Chevron South Africa (Pty) Ltd v Ufudu Transport (Pty) Ltd [2016] ZAGPJHC 251 (6 September 2016)

Chevron South Africa (Pty) Ltd (Chevron) entered into a distribution agreement with Ufudu Transport (Pty) Ltd (“Ufudu”) in September 2004, allowing Ufudu to sell and distribute Chevron's petroleum products. Dr. Mogale and Mr. Ngwenya, along with Baniparsad, all directors of Ufudu at the time, provided individual deeds of suretyship to Chevron, binding themselves as sureties and co-principal debtors for any amounts Ufudu might owe Chevron.

Ufudu's management under Baniparsad led to financial difficulties, resulting in a debt of over R2.2 million to Chevron by May 2006, causing Chevron to terminate Ufudu's credit facility. Ufudu then acknowledged the debt and agreed to repay Chevron over an extended period, with Chevron agreeing to supply Ufudu strictly on a cash-on-delivery basis thereafter.

In October 2006, Ufudu, represented by Dr. Mogale and Mr. Ngwenya, entered into two agreements with Mooipan Boerdery CC (“Mooipan”), which lacked the necessary regulatory license to distribute petroleum products. The agreements included a lease of Ufudu's premises and a "joint-venture" agreement, under which Mooipan would manage the day-to-day operations and sell petroleum products on behalf of Ufudu. Mooipan effectively conducted its own petroleum resale business using Ufudu's name and regulatory license.

In February 2008, Dr. Mogale and Mr. Ngwenya sold their shares in Ufudu to Mr. Masinga, leading to a dispute with Mooipan. Around the same time, Chevron upgraded its accounting system, which led to an error resulting in payments being made to Ufudu's bank account, over which Mooipan had no control. This situation led to a significant outstanding balance on Ufudu's account with Chevron.

Chevron's claim against the defendants was for the outstanding balance for petroleum products sold and delivered post-February 2008. The defendants initially disputed the direct relationship between Chevron and Mooipan and denied that any product was sold or delivered to either Ufudu or Mooipan. However, during the trial, the defendants abandoned their initial defence and introduced a new defense, challenging the authority of Mooipan to order petroleum products from Chevron on Ufudu's account and claiming that any such authority was revoked in February 2008.

The court held that an authority or power granted to an agent can be effectively revoked by the principal, even if the authority is "coupled with an interest," provided that the interest is not in the subject matter of the power itself but rather in what is produced by the exercise of the power. In this case, the court found that the authority granted to Mooipan by Ufudu to purchase petroleum products on Ufudu's account was effectively revoked by Ufudu, despite Mooipan having an interest in the exercise of that authority under the "joint-venture" agreement.

The court distinguished between an authority that is "coupled with an interest" in the sense of the recipient having a real right in the property (which would make the authority irrevocable) and an authority where the agent has an interest in the outcome of the exercise of the power (which does not make the authority irrevocable). The court concluded that Mooipan's interest was of the latter kind and, therefore, the revocation of the authority by Ufudu was effective.

The court also held that the revocation of Mooipan's authority was a breach of the "joint-venture" agreement, but this breach did not render the revocation ineffective. Instead, it would give rise to a potential claim for damages by Mooipan against Ufudu for breach of contract. However, the revocation itself terminated Mooipan's power to bind Ufudu to Chevron in respect of purchases of petroleum products on Ufudu's account.

The court referred to the following authorities:

1. Consolidated Frame Cotton Corporation Ltd v Sithole and Others 1985 (2) SA 18 (N)
    This case was cited for the general rule that a principal may freely terminate the authority he has conferred on his agent, even if it is asserted in the mandate establishing the authority that the authority is not to be revoked.

2. Stupel & Berman Inc v Rodel Financial Services (Pty) Ltd 2015 (3) SA 36 (SCA)
   This case was cited for the general principle that a mandate can always be effectively revoked or renounced, although this might give rise to a claim for damages.

3. Hunt v Rousmaniere's Administrators 8 Wheat 174, 21 US 174 (1823)
   This US Supreme Court decision was discussed extensively in the judgment and was used to explain the concept of a power "coupled with an interest," which survives the person giving it and may be executed after his death if it is an interest in the thing itself.

4. Natal Bank Ltd v Natorp and Registrar of Deeds 1908 TS 1016
   This case was referred to for the proposition that a mandate cannot be revoked if a person has been created agent in rem suam by the cession of an action to him.

5. Ward v Barrett NO and Another 1962 (4) SA 732 (N)
   This case was cited for the recognized exception to the general rule that a power ceases with the life of the person giving it, namely where the authority "is coupled with an interest."

6. National Bank of South Africa Ltd v Hoffman's Trustee 1923 AD 247
   This case was cited for the distinction between a power that was granted from a cession of action or rights and the appreciation of the distinction in Rousmaniere of an interest in the subject matter of the power as opposed to an interest arising from the exercise of power.

7. The Law of South Africa (LAWSA)
   The court referred to LAWSA for the uncertainty surrounding the question of whether authority can be given irrevocably and the failure to distinguish between the revocation of authority on the one hand and the termination of the relationships arising out of the contract of mandate on the other.