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[2011] ZAGPJHC 175
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Brilliant Cellular CC v MTN Service Provider (Pty) Ltd (2011/40453) [2011] ZAGPJHC 175 (23 November 2011)
REPORTABLE
SOUTH GAUTENG HIGH COURT, JOHANNESBURG
CASE NO
:
2011/40453
DATE:
23/11/2011
In the matter between:
BRILLIANT
CELLULAR
CC
................................................................
Applicant
and
MTN
SERVICE PROVIDER (PTY)
LIMITED
.....................................
Respondent
REASONS FOR JUDGMENT
On 1 November 2011, Wepener J
made the following order in this matter on an urgent application:
The application is postponed to
the Ordinary Opposed Motion Court Roll of the week of 8 November
2011.
The Applicant shall deliver its
Replying Affidavit by 17h00 on Wednesday 2 November 2011.
Entirely without prejudice to
the Respondent’s rights and without any admission whatsoever
on its part, the Respondent
shall without prejudice to its
contentions that the letter of termination of 6 October 2011 is
valid, extend the termination
date from 5 November 2011 to close of
business on Friday 11 November 2011.
Costs are reserved.
On 11 November 2011, after
having read the papers and heard judgment by both Counsel in this
matter, I made the following order:-
This application is dismissed with costs.
On that same day, I was
requested to provide reasons for the aforementioned order. The
reasons for this order follow.
Background
On 30 September 2010, the
parties entered into a written Dealer Agreement, in terms of which
the applicant was defined as the
Dealer and the respondent was
defined as the Service Provider. A copy of this agreement was
annexed to the applicant’s
founding affidavit as annexure
“FA1”.
For the purposes of this matter,
the important terms of the aforementioned Dealer Agreement are as
follows:
“1.
Preamble
1.1 The Service Provider is a
company or close corporation duly incorporated in accordance with the
company laws of South Africa
and conducts business as an exclusive
cellular telephony Service Provider of the Operators’ products
and services, in the
Republic of South Africa.
1.2 The Dealer is a company duly
incorporated in accordance with the company laws of South Africa and
conducts business as, among
others, a Dealer of cellular telephony
products and services, in the Territory.
The Service Provider wishes to
appoint the Dealer to market, promote and facilitate distribution
by the Service Provider of
Network Services and stock in the
Territory.
The Dealer wishes to accept
such appointment.
The parties wish to record their respective rights and obligations
regarding the matters contemplated herein.
...
Duration
4.1 This Agreement shall commence
on the Effective Date and will continue for an indefinite period,
unless terminated earlier in
accordance with the provisions of this
Agreement.
5.
Undertakings
by the Dealer
5.1 The Dealer undertakes,
throughout the term of this Agreement:
…
5.1.4 to ensure that the good
name and reputation of the Service Provider and the Operator are at
all times protected and enhanced
in the fulfilment of its obligations
under this Agreement;
5.1.5 to comply with the Service
Provider’s directions and ensure that a prominent sign is
displayed in the Dealer Stores
indicating that the Dealer is an
authorised Dealer, licensed by way of a Dealer Agreement concluded
with the Service Provider to
trade on the Service Provider’s
behalf;
5.1.6 to procure that such
promotional or advertising material as may be provided by the Service
Provider from time to time to
the Dealer is displayed at all times at
its Dealer Stores in accordance with the directions and requirements
of the Service Provider;
…
5.1.8 not to display or procure
the display of any advertising or promotional material pertaining to
the subject matter of this
Agreement, without obtaining the prior
written approval of the Service Provider, as the format and content
of such material;
5.1.9 to act in accordance with
the instructions and direction provided and standards set by the
Service Provider, from time to
time, regarding advertising, promotion
and publicity in relation to the subject matter of this Agreement;
5.1.10 to actively participate
in and promote all special offers and Tariffs offered by the Service
Provider for distribution
through the Dealer Stores from time to
time, and the manner and in accordance with the terms stipulated by
the Service Provider;
5.1.11 to provide all necessary
human and other resources required to efficiently sell, supply and/or
distribute the Service Provider’s
services and products through
the Dealer Stores and to adequately fulfil its obligations in terms
of this Agreement;
5.1.12 to obtain the prior
written consent of the Service Provider to promote and/or sell any
stock from any Dealer Store, not
referred to in this Agreement;
5.1.13 to utilise the Service
Provider’s system to which the Dealer has been granted access
for the specific purpose for
which it was granted;
5.1.14 to exercise full control
over and take full responsibility for its Authorised Employees, their
acts and/or omissions;
…
5.1.18 not to, under any
circumstances whatsoever, induce or persuade any Customer of the
Service Provider to subscribed to any
service or purchase any product
offered by a Competing Third Party, unless otherwise authorised in
writing by the Service Provider;
…
5.6 The Dealer shall utilise the
Point Of Sale System/s (“POS”) chosen by the Service
Provider as and when stipulated
by the Service Provider. The Service
Provider shall bear all costs associated with migrating the Dealer to
the Service Provider’s
POS and of acquiring the POS. The
Dealer shall allow the Service Provider read-only access to its POS
at all times. The Dealer
expressly consents to such access.
…
5.8 The Dealer will ensure and
direct that all Authorised Employees have access to and receive a
copy of the electronic communication
received from the Service
Provider on a daily basis and where necessary direct that the
requests are actioned so as to timeously
comply with instructions
contained therein.
…
5.16 The Dealer undertakes not
to sell Prepaid Products and/or Post paid Products to any third party
other than a Customer of the
Operator, who intends connecting and
utilising such products on the Network and to make the necessary
enquiries to ensure itself
that, in the Dealer’s reasonable
opinion, such Customer does not intend onselling such products to any
third parties. It
shall be incumbent upon the Dealer to prove to the
Service Provider that such enquiry has been conducted. Provided that
the Dealer
has undertaken such an enquiry, the Dealer shall bear no
liability to the Service Provider if it subsequently transpires that
the
Customer is not
bona
fide
.
…
5.21 The Dealer shall use its
best endeavours to comply with such Standard Operating Procedures,
which the Service Provider may
publish, from time to time and to
notify the Service Provider promptly in writing where such Standard
Operating Procedures do not
appear to be appropriate or function so
as to afford efficient or effective practices.
…
Terminal Equipment and
Warranty
:
…
9.3 The Dealer shall not be
entitled to install or procure the installation of Terminal Equipment
in vehicles, save wtih the prior
written consent of the Service
Provider.
9.4 Where the Dealer intends to
conduct installation procedures contemplated in clause 9.3 above, the
Dealer undertakes to refer
parties wishing to procure the
installation of any products in their vehicles, only to experts
recommended by the Service Provider,
from time to time, during the
term of this Agreement.
…
9.9 All repairs to Terminal
Equipment shall be carried out by the Service Provider or its duly
authorised agent only, unless otherwise
authorised in writing by the
Service Provider, provided that any repairs which fall outside of the
terms of the warranty, may be
charged for by the Service Provider or
its authorised agent to the Customer.
…
Lease of Dealer’s
Stores
22.1 In the event of the
Dealer entering into any lease and/or arrangement with a
Landlord to lease any premises,
in which the Dealer intends
conducting its Business in terms of this Agreement, the
Dealer shall notify the Landlord
of the premises from which
the Business is carried out, of the Service Provider’s
ownership of the relevant
shop fixtures and fittings and
stock, which may still be owned by the Service Provider,
which assets shall be
specifically excluded from the
Landlord’s hypothec. Such letter shall be
substantially in the form set
out in
Annexure
“G”
hereto.
