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[2020] ZAWCHC 38
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Hadjigeorgiou and Others v Barak Fund SPC Limited; In Re: Barak Fund SPC Limited v Anchor Africa Holdings (Pty) Ltd and Others (22678/2014) [2020] ZAWCHC 38 (30 April 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No.: 22678/2014
In
the matter between:
TASSOULA
HADJIGEORGIOU
First Excipient
GROUP
1609 HOLDINGS (PTY) LTD
Second Excipient
MIKE
HURWITZ
Third Excipient
and
BARAK
FUND SPC
LIMITED
Respondent
In
re:
BARAK
FUND SPC
LIMITED
Plaintiff
and
ANCHOR
AFRICA HOLDINGS (PTY) LTD
First
Defendant
TASSOULA
HADJIGEORGIOU
Second
Defendant
GROUP
1609 HOLDINGS (PTY) LTD
Third
Defendant
MIKE
HURWITZ
Fourth
Defendant
PETRUS
JOHANNES DU PREEZ
Fifth
Defendant
MARTHINUS
JOHANNES WOLMARANS
Sixth Defendant
JUDGMENT
: HANDED DOWN ELECTRONICALLY ON 30 APRIL 2020
MABINDLA-BOQWANA,
J
Introduction
[1]
The
first to third excipients (the second to fourth defendants in the
action by the plaintiff) have raised altogether seven exceptions
against the plaintiff’s particulars of claims. For convenience
I refer to them as the defendants. The exceptions are taken
on the
basis that the particulars of claim lack averments necessary to
sustain a cause of action, or are vague and embarrassing.
[2]
The
claims brought by the plaintiff centre around a Purchase and
Repurchase Agreement (“the REPO agreement”), entered
into
by and between the plaintiff “
on
behalf of Barak Structured Trade Finance segregated Portfolio
”
[1]
[referred to as “
BARAK”
in the REPO agreement], and the first defendant, which commenced on
18 February 2014.
[3]
In
terms of the REPO agreement parties “
may
from time to time, enter into transactions in terms of which the
Counterparty
[the
first defendant]
shall
offer for sale to BARAK
certain
quantities of Commodity
[Cements]
which
BARAK shall purchase, should it wish to do so, on the Purchase Date
against
payment
of the Purchase Commodity
[Price]
with
a simultaneous agreement between the Counterparty and BARAK in terms
of which BARAK agrees to sell an equivalent quantity of
Commodity or
similar Commodity to the Counterparty at an agreed or determinable
Price (Repurchase Commodity) on a fixed date (“Repurchase
Date”) or on demand of the Counterparty.”
(Recordal: clause 5)
[4]
In
terms of clause 5.2 the parties record that they “
wish
for each such transaction (hereinafter referred to as “a
Repurchase Transaction”) to be governed by this Agreement.”
[5]
According
to the plaintiff the first defendant, which has now been
deregistered, failed to pay Repurchase Prices arising from various
transactions, discussed more fully below. It therefore contends
that the second, fourth and fifth defendants are responsible
for the
failure of these transactions, alleging that these defendants are
personally liable, in that they conducted themselves
fraudulently or
recklessly, or knowingly were part of the carrying on of the first
defendant’s business in a fraudulent or
reckless manner, or
with intention to defraud. Alternatively, that these
individuals breached their fiduciary duties.
It is alleged by
the plaintiff that: the second defendant was a director of the first
defendant (from 12 February 2014 until her
resignation on 28 January
2015) and at all material times a director of the third defendant;
the fourth defendant had been married
to the second defendant, and
was both the sole shareholder and a director of the third defendant;
and the fifth defendant was a
director of the first defendant,
included as at date of deregistration.
[6]
The
third defendant owned 49% of the first defendant’s issued share
capital, prior to its deregistration, and, according to
the
plaintiff, it is cited merely by virtue of any interest which it may
have in the outcome of the action proceedings, and no
relief is
sought against it.
Misjoinder
[7]
The
inclusion of the third defendant in the action proceedings, on the
terms mentioned in paragraph 6 above, forms the basis of
the
defendants’ first complaint of misjoinder. It is
submitted on behalf of the defendants that, other than the averment
that the third defendant is a minority shareholder of the first
defendant, the plaintiff has failed to plead any averments that
establish that the third defendant has a direct and substantial
interest in the subject matter, or which renders it necessary or
convenient to join the third defendant.
[8]
It
is settled that a question of misjoinder may be raised by way of
exception.
[2]
Furthermore,
as was held by Dlodlo J in
Crawford-Browne
v Manuel and Another
[3]
:
“
[t]
he
inclusion of a party who is not a necessary party will be bad for
misjoinder unless it can be justified on the ground of convenience
or
in terms of the rules of Court. See:
Herbstein
& Van Winsen, The Civil Practice of the Supreme Court of South
Africa
at page 199
.”
[9]
He
went on to say:
“
In
these proceedings, the Second Respondent is not a necessary party in
relation to the relief sought by the Applicant. Further,
no
basis is provided for the joinder of the Second Respondent on the
basis of convenience
.”
