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[2014] ZAGPJHC 435
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Soft Coffee (Pty) Ltd v Molai Property Development (08276/14) [2014] ZAGPJHC 435 (1 October 2014)
iAfrica Transcriptions
(Pty) Ltd/LAD
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE NO: 08276/14
DATE: 01 OCTOBER 2014
In the matter between
SOFT COFFEE (PTY)
LTD
................................................................................................
PLAINTIFF
And
MOLAI PROPERTY
DEVELOPMENT
...............................................................................
Defendant
J U D G M E N T
SPILG J:
INTRODUCTION
This is an ex tempore judgment, if
there is a need to clarify or amend, as long as the content is the
same, I will do so. I will
refer to the parties as in the main
action or by abbreviated name. Molai Property Development (Pty) Ltd
sued Soft Coffee (Pty)
Limited and Soft Coffee Holdings (Pty)
Limited, for, inter alia the following orders:
a) declaring that Soft Coffee
contravened a number of provisions of the Consumer Protection Act 68
of 2008 (CPA) in respect of a
franchise agreement concluded in July
2013 by Molai with Soft Coffee for the exclusive right to operate a
business under the name
Capello, utilising the latter's trademark and
knowhow in a shopping centre in Brooklyn, because:
1. it supplied the plaintiff with
grossly exaggerated turnover projections in contravention of sections
41(a), (b) and (c) of the
Criminal Procedure Act, the disclosure of
which was material to the conclusion of the agreement;
2. it failed to specify the information
prescribed under regulation 23(Y) of the Consumer Protection
Regulations, as read with section
7(1) (b) and 7(3) of the Criminal
Procedure Act;
3. it failed to disclose or state the
purchase price for the granting of the franchise businesses required
under regulation 2(3)
(y) (v); and
4. It failed to provide a disclosure
document under regulation 3.
b) declaring that the franchise
agreement is void under section 52(4) (a) (i) (bb) of the CPA, and
directing Soft Coffee to repay
the purchase price of R3 245 401.00
together with
interest as from 24 January 2014,
being the date when the franchise business was formally returned by
the plaintiff, orwas tendered
by the plaintiff, to Soft Coffee.
The particulars of claim are some 23
pages in length and contain precise details of the alleged breaches
of, and noncompliance with,
the provisions of the CPA and its
regulations. Although the defendants served a notice of intention to
defend in good time, they
failed to file a plea by due date (which
was 23 April 2014).
Although a notice of bar was delivered
on 29 April the defendants did not plead within the five days
allowed. This prompted the
plaintiff to deliver an application for
default judgment on 20 May.
The defendant then filed a bare denial
plea on 27 May. Since they had already been barred from pleading it
was necessary to uplift
the bar; hence the present application by
them which attempts to deal with the issues.
THE ISSUES
The plaintiff took a number of
preliminary points. One was that the defendants were precluded from
filing replying affidavits since
they had set the application down on
the unopposed roll; the argument being that this amounted to
approbating and reprobating.
I ruled that setting the matter down on
the unopposed roll was not an unequivocal act precluding the
defendants from contending
that the matter was not opposed. The
issue of whether a matter is opposed or not is not an election made
by a party but is a question
of fact.
The plaintiff challenged both the
reasonableness of the default and the bona fides of the defence.
EXPLANATION FOR DELAY
The defendants provided an explanation
as to the extensive travelling commitments of their director, which
resulted in the failure
to file the plea in time. Moreover on
receipt, the notice of bar was simply filed by a clerk. Accordingly
it was not brought
to the attention of the attorney dealing with the
matter.
A bare bones plea was subsequently
filed in an attempt to remedy the delay. However, the plaintiff
refused to accept it and delivered
a Rule 30 notice.
The defendants were not seriously out
of time, and the failure to file a plea after receipt of the bar
cannot be attributed to the
clients as they would have been unaware
of it; as was the attorney dealing with the matter.
There was accordingly an explanation
for the relatively short delay in filing the plea.
Nonetheless it is somewhat
disconcerting that there had been an inordinate delay in bringing the
application to court, which cannot
be fully explained. It required
the plaintiff to secure the set down of this matter so that it can be
decided upon.
BONA FIDE DEFENCE
At the outset it is evident that the
plea contains bare denials and fails to plead pertinently to the
serious allegations made against
the defendants; and in particular
with regard to the alleged gross misrepresentation of the turnover
figures.
At page 17 of the summons the following
(with grammatical corrections) is alleged at paragraph 8.4:
"8.4 The First and/or the Second
Defendant had, on 03 May 2013, sent an e-mail to Molai. The sales
projections which were provided
to the plaintiff by the first and
second defendants, which is item 4 of the attached documents to the
e-mail of 03 May 2013, did
not form part of the information which was
required in terms of the disclosure document prescribed in terms of
the CPA regulation
31(d).
8.4.1 The projections were false,
misleading or deceptive representations and in contravention of
Section 41(a) to (c) of the CPA,
in that the projected figures for
month one were projected to be R510 487.20, and for month two R518
144.51, and in month three
R525 916.68 respectively. A copy of the
projections for month one to month 24 is attached hereto marked SC1.
