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[2016] ZAWCHC 42
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Western Breeze Trading 43 (Pty) Ltd v Engen Petroleum Ltd (1404/2015) [2016] ZAWCHC 42 (17 March 2016)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 1404/2015
DATE:
17 MARCH 2016
In
the matter between:
WESTERN
BREEZE TRADING 43 (PTY)
LTD
..................................................................
Applicant
And
ENGEN
PETROLEUM
LTD
................................................................................................
Respondent
JUDGMENT
DELIVERED ON 17 MARCH 2016
RILEY,
AJ
[1]
On 3 February 2015 the applicant, Western
Breeze Trading 43 (Pty) Ltd (“Western Breeze”) brought an
urgent application
against the respondent, Engen Petroleum Limited
(“Engen”) in terms of which it seeks the following
relief:
1.
That pending the resolution of the action
referred to hereunder Engen is interdicted and restrained from
contacting any of the debtors
of Western Breeze and/or attempting to
collect any debts due to Western Breeze by any of the debtors of
Western Breeze.
2.
That within 30 days of the granting of the
order under (1)
supra
;
Western Breeze is to bring action proceedings against Engen for the
determination of the validity of the memorandum of agreement
entered
into between the parties on 30 June 2014 and the setting aside of
such agreement.
[2]
The founding papers were signed on 29 January 2015 and issued on 30
January 2015 and served on Engen that afternoon. On 3 February
2015
i.e. the day of the hearing of the matter Anton Frederick Pienaar
(“Pienaar”) deposed to what has been referred
to as
Engen’s Preliminary Answering Affidavit which was also served
and filed on the same day. In Engen’s Preliminary
Answering
Affidavit, Pienaar states specifically that his failure to traverse
seriatim the contents of the founding affidavit and
to controvert any
allegation made therein must not be construed as an admission of that
allegation and that should this court not
dismiss the application on
3 February 2015 for
inter alia
lack of urgency, he reserves the right to supplement his affidavit
and to answer fully to the founding affidavit in due course.
On
the same day Bruce Anthony Gaskell (“Gaskell”) who also
deposed to the founding affidavit, deposed to the replying
affidavit
of Western Breeze which was served on Engen.
[3]
On 3
February 2015 the matter was postponed by agreement to 21 April
2015. The order of Henney J which was granted by agreement
can
be summarised as follows:
1.
The application for the interim interdict
and the relief sought in terms of prayers 1 to 3 of the notice of
motion be postponed
for hearing to the semi-urgent roll;
2.
Pending the determination of this
application, any cession agreement between Western Breeze and Engen
is suspended and Western Breeze
may collect all debt due to it of any
nature, and Engen is not permitted to collect any debts due to
Western Breeze;
3.
Engen is to deliver any further affidavits
by 3 March 2015;
4.
Western Breeze is to deliver its further
reply thereto if any, by 24 March 2015;
5.
Western Breeze and Engen will file their
heads of argument respectively by the 7
th
and 14
th
April 2015;
6.
Without prejudice and without any admission
of liability whatsoever Western Breeze will make payment to Engen in
the amount of R
350 000-00 on or before 16 March 2015 in
reduction of the debt owed by Windsharp Trading (Pty) Ltd
(“Windsharp”)
to Engen;
7.
The costs occasioned by the postponement
are to stand over for later determination.
[4]
On 5 March 2015 Engen served and filed a
notice of counter-application which can be summarised as follows:
4.1
That at the hearing of the main application, Windsharp is joined as
second respondent in this application;
4.2
That Western Breeze and Windsharp are directed to furnish Engen with
copies of their debtors book for the
period 1 September 2014 to 21
February 2015 or the last day of the calendar month prior to this
order whichever is the later, including
the name and physical address
of each debtor and the amounts outstanding by each debtor as at the
accounting months and of the
book during that period;
4.3
That Western Breeze and Windsharp are directed to furnish Engen with
a copy of the alleged cession agreement
concluded with Scania Finance
Southern Africa (Pty) Ltd;
4.4
That Western Breeze is directed to forthwith disclose to Engen full
details of all receipts of payments from
its debtors received after
09 December 2014 supported by vouchers and bank statements of the
account into which such funds were
deposited;
4.5
Windsharp is directed to forthwith disclose to Engen full details of
all receipts from its debtors received
after 9 December 2014
supported by vouchers and bank statements of the account into which
such funds were deposited;
4.6
Western Breeze and Windsharp are interdicted and restrained from
passing off any of the debtors of Windsharp
as those of Western
Breeze and
vice versa
.
[5]
On 5
November 2014 Engen had already instituted proceedings for the
winding up of Windsharp in the KZN Division, Pietermaritzburg.
On 25 March 2015 Windsharp issued summons against Engen out of this
court in terms of which it seeks the following relief:
5.1
That Engen render a full account, supported by vouchers of all
purchasers of product by it during the period
2009 to December 2014;
.2
Debatement of the said account;
5.3
Payment to it of whatever amount appears to be due to it upon
debatement of the account.
[6]
On 21 April
2015, and by agreement between the parties, the application was
postponed to 18 June 2015 for hearing on the semi-urgent
roll and it
was further agreed that the provisions of paragraph 2 of the Order of
Henney J dated 3 February 2015 continue to remain
of full force and
effect pending the determination of the application. The costs
occasioned by the postponement, was to stand
over for later
determination. On 18 June 2015 counsel for Western Breeze and
Windsharp commenced argument but the matter
was postponed for further
argument to 17 August 2015.
The
background facts
[7]
During
January 2009 Engen and Windsharp, a trucking transport haulage
courier company, which is part of the Gaskell Family Group
of
Companies, concluded an agreement with one another styled the Engen
Diesel Club agreement (“EDC”). The material
terms
of the agreement are not in dispute and can be summarised as follows:
7.1
The EDC commenced on 12 January 2009,
endured for an initial period of 5 years and thereafter for a further
automatic renewal period
of 5 years, unless Engen notified Windsharp
to the contrary;
7.2
Engen shall submit a statement of account
to Windsharp on a monthly basis and unless Windsharp disputes its
correctness, within
30 days from the date of such statement, it shall
be deemed to have admitted the accuracy thereof and shall make
payment within
such period of time;
7.3
Should Windsharp fail to pay any amount
owing, then the full amount owing to Engen shall immediately become
due and payable without
notice to or demand being made on Windsharp;
and
7.4
Should Windsharp breach the agreement, it
acknowledges that Engen may suspend its obligations under the
agreement until Windsharp
remedies its breach, without Windsharp
being entitled to suspend its obligations.