[10]
The
factual basis of joining a party must be pleaded.
[4]
This should be the case even if a party is joined on the grounds of
convenience.
[5]
I can go no
further than quote a passage in
Erasmus,
Superior Court Practice
[6]
,
which encompasses the test involved in the joining of a party:
“
The test
is whether or not a party has a ‘direct and substantial
interest’ in the subject matter of the action, that
is, a legal
interest in the subject matter of the litigation which may be
affected prejudicially by the judgment of the court.
A mere financial
interest is an indirect interest and may not require joinder of a
person having such interest. The mere fact that
a party may have an
interest in the outcome of the litigation does not warrant a
non-joinder plea. The rule is that any person
is a necessary party
and should be joined if such person has a direct and substantial
interest in any order the court might make,
or if such an order
cannot be sustained or carried into effect without prejudicing that
party, unless the court is satisfied that
he has waived his right to
be joined.”
(Footnotes
omitted)
[11]
In
its heads of argument the plaintiff acknowledged that “
if
the citation of the third defendant is removed, the claims which are
advanced will be entirely unaffected
”.
Indeed during oral argument it became clear that the third defendant
has no direct and substantial interest in the action.
One argument
advanced by Mr Mahon, for the plaintiff, to support the third
defendant’s inclusion as a party in the proceedings,
was that
its director dynamically and substantially partook in the actions
that led to the claims, and his collusion with other
defendants gave
rise to the claim. The difficulty with this argument is that if an
individual holds multiple directorships in different
companies, which
often happens, would it mean all the companies where such a person is
a director would need to be cited as parties,
even though they have
neither any direct and substantial interest in the matter and its
outcome, nor is there any identified prejudice
if they were to be
left out of the proceedings? That cannot be so.
[12]
That
question should also be asked in respect of the proposition that the
third defendant has been cited merely because of the minority
shareholding it held in the first defendant, which is now defunct.
Other than being mentioned in paragraphs dealing with citation,
there
is no further mention of the third defendant in the particulars of
claim. The particulars of claim do not contain any cause
of action in
relation to it and no relief is sought against it. The interest it
“may” have has not been pleaded, neither
have any
questions of law or fact justifying its joinder. In any event, I have
dealt with the manifest difficulty arising from
keeping the third
defendant in the action merely because of its minority shareholding
in the first defendant, and because of its
director’s
implication in impropriety in the first defendant.
[7]
[13]
I
could not identify how the administration of justice would be served
by allowing joinder of the third defendant. I agree
with Mr
Leech SC, who appeared for the defendants with Mr Engelbrecht, that
keeping the third defendant in as a party to the proceedings
means it
must stay in the process, and incur costs by instructing attorneys,
even if on a watching brief, to protect its interests.
For
these reasons, I hold that there was a misjoinder of the third
defendant.
Agency
[14]
The
second exception raised is that the REPO agreement contains an
unambiguous statement that the plaintiff contracted “
on
behalf of Barak Structured Finance segregated Portfolio
”.
According to the defendants, the words “
on
behalf of
”
mean “
as
an agent and on behalf of a principal, not as principal”,
and
the allegation that the plaintiff is the party with whom the first
defendant contracted is incapable of proof. If the REPO agreement
does contain such statements, the plaintiff cannot lead extrinsic
evidence to demonstrate that, to the contrary, it acted as principal.
In
KPMG
Chartered Accountants (SA) v Securefin Ltd and Another
[8]
,
the Court held:
“…
the
integration (or parol evidence) rule remains part of our law.
However, it is frequently ignored by practitioners and seldom
enforced by trial courts. If a document was intended to provide a
complete memorial of a jural act, extrinsic evidence may not
contradict, add to or modify its meaning (Johnson v Leal
1980 (3) SA
927
(A) at 943B). …”
[15]
In
this regard the defendants submit that the plaintiff does not plead
that it and the first defendant ever intended to contract
with the
plaintiff, not as an agent but as a principal. Furthermore, it does
not contend for rectification of the REPO agreement.
Accordingly, the averment that the plaintiff is the party with whom
[the first defendant] contracted contradicts the written agreement
and, on the pleadings, is wrong in law.
[16]
The
plaintiff pleads that it concluded the REPO agreement on behalf of a
segregated portfolio, it being a segregated portfolio within
the
plaintiff and not a separate entity as contemplated in section 216
(2) of the Cayman Island Companies Law. The plaintiff
alleges
that in terms of section 216 (2) of the Cayman Island Companies Law,
a segregated portfolio company shall be a single legal
entity and any
segregated portfolio of, or within, a segregated portfolio company
shall not constitute a legal entity separate
from the segregated
portfolio company.
[17]
According
to the plaintiff, the REPO agreement is not an agency agreement. It
is a matter of interpretation of the contract. To
uphold the
exception, the court must find that, on all reasonable
interpretations, “on behalf of” means agent.