22.2 Upon signature of this
Agreement, copies of any current leases in existence for the purpose
of conducting the Business of
a Dealer must be provided to the
Service Provider.
…
Inspection of Premises
25.1 The Service Provider
reserves the right to inspect, on notice during normal working hours
and without notice if such inspection
is conducted as part of the
Mystery Shopper Programme, the Dealer’s premises. All other
inspections will require prior notification
to the Dealer. Such
inspection shall be carried out by the Service Provider with the
minimum of interference to the normal business
activities of the
Dealer. If, as a result of such inspection, and after having been
given a written notice to that effect, the
Dealer is found, in the
Service Provider’s reasonable opinion to be conducting its
business in anyway that falls below the
standard required in terms of
this Agreement, or the standards reasonably required of a Dealer
and/or that any equipment and fixtures
are not in good order and
condition, the Dealer shall be in breach of this Agreement.
…
27.
Confidentiality
Requirements
The Dealer shall ensure that
its Authorised Employees assigned to the Dealer Stores are familiar
with the applicable laws, regulations
and standards pertaining to
the services and/or data interchange between the parties, and to
ensure that the Authorised Employees
are aware of the Dealer’s
obligations in terms of this Agreement.
…
37.
Breach
37.1 Notwithstanding any other
provision to the contrary contained in this Agreement, and without
prejudice to any other rights
or remedies which the parties may have,
either party (“the aggrieved party”) may terminate this
Agreement without liability
to the other, immediately on giving
notice to the other, if the other party (“the defaulting
party”) commits a material
breach of any of the terms of this
Agreement and fails to remedy such material breach within 7 (seven)
days of that party being
notified in writing of the material breach.
37.2 Notwithstanding the
provisions of clause 37.1 the aggrieved party shall be entitled to
terminate this Agreement at any time,
after having provided the
defaulting party with 14 (fourteen) days written notice to remedy the
breach if:
37.2.1 the defaulting party
commits a second or subsequent breach of this Agreement, after having
remedied an earlier similar
breach during the preceding 12 (twelve)
months duration after written notice to do so; or
37.2.2 there is a Change in
control of the Dealer or in any person, body or entity who has stood
as surety for the obligations
of the Dealer to the Service Provider
without the prior written consent of the Service Provider, or if such
person, body, or entity
is placed under provisional or final
liquidation or under provisional or final receivership or judicial
management or if that party
becomes insolvent or compromises or
attempts to compromise with its creditors;
…
Disputes
If any dispute arises between the
parties in connection with this Agreement or its subject matter:
38.1 The aggrieved party shall
request a meeting in writing which request shall contain the
following:
38.1.1 the date on which such meeting shall take place, which date
shall not be more than 7 (seven) days from the date of the
request.
38.1.2 the reason for the meeting together with an agenda;
38.1.3 details of the parties being requested to attend the meeting;
and
38.1.4 the time and venue of the meeting.
39.
Termination
and Consequences
39.1 Termination of this
Agreement for any reason other than by way of breach will occur by
Service Provider giving at least 90
(ninety) days notice in writing
to the Dealer.
…
Exclusivity and Restraints
42.1 The Service Provider
reserves the right to appoint other Dealers from time to time, on
whatsoever terms and conditions as
are negotiated with those other
Dealers, from time to time in the Service Provider’s discretion
the Dealer accordingly acknowledges
that its rights under this
Agreement are not exclusive in any respects.
42.2 Subject to clause 42.8, the
Dealer undertakes, during the term of this Agreement, and for a
period of 6 (six) months after
its termination for whatever reason,
not to:
42.2.1 provide services of the
same or similar nature to those set out in this Agreement to a
Competing Third Party or its agent;
or
42.2.2 sell Terminal Equipment
and/or any wireless telephony products to Customers of a Competing
Third Party; or
42.2.3 promote the services of
a Competing Third Party; or
42.2.4 procure the entry into
Agreements as agent or otherwise between such Competing Third Party
and its Customers for the provision
of that Competing Third Party’s
services.
42.3 The Dealer further
undertakes during the term of this Agreement not to be concerned or
interested in any capacity whatsoever,
whether directly or
indirectly, in the provision of services anywhere in the Territory by
a Competing Third Party which are the
same or substantially similar
to any of those provided by it to the Service Provider, save with the
prior written consent of the
Service Provider.
42.4 The Dealer undertakes not
to be involved, or interested, in any capacity whatsoever, whether as
proprietor, partner, director,
shareholder, member, employee,
consultant, contractor, financier, agent, representative, trustee or
beneficiary of a trust or otherwise,
and whether directly or
indirectly, during the term of this Agreement in the Territory, in
any business of a Competing Third Party
which supplies, sells or
distributes any services which are the same or substantially similar
to those provided by the Dealer to
the Service Provider, in terms of
this Agreement, save without prior written consent of the Service
Provider.”
Against the background as
detailed in this agreement, the respondent arranged for an audit or
mystery shop to be concluded at
two of the stores owned and operated
by the applicant, being those situated at Balfour and Westonaria on
19 September 2011.
In both instances, airtime that operated on the
direct competitor of the respondent was purchased in such stores.
Thus culminated
in the letter which appears as annexure “FA2”
to the founding affidavit being sent by the respondent to the
applicant
on 26 September 2011.
In such letter, Jody Forrester, the National Franchise Manager of
the respondent informed the applicant’s Mark Olivier
as
follows:
“
SALE
OF COMPETING THIRD PARTY PRODUCTS IN DEALER STORES
.
1. It has recently come to our
attention that you have been selling Competing Third Party pre-paid
airtime to customers through
your Dealer Stores.
2. One of the Brilliant Cellular
Dealer Stores through which the competing pre-paid airtime has been
sold to customers is located
in Balfour.
Your conduct is in violation of
the core terms of our Dealer Agreement regarding exclusivity and
restraint and is not remediable.
We invite you to dispute the
above allegations by no later than 30 September 2011.
Should you fail to provide MTN
SP with satisfactory evidence that you have not been selling
pre-paid airtime of Competing Third
Parties from your Dealer Stores,
MTN SP shall have no option but to terminate the Dealer Agreements
on 7 (seven) days written
notice.”
In response thereto, the
applicant’s representative, the same Mr Olivier stated:
“1. The agreement does not
contain a provision dealing with so-called ‘core terms which
are not remediable’ as
contended for by the Respondent; (FA,
para 15)
2. The agreement does however
contain provisions which deal with a breach and the cancellation of
the agreement; (FA, para 16)
3. Reference is thereafter made
to the aforementioned clause 37.”
On 29 September 2011, the
applicant’s attorneys of record addressed a letter to the
Respondent, a copy of which, despite
being marked “without
prejudice” appears as annexure “FA3” to the
founding affidavit and in which the
following is stated:
“1. Our client (The
applicant) regrets to confirm that it has happened at the Balfour
store that a Competing Third Party’s
prepaid airtime was sold
but (the applicant) states categorically that:
1.1 Our Mr Olivier was totally
unaware of the fact that the Cellair vending terminal which was
installed on a trial basis was not
deactivated in as much as
Competing Third Party prepaid airtime could be purchased through the
said installation;
1.2 Our client (the applicant) at
all times when installing the Cellair vending terminal requested that
the buttons relating to
the other Competing Third Parties be
de-activated. In this regard we attach hereto a copy of a letter
dated 28 instant, which
our client (the applicant) has received from
Mr AP Jansen at Cell Remote CC trading as Cellair;
1.3 Our client (the applicant)
has immediately taken steps to rectify the situation;
1.4 From our (the applicant’s)
records it would be very clear that our client (the applicant) meets
all targets and he is
on a fulltime basis busy with promoting all MTN
products as required in his agreement.
