Lakes Forestry & Development CC v Cognad Properties CC

The plaintiff, Lakes Forestry & Development CC, and the defendant, Cognad Properties CC, entered into a Tree Harvesting Agreement on 14 July 2012 regarding the Oudebosch Farm in Riversdale, Western Cape. The farm had an old pine plantation ravaged by fire, which degenerated into uncontrolled natural pine regeneration and black wattle infestation. The agreement granted the plaintiff the right to harvest pine trees subject to certain conditions, including the obligation to clear 20 hectares per annum of black wattle and blackwood in a conservation area, the area to be determined at the sole discretion of the defendant. In return, the plaintiff would establish a commercial pine forest, and the proceeds from the sale of mature pine trees would be shared. The plaintiff commenced forestry operations in 2012 and all went well until about November 2016, when a dispute arose regarding the plaintiff's performance. The dispute was referred to an expert, Mr Barry Joubert, who produced a report on 26 November 2016 favourable to the defendant. Relying on the Joubert report, the defendant gave the plaintiff notice to rectify its breach. The plaintiff rejected the Joubert report. On 20 January 2017, the defendant cancelled the agreement. The plaintiff sued for specific performance and damages, while the defendant counterclaimed for damages.

• Whether the parties are bound by the findings of the expert, Joubert, in terms of clause 13 of the agreement.
• Whether the plaintiff breached the agreement by failing to clear 50 hectares of black wattle in the conservation area.
• Whether the plaintiff breached the agreement by felling and removing pine trees within three years of commencement.
• Whether the plaintiff breached the agreement by felling and removing pine trees after three years, i.e., whether the trees removed constituted thinning under clause 6.9.1 or harvesting under clause 6.
• Whether the agreement was validly cancelled by the defendant.
• Whether the defendant is liable for damages for timber removed by a third party prior to cancellation.

Plaintiff's claims were dismissed, except that the defendant was directed to pay to the plaintiff such damages as the plaintiff may prove on account of the removal of timber by any third party from the farm prior to 20 January 2017. The defendant's counterclaim was dismissed. Each party was ordered to bear their own costs.

An expert determination under a contract is only binding if the expert acts impartially, independently, and within the mandate jointly given by the parties. If an expert does not act impartially or independently and departs from the instructions given, the determination cannot be relied on as conclusive. Furthermore, where a contract provides a party in breach with a specific period to remedy the breach, the defaulting party bears the responsibility to query the reasonableness of that period and propose an alternative; failure to do so precludes a later complaint that the period was unreasonable.

The court observed that the agreement was not a model of clarity and lacked a definitions clause that could have been helpful in defining the meaning of the technical terms used.

This case provides important guidance on the requirements for a valid and binding expert determination in South African contract law, emphasizing that an expert must act independently, impartially, and strictly within the joint mandate. It also clarifies principles relating to the interpretation of forestry contracts, the distinction between thinning and harvesting operations, and the requirements for a valid notice to remedy breach in terms of a lex commissoria. It demonstrates that parties cannot unilaterally alter a jointly agreed mandate to an expert after the fact.