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[2017] ZAWCHC 144
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Dotcom Trading 118 (Pty) Ltd v Hobbs Sinclair Advisory (Pty) Ltd (6532/2014) [2017] ZAWCHC 144 (12 December 2017)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: 6532/2014
Before: The Hon. Mr Justice Binns-Ward
Hearing: 21-23, 27 and 29 November
2017
Judgment:
12 December 2017
In
the matter between:
DOTCOM
TRADING 118 (PTY)
LTD
Plaintiff
and
HOBBS
SINCLAIR ADVISORY (PTY)
LTD
Defendant
JUDGMENT
BINNS-WARD
J:
[1]
The plaintiff company is claiming payment
of the balance it alleges is due and owing to it by the defendant
company in respect of
consultancy services rendered in respect of the
operations of Wilenri Appliance Services (Pty) Ltd t/a Mastercare
(‘Wilenri’)
while the latter company was in business
rescue. The claim is predicated on the enforcement of a
contract that the plaintiff
alleges was concluded orally with the
defendant in May, alternatively in late July or early August, 2012.
Mr Mark Mans represented
the plaintiff in concluding the
agreement. He transacted with Mr Neill Hobbs, who is alleged to
have acted on behalf of the
defendant.
[2]
Pursuant
to an order in terms of rule 33(4) made in chambers by the Judge
President, the issues separated for decision in the stage
of the
action tried before me were limited to (i) the standing of the
plaintiff to sue on the contract; (ii) whether
the defendant was
party to the contract; and (iii) the terms of the contract.
Only two witnesses testified at the hearing;
Mr Mans for the
plaintiff and Mr Hobbs for the defendant. To the extent that
their evidence gave rise to two mutually conflicting
versions of the
facts, the proper approach to deciding which to prefer is that
described in the oft cited analysis by Nienaber JA
in
Stellenbosch
Farmers’ Winery Group Ltd and another v Martell et Cie SA and
others
2003 (1) SA 11 (SCA), at para. 5.
[1]
(See also e.g.
Dreyer
and another NNO v AXZS Industries (Pty) Ltd
2006 (5) SA 548 (SCA) at para 30 and
National
Employers’ General Insurance Co. Ltd v Jagers
1984 (4) SA 437 (E) at 440D-H.)
[3]
It
was common ground that Mr Hobbs, a practising chartered accountant
who had been appointed as business rescue practitioner to
Wilenri on
21 May 2012, had invited Mr Mans - to whom he had at that time
(through the vehicle of the defendant company) provided
tax advice
for several years - to become involved in the business rescue by
providing the consultancy services required.
Mr Hobbs confirmed
in his oral evidence that he had appreciated when Mr Mans had agreed
to be engaged that he would use a corporate
entity for the purpose of
the agreement. He also conceded that Mr Mans had chosen the
plaintiff as the vehicle concerned,
and acknowledged that the
plaintiff company had, in consequence, been the contracting party.
The upshot of that concession
was that the pleaded dispute in respect
of the first of the aforementioned issues separated for determination
at this stage fell
away; the plaintiff’s standing to claim
enforcement of the contract, which had been contested, was thereby
admitted.
[2]
[4]
The plaintiff’s counsel argued,
however, that the lateness of the concession was a matter that fell
to be taken into account
in the assessment of Mr Hobbs’
credibility. There is something in this, because in his
affidavit on behalf of the defendant
in opposition to the plaintiff’s
application for summary judgment Mr Hobbs had alleged that the
contract had been between
Wilenri and Mr Mans acting
personally. He averred (at para. 14.2) that ‘Mr Mans
should have issued the
invoices in his own name. For some
undisclosed reason the invoices were made out in the name of the
Plaintiff. …’.
[5]
It also became apparent during the trial
that there was little that was substantially in dispute concerning
the terms of the agreement.
Indeed, the only question requiring
determination in that regard was the plaintiff’s allegation
that the contract had entitled
it to charge a 10% administration
fee. That is an issue that can be disposed of shortly. Mr
Hobbs denied that there
had been any discussion about such a fee, and
the plaintiff’s conduct during the execution of the contract
did not support
the existence of such a provision in the agreement.
None of the invoices rendered by it reflected such a fee. In
the
circumstances, notwithstanding Mr Mans’ evidence as to the
existence of an objectively plausible commercial rationale for
the
plaintiff to have raised such a fee, the question falls to be
determined adversely to the plaintiff.
[6]
The focus of the contestation at the trial
was the second of the aforementioned separated issues; namely whether
the plaintiff’s
contract was with the defendant or some other
counterparty. The defendant had pleaded that the plaintiff’s
claim (if
any) lay against Wilenri, not the defendant. The
contention that Wilenri in business rescue had been the entity with
which
the plaintiff had contracted derived support from the
plaintiff’s conduct in invoicing Wilenri for the consultancy
services
provided at the outset of the contract work in June 2012.
From the beginning of August 2012, however, the plaintiff directed
its invoices (including those in respect of the consultancy services
rendered during July 2012) to ‘Hobbs Sinclair Business
Rescue
Services’.
