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[2018] ZAWCHC 190
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Jehring and Others v Times Media Group (A279/2017) [2018] ZAWCHC 190 (21 August 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No: A279/2017
In the
matter between:
DAVID
ERIC
JEHRING
First Appellant
COLD
BLUE INVESTMENTS (PTY)
LTD
Second Appellant
STAX
BLACK BOX (PTY)
LTD
Third Appellant
STAX
PROPERTY INVESTMENTS (PTY)
LTD
Fourth Appellant
and
TIMES
MEDIA GROUP (PTY)
LTD
Respondent
Before:
Bozalek, Boqwana et Savage, JJ Delivered: 21 August 2018
JUDGMENT
THE
COURT
Introduction
[1]
This is an appeal, with the leave of the Supreme Court of
Appeal, against the judgment of this Court (Cossie AJ) handed down on
23 November 2016 in which it was found
inter alia
that no oral
agreement had been concluded on 4 September 2012 between the
appellants and the respondent and the appellants' action
was
dismissed with costs.
[2]
The first appellant, Mr David Jehring, conducted a business
through the second appellant, Cold Blue Investments (Pty) Ltd ("Cold
Blue") which distributed and rented out DVD and Blu-Ray films
under the name and style of Stax Black Box to the public via
13
free-standing kiosks placed on the premises of third parties to which
the public had access. A further six kiosks were
due to be
installed in September 2012 at identified Caltex service station
Fresh Stop convenience stores, in terms of a preferred
supplier
agreement which was being negotiated.
[3]
The third appellant, Stax Black Box (Pty) Ltd, a company
controlled by Mr Jehring, was the vehicle through which Mr Jehring
intended
that a joint venture with Avusa Media Limited ("Avusa"),
before Avusa's sale to the respondent, Times Media Group (Pty)
Ltd
("Times Media"), would operate once established. The fourth
appellant, Stax Property Investments (Pty) Ltd, was the
entity
through which Mr Jehring undertook to provide services to Nu Metro
Home Entertainment ("NMHE"), a business which
was wholly
owned by Avusa.
[4]
During 2012 Mr Jehring was approached by Mr Richard Benedetti,
an employee of NMHE, to explore a possible joint venture between NMHE
and Cold Blue to distribute DVD's through kiosks. A first
confidentiality agreement was signed between Mr Jehring and Mr
Benedetti and following its cancellation on 8 June 2012, a second
confidentiality agreement was entered into on 23 August 2012
between
Ms Fay Amaral, the managing director of NMHE, acting on behalf
ofNMHE, and Mr Jehring. As a business relationship between
the
parties was explored, Mr Benedetti prepared a document concerning the
rebranding of Mr Jehring's Stax Black Box kiosks, while
Mr Jehring
assessed the DVD-dispensing kiosks already purchased by NMHE, which
remained in storage.
[5]
On 4 September 2012, Ms Amaral and Mr Adam Curtis, also
ofNMHE, attended a meeting at Avusa's offices with Mr Jehring and his
attorney
Mr Brett Carnegie. The issue central to this appeal is
whether an oral agreement was concluded between the parties at this
meeting
in terms of which it was agreed that they would carry on
business together.
[6]
Following the meeting, Ms Amaral sent an email to Mr
Benedetti, Ms Jacqueline Crosby and Mr Adam Curtis ofNMHE in which
she stated:
"Given go ahead in principle
-
His lawyer-Brett going to have a stab at HOA
•
Settled on 25% share tbc our side
•
No upfront
•
Managementfee
ok-R55k
•
Take on debt
•
Take
on
vehicles
•
Take on 2 x
staff
•
Targets to incentive
-
rather than upfront tbc
•
Standard put and call
-
5 years
•
Needs to sustain
business
•
Fresh stop contract in
•
Dave manages business
•
Brand NU Metro Black
Box
•
Need potentially 2
x
containers
by
dee-
need to
request
CAPEX
•
Placing new stock orders for 16 machines now
•
Sorting boxes and 2 x box leg repairs
-
you aware
... Dave let me know today. Way he explained it to me is that has had
problem before with transport damage. Am following
up with him as to
what exactly is the easy fix he referred to.
•
Sale of Assets to New Co
•
New Co
-
got empty shelf co
-
will provide
detail and indemnify on tax etc. past?
•
Employee
contracts
•
Implementation date 1 Sept 2012
-
back
date
•
Need to
start
•
Bank account
-
new account at std ?? JC to
confirm
[7]
Mr Carnegie also detailed
"the gist of what was
discussed at the meeting"
in an email dated 6
August 2012, in which it common cause the reference to
"tbc"
stands for
"to be co;ifirmed''.
Mr Jehring
immediately began working on the project, rebranding the kiosks he
owned through Cold Blue and exploring the roll-out
of the NMHE kiosks
in storage. In doing so, he earned an agreed management fee of R55
000,00 plus VAT per month. In addition, staff
and vehicles were made
available to the project by NMHE. On 7 September 2012 Mr Benedetti
provided Mr Carnegie with a draft shareholders'
agreement, a draft
cession of assets agreement and a draft consultancy agreement. Over
the next months amended versions of these
draft agreements were
exchanged between the parties until on 5 December 2012 Mr Carnegie
indicated that the agreements were acceptable
to his client, subject
to certain final outstanding issues which still required resolution.
With these issues resolved, on 28 January
2013 Avusa's attorney
forwarded copies of the Sale of Business Agreement, the Shareholders'
Agreement and the Consultancy Agreement
to Mr Carnegie for Mr
Jehring's signature, noting that the agreements were subject to the
approval of the respondent's board of
directors. The following day,
on 29 January 2013, Mr Jehring signed the agreements. The same day
Mrs Amaral sent an email to Mr
Carnegie in which she indicated that
negotiations were terminated.
[8]
The appellant accepted the repudiation of the agreement and
instituted action against the respondent claiming damages from the
respondent
arising from the respondent's repudiation of the agreement
to carry out business together, which he contended had been concluded
on 4 September 2012.
The
pleadings
Appellant's
pleaded case
[9]
In the final incarnation of the appellants' amended
particulars of claim, the case advanced was that when Mr Benedetti
approached
Mr Jehring and Cold Blue in August 2012, he advised
that negotiations for Times Media to take over Avusa, including NMHE,
were at an advanced stage. He proposed that NMHE,
"which
would soon be taken over by Times Media",
Mr Jehring and
Cold Blue enter into a joint venture business with NMHE similar to
Cold Blue's Stax Black Box business. It was pleaded
that negotiations
ensued between the parties with a view to concluding an agreement,
during which Mr Jehring represented himself
and Cold Blue and that Mr
Benedetti
"held himself out to be representing Times Media
Group alternatively Nu Metro".
