause.” The court adopted a commonsense approach to the matter of interpretation and to recognise that Imperial Group and NCS Resins, through a lack of draftsmanship, may use words or language that isn’t always the most appropriate.