[7]
All of the invoiced amounts that were paid
were settled by means of transfers from an account operated by the
defendant with Mercantile
Bank. The source of payment is a
neutral factor in my view, however, because it was evident that the
defendant’s bank
account had at all material times been used
exclusively as the transactional account for Wilenri’s business
while the company
was in business rescue. Mr Hobbs explained
that this had been because Wilenri had been unable to operate its own
existing
bank accounts or obtain new banking facilities while it was
in business rescue.
[8]
That
said, the fact that the credit balance in the bank account was,
understandably, characterised by Mr Hobbs as being ‘Wilenri’s
money’ is neither here nor there. The business rescue
practitioner would have been entitled to pay his expenses by
drawing
on the account, for those expenses would be a charge against the
company. It was implicit in the plaintiff’s
case that the
business rescue operation was conducted by Hobbs through the
defendant and its charges for the consultancy services
were expenses
incurred by the defendant in that operation. It is therefore
also not determinative one way or the other that
the consultancy fees
that the plaintiff contends were due to it by the defendant were paid
out of the same bank account as the
director’s fees that it
admits were payable by Wilenri.
[3]
Moreover, from a commercial perspective, it seems axiomatic that the
parties would have expected the operations of Wilenri
to generate the
funding to pay for the consultancy services rendered by the plaintiff
irrespective of whether the latter’s
contract were with Wilenri
itself, or the business rescue practitioner. It would have been
unbusinesslike to undertake or
continue with the business rescue
operation if it had been evident that Wilenri’s revenue would
be unable ultimately to pay
for what Mr Hobbs called the plaintiff’s
‘operational intervention’.
[4]
[9]
The
evidence established that Mr Hobbs and his business partner, one
Grieg Sinclair, had acquired a shelf company earlier in 2012
through
which they intended conducting a business rescue directed business.
They named the company Hobbs Sinclair Business
Rescue Services (Pty)
Ltd. It was apparent, however, that for whatever reason Mr
Hobbs conducted the business rescue of Wilenri
not through the
recently acquired company, but using the vehicle of the defendant
company. The business rescue plan prepared
by him in terms of
s 150 of the
Companies Act 2008
, and all the correspondence
directed by him as business rescue practitioner to which reference
was made in the course of the evidence
was issued in the defendant’s
name using ‘Hobbs Sinclair Business Rescue Services’ as a
trading name. Letters
written by Mr Hobbs in his capacity as
the business rescue practitioner were on stationery with a letterhead
bearing the title
‘Hobbs Sinclair Business Rescue Services’
in capital letters, with the defendant’s company name and VAT
and company
registration particulars printed in a small font size at
the foot of the page. Mr Hobbs conceded that it was common
business
practice for companies to use stationery discretely
reflecting their trading names and formal identity in the manner
described.
[5]
[10]
Mr
Hobbs initially claimed that the format of the stationery that he had
used had come about because of a mistake in his office
concerning the
design of stationery. Under cross-examination, he was driven by
the weight of the evidence concerning his
consistent use - commencing
with his letter to the directors of Wilenri confirming his
appointment as business rescue practitioner
and his fee structure
[6]
- of stationery identifying its authorship with the defendant company
to concede that it was difficult, if not impossible, for
him to say
that it had been in error. The letter from Mr Hobbs to Mr Mans
recording the termination of the plaintiff’s
contract in August
2013 was also written on the defendant company’s stationery.
The probabilities support the conclusion
in the circumstances that Mr
Hobbs’ concession accorded with the reality of the state of
affairs. The defendant was
indeed the entity through which he
carried out his business rescue practitioner function in respect of
Wilenri. My attention
was not directed to a single document
signed by Mr Hobbs as business rescue practitioner under a Hobbs
Sinclair Business Rescue
Services (Pty) Ltd letterhead.
Mr Hobbs’ conduct in holding out to the world that the
business rescue was being
conducted by him under the auspices of the
defendant company was impossible to reconcile with his claim to have
done so under the
umbrella of Hobbs Sinclair Business Rescue Services
(Pty) Ltd. Indeed, the use of the name of the latter company as
the trading
name of the defendant was enigmatic. Mr Hobbs’
repeated emphasis that the business of the defendant was the
furnishing
of tax advice, not business rescue, was inconsistent with
his conduct. It is also significant that Mr Hobbs’
conduct
in this respect cannot have escaped notice by his business
partner in and co-director of the defendant company, Mr Sinclair.
[11]
Mr Mans was taken in cross-examination to
certain invoices rendered to Wilenri by Hobbs Sinclair Business
Rescue Services annexed
to the replying papers in separate
proceedings under case no. 14190/13, referred to below, which
showed two charges s.v. ‘
Professional
Services
’; namely for ‘
To
our fee for time spent as follows:
’
or ‘
To our fee as follows:
’
‘
Business Rescue Consulting Fees
for period xxx-xxx R xxx
’,
‘
Disbursement to HS Advisory for
the period xxx-xxx R xxx
’.