It was pleaded further that:
11. On or about 4 September 2012 an oral agreement was
concluded between [Mr Jehring] and/or [Cold Blue] and/or [Stax Black
Box] of the one part and the [respondent] of the other in terms of
which the parties thereto agreed to commence carrying on business
together.
11.A In the alternative to paragraph 11 the [appellants]
plead that it was expressly alternatively impliedly agreed between
[Mr
Jehring] and [Cold Blue] of the one part and the [respondent] of
the other part that:
11A.1 [Mr Jehring] and [Cold Blue] and the
[respondent] would go into business together using a
company which
[Mr Jehring] would make available for this purpose
("the Shelf Company");
11A.2 The Shelf Company would be entitled to
accept the benefits of the agreement referred to in paragraph 11A and
thus become
a party to such contract, and it would be entitled to:
l1A2.1 Receive from [Mr Jehring] and [Cold Blue] the
benefits referred to in paragraph 14.3;
l1A2.2 Receive from [Times Media] the benefits which are
referred to in paragraph 14.4;
l1A2.3 Conduct the business referred to in paragraph
14.1;
12. In concluding this agreement [Mr Jehring] and [Cold Blue]
were represented by [Mr Jehring] and [Times Media] was duly
represented by Fay Amaral and/or Adam Curtis.
12A In the event that it is held that the agreement
which was concluded on 4 September 2012 ("the September
Contract")
was concluded between [Mr Jehring] and/or [Cold Blue]
and/or [Stax Black Box] of the one part and [NMHE] alternatively
Avusa Media
Ltd further alternatively Avusa Ltd ("the
Contracting Party") of the other part, the Plaintiffs plead
that:
12A.l To the knowledge of both [Mr Jehring]
and [Cold Blue] and the Contracting Party [Times Media] had taken
over or
was in the process of taking over NMHE and/or Avusa Media Ltd
and/or Avusa Ltd;
12A.2
It was a tacit term of the agreement that:
12A.2.l [Times Media] would cause the Contracting Party
to nominate an entity which would conduct the business venture
contemplated
by the September agreement with the Plaintiffs;
12A.2.2 The rights and obligations which the Contracting
Party had acquired under the September Agreement would be transferred
to
the entity which was so nominated,
alternatively
the said entity would be substituted as the contracting party;
12A.3 At all material times hereto [the
respondent] has been a wholly owned subsidiary of [Times Media] which
it intended
to use as an operating company to conduct certain
businesses which were subsidiaries of Avusa Media Ltd and/or Avusa
Ltd;
l2.A4 At a time date and place to the [appellants]
unknown the [respondent] entered into a sale of business agreement
with the Contracting
Party and in so doing the [respondent] acquired
the business of the Contracting Party, including the contract which
had been concluded
with [Mr Jehring] and/or [Cold Blue] and/or [Stax
Black Box].
12A.5 On 14 September 2012 the [appellants]
requested the Contracting Party to advise who the contracting party
would be from
Nu Metro's side. A copy of the request is
attached hereto marked "PClA".
12A.6 On 14 September 2012 the Contracting Party,
which was duly represented by Mr Riccardo Benedetti, indicated that
[Times
Media] would be the contracting party. A copy of the response
is attached hereto marked "PCIB".
12A.7 The [appellants] at all times accepted that
[Times Media] was the contracting party of the purposes of the
September
Agreement.
12A.8 [Times Media] was thereby substituted as
the contracting party for the purposes of the September Agreement, it
is apparent from the context that [Times Media] became the
contracting party on 14 September 2012 when Riccardo Benedetti
indicated
that it would be the contracting party.
13.
At the
time of contracting, the parties were aware of the following facts
and circumstances and the contract was concluded on this
basis:
13.1[Cold
Blue] would desist from trading under the name and style of Stax
Black Box, and it would in so doing suffer loss to its
established
goodwill and brand-name;
13.2The
[appellants] could not financially afford to take over the entire
project in the event that the defendant withdrew;
13.3The
[appellants] would be committing resources to the venture which they
would not otherwise have committed;
13.4The
[appellants] would suffer a loss ofrevenue in the event that the
combined project contemplated by the agreement was terminated
and/or
not proceeded with;
13.5[Cold
Blue] had entered into agreements with certain franchisees who had
purchased between 25% and 30% of the income from certain
of the Cold
Blue Kiosks.
13.5.1 [Cold Blue] was required to pay the monthly amount of 25% to
30% of the said income to the said person.
13.5.2 In the event that [Times Media] did not proceed with the
contract [Cold Blue] would still be liable to pay the amounts,
including the capital amounts, to the said franchisees.
14. The following were the express, alternatively implied, and
in either case material terms of the said agreement:
14.1The parties would go into business together in order to
distribute and rent DVD and Blu-Ray films to the general public via
free-standing kiosks placed on the premises of third parties to which
the general public has access. The business would initially
be
conducted in the Western Cape and in Gauteng, but the intention was
to expand into other areas, countrywide, and into neighbouring
countries including Namibia, Botswana and Zimbabwe.
14.2Notwithstanding that the agreement was concluded on 4 September
2012, the agreement would be deemed to have commenced on 1
September
2012;
14.3[Mr Jehring] and/or [Cold Blue] would make the following
contributions to the business:
14.3.1 The Shelf Company referred to in para llA above
which was done by making available the shareholding of the third
plaintiff being Stax Black Box (Pty) Ltd, an existing company 75% of
which would be registered in the name of the Defendant and
25% of
which would be registered in the name of the Plaintiffs nominee;
14.3.2 The business conducted by [Cold Blue], including:
(1) the 19 Cold Blue Kiosks, including:
(a) the sites on which these would be located; including
(b) the right to place the kiosks at the Fresh Stop sites once the
preferred supplier agreement had been concluded.
(c) a Nissan bakkie.
14.3.3
[Mr
Jehring] would consult to the business through a corporate entity in
which he had an interest for a monthly consultancy fee
of R55,000.0
(plus VAT) and he would, in so doing, devote no less than 40 hours to
the business each week;
14.3.4
[Cold
Blue] would make at least 4 employees available who would thereafter
be employed and paid by the Nu Metro Black Box business.
