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[2010] ZAGPJHC 40
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Pooosh Cellular (Pty) Ltd v Italk Cellular (Pty) Ltd and Others (2009/48153) [2010] ZAGPJHC 40 (24 May 2010)
IN
THE SOUTH GAUTENG HIGH COURT (JOHANNESBURG)
Case Number: 2009/48153
In
the matter between:
POOOSH
CELLULAR (PTY) LTD
Applicant
And
ITALK
CELLULAR (PTY) LTD
First
Respondent
MTN
HOLDINGS (PTY) LTD
Second
Respondent
MOBILE
TELEPHONE NETWORKS (PTY) LTD
Third
Respondent
MTN
SERVICE PROVIDER (PTY) LTD
Fourth
Respondent
_______________________________________________________________
JUDGMENT
_______________________________________________________________
C. J. CLAASSEN J
:
This is an application pursuant
to the provisions of Rule 49(11) of the Uniform Rules of Court. The
applicant seeks the leave
of this court to execute upon a judgment
in its favour pending the outcome of an appeal lodged by the
respondents to the Full
Court of this Division. This sub-rule
states:
“Where an appeal has been noted or an application for leave to
appeal against or to rescind, correct, review or vary any
order of
court has been made, the operation and execution of the order in
question shall be suspended, pending the decision of
such appeal or
application, unless the court which gave the order, on the
application of a party, otherwise directs.”
INTRODUCTION
On 31 October 2008 the
applicant and first respondent concluded a “Corporate Network
Service Subscription Agreement”
(the “Agreement”).
1
In terms of this agreement, the first respondent was required to
supply to the applicant certain telephony products described
as
“value added telephony products” as well as certain
telephony services such as “Push to Talk”, e-mail,
chat
rooms, faxing and discounted calls. The network which was required
for these telephony goods and services was operated by
the third
respondent in terms of a sub-licence granted to the first
respondent. The duration of this contract was to last for
a minimum
of two years subject to termination by either party upon notice
being given.
Approximately ten and a half
months into the contract and on 17 September 2009 the applicant
issued its first purchase order for
301 “HO1 MTN Anytime 50
TopUp” items from the first respondent.
2
Although the order was intended for the first respondent, for some
reason it was sent to the fourth respondent instead, who promptly
rejected the order.
3
Subsequent hereto a litany of correspondence between the respective
parties’ attorneys of record ensued culminating in
the
applicant’s attorneys threatening legal action in the form of
urgent interim relief.
On 21 October 2009 the
sub-licence agreement which entitled the first respondent to supply
the products and services to the applicant,
was cancelled.
On 13 November 2009 the
applicant issued an urgent application, which I will refer to as
“the main application”, for
an order (i) declaring the
Corporate Network Services Subscription Agreement valid and
enforceable; and (ii) declaring that the
first respondent is obliged
to honour the order for 301 units dated 17 September 2009. This
application was argued before Farber
AJ on 1 and 2 December 2009
where after he handed down a written judgment
4
on 24 December 2009. In his judgment the declaratory orders asked
for were granted together with an order for costs against the
respondents jointly and severally.
On 18 January 2010 the
respondents issued an application for leave to appeal the aforesaid
judgment. This application was argued
on 16 February 2010 and leave
was granted by Farber AJ to appeal his judgment to the Full Court of
this Division.
Approximately three weeks
thereafter and on 5 March 2010, the applicant issued the present
application against the respondents.
Paragraph 1 in the notice of
motion was incorrectly worded resulting in an objection thereto
being raised by the respondents.
The applicant was obliged to amend
prayer 1 by the deletion of the words “…application for
leave to…”
in order for the prayer to be effective. The
applicant filed a notice of amendment on 25 March 2010 which
amendment was duly
granted. The notice of motion in this application
now reads as follows:
“
1. Directing that the
judgment granted by his Lordship Mr. Justice Farber on 24 December
2009 shall continue in force until the
outcome of the respondents’
appeal.