Inasmuch as these documents professed to be VAT invoices and
indicated ‘vat reg. no pending’, it appears
that they
were probably issued by Hobbs Sinclair Business Rescue Services (Pty)
Ltd – although the company’s designation
as a private
company and its incorporation number were not reflected. Mr
Hobbs explained the invoices on the basis that Hobbs
Sinclair
Business Rescue Services (Pty) Ltd had contracted with the defendant
company (‘HS Advisory’) to provide accounting
and
financial services to Wilenri. Mr Hobbs admitted that these
invoices were internal documents in the sense that they would
not
have been distributed to the ‘outside world’, but only
within the Hobbs Sinclair stable. In its pleadings,
however,
the defendant admitted that when the plaintiff had addressed invoices
to ‘
Hobbs Sinclair Business Rescue
Services
’ it had been using the
defendant’s trading name – see para. 3.2 of the
defendant’s rejoinder. The
defendant pleaded that the
plaintiff had submitted such invoices to the defendant to obtain
payment by the defendant out of funds
held on Wilenri’s behalf
in an account operated by the defendant. Para. 3.2.4 of the
rejoinder, which was amended during
the trial, had originally been
drafted, confessedly on Mr Hobbs’ instructions, to read as
follows concerning such invoices:
‘
Those
invoices which the Plaintiff had made out and
on
which the Defendant’s name was inserted
were intended and understood to have been submitted to the Defendant
because the latter was attending to making payments on behalf
of
Wilenri.
’ (Underlining
supplied.)
[12]
Mr Hobbs sought to explain that the
amendment had been effected because ‘Hobbs Sinclair Business
Rescue Services’
had never been the defendant’s name and
the implication to the contrary in the pleading as originally framed
had been incorrect.
I find it improbable, having regard to the
question most centrally in issue concerning the defendant’s
disputed liability,
that such an error could have been made by the
defendant’s then legal representatives, or, if it had been,
that it could
have been overlooked by Mr Hobbs at the time. On
the contrary, the admission is wholly consistent with Hobbs’
undeviating
use, over a prolonged period, of documentation reflecting
‘Hobbs Sinclair Business Rescue Services’ as the
defendant’s
trading name.
[13]
Mr
Mans explained the abovementioned change from the plaintiff having
invoiced Wilenri for the consultancy services to invoicing
Hobbs
Business Rescue Services
[7]
in the context of his having become ‘discomforted’, after
considering the provisions of chapter VI of the
Companies Act 2008
,
about the plaintiff being reliant on payment from Wilenri in the
event of the business rescue failing and that company being wound
up. Mr Mans had had regard to the
Companies Act after
having
been provided with a pocket book publication of the statute by Mr
Hobbs.
[8]
It was implicit in Mr Mans’ evidence, and subsequently
acknowledged by Mr Hobbs when he gave evidence, that Mans was
reluctant to have the plaintiff continue with the consultancy
services in respect of Wilenri’s business rescue on the basis
of such downside exposure. Mr Mans’ description of the
parlous state of Wilenri’s business at the inception of
business rescue justified his concern about the plaintiff’s
exposure if its contractual claim for remuneration were to lie
against the company. Mr Mans testified that Mr Hobbs
had accepted his concern and advised him to ‘bill me’.
The import of the words ‘bill me’ is the key issue in
this part of the case. Mans understood them to convey that
the
plaintiff should render its accounts to the entity through which
Mr Hobbs was conducting the business rescue, and an acceptance
by Hobbs that that entity, not Wilenri, would be the party
contractually liable to the plaintiff.
[14]
The content of an email sent on 1 August
2012 by Mr Mans’ accountant to the person appointed by Mr
Hobbs as managing
director of Wilenri during the business rescue,
Mr Richard Saner bore out Mans’ evidence that a change in
the identity
of the party to which the plaintiff would look to for
payment in terms of its consultancy services agreement had been
agreed.
The email read in relevant part as follows:
Subject
:
M Mans and Mastercare – July consultancy
Hi Richard,
I believe you are in JHB
on business and I need to invoice out the charges for Mark and his
team for July consultancy. Mark
has advised that I need to
invoice Neil (sic) Hobbs and Associates, and therefore I require your
billing details, including the
VAT number.
…
Kind regards
Der-Anne Dods
Financial Accountant –
M Mans Holdings Group
Ms
Dods addressed a further email to Mr Mans, whom it would appear must
also have been in Johannesburg at the time, later in the
afternoon of
1 August 2012. That email read:
Subject: Neil (sic) Hobbs
& Association (sic) invoice details
Hi Mark,
Just a reminder that if
you see Richard to ask him to please forward me the invoicing details
for the Mastercare consultancy fee
& expenses.
Thanks
Der-Anne Dods
Financial Accountant –
M Mans Holdings Group
‘
Hobbs
and Associates’ was a name under which Mr Hobbs carried on
certain business in his personal capacity. Despite
Mr Mans’
evidence that he had understood from his conversation with Mr Hobbs
that by ‘bill me’ Hobbs had meant
the defendant company,
the tenor of the emails suggests that he must initially have
understood Hobbs to mean Hobbs and Associates.
But the
subsequent conduct of the parties indicates that any such
understanding by Mans was transient.
