THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

CASE NO: 238/04
Reportable

In the matter between

TRANSNET LIMITED

Appellant

and

LEON RUBENSTEIN

Respondent

Coram:
MPATI, ZULMAN, MTHIYANE, CLOETE, LEWIS JJA

Heard:
13 May 2005

Delivered:
1 Junie 2005

Summary: Where parties to a contract agree that it is terminable on the
happening of a specified future event, a tacit term that it is terminable on
reasonable notice cannot, in the absence of evidence as to the parties’
intention, and the precise formulation of the term, be read into the
contract.

JUDGMENT

LEWIS JA

[1] The principal issue in this appeal, and indeed the only one
argued before this court, is whether a tacit term should be read
into a contract allowing either of the parties to terminate it by giving
reasonable notice. The contract itself is not silent on the question
of its duration. It states that it will come to an end on the happening
of a future event – privatisation of the ‘Blue Train’, one of the
businesses of the appellant, Transnet Limited.
[2] The respondent, Mr Leon Rubenstein, brought an urgent
application in the Johannesburg High Court for various orders
relating to a contract between him and Transnet, entitling him to
the exclusive right to operate a jewellery boutique on two trains,
known as the Blue Train, operated by Transnet. The relief sought
was a declaratory order that the contract was still in existence and
that Rubenstein was entitled to operate the boutique until
privatisation of the Blue Train; and that Transnet be interdicted

from purporting to cancel the contract and from denying him
access to the boutique. Alternatively, if the court were to find that
the contract was terminable on reasonable notice, Rubenstein
asked for an order that such notice be not less than six months.
[3] The court of first instance decided that the contract was
terminable on the giving of six months’ notice, but ordered
Transnet to pay only 50 per cent of Rubenstein’s costs. An appeal
to the full court (the High Court, Johannesburg), against both the
order that the contract was terminable on notice, and against the
costs order, succeeded. It is against the decision of the full court
that this appeal lies with special leave of this court.
[4] It is common cause that the express terms of the contract
are set out in a letter written to Rubenstein on 14 July 1999 by the
operations manager of the Blue Train, and which is annexed to the
founding affidavit. The letter deals inter alia with stock control,

receipt of payments for items sold, accommodation on the Trains
for Rubenstein and his staff, shop facilities and the determination
of a management fee. The clause in issue, paragraph (j) of the
letter, states that the management fee will ‘form the basis for the
contract; the duration of which is to extend to the final date of
privatization’. (My emphasis.)
[5] It is also not disputed that Rubenstein ran the jewellery
business on the Blue Train successfully, making a profit not only
for himself but also for Transnet. He discovered, however, in April
2001 that Transnet had published invitations to tender for the
operation of the jewellery boutique. He demanded that the
invitations be withdrawn. His demand was ignored and he
accordingly launched an urgent application for an interdict
prohibiting Transnet from proceeding with any tender process. A

rule nisi was granted calling on Transnet to show cause why the
interdict should not be made final.
[6] Before any final interdict could be granted the parties
embarked on negotiations to settle the litigation, and there was talk
about entering into a new agreement. The rule was discharged,
and Transnet was ordered to pay the costs. Rubenstein continued
to run the boutique, and the parties continued to talk about a more
comprehensive contract. A draft produced by Transnet in October
2001 was considered unacceptable by Rubenstein. Transnet
threatened Rubenstein that if no new contract were concluded by
31 January 2002, it would give two months’ notice of termination. It
gave such notice on 14 February 2002, advising that Rubenstein’s
‘services’ would be terminated with effect from 15 April 2002. That
prompted the urgent application currently under consideration.

[7] Transnet, as I have said, does not deny the existence or the
terms of the contract alleged by Rubenstein. But in an affidavit filed
in support of the answering affidavit, a Ms Borotho, the executive
manager of the division (Luxrail) which runs the Blue Train, it was
alleged that the parties had ‘accepted’ that privatization was due to
take place by the end of 1999. When it became clear that that
would not happen ‘the parties agreed to regulate the appointment
and services provided by [Rubenstein] in terms of extensions’. In
fact there were several internal memoranda of Transnet, annexed
to Borotho’s affidavit, that indicated that as far as Transnet was
concerned the contract required extension. But this was never
communicated to Rubenstein and before this court it was not
contended that the contract had come to an end, nor that
Rubenstein‘s business or services continued by virtue of any
extension.

