O Attribution — You Must Give Appropriate Credit, Provide a Link to the License, and Indicate If Changes Were Made

o Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.

o NonCommercial — You may not use the material for commercial purposes.

o ShareAlike — If you remix, transform, or build upon the material, you must distribute your contributions under the same license as the original.

How to cite this thesis

Surname, Initial(s). (2012). Title of the thesis or dissertation (Doctoral Thesis / Master’s Dissertation). Johannesburg: University of Johannesburg. Available from: http://hdl.handle.net/102000/0002 (Accessed: 22 August 2017).

Faculty of Law ______

Canadian and South African Private International Law of Contract - a comparative Study

by YVONNE DLIWAYO Minor LL.M. Dissertation Submitted in partial fulfillment of the requirements for the degree of Magister Legum MASTERS OF LAW (LLM) In INTERNATIONAL COMMERCIAL LAW University of Johannesburg SUPERVISOR: PROF EA FREDERICKS [10278 Words] January 2019

1 TABLE OF CONTENTS

TABLE OF CONTENTS...... II

CHAPTER 1 INTRODUCTION ...... 1

CHAPTER 2 CANADIAN PRIVATE INTERNATIONAL LAW OF CONTRACT ...... 3

1. Introduction ...... 3

1.1 Party Autonomy and Express choice of law ...... 4

1.2 Ancillary aspects of party autonomy: Dépeçage ...... 5

1.3 Implied Choice of Law ...... 5

1.4 Limitations to Party Autonomy...... 6

2. Absence of a Choice of Law ...... 6

3. Scope of the proper law ...... 8

3.1 Formal Validity ...... 8

3.2 Capacity ...... 9

4. Conclusion ...... 10

CHAPTER 3 SOUTH AFRICAN PRIVATE INTERNATIONAL LAW OF CONTRACT . 11

1. Introduction ...... 11

1.1 Party autonomy and Express choice of law ...... 11

1.2 Ancillary Aspects of Party autonomy: Dépeçage ...... 12

1.3 Tacit Choice of Law ...... 13

1.4 Limitations to party Autonomy ...... 14

2. Absence of a Choice of Law ...... 15

3. Scope of the proper law ...... 17

3.1 Formal Validity ...... 17

3.2 Capacity ...... 18

4. Conclusion ...... 20

CHAPTER 4 COMPARATIVE ANALYSIS ...... 21

1. Introduction ...... 21

II 2. Party autonomy and express choice ...... 21

2.1 Dépeçage ...... 21

2.2 Limitations of Party Autonomy ...... 22

2.3 Tacit Choice of Law ...... 23

3 Determination of the Proper Law ...... 23

4. Scope of the proper law ...... 24

4.1 Formal Validity ...... 24

4.2 Capacity ...... 24

5. Interim Conclusion ...... 25

CHAPTER 5 RECOMMENDATIONS AND CONCLUSION ...... 26 BIBLIOGRAPHY ...... IV

III CHAPTER 1 INTRODUCTION

South Africa and Canada share a sentimental history and commercial relationship at present. Histor- ically, in the 1980s, Canada was seen at the forefront of establishing a multi-ethnic, multi-racial and democratic society in South Africa. According to Hogg, Canada has contributed significantly in the development of policy and the legal framework in South Africa, particularly in the drafting of the South African Bill of Rights.1 Commercially, South Africa, as one of the leading economies in Africa, is said to be the prime destination for Canadian goods and services.2 Statistics indicate that in 2017 alone, two-way merchandise trade between the two states was a total of $1.27 billion, consisting of exports and imports.3 Furthermore, it is submitted that Canada as one of the major investors in South Africa, focuses on several sectors including the mining and mineral industry.4 Currently, trade and investment between Canada and South Africa is facilitated by a memorandum of understanding on cooperation in mining and mineral development and a double taxation agreement.5 If the question of “what governs an international contract?” had to be asked, the immediate answer in both legal systems would be “the proper law of the contract”. This is because both Canadian (except for the province of Quebec) and South African private international law of contract is governed by the English common-law. Hence, the objective of this dissertation is to investigate the private international law of contract rules of common-law Canada and South Africa, to establish compatibility or non-compatibility thereof. The purpose of this comparative analysis is to investigate whether both legal systems are on the right track, whether there are possible lessons that the two can learn from each other or whether a different legislative approach should be taken into consideration. It must be

1 Hogg “Canadian law in the Constitutional Court of South Africa” 1998 SAPR/PL 1 2. The author submits that “the Canadian Charter of Rights is the closest in its language and structure to the South African Bill of Rights. It is also submitted that “Canadian and South African experts worked closely together in drafting South Africa’s first democratic constitution. 2 See Newspaper article by Geoffrey York - The Globe and Mail (23-06-2014) where the Minister of international trade of Canada at the time, Mr Ed Fast, was quoted saying South Africa “remains the linchpin of Canada’s economic strategy on the African continent”. 3 High Commission of Canada in South Africa https://www.canadainternational.gc.ca/southafricafriquedusud/bilateral relations_bilaterales/canada_southafrica-afrique-du-sud.aspx?lang=eng (30 -08-2018). 4 Other sectors include, transportation, hospitality, information and communication, as well as food processing and instrumentation sectors; n 3 above. 5 The then Minister of mineral resources Adv. Ngoako Ramathlodi was quoted stating: “The signing (of the memorandum of understanding) represents South Africa’s commitment to global partnerships in development and serves to further encourage more Canadian and South African companies operating throughout the mining and minerals value chain to deepen the special relationship we have established over the years and formalized today.” See Mining Review Africa, https://www.miningreview.com/sa-government-signs-mou-with-canada-on-mining-and-mineral-development (11/12/2018). 1 noted that not all aspects of the private international law of contract will be dealt with. This dissertation limits itself to the proper law rule, and two topics that fall outside the scope of the rule. Thus, express choice of law, tacit/implied choice and objectively determined law, formal validity and contractual capacity. Canada and South Africa have been chosen because the two countries seem to share a commercial and political relationship, forming a basis for comparison. Furthermore, as part of the commonwealth, the two countries provide a basis for comparing the nations of the commonwealth at large, as most of the decisions in the private international law sphere are based on early English cases.6 The structure followed in this study will be to firstly to discuss the private international law rules of common-law Canada (Chapter 2). The same rules under the same topics in the South African legal system will follow (Chapter 3). Thereafter, a comparative analysis will follow, to explore the compatibility or non-compatibility of the two legal systems (Chapter 4). Finally, a recommendations and concluding chapter (Chapter 5) will end this dissertation, based on the observation of the two legal systems.

6 Wood Comparative Law of Security Interests and Title Finance (2007) 435-535. Book contains a list of the legal families of the world. Note however, that in Canada, the province of Quebec is not part of the common wealth. 2 CHAPTER 2 CANADIAN PRIVATE INTERNATIONAL LAW OF CONTRACT

1. Introduction In Canada, private international law is not codified in a single statute. The country follows the English common-law, inherited from the British during its colonisation. In the early stages of the English common-law, it was accepted that what governed an international contract was the law of the place where the contract was concluded – the lex loci contractus.7 In practise, this rule proved not to be good enough, as it came under attack for not giving effect to party autonomy, being too rigid, and fortuitous in not reflecting the reasonable expectations of parties.8 As a result, in 1760, the courts introduced a reformation of that position, and the court in Robinson v Bland9 stated that the general rule was that the lex loci contractus applied, except where the parties had a different law in mind.10 The reformation of the law in this regard continued and today, the “proper law” governs international contracts at common-law.11 The proper law doctrine is described as “the system of law by which the parties intended the contract to be governed, or where the intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its closest and most real connection".12 Therefore, in common-law Canada, the proper law of the contract governs the contract. Hereunder, a discussion of the proper law rule and its factors in the Canadian context com- mences.

7 Walker Castel & Walker: Canadian Conflict of Laws (6th ed) 31-1, Walker Halsbury’s Laws of Canada – Conflict of Laws (2006) 596; also see Robinson v Bland (1760) 12 Burr 1077. 8 For a detailed discussion, see Pitel and Rafferty Conflict of Laws (2010) 269-270; Castel and Walker (n 7) 31-1; Walker (n 7) 596. 9 Robinson v Bland (1760) 2 Burr 1077. 10 Walker (n 7) 31-1 to 31-2, Pitel and Rafferty (n 8) 270. Walker (n 7) 596. 11 Nygh Autonomy in International Contracts Oxford University Press Oxford (1999) 125; Pitel and Rafferty (n 8) 270, Walker (n 7) 596; Castel and Walker (n 7) 31-2. The proper law rule was adopted from the English courts and English decisions became of persuasive value to the Canadian courts. 12 Dicey and Morris Conflicts of Laws (1987) Rule 180 at 1161; Walker (n 7) 31-3; Forsyth Private International Law: The Modern Roman-Dutch Law Including the Jurisdiction of the Supreme Court (2012) 316. See also Richardson “The concept of characteristic performance and the proper law doctrine” 1989 Bond Law Review 284 289. 3 1.1 Party Autonomy and Express choice of law