[8]
On 11
January 2014 the agreement was automatically renewed.
[9]
It is not
in dispute that Windsharp breached the agreement by failing to make
payment of the amounts of R3 123 423-46
and R2 744 980-92
that fell due for payment on 31 December 2013 and 31 January 2014
respectively. Windsharp does
not dispute Engen’s claim.
Engen avers that consequent to Windsharp’s breach, Engen’s
obligations under
the agreement were (and remain) suspended.
It is common cause that the financial position of Windsharp was so
dire
that by 25 June 2014, despite its constant promises to pay, it
had only been able to reduce its indebtedness to Engen by the amount
of R309 701-05, leaving a balance of R5 558 703-33
owing.
[10]
On
25 June 2014 Windsharp entered into a written agreement of
acknowledgement of debt and undertaking to pay to Engen the sum of
R5 558 703-33 over the period 30 June 2014 to 31 August
2015. It is not in dispute that Windsharp was in immediate
breach of this acknowledgement of debt and undertaking to pay Engen.
[11]
I
pause to mention that on 3 April 2012 Windsharp had signed a
memorandum of cession of book debts in favour of Engen. I shall
refer to this as the first cession. Its validity is not in
dispute.
[12]
On
30 June 2014, Western Breeze together with Windsharp, signed a
‘
Memorandum of Agreement (Cession
of Debts)
’ with Engen, whereby
Western Breeze would cede its debtor’s book to Engen in
discharge of any present and future obligations
it might have to
Engen.
[13]
The
relevant paragraphs that define the nature of the cession and the
definition of debts are:
“
1
CESSION
AND PLEDGE
The
Cedent hereby cedes, tranfers and makes over to the Cessionary all
the Cedent’s right, title and interest in and to the
Debts (as
defined in clause 2) as a continuing general covering security for
the due performance and discharge of every obligation
and
indebtedness from whatsoever cause and however arising which the
event may now or at any time hereafter have toward the Cessionary,
and without limiting the generality of the foregoing, whether such
indebtedness be a direct, indirect or contingent liability;
whether
it be matured or not; whether it may be or may have been incurred by
the Cedent individually or jointly with others or
by any firm in
which the Cedent has or holds or may hereafter have or hold any
interest; and whether it arises through any acts
of suretyship,
guarantee warranty, indemnity or other undertaking signed by the
Cedent solely or jointly with others or otherwise.
The Cession
hereby granted by the Cedent to the Cessionary includes any and all
reversionary rights the Cedent might otherwise
have had in and to the
claim ceded.
2
DEFINITION OF DEBTS
Debts’
shall mean all the right, title and interest in and to all and any
claims of whatsoever nature and howsoever arising
which the Cedent
may now or hereafter have against any person whomsoever, and all and
any monies and amounts of whatsoever nature
which may now be or
hereafter become due or owing to the Cedent from whatsoever cause and
howsoever arising by any person whomsoever,
including in particular,
but not limited to, debts generally described as ‘book debts’.”
The
correspondence between the parties leading up to the application
[14]
It
is not in dispute that in December 2014 and January 2015, Engen
addressed notices to a number of the clients of Western Breeze
instructing the clients not to pay Western Breeze but rather to pay
Engen. The notice reads as follows:
“
Re:
Engen Petroleum Limited / Western Breeze Trading 43 (Pty) Ltd /
Yourselves
1.
Reference is made to the Memorandum
of Agreement concluded between Engen Petroleum Limited (EPL) and
Western Breeze Trading 43 (Pty)
Ltd. (Western Breeze) on 30
June 2014, at Westville (the agreement);
2.
In terms thereof:
2.1
Western Breeze ceded to EPL all of
its rights, as a continuing general covering security, for the
performance and discharge of its
obligations and indebtedness to EPL
from any cause and when so ever arising, all and any claims of
whatsoever nature which it has
against any person and all and any
monies and amounts of whatsoever nature that is due it by any person
from any cause, including
without limitation its debtors’ book
and/or book debts; and
2.2
EPL shall, in its discretion, be
entitled to collect the debts itself.
3.
Kindly be advised that EPL had
elected to collect the debts owed to Western Breeze itself, to which
notice has been given to Western
Breeze.
4.
Kindly therefore make payment of all
future and current debts owing to Western Breeze to EPL by electronic
fund transfer into its
Banking Account, the details whereof are found
below:
ENGEN
PETROLEUM LIMITED
STANDARD
BANK THIBAULT SQUARE
BR
CODE 0.............
ACC
NO 0..............
REF.:
WESTERN BREEZE TRADING 43 (PTY) LTD
5.
Kindly be advised that should you
continue to make payment to Western Breeze, you shall be deemed in
law to have not paid your debt,
and EPL reserves the right to
institute legal proceedings against you for the recovery of its
claim...”
[15]
On a reading of
the notice it clearly states that the general covering security was
given for the performance and discharge of all
of the applicant’s
obligations and indebtedness to EPL.
[16]
On 9 December
2014, and in response to Engen’s notice, Hooyberg, the
attorneys of record for Windsharp and Western Breeze
sent an email to
Engen’s attorneys of record in relation to the cession
agreement dated 30 June 2014 which states
inter
alia
:
“…
At
the meeting held at your offices on 24 October 2014, it was conceded
by you that the said cession agreement is null and void,
in that, at
the time of conclusion thereof, our client disclosed to your client
that the debtor’s book had been ceded to
another creditor.
In order to appease your client, our client signed all the documents
presented to it at that stage.
In
light of the above, we demand that your client immediately desist and
refrain from contacting our client’s debtors now
or in future.
Failure to do so has the potential to severely prejudice our client
and its business operations.
”
[17]
In a letter dated 10 December 2014 Engen’s
attorneys responded by stating
inter
alia
that Windsharp has entered into
more than one cession agreement with Engen and then referred to the
earlier cession entered into
by Windsharp prior to 30 June 2014.