[8] Ponnan J, in the court of first instance, came to the
conclusion that the contract was terminable on notice, but that the
period of notice given was inadequate.  He made an order
declaring that the notice of two months was ‘unreasonably short’
and that Transnet ‘was obliged to give the applicant six months’
notice of cancellation . . . such notice to operate with retrospective
effect to 14 February 2002’. The contract would thus terminate with
effect from 15 August 2002. He ordered Transnet to pay only 50
per cent of Rubenstein’s costs, censuring the latter as being
responsible for the urgency of the application.
[9] The learned judge of first instance reasoned as follows in
regard to reading the contract subject to the right of the parties to
terminate on reasonable notice:
‘On a conspectus of the factual matrix before me, privatization of the Blue
Train has become an uncertain future event. It is quite clear that the
perception of the parties at the time  that they contracted with each other was

that privatization would occur shortly thereafter. A period of almost three
years has since elapsed. That the contract would endure for as long as it
already has, could not have been the common intention of the parties. It is
thus reasonable to infer that they did not intend to bind themselves
indefinitely, but rather contemplated termination by either party on reasonable
notice. To hold otherwise would be to permanently bind them to each other
and the contract when all they contracted for was a temporary arrangement.’
[10] The appeal to the full court succeeded, as I have said.
Gildenhuys J (Schwartzman and Willis JJ concurring) held that the
implication of a term that the contract was terminable on
reasonable notice was contrary to the express provision of the
contract as to its duration. It was conceded by counsel for
Transnet that the learned judge of first instance should not have
substituted his view of what constituted reasonable notice for that
of the parties, and thus no reliance was placed on the right to six
months’ notice.

[11] The court a quo, in concluding that the contract was not
terminable on notice, distinguished the case from Trident Sales
(Pty) Ltd v AH Pillman & Son (Pty) Ltd1  and Putco Ltd v TV and
Radio Guarantee Co (Pty) Ltd.2 In both those cases it was held
that where the circumstances of an agreement show that all that
the parties intended was a temporary arrangement, but the
contract was silent as to duration, it is reasonable to infer that they
contemplated termination on reasonable notice.
[12] That was the approach too of this court in Amalgamated
Beverage Industries Ltd v Rond Vista Wholesalers,3 a decision
reported after the judgment of the full court was handed down. In
Amalgamated Beverage the court was asked to determine only
whether reasonable notice had been given, the respondent having
conceded that although the contract was silent as to duration, it

1 1984 (1) SA 433 (W).
2 1985 (4) SA 809 (A).
3 2004 (1) SA 538 (SCA).

could be terminated on reasonable notice. Streicher JA said4
that whether a contract which is silent on its duration is terminable
on reasonable notice is a matter of construction:
‘The question is whether a tacit term to that effect should by implication be
read into the contract. That would be the case if the common intention of the
parties at the time when they concluded the contract, having regard to the
express terms of the contract and the surrounding circumstances, was such
that, had they applied their minds to the question whether the contract could
be so terminated, they would have agreed that it could.’
[13] This case, on the other hand, is not silent on duration: the
contract terminates on the happening of an uncertain future event.
Moreover, the tacit term contended for in this appeal was never
pleaded let alone formulated. There is no allegation of a tacit term
in the answering affidavit, nor is there any evidence proffered by
Transnet that would support the implication of one. But counsel for
Transnet argued that it is necessary to read in a term that if

4 Para 13.

privatization did not occur, the contract would be terminable on
reasonable notice, because otherwise the parties would be locked
in a contract indefinitely, which was patently never their intention, a
point made by Ponnan J in the court of first instance.
[14] The court a quo, on the other hand, was of the view that
there was no evidence that privatization had become impossible or
impracticable or that it had been abandoned. That is indeed so. I
accept, without deciding, however, that there should be some
mechanism for bringing the contract to an end if it becomes
evident that privatization is not going to occur.  As counsel for
Transnet argued, it is required, as an organ of state, when it
contracts for goods or services, to ‘do so in accordance with a
system which is fair, equitable, transparent, competitive and cost-
effective’.5 That requires it to invite tenders for the operation of the
Blue Train boutiques. While an exemption in respect of