Directing
that the applicant shall not be required to furnish security.
Costs.
Further
and alternative relief.”
A further skirmish ensued
between the parties in regard to the time period within which the
respondents were to file their answering
affidavits.
5
Ultimately, the answering affidavits were filed on 13 April 2010 and
the applicant’s replying affidavit on 16 April 2010.
THE APPLICABLE LAW
It is trite that Rule 49(11)
constitutes a codification of the common law regarding the effect on
judgments when an appeal is
lodged.
6
The accepted common law rule of practice in our courts is that,
generally speaking, the execution of a judgment is automatically
suspended upon the noting of an appeal, with the result that,
pending the appeal, a judgment cannot be carried out and no affect
can be given thereto, except with the leave of the court which
granted the judgment. The purpose of this rule as to the suspension
of a judgment on the noting of an appeal, is to prevent irreparable
damage from being done to the intending appellant, either
by levy
under a writ of execution or by execution of the judgment in any
other manner appropriate to the nature of the judgment
appealed
from.
To obtain such leave, the party
in whose favour the judgment was given must make a special
application. The court, to which application
for leave to execute is
made, has a wide and general discretion to grant or refuse such
leave. It is common cause that the
locus
classicus
in regard
to applications for leave to execute pending an appeal, is the
judgment of Corbett JA in
South
Cape Corporation (Pty) Ltd v Engineering Management Services (Pty)
Ltd
1977 (3) SA 534
(AD) at 545 where the learned Judge of Appeal stated the following:
“
In exercising this
discretion the Court should, in my view, determine what is
just
and equitable
in all
the circumstances, and, in doing so, would normally have regard,
inter alia
,
to the following factors:
the
potentiality of irreparable harm or prejudice being sustained by
the appellant on appeal (respondent in the application)
if leave
to execute were to be granted;
the
potentiality of irreparable harm or prejudice being sustained by
the respondent on appeal (applicant in the application)
if leave
to execute were to be refused;
the
prospects of success on appeal, including more particularly the
question as to whether the appeal is frivolous or vexatious
or
has been noted not with the
bona
fide
intention of
seeking to reverse the judgment but for some indirect purpose,
e.g., to gain time or harass the other party;
and
where
there is the potentiality of irreparable harm or prejudice to
both appellant and respondent,
the
balance of hardship or convenience
,
as the case may be.” (Emphasis added)
Previously the question of who
bears the onus of satisfying the court that the application should
succeed or be refused was a
vexed one. However, this has now been
settled by Corbett JA in the
South
Cape Corporation
case
supra
at 546D – F, where the learned Judge of Appeal said the
following:
“
Approaching the matter on
principle, one starts with the basic rule that the due noting of an
appeal suspends the operation of the
judgment and that, if the party
in whose favour it has been given wishes it to be put into execution,
he must make special application
for leave to do so. He, being the
claimant for relief, must satisfy the Court that there are good
grounds for the exercise by the
Court of
its
general discretion
in
his favour. This means that the overall
onus
of establishing a proper case for the grant of leave to execute would
rest upon the applicant and
,
if at the end of the hearing the Court were left in doubt as to the
essential facts or as to whether it was an appropriate case
of the
grant of leave, then the application should be refused
.”
(Emphasis added)
THE MERITS OF THE
APPLICATION
Upon a perusal of the papers
and after hearing argument, I have come to the conclusion that this
is indeed a case where both parties
may potentially suffer some
prejudice or harm whichever way the decision goes. I came to this
conclusion for the following reasons.
It is common cause that the
contract concluded between the parties will terminate on 31 October
2010. This is so because the contract
expressly provides that it
will last for two years and because the respondents contend that it
had already terminated alternatively,
without prejudice to its
allegations in this regard, gave notice of such termination in their
answering affidavits.