On the same day Hooyberg wrote to Engen’s attorneys, and
requested
inter alia
that Engen urgently supply a copy of the cession on which they rely.
[18]
On 22 January 2015, Hooyberg addressed a
further email marked “
Extremely
urgent
”, and with reference to
the “
Cession dated 30 June 2014
Debtors of Western Breeze Trading 43 (Pty) Ltd. / Windsharp Trading
(Pty)
,” to Engen’s
attorneys, wherein it stated,
inter
alia
:
“…
Instructions
are that your client has yet again contacted another of our client’s
debtors, namely, Unitrans Supply Chain Solutions.
Instructions
are that, on even date, your client demanded that payment of debt
(that is now due, owing and payable) be paid directly
to itself in
terms of the cession of 30 June 2014.
Instructions
are further that your client forwarded the very same generic letter
dated 9 December 2014, that it sent to other debtors
during December
2014, to Unitrans Supply Chain Solutions earlier today, and attached
a copy of the cession dated 30 June 2014,
thereto.
We
submit that your client’s conduct herein is mala fide, and
clearly an attempt to engineer the demise of our client’s
businesses. We are amazed that your client continues to act in terms
of and enforce the said cession despite:
1.
Your confirmation that the said cession
is null and void; and
2.
Your most recent advices on 14 January
2015, that your client does not rely upon the cession of 30 June 2014
but on an alleged earlier
cession (which we are yet to be given a
copy of, despite our request for same).
Your
client’s conduct herein is not only unlawful, but is severely
prejudicial to our client and its businesses going forward,
and is
causing our clients irreparable financial harm.
In
light of the above, we demand that your client undertakes to
immediately desist from contacting any of the debtors concerned,
and
forthwith informs those which it has contacted, especially Kobus Lock
Transport; Unitrans Supply Chain Solutions; Imperial
Managed Chain
Solutions, and Monteagle Logistics Limited, by way of a written
communication and/or publication that the debts must
be paid
forthwith to our clients in terms of the relevant service agreements.
Without
the receipt of these funds, our clients will no longer be able to
trade. Instructions are that the debtors have indicated,
on no
uncertain terms, that they refuse to pay the amounts that are
currently due until such time as the dispute regarding the
validity
of the said cession is dispensed with, alternatively they have
received written confirmation from your client that the
funds may be
paid to our clients.
We
accordingly require the written undertaking by no later than 12h00
tomorrow, 22 January 2015, and confirmation that your client
has sent
the appropriate letter to the debtors with an instruction that the
debts are to be paid forthwith to our client.
We further
require a copy of the letter to the debtors to be sent to us by 12h00
tomorrow ..
.”
[19]
On 22 January
2015, Engen’s attorneys responded to this email and stated:
“
Kindly
find attached hereto the earlier cession dated 03 April 2012, given
by your client which my client is entitled to rely upon
unless you
favour me with reasons why it cannot.
In
the absence of such reasons, I am unable to give the undertaking, and
call on you to favour me with your urgent response.
”
[20]
On 23 January
2015, Hazel De Souza of Hooyberg attorneys e-mailed Engen’s
attorneys and stated that:
“
Our
instructions are to confirm that the cession dated 3 April 2012 is
valid and that your client may rely upon same against the
cedent
named herein, namely Windsharp Trading (Pty) Ltd.
Kindly
let us have your undertaking and confirmation that your client has
addressed the relevant letter to the debtors of Western
Breeze
Trading 43 (Pty) Ltd, as a matter of urgency
.”
[21]
On
26 January 2015, Engen’s attorneys sent an e-mail to Hooyberg
attorneys and requested that they forward a copy of the cession
entered into between Western Breeze and Scania. This request
was refused by Hooyberg on the basis that Engen had previously
advised that it was not relying on the cession agreement dated 30
June 2014.
[22]
On
the same day, Engen’s attorneys wrote to Hooyberg and Windsharp
wherein it stated that Engen “
has
not waived any of its securities and in particular has not cancelled
the cession in question and that Engen is entitled to enforce
the
cession to the extent that the claim of the prior ranking cessionary
is discharged which according to point 2.4 of your memorandum
to my
client dated 22 May 2014 was discharged on 1 November 2014
”.
Engen’s attorneys further advised that they regarded the stance
taken by Hooyberg regarding the alleged indebtedness
to Scania as
suspicious and requested a copy of the cession and a letter of
confirmation from Scania that its debt, secured by
the prior ranking
cession had not been discharged. To this Hooyberg responded by
saying that the submissions made by Engen’s
attorneys are
disingenuous.
[23]
On
28 January 2015, Hooyberg wrote to Engen’s attorney’s and
advised
inter alia
that they failed to understand why Engen was refusing to provide the
letter of the undertaking as Western Breeze is not indebted
to Engen,
that it has never traded with Engen nor has it ever stood as surety
or guarantor in respect of the debt owed by any other
party to Engen.
[24]
On
29 January 2015 Engen’s attorneys responded
inter
alia
as follows:
“…
whilst
Western BreezeTrading 43 (Pty) Ltd did not bind itself as a surety,
it did undertake in writing in favour of the client to
settle the
debt due by Windsharp Trading (Pty) Ltd and offered the cession as
collateral security for its undertaking. Pursuant
to favouring
my client with the above undertaking/ guarantee/indemnity, the
cession was concluded …
”
[25]
On
29 January 2015 Hooyberg sent a letter to Engen’s attorneys and
advised that they were busy compiling an urgent application
on behalf
of their client and asked whether they were prepared to accept
service of the application on behalf of Engen.
[26]
Western
Breeze avers that when it was clear that the attempts by their
attorneys to persuade Engen to provide an undertaking to
desist from
contacting its debtors and to inform the debtors of Western Breeze to
pay their indebtedness to Western Breeze, were
unsuccessful and they
were facing bankruptcy due to what they described as Engen’s
unlawful and
mala fide
behaviour, it launched this application to this court.
[27]
According
to Western Breeze it has no obligations or indebtedness to Engen and
accordingly Engen is not entitled to enforce the
cession and/or
collect the debts of Western Breeze until such time as it is indebted
to Engen. Accordingly Western Breeze
avers that Engen is
attempting to collect the alleged indebtedness of Windsharp due to it
from the debtors of Western Breeze in
circumstances where the two
entities (i.e. Western Breeze and Windsharp); are entirely separate,
and do not trade together but
are individual companies. It
avers that as a result of Engen’s notice, many of the creditors
of Western Breeze have
refused to pay the amounts owed to it.