5 Section 217(1) of the Constitution.

Rubenstein’s business had apparently been obtained, this
situation could not continue indefinitely.
[15] The question is, however, what was intended by the parties
should privatization not occur within a particular, though
unspecified, period? Rubenstein’s uncontradicted evidence was
that he had not intended that the contract endure only until the end
of 1999: he had invested in training staff, and in stock, and would
not have contracted on that basis. Borotho, for Transnet, said only
that she was advised that there was a common supposition that if
privatization had not occurred by the end of 1999, the contract with
Rubenstein would have to be extended from time to time. As I
have indicated, Rubenstein was never made aware of these
‘extensions’ which were internal Transnet arrangements. And the
fact that Transnet representatives thought it necessary to authorise
‘extensions’ from time to time shows clearly that Transnet did not

intend that the contract was terminable on reasonable notice.
There was thus no common underlying supposition or assumption
as to the termination of the contract should privatization not occur.
[16] And even if a tacit or implied term as to termination should
privatization not occur were to be inserted in the contract, given
the express condition as to termination on privatization, how would
one formulate the term? Of course such a term can be formulated
in the abstract. To give business efficacy to the contract one could
suggest that there must be inserted into the contract a term that
either party has the right to terminate the contract on giving
reasonable notice if privatization has not occurred by the end of
1999, although that would be contrary to the intention of the parties
as described in their affidavits. Or one could assume that either
party would be entitled to terminate if privatization did not occur
within a reasonable time after the conclusion of the contract. But

as I have said, no such term was pleaded or formulated by
Transnet, and there is no evidence to suggest that such an
arrangement was ever contemplated by the parties.
[17] Transnet sought to rely on Wilkins NO v Voges6 in arguing
that the term should be imputed by having regard to what
reasonable people would say was needed to give effect to the
contract. This is in essence the expression of tests that have been
used for many decades in relation to the implication of a tacit term:
would the ‘officious bystander’, when asked whether the term is
necessary, and not merely desirable, say ‘Of course it is’; or is the
term necessary to give business efficacy to the contract?7  But
while one may assume that the parties are reasonable people, one

6 1994 (3) SA 130 (A).
7 Union Government (Minister of Railways and Harbours) v Faux Ltd 1916 AD 105; West End
Diamonds Ltd v Johannesburg Stock Exchange  1946 AD 910; Mullin (Pty) Ltd v Benade Ltd
1952 (1) SA 211 (A); See also Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration 1974 (3) SA 506 (A) at 532 in fin-533B, where Corbett AJA relied on a
statement of  Scrutton LJ in Reigate v Union Manufacturing Co [1918] 1 KB 592 (CA) at 605;
118 LT 479 (CA) at 483. See also Botha v Coopers & Lybrand 2002 (S) SA 347 (SCA)  para
23 and Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd [2004] 1 All SA 1 (SCA)
paras 50 and 51.

must be astute not to ignore their expressed intention. Thus
Nienaber JA states in Wilkins:8
‘One is certainly entitled to assume, in the absence of indications to the
contrary, that the parties to the agreement are typical men of affairs,
contracting on an equal and honest footing, without hidden motives and
reservations. But when the facts show that the one or the other had special
knowledge, which would probably have had a bearing on his state of mind,
that fact simply cannot be ignored. For otherwise the enquiry as to the
existence of the tacit term becomes a matter of invention, not intention.’9
[18] The difficulty of formulating the kind of term contended for by
Transnet (quite apart from its failure to do so, or even to plead its
existence) is that it could be in conflict with the express term as to
duration. In Kelvinator Group Services of SA (Pty) Ltd v

8 At 141C-E.
9 See also Barnabas Plein & Co v Sol Jacobson & Son 1928 AD 25 at 31-32 where Stratford
JA too had regard to what an independent person would say about the necessity of
incorporating the term in question, but also stated  that the ‘true view’ is that ‘you have to get
at the intention of the parties in regard to a matter which they must have had in mind, but
which they have not expressed’. He considered therefore that one had to have regard not
only to objective tests but also to what the parties claimed to have intended.