[15]
There
was no direct evidence concerning the content of the billing details
given in response to the enquiry being pursued by Ms
Dods. The
parties’ conduct in respect of the subsequent rendering and
payment of invoices for the consultancy services
supports the
inference that ‘Hobbs Sinclair Business Rescue Services’
must have been given as the party to whom they
should be rendered.
As described, that was the name under which Hobbs was conducting the
business rescue through the vehicle
of the defendant company.
[9]
[16]
The probability is that Mr Saner provided
the billing details, as claimed by Mr Mans. As the business
rescue practitioner-appointed
managing director of Wilenri, Saner
would have had no authority to bind the defendant company to the
plaintiff. It is clear,
however, that Saner worked under the
close direction of Mr Hobbs and it is likely, in the context of the
conversation between Mans
and Hobbs just described, that the billing
details would have been provided by Saner on Hobbs’
instruction. The inference
that that was so is supported by the
fact that invoices directed to ‘Hobbs Sinclair Business Rescue
Services’ were
thereafter accepted without demur. Mr
Hobbs’ denial that he had authorised the furnishing of the
billing details is
not supported by the probabilities.
[17]
It
was put to Mr Mans in cross-examination that the addressing of the
plaintiff’s invoices to ‘Hobbs Sinclair Business
Rescue
Services’ indicated that the company of that name, and
not
the defendant company, was treated by it as its debtor. Mans’
evidence was that he had understood at the time that
‘Hobbs
Sinclair Business Rescue Services’ was a trading name of the
defendant company. He said that he was unaware
then of the
existence of a separate company of that name. He was taxed in
cross-examination over his claim to have become
aware of the
existence of a separate company called Hobbs Sinclair Business Rescue
Services (Pty) Ltd only during the discovery
process in the lead up
to the trial in the current matter being contradicted by his earlier
acknowledgment of the existence of
that company when he made a
supporting affidavit in motion proceedings instituted by Nedi
Investments (Pty) Ltd and M Mans Holdings (Pty)
Ltd
[10]
for removal of Mr Hobbs as business rescue practitioner of
Wilenri.
[11]
Hobbs Sinclair Business Rescue Services (Pty) Ltd was cited as the
fourth respondent in those proceedings, which were instituted
at the
end of August 2013. Mans’ evidence as to precisely when
he first became aware of the separate existence of Hobbs
Sinclair
Business Rescue Services (Pty) Ltd was unreliable. However, in
my judgment his knowledge in this respect was not
relevant. In
the context of Hobbs’ conduct of the business rescue using the
name as the defendant’s trading name,
there is nothing to
support the notion that the plaintiff was actually invoicing a
separate company that happened to have that
name. There is also
nothing to support a conclusion that by causing the plaintiff to be
furnished with the billing details
used with effect from its invoice
dated 31 July 2012, Hobbs had intended Hobbs Sinclair Business
Rescue Services (Pty) Ltd
to be charged for the consultancy services
rendered under the plaintiff’s auspices.
[18]
Whilst, Mr Mans’ evidence as to when
he first became aware of the existence of a separate company by the
name Hobbs Sinclair
Business Rescue Services (Pty) Ltd was vague and
unreliable, I nevertheless have no reason to reject his evidence that
he was unaware
of it when he had his conversation with Hobbs in
2012. There had admittedly been dinner table discussions in or
about May
2012 about the establishment of a dedicated business rescue
enterprise in which Mans might invest or participate, but there is
nothing to show that these discussions were taken anywhere as far as
Mr Mans would know. He was given a business card with
the name
‘Hobbs Sinclair Business Rescue Services’ on it, but the
card did not associate the name with an identified
company. Mr
Saner was also issued with such a card. Mr Hobbs explained the
issue of the business card to Saner as being
‘(b)ecause at that
stage we were contemplating putting together a team that would have
an on-going business rescue activity’.
He admitted that
the circumstances in which Saner had been given the card were
indistinguishable from those in which Mans obtained
his card.
As far as one can tell by the evidence, Mr Hobbs was doing
nothing to show the face of Hobbs Sinclair Business
Rescue Services
(Pty) Ltd to the outside world, including Mr Mans.
[19]
The probability is that when Mr Hobbs said
‘bill me’ he would have meant the entity through which he
was conducting
the business rescue. It did not redound to Mr
Hobbs’ credit that, having caused the defendant to plead that
that Mr
Mans had contracted with Wilenri, he sought during his
evidence to suggest variously that the plaintiff’s contract had
been
with him (Hobbs) in his personal capacity or with Hobbs Sinclair
Business Rescue Services (Pty) Ltd. As the plaintiff’s
counsel stressed in argument, on the pleaded case only two
‘candidates’ were presented as the plaintiff’s
counterparty,
Wilenri or the defendant.
[20]
It was demonstrated to Mr Mans during
cross-examination that the plaintiff had also addressed some invoices
to ‘Hobbs Sinclair
Business Rescue Services’ in respect
of matters such as his monthly directors’ fee and a software
licence for a program
called HEAT, which he had admitted were
Wilenri’s liability, and not that of the defendant. Mans
expressed puzzlement
over that and conjectured that the invoices in
question must have been addressed in that way on request or by
mistake. It
was suggested to Mans that the plaintiff’s
conduct in this respect showed that when it invoiced ‘Hobbs
Sinclair Business
Rescue Services’ it was doing so in respect
of Wilenri’s liability. Mans denied the proposition.