14.4
[Times Media] would provide:
14.4.1
the
Nu Metro branding and intellectual property;
14.4.2
all
of the necessary financial support required by the business, more
particularly:
(1)
the operating costs; and
(2)
the capital costs, which would include making the necessary
payments due in respect of the finance agreements which [Mr Jehring]
had concluded in relation to the acquisition of the Cold Blue Kiosks
namely to settle the amounts outstanding in full to:
(a)
Wesbank,
which was owed amounts of Rl49 066.59. R97 723.37, R97 723,37 and
R323 365.68;
(b)
First
National Bank, which was owed R740 545.04;
(c)
Anaya
Trading, which was owed an amount ofR643 200.15;
(d)
VideoSystem,
which was owed R905 437.44.
(e)
The
franchisees referred to in paragraph 13.5 above.
14.4.3
The
necessary DVD and Blue Ray stock (until such time as the business was
able to cover this cost itself);
14.4.4
16
dispensing kiosks;
14.4.5
A
further 464 dispensing kiosks;
14.4.6
The
general manager, financial manager, and such further members of staff
as were required.
14.5
[Times
Media] would have a so-called "call option" in terms of
which:
14.5.1
[Times
Media] would have the right to give [Mr Jehring] (or his nominee, if
the shares were held by one) written notice of its intention
to
purchase the latter's shares at any time after 1 September 2018 and
before 31 August 2021;
14.5.2
If
such notice was given [Mr Jehring] (or his nominee) would be obliged
to sell to the defendant:
(1)
the shares at their fair and reasonable market value;
(2)
its loan accounts at face value.
14.6
[Mr
Jehring] (or his nominee) would have a so-called "put option"
in terms of which:
14.6.1
[Mr
Jehring] (or his nominee) would have the right to give [Times Media]
notice to purchase the shares of first plaintiff (or his
nominee) at
any time after 1 September 2018 and before 31 August 2021;
14.6.2
If
such notice was given [Mr Jehring] (or his nominee) would be obliged
to sell to the defendant:
(1)
the
shares at their fair and reasonable market value;
(2)
its
loan accounts at face value.
14.7
The parties would in the future negotiate with each other in
good faith for the purposes of concluding certain further agreements
necessary in order to structure Nu Metro Black Box (Pty) Ltd.
[10]
The appellants pleaded that they complied with their
obligations under the agreement and in so doing
inter
alia
during the period from 4 September 2012
to February 2013 Stax Black Box ceased trading; and the respondent
was permitted to take
control and rebrand the business of the third
appellant as Nu Metro Black Box. The appellants stated that the
business of Cold
Blue, including 19 kiosks plus the sites and the
agreement with Fresh Stop had been transferred to the third
appellant. Furthermore,
Mr Jehring consulted to the Nu Metro Black
Box business through the fourth appellant, Stax Property Investment
(Pty) Ltd, in which
he had an interest, for a monthly
consultancy fee of R55 000.00 (plus VAT),
devoting no less than 40 hours to the business each week and making
four employees available
to Nu Metro Black Box. The appellants
pleaded that negotiations had been entered into in good faith and
that Mr Jehring nominated
a company, Matrinamix, to hold his
shares.
[11]
It was pleaded further that Times Media initially compiled
with its obligations under the agreement by assuming control of the
Stax
Black Box business of the third appellant, rebranding it as Nu
Metro Black Box. It transferred its 16 kiosks to Stax Black Box and
adjusted the asset register of the third appellant accordingly. It
also provided the necessary financial support required by the
business, particularly the capital and operating costs, and by 28
February 2013 had paid the amount of R3 961 128.17 to the account
of
Stax Black Box, including Mr Jehring's monthly consultancy fee. In
addition, the respondent provided the general manager, financial
manager and certain further staff members as were required.
[12]
Further pleaded was that if it was held that Stax Black Box
was not a party to the agreement, by their conduct Mr Jehring, Cold
Blue and Times Media agreed to accept it as a contracting
party. Stax Black Box, by accepting the performance of Mr
Jehring,
Cold Blue and Times Media, tacitly agreed to and did become a
party to the agreement and accepted the benefits conferred
on
it by the agreement. As a consequence, Times Media incurred an
obligation to render performance to Stax Black Box, which
became
entitled in law to enforce such performance by Times Media.
[13]
The appellants claimed that the respondent thereafter
"materially and unlawfully breached and/or repudiated the
terms of the said agreement by sending a letter to the plaintiff on
29 January 2013"
in which it
"gave notice of its
intention not to proceed with the terms of the contract which had
been concluded on or before 4 September
2012";
and indicated
that its focus had shifted to ensure maximised financial returns for
shareholders and that it
was unable
"to
continue with the discussions around the Shareholding
arrangement on Black Box".
[14]
The appellants accepted the repudiation of the agreement in an
email sent on 22 February 2013, subject to their rights to claim
damages. The appellants pleaded the damages claimed from Times Media,
suffered as a consequence of the respondent's repudiation
of the
contract, which included R2 970,000.00 (plus VAT) in respect of the
monthly consultancy fee which it had been agreed that
Mr Jehring,
alternatively the fourth appellant, would be paid over a 54-month
period from March 2013 through
September
2018; Rl 792
719.00 payable to franchisees; R244 375
000.00, being the value of the Stax Black Box business as at 1
September 2019
"valued on
a non-marketable,
controlling basis";
RI 19 109 852.00 being the difference
between the value of the business prior to the repudiation by Times
Media (Rl20 299 852.00)
and the value thereafter (Rl 190 000.00);
alternatively
, damages in the amount of R29 777 463, being 25%
of the value of the shares in Stax Black Box.
Respondent's
plea
[15]
The respondent admitted in its plea that it had entered into a
written sale of business agreement on 19 September 2012 with Avusa,
in terms of which it purchased the businesses and rights of Avusa
under all contracts, and all liabilities of Avusa Media Limited.
It
stated that Mr Benedetti informed Mr Jehring of the advanced
negotiations between the respondent and Avusa in this regard.
[16]
It was admitted that Mr Benedetti held discussions
with Mr Jehring with a view to a possible DVD rental kiosk
joint venture. The meeting held on 4 September 2012 was pleaded to be
"an introductory meeting between the management of Nu Metro
and the first plaintiff, following the discussion as referred to
in
paragraph 4.1 above and with the view to the potential structure of
an agreement to be concluded between Nu Metro and Stax Black
Box, but
subject to executive committee approval...".