It is
not the South African common law of agency which is called for, the
case involves a consideration of a foreign statute. The
nature of the
legal personality of the plaintiff, and the concept of a segregated
portfolio, must be determined with reference
to the law of the Cayman
Islands. Segregated portfolio companies are internationally
recognised. A segregated portfolio company
is a company which
segregates the assets and liabilities of different classes (or
sometimes series) of shares from each other and
from the general
assets of the company. The segregated portfolio however remains part
of the same entity. The nature of the company
(gleaned from the
foreign statute) makes it obvious that the plaintiff was contracting
with regard to the ring-fenced assets and
liabilities of the
segregated portfolio. The words “
on
behalf of
”
therefore, used in this context, do not mean “
as
an agent or representative of a principal
”
as contended for by the defendants. It means that the plaintiff was
acting in furtherance of the interests associated with
the segregated
portfolio. This is an interpretation which is entirely acceptable on
the basis of the words in the contract, and
therefore no
rectification thereof is necessary. The plaintiff refers to clause
20.1 of the REPO agreement, dealing with applicable
law and
jurisdiction, which states that the agreement shall be interpreted
and governed in all respects by the laws of England.
[18]
To
this, the defendants submit that the allegation that in terms of the
law of the Cayman Islands the person described variously
as the
principal and the plaintiff are the same entity, does not assist the
plaintiff, as it merely means that there is a non-existent
principal.
In such circumstances, the conclusion of a contract by a person who
intends to act as an agent, in circumstances where
a principal does
not exist, does not result in a contract with the agent, and the
person cannot act as their own agent.
[19]
In
our law when the language in a contract is unambiguous, the position
is as stated in KMPG
supra
and other like cases. However, where the language is ambiguous,
extrinsic evidence is admissible in order to interpret its meaning,
by reference to “context”, or the factual matrix in which
the contract was concluded. The apparent purpose to which
the
contract was directed may also be considered.
[9]
[20]
In
the present matter, the plaintiff has not necessarily stated that the
language of the contract is ambiguous; what it says is
that the
context in which the words were used was that of foreign law, and
that South African law of agency does not come into
play. It
does not seem to dispute that, if South African law were applicable,
the words “
on
behalf of
”
would mean representative or agent of another. It contends that in
interpreting the REPO agreement, the laws of England
would be
applicable, as stipulated in clause 20.1 of the agreement.
[21]
The
applicable laws of England should have been alleged, what they entail
and more especially how they would regard the words “
on
behalf of
”
in the contract to mean or to be interpreted and that must be proved.
This may require expert evidence, but in the first
instance it must
be alleged. I agree with Mr Leech that, as foreign law, it ought to
be alleged and it must be proved. In the absence
of the allegation it
should be presumed to be the same as South African law. The words “
on
behalf of
”
are unambiguous and in South African law the words “
on
behalf of
”
denote that the contracting party does so for a principal.
[10]
If the party contracting and the one contracted on behalf of are one
and the same person, it follows that a party cannot act as
its own
agent. Such a scenario is akin to an entity concluding an agreement
“on behalf of” a division within the same
entity.
Further, in its averment on paragraph 15 of its particulars of claim
use of the word “purported” in describing
the conclusion
of the agreement may be suggestive of its acceptance that the
document is incorrect in its use of “on behalf
of”.
[22]
It
seems to me the plaintiff has two choices, if it seeks for the words
“on behalf of” to be interpreted in accordance
with
foreign law which connotes a meaning different to the South African
law of agency such foreign law must be specifically pleaded.
If that
cannot be done, the plaintiff may seek rectification of the contract.
[23]
It
is further not clear to me whether the fact that section 216 (1) of
the Cayman Islands Companies Law, which allows for a segregated
portfolio company to create one or more segregated portfolios in
order to segregate the assets and liabilities, went as far as
requiring contracts concluded in a segregated portfolio to be done
“on behalf of” the segregated portfolio by the segregated
portfolio company. My reading of section 216 (2) of the Cayman
Islands Companies Law referred to by the plaintiff is that it merely
stresses the point that segregated portfolios within the segregated
portfolio company shall not constitute separate legal entities
from
the segregated portfolio company. I am in agreement with the
defendants that the allegation that in terms of the Cayman Island
laws the plaintiff and Barak Structured Finance Segregated Portfolio
are one and the same entity merely means that there is a non-existent
principal. It is for these reasons that the exception must succeed.
The
relevant contracts
[24]
The
third ground is that the REPO agreement on which the plaintiff relies
provides for agreements, referred to as Repurchase Transactions,
to
be concluded. In other words, the REPO agreement is an agreement to
agree.
[25]
According
to the defendants, the plaintiff does not plead the identities of the
representatives who allegedly concluded the Repurchase
Transactions,
or the terms or particulars relating to those agreements on behalf of
the plaintiff. It merely pleads that it “disbursed”
USD 1
6161 518.18 on behalf of the first defendant under the REPO agreement
“
pursuant
to the following Purchase and Repurchase Confirmations (which
disbursements constituted payments as contemplated in paragraph
17.6.1 above
.”