Western Breeze avers that the amount that its debtors are refusing to
pay it, is in
excess of R1 350 000-00, and therefore
constitutes a substantial amount of all its outstanding debts and
that if it is
not allowed to collect its indebtedness immediately,
its business operations will close down and it will be wound up as it
is unable
to pay its creditors, including staff and suppliers.
Material
non-disclosure
[28]
Engen
avers that when Western Breeze brought the application on an urgent
basis that it knew it was not entitled to do so, that
Western Breeze
had only told half of the story and that it had failed to disclose
the remaining facts that are material and relevant
to the
determination of the matter. In particular it was submitted by
Mr Harcourt on behalf of Engen that Gaskell had failed
to disclose
his own letter dated 22 May 2014 which is inconsistent with its
version as set out in the application. The letter
(Annexure “C”
to Engen’s papers), which I shall deal with later on herein, is
the restructure and payment proposal
made by Gaskell to Engen.
[29]
It
is accepted law that an applicant who applies to court to obtain an
order on an
ex parte
basis must in his/her conduct be beyond reproach. Such an
applicant is required to place all relevant facts before the court.
See
M V Rizcum Trader 4 M V Rizum Trader
v Mantly Appledore Shipping Ltd
2000
(3) SA 776
(C). Our courts have held that factors that could
properly be taken into account include the urgency of the matter and
the
conduct of the debtor in relation to his assets. A court
will “
generally weigh the interest
of the creditor and the debtor and, more particularly the prejudice
that may be suffered by such creditor
if he/she gives notice and the
application is heard in due course. The factors that could be
taken into account are not exhaustive.
Each case will depend on
its own particular circumstances.
”
See
Berrange NO v Hassan and
Another
2009 (2) SA 339.
Although
‘
the utmost good faith must be
observed by litigants making ex parte applications in placing
material facts before the court; so
much so that if an order had been
made upon an ex parte application and it appears that material facts
have been kept back, whether
wilfully and mala fide or negligently
which might have influenced the decision of the court whether to make
the order or not, the
court has a discretion to set aside with costs
on the grounds of non-disclosure. It should, however be noted
that the court
has a discretion and is not compelled, even if the
non-disclosure was material, to dismiss the application or to set
aside the
proceedings.
’ See
Herbstein & Van Winsen The Civil Practice of the Superior Court
of South Africa,
Schlesinger v
Schlesinger
1979 (4) SA 342
(W) at 349;
Phillips and Others v National Director
of Public Prosecutions
2003 (6) SA 447
(SCA)
2003 (2) SACR 410
(at para 29). On a conspectus of the
evidence I am on the whole not persuaded that the failure by Western
Breeze to disclose
the payment proposal and/or to provide further
information about the financial status of Western Breeze was material
and/or that
the non-disclosure will have an influence on the decision
of the court whether to make a provisional order or not. I am
also
satisfied that Engen has in any event not been prejudiced by the
short notice as it was able to serve and file a preliminary answering
affidavit in opposition to the relief sought timeously and it was
afforded the opportunity to file a substantive answering affidavit
thereafter by agreement between the parties..
Can
Engen place reliance on the restructure of debt and payment proposal
made to it by Gaskell?
[30]
Mr
Riley, who appeared on behalf of Western Breeze and Windsharp, has
submitted that the document relating to the restructure of
debt and
payment proposal which was sent by Gaskell to Engen was made on a
without prejudice basis and that it should be struck
out. He
submitted further that the restructure of debt and payment proposal
was sent by Gaskell to Engen to facilitate a
settlement of the
dispute between Windsharp and Engen. In the alternative he
submitted that it was at worst a proposal that
was not accepted.
[31]
In
Lynn & Main Inc v Naidoo
2006 (1) SA 59
(NPD) 65 at para [22] Tshabalala JP confirmed the
principle that ‘…
as a
general rule negotiations between parties, whether oral or written,
which are undertaken with a view to a settlement of their
disputes or
differences are privileged from disclosure. This is so whether
there are express stipulations that they shall
be without prejudice
or not
’. (See Millward v
Glaser
1950 (3) SA 547
(W).)
Indeed
in
Jili
v South African Eagle Insurance Co Ltd
1955 (3) SA 269
(N) at 275 B
, it was
decided that:
‘
No
conclusive legal significance attaches to the phrase “without
prejudice”. The mere fact that a communication
carries
that phrase does not per se confer upon it the privilege against
disclosure for example where there exists no dispute between
the
parties or it does not form part of a genuine attempt at settlement …
nor is a communication unadorned by that phrase
always admissible in
evidence, for it will be protected from disclosure if it forms part
of the settlement negotiations.
’
[32]
The requirements for a statement to be
“
without prejudice
”
and inadmissible are as follows:
(a)
A dispute between the parties;
(b)
A communication (oral or written)
containing both:
(i)
An admission;
(ii)
An offer to achieve a compromise;
(c)
Which is
bona
fide
(‘
genuine
negotiations
’). See
Brauer
v Markow and Another
1946 TPD 344
at
350 – 5, Schikkard & Van Der Merwe Principles of evidence
2
nd
ed
(2002) at 298 – 9.
[33]
The following is evident on a consideration
of the restructure of debt and payment proposal:
33.1
Western Breeze and Windsharp among others
are parties to it.
33.2
The combined monthly diesel consumption of the businesses of Western
Breeze and Windsharp is approximately
R3 Million.
33.3
Scania holds a cession over the debtor’s book of Western
Breeze.
33.4
Scania’s claim shall be settled on 1 November 2014 leaving
Western Breeze with ± R900 000-00
per month
of free cash flow.
33.5
Western Breeze shall utilise a portion of this free cash flow to
assist in settling a greater portion of
the historic debt of
Windsharp to Engen, by allowing Western Breeze’s debtors book
to become available as additional security
to Engen from 1/12/2014.