McCullogh10 Nugent J pointed out that a term, to be imputed,
must not merely be reasonable or desirable, but necessary, and
that ‘there can be no room for such a term if it would be in conflict
with the express provisions of the agreement’. The learned judge
relied in this regard on South African Mutual Aid Society v Cape
Town Chamber of Commerce11 where Van Winsen JA said:
‘A term is sought to be implied in an agreement for the very reason that the
parties failed to agree expressly thereon. Where the parties have expressly
agreed upon a term and given expression to that agreement in the written
contract in unambiguous terms no reference can be had to surrounding
circumstances in order to subvert the meaning to be derived from a
consideration of the language of the agreement only.’
[19] In my view, therefore, especially given the absence of
evidence as to what the parties intended, it is not possible to

10 1999 (4) SA 840 (W) at 844A-C.
11 1962 (1) SA 598 (A) at 615D-E. See Aymard v Webster 1910 TPD 123; Mullin (Pty) Ltd  v
Benade Ltd above at 215I-H; and Pan American World Airways Incorporated v SA Fire and
Accident Insurance Co Ltd 1965 (3) SA 150 (A) at 175C; Alfred McAlpine & Son (Pty) Ltd
above at 531E-F and Robin v Guarantee Life Assurance Co Ltd 1984 (4) SA 558 (A) at 567A-
F.

impute into the contract between the parties a term that is in
conflict with their express agreement as to its duration. This is all
the more so since the evidence that we do have conflicts with the
proposition argued for by Transnet that the contract was
terminable on reasonable notice.
[20] Lastly, the question of costs. Ponnan J considered that
Rubenstein was responsible for creating the urgency that led to the
application being made on an urgent basis. He censured
Rubenstein by awarding only half his costs. The court below
disagreed with the decision and reversed the order, allowing
Rubenstein full costs.
[21] Transnet argues that the question of costs is a discretionary
matter, and that the appeal court ought not to have interfered with
the order. It is clear, however, that that court, although it does not
say so expressly, considered that Ponnan J had misdirected

himself. The judgment deals with the fact that Rubenstein, in his
replying affidavit, explained the reasons for delay, which related
largely to attempts to settle the matter and to enter into a new
contract. It was not essential for Rubenstein to deal fully with the
question of delay in the founding affidavit given that much of it was
attributable to ongoing discussions with Transnet about the
conclusion of a new contract. Transnet was not deprived of the
opportunity properly to prepare and file its answering affidavit. The
costs order, intended to censure Rubenstein, was based on the
assumption that the application was brought on an urgent basis
only because of delay on the part of Rubenstein. This was not the
case, as was fully explained in the replying affidavit. Thus there
was, with respect, a misdirection on the part of the learned judge
of first instance, and the court on appeal was entitled to interfere
with the costs order as it did.

[22] Accordingly the appeal is dismissed with costs.

C H Lewis
Judge of Appeal

Concur:
Mpati DP
Zulman JA
Mthiyane JA

CLOETE JA:
[23] I have had the advantage of reading the judgment by my
colleague, Lewis JA. I concur in the conclusion she has reached
but I approach the matter with a different emphasis. I also find it
unnecessary to consider whether a tacit term can be imputed to
the parties in view of the express term of the contract relating to its
duration; and if the appeal is disposed of for the reasons set out in
this judgment, whatever is said on that question would be obiter.
Because the facts are set out fully in the judgment of my learned
colleague, a brief summary will suffice for purposes of this
judgment.

[24] The respondent in this appeal is Mr Rubenstein, a jeweller.
He brought motion proceedings as a matter of urgency in the High
Court, Johannesburg, against the appellant, Transnet. Transnet
owns the Blue Train. Part of the relief claimed by Rubenstein in the
notice of motion was the following:
‘2.
Declaring that a contract exists between the applicant [Rubenstein] and
the respondent [Transnet], which entitles the applicant to the sole and
exclusive right to operate a jewellery boutique and to sell jewellery and other
gift items on respondent’s train known as the “Blue Train”.
3.
Declaring that the respondent bound itself to permit the applicant to
operate the aforesaid boutique until such time as the business of operating

the Blue Train is privatised i.e. vests in a private organisation not under the
control of the State.’