7
Currently, the applicant is left with the remaining six months of a
twenty four month contract during which it would be able
to reap the
benefits therefrom. If leave to execute is refused and the appeal is
only heard and possibly completed towards September
2010, then, if
the applicant is successful in the appeal, it would be left with
only a month or so to exercise any of its contractual
rights. Such
prejudice suffered by the applicant can only be remedied by a claim
for damages against the respondents, which the
applicant contends
will be difficult to quantify.
The applicant would be further
prejudiced if leave to execute is not granted in that it may forego
the beneficial contractual
provisions which it had negotiated for
itself in the agreement. It is not in dispute that the applicant is
entitled to a discount
of between 22% and 24% from the first
respondent on orders for products placed by the applicant. If leave
to execute is refused,
the applicant would obviously be unable to
enforce these beneficial contractual rights within the curtailed
contract period.
On the other hand, if leave to
execute is granted, the respondents, and in particular the first
respondent, would also suffer
harm and prejudice. In particular, the
answering affidavits in some detail indicate that the first
respondent has been divested
of its personnel and assets which will
render it unable to provide any products and services to the
applicant pursuant to the
provisions of the agreement. It is alleged
that this process of stripping the first respondent commenced well
before the application
was issued and pursuant to the respondents’
bona fide
view that the agreement had already been cancelled. Should leave to
execute be granted, the first respondent would have to reassemble
its staff and product to comply with its contractual obligations, a
costly exercise which according to the respondents would
be
exorbitant.
Furthermore, even if it was
able to reassemble its personnel, it would not be able to provide
the contractually required products
and services since the
sub-licence which enabled it to do so, has been terminated. Although
this of course is not the fault of
the applicant, it is a
circumstance which a court must take into account when weighing up
the just and equitable circumstances
for purposes of exercising its
wide discretion. Thus, should leave to execute be granted, the first
respondent would immediately
be rendered in breach of the provisions
of the agreement with all the prejudicial consequences attached
thereto.
To a certain extent, the
potential prejudice sufferable by the applicant, should leave to
execute be refused, may be ascribed
to its own fault. It wasted
almost half of the contractual period before placing the first order
with the first respondent. In
addition, such order was not for a
substantial amount of items but only for 301 units which was 1 more
than the minimum per order
permitted by the contract. This conflicts
with the applicant’s purported intentions to order thousands
of units of product
as alleged by the applicant in the main
application. Furthermore, it is common cause that the applicant was
able to obtain similar
products for resale by it in the open market
and admitted to spending 2.5 million rand in advertising such
similar products.
In so doing, it acquired fifty thousand clients
using such similar products. This is not a case where the applicant
will be crippled
by being denied all access to such product in the
event of leave to execute being refused.
The respondents, in its
answering affidavits, make out a substantial case that the
computation is not that difficult to quantify
any potential damages
suffered by the applicant in the event of the appeal going its way.
Of course, in an application such as
this, the Plascon Evans-rule
applies and the allegations of the respondents in regard to this
kind of dispute of fact have to
be accepted. In the present case the
applicant’s real loss would be in foregoing the beneficial
terms in regard to the
discount which the agreement affords it.
However, the respondents have indicated that discounts, although of
a lesser amount,
are in fact available in the industry should the
applicant have to forego the beneficial discounts in the present
agreement,
thus minimising any potential loss to the applicant.
Based upon the aforesaid
considerations it would seem to me that the balance of hardship or
convenience is in favour of an order
refusing leave to execute.
I have not yet considered the
prospects of success on appeal. In doing so Let me say immediately
that I cannot find the respondents’
noting of the appeal to
have been frivolous or vexatious. In my experience, when it concerns
interpretation of contracts, an
appeal is often allowed unless the
interpretation is so clear and unambiguous that no other conclusion
can be arrived at. In
my view, reading the contract in the present
case, it cannot be said that the contract is so explicitly clear and
unambiguous
that the appeal as wholly unfounded. For that reason
alone I am of the view that it cannot be said that the appeal was
noted
for an ulterior purpose i.e. to gain time in order to
prejudice the applicant in the exercise of its contractual rights.