It is an important principle of the common-law that persons should have the freedom to arrange their contractual affairs according to their discretion.13 In Printing and Numerical Registering Co v Simp- son,14 the court was quoted saying: “if there is one thing which more than another public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting”.15 This profound expression shows the need for parties to freely contract and determine the course and nature of their contract, in particular, that people who find themselves contracting have an inher- ent right to choose the law that will govern their contract. Following the common-law position, party autonomy is recognised and highly favoured in Canada, particularly in international agreements.16 One such way of practising this freedom is by expressly choosing the law applicable to the contract.17 Thus, parties can incorporate a clause in their contract, stating for example, that their contract is governed by the law of Germany. It is submitted that by expressly choosing the proper law of the contract, parties eliminate the difficulties associated with identifying their intentions.18 It seems Canada is on the right track in this regard considering that up to now, there are countries that still do not recognise this principle.19 Party autonomy found concrete establishment in Canada, after the case of Vita Food Products Inc v Unus Shipping Co.20 In casu, it was held that the very words incorporated in a bill of lading must be given effect, and the law which the parties intended to apply is the proper law of the contract.21 The court further confirmed that its decision was influenced by English law, with Lord Wright holding that “by English law, the proper law of the contract is the law chosen by the parties”.22 This case finds its origin in the Canadian province of Nova Scortia. Another case where the court confirmed the approval of party autonomy is the Amin Rasheed Shipping Corp v Kuwait Insurance Co23 case, where Lord Diplock held that if it is evident from the contract itself that the parties intended to apply the law of a particular legal system that law shall apply.24 The use of the word “shall” by

13 Schimtthoff “The Doctrine of the Proper Law of the contract in the English Conflict of Laws” 1940 The Georgetown Law Journal 447; Marshall “Reconsidering the proper law of the contract”2012 Melbourne Journal of International Law 447. 14 Printing and Numerical Registering Co v Simpson LR 19 462 465. 15 n 14 above. Also see Schimtthoff (n 13) 447. 16 Leon and Reynolds “A Canadian Perspective: Choice of Law and Choice of Forum” 2005 NYSBA International Law Practicum 130. 17 Walker (n 7) 31-3; Pitel and Rafferty ( n 8) 272. 18 n 17 above. 19 For example, Brazil. See Kandiyero Party autonomy in Brazilian and South African Private International Law of Contract (dissertation 2015)18. 20 Vita Food Products Inc v Unus Shipping Co 1939AC 277 290 (PC). 21 n 20 above at 289-290. 22 n 20 above. 23 Amin Rasheed Shipping Corp v Kuwait Insurance Co 1984 AC 50. 24 n 23 at par 61. 4 the said presiding officer implies that if indeed the parties have chosen a law, that law will always apply.25 Therefore, in Canada, the principle of party autonomy is well received.

1.2 Ancillary aspects of party autonomy: Dépeçage There are cases where, instead of one legal system governing the entire contract, parties choose to incorporate different legal systems for different aspects of the contract. This is referred to as dé- peçage.26 This principle is recognised in Canada, both in the common-law and civil-law provinces. In Quebec, it is found in Article 3111 of the Quebec Civil Code, where it is stated that: “The Law of a country may be expressly designated as applicable to the whole or only part of a juridical act”.27 In the common-law provinces, dépeçage was confirmed in Hamlyn v Talisker.28 In Canada dépeçage is not limited to the choice of the parties, as the courts may decide in the absence of choice, that different laws are applicable to different aspects of the contract.29 This is seldom applied, as a good reason must exist for the court to do so, but the possibility is nevertheless acknowledged.30 Therefore, in light of the above discussion, dépeçage is recognised in Canada.

1.3 Implied Choice of Law In cases where the parties have failed to express their choice of law, the proper law rule next deter- mines whether a tacit law has been agreed upon.31 It is submitted that such a consideration exists to effect the reasonable expectations of the parties.32 In Canada, certain factors are used as an indication that a certain legal system has been chosen, but failed to be reduced into writing. Such factors include a jurisdiction clause in the contract, a choice of the place of arbitration, the language and currency of the contract.33 A jurisdiction clause and a choice of the place of arbitration are considered as strong indicators whilst the language and currency of the contract are weak indicators, and face the threat of

25 It must be noted however, that party autonomy is not absolute in Canada. Limitations will be discussed in paragraph 1.4 below. 26 Dépeçage is also described as “the severance of different parts of the contract in order to subject them to different legal regimes”, see Adams The compatibility of Australian and South African Private International Law with The Hague Principles on Choice of Law in International Commercial Contracts (2013 dissertation SA) 11; Walker (n 7) 598, Pitel and Rafferty (n 7) 274. 27 Walker (n 7) 601; Article 3111 of (QC) Civil Code of Quebec, R.S.Q. 1991, c.64. 28 Hamlyn v Talisker 1954 AC 202 (HL). 29 n 28 above. 30 This was acknowledged in Montreal Trust Co v Stanrock Uranium Mines Ltd 1965 1 O.R 258 (HCJ); Walker (n 7) 601; Pitel and Rafferty (n 8) 277. 31 Pitel and Rafferty (n 8) 274. 32 n 31 above. 33 n 31 above. 5 being disregarded.34 Although some commentators in Canada are sceptical with the recognition of a tacit choice,35 one is compelled to believe that it is nevertheless recognised in Canada.

1.4 Limitations to Party Autonomy Party autonomy is not absolute. This is to say, it is not without qualifications. There are various limitations attached to parties’ freedom to choose the law applicable to their contract in Canada. The threshold is that the choice must be bona fide, legal and it must not be an attempt to evade public policy.36 These limitations were set in the Vita Foods case discussed above.37 Consequently, choices that fall outside of this threshold, for instance, where the subject of the contract is the sale of illicit substances, or where the parties mischievously select a legal system to evade mandatory rules of the legal system mostly connected to the contract, the Canadian courts will be sure to put restrictions or not recognise at all the choice of law made by the parties. The restrictions to party autonomy are not limited as determined in the Vita foods case. There are other factors that put this principle in jeopardy. It is submitted that according to Canadian law, there need not be a connection between the chosen law and the contract.38 This is indeed the position, but Walker argues that if parties choose a law with absolutely no connection to the contract, this will dilute the bona fide factor, and courts will subsequently disregard such choice.39 It is further submitted that if the choice of law is ambiguous, ordinary principles of contract interpretation will be used to construe such choice, but if it is meaningless, the courts will disregard it.40 Therefore, although parties enjoy party autonomy in Canada, few exceptions limit this freedom.

2. Absence of a Choice of Law Anciently, in the absence of a choice of law by the parties, the common-law would employ certain presumptions to help facilitate the determination of the applicable law.41 An example is the presump- tion that the proper law was the law of the place of performance.42 These presumptions rendered some connecting factors more important than others, and raised a lot of issues.43 This rule was reformed,

34 Pitel and Rafferty (n 8) 275. 35 n 34 above. It is submitted that recognising an implied choice of law is “artificial, imputing intent to the parties that may not exist.” Consequently, only two parts of the proper law are preferred, an express law and objective determination. 36 Pitel and Rafferty (n 8) 272; Walker (n 7) 31-3; Walker (n 7) 597. 37 n 20 above. 38 Leon and Reynolds (n 16) 131. 39 Walker (n 7) 31-3. 40 n 39 above. 41 Pitel and Rafferty (n 8) 276; Walker (n 7) 31-6. 42 n 41 above. 43 Pitel and Rafferty (n 8) 276. 6 and a new general rule immerged, that where there is an absence of an express or an implied choice of law, the law with which the transaction has its closest and most substantial connection governs the contract.44 This was landmarked by Imperial Life Assurance Co of Canada v Colmenares,45 where the Supreme Court of Canada had to decide whether the law of Ontario or Cuba governed two life insurance contracts. The Supreme Court was quoted stating:

“the problem of determining the proper law of a contract is to be solved by considering the contract as a whole in light of all the circumstances which surround it and applying the law with which it appears to have the closest and most substantial connection”.46

The law with which the transaction has its closest and most real connection raises two questions. First, should the courts apply the law which the parties would have intended had they directed their minds to this question? - a subjective approach, or secondly and alternatively, should the courts apply the law with which reasonable persons in the position of the parties would intend? - an objective approach.47 Authors are not unanimous on the topic, as there is considerable support for both the subjective48 and the objective approach.49 Be that as it may, it seems an objective approach is followed by the Canadian courts, with a number of connecting factors weighed against each other to determine the law most closely connected to the transaction.50 These factors include among others the place of contracting, the place of performance of the contract, the place where the subject matter of the contract is located, the residence of each of the parties, the style and language used in the contract, and the fact that one of the parties is a government.51 It is relevant to add that in Canada, in cases where the place of contracting is the same as the place of performance, it is considered an indicator that the law of that particular place is applicable to the contract.52 In Imperial Life Assurance Co of Canada v Colmenares,53 the court came to the conclusion that the law of Ontario applied, because the appli- cations for coverage and the policies were prepared in Ontario using a standard form that complied with the law of that province. Thus, a qualitative approach to the determination of choice of law is followed by the courts in Canada.