33.6
As from around May 2014, Western Breeze and Windsharp are in a
restructuring process in terms of which their
assets, debtors books,
creditors and contracts are being sold, transferred and ceded to a
new company (“Newco”) in
order to consolidate the two
transport operations into one. The restructure shall be
completed after the Scania debt is settled
in full on 1/11/2014.
33.7
From 1/12/2014 a consolidated debtors book comprising that of the
Western Breeze and Windsharp shall exist
that may be ceded to Engen
by the Newco, for a new facility with Engen.
[34]
It
is common cause that Engen rejected the proposal as recorded in the
restructure of debt and payment proposal, refused the grant
of the
new facility to the Newco and persisted with its demand for immediate
payment of its claim, failing which it would proceed
with the winding
up proceedings against Windsharp.
[35]
On
a consideration of the restructure of debt and payment proposal there
is no suggestion that there is a dispute about the fact
that
Windsharp is indebted to Engen. In fact paragraph 2.6 clearly
states that ‘
Windsharp is
currently indebted to Engen in the sum of approximately R5 500 000-00
as at 31 May 2014’.
In
paragraph 2.9.3 there is a request for time to pay off the debt and
the rest of the letter explains where the income will be
found to
make payment; and an offer of security for continued credit while the
so-called historic debt is being paid off.
I must agree with Mr
Harcourt’s submission that the letter amounts to no more than a
request for an extension of time to
pay without being sued i.e. a
pactum de non petendo
.
See
HNR Properties CC v Standard Bank of
SA Ltd
2004 (4) SA 471
(SCA) at p 479 E
- F. In the circumstances there is no basis upon which I can
find that the use the letter is inadmissible
on the basis that it was
made on a without prejudice basis. There is therefore no reason
why Engen cannot place reliance
on the restructure of debt and
payment proposal made to it by Gaskell.
The
validity of the cession dated 30 June 2014
[36]
In
my view the crucial issue to be decided in this matter is whether or
not Western Breeze is bound to Engen in terms of the agreement
of
cession of debts which it concluded together with Windsharp on 30
June 2014 with Engen. This agreement is central to the
main
application. On a consideration of the events as they unfolded,
it does not appear to be in dispute that the cession
dated 30 June
2014 was concluded at the demand of Myrna Jacqualine Theresa
Wilkinson (“Wilkinson”), a regional credit
manageress in
the employ of Engen. The evidence indicates that after having
considered the restructure of debt and payment proposal
which she
received from Gaskell, she made it clear to Gaskell that without the
second cession (i.e. of 30 June 2014), she would
reject the written
agreement of acknowledgement of debt and undertaking to pay dated 25
June 2014, and proceed to issue winding-up
proceedings against
Windsharp, as she was of the view that Western Breeze had been
purchasing fuel on the Windsharp account and
was in a stronger
position than Windsharp to repay Engen’s claim. The
approach adopted by Wilkinson and Engen cannot
be faulted and
considering the situation that Engen was confronted with, made clear
economic sense. Engen wanted to secure
payment of the amount
owing by Windsharp to it at all costs.
[37]
The
inescapable conclusion on the evidence is that the cession dated 30
June 2014 was concluded as part of the restricted payment
arrangements in respect of Engen’s claim which was also
consistent with the intention of Western Breeze to settle Windsharp’s
debt as is clear from the restructure of debt and payment proposal
made by Gaskell to Engen which I have referred to hereinbefore.
[38]
Mr
Harcourt submitted that although Western Breeze now seeks to avoid
the cession dated 30 June 2014 on the grounds that it is bad
in law
for lack of suretyship or alternatively because it was rendered
conditionally as part of the restructure of debt and payment
proposal, that the objective facts demonstrate and establish that the
grounds for dispute raised by Western Breeze must fail as
all the
facts point to the conclusion that Western Breeze recognised the
validity of the cession up until Engen elected to exercise
its rights
thereunder.
[39]
Objective
facts and conduct on the part of Western Breeze that clearly point to
the fact that it must have and did recognise the
validity of the
second cession is to be found in the fact that in accordance with the
cession agreement dated 30 June 2014 Western
Breeze and Windsharp
provided Engen with its debtors list without fail when requested to
do so. It must be so that if Western
Breeze and Windsharp
genuinely disputed the validity of the cession dated 30 June 2014
then they would not have furnished Engen
with the requested details
of their debts. There would have been no reason to provide this
information if there was not a
valid cession in existence. It
must further be borne in mind that by this time Engen had already
rejected the restructure
of debt and payment proposal.
[40]
It
is telling that in its replying affidavit, Gaskell admits the
validity of the cession of the book debts of Western Breeze to
Engen
and states that:
“
para
[25]
The validity of the cession
of the Applicant’s book debts is not in dispute
.
What is disputed is that the applicant is not indebted to the
Respondent, and that it did not guarantee the debts of Windsharp.
Accordingly there is no prejudice to the Applicant in copying its
debtor’s book to the Respondent …
”
(my underlying)
[41]
In
its ordinary sense paragraph 25 can only be read to mean that Western
Breeze does not dispute the validity of the cession but
rather
disputes that Western Breeze has any debt owing to Engen.
[42]
Surprisingly
and for the first time during legal argument on 18 June 2014, Mr
Riley submitted that the statement in paragraph [25]
i.e. that the
validity of the cession of the Western Breeze book debt is not
disputed, was a typographical error. According
to Mr Riley the
sentence should have read “
The
conclusion of the applicant’s book debts is not disputed
”.
He stated that the error was realised when Western Breeze had
received Engen’s heads of argument. He
submitted that it
must be a mistake as it has always been applicants case that the
validity of the cession is denied.
[43]
Whilst
he was presenting argument on this crucial aspect, I asked Mr Riley
why, if it was indeed a typographical mistake, this important
issue
was only being raised in argument and why Engen had not been advised
in advance of this aspect. I further expressed
my concern at
why, at the very least, Western Breeze had not filed an affidavit
explaining the mistake. I pause to mention
that after the
luncheon adjournment and because Mr Riley was experiencing problems
with his throat and speaking, and when he indicated
that he would not
be in a position to finish his submissions on the day, it was agreed
that the matter would be postponed for further
argument.