In my
view, the proposition might have had some force were it not for
the fact that it failed to address the effect of the arrangement
specially put in place after Mans’ conversation with Mans in
early August 2012 about his discomfort about the plaintiff’s
exposure to Wilenri in respect of its claim for consultancy
services. Mans had special reason for concern in this regard
because of the plaintiff’s liability to pay the individuals the
plaintiff had independently contracted to provide these services.
[21]
Mr Hobbs professed to lack any independent
recollection of the conversation with Mr Mans, but admitted to
not being able to
deny that it had taken place. He did confess
to remembering a conversation with Mans that had centred around
s 143
of the (2008)
Companies Act. He
also conceded that he could not
deny having uttered the words ‘bill me’ and was
constrained to admit that any such
statement by him would have been
directed at addressing Mans’ concern about the plaintiff’s
exposure to the effect
of Wilenri’s potential liquidation.
These concessions forced Mr Hobbs to allow that Mans’ concern
could hardly
have been addressed if Wilenri had remained as the
debtor to which the plaintiff was expected to look for the redemption
of its
claims. His attempts under cross-examination to suggest
that Mans’ concern had been left ‘unresolved’,
alternatively that he had offered himself personally as the
substituted debtor, were singularly unconvincing. Mans did not
give the impression of being a businessman who would be easily fobbed
off with a nebulous response to the issue that he had raised,
and it
is most improbable that Hobbs would have agreed to expose himself to
unlimited personal liability.
[22]
The
evidence suggests that it is probable that Mr Hobbs would have been
especially keen to keep Mr Mans involved in the business
rescue
because of his wide experience and proven competence in areas
critically relevant to salvaging Wilenri’s business.
[12]
It was for that reason that he had especially sought out Mr Mans’
assistance in what he at the outset had appreciated
would be a
seriously challenging business rescue operation. This would
explain a willingness on his part to accommodate Mans’
expressed concern.
[23]
The
only pertinence that
s 143
of the
Companies Act could
conceivably have had in the context was an understanding that if the
plaintiff’s charges were treated as an expense of the
business
rescue practitioner, Mr Hobbs or the company through which he
conducted the business rescue would be entitled to recover
them as a
first charge against Wilenri in liquidation.
[13]
On that approach, by agreeing that the defendant should be liable to
pay for the consultancy services, Hobbs would have been
undertaking a
limited risk in return for assuaging Mans’ concerns and
ensuring that the plaintiff’s services remained
retained.
[14]
In evidence, Mr Hobbs voiced the opinion that the plaintiff would
have enjoyed some form of preferent claim against Wilenri
upon the
latter’s liquidation in any event. I am not aware,
however, of any statutory basis for that belief, nor was
attention
directed to any by counsel.
[24]
The defendant’s counsel argued that
it would not have been legally permissible for Hobbs to contract with
the plaintiff for
the provision of the consultancy services.
They did not elaborate on the basis for that contention. I
gathered it to
be implicit in the argument that the business recue
practitioner could not competently have incurred the cost of engaging
the plaintiff
as a recoverable expense. I agree with the
plaintiff’s counsel’s submission that the contention was
without merit.
[25]
In
the commentary on
s 143
of the Act in (Delport
et
al
)
Henochsberg
on the
Companies Act 71 of 2008
,
the ambit of the rescue practitioner’s ‘expenses’
is explained with reference to the provisions of
Companies Act
Regulation
128(3), which speaks of ‘
expenses
incurred by the practitioner to the extent reasonably necessary to
carry out the practitioner's functions and facilitate
the conduct of
the company's business rescue proceedings
’.
One has to be circumspect about interpreting a statute with the aid
of the regulations made under it (see e.g.
Moodley
and Others v Minister of Education and Culture, House of Delegates
and Another
[1989] ZASCA 45
;
1989 (3) SA 221
(A) at 233D-G, and
Rossouw
and Another v FirstRand Bank Ltd
2010 (6) SA 439
(SCA) at para 24), but I find nothing in the
regulation that is inconsistent with the evident import of the
section in the statute
from which it derives.
[15]
[26]
It was clearly established in Mr Hobbs’
evidence that the consultancy services enlisted under the aegis of Mr
Mans were considered
necessary by him to carry out his functions and
enable an effective business rescue. It could hardly be
contended in such
circumstances that it was outside the scope of
Hobbs’ remit as the business rescue practitioner to incur
expenses in respect
of the engagement of the consultancy services.
Indeed, the defendant’s counsel’s contention in
this respect was
inconsistent with Hobbs’ explanation that he
had contracted with the defendant company to provide accounting
services to
Wilenri. On Mr Hobbs’s version the cost
of those services was charged to Wilenri by Hobbs Sinclair Business
Rescue
Services (Pty) Ltd as expenses of the business rescue
practitioner.
[27]
In all these circumstances I have been
satisfied that the plaintiff has succeeded in proving on a balance of
probabilities that
it had a contract with the defendant company.