1.5 Our client (the applicant)
disputes that fact that he is in violation of core term of his Dealer
Agreement dated 15 September
2010 or that the alleged violation (of
which he still repeats he was unaware) is not remediable.
1.6 Our client (the applicant)
categorically denies that he had been selling prepaid airtime of
Competing Third Parties from his
dealer stores referred to in your
contract dated the 15
th
September 2010.
1.7 The Balfour dealer is a new
dealership and has only been in operation for two months. Our client
(the applicant) regrets any
inconvenience which may have been caused
by the failure of Cell Remote CC to de-activate the buttons relating
to competing third
parties;
1.8 Our client (the applicant)
trading as Brilliant Cellular CC in Heidelberg, Nigel and Sharonpark
does not and has not been selling
prepaid airtime of Competing Third
Parties;
1.9 The manager at Balfour was
previously employed by Vodacom and disciplinary action has been taken
to prevent recurrence.
Our client (the applicant) is
certain that this matter can be settled on an amicable basis.”
Annexed thereto as “FA4”
to the founding affidavit, was a letter received from Cellair dated
28 September 2011, confirming
that a Cellair vending terminal had
been installed in a MTN outlet on a trial basis. Their Technology
had been designed to deactivate
certain buttons on the touchpad to
enable the outlet “to sell only certain vouchers”, but
due to human error, certain
buttons were not deactivated. They
apologised for the inconvenience and stated that a new terminal
cover branded specifically
for MTN was in progress.
The respondent responded thereto
in a letter on 6 October 2011, a copy of which, despite also being
marked “without prejudice”
is annexed to the papers as
“FA5”.
Inter
alia
, the following
appears from this letter:-
1. “… While your
client (the applicant) has made every effort to deny knowledge of the
sale of competing products from
his stores, he has failed to deny
that this has in fact occurred.
2. Numerous correspondence had
been communicated to the Dealers advising of the seriousness with
which the sale of competitor and
non approved products is viewed,
3. Your client (the applicant)
believes that the matter has been remedied by the deactivation of the
competitor product button on
the Cellair Vending Machine. What is
alarming is that your client (the applicant) fails to recognise that
the presence of the
vending machine as a whole contravenes the very
fibre of the Dealer Agreement in that all products are sourced by MTN
SP and the
Dealer is required to obtain prior approval for the
sourcing of any alternative product. MTN SP had expressly provided
the Logical
airtime solution to be sold through the MTN SP point of
sale terminals, which makes the proof of concept with an external
supplier’s
product and equipment redundant and illegal.
4. Furthermore, a significant
role of a Dealer Principal is the fact that his staff are made aware
of all terms of trade with MTN
SP and as per the Dealer Agreement, a
Dealer is entirely responsible for the acts of his staff at all
times. It is not plausible
that an employee is not inducted into the
MTN SP way before being permitted to work within a Dealer’s
store and thus the
attempt to pass responsibility for the
contravention onto his staff member is not acceptable.
5. Your client (the applicant)
has failed to acknowledge and recognise that such an act is
unremediable. The trust with which MTN
SP views your client (the
applicant) has been irreparably broken.
Accordingly, MTN SP (the
respondent) had no alternative other than to terminate the Dealer
relationship. In order to accommodate
your clients (the applicant’s)
staff notice requirement, your client (the applicant) is hereby
given a month’s notice
of termination, that is, closure of the
stores will take place on the 5
th
November 2011.
The procedure to be followed
upon termination has been recorded in clause 39.4 of the Dealer
Agreement (which was then set out).
In addition MTN SP (the
respondent) shall exercise its rights with regards to all lease
agreements.
Finally all fixtures, fittings
and equipment which are the property of MTN SP (the respondent) may
not be removed or tampered
with in any way prior to closure.
In response thereto, the
applicant’s Mr Olivier claimed that the vending machine had
been adapted so as to only dispense
MTN airtime vouchers.
Consequently, he maintained that its presence and use in its adopted
form could not constitute a breach
or a material breach of the
agreement as contended by the respondent. However, upon receipt of
annexure “FA5”, he
had removed the Cellair vending
machine from applicant’s Balfour outlet. He further stated
that Cellair was a customer
of the applicant and bought data-cards
(respondent’s product) from the applicant. They had
approximately 2000 contracts
with the respondent, all of which were
managed by the applicant.
The applicant further contended that the agreement could not be
cancelled without prior written notice in terms of clause 37.1
thereof, affording applicant 7 (seven) days within which to remedy
the alleged breach.
On 14 October 2011, the
applicant’s attorney addressed a letter to respondent, a copy
of which is annexed to the papers
as “FA6” informing the
respondent that the applicant disputed the respondent’s right
to cancel the agreement
and the validity of its purported
termination. Furthermore the provisions of clause 38 were invoked in
order to resolve the dispute
between the parties and a meeting was
requested in terms of clause 38.1 of the agreement. Respondent was
furthermore requested
to give an undertaking by no later than 16h30
on Tuesday 18 October 2011, that it would not proceed with the
termination of the
agreement pending the finalization of the dispute
and/or any litigation which may follow, should such dispute not be
resolved,
failing which the applicant would have no alternative but
to apply to this Court on an urgent basis for an interdict
restraining
the respondent from terminating the agreement pending
the resolution of the dispute.
The respondent responded thereto
in a letter on 17 October 2011, a copy of which is annexed to the
papers as “FA7”,
in terms of which it denied that there
was a dispute between the parties. The respondent further advised
that the applicant’s
conduct constituted a violation of clause
5.6 of the Dealer Agreement. Respondent agreed to meet to discuss
any concerns that
the applicant may have on 20 October 2011, but
refused to withdraw its notice of termination of the agreement.
On 20 October 2011, the meeting
took place, the parties stuck to their respective views and the
respondent refused to accept an
offer of payment by the applicant
for any damages allegedly suffered by the respondent due to the
applicant’s alleged breach
of the agreement. The applicant
contended that only R268.00 worth of competing third party prepaid
airtime vouchers had been
sold over the period of 2 (two) months.
The applicant contended that the
respondent’s decision to terminate the agreement was premature
and unlawful and that it
did not comply with the terms of the
agreement between the parties relating to the cancellation thereof.
This resulted in the
application being launched on an urgent basis.
The applicant filed a notice of
opposition on 31 October 2011 and thereafter filed an answering
affidavit.
By way of background, the
respondent’s General Manager, Eleanor Mitrovich stated
inter
alia
, as follows:
The respondent is part of the
MTN group of companies. The respondent has a dedicated exclusive
MTN franchise network that operates
nationally throughout the
Republic of South Africa. The product which the respondent deals
in exclusively is the MTN product.
In South Africa there are three
service providers (the other two being Vodacom and Cell C). Both
Vodacom and Cell C are direct
competitors to MTN and to the
respondent in particular. The market in which MTN, Vodacom and
Cell C compete involves literally
hundreds of millions of rands (in
fact billions of rands) annually and extends over a wide variety of
telephony products and
service.
MTN has invested literally
billions of rands in building up the MTN brand in its various
respects. This includes the infra-
structure which is necessary to
provide the MTN services throughout the Republic of South Africa,
the MTN store builds, the
various electronic systems and
infrastructures which are available, the stock which is available
and the various aspects which
go up to build the MTN brand as a
whole.