The
fact that Farber J granted leave to appeal is further
confirmation of this conclusion. In this regard it must also be
noted that
the delays in bringing this matter to finality are
attributable to both the applicant and the respondents. The
applicant substantially
delayed in activating the contract by
ordering the product to which it was entitled. It also delayed the
matter by making procedural
mistakes in the drafting of its notice
of motion in this application. Similarly, the respondents are also
at fault in taking
points unnecessarily and elevating procedural
issues to substantive issues when reasonable conduct could have
avoided the resulting
delays.
Finally, it would seem to me
that the scales of justice weigh heavily in favour of the
respondents by virtue of their undertaking
to hold available an
amount of “R10 million rand in cash within the first
respondent pending the outcome of the appeal”.
Should the
applicant ultimately be successful in the appeal, any claim for
damages and costs which it may have will in fact be
secured by the
aforesaid amount. Of course, the applicant cannot be assured that
such amount will be retained for its benefit
in the event of the
appeal being decided in the applicant’s favour. However, if
such offer had been made earlier and prior
to the issue of this
application, the applicant may very well have been persuaded to
accept it. Such acceptance may have averted
this application. By the
time it was made in the respondents’ answering affidavits, the
battle lines had been drawn and
attitudes had hardened. It would
therefore seem just and equitable to issue an order under the prayer
“further and/or alternative
relief” in the notice of
motion, to secure such amount for the potential benefit of the
applicant pending the unfolding
of further events. Thus, if leave to
execute is refused, justice would prevail by protecting the
respondents from unnecessary
harm and so too would the applicant’s
interests be protected if the amount of R10 million remains
available to it, subject
to appropriate conditions. In my view the
amount of R10 million is more than adequate for these purposes
considering the applicant’s
own projections of revenue.
8
COSTS
[22] In view of my finding that
all the parties share the blame for the delays in this matter and the
order I propose to make, it
would seem to me to be an equitable
exercise of my discretion in regard to costs, to order each party to
bear its own costs.
CONCLUSION
[23] Based on the aforesaid
reasons, I am of the view that a just and equitable order in these
circumstances would be as follows:
The application is refused.
The respondents are ordered to
retain an amount of R10 000 000.00 (ten million rand) in cash set
aside within the first respondent
pursuant to the undertaking
contained in paragraph 37.2 of the respondents’ answering
affidavit as security for any judgment
for damages and costs or
other relief awarded to the applicant arising out of the current
litigation pending between the parties.
The order in 2 above will
operate with immediate effect pending the final outcome of the
appeal lodged by the respondents.
In the event of the applicant
failing to institute an action for damages and costs and/or any
other relief it may be advised to
seek, within 30 days after the
final outcome of the aforesaid appeal, the order in 2 and 3 above
will lapse.
Each party is to pay its own
costs of this application.
SIGNED AND DATED THE 24th DAY OF
MAY 2010 AT JOHANNESBURG.
___________________________
C. J. CLAASSEN
JUDGE OF THE HIGH COURT
Counsel for the Applicant
:
Counsel for the
Respondents
:
Adv T. Beckerling SC Adv A.
R. Bhana SC
Adv J. Heher Adv T. Massyn
Attorney for the
Applicant
:
Attorney
for the Respondents
:
Fluxmans Incorporated Mashiane,
Moodley & Monama Inc
Argument was heard on 22 April
2010.
1
See annexure “DT2” to the founding affidavit in the main
application at p 68.
2
See annexure 2 on p 107 of this application.
3
See paragraph 21 of the judgment of Farber AJ on pp 22 – 23 of
this application.
4
See annexure A pp 14 – 39 of this application.
5
See the letters in the document headed “INDEX IN RESPECT OF
CORRESPONDENCE ON APPLICATION FOR LEAVE TO EXECUTE”.
6
See
United Reflective Converters (Pty) Ltd v Levine
1988 4
SA 460
(W) at 463F.
7
See paragraph 24.2 of the answering affidavit at pp 54 – 55.
8
See annexure 3 p 108 of this application.