[28]
The claim was originally formulated on the
basis that the plaintiff had contracted with the defendant from the
outset; that is from
the time that Mr Hobbs had agreed with Mr Mans
in May 2012 that the latter would provide the required consultancy
services.
Mr Mans also sought to advance that case in his
testimony. I do not think that the contention is sustainable.
It is
inconsistent with the plaintiff’s conduct in submitting
its invoices for consultancy services rendered during June 2012 to
Wilenri. It is also inconsistent with Mr Mans’ described
discomfiture; there would be no reason for it if he had not
thought
at that time that the plaintiff’s contract was with Wilenri.
[29]
An appreciation by the plaintiff’s
counsel of the weakness of Mr Mans’ evidence in this regard no
doubt inspired the
application made immediately after the completion
of his testimony to amend the plaintiff’s particulars of claim
by inserting
late July or early August 2012 as an alternative time
for the alleged conclusion of the contract. The application to
amend
the pleading was granted in the face of opposition by the
defendant.
[30]
The plaintiff’s counsel argued in
support of the proposed amendment that it was merely to bring the
pleadings into line with
the evidence that had been adduced. The
inherent soundness of that contention, which was supported by
counsel’s indication
in his address in support of the
application that the plaintiff did not intend to call any further
evidence, commended itself to
me. I was also not persuaded that
the amendment raised any cognisable prejudice to the defendant –
none was obviously
evident – that could not be fairly
accommodated. The defendant’s counsel would have been at
liberty to cross-examine
Mr Mans further if they wished, and could
also have sought other forms of procedural relief such as a
postponement if their client
would be embarrassed in the conduct of
its case as a consequence of the amendment being allowed.
[31]
I was unpersuaded by the defendant’s
counsel’s argument that any further cross-examination of Mr
Mans would be of little
or no worth because of the timing of the
amendment at the conclusion of his evidence. The evidence that
Mans had already
given had nailed his colours to mast as far as his
version of the relevant facts was concerned and, if it were so
minded, it remained
open to the defendant to further attack or rebut
it. As it was, the cross-examination of Mans that had already
occurred had
proceeded on the basis of a concession by the defendant
that the July-August conversation between Mans and Hobbs described by
the
witness had taken place. The allegedly related subsequent
email correspondence and change in invoicing, on which the plaintiff
relied, had been objectively established by the documentary
evidence. All that remained was what inferences and conclusions
fell to be drawn from that evidence. In the circumstances it
came as no surprise to me that the defendant did not ask for
Mans’
recall or seek a postponement when leave to effect the amendment was
granted.
[32]
I reserved the costs of the plaintiff’s
application to amend its particulars of claim for later
determination. The defendant’s
opposition to the
application was not so unreasonable as to justify visiting it with an
adverse costs order. The plaintiff
will be ordered to pay the
defendant’s costs in the application as if it had been an
unopposed application; in other words,
the defendant will have to
bear its own costs arising out of its opposition.
[33]
Inasmuch as the parties’ conduct
indicates that the change in billing occurred and was accepted with
effect from the plaintiff’s
invoicing for consultancy services
provided during July 2012, it falls to be inferred that the agreement
concluded in late July
or early August 2012 between Messrs Hobbs and
Mans, representing their respective principals, must have contained a
term making
it retrospective in effect from 1 July 2012.
The contextual effect of the alternative introduced by the amendment
was
to imply that the agreement reached between Mans and Hobbs in
late July or early August 2012 substituted that which had been
concluded
in May. The defendant’s counsel argued at the
end of the trial that if that had been the plaintiff’s
intention,
the implication should have been expressly pleaded.
Even if there is some merit in the argument, I do not consider that
the
plaintiff’s failure to expressly plead or expatiate on the
implication stands in the way of a determination of the issue on
the
evidence that was adduced; cf.
Shill
v Milner
1937 AD 101
at 105. The
implication was obvious and the relevant facts were fully ventilated
in the evidence.
[34]
Both sides were represented at the hearing
by senior counsel. For the guidance of the taxing master, I
should mention that
in my view the relative complexity of the matter
justified the engagement of senior counsel.
[35]
The following order is made:
1.
It is declared that the agreement relied on
by the plaintiff in the particulars of claim (‘the agreement’)
was concluded
between the plaintiff, represented by Mr Mark Mans, and
the defendant, represented by Mr Neill Hobbs, in late July,
alternatively,
early August 2012.
2.
The pertinent terms of the agreement (as
subsequently amended in the respect reflected in para. 2.6
below) were as follows:
2.1.
The plaintiff was appointed by the
defendant, with retrospective effect from 1 July 2012, to render
certain consultancy services
concerning the restructuring of the
operational activities of Wilenri Appliance Services (Pty) Ltd
(‘Wilenri’) under
business rescue.
2.2.
The plaintiff would appoint appropriate
personnel to effect the restructuring of the operational activities
of Wilenri.
2.3.
The plaintiff would at all times in the
execution of the restructuring of the operational activities of
Wilenri be subject to the
management and control of the business
rescue practitioner, who was carrying out his functions through the
vehicle of the defendant
company.
2.4.