Since approximately the middle of 2010, the respondent has revised
its dealer commission structures (applicant is one of 26
such
dealers) as a result of which dealers (of whom, the applicant is
one) have enjoyed substantially enhanced and extremely
lucrative
commissions from the business which they had exclusive rights to.
The respondent has approximately 26 dealers which it has contracted
with throughout the Republic of South Africa. Respondent
has
invested literally millions of rands in building up its dealer
network and it is vitally important to the respondent’s
business that the parties (both individuals and entities) whom the
respondent appoints as dealers (such as the applicant) are
persons
of impeccable trust and integrity, that they do not undermine the
MTN brand.
The reason for this is that the
respondent essentially entrusts its various dealers with the MTN
brand as a whole. The dealers
are the face of MTN. There are very
strict provisions which have been incorporated in the Dealer
Agreement which the respondent
enters into with these various
dealers (of whom the applicant is one). In order to protect
various aspects of the respondent’s
business, including
aspects pertaining to (for example) the fact that the dealer has to
operate within the framework which
the respondent has established
over the years, the fact that the dealer has to make use of the
systems which are employed within
the respondent’s business,
the obvious fact that the dealer must only sell MTN products (this
is absolutely fundamental
to the appointment of the dealer) and
various other important provisions and controls which are included
in the agreement to
ensure that the standards and procedures which
the respondent has built up over many years, at great cost and
effort to itself,
are adhered to.
It is naturally absolutely
fundamental to the relationship between the respondent and a
dealer, which is appointed by the respondent
(such as the
applicant) that the dealer (i.e. the applicant) does not sell or
offer for sale competitive brands, i.e. telephony
or mobile
services which are offered for sale, either by Vodacom or by Cell
C. Both are a Competing Third Party, as defined
in the Dealer
Agreement. Both Vodacom and Cell C are direct competitors of MTN.
This extends also to airtime as a stock item.
Basically, airtime
is a product which can be purchased by a cellular telephone user
which gives access to a certain amount
of airtime using a mobile
telephone. Airtime is available from MTN, the same applies for
Vodacom and Cell C. The fundamental
difference, however, is that
if airtime is purchased which is made available by Vodacom or Cell
C, then the purchaser of that
airtime utilises the network of
Vodacom or Cell C as the case may be. By the same token, if MTN
airtime is purchased, then
the purchaser of the airtime is only
able to utilise that airtime to make use of the network of MTN.
It need hardly be stated that
it is entirely at odds with the relationship of trust which exists
between the respondent and
any of its dealers (including the
applicant) for one of its dealers (such as the applicant) to offer
for sale or to sell in
one of the branded dealers stores (or indeed
elsewhere) either Vodacom or Cell C stock, whether stock be airtime
or any product
made available by Vodacom or Cell C or on their
behalf; and
The applicant has been less
than candid (and, in certain respects, dishonest, underhand and
untruthful) in respect of not only
various material facts in this
matter but also Olivier’s personal knowledge of those facts.
At all material times Olivier
represented the applicant. The
relationship of trust has, as a result, completely broken down.
The respondent was quite simply
not prepared to continue with the
applicant in a relationship as an MTN dealer where the applicant
has not only been selling
Vodacom products from its MTN stores, but
has also lied to and sought to mislead the respondent about this
matter.
The respondent’s
representative denied the applicant’s version and stated
further at paragraph 25,
inter
alia,
as follows:
1. On 12 August 2011, Dunjsha
Allers conducted a routine store visit on behalf of the respondent to
the applicant’s Westonaria
and Belfour stores. Both stores
were selling Vodacom prepaid airtime. They were doing so in a
surreptitious manner in that the
till points referred to in the
applicant’s founding affidavit as (“Cellair vending
terminal”) which were being
used for this purpose were located
in the back office so that they were not visible from the front. With
regard to the purchasing,
the clients requested the airtime and the
applicant’s employee then went to the back to fetch the
purchased airtime from
the unit.
2. She (this was) reported to
Jody Forrester on 14 September 2011. Her email of 14 September 2011
is ANNEXURE “5” thereto.
3. Jody Forrester, the national
franchise manager of the respondent arranged for an audit or mystery
shop to be conducted by the
respondent at the two stores of the
applicant being Balfour and Westonaria.
4. This mystery shop or audit
took place on 19 September 2011 and was conducted by Jaco du Plessis
and Moegsien Davids and who were
overseen by Ivone Avelar, who was
the audit supervisor. Jaco du Plessis attended on 19 September 2011
at both the applicant’s
Westonaria MTN store and at the
applicant’s Balfour MTN store. Jaco went along as a member of
the public and claimed to
be an IT Technician so as not to arouse
suspicion. Jaco took video footage of the applicant’s sales
staff (using the camera
which is on his personal mobile cellular
telephone) in the applicant’s Balfour MTN store ringing up and
selling Vodacom airtime,
i.e. from within the applicant’s
Balfour MTN store and utilising a till point which had not been
approved by the respondent
and, indeed, not been supplied by the
respondent. Vodacom airtime was purchased at this MTN licensed store
of the applicant, and
a copy of the receipt is ANNEXURE “9”.
ANNEXURE “10” is a till point or device which the
applicant uses
to sell Vodacom prepaid airtime.
5. The footage which Jaco took
from the aforementioned operation was made available to this Court.
6. At the Westonaria store, Jaco
and Moegsien attended and observed the same thing happening. No
video was made of this purchase,
but Moegsien purchased Vodacom
airtime from the Westonaria store, a copy of the Vodacom airtime
receipt was annexed as ANNEXURE
“11”. It depicted that
it was in respect of Vodacom airtime that had been purchased at the
applicant’s Westonaria
store, using the very same type of
device, that had not been supplied by the respondent or authorised by
the respondent.
7. This led to the letter of 26
September 2011 (annexure “FA2”) being sent to the
applicant.
Furthermore, according to the respondent’s representative:
reference by Jody Forrester to
the “core terms which are not remediable” is a
reference by him to the fact that
the selling by the applicant (a
licensed MTN dealer) of Competing Third Party (i.e. Vodacom)
prepaid airtime to customers through
the applicant’s Dealer
Stores is in violation of a number of the fundamental and material
terms of the Dealer Agreement
between the applicant and the
respondent. This is expressly provided for in clause 42 of the
Dealer Agreement, which deals
with Exclusivity and Restraints, and
is referred to in paragraph 3 of annexure “FA2” to the
founding affidavit.
Once the dealer has sold prepaid airtime of a
Competing Third Party (as the applicant did from at least the
period 12 August
2011) that dealer cannot “unsell” the
prepaid airtime. Consequently, the dealer has not only breached
clause 42.2.2
of the Dealer Agreement, but has also breached clause
42.2.3 thereof by promoting the services of Vodacom.
In terms of the Dealer
Agreement, the applicant was appointed by the respondent
specifically to market, promote and facilitate
distribution of its
stock (i.e. MTN stock) through its stores, and the applicant
accepted such appointment. The applicant’s
stores are
branded MTN stores, replete with MTN branding and logos.
It need hardly be stated that
the applicant’s conduct in offering for sale and in selling
Vodacom products from its MTN
branded and licensed stores goes
against every basic principle of trust and integrity underlying the
Dealer Agreement, which
pertains exclusively to MTN products, stock
and services. It is this breach of the relationship of trust which
is either irremediable.