[25] It has at all times been common cause that a contract was
concluded between Rubenstein and Transnet in terms of which
Rubenstein was granted the right to operate a jewellery boutique
on the Blue Train. The prayers quoted above were refused by
Ponnan J at first instance, although alternative relief was granted
to Rubenstein. On appeal, the full court (Gildenhuys J,
Schwartzman and Willis JJ concurring) set aside the order made
but issued a declaratory order that the purported cancellation of
the contract between Rubenstein and Transnet was invalid. That
order presumably satisfied Rubenstein as he has not sought to
challenge it. Transnet has, however, appealed further with the
special leave of this court.

[26] It is common cause that the letter written on behalf of
Transnet dated 14 July 1999 and which embodied the express
terms of the contract between the parties provided that ‘the
duration’ of the contract ‘is to extend to the final date of
privatisation’. The Blue Train has not been privatised yet and it is
at present uncertain when this will occur.

[27] Counsel representing Transnet submitted that Transnet
was entitled to cancel the contract on notice to Rubenstein
because of a tacit term permitting it to do so. In the absence of
such a tacit term Transnet’s appeal cannot succeed.

[28] The fundamental problems facing Transnet are twofold. In
motion proceedings the affidavits constitute not only the evidence,
but also the pleadings.12 Transnet’s answering affidavit is deficient
in both respects.

[29] There is no allegation in the answering affidavit that the
contract contained the tacit term for which Transnet’s counsel
contended ─ much less a formulation of such a term. The high-
water mark of Transnet’s case is the following statement in the
affidavit of Ms Borotho, who is now (but was not at the time when
the contract with Rubenstein was concluded) the Executive
Manager of Luxrail (which is part of Transnet and operates the
Blue Train on its behalf):
‘I have been advised and respectfully submit that the appointment of the
applicant to manage the boutiques was made on a supposition common to
both parties that the business of The Blue Train would be privatised by the
end of 1999. That supposition was mistaken and The Blue Train was not
privatised as was assumed.’

12 See eg Triomf Kunsmis (Edms) Bpk v AE & CI Bpk 1984 (2) SA 261 (W) 269G-H and
Saunders Valve Co Ltd v Insamcor (Pty) Ltd 1985 (1) SA 146 (T) 149C.

A supposition, to have legal effect, must translate into a mistake,
a misrepresentation, a term or a condition (and the term or
condition may be express or tacit). This court said in Van Reenen
Steel (Pty) Limited v Smith NO13:
‘[8]
Assumptions or suppositions can have many forms and have different
effects depending upon the circumstances. An assumption relating to a future
state of affairs
“relates to an agreement which is in operation and its recognition would have
a direct bearing upon one of the terms of the agreement. Such a supposition
is indistinguishable from a condition,”
usually a resolutive condition, perhaps also a condition precedent or an
ordinary term of the contract. The use of the word “supposition” or
“assumption” instead of “condition” in this context is not conducive to clear
thinking.
[9] Assumptions may also relate to present or past facts. If unilateral, one
is back to the effect of a unilateral mistake on a contract. If common, unless
elevated to terms of the agreement, they invariably amount to no more than
the reasons for contracting (on those terms) or, expressing the same idea,
common mistakes relating to a motive in entering into the agreement
(“dwaling in beweegrede”). Whether or not a motive leading up to an
agreement is based upon an assumption of fact, it remains a motive. A party
cannot vitiate a contract based upon a mistaken motive relating to an existing
fact, even if the motive is common, unless the contract is made dependent
upon the motive, or if the requirements for a misrepresentation are present.

13 2002 (4) SA 264 (SCA) (footnotes omitted).

The principle is as stated in African Realty Trust Ltd v Holmes 1922 AD 389
at 403:
“But as a Court, we are after all not concerned with the motives which
actuated the parties in entering into the contract, except insofar as they were
expressly made part and parcel of the contract or are part of the contract by
clear  implication.” ’
The allegations made by Borotho accordingly do not go far
enough. In the absence of an allegation by Transnet that the
agreement between the parties contained a tacit term entitling
Transnet to cancel it, a defence based on such tacit term cannot
succeed. Nor is it for this court to formulate such a tacit term when
Transnet has failed to do so.