[44]
When
the proceedings resumed on 17 August 2015, Mr Riley sought leave to
hand in a further affidavit which attempts to explain that
paragraph
25 hereinbefore referred to was a typographical error. Needless
to say Mr Harcourt objected to the handing in of
the affidavit and
submitted
inter alia
that the admission of the affidavit at that stage would be highly
prejudicial to Engen and that Engen did not accept that the
“admission” of the validity of the cession was a
typographical error. After hearing argument, I agreed to admit
the affidavit and advised that I would decide what, if any, weight at
all to attach to this affidavit.
[45]
On
a consideration of the papers before me it is clear that Engen had
prepared its papers and submissions based on the admission
by Western
Breeze of the validity of the cession. This must also have been
clear to Western Breeze and its attorneys of record
when it prepared
its further papers. It is not in dispute that Engen’s
heads of argument was served on the attorneys
of Western Breeze on 13
April 2015. Nowhere in the further papers filed by it, nor in
its heads of argument does Western
Breeze make mention that what is
set out in paragraph 25 of its replying affidavit is a typographical
error.
[46]
When
considering the submission that the use of the word ‘validity’
was a typographical error, which it is now sought
to be withdrawn, it
is necessary to have regard to whether or not the party seeking the
withdrawal of such admission has given
a reasonable explanation about
how the typographical error arose. On a consideration of the
affidavit, which was deposed
to on 11 August 2015, it does not
explain how such a mistake could have been made nor why it was made.
No reasonable explanation
is provided as to why the typographical
error was not brought to the attention of Engen or its attorneys
timeously before the hearing
of the matter or at least immediately
after Engen had filed its heads of argument. It is further
significant that there has
been no formal attempt on the part of
Western Breeze to withdraw the admission.
[47]
It
is necessary to refer to the paragraph in the final answering
affidavit of Engen so that the response of Gaskell in paragraph
25 of
the replying affidavit of Western Breeze can be viewed in its proper
context. In Engen’s final answering affidavit,
Engen’s
deponent states as follows:
“
[28]
As is apparent from the aforementioned
e-mails Salem requested the debtors list of both applicant and the
second respondent in accordance
with the first respondent’s
rights under the second cession and these were provided to her
without fail. Most certainly
had applicant and second
respondent genuinely disputed the validity of the second cession then
they would not have furnished Salem
with the required details of the
debtors
”.
[48]
The
paragraph specifically deals with the fact that after the cession
agreement was entered into, Western Breeze and Windsharp had
in
accordance with the cession provided Engen with their debtors lists
and further states that if Western Breeze and Windsharp
really
disputed the validity of the cession that they would not have
provided Engen with details of their debtors. There
can be
doubt that there is a vast difference between the meaning of the
words ‘
validity
’
and ‘
conclusion
’
in the context of what is contained in paragraph 28 of Engen’s
final answering affidavit. In my view we are
further dealing
with deliberately different language if the word ‘
conclusion
’,
is substituted with the word ‘
validity
’.
I agree with Mr Harcourt that in the context in which it was made as
a reply to what was stated in paragraph 28,
the submission that it
was a typographical error cannot be correct. I am satisfied
that what was stated was quite intentional
and what was meant to be
conveyed is that although the validity of the cession was admitted,
the cession cannot be enforced because
there is no underlying
indebtedness. In my view such a finding fits in with Gaskell’s
statement at paragraph 8 of the
founding affidavit of Western Breeze
where he states that, ‘…
the
applicant together with Windsharp, signed a memorandum of agreement
with respondent whereby the applicant would cede its debtors
book to
the respondent in discharge of any present and future obligations it
might have to the respondent (“the cession agreement”)
’.
[49]
I
am accordingly not persuaded by the argument on behalf of Western
Breeze that when the word “
validity
”
was used by Gaskell in paragraph [25] of his replying affidavit that
it was a typographical error. The explanation
provided on
behalf of Western Breeze is neither reasonable or probable and the
manner and circumstances under which the issue was
dealt with, reeks
of bad faith on the part of Western Breeze. All the indications
are that the explanation that it was a
typographical error is an
afterthought.
[50]
In
Bank of Lisbon and South Africa Ltd v
The Master and Others
1987 (1) SA 276
(A) Galgat AJA (in a judgment concurred in by Rabie CJ, Jansen JA,
Corbett JA and Joubert JA), stated that: “
When
book debts are ceded in securitatem debiti the cedent cedes to the
cessionary the exclusive right to claim and receive from
the existing
and future ‘book debtors’ the amounts owing by them
”.
It is accepted law that ‘
unless
otherwise agreed, a cession in securitatem debiti results in the
cedent being deprived of the right to recover the ceded
debts,
retaining only the bare dominium or a ‘reversionary interest
therein …
’ See
Picardi Hotels Ltd v Thekwini Properties
(Pty) Ltd
[2008] ZASCA 128
;
2009 (1) SA 493
(SCA) at para
[3]
. It is further accepted that a cession of book debts is
valid and binding even if the principal obligation has not yet come
into existence when the cession is executed. The cession comes
into immediate force between the cedent and the cessionary
and the
cedent (i.e. Western Breeze in the present case) has no
locus
standi
to sue the debtor because the
cession has come into force. See
African
Cons Agencies v Siemens Nixdorf Info Systems
1992 (2) SA 739
(CPD) at 743 A – 5. In
Picardi Hotels Ltd v Thekwini Properties
(Pty) Ltd
supra
Boruchowitz AJA held at para [14] in this regard that:
“
[14]
I am of the view therefore that an effective and unconditional
transfer of rights occurred when the cession in securitem
debiti
was executed. The consequence is that the respondent was
divested of the power to sue the appellant in respect
of the unpaid
rentals. In order to sue for the recovery of the ceded debts
the respondent should have taken recession of
them from the bank
.”
[51]
I
am on the whole satisfied that on a consideration of the relevant
portion of Clause 1 of the cession i.e. ‘…
whether
it may be or may have been incurred by the cedent individually
or jointly with others or by any firm in which the
cedent has or
holds or may hereafter have or hold any interest and whether it
arises through any acts of suretyship, guarantee,
warranty, indemnity
or other undertaking signed by the cedent solely or jointly with
others or otherwise, …
’
that the deed of cession is an explicit original and unqualified
undertaking by Western Breeze to stand good for the debt
as
principal. The cession provides that the undertaking is
preceded by an undertaking “
for
due performance and discharge of every obligation from whatsoever
cause and howsoever arising”.