The plaintiff would be remunerated on the
basis of time spent and the plaintiff’s employees and / or
consultants, certain
of whom were contracted on an
ad
hoc
basis, would be charged out by the
plaintiff at rates that were reasonable.
2.5.
Save as set out in para. 2.6
below,
the plaintiff would submit its invoices to the defendant at the end
of each month and the defendant would make payment in
respect thereof
at the end of the following month.
2.6.
With effect from February 2013, the
plaintiff would provide the defendant with pro forma invoices, in
respect of which:
2.6.1.
of the consultancy fees payable for Mr
Mans’ hours, any amount up to R50 000 would be payable as
set out in para. 2.5
above, and any amount
exceeding R50 000 would be accrued and paid when funds became
available to pay such accrued balance or
the business rescue was
terminated, whichever occurred first;
2.6.2.
the balance of the consultancy fees, aside
from the hours of Mr Mans, would be payable as set out in para. 2.5
above.
3.
Save that the plaintiff shall pay the
defendant’s costs occasioned by the application to amend the
particulars of claim on
the basis as if such application had not been
opposed, the defendant shall otherwise pay the plaintiff’s
costs of suit in
respect of the trial of the separated issues.
A.G. BINNS-WARD
Judge
of the High Court
APPEARANCES
Plaintiff’s
counsel: J.C. Butler SC
Plaintiff’s
attorneys C&A Friedlander Inc.
Cape
Town
Defendant’s
counsel: I.C. Bremridge SC
R.
Gordon
Defendant’s
attorneys Gillan & Veldhuizen
Westlake,
Cape Town
[1]
The technique generally
employed by courts in resolving factual disputes of this nature
[i.e. where there are two
irreconcilable versions]
may
conveniently be summarised as follows. To come to a conclusion on
the disputed issues a court must make findings on (a) the
credibility of the various factual witnesses; (b) their reliability;
and (c) the probabilities. As to (a), the court’s
finding on
the credibility of a particular witness will depend on its
impression about the veracity of the witness. That in turn
will
depend on a variety of subsidiary factors, not necessarily in order
of importance, such as (i) the witness’s
candour and
demeanour in the witness-box, (ii) his bias, latent and
blatant, (iii) internal contradictions in his evidence,
(iv) external contradictions with what was pleaded or put on
his behalf, or with established fact or with his own extracurial
statements or actions, (v) the probability or improbability of
particular aspects of his version, (vi) the calibre
and cogency
of his performance compared to that of other witnesses testifying
about the same incident or events. As to (b), a
witness’s
reliability will depend, apart from the factors mentioned under
(a)(ii), (iv) and (v) above, on (i) the
opportunities he had to
experience or observe the event in question and (ii) the
quality, integrity and independence of
his recall thereof. As to
(c), this necessitates an analysis and evaluation of the probability
or improbability of each party’s
version on each of the
disputed issues. In the light of its assessment of (a), (b) and (c)
the court will then, as a final step,
determine whether the party
burdened with the onus of proof has succeeded in discharging it. The
hard case, which will doubtless
be the rare one, occurs when a
court’s credibility findings compel it in one direction and
its evaluation of the general
probabilities in another. The more
convincing the former, the less convincing will be the latter. But
when all factors are equipoised
probabilities prevail.
[2]
The
defendant’s counsel (who were not the authors of the
defendant’s special plea) had not directed any
cross-examination
on the issue when Mr Mans testified.
[3]
See note 8 below.
[4]
In my
judgment, it is this consideration, and not a belief that
plaintiff’s debtor was Wilenri, that explains Mans’
agreement, during the conduct of the business rescue, that recovery
of the fees incurred for consultancy services rendered by
him under
the contract with the plaintiff should be limited to R50 000
per month until such time as Wilenri’s cashflow
had improved
to the extent that it could finance payment of the accrued unpaid
balance.
[5]
Section 32
of the
Companies Act provides
, insofar as currently relevant, as
follows:
1) A company or
external company must—
(a) …
(b) not misstate its
name or registration number in a manner likely to mislead or deceive
any person.
2) …
3) A person must not
–
(a) use the name or
registration number of a company in a manner likely to convey an
impression that the person is acting or communicating
on behalf of
that company, unless the company has authorised that person to do
so; or
(b) use a form of
name for any purpose if, in the circumstances, the use of that form
of name is likely to convey a false impression
that the name is the
name of a company.
4) Every company must
have its name and registration number mentioned in legible
characters in all notices and other official
publications of the
company, including such notices and publications in electronic
format as contemplated in the Electronic
Communications and
Transactions Act, and in all bills of exchange, promissory
notes, cheques and orders for money or goods
and in all letters,
delivery notes, invoices, receipts and letters of credit of the
company.
5) Contravention of
subsection (1), (2), (3) or (4) is an offence.
In
terms of s 11(3)(c), a private company’s name has to end
with the words ‘Proprietary Limited’ or the
abbreviation
thereof expressed as ‘Pty Ltd’.
[6]
The letter
called upon the directors of Wilenri to countersign the document in
acceptance of the remuneration to which the business
rescue
practitioner would be entitled. The letter, according to is
tenor, was written by Hobbs as business rescue practitioner
speaking
through the vehicle of Hobbs Sinclair Advisory (Pty) Ltd (i.e. the
defendant).
