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[2011] ZAGPJHC 183
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Burgandy Rose Trading 53 (Pty) Ltd v Bressler and Another (20650/11) [2011] ZAGPJHC 183 (12 August 2011)
NOT REPORTABLE
IN THE HIGH COURT
OF SOUTH AFRICA
(
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
)
CASE NO
:
20650/11
DATE
:
2011-08-12
In the matter between
BURGANDY ROSE TRADING 53 (PTY) LTD
…..........................................
APPLICANT
and
SHARNE
BRESSLER
...................................................................
FIRST
RESPONDENT
QUINNETTE
BRITS
..................................................................
SECOND
RESPONDENT
Restraint of trade – franchise agreement -
application for enforcement of restraint -– contractual
provisions for the restraint to come into operation not complied with
– application dismissed but ancillary relief granted
JUDGMENT
VAN OOSTEN,J
:
This is an application by the applicant to enforce a restraint of
trade provision which is embodied in a franchise agreement (the
agreement). The applicant is the South African franchisee of Semas
Abacus and Mental Arithmetic Academy Pvt Ltd, registered in
India,
(Semas International) holding the sole and exclusive rights to teach,
distribute and deal with an educational system and
product known as
the Japanese Soroban and Mental Arithmetic System in South Africa.
The system and product essentially comprise
the teaching of
mathematical skills to scholars by making use of an abacus
instrument. The applicant, in turn as a franchisor
of the product in
South Africa, sells the rights and licence to utilise and conduct
Semas courses for the duration of a specified
time to franchisees, of
which there are at present 16 in different locations throughout South
Africa.
On 4 August 2009, the applicant and the
respondent concluded the agreement in terms of which the respondents
obtained a Semas franchise
for the Westrand area, which included
Roodepoort and Krugersdorp, until 30 June 2011. The respondents
received extensive training
in the Semas educational system, its
business model, concept and training courses, and they succeeded in
establishing a successful
business enterprise.
During January 2011, disputes occurred between
the applicant and the respondents. The agreement eventually came to
an end in circumstances
I will presently refer to, but the
respondents continued with their business, in particular, teaching
mathematics to established
clients. The applicant alleges that the
respondents conduct is in breach of a restraint of trade clause
contained in the agreement,
which prompted it to launch the present
application. The relief sought by the applicant against the
respondents, is the following:
‘
1.
That
the respondents be interdicted and restrained for a period of five
years, calculated from 12 May 2011:
from
dealing in and or operating the SEMAS courses and/or any similar
type of courses and/or concepts dealing in Abacus educational
materials, including material issued by the respondents for
conducting the courses and/or any resemblance thereof;
From
operating any form of business venture wherein they describe
themselves as a franchisee of the applicant in any manner
whatsoever.
That the
respondents be ordered to forthwith make payment to the applicant of
the amount of R49 907.00 being the money outstanding
due and payable
to the applicant as from 12 May 2011;
That the
respondents be ordered to forthwith return to the applicant all
SEMAS materials which were provided to the respondents
for
conducting and/or managing the SEMAS courses;
That the
respondents be ordered to pay the costs of the application on a
scale as between attorney and client.’
A number of defences have been raised against the
main relief sought. One thereof is that the respondents’
continued teaching
of mathematics, after the termination of the
agreement, is no longer based on the Semas model and that they are no
longer utilising
any Semas products. Although there are indications
to the contrary, as can be gleaned from certain emails and letters by
the respondents
addressed to principals of schools where they are
teaching, and others, I, in the view I take of this matter, do not
consider it
necessarily to decide this issue. A more fundamental
issue which in my view is the decisive of this matter, concerns the
question
whether the applicant, in any event, having regard to the
terms of the agreement, is entitled to enforce the restraint of trade
clause against the respondents. I turn now to a determination of that
question.
At the outset it is necessary to quote the
restraint of trade clause in its entirety. It reads as follows:
‘
TERMINATION
9.1 In the
event of occurrence of any of the events of default stated in Clause
5 hereof, the Company (the applicant) shall have
the right to
terminate this Agreement any time by giving notice in writing to the
Franchisee (the respondents) and upon proper
consultation between the
parties regarding the default. The Company shall give the Franchisee
thirty (30) days to comply with he
terms of the discussion conducted
between the parties. In the case of such negotiation not being
fruitful the parties shall nominate
a mediator to mediate a
settlement between the parties. In the unlikely event of such
negotiation not being successful the Company
may request from the
Franchisee to:
....
(e) cease to
operate the SEMAS courses and any similar type of courses and
concepts dealing in abacus educational materials, including
material
issued by Franchisee for conducting the Courses and or any
resemblance thereof for a period for a period of Five (5) years
after
the termination of this Agreement or any extension of the
Agreement.’
The applicant relies on a cancellation of the
agreement by way of a letter dated 15 may 2011 by the applicant’s
attorneys
addressed to only the first. The relevant portion of the
letter reads as follows:
“
2.
Kindly be advised that Burgandy Rose Trading 53 (Pty) Ltd
(hereinafter “Semas”) with immediate effect terminates
the contract as entered into between the parties on 1 July 2009 and
signed on 4 August 2009 and on the basis of material breach.
3. It is
indeed so that the contract provides for notice and in effect for a
period granted to rectify your breach, however in the
circumstances
the breach is of such material consequence that our client has no
option but to protect its interests with immediate
effect and such
limits to damages intended to be caused by yourself.
4. In
particular, be advised that our client is taking over all teaching
and attendance functions as from 1 May 2011 and that you
are
prohibited from that point onwards to have any dealings further with
SEMAS West Rand.