The relationship of trust was clearly
understood between the parties at the time of the conclusion of the
agreement, and
it was tacit term of the agreement that the
applicant would at all times act in a trustworthy manner, honestly
and with integrity
in its dealings with the respondent. The
applicant did not do so.
Reference is thereafter made to
the provisions of clauses 5, 7 and 42 of the Dealer Agreement.
Thereafter the respondent’s representative submitted that the
express terms of the agreement, appear therefrom. The breach
was
not remedied (to the extent that it was remediable) by the applicant
within the 7 (seven) day period. The breach is material
and goes to
the very heart or root of the agreement. The breach is absolutely
fundamental. Furthermore, the breakdown in trust
is irremediable.
Ms Mitrovich continued as follows:
23.1 The applicant confirms that
at its (MTN licensed) Balfour store, it sold a Competing Third
Party’s prepaid airtime;
23.2 What the applicant does not
disclose, is that it was also doing so in its Westonaria store. This
is blatantly dishonest, given
the serious nature of the matter.
23.3 The applicant was actively
selling Vodacom airtime, from both its Balfour and Westonaria stores.
Furthermore the applicant
utilised till points or vending machines
which were not supplied by the respondent in order to do so. It is
not possible to use
vending machines supplied by the respondent to
supply Vodacom airtime and it is necessary for a person who wishes to
sell Vodacom
airtime to obtain and have installed and have connected
electronically to Vodacom or to one of its authorised dealers or
wholesalers,
a Vodacom vending machine. All of this must, of
necessity, have taken place as observed both by Dunjsha Allers and
Jaco du Plessis
because the staff at both of the applicant’s
MTN stores in Balfour and in Westonaria were selling Vodacom airtime
using the
Vodacom vending machines.
23.4 Furthermore, the airtime
which was being offered for sale included not only Vodacom but also
Cell C airtime.
23.5 Whether or not one or more
buttons on a particular vending device is or should have been
deactivated entirely misses the point.
What was taking place in both
the applicant’s stores is entirely in conflict with the clear
provisions of the Dealer Agreement.
23.6 The applicant did not
disclose what was happening at the Westonaria store.
23.7 Not only were the buttons
not deactivated, but the applicant’s staff were offering
Vodacom airtime for sale and in fact
selling Vodacom airtime.
23.8 Airtime was bought by the
applicant from Cellair which is
inter
alia,
a third party
distributor of Vodacom products, and onsold by the applicant.
She had no doubt that:
the applicant had Cellair as
its customer;
Cellair had purchased a number of SIM cards from the applicant;
Cellair is a wholesaler of not
only MTN products but also Competing Third Party products including
Vodacom;
the applicant had entered into an arrangement with Cellair as its
customer of a number of SIM cards, that it, the applicant,
would
help sell Cellair’s airtime in the applicant’s MTN
stores;
this basically increased the
bullying power of a wholesaler which tried to get better margins
from the respondent.
This was all in breach of the
terms of the Dealer Agreement
even in respect of MTN products
.
At the meeting on 20 October 2011:
the applicant was given the opportunity to present its case.
Its attorney had a problem with
the respondent’s termination of 6 October 2011 and did not
believe that it was the only
option. He further stated the
respondent could claim damages from the applicant for the breach or
could buy Mr Olivier out
of his businesses and take over the staff
and the store.
Mr Olivier was of the view that this was a personal attack and that
the respondent wanted him out of business.
In response thereto, Jody Forrester advised that this was not the
case. There had been a fundamental breakdown of trust between
the
applicant and the respondent as a result of the applicant’s
conduct.
Mr Olivier was then asked whether he was absolutely sure that the
sale of competitive products was only taking place at the
applicant’s Balfour store.
Mr Olivier replied that he was quite sure that it was only taking
place at that store.
This was demonstrably false and further served to confirm that the
respondent could not trust the applicant.
It was thereafter suggested that the Balfour store should not be
part of this agreement. This was not acceptable to the respondent.
Mr Olivier then told the meeting that as far as he was concerned,
the relationship between the applicant and the respondent
had
broken down and he wanted the respondent to make him an offer to
buy out his businesses.
Mr Olivier was looking for a pay-out of some sort or another.
Respondent’s
representatives excused themselves from the meeting, but
subsequently returned to tell Mr Olivier and his
attorney that the
respondent stood by its notice of termination.
Against this background, the
applicant sought the urgent order previously mentioned from Wepener
J, which order was granted, whereafter
the applicant filed its
replying affidavit.
In its replying affidavit, the
applicant did not deal with the contents of the answering affidavit
ad seriatim
.
In the reply, the applicant’s
Mr Olivier stated,
inter
alia
:-
28.1 In the 12 years that the
applicant had been a dealer of the respondent, the applicant had
always enjoyed an open line of communication
with the respondent and
its representatives. As would be expected, there had been times when
there was frustration and unhappiness
but that centred around service
delivery levels. He had always been able to address these problems.
28.2 When the applicant opened
the stores in Westonaria and Balfour it decided to use airtime
terminals supplied by Cell Air for
the sale of MTN prepaid airtime.
The reasons for this decision were that:
28.2.1 Cell Air was an existing
client of the applicant and the applicant supplied Cell Air with MTN
sim cards which are installed
in the terminals;
28.2.2 the system offered by
Cell Air was reliable and stable. The OMS system used by the
respondent was slow and the applicant
had in the past experienced
system failure problems which affected the service to clients;
28.2.3 the system provided by
Cell Air was secure as opposed to so-called airtime vouchers or
cards. The applicant had suffered
substantial losses in the past due
to pilfering and theft using airtime vouchers or cards. It was never
the intention of the applicant
to sell any airtime of a competitor
using the terminals.
28.3 When the stores were
opened, Ms Dunjsha Allers and Mr Anton Kapp visited them in July and
August 2011. At the time the terminals
were installed and seen by
both of them. He had discussed the terminals with them and explained
why the applicant used those machines
to sell MTN airtime. He
further explained to Kapp that the supplier of the terminals, Cell
Air, was making an overlay to show
that only MTN airtime was sold
from the terminal.
28.4 The terminals were situated
in the back office for security reasons, with other administrative
equipment. There was no signage
or indication visible to members of
the public that products other than the respondent’s products
could be purchased from
the stores.
28.5 The terminals were meant to
be modified, but unbeknown to him, Cell Air, due to an oversight on
their part, failed to disenable
the switches for the other service
providers.
28.6 Neither Ms Allers nor Mr
Kapp made any mention or gave any indication that the mere presence
of these machines constituted
a potential breach of the agreement.
Had they done so, he would have immediately removed the machines from
the premises.
28.7 This response created the
impression in his mind, that it was in order for the applicant to
continue to use these terminals
to sell MTN airtime. In fact, Mr
Kapp mentioned to him that once the overlays were made, he should
present them to the respondent’s
management so that they could
consider using similar terminals for the sale of airtime.
28.8 In September 2011 there was
a dispute between the applicant and the respondent concerning service
delivery. He however denied
that there had been a breakdown of
trust.
28.9 Ms Allers only reported the
presence of the terminals to Mr Forrester after this incident and
more particularly on 14 September
2011. Thereafter, and following an
acrimonious meeting, the respondent conducted their investigations.
28.10 He was of the view that
the investigation was nothing other than a poorly disguised trap to
catch the applicant out.