[30] Furthermore Transnet delivered no affidavit deposed to by
the employee(s) who had negotiated with Rubenstein and who had
knowledge of what the agreement was, to the extent to which (if at
all) it was not embodied in the letter of 14 July 1999. The existence
of a tacit term is primarily a question of fact (as opposed to a term
which is implied by operation of law); and the decision in Wilkins
NO v Voges,14 which was much relied upon by Transnet’s counsel,
makes it clear at 136I-137A and 141C-E that this is so even where
the court is dealing with a tacit term which is imputed to the
parties. The advice given to Borotho, whatever it source, was

14 1994 (3) SA 130 (A) 136H-I.

therefore hearsay and inadmissible and her submission is
nothing more than argument without a factual foundation. The
argument advanced by Transnet’s counsel suffers from the same
defect. In response to the passage in Borotho’s affidavit quoted
above Rubenstein said in his replying affidavit:
‘I emphatically deny that there was a common supposition that privatisation
would take place by the end of 1999. Nor was it ever suggested that my rights
to operate the boutique were in any way affected because privatisation had
not occurred by the end of 1999. I state that the year 1999 was never
mentioned as a material time with respect to my contract.’
There is no admissible evidence ─ indeed, no evidence at all ─ to
contradict this assertion; and it is not so improbable that it falls to
be rejected even although uncontradicted.15 What Rubenstein
might have said if faced with an allegation that the contract
between the parties contained a tacit term entitling Transnet to
terminate it on notice, and evidence in support of such an
allegation, is a matter of pure conjecture.

[31] Borotho did say in her affidavit:
‘Transnet has been forced to deal with this matter on the basis of
unreasonable time frames fixed by the applicant, without due regard to
Transnet’s procedure or rights and interests as to the time period for the filing
of its notice of intention to oppose and answering affidavit. It has been

15 Some of the decisions of this court on the point are collected  in Kentz (Pty) Ltd  v Power
[2002] 1 All SA 605 (W) paras [16] to [20].

deprived of an adequate opportunity to obtain confirmatory affidavits from
persons who have knowledge of certain crucial aspects of this case.’
But Transnet did take a week longer than the time period fixed by
Rubenstein for the filing of its answering affidavit; and no attempt
was made by Transnet to have the matter postponed so that
further affidavits could be delivered. Nor did Transnet aver that the
person(s) who negotiated and concluded the contract with
Rubenstein were no longer available to it, and seek to have the
matter referred to oral evidence in terms of Uniform Rule of Court
6(5)(g) so that Rubenstein could be cross-examined. On the
contrary, Transnet was content to argue the application, and both
appeals, on the papers as they stood.

[32] In short, Transnet’s defence has no basis in fact or in law.
The
appeal against the order made by the full court on the merits
accordingly falls to be dismissed.

[33] Transnet’s appeal against the costs order made by the full
court must suffer the same fate. Rubenstein was deprived of half
of his costs by Ponnan J, who held the view that Rubenstein had
abused the process of the court by the delay in bringing the
application. The full court set this order aside and awarded
Rubenstein all of his costs in the court of first instance. The

submission on behalf of Transnet to this court was that there
was no basis upon which the full court could legitimately have
interfered with the discretion exercised by the court of first
instance. But there was. As the full court pointed out, Ponnan J
disregarded the explanation for the delay given by the respondent
in his replying affidavit, in reply to the complaint raised by Transnet
in this regard in its answering affidavit. Rubenstein’s explanation,
which there is no reason to doubt, is that he, on several occasions
personally and in a letter written by his attorney, requested a
meeting to discuss the matter; and although Borotho indicated her
willingness to do so, she never fixed a date for such a meeting
despite an undertaking that she would. Ultimately, Rubenstein’s
attorney wrote a letter requesting Transnet to withdraw its
purported notice of termination and that letter was simply ignored
by Transnet. The application was then urgent because the date for
cancellation specified by Transnet was looming. Rubenstein
cannot legitimately be criticised for attempting to settle the matter
before resorting to litigation. Counsel representing Transnet
submitted that the explanation given by Rubenstein should have
been in the founding affidavit. I disagree. It formed no part of his
cause of action on the merits. It was also not incumbent upon him,
when dealing with the question of urgency in terms of Uniform

Rule of Court 6(12), to anticipate the complainant made by
Transnet.

[34] It is for these reasons I conclude that the appeal should be
dismissed.

______________
T D CLOETE
JUDGE OF APPEAL

Concur: Zulman JA