The parties
present left the meeting on the basis that Mr Carnegie
would prepare draft agreements for consideration,
with it
"intimated
that no final agreement between the parties could be concluded
without the consent of the Avusa Exco first being
obtained".
While the
"exploration of the project"
continued,
the respondent pleaded that no written agreement was concluded
between the parties, nor were Ms Amaral, Mr Curtis or
Mr Benedetti
authorised to represent Avusa in entering into such an agreement.
[17]
The respondent admitted that
"R3 961 128,17 was paid
in
contemplation of the parties concluding valid and
binding agreements"
but denied the remainder of the
appellants' averments. It was pleaded that
"in any event, the
first plaintiff, alternatively the fourth plaintiff should have
mitigated its losses by providing consultancy
services to third
parties during the period March 2013 through September 2018, and in
that way earning consultancy fees".
[18]
In its claim in reconvention the respondent claimed that the
appellants were in possession of 16 automated rental kiosks belonging
to the respondent, having been purchased by Avusa following a capital
expenditure approval of R2.9 million for this purpose.
Judgment
of Court
a quo
[19]
At trial, the appellants relied on the evidence of two
witnesses: Mr Jehring and his attorney, Mr Brett Carnegie. Three
witnesses
testified for the respondent: Mr Adam Curtis; Ms Amaral;
and Dr Neil Croft, an expert witness, who was led to rebut
allegations
of tampering raised by the appellants pertaining to
certain documents discovered by the respondent.
[20]
From the evidence at the trial it was apparent that the NMHE
had purchased 16 kiosks, with the purchase of further kiosks intended
to follow, but that problems and delays had been encountered in the
rollout of these initial kiosks, which had been in storage
from May
2012. The NMHE engaged Mr Jehring given its need to rollout the
kiosks in storage and Mr Jehring's experience with kiosk
DVD and film
rentals. At the meeting on 4 September 2012 it was agreed that Mr
Jehring would assist with this rollout and would
receive a monthly
consultancy fee of R55 000.00 plus VAT and that both parties would
allocate staff and other resources to facilitate
the rollout the 16
kiosks. The evidence of the respondent was that neither Ms Amaral,
nor Mr Curtis, who attended the September
meeting and represented
NMHE, had the necessary authority to conclude a long term
multi-million rand agreement on behalf of Avusa,
more so given the
imminent takeover of Avusa by the respondent. Furthermore, the
performance of the 16 kiosks was intended to serve
as motivation for
a further 32 kiosks to be purchased in the event that agreement was
reached in future between the parties.
[21]
Mr Jehring understood the position differently. He stated that
following the meeting on 4 September 2012, there was an
agreement
to go into business together to distribute and rent DVD and
Blue Ray films to the public, with the respondent having agreed to
provide all the necessary financial support required by the
business, including the provision of a further 464 kiosks. Mr
Jehring
stated that it had been agreed that he would have a " put and
call option" in terms of which he, or his nominee,
would have
the right to give the respondent notice to purchase his shares, or
his nominee, at any time after 1 September 2018 and
before 31 August
2021; and that if such notice was given, Mr Jehring, or his nominee,
would be obliged to sell the shares to the
respondent at their fair
and reasonable market value, with the loan accounts to be accepted at
face value. In addition, Mr Jehring
understood that the parties would
in the future negotiate with each other in good faith to conclude
further agreements necessary
to structure Nu Metro Black Box (Pty)
Ltd.
[22]
At the trial the appellants repeatedly contended that certain
documents, mainly emails, discovered by the respondent had been
"tampered with"
by the respondent. In spite of this
view, the appellants elected not to call their expert witness on the
issue and in support of
such claim, although an expert summary had
been filed. The appellants nevertheless persisted with their attack
against the authenticity
of the documents. Consequently, the
respondent was required to answer to the allegations raised and in
doing so relied on the evidence
of an expert witness, Dr Croft, who
testified before the trial court. The respondent denied any
manipulation of any emails and
Dr Croft's evidence supported a
conclusion that distinctions between the printouts of various emails
could be attributed to different
formats being involved and the
printing process. The Court accepted the evidence of Dr Croft, which
went unchallenged, that there
had been no manipulation of emails and
that the difference between the printouts in the appellants and
respondent's bundles was
"a possible result of printing
inconsistencies from the Mimecast portal".
The Court viewed
the appellants' persistence that tampering had occurred in a
"dim
light"
and of such a nature that it warranted the imposition
of a special costs order against the appellants.
[23]
As to the claim that an agreement on the terms pleaded had
been concluded on 4 September 2012 between the parties, the Court
found
that there was an
"arrangement”
arrived at
between the parties on 4 September 2012 that Mr Jehring would assist
in rolling out the 16 Nu Metro kiosks which had
been warehoused,
since both Ms Amaral and Mr Curtis were anxious that such rollout
should occur. In agreeing to this arrangement,
Ms Amaral and Mr
Curtis were found to have represented Avusa, but, since they were not
employed by the respondent, the Court found
that they could not have
represented the respondent and could therefore not have represented
to Mr Jehring that the respondent
had become the contracting party.
[24]
The Court found that many of the material terms which Mr
Jehring claimed had been agreed at the September meeting, save for
those
related to the rollout of the 16 kiosks, had not been discussed
at the meeting. Mr Jehring was found to be a poor witness, unreliable
and evasive, whose version was contradicted by the appellants'
pleaded case and by Mr Carnegie. He was found to have put up no
coherent version as to the terms of the oral agreement, who the
contracting parties were, the budget agreed or the period for which
the business was to run. Mr Carnegie, the Court found, did not take
the appellants' case any further.
[25]
It was consequently concluded that the appellants had failed
to establish either a legal or factual basis for the allegations that
an oral agreement had been concluded on 4 September 2012 and had
failed to establish the terms of any such agreement on which they
relied; and that the respondent was not a party to any such
agreement. The appellants' action was therefore dismissed with costs,
to be paid jointly and severally on the scale as between attorney and
client, including the costs of two counsel.