5. The ground
for cancellation is twofold and as follows:
5.1 in terms
of the contract between the parties you were obliged to advise SEMAS
in writing six months prior to the end date of
your intention to
renew, which has not been forthcoming.
5.2 Despite
the above, SEMAS does have the right to not engage in a new contract
on the basis of, in essence, material breach.
5.3
At
this stage it is not our client’s intention to deal with this
aspect exhaustively, but suffice
to place on record that this can be dealt with in the correct forum
should the need arise.
5.4 Our
client did leave the door open and has invited yourself to deal with
any aspects, but it has become clear that this never
was your plan
and in the long term, as it is aptly illustrated below.’
and, further, in the same letter
‘
10.
The writer is not going to set out your sum total of your breaches
nor instances of blatant disregard to the terms of the contract,
but
incorporate herein paragraph 3 and 5 of the agreement as between the
parties and as such deem same to be read into this correspondence.
11. The
writer further places on record that you are restrained in terms of
the agreement between our client and yourself and have
each and every
intention to enforce same should it become necessary.’
In response to the letter the respondent’s
attorneys, on 24 May 2011, advised that the applicant’s
cancellation of the
agreement constituted a repudiation thereof which
was accepted resulting in the agreement being cancelled.
The applicant’s cancellation of the
agreement, in my view, was unlawful and therefore constituted a
repudiation of the agreement.
Clause 9 of the agreement, as quoted
above, provides for the steps to be taken by the applicant once a
right to terminate the
agreement arises. The wording of the clause is
peremptory: the word “shall” imposes an obligation on the
applicant
to indeed take the steps provided for prior to the coming
into effect of
inter alia
sub clause (e) which provides for the restraint of trade now relied
upon. It is common cause between the parties that none of these
steps
were implemented by the applicant. On the contrary, and as is
indicated in no uncertain terms in the letter of cancellation,
it was
with immediate effect.
Counsel for the applicant submitted that the
applicant, in view of the respondents’ material breach on which
reliance was
placed, was entitled to simply disregard the preliminary
steps provided for in clause 9. The argument is fallacious. The
clause
does not provide for a discretionary implementation of the
preliminary steps. The applicant, accordingly, was bound in terms of
the agreement, to comply with the provisions in clause 9 prior to the
restraint provisions coming into effect. That the applicant
has
failed to do and it follows that the main application for this reason
alone, must fail.
The applicant’s claim for return of Semas
materials, contained in prayer 3, can swiftly be disposed of. Counsel
for the applicant
very properly conceded that the respondents’
denial having purchased Semas materials, stands uncontroverted, and
he, for
that reason, did not persist in the relief sought.
This brings me to the payment claimed of the sum
of
R49 907.00. The respondents do not dispute that they in fact
are in arrears with the payment of certain amounts due in terms of
the agreement. They admit their indebtedness in the sum of R41
725.00. Counsel for the applicant, for the purpose of this
application,
accepted the correctness of the lesser amount. I will
revert to this aspect later.
This brings me to the respondents’ counter
application. The agreement, it is alleged, was void
ab
initio.
In support thereof reference
was made to the license agreement, in terms of which the applicant
was appointed by Semas International
as the franchisee for South
Africa. Upon closer scrutiny of the document it is apparent that it
was issued on and therefore valid
from, 23 October 2010. The
agreement we are now concerned with, having been concluded on 4
August 2009 and thus prior to this date,
so the argument went, was
therefore void as the applicant, at the date of the conclusion
thereof, was not the appointed franchisee
and therefore could not
transfer any rights to the respondents. Based on these assumptions,
the respondents instituted a counter
application in which they seek a
refund of all monies paid to the applicant pursuant to and in terms
of the agreement, amounting
to R354 970.82.
The applicant has specifically addressed this
issue in the replying affidavit. Annexed to it is a copy of an
earlier license certificate
issued by Semas International to the
applicant, dated 29 June 2009, and valid until 22 September 2010.
This of course cures the
apparent defect relied upon by the
respondents in order to attack the validity of the agreement. But,
counsel for the respondents
was not prepared to accept the
authenticity of the earlier license certificate. Nothing of substance
however, was raised in support
of the perceived scepticism. Counsel
therefore sought an order for the referral to trial of the counter
application, which would
have the added benefit of determining the
amount of the respondents’ indebtedness, which I have already
dealt with. Such
referral, so the argument went, would enable the
respondents to fully investigate this aspect and then, depending on
the possible
outcome thereof, to decide whether to proceed with the
trial. Counsel however was unable to offer any explanation why
nothing had
been done regarding this aspect since the date of the
filing of the replying affidavit on 13 July 2001. I am accordingly
not prepared
to accede to the request for a referral to trial.
An order for the payment by the respondents of the
admitted amount will be appropriate. As for the balance of the claim
the applicant
remains at liberty to institute proceedings for the
recovery thereof. As to costs, the respondents are substantially
successful
in the main application. The costs relating to the main
application are accordingly to be paid by the applicant.
In the result I make the following order:
Prayers 1 and 3 of the notice of motion are
dismissed.
The respondents are ordered to pay to the
applicant the sum of R41 725.00 together with interest thereon at
the rate of 15,5%
per annum, from 12 May 2011 to date of final
payment.
The applicant is ordered to pay the costs of the
main application.
No order is made on the counter application.
Counsel for the applicant Adv G Beytel
Counsel for the Respondents Adv S
Guldenpfennig