28.11 The cancellation of the
contract had nothing to do with the alleged breakdown of trust but
everything to do with the fact
that he had forcefully expressed his
dissatisfaction of the level of service that his client and he had
received from the respondent.
In his view, the sale of airtime was
an insignificant portion of the applicant’s total business.
28.12 The respondent had not
mentioned the sale of Vodacom airtime at the Westonaria branch so he
was unaware of it. Subsequent
to the receipt of the letter dated 26
September 2011, he requested Cell Air to make sure that only MTN
airtime could be sold from
the terminals.
28.13 He was further of the view
that the only problem that the respondent had with the applicant was
the sale of a competitor’s
airtime and did not regard the
presence of the terminals in the stores as a problem. Once he was
informed that it was problem,
he had the terminals removed. Since
then the applicant had sold MTN airtime using the OMS system of the
respondent and the “high
risk” airtime cards or vouchers.
28.14 He never foresaw that the
terminals could be a problem. He also never contemplated the
possibility that any competitor’s
product would be sold from
the premises. In particular, he never foresaw the possibility that
any reasonable customer would enter
a store which is branded
exclusively for the products of the respondent to buy the products of
a competitor.
28.15 The applicant would never
have intentionally jeopardised its relationship with the respondent.
He had been aware of the
respondent’s practice to send
so-called mystery clients to shops. It would have been “foolish”
of him to risk
the chance of being caught out for the insignificant
benefit of selling airtime of a competitor.
28.16 The applicant never
actively promoted or held itself out to be a dealer or supplier of
the products of any of the respondent’s
competitors. Apart
from the sale of Vodacom airtime to the respondent’s sting
operators, he could not explain how it happened
that the balance of
the airtime sales occurred.
He had then advised that the
breach complained of by the respondent was not a so-called
unremediable breach. Without admitting,
he was prepared to accept
that the sale of a competitor’s product may be a material
breach. However, despite the fact
that the respondent had not
given the applicant proper notice in terms of clause 37 of the
agreement, the applicant had rectified
such alleged breach.
He therefore denied that the
respondent was entitled to summarily terminate the agreement. As
far as the respondent had demanded
that the applicant rectify the
alleged breach, such had been rectified.
Consequently he denied that
there had been a breakdown in trust and contended that it was
rather a few employees who felt aggrieved
by the fact that the
applicant had expressed its dissatisfaction with the level of
service it had received.
During argument, the applicant’s
Counsel, Advocate JF Steyn contended
inter
alia
, that:
it had been conceded that the
applicant breached the terms of the agreement by:
selling prepaid airtime of a
competitor through the terminal situated on the applicant’s
premises in Balfour and Westonaria;
and
28.1.2 utilising the terminal which was not supplied by the
respondent for the sale of prepaid airtime.
Clause 37 regulated the rights
of the parties in the event of a material breach of any of the
terms of the agreement.
Clause 37(1) is a forfeiture
clause or
lex
commissoria
. It
entitles the innocent party to cancel the agreement if the
breaching party fails to remedy its breach by the time fixed
in the
contract. (See:
Northvaal
Mineral Co Limited v Lovasz
1961 (3) SA 604
;
Oatorium
Properties (Pty) Limited v Maroun
1973 (3) SA 779
(A); Buytendag Boerdery Beleggings (Edms) Bpk v
Goldburg
1979 (2) SA 172
;
Edengeorge
(Pty) Limited v Chamonu Properties Investments (Pty) Limited &
Others
1981 (3) SA 460).
Clause 37.1 read together with clause 37.3 confers the right on the
innocent party to terminate the agreement immediately on
giving
notice to the defaulting party:-
29.4.1 if the defaulting party
commits a material breach of any of the terms;
29.4.2 fails to remedy such
breach within 7 days of that party being notified in writing of the
material breach;
29.4.3 only if the material
breach goes to the root of the agreement and is incapable of being
remedied by payment in money;
and
29.4.4 if it is capable of
being remedied by payment in money, the defaulting party fails to pay
the amount concerned within 7
days after such amount has been finally
determined.
29.5 The agreement has no
provision entitling any party to summarily terminate the agreement
for breach.
29.6 Before the respondent is
conferred with the right to immediately terminate the agreement, it
is required to give the applicant
notice in writing of the material
breach.
29.7 For such notice to be
effective the respondent must give full details of all the breaches
that it requires to be remedied.
29.8 The respondent’s
letter of 26 September 2011, purports to summarily terminate the
agreement. It is not a notification
to the applicant to remedy the
breach within the required 7 day period.
29.9 The aim of clause 37.1 is
not to undo what has happened in the past but to afford the
defaulting party an opportunity to address
its conduct and ensure
compliance with the agreement in the future.
29.10 There is no evidence that
the applicant continued to be in breach of the agreement after it
received the letter of 27 September
2011.
29.11 The respondent claims that
the breach is incapable of being remedied.
29.12 Whilst it is so that the
sale of the airtime cannot be undone, the applicant has after it
received the notice, despite the
fact that it does not comply with
the provisions of clause 37.1, addressed its conduct and removed the
terminals from the Balfour
and Westonaria branches.
29.13 The applicant has clearly
indicated that it intended to comply with the terms of the agreement
in the future and not permit
the sale of a competitor’s airtime
from its premises or to use a terminal other than the system provided
by the respondent.
29.14 For the applicant’s
conduct in permitting the sale of a competitor’s airtime
through a terminal not supplied
by the respondent to amount to a
repudiation or anticipatory breach of the agreement, it must exhibit
a deliberate and unequivocal
intention no longer to be bound by the
terms of the agreement.
29.15 Factors to be taken into
consideration to determine whether the conduct fairly interpreted
amounts to repudiation of the
whole of the bargain are:
28.15.1 the character of the
contract;
29.15.2 the number and weight of
wrongful acts or assertions;
29.15.3 the intention indicated
by the acts or words of the applicant;
29.15.4 the deliberation or
otherwise with which they are committed or uttered; and
29.15.5 the general
circumstances of the case.
(See:
Schlinkmann v Van der Walt
1947 (2) SA 900
;
In re
Belange (Edms) Beperk v Pretorius
1966
(2) SA 427
;
Van Rooyen
v Minister van Openbare Werke en Gemeenskapsbou
1978
(2) SA 835
; and
Tuckers
Land & Development Corporation (Pty) Limited v Hovis
1980
(1) SA 645.)
29.16 The onus to prove that the
applicant has repudiated the agreement is on the respondent.
29.17 Applying this test and
taking into consideration the following factors, it cannot be said
that the applicant through its
conduct exhibited a deliberate and
unequivocal intention no longer to be bound by the agreement. The
factors upon which the applicant’s
conduct must be interpreted
are:
29.17.1 the applicant has been
an agent for the respondent for 12 years. It is apparently quite
successful and operates 6 branches.
One of the branches was
established by the applicant at the request of the respondent after
the previous dealer failed. The applicant
employs 21 persons;
29.17.2 the applicant acquired
the terminals because the respondent’s system was in the
experience of the applicant, unreliable;
29.17.3 the applicant requested
the supplier of the terminals to deactivate the keys for the sale of
airtime supplied by the respondent’s
competitors;
29.17.4 the respondent’s
representatives knew of the presence of these terminals at the
applicant’s premises since
the opening thereof and on the
respondent’s own version, since 12 August 2011;
29.17.5 there was no indication
or promotional material visible to the general public that airtime of
a competitor could be purchased
from the premises;
29.17.6 airtime by its mere
definition can only be sold to an existing client of a competitor;
29.17.7 the value of the
competitor’s airtime sold is insignificant. At the Westonaria
branch, only R39.00 worth of Vodacom
airtime was sold, of which
R29.00 was sold to the respondent’s so-called mystery shopper.