Evaluation
[26] As a general
proposition a contract exists where there is consensus reached
between the offeror and the offeree,
[1]
brought about through offer and acceptance, with the intention of
creating a legal obligation between the parties. An agreement
may be
concluded expressly, by words, or tacitly, by conduct,
[2]
with the onus resting on the party who alleges the existence of a
contract to prove it. A determination of the true agreement between
parties is revealed by its external manifestations, in that the court
can only judge from external facts whether or
not a
meeting of minds has occurred.
[3]
A court will enforce an agreement if there is sufficient information
to enable its object to be accurately ascertained
[4]
and where it is sufficiently definite -
“
..
to enable the court to
give it a practical meaning. Its terms must be so definite, or
capable of being made definite without further
agreement of the
parties, that the promises and performances to be rendered by each
party are reasonably certain”
[5]
[27] In
SA
Forestry Co Ltd v York Timbers
[6]
it was stated:
"...
In the interpretation
process, the notions of fairness and good faith that underlie the law
of contract again have a role to play.
While a court is not entitled
to superimpose on the clearly expressed intention of the parties its
notion of fairness, the position
is different when a contract is
ambiguous. In such a case, the principle that all contracts are
governed by good faith is applied
and the intention of the parties is
determined on the basis that they negotiated with one another in good
faith."
[28] Uniform Rule
18(4) requires that:
“
Every pleading shall contain a clear and concise
statement of the material facts upon which the pleader relies for his
claim, defence
or answer to any pleading, as the case may be, with
sufficient particularity to enable the opposite party to reply
thereto.”
[29] The function of
pleadings is to give fair notice of the case which has to be met,
define the issues on which the court will
have to adjudicate in order
to determine the matters upon which reliance is to be placed and
which are in dispute between the parties;
and enable the parties to
decide in advance of the trial the evidence that will be needed.
[7]
While a party cannot
"direct the attention of the other party
to one issue and then, at the trial, attempt to canvass another”
,
[8]
the degree of precision required in pleadings depends on the
circumstances of each case,
[9]
with the formalistic requirements not to be over emphasised and
the substance of the allegations to be properly considered.
[10]
The importance of pleadings should not be unduly heightened since it
is common for pleadings not to be correct in each material
respect
and for mistakes to be made.
[11]
[30]
However, as was stated in
Robinson v Randfontein Estates GM
Co Ltd:
[12]
“
..
.parties will be kept
strictly to their pleas where any departure would cause prejudice or
would prevent full enquiry. But within
those limits the Court has a
wide discretion. For pleadings are made for the Court, not the Court
for the pleadings. And where
a party has had every facility to place
all the facts before the trial Court and the investigation into all
the circumstances has
been as thorough and as patient as in this
instance, there is no justification for interference by an appellate
tribunal, merely
because the pleading of the opponent has not been as
explicit as it might have been.
”
[31] In
Sentrachem
Bpk v Wenhold
[13]
it was made clear that where a court has all the relevant
evidence before it, it should not place undue emphasis on the
pleadings,
but should rather decide the case on the real issues
canvassed during the course of the trial in the Court
a quo.
In
doing so, the issue remains whether prejudice will be suffered.
[14]
[32]
Central to this appeal is whether a binding oral agreement was
concluded on 4 September 2012, and if so, on what terms. The
appellants
pleaded case was that the parties to the agreement were,
on the one part, Mr Jehring
"and/or"
Cold Blue
""and/or"
the third appellant, or Mr Jehring
and Cold Blue; and on the other part, was
"Nu
Metro
alternatively Avusa Media Ltd alternatively Avusa Ltd''.
Avusa
Ltd was not cited as a defendant in the proceedings before the Court
a quo.
The agreement contended for was an extensive one,
which, it was claimed, had been concluded between Mr Jehring,
representing the
appellants, and Ms Amaral and Mr Curtis,
representing Avusa on the day. The respondents dispute that this was
so.
Times
Media or Avusa?
[33] The Court
a
quo
found that since Ms Amaral and Mr Curtis represented Avusa at
the meeting of 4 September 2012, but not Times Media, any rights and
obligations which may have arisen in terms of any agreement entered
into with the appellants, did not transfer to the respondent
on the
sale and transfer of the business of Avusa to the respondent.
[34] While the
respondent disputed that the kiosk business formed part of the
businesses listed under the NMHE schedule of businesses,
there
appears to be little substance in this contention. NMHE owned the
kiosks it had purchased and it entered into an agreement,
to which we
will return, which at its minimum saw Mr Jehring undertaking the
rollout for NMHE of those kiosks immediately after
the 4 September
2012.
[35] It is common
cause that after the meeting of 4 September 2012, a sale of business
agreement was entered into between Avusa
and Times Media in late
September 2012 in terms of which Times Media purchased the
businesses, rights and obligations of Avusa
and all of its divisions.
NMHE was a division of Avusa before the sale of the business of Avusa
to Times Media. The evidence indicated
that Ms Amaral and Mr Curtis,
as employees of NMHE, represented NMHE in concluding, at least, the
limited oral agreement of 4 September
2012. It follows that when
Times Media took over the rights and obligations of Avusa, it took
over the rights and obligations arising
from, at least, that limited
oral agreement. The fact that Times Media performed in terms of the
limited oral agreement confirms
as much in,
inter alia,
making
payments to Mr Jehring, allocating staff to the business involved
with the rollout of the kiosks and covering certain costs
associated
with that business. Furthermore, the fact that various incarnations
of draft agreements, directed at achieving agreement
between the
parties on a more expensive kiosk business, were thereafter exchanged
between with the appellants and representatives
of Times Media
confirms the involvement of Times Media in the kiosk venture.
Consequently, the Court
a quo
erred in failing to find that
Times Media, by virtue of its acquisition of Avusa, including NMHE,
took over the obligations of Avusa
arising from, at least, the
limited oral agreement concluded on 4 September 2012.
What
agreement was entered into?
[36]
Mr Jehring, Mr Carnegie, Ms Amaral and Mr Curtis
attended the meeting on 4 September 2012, following
which Ms
Amaral sent an email in which it was she stated
inter
alia:
" ...
Given
go ahead in principle
-
His
lawyer
-
Brett going
to have a stab at HOA ...
". There is no
dispute that no written agreement was concluded between the parties
on 4 September 2012, nor that the consultancy
agreement, shareholders
agreement and transfer of assets agreement, which were the subject of
later negotiations, and which may
have been necessary to structure
any company which might have been established to undertake the
contemplated business of Nu Metro
Black Box, were concluded.