It further pleads that in Cape Town and on various dates, the
plaintiff and the first defendant’s duly authorised
representative concluded various Purchase and Repurchase
Confirmations and that the first defendant is liable to the plaintiff
in respect of the aforesaid Purchase and Repurchase Confirmations.
Copies of the alleged Purchase and Repurchase Confirmations
are
attached to the particulars of claim.
[26]
The
defendants submit further that the plaintiff does not plead the
Repurchase Commodity, which is defined in clause 2.2.25 as “
the
Commodity
or determinable Commodity specified as such in each Purchase and
Repurchase Confirmation
which the Counterparty
[the
first defendant]
shall
pay to BARAK in terms of a repurchase by the Counterparty from
BARAK
…”,
and referred to in clause 11.1 which found the plaintiff’s
claim. The plaintiff merely pleaded the first
defendant was liable to
pay Repurchase Prices stated in the particulars of claim.
[27]
The
defendants refer to the following provisions of the REPO agreement.
Clause 8.1 provides that “[
t
]
he
Counterparty
[the first defendant]
may
from time to time, request BARAK
[the plaintiff]
to
enter into a Repurchase Transaction,
which
request must be in writing
.”
In terms of clause 8.2, “[
s
]
hould
BARAK be willing to agree to enter into the proposed Repurchase
Transaction,
and
upon the Parties having agreed the terms thereof, a Repurchase
Transaction shall be concluded and BARAK shall deliver a Confirmation
(Annexure “A”) in respect of such agreed terms to the
Counterparty
.”
The Confirmation will confirm a number of items listed under clause
8.3. In terms of clause 8.4 “[
t
]
he
Confirmation relating to Purchase Transaction shall, together with
this Agreement,
constitute
prima facie evidence of the terms agreed between BARAK and the
Counterparty for such Repurchase Transaction
,
unless the Counterparty objects to the terms of the Confirmation
within 24 (twenty four) hours after receipt thereof.
The
Counterparty must sign and return via facsimile the Purchase and
Repurchase Confirmation sent to it to confirm its agreement
with the
terms thereof within 24 (twenty four) hours after receipt thereof
,
but failure to do so will not affect the validity of the
Purchase
and Repurchase Transaction.
If
there is a conflict between the provisions of the Purchase and
Repurchase Confirmation and this Purchase and Repurchase Agreement,
the Purchase and Repurchase Confirmation shall prevail
.”
In terms of clause 2.2.21 “
Purchase
and Repurchase Confirmation”
means
“
a
written confirmation issued by BARAK in similar format to that
contained in Annexure “A”, ordinarily issued fax or
email, confirming the terms and conditions of each Purchase and
Repurchase Transaction
as
agreed between BARAK and the Counterparty
.”
(Underlined for emphasis)
[28]
The
defendants contend that the plaintiff misconstrues the nature of the
Repurchase Transactions and fails to plead both the conclusion
and
the material terms of the Repurchase Transactions. Such is central to
the plaintiff’s claim against the defendants, because
their
liability depends on the terms of the Repurchase Transactions. Those
terms govern every material component of the alleged
liability of the
first defendant. The particulars of claim are accordingly excipiable,
as the plaintiff is required to plead and
prove the contracts on
which it relies. It is impermissible to merely attach documentary
evidence.
[29]
The
plaintiff submits that it is not required to provide any
particularity in its particulars of claim, other than what is
contemplated
in Rule 18.
[11]
Such required particularity may be obtained by means of a request for
particulars for trial. It further argues that it has provided
details
of the parties to the transactions; the place and date of the
transactions; and the Purchase Transactions are, in each
case, said
to be comprised of the annexures referred to in paragraph 26 of the
particulars of claim and annexed thereto marked
POC2.1 to POC2.7.
[30]
Mr
Mahon, during oral argument, submitted that the Purchase and
Repurchase Confirmations are the Repurchase Transactions which are
annexed, and the Repurchase Transactions are subject to the REPO
agreement in terms of clause 5.2, which stipulates that the parties
wish for the Repurchase Transactions to be governed by the REPO
agreement.