44 Pitel and Rafferty (n 8) 275; Walker (n 7) 31-4. 45 1967 SCR 443. 46 n 45 at par 448. 47 Walker (n 7) 31-5. 48 Dicey and Morris Conflicts of Laws (1932) Rule 155, where he is quoted saying, “The law which the parties intended or presumed to have intended the contract to be governed is applicable”. 49 Westlake Private International Law (5th ed) s. 212 at 305-308, Cheshire and North Private International Law (9th ed) 198. 50 Charron v Montreal Trust Co 1958 OJ N.O 640; Pitel and Rafferty (n 8) 275, Walker (n 7) 606; Walker (n 7) 31-4. 51 Pitel and Rafferty (n 8) 275; Walker (n 7) 31-6; Walker (n 7) 606. 52 Walker (n 7) 31-6. 53 n 45 above. 7 As one can reasonably make out, determination of choice of law by the courts is not a clear and certain process. Many uncertainties and difficulties are associated with this determination of the choice of law.54 However, it is still applied to date, and is the status quo of the courts in Canada.

3. Scope of the proper law Even after the proper law has been determined, whether expressly, implied or assigned, other issues are most likely to arise. The determination of the proper law of the contract does not guarantee the contracts validity, or whether the parties had the capacity to contract.55 In this section, such issues (formal validity and capacity), where the proper law may not apply will be explored.56

3.1 Formal Validity In Canada, a commercial contract is said to be formally valid if it complies with the requirements of either the lex loci contractus or the proper law of the contract.57 This was held in Greenshields Inc v Johnston1981 28 AR 1 (QB),58 where a contract was made in the province of Alberta. In casu, the parties failed to comply with the guarantee laws of the contract (Guarantees Acknowledgement Act) that required a person giving a guarantee to appear before a notary public and provide a signature to the required statement. The court held that the contract was not formally valid because it did not comply with the laws of the place of contracting (Alberta). Furthermore, the court held that putting aside the lex loci contratus, the proper law of that contract was that of Ontario. Therefore, this case confirmed the two options of applicable laws- the lex loci contractus and the proper law of contract.59 Initially, it was mandatory for the lex loci contractus to apply, based on the maxim locus regim actum which means ‘the place governs the act’.60 However, the position changed to allow for the proper law of contract to apply in the alternative.61 In land issues, Walker submits that “although the conveyance

54 Walker (n 7) 31-6; Walker (n 7) 606; Pitel and Rafferty (n 8) 277. 55 In general, see Fredericks on contractual capacity in Canada - Fredericks Contractual Capacity in Private Interna- tional Law (2016) 85; Pitel and Rafferty (n 8) 277. Also see Schoeman, Roodt and Wethmar – Lemmer Private Inter- national Law in South Africa (2007) 56 at par 103. 56 Pitel and Rafferty (n 8) 277. 57 Pitel and Rafferty (n 8) 280; Walker (n 7) 31-51; Walker (n 7) 617. 58 1981 28 AR 1 (QB). 59 This was termed a “multilateral approach”. See Pitel and Rafferty (n 8) 281. 60 It is significant to note that in marriage cases, this rule still applies. See Berthuame v Dastous 1930 1 DLR 849; see also Walker (n 7) 31-53. 61 Walker (n 7) 31-53. 8 must comply with the formal requirements of the lex situs”, the contract should be regarded as formally valid if it complies with either the lex loci contractus or the proper law of the contract.62 There- fore the lex loci contractus, proper law and the ls in land issues governs the formal validity of the contract in the Canadian courts.63

3.2 Capacity It is not absolutely clear as to what law governs contractual capacity of parties in Canada.64 Neither the courts nor the academic authors provide certainty or uniformity to the applicable law in this regard.65 With regard to case law, the only common-law Canadian decision dealing with the contractual capacity of parties is Charron v Montreal Trust Co,66 where the court applied the proper law of the contract, objectively determined.67 The court in casu held that:

“A party’s capacity into a contract is to be governed by the proper law of the contract, that is the law of the country with which the contract is most substantially connected. In this case there is no doubt that the proper of the agreement was the law of Ontario, and by that law, neither party to the agreement lacked the necessary capacity.”68

Some authors hold the view that, with regards to contractual capacity of parties, there are three possible laws that may apply.69 These are the law of the place of contracting (lex loci contractus), the law of the parties’ habitual residence and the putative proper law of the contract.70 All these afore- mentioned possibilities have their flaws and have been criticised. For example, the law of the place of contracting is considered to be fortuitous and dependent on the proper law of the contract.71 The law of the habitual residence of the parties is said to be famous in and drawn from cases involving the capacity to marry, not necessarily commercial relationships.72 Pitel and Rafferty in this regard favour the putative proper law including any express choice, as it is said to be more sensible and flexible to various contractual circumstances.73Walker on the other hand submits that the three possible legal systems that may govern contractual capacity are the lex domicilii, lex loci contractus, and

62 n 61 above. 63 Walker (n 7) 31-52. 64 Fredericks (n 55) 86; Pitel and Rafferty (n 8) 281. 65 Fredericks (n 55) 88. 66 1958 15 DLR (2d) 240 (Ontario). 67 Fredericks (n 55) 85. Also see Rafferty, et al (eds) Private International Law in Common law Canada (2010) 756. 68 Charron v Montreal Trust Co at 244-245. Also see Fredericks (n 53) 86. 69 Pitel and Rafferty (n 7) 281; Walker (n 7) 618. 70 Fredericks (n 55) 86; Pitel and Rafferty (n 8) 281, Walker (n 7) 618. 71 Walker (n 7) 31-52; Fredericks (n 55) 87. 72 n 71 above. 73 Fredericks (n 55) 86-87 9 the objective proper law of the contract.74 However, she also goes on to criticize the lex loci contractus and the lex domicilii, holding that the former applies to non-commercial matters whilst the latter is fortuitous.75 Furthermore, it is significant to add that the lex stus is said to apply in matters involving immovable property, as supported by Walker, Pitel and Rafferty.76 Therefore, from case law and views of authors put together, it seems the possible applicable legal systems to govern contractual capacity are the objective proper law, law of the place of contracting, the law of the parties’ habitual residence; the putative proper law of the contract (including any express choice), lex domicilii and lex situs.77

4. Conclusion In Canada, we see that there is little certainty in its private international law of contract rules. So many options exist as the applicable law of the contract. One may argue that this is an advantage in the sense that the system is not rigid, which can result in the courts applying a system of law that might not work for a particular contract. This reasoning carries some degree of truth. However, it seems the disadvantages outweigh the advantages thereof. This is because confusion is not uncommon in a such a system with many options. Castel and Walker describe this position in the following way:

“With so many options for connecting factors, a choice of law rule such as the proper law of the contract might seem to amount to a non-rule, leaving the courts to exercise unbridled discretion in the ascertainment of the applicable law.”78

Furthermore, the determination of the proper law, especially in the absence of choice is a lengthy process that brings legal uncertainty and no predictability because there are so many possibilities and so many connecting factors that have different relevance in the determination thereof. The same applies to formal validity and capacity. Therefore, one is compelled to believe that reformation is indeed needed in this legal system.

74 Fredericks (n 55) 87; Walker (n 7) 31-55. 75 Walker (n 7) 31-52. 76 Fredericks (n 55) 86-88. In cases involving foreign immovable property, Pitel and Rafferty favour the proper law of the contract to govern. 77 For a detailed discussion of contractual capacity in Canada, see Fredericks (n 55) 85-88. 78 Walker (n 7) 31-4. 10 CHAPTER 3 SOUTH AFRICAN PRIVATE INTERNATIONAL LAW OF CONTRACT

1. Introduction Private international law of contract in South Africa is governed by common-law, consisting of Ro- man Dutch law and an influence of English Law.79 Consequently, as in Canada, the law that governs the contract is the proper law of the contract.80 The formation of the proper law rule has been discussed in depth in the previous chapter, and applies herein. The aspects that make up the proper law rule and its scope will be discussed in the South African context hereunder.

1.1 Party autonomy and Express choice of law

“That our law recognises party autonomy in respect of the proper law of the contract seems clear. Thus where the parties have expressly or impliedly (or tacitly) agreed upon a governing law our courts would give effect to the intention of the parties”.81

This opening statement was made in the Laconian case,82 where the court made a clear indication that the South African private international law recognises the freedom of parties to choose a legal system to govern their contract.83 An express choice of law is regarded as the most concrete expression of party autonomy.84 Thus, identical to the position in Canada, parties may incorporate in their contract, a clause that states the chosen proper law. In Guggenheim v Rosenbaum,85 it was held that the law applicable to the contract is the law of the country which the parties have “agreed or intended.” In Creutzburg v Commercial Bank of Namibia, Mpati AP confirmed the recognition of party autonomy by holding that if parties have chosen a law to govern their contract, that law should be upheld.86 The list of South African judgements accepting party autonomy is replete.87 Authors such as Neels and

79 Schoeman, Roodt and Wethmar-Lemmer (n 55) 14. Authors refer to Forsyth (n 12) 29-73. 80 Forsyth (n 12) 316. 81 Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 (3) SA 509 (D & CLD) at 525 – G. See also Schoe- man, Roodt and Wethmar-Lemmer (n 55) 50. 82 n 81 above. 83 See also Standard Bank of South Africa Ltd v Efroiken and Newman 1924 AD 171 at 186; Forsyth (n 12) 316. 84 Schoeman, Roodt and Wethmar-Lemmer (n 55) 51. 85 1961 4 SA 21 (W) 16. 86 2006 4 All ASA 327 SCA 87 See Representative of Lloyds v Classic Sailing Adventures (PTY) Ltd 2010 5 SA 90 (SCA); Society of Lloyd’s v Lee 2006 5 SA 393 (SCA); Hay Management Consultant Ltd v P3 Management Consultants 2005 2 SA 522 (SCA). See also Adams (n 26) 10. 11 Fredericks have affirmed to the acceptance of party autonomy, holding that “the parties may, in principle, freely, expressly, or tacitly choose the proper law of their contract”.88 Whether or not this acceptance is absolute, is a topic to be discussed below. In light of the above discussion, it is safe to conclude that party autonomy is recognised in South Africa.89

1.2 Ancillary Aspects of Party autonomy: Dépeçage In South Africa, the judiciary and academic authors are not unanimous on whether dépeçage is recognised.90 There are different outcomes on cases and different opinions given by authors. In Improv- air (Cape) (Pty) Ltd v Establissements Neu,91 the court vehemently rejected the principle. Justice Grosskopf held that:

“An indivisible contract laying down reciprocal rights and obligations can, as a matter of logic, not be governed by more than one proper law. I exclude contracts where the parties have expressly agreed otherwise, or possibly some other exceptional cases, but in the ordinary contract which forms an organic whole, the parties’ rights and obligations would be distorted if some were to be governed by one system of law and others, by another. The same logic applies in a temporal sense – the proper law which is assigned to a contract at the time of its formation should continue to apply until all rights and obligations thereunder are extinguished.”92

In other words, Justice Grosskopf held that it does not make sense for different parts of the contract to be governed by different legal systems. On the contrary, in Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd,93 the court decided that one part of the contract was to be governed by the law of the place of performance, whilst the other, the law of the place of payment. This is one of the few cases where dépeçage was recognised and applied.94 Authors such as van Niekerk and Schulze submit that dépeçage is not fully recognised in South Africa95 whilst van Rooyen and Forsyth have attempted to address the issue, but failed to reach common ground on this aspect.96 Furthermore, there are no recorded cases where the parties have chosen different legal systems to govern different aspects of

88 Neels and Fredericks “The proper law of a documentary letter of credit” (part 1) SAMLJ 63 64. 89 Schoeman, Roodt and Wethmar-Lemmer (n 55) 51; Neels and Fredericks (n 88) 64; Adams (n 26) 11. 90 Edwards- Kahn “Conflicts of Laws” 11.2 (2003) LAWS 360; Adams (n 26) 14. 91 1983 2 SA 138 (C) 147 F-G. 92 n 91 at par 138-145; Also see Oppong Private International Law in Commonwealth Africa (2013) 136. 93 1984 3 SA 233 (D) 529 B-E. 94 n 93 above. In casu “different laws governed alternate parts of the contract”. The Laconian case is in fact considered a locus classicus on the severability principle in South African Law. See Adams (n 26) 14. 95 Van Nierkerk and Schulze The South African Law of International Trade: Selected Topics (2011) 95. 96 Van Rooyen Die Kontrak in die Suid- Afrikaanse Internasionaale Privaaterg (1972) 105; Forsyth (n 12) 290-291; Adams (n 26) 14. 12 the contract.97 In light of the above conflicting views, it seems dépeçage is not fully recognised in South Africa.98

1.3 Tacit Choice of Law With regards to a tacit choice of law, Forsyth distinguishes between two circumstances.99 One is where the parties have a specific choice of law in mind but fail to express it into writing. The other is when the parties “do not put their minds to the question of choice”.100 An example of the latter situa- tion is found in The Castle Mail Packets Co v Mitheram and Toteram,101 where it did not occur to the minds of the parties that it is necessary to choose the law that will govern their contract. In casu, the parties took passage to a voyage from Delagoa Bay to Durban but their luggage was stolen. Action was then instituted against the carrier, who was based in London.102 In such a case, Forsyth proposes that it is better for the courts to assign the proper law, as parties have failed to provide guidance in this regard.103 However, similar to the Standard Bank case,104 the courts found that the parties must have had a particular legal system in mind.105 As already stated above, there are also cases where the parties had in fact chosen a legal system, but failed to express the choice in writing. In such instances, the court looks at surrounding circumstances from which a choice can be inferred. This was confirmed in Guggenheim v Rosenbaum,106 where the judge confirmed this position by holding that “there are indications that the parties intended that our law should govern their contract.”107 The court looked at the fact that one of the parties was domiciled in South Africa, that his business was located there, that he entered into the contract while on a short visit in New York and intended returning to South Africa and that the agreement to marry in South Africa was because the defendant did not know the effect of the New York law on marriage. The compelling inference drawn from all those facts is that both parties intended that the law South Africa should govern their contract.108

97 Oppong (n 92) 137. 98 Adams (n 26) 14. 99 Forsyth (n 12) 326. 100 n 99 above. 101 1892 13 NLR 199. 102 “The Steamer was registered in London, her captain British and the appellant was incorporated in England.” See Forsyth (n 12) 326. 103 Forsyth (n 12) 326. See also Standard Bank of South Africa Ltd v Efroiken and Newman 1924 AD 171. In casu, the parties clearly lacked an intention with regards to the law that will govern their contract, but the court never the less presumed that the parties must have had a particular legal system in mind. See also Bouwers Tacit choice of law in international commercial contracts- the position in South African law and under the Rome 1 Regulation (2017) 10. 104 n 103 above. See also Adams (n 26) 10. 105 This case is an example of the thin line that exists between absence of choice and tacit choice of law. 106 n 85 above. 107 1961 (4) SA 21 (W) at paragraph 31 D-G. 108 See further discussion in Forsyth (n 12) 327. 13 Other factors taken as an indication of a tacit choice of law include reference to specific legislation in the contract,109 the use of a standard form in the contract110 and choice of forum clause in the contract.111 The latter factor is based on the maxim qui elegit iudicem elegit ius, which means ‘he who chooses the judge chooses the law.112 The level of strictness in South Africa was expressed in the Improvair case113 where the phrase “should not readily be implied” was used. Therefore, the South African judiciary gives due acknowledgement of the fact that certain circumstances may be regarded as indicators that a tacit choice of law has been chosen by the parties to a contract. Although scepti- cism has been expressed by authors and presiding officers regarding whether a tacit choice of law truly represents the intention of the parties, it is nevertheless recognised in South Africa.

1.4 Limitations to party Autonomy Similar to the position in Canada, party autonomy in South Africa is not absolute. There are cases where choice is rendered void, subsequently causing the courts to disregard it. It is submitted that the existing limitations are based on the idea to protect the parties to the contract, the interests of the forum and other countries involved in the contract.114 Mandatory rules are known to limit the choice of the parties.115 For example, in Representative of Lloyds v Classic Sailing Adventure,116 the proper law of the contract as per the choice of the parties was English law.117 The court, however, found that Short Term Insurance Act 53 of 1998 was applicable, and could not be excluded.118 The court further held that autonomy cannot prevail over the peremptory rules of the court.119 Although it was found that the South African act was not prohibitory per se, the English act was found to be in conflict with the provisions of the South African Short Term Insurance Act, and therefore could not be upheld.120 One therefore learns from this case that mandatory rules and rules that are in conflict with legislation

109 See in general Stretton v Union Steamship company Ltd 1881 1 EDC 315 323, where the judge held that the parties intended the British law to apply since they incorporated the English Carriers Act in their contract. 110 Ex parte Spinazze 1985 3 SA 650 (A). 111 Bouwers (n 103) 13. 112 Schoeman, Roodt and Wethmar-Lemmer (n 55) 52; Forsyth (n 12) 328. 113 n 91 above. 114 Oppong (n 92) 139; author refers to Nnona, Choice of Law in International Commercial Contracts for the Transfer of Technology: A critique of the Nigerian Approach’ (2000) 44 Journal of African Law 78. 115 Oppong (n 92) 141; Fredericks and Neels (n 88) 64. Also see De Villiers “Limitations on party autonomy in the context of cross boarder consumer contracts” 2013 SALJ 478 478; Van Nierkerk “Choice of foreign law in South African Marine Insurance Policy: an unjustified limitation of party autonomy” 2011 Journal of South African Law 159 166. 116 n 87 above. 117 Specifically, the parties had chosen the English Marine Insurance Act of 1906. See Schoeman, Roodt and Wethmar- Lemmer (n 55) 51. 118 Oppong (n 92) 141. 119 n 118 above. 120 See Schoeman, Roodt and Wethmar- Lemmar (n 55) 51. 14 cannot be upheld. Another factor considered to possibly limit the choice of the parties is the choice of a legal system unconnected to contract or transaction.121 This position is however debatable.122 Van Niekerk asserts that choosing a legal system that is not connected to the contract or its transac- tions is not a cause of concern in South Africa. It is in fact seen as encouraging neutrality of laws and legal certainty.123 On the contrary, it can be argued that parties cannot choose a legal system com- pletely unconnected to the contract,124 as this can be an indicator of mala fide. Therefore, the question to whether parties may select an unconnected legal system in the South African context is left open.125 Further causes of limitation as outlined by Van Nierkerk are the choice of meaningless rules, impossibility of implementation of the rule and fraud by the parties.126 Despite the uncertainty and debates surrounding limitations to party autonomy, it is clear however, that party autonomy in South Africa is not absolute. Therefore, the freedom of parties is limited in several cases.

2. Absence of a Choice of Law As already mentioned in the previous chapter,127 failure by the parties to choose an express or tacit choice of law leaves the courts with the burden of determining the proper law of the contract.128 There are two approaches that South African courts employ to determine the proper law of the contract.129 The first is where the court weighs all relevant factors that connect the contract and the parties to a legal system.130 These connecting factors include the lex loci solutionis (the law of the place of performance), the place of conclusion of the contract; the place of agreed arbitration; the place of offer and acceptance; the choice of jurisdiction; the domicile; nationality and habitual residence of each party; place of business; the form, terminology and language of the contract; the lex situ or any other relevant factor.131 It is imperative to note that the inclusion of the words “or any other relevant factor”

121 Van Nierkerk (n 115) 166; Kandigero (n 19) 7. 122 Schoeman, Roodt and Wethmar-Lemmar (n 55) 50. 123 Van Niekerk (n 115) 167; see further Schoeman, Roodt and Wethmar-Lemmer (n 79) 50, where it is argued that an unconnected legal system “may contain specialized rules pertaining to the subject-matter of the contract, for example a contract for the shipping of goods, and this may be the very reason why the parties chose that particular legal system as the proper law for their contract”. 124 See Schoeman, Roodt and Wethmar-Lemmer (n 55) 50. 125 Spiro Conflict of Laws (1973) 150. Adams, based on the opinions of a majority of authors, came to the conclusion that South African courts seem to uphold choice of law that is unconnected to the country. See Adams (n 26) 19. 126 Van Niekerk (n 115) 166. Also see Kandigero (n 19) 7. 127 Chapter 2 above at par 2. 128 Schoeman, Roodt and Wethmar-Lemmer (n 55) 53; Fredericks (n 55) 11; Neels and Fredericks (n 88) 64. 129 Fredericks (n 55) 11; Schoeman, Roodt and Wethmar- Lemmer (n 55) 53-54. 130 Fredericks (n 55) 12. 131 Fredericks (n 55) 11- 13; Fredericks and Neels (n 88) 67- 68; Neels and Fredericks “The music performance contract in European and Southern African Private International Law” (part 2) 2008 THRHR 529- 535; Schoeman, Roodt and Wethmar- Lemmer (n 55) 55. 15 suggest that the list is not exhaustive.132 With regard to the connecting factors mentioned above, Schoeman, Roodt and Wethmar- Lemmer submit that “the courts weigh the importance of every relevant factor; such that a single factor may indeed weigh more than three others together.”133 Thus, a qualitative approach is employed in South Africa. The first approach was laid out in three South African decisions – the Laconian case,134 the Kleinhans case135 and the Parry case.136 The second approach comprises of a default position, where the “lex loci solutionis constitutes the proper law of the contract, unless specific circumstances clearly indicate that another legal system has to be applies”.137 The challenge about the lex loci solutuionis is that it comprises of two parts – the locus solutionis in respect of characteristic performance and the locus solutionis in respect of payment, which may in fact differ.138 In such instances, two possibilities exist - the application of the scission principle or the unitary principle.139 In terms of the scission principle, it is submitted that the each obligation has its own proper law.140 This means that the lex loci solutionis in respect of characteristic performance has its own legal system governing the contract and the same applies to the lex loci solutionis in respect of payment. In terms of the unitary principle, however, both obligations share the same proper law.141 Fredericks and Neels support the unitary principle and submit that the scission principle renders complications.142 Furthermore, the unitary principle has found favour in two recent court decisions – the Kleinhans case143 and the Parry case.144 Therefore, in the absence of choice, the South African courts employ the two approaches discussed above to determine the proper law of the contract.

132 Forsyth confirms this when he holds, “there is no closed list of connecting factors on which the courts may rely, and the factors listed above are not meant to be exhaustive.” See Forsyth (n 12) 335. 133 Schoeman, Roodt and Wethmar- Lemmer (n 55) 55. 134 Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 3 SA 509 (D). 135 Kleinhas v Parmalat 2002 9 BLLR 879 (LC). 136 Parry v Astra Operations 2005 10 BLLR 989 (LC). 137 See Fredericks (n 55) 13; Schoeman, Roodt and Wethmar- Lemmer (n 55) 55; Fredericks and Neels (n 88) 69. 138 Fredericks (n 55) 13; Fredericks and Neels (n 88) 69. 139 n 138 above. The two principle have found support in the courts; in the Laconian case (n 89) above, and the Standard bank case (n 83) above. See Fredericks (n 55) 14; Fredericks and Neels (n 88) 69. 140 Fredericks (55) 14; Fredericks and Neels (n 88) 69. 141 Fredericks and Neels (n 88) 70. 142 Fredericks (n 55) 14. It is also submitted that “as obligations of parties are always closely connected, their contractual relationship should be governed by one proper law.” see Fredericks and Neels (n 88) 70. 143 n 135above. 144 n 136 above. 16 3. Scope of the proper law As already been discussed in Chapter 2, the proper law of the contract does not apply to all contractual issues. There are some contractual areas in which commercial convenience, principle or logic require for the application of another legal system.145 Hereunder, two such issues – formal validity and capacity, will be discussed.

3.1 Formal Validity Although in most cases it is not compulsory for parties to incorporate formalities into their contract, formalities are never the less crucial for purposes of evidence of the contract.146 Matters of evidence are known to be dealt with by the lex fori.147 In international contract cases, the lex fori is not suitable and this has resulted in most legal systems applying the lex loci contractus instead. 148 South Africa is one of the countries in favour of the lex loci contractus.149 Furthermore, South Africa is known to apply a facultative approach in the determination of the legal system to govern the formal validity of the contract.150 The facultative approach allows for the application of an alternative legal system to govern formal validity, where the lex loci contractus is not applicable. According to Oppong, the facultative approach “ensures that a contract is not rendered invalid merely for lacking the form required by lex loci contractus, when it complies with some alternative system of law”151 This expla- nation originates from the case Ex parte Spinazze and Another NNO,152 where Corbett JA expressed his support for the facultative approach by stating:

“I am of the opinion that modern South African law should adopt a facultative approach, and hold that a contract which complies as to form with the proper law or the (lex causae), is formally valid, and though it may not comply with the formal requirements of the lex loci contractus. Such an approach would maintain in South Africa a conformity to modern jurisprudential trends in the western world in this sphere of private international law”.

Authors like Cheshire and Morris have shown support for the facultative approach and have suggested the proper law of the contract as an alternative testing of formalities. Therefore in South Africa, the

145 Forsyth (n 12) 336-337; Schoeman, Roodt and Wethma- Lemmer (n 55) 56; Oppong (n 92) 142. 146 The purpose of formalities is not limited to evidential value only. Anton submits that ‘to impress the parties with the seriousness and consequences of the juristic act’, formalities are added to the contract. see Anton Private International Law (1967) 203- 204. Also see Forsyth (n 12) 341. 147 Forsyth (n 12) 341. 148 This is because the lex fori is usually not known at the time of the conclusion of the contract. See Forsyth (n 12) 341. 149 Oppong (n 92) 143; Forsyth (n 12) 341; Schoeman, Roodt and Wethmmer- Lemmer (n 55) 57. 150 Oppong (n 92) 143; Forsyth (n 12) 342; Schoeman, Roodt and Wethmmer- Lemmer (n 55) 57. 151 Oppong (n 92) 143. . 152 Ex parte Spinazze and Another NNO 1985 (3) SA 651 (A). 17 formal validity of contract is tested by either the lex loci contractus, the facultative approach which comprises of the lex loci contractus and the proper law and the lex situs.153

3.2 Capacity Similar to the Canadian position, there seems to be no clarity and uniformity on which law governs the determination of contractual capacity of the parties.154 This has led to Forsyth describing contractual capacity as a special case that deserves special treatment.155 It is so because without it, there is no contract and this poses challenges in the determination of the proper law that will govern this issue.156 There are four legal systems that can possibly be applied for the determination of contractual capacity.157 These are the lex domicilii, the lex loci contractus, the putative proper law, and the lex situs in the case of immovables.158 Considerable support from case law and authors has been shown for each of the legal systems and will be discussed below. In Ferraz v d’Inhaca,159 a case involving the sale of immovable property situated in Mozambique, the court held that in such cases, the lex situs is always applicable. The court in casu was quoted stating: “I apprehend, no doubt that according to the law of this country… the lex situs must govern all questions with regard to the capacity to enter into a contract for the alienation of immovable property, or with regard to the interpretation of such contract or the respective rights and obligations of the parties under it.”160

Therefore, the Ferraz161case above provides clarity, that the lex situs applies to capacity cases involving immovable property.162 This decision has received support from authors including Forsyth,163