[7]
See
paragraph [6]
above.
[8]
Mr Mans had
been appointed as an executive member of the board of Wilenri by Mr
Hobbs during June 2012. It was in the context
of that appointment
that Mr Hobbs had given him and the other persons appointed to the
board at the same time copies of the Act
so that they could apprise
themselves of the statutory provisions regulating business rescue.
Business rescue was a novel
concept at that stage. It was
introduced when the 2008
Companies Act came
into operation in May
2011, only just over 13 months before Mr Mans became involved as a
director of Wilenri.
[9]
Mr Mans
was taxed in cross-examination with averments that he had made on
affidavit in an application brought by Nedi Investments
(Pty) Ltd
and M Mans Holdings (Pty) Ltd (which was a creditor of Wilenri)
under case no. 14190/13 - in which, amongst other
things, an
order removing Mr Hobbs from office as Wilenri’s business
rescue practitioner had been sought - that were
amenable to being
understood as having identified Wilenri as the plaintiff’s
creditor. So, for example, in para.
222.19 of the replying
affidavit (
jurat
8 October 2013) that he made in those proceedings, Mans had stated:
When I was
however “fired” by Hobbs, Dotcom
[i.e.
the plaintiff company]
(which it is
entitled to do) invoiced Wilenri to date for the outstanding
consultancy fees which presently amounts to Rxxx plus
VAT in the
amount of Rxxx. I point out that Dotcom accordingly, since the
inception of business rescue proceedings, has
only been paid a total
amount of Rxxx, excluding VAT, for my services.
and
had included the amounts therein referred to in a ‘Summary of
accounts outstanding for Wilenri Appliance Services (Pty)
Ltd’
attached to the affidavit as annexure ‘MM20’. It
was suggested that these averments were incongruent
with his claim
that the defendant company, not Wilenri, was the plaintiff’s
debtor. In his evidence at the trial
Mr Mans stated that
his evidence in the paragraph cited had been incorrect in two
material respects: the plaintiff had not
invoiced Wilenri and the
amounts referred to as allegedly owed to Dotcom had been incorrect.
The objective evidence bore
him out in the first of these respects.
The plaintiff did not invoice Wilenri for any of the consultancy
services rendered
after 1 July 2012, it invoiced ‘Hobbs
Sinclair Business Rescue Services’. What amount, if any,
remains
owing to the plaintiff for the consultancy services is a
matter in contention, to be tried in the second stage of this
action.
[10]
M Mans
Holdings (Pty) Ltd is a company controlled by Mr Mans. It
emerged in evidence that that company was a secured loan
creditor of
Wilenri and had also leased certain fixed property to Wilenri.
[11]
The
witnesses were referred during the trial to selected passages in the
papers in the application brought by Nedi Investments
(Pty) Ltd and
M Mans Holdings (Pty) Ltd under case no. 14190/13 in which
Hobbs Sinclair Business Rescue Services (Pty) Ltd
was cited as the
fourth respondent. The court was not, however, required to
read the entire set of papers. It was
not apparent from the
passages to which reference was made or the relief sought in the
notice of motion why the fourth respondent
had been joined in that
matter.
[12]
Mans
testified that he had previously been involved through the plaintiff
company in supplying operational support to large corporates
such as
Woolworths, Foschini, Makro and Game.
[13]
Section 143
provides as follows insofar as currently relevant:
(1)
The
practitioner is entitled to charge an amount to the company for
the remuneration and expenses of the practitioner
in accordance with
the tariff prescribed in terms of subsection (6).
…
(5) To the extent that the
practitioner’s remuneration and expenses are not fully paid,
the practitioner’s claim for
those amounts will rank in
priority before the claims of all other secured and unsecured
creditors.
(6) The Minister may
make regulations prescribing a tariff of fees and expenses for the
purpose of subsection (1).
Regulation
128(3) of the Companies Regulations, 2011, provides:
In addition to the remuneration
determined in accordance with section 143 (1) to (4), and this
regulation, a practitioner is entitled
to be reimbursed for the
actual cost of any disbursement made by the practitioner, or
expenses incurred by the practitioner to
the extent reasonably
necessary to carry out the practitioner's functions and facilitate
the conduct of the company's business
rescue proceedings.
[14]
Mr Hobbs’
testimony gave me to understand that his appreciation of the
relevant import of s 143 accorded with the interpretation
reportedly advanced on behalf of the business rescue practitioner in
Diener
N.O. v Minister of Justice and Others
[2017] ZASCA 180
, a case in which judgment was delivered 2 days
after the hearing in the current matter was concluded. In
Diener
,
the appeal court – not for the first time – noted the
uncertainty to which some of the provisions in chapter 6 of
the Act
have given rise, but after a thorough contextual analysis of the
effect of s 143, read with s 135 of the Act
and the
relevant provisions of the Insolvency Act 24 of 1936, held that
those provisions could not be read to afford any preference
in
respect of the rescue practitioner’s unpaid fees and expenses
in the event of the company under business rescue going
into
liquidation.
[15]
See note 13 above for the relevant text of s 143 and regulation
128(3).