[31]
As
I understand the REPO agreement, contains two parts, i.e. the
Purchase and Repurchase Transactions. It is perhaps important to
sketch briefly how the arrangement is fashioned in the agreement. The
transactions are initiated by the first defendant requesting
BARAK,
in writing, to enter into a
Repurchase
Transaction
(clause 8.1). Should BARAK be willing and agree to enter into such
proposed Repurchase Transaction,
and
upon the parties having agreed the terms thereof
,
a Repurchase Transaction shall be concluded and BARAK shall deliver a
Confirmation in respect of such agreed terms (clause 8.2),
confirming
a number of terms (clause 8.3). Clause 9 deals with how “[
d
]
elivery
of and title to the Commodity pursuant to the purchase referred to in
clause
8” shall pass. The Commodity purchased by BARAK would be
delivered by the first defendant in storage facilities (clause 9.1),
the first defendant shall deliver certain documents in respect of
such Commodity, listed in clause 9.3. The Collateral Manager
would
issue an original Warehouse Receipt or Load Survey Report, “
ownership
and benefit in and to the Commodity shall be deemed to have passed
from the Counterparty to BARAK by way of symbolic delivery
upon the
issuance by the Collateral
”
of those documents, approved and accepted by it. (clause
9.4)
[32]
In
terms of clauses 10.1 the first defendant shall deposit a Collateral
Deposit as security for any debt the first defendant may
have
(however arising) to BARAK. Upon receipt of documents listed in
clause 9, title or security vesting in BARAK, and the
first defendant
having deposited the relevant Collateral Deposit mentioned above,
BARAK would pay the Purchase Commodity (Price)
to the first defendant
(clause 10.2)
[33]
In
terms of clause 10.7, the first defendant shall ensure that the
Commodity sold to BARAK is paid in full and that no moneys remain
due
and payable to any entity from whom the first defendant has sourced
the Commodity and shall ensure that such Commodity is not
encumbered
in any way. Now, here is the important part: “
In
the event that the Counterparty
[the
first defendant]
has
purchased the Commodity so sold to the BARAK on credit or has
otherwise not paid in full for the Commodity, the Counterparty
hereby
authorises BARAK to effect payment
on
the Counterparty’s behalf directly to the entity from whom the
Counterparty had sourced the Commodity, and to utilise the
relevant
Purchase Commodity for such purpose, and the Counterparty agrees to
indemnify and hold harmless BARAK should BARAK incur
or suffer any
additional cost, loss or expense (including consequential losses and
loss of profit) in effecting such payment
.
(Own emphasis)
[34]
Clause
10.8 further provides that:
“
By BARAK
settling the amounts due in respect of the Commodity to the entity
from whom the Counterparty sourced the Commodity as
described in
clause 10.7,
BARAK’s
obligations to make payment of the Purchase Commodity to the
Counterparty in respect of the Commodity shall be extinguished
by
such amount/s paid by BARAK to any such aforementioned
entity.
”
[35]
In
other words, if BARAK pays the third-party supplier from where the
first defendant sourced the commodity, its indebtedness to
the first
defendant for the Purchase of the Commodity is extinguished by the
amounts paid to the third-party supplier.
[36]
Clause
11 deals with the Repurchase of the Commodity. In terms of clause
11.1, the Repurchase Date shall not be more than 180 calendar
days
after the relevant Purchase Date of such Purchase Transaction. This
clause also states that “
BARAK
will deliver the Commodity, and transfer title thereto, to the
Counterparty against immediate payment, and only upon receipt
of such
payment, of Repurchase Commodity from the Counterparty
.”
[37]
In
terms clause 11.2, “
BARAK
shall not be obliged to deliver the Commodity, and transfer title
thereto, to the Counterparty unless it has received payment
of the
Repurchase Commodity from the Counterparty
.”
[38]
Clause
11.3 details how such delivery would take place. Failure to pay by
the first defendant constitutes a material breach and
the plaintiff
shall be entitled to exercise the remedies available in clause 15
(clause 11.7.1) or, should it not elect to exercise
the remedies
stipulated therein, grant the first defendant additional time to pay,
inter alia, (clause 11.7.2) or sell the Commodity
to any third party
as it may determine in its sole discretion and retain the proceeds of
the sale. In the event of such selling,
the plaintiff will have the
right to use the Collateral Deposit. If the selling price to the
third party is less than the Repurchase
Commodity (Price), BARAK is
entitled to recover the difference between the two and related costs.
Should the Collateral Deposit
not be sufficient to reimburse BARAK
any amounts due by the first defendant, the first defendant shall
remain liable to the plaintiff,
which shall be paid within two days
of receipt of the plaintiff’s written demand for payment of
such amount. (Clause 11.7.3)
[39]
Having
regard to the clauses referred to above, while the parties agreed
that the Repurchase Transactions are to be governed by
the REPO
agreement as per clause 5.2, it seems evident that the REPO agreement
was indeed an agreement to agree. From the reading
of the REPO
agreement, it appears to me that the Purchase and Repurchase
Confirmations and Repurchase Transactions are contemplated
as
different steps. The plaintiff only referred to the former in its
particulars of claim and that, in my view, does not concur
with the
various clauses I have detailed above. In terms of these clauses it
appears that the parties would first enter into a
Repurchase
Transaction, which is put into operation by a written request from
the first defendant. After such terms have been agreed,
then BARAK
shall deliver a Confirmation. The Confirmation confirms the agreed
terms. It is those terms which precede the Confirmation
that ought to
be pleaded. Confirmation constituting
prima
facie
evidence of the contract, does not equate to them being the contracts
that the parties ought to enter into prior to the delivery
of
Confirmations, if one has regard to the provisions of the REPO
agreement, referred to above. The plaintiff cannot simply attach
documentary evidence of such contracts. The plaintiff is required to
plead the contract and the terms of the contract it relies
on.