[52]
On
a conspectus of the evidence I am satisfied that when Gaskell entered
into the cession agreement with Engen, he intended that
Western
Breeze should stand good for Windsharp’s debts to Engen.
In my view it must therefore be so that the second
cession
constituted a contract of guarantee because Western Breeze undertook
as a principal to pay the debt together with Windsharp.
See
List v Jungers
1979 (3) SA 106
(A),
Carrim v Omar
2001 (4) SA 691
(W) at para’s 24 – 30. Accordingly
there is no basis upon which Engen should be denied its rights to
proceed
to collect the debt owing by Windsharp from Western Breeze in
accordance with the cession of book debts signed on 30 June 2014.
[53]
On the evidence
it is clear that Engen has accepted that it would only be entitled to
act on the cession until such time as the
alleged Scania debt has
been discharged during December 2014. It is however clear that
Western Breeze have at various times
sought to circumvent their
obligations on the basis of this alleged prior ranking cession in
favour of Scania Finance. It
is also so that Engen’s
efforts to obtain a copy of the Scania cession from Hooyberg, the
attorneys for Western Breeze and
Windsharp, have been unsuccessful.
It is not exactly clear why there has been a reluctance to provide it
to Engen.
The truth of the matter is that the production of the
alleged cession to Scania is directly relevant to the determination
of the
relief sought by Western Breeze and in respect of the
counter-application by Engen. The Scania cession has legal
consequences
in relation to the first and second cessions. I
agree with Mr Harcourt that if the Scania cession does not exist,
does not
have prior ranking or if the debt to Scania has been
settled, then there is no basis upon which Western Breeze and
Windsharp can
avoid the consequences of the first and second cessions
on the basis of the alleged prior ranking cession to Scania. In
any
event, should there indeed be a valid prior cession in favour of
Scania, there is no reason why Scania cannot itself take up this
issue with Engen.
Has
Western Breeze shown that it has an identifiable interim right
pending an action which is protectable by an interdict?
[54]
A further question to be answered is
whether Western Breeze has shown that it has an identifiable interim
right pending an action
which is protectable by an interdict?
The requisites for an interim interdict is as follows:
“
(a)
A right which, “
though prima facie
established, is open to some doubt;
(b)
well-grounded apprehension of irreparable injury;
(d)
the absence of ordinary remedy.
”
See
Setlogelo v Setlogelo
1914 AD 221
at 227.
[55]
It
is accepted law that the granting of an interim interdict pending
action is an extraordinary remedy within the discretion of
the
court. It is further accepted that in exercising its discretion
a court weighs
inter alia
,
the prejudice to the applicant if the interdict is withheld against
the prejudice to the respondent if it is granted. The
courts
have a wide discretion to refuse to grant an interim (or final)
interdict ‘… (which)
seems
to mean no more than that the court is entitled to have regard to a
number of disparate and incommensurable features in coming
to a
decision
’. See
Knox
D’Archy Ltd v Jamieson
[1996] ZASCA 58
;
1996 (4)
SA 348
(A) at 361 H – I. Since I am satisfied that a
valid cession exists which can be enforced by Engen, I am not
persuaded
that Western Breeze has a basis in fact or law for an
interdict to restrain and/or to prevent Engen from acting in
accordance with
the terms of the cession. On the whole I am
satisfied that should I grant the interim interdict to Western Breeze
the effect
thereof would be that I would allow Western Breeze to fail
to uphold a valid agreement between itself and Engen, and in so doing
strip Engen of its security and further allow Western Breeze to
favour other creditors over Engen when on its own version Western
Breeze cannot pay its debts. In the circumstances I have
decided to exercise my wide discretion against granting Western
Breeze the interim interdict.
Condonation
of the late counter-claim
[56]
I
now turn to deal with the issue of the condonation of the alleged
late counter-claim. Western Breeze complains that Engen
has
brought the joinder-application and the counter-application on a
semi-urgent basis without applying for condonation.
Mr Riley
has also submitted that the counter-application should have been
filed simultaneously with Engen’s preliminary answering
affidavit.
[57]
In
regard to what has been described as the ‘
technical
arguments
’ raised on behalf of
Western Breeze, it is necessary to point out that our courts have
consistently held that the “
rules
are for the court and not the court for the rules
”.
See
Standard Bank of South Africa Ltd v
Dawood
2012 (6) SA 151
(WCC) at para
[12]. In
Mukaddum v Pioneer Foods
(Pty) Ltd
2013 (5) SA 89
CC Jafta J
writing for the court held at para [39] that:
“
Flexibility
in applying requirements of procedure is common in our courts.
Even where enacted rules of court are involved,
our courts reserve
for themselves the power to condone non-compliance if the interest of
justice require them to do so. Rigidity
has no place in the
operation of court procedures …
”
See
also Herbstein & Van Winsen The Civil Practice of the Superior
Courts in South Africa 3
rd
ed at pp 19 – 20. It is clear that the approach adopted
by our courts is that the Rules of Court will be interpreted
and
applied in a spirit that will facilitate the work of the courts and
enable litigants to resolve their differences in as speedy
and
inexpensive a manner as possible. See
Chelsea
Estates & Contractors CC v Speed-O-Rama
1993 (1) SA 198
(SE) at 201G. Courts have a wide discretion to
permit a late counter-application. See
Truter
v Degenaar
1990 (1) SA 206
(T) at p.
211. Rule 24 of the Rules of Court now makes provision for a
court to permit a late counter-claim. See
Shell
SA Marketing v Wasserman
2009 (5) SA
212
OPD at 215 G – I.
[58]
In
considering the complaints by Western Breeze it must further be borne
in mind that the deponent of the preliminary answering
affidavit on
behalf of Engen made it clear that due to the extremely short notice
and the fact that he was not in a position to
answer the application
fully, that should the application not be dismissed for among other
reasons for want of urgency, that Engen
be allowed to supplement the
affidavit. I am satisfied that it was clear from the outset
that Engen had always reserved its
rights to respond fully to the
application. The fact that Engen would be allowed to file a
further affidavit was also agreed
to by the parties and was made an
order of court. The fact that Western Breeze did not therefore
simultaneously file its
counter-claim with the preliminary answering
affidavit is therefore understandable.