153 Schoeman, Roodt and Wethmar- Lemmer (n 55) 57; Forsyth (n 12) 342. In some cases, support is shown for the lex domicilli and the lex rei sitae in place of the lex loci contractus. The lex rei sitae is normally used in cases involving immovable property, and this position has found support in old authorities and cases such as the Roux v Kuils River Land Syndicate 1912 TPD 547 at 551- 552. 154 Schoeman, Roodt and Wethmar- Lemmer (n 55) 58; Fredericks (n 55) 22. 155 Forsyth (n 12) 337. 156 Innes CJ in Hulscher v Voorschotkas voor Zuid Africa 1908 TS at 542 546 supports this statement by stating: “if either of the parties lack the capacity to contract at the time of the conclusion, he is unable to agree that any other law should regulate the validity and extent of his obligation”; Forsyth (n 12) 337. 157 Fredericks (n 55) 7, Schoeman, Roodt and Wethmar- Lemmer (n 55) 58. 158 n 157 above. 159 1904 TH 137. 160 n 159 above at par 142-143. 161 159 above. 162 Fredericks (n 55) 22. 163 Forsyth (n 12) 338. 18 Schoeman, Roodt and Wethmar- Lemmer,164 Hahlo and Kahn165 and Van Rooyen,166 as they all ac- cept that indeed the lex situs governs capacity in the case of immovables.167 In Hulscher v Voorschot- kas voor ZuidAfrika,168 where a minor’s capacity to contract was in dispute, the lex domicilii and the lex loci contractus were regarded as the possible systems applicable to contractual capacity.169 The same legal systems were referred to in Guggeinheim v Rosebaum,170 where the court, after distin- guishing between contractual capacity and status, held that contractual capacity matters are governed by either the lex loci contractus or the lex domicilii.171 In Kent v Salmon,172 similar to Guggeinheim,173 the judge distinguished between status and one of its incidents, and found that the in commercial case, the lex loci contractus, and not the lex domicilii applies in capacity matters. The court was quoted stating:

“There are strong grounds for holding that in the case of ordinary commercial contracts, such as the one in question, the contractual capacity of the person entering into them is to be decided not by the law of domicile, but by that of the place where the contract is made.”174

The case of Tesoriero v Bhyjo Investments Share Block175 favours the proper law of the contract and is said to be critical about the application of the lex loci contractu.176 In Powell v Powell,177 a case involving the revocability of a donation between the parties, the court applied the lex domicilii.178 Authors are also not in agreement as to the applicable law in this regard. Forsyth is in favour of the lex loci contractus applying in commercial matters and the lex domicilii in non-commercial matters.179 Kahn on the other hand, proposes an “alternative reference rule”, where the lex domicilii, the lex loci contractus, the objective proper law should govern contractual capacity matters.180 Sonnekus supports the approach proposed by Kahn, and adds that such an approach is fair in that “the proverbial

164 Schoeman, Roodt and Wethmar- Lemmer (n 55) 60. 165 Hahlo and Kahn The South African Law of Husband and Wife (1975) 625. 166 Van Rooyen (n 96) 126. 167 Fredericks (n 55) 41-42. 168 1908 (TS) 542. 169 Fredericks (n 55) 41. 170 1961 (4) SA 21 (W). 171 n 172at 33B-C. For a detailed discussion, see Fredericks (n 55) 32. 172 1910 TPD 637. 173 n 170 above. 174 n 172 at 639. 175 Tesoriero v Bhyjo Investments Share Block (Pty) Ltd 2000 (1) SA 167 171-172; Oppong (n 92) 142. 176 Fredericks (n 55) 41. However, it seems authors are not in agreements as to whether this case is authority for the lex loci contractus or the proper law of the contract governing contractual capacity. See Schoeman, Roodt and Wethmar- Lemmer (n 55) 60. 177 1953 (4) SA 380. 178 Fredericks (n 55) 41; Schoeman, Roodt and Wethma- Lemmer (n 55) 59. 179 Fredericks (n 55) 41. 180 Fredericks (n 55) 42. 19 net is cast wide enough to intercept all possible technical defences which a contractant may attempt to utilise to escape liability.”181 In light of the above conflicting opinions form case law and authors, it seems the most sensible and most supported approach by authors including Forsyth, Schoeman, Roodt and Wethma- Lemmer, is the approach used by the common-law authors, which distinguishes between status (governed by the lex domicilli) and consequences of status matters (governed by the lex loci contractus).182 How- ever, it is submitted that this approach has not been received by South African courts.183 Therefore, except for cases involving immovable property, the law that governs contractual capacity in South Africa is uncertain.184

4. Conclusion Although the common-law still applies to date, the discussion above shows us that this regime carries a lot of complexities. Problems encountered include the lack of certainty and predictability, caused by a lot of options for courts and conflicting views from authorities. It is unclear which direction South African private international of contract will develop.185 However, it seems the academic sphere in South Africa is not passive in providing a remedy in this regard. Fredericks submits that the Research Centre Private International Law in Emerging Countries at the University of Johannesburg is working on a project which involves the drafting of legislative instruments for utilisation by the African Union.186 The said instrument is said to be influenced, in its creation, by the Hague principles on Choice of Law in International Commercial Contract (2015) and the Rome I Regulation on the Law Applicable to Contractual Obligations (2008).187

181 Sonnekus “Handelingsbevoegdheid van getroudes en die norme van die internasionale privaatereg” 2002 Journal for Judicial Science 145 147-148. Also see Fredericks (n 55) 39. 182 Fredericks (n 55) 42. 183 n 182 above. 184 For a detailed discussion on contractual capacity in South Africa, see Fredericks (n 55) 7-43. 185 Fredericks (n 55) 16. 186 n 186 above. It is further submitted that the drafting of the African principles on the Law Applicable to International Commercial Contracts is the first project of the research centre. 187 n 186 above. 20 CHAPTER 4 COMPARATIVE ANALYSIS

1. Introduction As a point of departure, it must be noted that both a civil-law and common-law tradition exists in particular territories in Canada. Whereas South Africa, is a mixed jurisdiction consisting of an English common-law and Germanic civil-law tradition. English common-law has greatly influenced the private international law of contract of both jurisdictions. As such, the proper law governs the contract, and this may comprise of an express choice, a tacit/implied choice, and a law assigned by the courts.188 Therefore, a comparative analysis will be done in this order respectively, where the proper law and two topics that fall outside its scope (formal validity and capacity) will be discussed.

2. Party autonomy and express choice of law With regard to party autonomy, it is recognised in the legal systems of both Canada and South Africa. In Canada, party autonomy found establishment following the 1939 decision of the Vita foods case.189 In South Africa, one realises that the old authorities were reluctant in accepting this principle,190 but it was nevertheless accepted following the Laconian case.191 Moreover, South African academics support this doctrine. As discussed above, the most concrete expression of party autonomy is an express choice of law.192 This means that in both Canada and South Africa, parties can choose the proper law of their contract and insert a clause to that effect. Therefore, in this regard, South Africa and Canada are compatible. This also brings both jurisdictions in line with the position adopted in international instruments such as the Hague Convention193 and the Rome I Regulation.194

2.1 Dépeçage Still in the context of party autonomy, parties to the contract, as stated above, have an option of choosing different legal systems for different parts of the contract (dépeçage).195 In Canada, it seems dépeçage is well received and applied in both the civil-law196 and common-law jurisdictions.197 In

188 n 12 above. 189 n 20 above. 190 Forsyth (n 12) 321; Adams (n 26) 10. 191 See n 93 above. 192 n 84 above 193 Hague Principles on Choice of Law in International Commercial Contracts (2015). Also see Adams (n 26) 7. 194 Rome 1 Regulation on the Law Applicable to Contractual Obligations (2008). 195 n 26 above. 196 n 27 above. 197 n 28 above. 21 South Africa, however, the courts and authors are not unanimous as to the recognition of this principle. For example, in the Improvair case,198 the court rejected this principle and held that it did not make sense. In the Laconian case, on the other hand, the court, in the absence of choice, applied dépeçage by holding that different legal systems applied to different parts of the contract.199 It is also relevant to add that there are no reported cases where parties outwardly applied dépeçage to their contract.200 Moreover, some South African authors are of the opinion that dépeçage is not recognised in South Africa,201 while others believe that it is.202 Therefore, in light of the above submissions, one is compelled to believe that dépeçage is not recognised in South Africa. Consequently, with regard to dépeçage, Canada and South Africa are not compatible. It seems South Africa should learn from Canada in this regard, because it is lagging behind from the rest of the world

2.2 Limitations of Party Autonomy In both Canada and South Africa, party autonomy is not without qualifications. In Canada, the restrictions to party autonomy have been found to be that the choice law must be bona fide, the contract must be legal and must not be an attempt to evade public policy.203 Anything contrary to this threshold faces the possibility of limitation by the courts. Whereas in South Africa, the same limitations apply and writers such as Van Nierkerk add that limitations will be imposed when there is fraud, mandatory rules, meaningless rules and/or impossibility of implementation of the chosen rule.204 There is however, one factor that causes uncertainty in both legal systems; the choice of an unconnected legal system to the contract. There are three possible reasons why parties would choose a law unconnected to their contract. These are randomly choosing an unconnected legal system without substantial reason, mischievously choosing the said law to evade public policy and choosing an unconnected legal system because it is advanced, established and stable.205 The first two reasons are more likely to lead to limitation of that certain choice in both legal systems. Therefore, it is reasonable for one to infer that when the parties have chosen an unconnected legal system, the courts are left with the burden of determining whether the reason behind the particular choice guarantees such limitation. Although the limitations to party autonomy differ relatively, the conclusion is the same; that party autonomy is not

198 n 91 above 199 In casu, the court held that the law of the place of performance and the law of the place of payment were in fact different, therefore applying dépeçage to the contract 200 n 97above. 201 n 95 above. 202 n 96 above. 203 Vita foods case n 20 above. 204 Van Nierkerk (n 115) 166. 205 See Pittel and Rafferty (n 8) 275; Schoeman, Roodt and Wethmar- Lemmer (n 55) 50. 22 absolute in both legal systems. Therefore, the position between the two legal systems is compatible in this regard.

2.3 Tacit Choice of Law According to the proper law rule, where parties have failed to choose expressly the law applicable to their contract, the next step is to determine whether there is a tacit choice of law. In both legal systems, certain indicators are used to determine the presence of such choice. These factors include a jurisdiction clause, chosen place of arbitration, legislation, use of standard form, the language and currency used in the contract. In Canada however, factors such as a jurisdiction clause and chosen place of arbitration are regarded as strong indicators, whilst the language and currency used in the contract are regarded as weak indicators.206 In South Africa, all indicators are regarded the same, but there are differing views on whether the presence of an arbitration clause is indicative of a tacit choice of law.207 Therefore, there is no clarity in South Africa in this regard. It is safe to conclude that both Canada and South Africa recognise a tacit choice of law. Therefore, both legal systems are compatible in this regard.

3 Determination of the Proper Law As already been pointed out above, where parties have failed to choose an express or tacit law, the courts are left with the burden to assign the applicable law. In both legal systems the law most closely connected to the contract is applicable to the contract in the absence of choice. The courts in both legal systems make use of a non-exhaustive list of connecting factors to establish the law most connected to the contract. There are a few differences in this regard. In South Africa, there is a default position that the lex loci solutionis applies unless specific circumstances clearly indicate that another legal system applies.208 Furthermore, it is submitted that “the courts weighs the importance of every relevant factor; such that a single factor may indeed weigh more than three others together”.209 This means that the evaluation in South Africa is qualitative. Meanwhile in Canada, there is no default position. It is further submitted that in Canada, where two or more performances of the contract occur in one legal system, this is an indicator that that legal system applies. This means that dissimilar from South Africa, a quantitative rather than a qualitative evaluation is employed in Canada. Therefore,

206 n 34 above. 207 See Compagnie D’Armement Maritime SA v Compagnie Tunisienne de Navigation SA 1971 1 AC 572 ; Benidai Tra- ding Co Ltd v Gouws and Gouws 1977 (3) SA 1020 (T). 208 n 137 above. 209 n 133 above. 23 although the end goal is the same - that is, for the courts to assign the proper law of the contract, it is evident that different methods are employed by the both legal systems. Nevertheless, with regard to the determination of choice of law, Canada and South Africa are partially compatible.

4. Scope of the proper law

4.1 Formal Validity With regard to formal validity of the contract, Canadian courts have as their options, the lex loci contractus or the proper law and the lex situs in immovable property contracts.210 In South Africa, the courts have an option of applying the lex loci contractus, the facultative approach and the lex situs in cases involving immovable property.211 With regard to the facultative approach, case law and the academic sphere support that the proper law be applied in the alternative of the lex loci contractus. It seems the position in both legal systems is compatible, as the facultative approach used in the South African courts boils down to the two options available for the Canadian courts- the lex loci contractus or the proper law of the contract. Therefore, positions in both legal systems are compatible.

4.2 Capacity Disputes regarding capacity are not uncommon in international agreements. The process of determining the law applicable in this regard is difficult in both legal systems. In Canada, when case authority and views of authors are put together, it seems the objective proper law, law of the place of contracting (lex loci contractus), the law of the parties’ habitual residence, the putative proper law of the contract (including any express choice), lex domicilii and lex situs are possible legal systems to be applied in capacity matters.212 Meanwhile in South Africa, possible applicable legal systems are outlined as the lex loci contractus, lex domicilii, putative proper law and the lex situs.213 In both legal systems, there is a substantial number of court cases and differing views of authors, supporting all the options mentioned above, leaving the courts with unbridled discretion in this regard. Therefore, the level of uncertainty in this regard is identical. It is safe to conclude that with regard to the capacity, the position in Canada and South Africa is compatible.

210 n 63 above. 211 n 153 above. 212 n 77 above. 213 n 158 above. 24 5. Interim Conclusion From all that has been discussed above, one realises that there are more similarities than there are differences between the Canadian and South African private international law of contract. Except for the recognition of dépeçage, not much can be learnt from each other. The most significant similarity between Canada and South Africa is that both legal systems lack clarity and predictability and are in need of a serious legal overhaul. This will be discussed further in the following chapter.

25 CHAPTER 5 RECOMMENDATIONS AND CONCLUSION

From a brief overview of the Private International Law of Contract rules of Canada and South Africa, it is evident that not much can be learnt from each other’s legal systems.214 Although there are a few differences here and there,215 complex legal questions such as “which law governs contracts in the absence of choice?” cannot be answered with absolute certainty. More so, both legal systems are still reliant on old English decisions to interpret choice of law rules in a modern context. Interestingly, however, the United Kingdom, “home” to the common-law, upgraded the proper law rule in its system to retain its competitiveness to the world.216 This is understandable, as explained in the 1992 report of the Australian Law Reform Commission that “the proper law of the contract as developed by the common-law is ill-defined and uncertain in scope and inadequate to deal with modern devel- opments in international contracts”.217 Therefore, the lagging behind of both legal systems cannot reasonably be explained. As discussed above, the common-law rule in most aspects218 gives judges too much discretion.219 This indeed undermines the principle of predictability and legal certainty. Because of the economic relevance of the field of private international law, market players require the abovementioned principles, which should be an incentive to implement statutory law. Also, seeing the connection that both legal systems still have to the English legal system,220 adopting the rules similar to that of the Rome I Regulation is recommended. The Rome I Regulation, although not a perfect instrument, seems to have reasonable solutions to the dilemmas faced by an English common-law jurisdiction such as Canada as well as a mixed jurisdiction as South Africa. For example, with regards to the limitation of party autonomy, it is uncertain in common-law whether choosing an unconnected legal system affects the bona fide factor of choice of law, or, whether, perhaps the mere choice of an advanced legal system would have this effect.221 The Rome I Regulation in Article 3 provides legal certainty in

214 This is because most aspects in this field are identical, as both legal systems are under the English common-law influence. 215 For instance, that dépeçage is recognised in Canada and not in South Africa. 216 This was done by adopting the rules of the Rome Convention, and subsequently the Rome I Regulation in this area of law. See Obiri – Korang “Private International Law of Contract in Ghana; The need for a paradigm shift” (2017 dissertation SA) 47. 217 Marshall (n 13) 506. 218 This includes formal validity and capacity. 219 It is submitted that this negatively affects the pattern of precedent, in that cases with similar facts may end up with different outcomes. See Obiri – Korang (n 216) 24. 220 Since both states are former British colonies and still refer to old English cases for answers. 221 n 205 above. 26 this regard, by stating that no connection is required between the choice of law and the parties’ contract.222 Furthermore, with regard to tacit choice of law, the common-law “readily imposes choice on parties even in situations where they clearly did not have that in mind”,223 as envisaged in the Standard Bank case.224 It is argued that the level of strictness in the Rome I Regulation is higher than the common-law, in that it requires that the tacit choice should be “clearly demonstrated” by the terms of the contract or the circumstances of the case.225 Therefore, by adopting the said instrument, clarity, as regards the presence or absence of a tacit choice of law in the contract, is provided. The common-law objective determination of law by the courts in the absence of a choice has always been problematic. As discussed above, there is no clarity and certainty in this regard. The Rome I Regulation tackles this determination, starting from article 4(1) to 4(3). In article 4(1), the “hard and fast”rule regulates eight types of contracts.226 It is submitted that this section of the Rome I-Regula- tion promotes predictability and certainty as to the law applicable to the contract, especially when the contract falls under one of the eight categories of contracts.227 Where the contract falls outside that scope, the characteristic performance rule comes to the rescue. This is enshrined in Article 4 (2) of the Rome I Regulation, which provides that where Article 4(1) does not apply, the law of the country “where the party required to effect the characteristic performance has his habitual residence” governs the contract.228 Similar to the previous Article (Article 4(1)), this section promotes legal certainty and predictability. It is also important to take note of the escape clause enshrined in Article 4(3) of the Rome I- Regulation. This clause comes into play where it is clear from all circumstances that the contract is manifestly more closely connected with a country other than the one indicated in Article 4(1) and (2). Thus, it is evident that the Rome I Regulation kept an aspect of the proper law rule, that the law with which the contract has closest and most real connection applies. It has been correctly submitted that the escape clause provides the necessary flexibility needed where the other articles do not apply.229 Although contractual capacity falls outside the scope of the Rome 1 Regulation,230 Article 13 may nevertheless be applicable in a particular scenario. It states that:

222 Recital 11 of the Rome 1 Regulation (2008). 223 See Obiri-Korang (n 216) 38. 224 n 103 above. 225 Obiri-Korang (n 216) 38-39. 226 Obiri-Korang (n 216) 30. 227 n 226 above. 228 Marshall (n 13) 529; Obiri-Korang (n 216) 31. 229 Obiri-Korang (n 216) 31. 230 Article 1(2)(a) of the Rome I Regulation. See also McParland The Rome I Regulation on the Law Applicable to Contractual Obligations (2015) 737 and Fredericks (n 55) 179. 27 “in a contract concluded between parties who are in the same country, a natural person who would have had capacity under the law of that country may invoke his incapacity resulting from the law of another country, only if the other party to the contract was aware of that incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence.”