[12]
[40]
It
is significant that the first defendant’s failure to send
Confirmation back, to confirm its agreement with the terms thereof,
does not affect the validity of the Purchase and Repurchase
Transaction, as per clause 8.4. In the circumstances, I agree with
the defendants in this regard that the particulars of claim are
excipiable on this ground too.
Disbursements
[41]
The
fourth exception is taken on the basis that the REPO agreement on
which the plaintiff relies does not expressly provide for
disbursements and recouping of disbursements. The agreement does,
however, make provision for payments to be made to the first
defendant’s supplier in clause 10.7. In this regard it is
contended by the defendants that in clause 10.8, on a proper reading
of the REPO agreement, the disbursements mentioned in clause 10.7
extinguish the indebtedness of the plaintiff to the first defendant.
[42]
Mr
Mahon acknowledged that use of the word “disbursed” is
unfortunate and may lead to two meanings, but the obvious
meaning in
the context of the particulars of claim is payment of money. He
further contended that the plaintiff has pleaded the
defendant’s
obligation to pay.
[43]
In
view of the word disbursed being open to two interpretations, this
lends the particulars of claim to vagueness, which may be
seen in the
light of clauses 10.7 and 10.8. In this regard, the exception should
be upheld.
Remedy
[44]
The
fifth ground is that the written agreement (clause 15.3) limits the
remedies available to the plaintiff to the payment of the
net amount
after set-off or termination. The plaintiff does not claim the
net amount and did not terminate the written agreement.
The
alleged indebtedness of the first defendant is founded on an
entitlement to specific performance of the Repurchase Transactions,
being the payment of the Repurchase Commodity. The contract
does not reserve common law remedies and accordingly, the plaintiff
is not entitled to, and the alleged indebtedness of the first
defendant cannot be founded on, the specific performance of the
Repurchase Transaction.
[45]
The
plaintiff contends that clause 15.3.1 is a remedy contractually
conferred on it which it would not enjoy under the common law;
and
clause 15.3.2 makes specific reference to the remedy provided being
“in addition to any other claims that the Non-Defaulting
Party
may have in terms of this Agreement or any law…”
[46]
According
to the plaintiff, the defendants seek to impute an interpretation of
the provisions of the contract which is not supported
by the terms
thereof and the exception ought to be dismissed. At worst for the
plaintiff, so it is argued, the correct interpretation
of the
provision is uncertain. In these circumstances, the court should be
reluctant to decide questions of interpretation of contract
by way of
exception.
[47]
Clause
15 deals with breach and termination of the contract. In terms of
clause 15.3:
“
In the
event of any of the circumstances mentioned in clause 15.1
[either party committing a material breach of the agreement]
occurring
to either Party or of the circumstances mentioned in clause 15.2
occurring to the Counterparty (“the Defaulting
Party”),
the other Party (“Non-Defaulting Party”)
will
be entitled
,
at any time thereafter by giving 7 (seven) Business Days written
notice to the Defaulting Party, to:
15.3.1
accelerate
the performance of all obligations
in terms of all outstanding Repurchase Transactions, and in
particular to accelerate the Repurchase Date, to a date not more than
7 (seven) Business Days after the date of the notice,
to
place a value on the amount of Commodity to be delivered pursuant to
such accelerated Repurchase Transactions
(…)
and
to set off the value of the Commodity to be delivered against the
amount of the Repurchase Commodity to be paid
,
whereupon the net amount, if any, will be the
only
amount payable by the one Party to the other and shall be payable
within 2 (two) Business Days of written demand; and
15.3.2
terminate
this Agreement and in addition to any other claims that the
Non-Defaulting Party may have in terms of this Agreement or
any law
,
the Defaulting Party shall be liable for all damages, losses or costs
suffered or incurred by the Non-Defaulting Party, including
legal
costs on the scale as between attorney and his own client.
”
(Own
emphasis.)
[48]
I
have already dealt with the provisions in clause 11.7. Failure to pay
Repurchase Price constitutes a material breach, it goes
to the root
of the contract (clause 15.4 and clause 11.7). If one accepts that in
law, where remedies are not specified by the
parties to a contract
then the common law remedies would be available
[13]
,
parties may exclude or depart from the common law position by
replacing or adding to the remedies.
[14]
The REPO agreement specifies remedies that the parties “shall”
or “will” be entitled to. It specifies accelerated
performance and set off, as well as termination, as remedies
available upon breach. In relation to the performance remedy, the
REPO agreement provides that “
the
net
amount
,
if any, will be the
only
amount payable by the one Party to the other
.”
It is important to underline “
only
”.
[49]
Further,
in terms of clause 11.7.3, should the plaintiff elect not to exercise
the remedies stipulated in clause 15, it may sell
such Commodity to a
third party as it determines.