Yet after the handover
date of 12 October 2013 the actual figure for
month one from 12 October to the end of October 2013 was R40 270, for
month two,
November 2013 was R114 323, and for month three, December
2013 was R150 388.40 respectively. Molai, on behalf of the plaintiff
brought these projection discrepancies (that is, the actual sales
against projected sales), amongst other things, to the attention
of
Mr Domenico Picone since the end of October 2013. Mr Domenico
Picone, who is one of the first defendant's directors, has since
the
end of October 2013 never responded to the plaintiff at all."
This again is dealt with in the
answering affidavit in the present application at page 60, paragraph
4.4.
The only reply is at page 80, paragraph
6. It is headed a reply to paragraphs 4.2 to 4.5.2 and accordingly
includes the allegations
made in paragraph 4.4 of the answering
affidavit. I have already indicated that paragraph 4.4 repeats the
substance of the contents
of the particulars of claim as set out
earlier.
“6 AD PARAGRAPHS 4.2 TO 4.5.2
"6.1 Although numerous allegations
are made on behalf of the respondent in these paragraphs regarding
noncompliance with certain
provisions of the
Consumer Protection Act
(CPA
), it is denied that the applicant actually failed to comply with
the provisions in the Act and the regulations thereto, which issue
is
an issue to be dealt with at trial.
6.2 However, even if it is accepted for
purposes of this application that there was the noncompliances
complained of by the respondent,
then that in itself does not mean
that the franchise agreement is automatically null and void. In this
regard I specifically refer
to the contention that there was
noncompliance with regulations 2 and 3 of the regulations promulgated
under CPA, and it must be
pointed out that the Act itself makes
provisions for a remedy for such noncompliance in the form of chapter
3 of the CPA, which
deals with the enforcement of the rights by a
consumer, which involves referral of the matter to a tribunal or the
commission.
It will be argued that in this regard the particulars of
claim are also excipiable in that they do not make out a cause of
action.
6.3 Insofar as the respondent contends
that there was a contravention of Section 41(a) to (c) of the Act,
such an inquiry is a factual
inquiry, and only after the court has
investigated and made such a factual inquiry as envisaged in Section
52, then can an order
for return of the monies be made. It will be
argued that the inquiry in terms of Section 52 is in any event
limited to cases of
contravention of Section 41, 41 (repeated) and 48
and not in contravention of regulation 2 or 3.
That is the full extent of the
engagement with what clearly is an actionable material
misrepresentation if not a fraud.
In my view the issue of what
constitutes a bona fide defence may be informed by the similar tests
applied in summary judgment proceedings
in order to determine whether
leave to defend ought to be granted or in rescission of judgment
cases.
The cases regularly cited on the test
for a bona fide defence are Maharaj v Barclays National Bank Limited
76(1) SA 418 (A) and
Breytenbach v Fiat SA Edms Beperk 76(2) SA 226
(T). The observation by Coleman J in Breytenbach infra at 228A-B is
apposite despite
it being made in the context of bona fides in
summary judgment proceedings, the defence will fail to overcome
summary judgment
if:
"The court, with due regard to all
the circumstances, receives the impression that the defendant has or
may have dishonestly
sought to avoid the dangers inherent in the
presentation of their further or clearer version of the defence which
he claims to
have."
In applying the test I am satisfied
that Soft Coffee has failed to disclose a bona fide defence. It has
not engaged the issue of
the projected figures at all and it does not
even attempt to suggest that it was the manner in which Molai
conducted its business
that resulted in the turnover figures not
materialising. Nor is any documentation produced to indicate that the
projected turnover
figures that had been provided were based on any
substantive historic turnover figures.
All this, in my view is [indistinct].
I also wish to refer to Standard Bank of SA Limited v EL-Naddaf and
Another
1999 (4) SA 779
(W) a judgment of Marais J where he referred
to previous authority, and adopted a similar position regarding what
constitutes a
bona fide defence.
Finally as regards what does and does
not constitute a bona fide defence I refer to the judgment of Zulman
J in Diesel Power Plant
Hire CC v Master Diggers (Pty) Limited
1992
(2) SA 295
(WLD) at 298 C-F where the context in which the plaintiff
has set out its case must be addressed in a proper way by a
defendant,
having regard to the substance of the contentions raised.
In this case the substance of the
contentions raised is clear. They however were not engaged at all; as
is demonstrated from the
submission of a bare denial in the plea, and
the failure to deal with the contents of the answering affidavit in
any relevant way
in the replying affidavit.
I therefore do not have to deal with
any of the other issues regarding the further failures to comply with
the CPA. I simply note
that similarly the defendants failed to engage
those matters as raised by the plaintiff. All they had to do was to
submit or demonstrate
that they did comply. No such documentation
was provided.
I am therefore satisfied that there has
not been a disclosure of a bona fide defence as required under law.
ORDER
Accordingly the defendant’s
application that the notice of bar dated 29 April 2014 be uplifted is
refused with costs.
SPILG, J
DATE OF HEARING: 29 September 2014
DATE OF JUDGMENT: 1 October 2014
LEGAL REPRESNTATIVES:
FOR PLAINTIFF/RESP: Adv MS Sebola
Nchupetsang Attorneys
FOR DEFENDANT/APP: Adv B Gradidge
Da Dadic Attorneys