The article therefore provides a better approach than that offered at common-law. It provides that the lex loci contractus applies in addition to the law applicable to capacity in terms of the lex fori’s private international law. This only applies when certain requirements are met, namely, that the parties were present in the same country at the time of conclusion of the contract, and that the incapable party had capacity in terms of the lex loci contractus, unless the capable party was aware of the incapacity or was unaware thereof due to his or her negligence.231 Although the Rome I Regulation carries its flaws and criticisms, it seems to be better and more advanced than the common-law rules followed by Canada and South Africa. Therefore, Canada and South Africa should walk in the footsteps of countries like South Korea, Japan and Taiwan, which have adopted provisions similar to the Rome I Regulation, to revamp their private international law rules and fall in line with the rest of the world.232 Also, since South Africa and Canada share a sentimental history and a fruitful commercial relationship, as discussed in the introductory chapter, it is suggested that both countries consider harmo- nising each other’s business laws or creating a bilateral treaty in this regard. This is the approach followed by Australia and New Zealand, to facilitate trade between the two countries and eliminate legal barriers.233 This was done by signing a bilateral treaty in April 1982, named the Closer Eco- nomic Relation (CER).234

231 For the comprehensive discussion on Article 13 of the Rome I Regulation, see Fredericks (n 55) chapter 5. 232 Neels “Rome in the Far East. The influence of the European model of Private International Law of Contract in China” 5. 233 Ferrar “Harmonisation of business law between Australia and New Zealand” 1989 Rev. 435 436. 234 Ferrar (n 233) 436. 28 BIBLIOGRAPHY

JOURNALS 1. Bouwers “Tacit choice of law in international commercial contracts- the position in South African law and under the Rome 1 Regulation”2016 Scientific Cooperations International Journal of Law and Politics 13. 2. De Villiers “Limitations on party autonomy in the context of cross boarder consumer contracts” 2013 SALJ 478. 3. De Vos “Freedom of Choice of Law for Contracts in Private International Law” Acta Ju- ridica 1. 4. Ferrar “Harmonisation of business law between Australia and New Zealand” 1989 Rev. 435. 5. Hogg “Canadian law in the Constitutional Court of South Africa” 1998 SAPR/PL 1. 6. Leon and Reynolds “A Canadian Perspective: Choice of Law and Choice of Forum” 2005 NYSBA International Law Practicum 130. 7. Marshall “Reconsidering the proper law of the contract” 2012 Melbourne Journal of Inter- national Law 505. 8. Neels “Rome in the Far East. The influence of the European model of Private International Law of Contract in China, Japan, Mangolia, South Korea, and Taiwan” (unpublished lec- ture at the University of Amsterdam, the University of British Columbia and the University of Johannesburg, 2011-2012). 9. Neels and Fredericks “The proper law of a documentary letter of credit” (part 1) SAMLJ 63. 10. Neels and Fredericks “The music performance contract in European and Southern African Private International Law” (part 2) 2008 THRHR 529. 11. Nnona, ‘Choice of Law in International Commercial Contracts for the Transfer of Tech- nology: A critique of the Nigerian Approach’ (2000) 44 Journal of African Law 78. 12. Richardson “The concept of characteristic performance and the proper law doctrine” 1989 Bond Law Review 284. 13. Schmitthoff “The Doctrine of the Proper Law of the contract in the English Conflict of Laws 1940 The Georgetown Law Journal 447. 14. Sonnekus “Handelingsbevoegdheid van getroudes en die norme van die internasionale privaatereg” 2002 Journal for Judicial Science145. 15. The globe and mail (23-06-2014) – Newspaper Article.

IV 16. Van Nierkerk “Choice of foreign law in South African Marine Insurance Policy: an unjustified limitation of party autonomy?” 2011 Journal of South African Law 159.

BOOKS 1. Anton Private International Law (1967). 2. Castel and Walker Canadian Conflict of Laws (2005). 3. Cheshire and North Private International Law (9th ed). 4. Dicey and Morris Conflict of Laws (1987). 5. Forsyth Private International Law: The Modern Roman –Dutch Law Including the Juris- dictions of the High Courts (4th ed). 6. Fredericks Contractual Capacity in Private International Law (2016). 7. Hahlo and Kahn The South African Law of Husband and Wife (1975). 8. McParland The Rome I Regulation on the Law Applicable to Contractual Obligations (2015). 9. Nygh Autonomy in International Contracts Oxford University Press Oxford (1999). 10. Oppong Private International Law in Commonwealth Africa (2013). 11. Pitel and Rafferty Conflict of Laws (2010). 12. Rafferty, et al (eds) Private International Law in Common law Canada (2010). 13. Schoeman, Roodt and Wethmar-Lemmer Private International law in South Africa (2014). 14. Spiro Conflict of Laws (1973). 15. Van Rooyen Die Kontrak in die Suid- Afrikaanse Internasionaale Privaaterg (1972). 16. Van Nierkerk and Schulze The South African Law of International Trade: Selected Topics (2011). 17. Walker Halsbury’s Laws of Canada – Conflict of Laws (2006) 18. Westlake Private International Law (5th ed). 19. Wood Comparative Law of Security Interests and Title Finance (2007). CASE LAW 1. Amin Rasheed Shipping Corp v Kuwait Insurance Co 1984 AC 50. 2. Benidai Trading Co Ltd v Gouws and Gouws 1977 (3) SA 1020 (T). 3. Berthuame v Dastous 1930 1 DLR 849. 4. Brisley Drotsky 2002 40 SA 1. 5. Charron v Montreal Trust Co. 1958 OR 597 (CA). 6. Compagnie D’Armement Maritime SA v Compagnie Tunisienne de Navigation SA 1971 1 AC 572. 7. Creutzburg v Commercial Bank of Namibia 2006 4 All ASA 327 SCA.

V 8. Ex parte Spinazze 1985 3 SA 650 (A). 9. Ferraz v D’inhaca 1904 TH 137. 10. Greenshields Inc v Johnston 1981 28 AR 1 (Q.B). 11. Guggenheim v Rosenbaum 1961 4 SA 21 (W). 12. Hamlyn v Talisker 1954 AC 202 (H.L). 13. Hulscher v Voorschotkas voor Zuid Africa 1908 TS at 542 546. 14. Imperial Life Assurance Co. of Canada v Colmenares 1967 SCR 443. 15. Improvair (Cape) (Pty) Ltd v Establissements Neu 1983 (2) SA 138 145. 16. Kleinhans v Parmalat 2002 9 BLLR 879 (LC). 17. Laconian Maritime Enterprises Ltd v Agromar Lineas Ltd 1986 3 SA 509 (D). 18. Montreal Trust Co. v Stanrock Uranium Mines Ltd 1966 1 OR 258 (HCJ) 277. 19. Parry v Astra Operations l 2005 10 BLLR 989 (LC). 20. Powell v Powell 1953 (4) SA 380. 21. Printing and Numerical Registering Co v Simpson LR 19 462 465. 22. Representative of Lloyds v Classic Sailing Adventures (PTY) Ltd 2010 5 SA 90 23. Robinson v Bland (1760) 2 Burr 1077. 24. Roux v Kuils River Land Syndicate 1912 TPD 547. 25. Standard Bank of South Africa Ltd v Efrioken and Newman 1924 AD 171. 26. Stretton v Union Steamship company Ltd 1881 1 EDC 315 323. 27. Tesoriero v Bhyjo Investments Share Block (Pty) Ltd 2000 (1) SA 167 171 . 28. The Castle Mail Packets Co (Ltd) v Mitheram and Toteram 1892 13 NLR 199. 29. Vita Food Products Inc v Unus Shipping Co. [1939] AC 277 290 (P.C). LEGISLATION 1. Civil Code of Quebec 2. Short Term Insurance Act 53 of 1998. (South Africa) 3. English Marine Insurance Act of 1906. DISSERTATATIONS 1. Adams The compatibility of Australian and South African Private International Law with The Hague Principles on Choice of Law in International Commercial Contracts (2013 dissertation SA). 2. Kandiyero Party autonomy in Brazilian and South African Private International Law of Contract (2015 dissertation SA). 3. Obiri – Korang Private International Law of Contract in Ghana; The need for a paradigm shift (2017 dissertation SA).

VI Regional and Supranational Instruments Rome 1 Regulation on the Law Applicable to Contractual Obligations (2008).

International Instruments Hague Principles on Choice of Law in International Commercial Contracts (2015).

International Sources 1. www.da intentionalgc.ca (30-08-2018). 2. http://www.canadainternational.gc.ca/southafrica- afriquedusud/bilateral_relations_bilaterales/canada_south-africa-afrique-du- sud.aspx?lang=eng (30 -08-2018). 3. https:www.miningreview.com/sa-government-signs-mou-with-canada-on-mining-and- mineral-development (11/12/2018).

VII