[50]
The
plaintiff does not claim specific performance of the contract, but
alleges that the defendants are liable for indebtedness resulting
from the first defendant’s failure to pay and claims Repurchase
Commodities less payments received. The plaintiff has not
set off the
value of the Commodities. The claim as pleaded is not provided for in
the contract. This exception raised in this regard
should also
succeed.
No
tender for performance
[51]
The
sixth exception taken is that the plaintiff has not alleged
compliance with the reciprocal obligation, or tendered to perform
the
reciprocal obligation to deliver the Commodity and transfer title
thereto. Further, that the Plaintiff is unable to comply
with
the reciprocal obligation to deliver, because the first defendant has
been deregistered. Accordingly, the plaintiff
is not entitled,
and the alleged indebtedness cannot be founded on, specific
performance.
[52]
The
plaintiff contends that this conclusion is wrong, because the
plaintiff’s obligation to transfer title is not antecedent
to
the first defendant’s obligation to transfer title. On the
contrary, clause 11.2 of the REPO agreement expressly provides
that
the plaintiff would not be obliged to deliver the commodity, and
transfer title thereto, to the first defendant, unless it
received
payment of the Repurchase Price from the first defendant. The
plaintiff’s claim is based on the contention that
it has not
received payment of the Repurchase Price from the first defendant and
an obligation to transfer title has not arisen.
Secondly, the
allegation that the plaintiff has not pleaded compliance with its
obligations to transfer is incorrect. It has pleaded
expressly that
it has complied with all its obligations under the REPO agreement.
[53]
My
reading of clause 11.2 simply is that no delivery of Commodity and
transfer of title can take place without payment having been
received. Therefore, once payment is received delivery of Commodity
and transfer of title ought to take place. Therefore, indeed
the
obligations are expressed as reciprocal.
[15]
Demand for performance of contract cannot be made unless the other
party has performed or is prepared to perform its own
obligations.
[16]
The
allegation that the plaintiff has complied with all its obligations
under the REPO agreement, lacks particularity and is too
broad. As
the plaintiff has pleaded that the first defendant is deregistered,
it in effect pleads it can no longer perform the
contract. This
exception too should succeed.
Enrichment
[54]
Lastly,
the alternative claim of enrichment. According to the defendants, the
plaintiff does not plead any averments to sustain
the contention that
the first defendant was enriched as a result of the alleged
disbursement.
[55]
The
plaintiff pleads in the alternative that, in the event that any of
the suspensive conditions contained in the REPO agreement
were not
timeously fulfilled or waived, with the result that the REPO
agreement is of no force and effect, or in the event of it
being
found that the REPO agreement is of no force and effect for some
other reason, then the plaintiff pleads that: (a) in the
bona
fide
mistaken belief that the suspensive conditions had been met and/or
the REPO agreement was of full force and effect, it purported
to
comply with its obligations in terms of the REPO agreement in the
belief that it was obliged to do so; (b) it disbursed amounts
of
money to third-party suppliers on the first defendant’s behalf,
whereafter cement was delivered by the third party suppliers
directly
to one of the first defendant’s customers; and (c) while the
first defendant remains in possession of the cement,
or the proceeds
from on-sale of the cement to one of its customers, the plaintiff has
been impoverished, while the first
defendant has been
unjustifiably enriched in the amount of USD 1 616 518.18, or the
outstanding amount of USD 1 456 972.87 plus
interest.
[56]
According
to the defendants, if the parties implemented their contractual
arrangement believing it to be valid and enforceable,
as alleged by
the plaintiff, the Commodities were delivered to the plaintiff and
the plaintiff retains ownership of the Commodities
until such time as
the first defendant pays the Repurchase Commodities. The plaintiff is
not impoverished and the first defendant
was not enriched as a
result. The plaintiff is not impoverished by merely making payments
(disbursements). It cannot claim to be
impoverished without
accounting for Commodities which it owns, the security and the
Collateral Deposit. The first defendant is
not enriched for the same
reasons and, more so because it was deregistered and effectively does
not exist, and any property it
may have belongs to the state.
[57]
As
I understand the agreement, in terms of which on this ground of
enrichment the plaintiff would have acted, under the
bona
fide
mistaken belief that the suspensive conditions had been met and/or
the agreement was of full force and effect, has two sides of
the
coin, namely, the Purchase of the Commodity and Repurchase thereof as
I mentioned earlier.
[58]
It
is not clear what the basis of the plaintiff’s enrichment claim
is. Although the enrichment claim is premised on the REPO
agreement
being found to be of no force and effect, the plaintiff pleads that
it was of the mistaken belief that the agreement
was valid. It then
pleads that it disbursed amounts to third-party suppliers on behalf
of the defendant. If payments were believed
to be made in terms of
the agreement to third parties, the provisions that govern such
payments are clauses 10.2 and 10.7, which
refer to payment to be made
by the plaintiff for Purchase of the Commodity sold to it by the
first defendant. If the first defendant
failed to pay the supplier in
full, then the plaintiff would pay the supplier directly which would
extinguish its indebtedness
to the first defendant.