Subsequent negotiations aimed at concluding agreements to structure
the joint venture contemplated on
4 September 2012 were called off in
January 2013, with no written agreements concluded. This followed the
draft agreements having
been accompanied by a letter addressed to the
appellants' attorney from the respondent's attorney, dated 28 January
2013, in which
it was stated that the draft agreements were still
subject to approval by the respondent's board of directors.
[37] While the
appellants' pleaded case was that an expansive agreement was entered
into on 4 September 2012, the respondent contended
that only a
limited
"arrangement"
was agreed in terms of which
Mr Jehring would assist in getting 16 dispensing kiosks operational,
which had been purchased by NMHE,
for which Mr Jehring
would receive a monthly salary of R55 000 plus VAT; that NMHE would
appoint two staff members to assist
in the roll-out of the
kiosks; and that the performance of the 16 kiosks would be used as a
motivation for capex
approval for the next tranche of 32
kiosks, which, it was anticipated, might be
required if a more comprehensive
agreement could be reached.
[38] Ascertaining
the terms of an oral agreement
"is always likely to be
be-devilled by faulty memory, dishonesty and genuine
misunderstanding, and the technique summarised
in [Stellenbosch
Farmers' Winery Group Ltd] will come into play”.
[15]
This
"does not mean that the Court is to make a contract for
the parties, or to go outside the words they have used, except
insofar
as there are appropriate implications of law …”
[16]
An apparently informal agreement may yet be binding where
agreement is shown to exist, even when
further
issues are to be resolved in due course. This is
distinguishable from a situation in which parties are
negotiating with the view to concluding an
agreement, even though those negotiations may have reached
an
advanced stage, but where they fail to agree.
[39] As for the
exact terms of an agreement:
[17]
"The terms of the contract are the promises
agreed on by the parties that together make up the contract. When
there is doubt
or dispute about what statements, oral or written, or
conduct should be included in the contract as terms a court may have
to carry
out a two-stage inquiry to decide first, what was said,
written or done and second, whether it must be included among
the
terms of the contract.”
[40]
In
Command Protection Services (Gauteng) (Pty)
Ltd t/a Maxi Security v South African Post Office Ltd,
[18]
the Court stated
that:
"Our case law recognises that in these
situations there are two possibilities. The first is that the
agreement reached by the
acceptance of the offer lacked animus
contrahendi, because it was conditional upon consensus being reached,
after further negotiations,
on the outstanding issues. In that event
that law will recognise no contractual relationship, the offer and
acceptance notwithstanding,
unless and until the outstanding issues
have been settled by agreement. The second possibility is that the
parties intended that
the acceptance of the offer would give rise to
a binding contact and that the outstanding issues would merely be
left for later
negotiation. If in this event the parties should fail
to reach agreement on the outstanding issues, the original contract
would
prevail ..."
[41] Step-by-step
analysis of the negotiations is necessary to decide whether an
agreement has been concluded:
[19]
"The question which arises, accordingly, is
whether the undertaking, given as it was during the course of
uncompleted negotiations,
had, or has been shown to have had,
contractual force. Was the undertaking an offer made, animo
contrahendi, which upon acceptance
would give rise to an enforceable
contract, or was it merely a proposal made by the appellant while the
parties were in the process
of negotiating and were feeling their way
towards a more precise and comprehensive agreement? This is
essentially a question to
be decided upon the facts of the particular
case.”
[42]
In
Hillas & Co. Ltd v Arcos Ltd
[20]
it was recognised that in business important agreements are often
recorded
"in crude and summary fashion"
and are
"far
from complete or precise
", with the caution sounded that it
is not for the Court to make a contract for the parties, but
"to
construe such documents fairly and broadly, without being too astute
or subtle in finding
defects".
[43]
The contemporaneous emails of Ms Amaral and Mr Carnegie,
record what transpired at the meeting of 4 September 2012. These
emails
indicated clear areas still to be negotiated between the
parties and are destructive of the appellants' contention that
agreement
had been reached on the fundamental material terms of the
expansive oral agreement pleaded and that all that was outstanding
was
the signature of the agreements and a determination of the value
to be accorded to the assets for purposes of a share swap.
[44]
The parties agreed on 4 September 2012 that they would m
future negotiate with each other in good faith to conclude further
agreements
necessary to structure the anticipated joint venture. The
evidence was that the ensuing negotiations concerned fundamental
terms
of the proposed venture and were not limited to simply putting
into effect an agreement reached on 4 September 2012 that the parties
go into business together on the terms contended by the appellants.
None of the draft written agreements prepared from September
2012
until January 2013 recorded that negotiations had been finalised. On
4 September 2012 no agreement had been reached regarding
the
long-term financial obligations of Avusa, nor could such agreement
have been reached without the requisite approvals of the
Avusa board.
Mr Jehring knew that no agreement regarding 464 additional kiosks, or
even a further 32 kiosks, could be reached without
the appropriate
capital expenditure approvals having been obtained by Avusa and that
no such approval had been obtained on 4 September
2012.
[45] Yet, it was
pleaded that the
"express, alternatively implied, and in
either case material terms"
of the expansive agreement,
which the appellants claim was entered into on 4 September
2012, included
inter alia
that:
i.
"the
parties would go into business together in order to distribute and
rent DVD and Blue Ray films to the general public via
free-standing
kiosks placed on the premises of third parties to which the general
public has access"
in agreed areas;
ii.
the
respondent would provide the Nu Metro branding and intellectual
property, all of the necessary financial support required by
the
business, particularly the operating and capital costs, which
included payments due in respect of the finance agreements concluded
by Mr Jehring in relation to
the
acquisition of the Cold Blue kiosks, as well as payments to
franchisees;
iii.
Mr Jehring
would, with immediate effect, commence with the rollout of the
business, for which he would receive payment of a management
fee
ofR55 000,00 plus VAT per month;
iv.
the
respondent would provide the necessary DVD and Blue Ray stock until
the business was able to cover this cost itself,
16
dispensing kiosks and a further 464 dispensing kiosks, the
general manager, financial manager, and further employees
as
required;
v.
Cold Blue
would
"desist from trading under the name
and style of Stax Black Box, and it would in so doing suffer loss to
its established goodwill
and brand-name"
and
revenue;
vi.
Mr Jehring
and Cold Blue would contribute a shelf company, Cold
Blue's business including 19 kiosks and kiosk sites
which included
the Fresh Stop sites, a vehicle, at least 4 employees
"who
would thereafter be employed and paid by the Nu Metro Black Box
business”
;
vii.
the
respondent was to have a "call option" in which it had the
right to
give Mr Jehring, or his nominee, notice
of its intention to purchase his shares "at any time after 1
September 2018 and before
31 August 2021" in which case he would
be obliged to sell to the shares at respondent "their fair and
reasonable market
value; its loan accounts at face value"; and
viii.
Mr
Jehring, or his nominee, would have a "put option" on terms
stated and the parties agreed to
"in the
future negotiate with each other in good faith for the purposes of
concluding certain further agreements necessary
in order to structure
Nu Metro Black Box (Pty) Ltd."
[46] In spite of
pleading such agreement, Mr Jehring in his evidence recognised that
on 4 September 2012
"it was agreed that we would work in good
faith to try and conclude an agreement”.
The evidence of Mr
Carnegie also did not support the appellants' claim that there was
agreement reached on 4 September 2012
on the far-reaching terms
pleaded by the appellants, and, according to Mr Carnegie, there had
been no discussions about budget,
cash flow or the duration of the
venture at that meeting. Mr Carnegie indicated that had such an
agreement been reached, he would
have recorded as much in his email
in which he detailed his impressions as to what had been discussed.
[47]
Ms Amaral's reference to a
"go ahead in principle"
in her email following the 4 September 2012 meeting, indicated
expressly that Mr Carnegie was to
"have a stab at HOA ...
".
She recorded that Mr Jehring was to manage the project, for which he
was to receive a management fee
"of R55k",
that the
implementation date was to be backdated so as to be immediate,
backdated to 1 Sept 2012, on the basis that there was a
"(n)eed
to start".
There was no dispute that Mr Jehring, immediately
after the meeting of 4 September 2012, began the roll out of the NMHE
warehoused
kiosks. This accorded with Ms Amaral's recordal of the
issues agreed at the meeting, including that work would begin
immediately;
that the Fresh Stop contract was
"in";
and
that the branding of kiosks was to reflect as
"NU Metro Black
Box".
However, what the facts show is that, save for
agreement on a limited number of issues which allowed for the
immediate rollout of
the NMHE kiosks, the remainder of the tenns of
the contemplated joint venture agreement were yet to be agreed.
[48] While the
appellants' case was that it was a term of the agreement reached on 4
September 2012 that the respondent would provide
all the necessary
financial support required by the business, this was not supported by
either Ms Amaral or Mr Carnegie in either
of their respective
emails. There was no evidence that a budget was discussed or
that Ms Amaral or Mr Curtis had already
received approval to enter
into a wide-ranging agreement with the appellants, more so given the
imminent sale of business agreement
between Avusa and the respondent.
[49] There was also
no agreement between the parties as to what shares the parties would
hold in any future business, with it expressly
noted that this was an
issue to be confirmed. Likewise, the issue of
"(t)argets to
incentive"
was recorded as an issue to be confirmed. Ms
Amaral made is clear that there was a
"need to request CAPEX"
in respect
"potentially"
of 2 containers to be
ordered by December. It was not proved that the respondent, or Avusa,
agreed on 4 September 2012 to provide
all necessary financial support
required by the joint venture. Furthermore, from the contents of the
unfinalised draft agreements
put up it is evident that the material
terms contained in such agreements intended to determine and
structure the relationship
between the parties, which terms did not
feature in Ms Amaral's email, had not been agreed on 4 September
2012.
[50] The fact that a
budget was prepared by Mr Benedetti for 499 kiosks, also does not
pennit a finding that the rollout of 499
kiosks had been agreed, more
so when Ms Amaral, Mr Curtis and Mr Carnegie testified that no budget
was either tabled or agreed
at the September meeting, nor would there
have been the requisite capital expenditure or higher-level Avusa
approval to do so.
The material terms which would define the
relationship between the parties and embed the structure of any
future joint venture
business were yet to be resolved, including
shareholding, funding and the duration of
the proposed
joint venture. Mr Carnegie stated that the
allocation of shares was
''yet to be decided'
and that any
agreement was
"to include protection of minority rights, put
and call, tag along clauses".
In any event, there was no
evidence before the trial court to contradict the fact that any draft
agreements prepared
would have to be approved by
the respondent's executive committee prior to any person
being authorised to conclude
any such agreement.
[51] What is clear
is that the oral agreement entered into on 4 September 2012 was one
which was constrained by more limited terms,
entered into on an
interim basis whilst negotiations ensued. The evidence showed that
the limited oral agreement and subsequent
negotiations were pursued
in good faith, with the hope that an agreement, perhaps such as the
one pleaded, would be finalised between
the parties in due course.
The 4 September 2012 oral agreement put in place an interim
arrangement between the parties, which provided
them time to begin a
limited roll out of the NMHE kiosks, rebrand certain of the
appellants' kiosks and explore entering into a
more expansive joint
venture together in due course. Ms Amaral was entitled to enter into
such limited agreement on behalf of NMHE
on 4 September 2012 given
the limits of her authority provided by Avusa; and in doing so
allowed for time to explore a more expansive
business arrangement.
[52] From the
evidence put up, the terms of the oral agreement of 4 September 2012
can be summarised as follows:
i.
Pending
negotiations on the terms of a long terms and large-scale joint
venture between the parties, Mr Jehring would, with immediate
effect
and backdated to 1 September 2012, provide services to a business
venture between the appellants and NMHE to rollout 16
warehoused
kiosks owned by NMHE;
ii.
Mr Jehring
would earn a management fee ofR55 000,00 plus VAT per month.
iii.
the
appellants' Fresh Stop contract would be included in the interim
business venture;
iv.
all kiosks,
including those of the appellants, would be altered to
"NU
Metro Black
Box”;
v.
certain staff
and vehicles would be provided to the business venture by the
appellants; and
vi.
the
respondent would pay certain capital and operating costs in respect
of the business (which by 28 February 2013 amounted to R3
961 128.17,
including Mr Jehring's monthly consultancy
fee).
[53] These were not
the terms of the expansive agreement pleaded by the appellants and
the appellants' claim was not one related
to the limited interim
agreement entered into. The limited terms agreed were done so on
risk, for an interim period, during which
time negotiations would
proceed towards the contemplated conclusion of a more far-reaching
agreement aimed at structuring an anticipated
joint venture between
the parties.