[59]
In
the present matter Engen filed its counter-application together with
its substantive affidavit in opposition to the relief.
There
can be no basis for complaint on the part of Western Breeze. On
the whole I am satisfied that this is in any event
a case where I
should exercise my discretion in favour of condoning the late filing
of Engen’s counter-claim.
[60]
In
regard to the joinder of Windsharp to these proceedings, Mr Riley has
submitted that the application amounts to an abuse of the
court
process. He submitted that Engen has presented contradictory
versions of which entity is allegedly liable for payment
of its
debt. In this regard he argued that in the application by Engen
for the winding-up of Windsharp in the Pietermaritzburg
High Court,
that:
1.
Engen alleges that Windsharp is liable for
the entire debt due to it and that it makes no allegations as to the
indebtedness of
Western Breeze to it in any amount or for any reason.
2.
Engen makes no mention of the fact, as it
alleges in this matter, that Western Breeze has given any security
for the debts of Windsharp’s
account and is therefore indebted
to Engen, as an afterthought.
[61]
Erasmus,
Superior Court Practice 2nd ed states at D1 – 126 that:
‘
Apart
from the obligatory joinder of a party who has a direct and
substantial interest in a subject matter of the litigation, a
defendant may be joined under the common law on grounds of
convenience, equity, the saving of costs and the avoidance of
multiciplicity
action
’.
[62]
Our courts have held that a party may be
joined if it can be shown that the party sought to be joined ‘…
has a direct legal interest and not
merely a financial interest which is only an indirect interest in
such litigation. Such
direct interest has been stated to be
limited to cases of joint owners, joint contractors and partners and
where the other party
has a direct and substantial interest in the
issues involved and the order which the court might make.
’
See
United Watch & Diamond Co v Disa
Hotels
1972 (4) SA (CPD) 409 at 415 E –
F. In
Henri Viljoen (Pty) Ltd v
Awerbuch Brothers
1953 (2) SA 151
(O)
Horwitz AJP, after analysing the concept ‘
direct
and substantial interest’
concluded
that “…
an interest in the
right is the subject matter of the litigation and … not merely
a financial interest which is only an indirect
interest in such
litigation
.”
[63]
In the further affidavit of Gaskell, filed
on behalf of Western Breeze, he states that, “
there
is no need to join Windsharp, as it is a separate entity and that
neither it nor Western Breeze are shareholders, nor subsidiaries
of
each other. He states further that neither entity controls the
other, either directly or indirectly, nor does Windsharp
have any
interest in the subject matter of the urgent application as it is not
affected thereby, either directly or indirectly
.”
[64]
In the
restructure and payment proposal to Engen, Gaskell states that “
the
Gaskell family have always operated and conducted two distinct
transport operations, one form 106 Van Moolmam Street, Vryheid,
Kwazulu Natal, being the Windsharp business which has a number of
general transport clients and the other from Melmoth, being the
Western Breeze business which is a specific forestry transport
business that has as its core client, Mondi Ltd
”.
He states further at 2.2 in the restructure and payment proposal that
“
Windsharp uses approximately R1.8
million of diesel per month and Western Breeze uses approximately
R1.2 million per month, a combined
diesel consumption of
approximately R3 million per month
”.
[65]
When the restructure of debt and payment
proposal and the Gaskell purchases of diesel from Engen are read
together then the following
is apparent:
1.
That Windsharp and Western Breeze are two
of several companies and entities which are controlled by the Gaskell
family;
2.
That Gaskell is the common director and
common controlling mind of both Western Breeze and Windsharp;
3.
That all the companies and entities under
the Gaskell group have the common interest of providing for the
financial advancement
of the Gaskell family;
4.
That Western Breeze was using Windsharp’s
facility with Engen to meet its own fuel requirements in
circumstances where neither
of them were making payment to Engen;
5.
The indications are that the merger which
was proposed and envisaged in the restructure of debt and payment
proposal had already
commenced as far back as October 2013 as the
diesel purchases show a rise up to R3 million which is in accordance
with Gaskells’s
admission to Engen.
6.
The commercial interest of Windsharp and
Western Breeze are indentical and the issues appear to be
intertwined.
[66]
I am satisfied that on the totality of the
evidence, Engen has shown on a balance of probabilities, that
Windsharp does indeed have
a direct legal interest in these
proceedings and that Windsharp should therefore be joined. In
so far as the argument is
concerned that Engen has failed to mention
that Western Breeze was indebted to it in the liquidation application
of Windsharp and
that this has resulted in a dispute of facts which
has resulted in this matter being referred to oral evidence, I
do not
agree that anything turns on the submissions made in this
regard and it accordingly falls to be dismissed.
[67]
Even though Mr Harcourt has urged me to
make a cost order against Western Breeze and Windsharp on an attorney
and client scale,
I am not persuaded that I should do so.
[68]
In the result I
make the following order:
1.
The application by the applicant is
dismissed with costs.
2.
It is ordered that Windsharp Trading (Pty)
Ltd is hereby joined as second respondent.
3.
The applicant and second respondent are
directed to furnish the first respondent with copies of their
debtor’s book for the
period 01 September 2014 to 28 February
2015 or the last day of the calendar month prior to this Order,
whichever is the later,
including the name and physical address of
each debtor and the amounts outstanding by each debtor as at the
accounting months-end
of the book during that period.
4.
The applicant and second respondent are
directed to furnish the first respondent with a copy of the alleged
cession agreement concluded
with Scania Finance Southern Africa (Pty)
Ltd.
5.
The applicant is direct to forthwith
disclose to the first respondent full details of all receipts of
payments from its debtors
received after 09 December 2014 supported
by vouchers and Bank statements of the account into which such funds
were deposited.
6.
The second respondent is directed to
forthwith disclose to the first respondent full details of all
receipts of payments from its
debtors received after 09 December 2014
supported by vouchers and Bank statements of the account into which
such funds were deposited.
7.
The applicant and second respondent are
interdicted and restrained from passing off any of the debtors’
of the second respondent
as those of the applicant and vice versa.
8.
The costs of the counter-application shall
be paid by the applicant and second respondent jointly and severally,
the one paying
the other to be absolved.
RILEY,
AJ