At the Balfour Branch over the
two month period R260.00 worth of
Vodacom airtime was sold;
29.17.8 there was no evidence
that Mr Olivier, the managing member of the applicant, knew that
airtime of a competitor was in
fact sold. Mr Olivier in fact claims
that he was unaware of the fact that the keys were not disenabled;
29.17.9 the applicant when
notified of the breach immediately caused the terminals to be
removed;
29.17.10 the respondent knew of
the presence of the terminals since 12 August 2011. It did nothing
until 19 September 2011.
29.18 The test whether the
conduct of the applicant amounts to a repudiation is an objective
test. The test is not whether objectively
the applicant had the
intention but rather whether the applicant’s conduct can be
perceived to be an unequivocal and deliberate
declaration not to be
bound by the terms of the contract. The conduct from which the
inference is drawn must be clear-cut and
equivocal and not consistent
with any other feasible hypothesis. (See:
Datacolor
International (Pty) Limited v Intamarket (Pty) Limited
[2000] ZASCA 82
;
2001
(2) SA 284).
29.19 In applying this test to
the applicant’s conduct it cannot be said that it exhibits a
deliberate and unequivocal intention
no longer to be bound by the
terms of the contract.
29.20 The respondent has not
established the alleged repudiation of the agreement as a basis for
the cancellation thereof.
In response thereto, the
respondent’s Counsel, Advocate B Maselle, made the following
submissions:
30.1 Clause 37 of the dealership
agreement affords an aggrieved party the right to act in a particular
manner should there be a
breach of the Dealer Agreement by the other
party;
30.2 The respondent relied upon
the provisions of
inter
alia
, clauses 37.1,
37.3, 38.5 and 38.7;
30.3 The respondent accepted
that on a reading of the letter dated 26 September 2011 (annexure
“FA2”) the applicant
was not notified that it was
required to remedy the breach within 7 (seven) days, however, who did
not assist the applicant inasmuch
as a clear reading of clause 37.1
of the Dealer Agreement shows that:
30.3.1 the respondent was
obliged to notify the applicant of the material breach;
30.3.2 the respondent was not
obliged to request or seek a remedy of the material breach; and
30.3.3 once notice was given of
the material breach, the applicant had the obligation to remedy the
material breach within 7 (seven)
days of receiving notification
thereof.
30.4 The aforementioned letter
clearly sets out the breach relied upon by the respondent. The
notification may not have made reference
to any clause of the
agreement which the respondent relied upon for the breach, however,
it set out the conduct of the applicant
who was in breach of the
following clauses:
30.4.1 clause 5.1.12;
30.4.2 clause 5.1.18;
30.4.3 clause 5.6;
30.4.4 clause 7.2;
30.4.5 clause 31.2;
30.4.6 clause 42.2; and
30.4.7 clause 42.3.
30.5 Reliance was placed on
Singh
v McCarthy Retail Limited t/a Mcintosh Motors
[2000] ZASCA 129
;
2000 (4) SA 795
(SCA), which dealt with the issue of when an innocent
party is entitled to cancel the contract because of malperformance by
the
other, in the absence of a
lex
commissoria
;
Although there is a
lex
commissoria
in the
Dealer Agreement, it was submitted that the aforementioned case was
equally applicable to the facts of this matter inasmuch
as a
material breach was the single most important factor.
Premised on the test set out in
this case, it was contended that the applicant’s conduct
constituted a flagrant and material
breach of the Dealer Agreement,
would allow the innocent party to cancel the contract and undo all
of its consequences. It
was absolutely fundamental that the
applicant, and other dealers of the respondent, did not sell or
offer for sale competitive
products because of the degree of
competition in the industry in question.
If regard is had to the express
terms of the Dealer Agreement and the surrounding circumstances,
there can be no doubt that
it was a tacit term of the Dealer
Agreement that the applicant would at all times act in a
trustworthy manner, honestly and
with integrity in its dealings
with the respondent. (See
:
Anglo Operations Limited v Sandhurst Estates (Pty) Limited
2006 (1) SA 350
(T), at 374H-I)
On the facts, the applicant had not acted in a trustworthy manner,
honestly and with integrity in its dealings with the respondent.
In terms of clause 37.3 of the
Dealer Agreement, the respondent would only be entitled to cancel
the agreement if the breach
is a material breach going to the root
of the contract and if it is incapable of being remedied by payment
in money, or if
it is capable of being remedied by payment in
money, the defaulting party fails to pay the amount concerned
within 7 days after
such amount has been finally determined.
The material breaches relied
upon by the respondent are incapable of being remedied because:
breach of the tacit term is incapable of being remedied. The trust
cannot be restored and is irremediable;
respondent’s breach letter complains about applicant selling
competing third party prepaid airtime to customers through
the
applicant’s dealer stores;
the breach has nothing to do
with “payment in money”. It relates to conduct of the
applicant which is unlawful.
Put another way, the material breach
relied upon by the respondent does not relate to a clause where
the applicant has failed
to make a monetary payment in terms of
the Dealer Agreement;
as a result the material breach relied upon by respondent cannot
be “remedied by payment in money …”;
the material breach can only be remedied by the applicant
immediately desisting in its breach, which is in any event
irremediable. However, this is irrelevant since the only issue
determined is whether the material breach is capable of being
“remedied by payment in money …” which it is
not.
Having regard to the aforegoing, the respondent’s
cancellation is good in law.
In the alternative, when a
party cancels an agreement based on a repudiation, such repudiation
is an anticipatory breach which
is different to an actual breach of
the agreement. Accordingly, the respondent will not need to show
that it has complied
with the breach clause of the Dealer
Agreement. (See
Stewart
Wrightson (Pty) Limited v Thorpe
1977
(2) SA 943
(A), at 953G).
What is clear from the facts
set out in the respondent’s answering affidavit, is that in
addition to a material breach
of the Dealer Agreement, the
applicant repudiated the Dealer Agreement which entitled the
respondent to cancel same. (See
Tucker’s
Land & Development Corporation (Pty) Limited v Hovis
1980
(1) SA 645
(A);
Datacolor
International (Pty) Limited v Intamarket (Pty) Limited
[2000] ZASCA 82
;
2001
(2) SA 284
(SCA), at 294 and 295).
The conduct of the applicant in:-
offering competing products
contrary to the terms of the Dealer Agreement;
selling competing products
contrary to the terms of the Dealer Agreement; and
acting deceitfully in relation to the aforegoing,
leads one to the ineluctable
conclusion that proper performance of the Dealer Agreement by the
applicant would not be forthcoming.
The respondent therefore had
every right to resile from the Dealer Agreement.
Having had regard to the above detailed affidavits, arguments and
case law, which formed the subject of debate in the argument
of the
matter before me, I make the following findings:
31.1 Not only did the applicant
install the Cellair terminals contrary to the Dealer Agreement, which
terminals were not adapted
to sell only the respondent’s
airtime, contrary to the express terms of the Dealer Agreement, but
its staff had no reluctance
or hesitation in selling airtime of the
applicant’s competitors to members of the public in further
blatant defiance of the
Dealer Agreement.
31.2 These sales lead to the
logical conclusion that not only did the applicant’s staff know
that they could do so, but members
of the public also knew that it
was possible to purchase airtime of Third Party Competitors of the
respondent from the applicant’s
stores.