[54] Late in his
argument the appellants' counsel urged this Court, if it was not
inclined to find that the full agreement pleaded
had been proved, to
hold that, in effect, a much less ambitious agreement had been
established. To this end he put up a draft order
embodying the terms
of such an agreement, which, although similar in many respects to the
agreement initially pleaded, was now
limited to a total of 35 kiosks
(as opposed to around 500); and that the parties
"would
negotiate with each other, in good faith, for the purpose of
concluding certain further agreements in order to structure
the
business of Nu Metro Black Box (Pty) Ltd".
Apart from the
inherent vagueness of this last term, it is clear that the scope of
this alternative agreement is dramatically smaller
than the extensive
agreement pleaded. Notably, as was repeatedly emphasised by the
respondent's counsel, not only was this new
agreement not the case
the respondent was ever called upon to meet, but were this Court to
make the proposed order embodying this
much scaled down agreement, it
would be tantamount to making an agreement between the parties in the
absence of the appellants
having proved, at least substantially, the
agreement initially pleaded. The appellants' counsel suggested that a
finding that a
reduced agreement had been concluded would have the
effect of rectifying an injustice which had been committed against
the appellants.
The facts of this case, however, do not allow such a
finding since the conclusion of the expansive agreement pleaded
hinged on
a number of important issues being agreed which were yet to
be finalised between the parties, approved by the respondent's
executive
committee and were not agreed on 4 September 2012. Without
such issues shown to have been agreed, it is not possible to find
that
the pleaded agreement was proved.
[55] It can
reasonably be assumed that, as an experienced business man, Mr
Jehring and the appellant companies he controlled, comprehended
the
real risk, when entering into an agreement to proceed with a limited
business relationship, that no future agreement might
be entered
into, more so when matters of prime importance to the parties were
left open for later negotiation. The decision to
proceed with the
venture on the limited basis agreed on 4 September 2012, can only
have been made cognisant of this risk.
[56] It follows for
all of these reasons that the appellants failed to prove their claim
as to the existence of the agreement pleaded
and the Court
a quo
consequently correctly determined that the claim fell to be
dismissed.
[57] As to the
punitive costs order granted in respect of the appellants'
unnecessary and unfounded challenge to the authenticity
of certain
documents produced by the respondent, it is material that the
appellants persisted with this attack although they produced
no
evidence in support of it, relying solely on the cross examination of
the respondent's expert witness. In the absence of any
such evidence,
the appellants can reasonably have been expected to withdraw this
challenge, thereby obviating the respondent's
need to call its expert
witness. Given the failure to do so and the seriousness of the
tampering charges, which clearly imputed
dishonesty to the
respondent's employees, there is no reason why the appellants
should not bear the costs of such challenge
on a punitive scale. The
trial court was correct in finding as much.
[58] For all of
these reasons, the appeal falls to be dismissed. There is no reason
why costs should not follow the result.
Order
[59] In
the result, the following order is made:
1. The appeal is dismissed with costs.
________________________
BOZALEK
J
________________________
BOQWANAJ
____________________
SAVAGEJ
Appearances:
Appellants:
Mr RGL Stelzner
SC and Mr P Tredoux
Instructed by Van der Spuy & Partners
Respondents:
Mr S Burger and Mr G Girdwood
Instructed
by Edward Nathan Sonnenbergs Inc.
[1]
Withok Small Farms (Pty) Ltd v Amber Sunrise Properties 5 (Pty)
Ltd2009
2 All SA 65
(SCA);
2009 2 SA 504
(SCA) par 10.
[2]
Wessels Contract pars 68-70.
[3]
Bradfield The Law of Contract in South Africa (7th Ed) 2016 at 2. 1
.2; Jordaan v Trollip (1960) 1 PH A25 (T); Rooyendal (Pty)
Ltd v
Minister of Land Affairs
2013 3 All SA 588
(LCC) par 64.
[4]
Pattison v Fell 1963 3 SA 277 (N) 279.
[5]
Registrar of Deeds v Ferreira Deep Ltd
1930 AD 180.
[6]
2005 (3) SA 323
(SCA) at para 32.
[7]
Herbstein & Van Winsen Civil Practice of The High Courts of
South Africa, Vol l (Juta) at Page 558; Jowell v Brandwell-Jones
1998 (l) SA 836 (W) at 899; Durbach v Fairway Hotel Ltd 1949 (3) SA
l 081 (SR) at l 082; Robinson v Randfontein Estates GM Co
Ltd
1925
AD 173
at 198.
[8]
Kali v Incorporated General Insurances Ltd
1976 (2) SA 179
(D) at
182A.
[9]
Imprefed (Pty) Ltd v National Transport Commission
1993 (3) SA 94
(A) at 107C-H; MN v AJ2013 (3) SA 26 (WCC) at para 24.
[10]
MN v AJ
2013 (3) SA 26
(WCC) at para 24.
[11]
See Shill v Milner 1937 AD l 0 l at l 05; Myers v Abramson
1951 (3)
SA 438
(C); Middeldorf v Zipper NO 1947(1) SA 545 (SR); Makate v
Vodacom [2014] ZAGPJHC 135 at para 124.
[12]
Robinson v Randfontein Estates GM Co Ltd
1925 AD 173
at 198.
[13]
Sentrachem Bpk v Wenhold
1995 (4) SA 312
(A) at 320A-B.
[14]
EC Chenia and Sons CC v Lame and Van Blerk
[2006] ZASCA 10
;
2006 (4) SA 574
(SCA) at
para 13.
[15]
Bradfield The Law of Contract in South Africa (7th Ed) 2016 at
5.1.1.
[16]
Hillas & Co Ltd
1947 LTR 503
at 514 referred to in Burroughs
Machines Ltd v Chenille Corporation of SA (Pty) Ltd
1964 (1) SA 669
(W) at 671B.
[17]
Id at 5.1.
[18]
2013 (2) SA 133 (SCA).
[19]
Pitout v North Cape Livestock Co-operative Ltd
1977 (4) SA 842
(A)
at 850C-D.
[20]
[1932] UKHL 2
;
147 L.T.R. 503.
At p. 514. See too Burroughs Machines Ltd v Chenille
Corporation of SA (Pty) Ltd
1964 (1) SA 669
(W); Heathfield v
Maqelepo
2004 (2) SA 636
(SCA) at 670G-H.