[59]
Delivery
of and title to the Commodity pursuant to the purchase would have
passed to the plaintiff as per clause 9. The plaintiff
would retain
ownership of the Commodity. It may only be delivered to the first
defendant as per the Repurchase Transaction upon
full payment
thereof. If the first defendant was not enriched as a result of
payment made to third parties by the plaintiff, the
plaintiff may not
be impoverished. I agree with the defendants that in that
connection, the first defendant would still need
to account for the
Commodities, security and the Collateral Deposit.
[60]
If
the enrichment claim is not based on the “purported”
Purchase of the Commodity as contemplated clauses 8, 9, 10 and
11,
then the basis of paying third-party suppliers on behalf of the first
defendant is not pleaded or not clearly pleaded. It is
not
sufficient, in my view, for the plaintiff to merely state that it
paid third parties, it should plead the basis for such payments,
which would have been implementation of a contractual arrangement
believed to be valid and enforceable. Accordingly, this exception
should also be upheld.
[61]
For
all the reasons outlined, the exception must succeed and the
plaintiff be afforded an opportunity to amend its particulars of
claim.
[62]
In
the result I make the following order.
1.
The
exceptions are upheld with costs including the costs of two counsel.
2.
The
plaintiff’s amended particulars of claim are set aside and the
plaintiff is afforded an opportunity to amend its particulars
of
claim, if so advised, within 20 days of this order.
_________________________
NP
MABINDLA-BOQWANA
Judge
of the High Court
APPEARANCES:
For
the Excipients: Adv. Q C Leech SC with Adv J B Engelbrecht
Instructed
by: Edward Nathan Sonnenbergs Inc., Sandton C/O
Edward
Nathan Sonnenbergs Inc., Cape Town
For
the Respondent: Adv D Mahon
Instructed
by: Schindlers Attorneys, Johannesburg C/O Andrew DE Vos &
Associates
[1]
This
forms the basis of the second exception.
[2]
Royce
Shoes (Pty) Ltd and McIndoe and Others NNO
2000 (2) SA
514
(W) at 516 C- 517D.
[3]
[2008]
ZAWCHC 29
at para 38.
[4]
In
Van
der Vyver and Others v Conradie and Others
1914
CPD 1040
at 1043-1044 it was held that there was a misjoinder when
it was not alleged, in the declaration, what acts were done by the
defendants, when, and what interdicts were sought against them.
[5]
Royce
supra
at 518 A-D.
[6]
Volume 2,
second edition
at
D-124 to D-125
[7]
In
NDPP
v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA), at para 85, the Court held that “
to
be able to intervene in proceedings a party must have a direct and
substantial interest in the outcome of litigation, whether
in the
court of first instance or on appeal”
and
this was in a case where the court had found the reasons in a
judgment a quo had cast aspersions on a party sought to intervene.
[8]
2009 (4) 399
(SCA) at para 39. Also see:
Union
Government Appellant v Vianini Ferro-Concrete Pipes (Pty) Ltd
Respondent
1941
AD 43
, at page 47, where the Court held
:
“
Now
this Court has accepted the rule that when a contract has been
reduced to writing, the writing is, in general, regarded as
the
exclusive memorial of the transaction and in a suit between the
parties no evidence to prove its terms may be given save
the
document or secondary evidence of its contents, nor may the contents
of such document be contradicted, altered, added to,
or varied by
parol evidence
…”
[9]
Communicare
and Others v Khan and Another
2013
(4) SA 482
(SCA) at para 31.
[10]
Kinekor
Films (Pty) Ltd v Drive-In Home Movies
1976 (2) SA 87
(O) at 91H-92A and
Nordis
Construction Co (Pty) Ltd v Theron, Burke and Isaac
1972
(2) SA 535
(D) at 543-544.
[11]
Rule
18 (6) provides: “
A
party who in his pleading relies upon a contract shall state whether
the contract is written or oral and when, where and by
whom it was
concluded, and if the contract is written a true copy thereof or of
the part relied on in the pleading shall be annexed
to the
pleading
.”
[12]
I-Chuan
Kuo v Sphia Investments CC
2016
JDR 2317 (Nm) at para 34 and
Resisto
Diary (Pty) Ltd v Auto Protection Insurance Co Ltd
1963 (1) SA 632
(A) at 645A.
[13]
Botha
and Another v Rich NO and Others
2014
(4) SA 124
(CC) at para 37.
[14]
Id fn
13; See also
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) where it was held, at 531E, that a term is not
implied if it is in conflict with the provisions of the contract.
[15]
Motor
Racing Enterprises (Pty) Ltd (In liquidation) v NPS (Electronics)
Ltd
1996
(4) SA 950
(A) at 961 E-G.
[16]
Smith v
Van den Heever and Others
2011 (3) SA 140
(SCA) at para 14;
R
M Van de Ghinste & Co (Pty) Ltd v Van de Ghinste
1980 (1) SA 250
(C) at 253 C – 254 A.