31.3 This conduct is the clearest
indication that the applicant exhibited a deliberate and unequivocal
intention to no longer be
bound by the terms of the Dealer Agreement.
31.3 In coming to this
conclusion, I have taken the following factors into consideration in
order to determine whether the conduct
fairly interpreted amounted to
a repudiation of the whole of the agreement:
31.3.1 the character of the
contract;
31.3.2 the number and weight of
wrongful acts or assertions;
31.3.3 the intention indicated
by the acts or words of the applicant;
31.3.4 the deliberation or
otherwise with which they are committed or uttered; and
31.3.5 the general circumstances
of the case.
31.4 Clause 1 of the agreement under the heading “Preamble”
identifies the very purpose and motivation of the agreement
and
explains that the respondent conducts business as an exclusive
cellular telephony service provider and wishes to appoint the
applicant to market, promote and facilitate distribution by the
respondent of network services and stock in the territory and that
the applicant wishes to accept such appointment. In turn, the
respective rights and obligations of the parties are thereafter
set
out in accordance with this appointment.
The applicant’s sole
member, Mr Olivier is contractually obliged to take responsibility
for the conduct of his staff.
Clause 5.1.14 provides in express
terms that the Dealer undertakes, throughout the term of the
Dealership Agreement to exercise
full control over and take full
responsibility for its Authorised Employees, their acts and/or
omissions.
In terms of clause 5.6, the applicant undertook to utilise the
Point Of Sale systems/s (POS) chosen by the respondent as and
when
stipulated by the respondent.
A recent, very similar reported
matter is that of
BP
Southern Africa (Pty) Limited v Mahmood Investments (Pty) Limited
[2010] 2 All SA 295
(SCA), which similarly dealt with
inter
alia
, a supply
agreement that provided that a respondent was obliged to only
utilise a particular property, in which that appellant
had expended
large sums of money to market its brand, being BP and to sell its
products exclusively. Clause 10.2 in that
matter provided as
follows:
“
No
petroleum fuels, products and/or lubricants other than those
manufactured and supplied by the seller and/or any other
manufacturer/distributor
approved by the seller in writing shall be
stored, handled, sold or distributed or dealt with in any manner
whatsoever on or from
the said property, save for the prior written
consent of the Transferor.”
In that matter, it was held at paragraph 11:
It
is settled law that a contractual provision must be interpreted in
its context, having regard to the relevant circumstances known
to the
parties at the time of entering into the contract.
(KPMG Chartered Accounts (SA) v Securefin Limited).
It
is also clear that a provision must be given a commercially sensible
meaning. In this regard, see Bekker NO v Total South Africa
(Pty)
Ltd and Ekurhuleni Metropolitan Municipality v Germiston Municipal
Pension Fund...”
Further at paragraph 12, the following appears:
“
BP
argues that the construction of the provision as imposing a positive
obligation on Mahmood Investments, is consonant with the
business
efficacy of the agreement. That is to be viewed in the light of all
the circumstances relevant to the sale of the property.
These
include the fact that BP had developed the property by constructing a
garage and petrol filling station on it. It sold
this to Mahmood
Investments on the basis that a supply agreement would be entered
into: indeed the sale was conditional (in the
true sense) on the
supply agreement being concluded. This would have made no sense had
it been intended that after the agreement
was concluded, and the
property transferred to Mahmood Investments, the latter would be
entitled to hold the property and not to
operate a filling station on
it. The contract of sale would not have made commercial sense but
for the conclusion of the supply
agreement and the operation of the
filling station.”
Analogous to the preamble of
the agreement in this matter, the supply agreement in that matter
had a clause 2 which was headed
“fundamental underlying basis
of this agreement”, which provided that the dealer (Mahmood
Investments in that case)
was about to become the owner of the
premises. Clause 2.2 recorded that BP had invested a substantial
amount of capital for
the purpose of optimising the operational and
marketing structure of the premises including the buildings, the
forecourt, the
dispensing and service station equipment and the
visual standards. These provisions clearly signified that the
underlying
basis of the sale agreement was an obligation to operate
a filling station on the premises sold for the purpose of selling
the products supplied by BP.
Similarly to the provision in
this matter, allowing for inspections and access to the property,
clause 6 in that matter provided
that BP would have rights of
access to the property, to inspect and maintain the equipment.
In that matter BP alleged that
Mahmood Investments had in fact breached clause 8 of that agreement
which set out its obligations
as a dealer to run the filling
station and to stock and supply only BP Products, which conduct
constituted a breach of the
sale agreement that entitled BP to
cancel it.
In that matter, Mahmood
Investments had sold to Argyle and Argyle was stocking and selling
products of other suppliers. This
is even further removed than the
facts that are before me in this matter.
At paragraph 32, the following
was held:
“
It
was not BP that repudiated the sale and supply agreement. Mahmood
Investments repudiated both contracts in refusing to perform
its
obligation to operate a filling station on the property. It evinced
a clear intention no longer to be bound by the contracts,
demanding
removal of the pumps and the tanks, and stating that it had no
intention of running a filling station.”
Furthermore in that matter, it
was argued that BP did not rely on a repudiation in its founding
papers. In paragraph 35, the
following was held:
“
It
is true that the word “repudiation” is not used. But BP
does rely on breach. And the breach it alleges is a refusal
to
operate a filling station. That is a repudiation. The absence of
the label is irrelevant.”
The breach of agreement complained of here, which comprises of the
conduct by the applicant’s employees in installing
and
utilising the Cellair terminals to sell airtime in respect of
Competing Third Parties of the respondent, constitutes, in
my
opinion a material breach going to the root of this agreement,
which is incapable of being remedied by payment in money
as
envisaged in clause 37.3 of the Dealership Agreement.
The change of tack by the
respondent, in relying on a ground for cancellation different from
the one referred to in its letter
of cancellation, by itself, was
not of any consequence. In the circumstances, the respondent was
entitled to rely upon the
breakdown in the relationship between the
parties as is evidenced, not only by the conduct of the applicant’s
employees
at its Balfour shop, but also at its Westonaria shop. As
Nienaber JA said in
Datacolor
International (Pty) Limited v Intamarket (Pty) Limited
[2000] ZASCA 82
;
2001 (2) SA 284
(SCA) at para 28:
“
It
is settled law that an innocent party, having purported to cancel on
inadequate grounds, may afterwards rely on any adequate
ground which
existed at, but was only discovered after the time. (cf Putco Ltd v
TV & Radio Guarantee Co (Pty) Ltd & Other
Related Cases
1985
(4) SA 809
A at 832C-D
)”,
see also
Government of
RSA v Thabiso Chemicals (Pty) Limited
[2008] ZASCA 112
;
2009
(1) SA 163
(SCA), at para 9.
A similar approach was followed
in the decision of
Sewpersadh
v Dookie
2009 (6) SA
611
(SCA), where it was held that any defect in the letter of
demand can be cured by a reliance upon a breach in a founding
affidavit
and that such a course of action would be sufficient both
in the trial court and in the appeal court.
In this matter, the applicant evinced a clear intention no longer
to be bound by the contract to exclusively stock and supply
MTN’s
products. This constitutes a repudiation.
Taking account of the prevailing circumstances, the respondent was
therefore entitled to cancel the agreement on the basis
of this
repudiation, even if it never referred to the term “repudiation”.
It was against these facts and findings that I held that the
application fell to be dismissed with costs.
_____________________________________
L M HODES S.C
ACTING JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG