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[2010] ZAGPPHC 106
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Emilia De Sousa t/a Old Fashioned Fish and Chips v Louwrens and Others (12311/2009) [2010] ZAGPPHC 106 (3 September 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
(NORTH AND SOUTH
GAUTENG HIGH COURT. PRETORIA)
DATE: 3
SEPTEMBER 2010
CASE NO:
12311/2009
In the matter
between:
EMILIA DE SOUSA t/a
OLD FASHIONED FISH AND CHIPS PLAINTIFF
And
HENDRIK ANDRIES
JOHANNES LOUWRENS FIRST RESPONDENT
ANNIE MAG RI ETA
HELENA GETRUIDA LOUWRENS SECOND RESPONDENT
ADRIAAN JAKOBUS
LOUWRENS THIRD RESPONDENT
JUDGMENT
PHATUDI, J
'Claim 1
An order confirming
the cancellation of the Franchise Agreement; Claim 2
An order against
...defendant's jointly and severally, the one to pay the other to be
absolved, for
• Payment of
outstanding royalties in the amount of R14 000.00
• Payment of
damages in the amount of R132 520.00
Claim 3
An order restraining
the Defendant's from carrying on or being interested, directly or
indirectly, in the business of a fast food
restaurant outlet within 1
(one ) kilometre of the Old Fashion Fish and Chips Restaurant, Shop
2, 225 Vermeulen Street... Pretoria,
up to and until 10 November
2009".
1
[2] The Defendants
filed a counterclaim for restitution of the purchase price of the
franchise they paid to the plaintiff in the
amount of R399 000.00 due
to the plaintiff's non performance.
[3] It is common
cause between the parties that a franchise agreement was concluded on
18 January 2008. It is further common cause
that the defendants
secured Shop 2, 225 Vermeulen Street, Pretoria (the premises) by
concluding a lease agreement on the 18 March
2008. The defendants
were afforded a free rental month
2
to equip and fit the premises. The keys to the premises were handed
over to the defendants on the 1 April 2008. They informed the
plaintiff and allowed her to fit and equip the premises with
equipment specified in Annexure C
3
to the franchise agreement within the given rent holiday period.
[4] Emilia De Sousa
(Mrs De Sousa) testifies that she is the founder and owner of Old
Fashion Fish and Chips (Old Fashioned). She
registered the business
with the Franchise Association of South Africa (FASA)
4
[5] The Third
Defendant (the defendant) approached her because he has an interest
in Old Fashioned. She then explained all requirements
to the
defendant. On the 18 January 2008, a franchise agreement was signed
by all defendants who there and then paid a deposit
in the amount of
R100 000.00. The premises were not as yet identified. She told the
defendants to find the premises as soon as
possible. She informed
them that R299 000.00 will only be payable once the premises has been
identified.
[6] She further
testifies that she explained to the defendants that she will only
proceed with fittings of equipment in the premises
and train the
staff once the purchase price is settled in full.
[7] She says the
defendant called her and informed her of his interest in a site
situated in Bloed Street, Pretoria. She informed
him that the Bloed
Street site has already been booked. He later identified the premises
at Vermeulen Street, Pretoria (the premises).
She intimated to him
that the premises were close to those at Bloed Street. Few days
later, she met with the defendant who gave
her pages 4 and 5 of the
franchise agreement with intent to "remove" the exclusive
area clause. She is under the impression
that the both intended the
provisions set out in pages 4 and 5 not to be regarded as part of the
contract. It is in those bases
she allowed him to proceed with the
premises at Vermeulen Street. The balance in the amount of R299
000.00 was paid. She equipped
the premises in accordance with the
franchise agreement and lastly trained the defendant's staff for a
period of 2 weeks.
[8] Vusi Vumase (Mr
Vumase) testifies that he is employed by the plaintiff as manager and
staff trainer. He confirms to have trained
the defendant's staff
members at Vermeulen Street. He cannot recall the dates and days of
the month upon which such training was
conducted.
[9] He is confronted
under cross-examination with the photos taken on one of the days
training was conducted. He concedes that 3
(three) of the people on
the photos are not members of the defendant's staff.
[10] The third
defendant, Adriaan Jakobus Louwrens (the defendant), confirms in his
testimony, the correctness of the plaintiff's
testimony as far as the
signing of franchise and the lease agreements for Vermeulen Street
are concerned. He further confirms that
a "rent holiday"
was indeed negotiated by both the plaintiff and himself for the
months April and May 2008 respectively.
The Landlord granted the rent
holiday only for April month. The plaintiff equipped the premises as
agreed during the 4th week of
April into the first week of May 2008.
The shop opened on the 6th May 2008.
[11] He further
testifies that on the opening day certain items were not in an
acceptable condition. The window was dirty. The pillar
in the shop
was not tiled up to the roof and the ceiling was not cleaned. He
concedes that the plaintiff uplifted pages 4 and 5
of the franchise
agreement with intent to change the commencement date and dates on
which royalties are payable. He testifies that
the Plaintiff informed
him that the amended contract will be returned back to him, by
Friday. The idea, as discussed between them,
was to cause royalty
payable by the end of June 2008.
[12] He denies
having ever been interested in the Bloed Street premises. He only
learned some months later from other Franchisees
that other Old
Fashioned have been opened at:
Sunnyside, which was
opened in September 2008.
Bosman to be opened
in October 2008
Bloed Street to be
opened in November 2008.
[13] He tried on
numerous occasions to secure an appointment with the plaintiff with
intent to discuss the exclusive area clause
vis-a-vis the opening of
the said shops but to no avail.
[14] He claims, in
his counterclaim, non performance on the part of the plaintiff. He
indicates that certain goods were not delivered
to the shop. He
refers me to the plumbing problems he had since opening. I enquired
from him if the plaintiff was liable to maintain
the plumbing in the
shop, and if so, which clause in the franchise agreement so provides.
He then refers me to clause 4.2 that
provides:
'In consideration
for the grant of it of the right to use the SYSTEMS,
PROCEDURES AND
KNOW-HOW, in terms of 3.2 above...'
He further refers me
to item 9 of Annexure C
5
that states:
'All indoor
plumbing.'
[15] He further
testifies that he effected payment for royalties for the months
September and October 2008 respectively. He caused
a set off for the
months June and July 2008 over R5000.00 the plaintiff owes in respect
of the steel work made by the first defendant
at her instance.
[16] Hendrik Andries
Johannes Louwrens (first defendant) testifies that he is indeed one
of the signatories of the franchise agreement.
He was never hands on
in the business. He confirms having made 5 (five) steel barriers at
the special instance and request of the
plaintiff at a price of
R1000.00 each. She took 1 (one). The remaining 4 (four) are still in
his possession. He confirms having
agreed with the plaintiff on the
said order. To date nothing has been paid to that effect save to
mention the set off the defendant
caused.
[17] In evaluating
the evidence tendered, it is common cause that the franchise
agreement was concluded on the 18 January 2008.
At that time the
defendants had no premises to operate at. The plaintiff testified
that the defendant was first interested in the
Bloed Street premises
which she indicated to have been "booked" by another
prospective franchisee. The premises were
then identified. She
alleges to have indicated to the defendant that the identified
premises are within 4 km radius of Bloed Street,
which would encroach
on clause 8.1 of the franchise agreement. She further alleges that
the defendant removed pages 4 and 5 of
the agreement and handed same
to her. Pages 4 and 5 of the franchise agreement contain royalty and
exclusive area clauses respectively.
[18] In rebuttal
thereto, the defendant testified that the plaintiff is the one who
took the said two pages with intend to amend
the date of payment of
royalties and not to "remove" the exclusive area clause
from the agreement.
[19] The two pages
are indeed not part of the properly signed franchise agreement
discovered in the evidence bundle. The plaintiff
annexed an unsigned
copy with her particulars of claim. It is not clear what the parties
intended at the time of uplifting the
said pages. The plaintiff
contends that the aim was to uplift the Exclusive area clause to
enable the defendants to conduct the
business at Vermeulen Street to
avoid Bloed street business encroaching clause 8.1 of the agreement.
The defendant alleges not
to have been aware of this. The defendant
alleges to have been under the impression that the exclusive area
clause is applicable.
He says he brought this to the attention of the
plaintiff on discovery of Essellen street franchise and later at
Bosman Street
and Bloed Street respectively. He denies having
intended to uplift the exclusive area clause.
[20] The defendant,
on the other hand, alleges that the upliftment of the pages from the
contract was to give effect to amendment
of commencement date from 1
April 2008 to 1 June 2008 respectively. He alleges that the amendment
would correspond with the 'rent
holiday" offered by the landlord
in the lease agreement. The plaintiff denies these averments. She,
however, concedes that
she equipped the defendants' premises during
April month.
[21] The parties'
versions create two destructive versions on royalty fee payable (if
any) and exclusive area clauses. The plaintiff
alleges that the
royalty fee is payable from 1 April 2008 whereas the defendant
alleges the 1 June 2008 as the commencement date.
[22] The Plaintiff
concedes under cross-examination that the two pages were uplifted
almost the same time with the defendants' occupation
of the premises.
She further concedes that the franchise fee is not payable for the
month of setting and equipping the shop. She
concedes that the
defendant did not operate during the April month due to the setting
of infrastructure. She further concedes after
it was put to her
during cross examination that no royalties are payable for April
month. She surprisingly includes April in her
claim.
[23] Contrary to the
said averments, the Defendant alleges to have effected payment on
royalty fee for the month of August and September
while June-July
payment had been set off.
[24] I find it
incomprehensible for the Plaintiff to allege that the franchise fee
is payable from April 2008 while she, on her
testimony, concedes that
the month of setting the shop is not payable and normally not
included for purposes of computing the franchise
fee.
[25] It is trite law
that the plaintiff must prove her case on a balance of probabilities.
It is further trite law that where an
amount is payable in monthly
instalments that such instalments are due and payable at the end of
that month.
[26] The plaintiff
concedes under cross-examination that she regularly cause issue of
monthly invoices and statements for royalties
payable. She however,
failed to annex or discover for trial purposes, any invoice(s) and or
statement(s) to prove her claim on
franchise fee payable. I find it
strange as to why she did not demand payment from April but wait
until 27 October 2008.
[27] I infer from
the defendants' testimony that the plaintiff got annoyed by the
defendants' telephone calls seeking a meeting
to discuss the
exclusive area clause vis-a-vis the Essellen street, Bosman street,
Bloed street franchise opened or to be opened,
prompted her to cause
issue of her letter of demand dated 27 October 2008.
6
[28] Mr Kellermann,
counsel for the Plaintiff, submits that the defendants' alleged
payment made in September 2008 as indicated
on the defendants' bank
statements is classified as an "S", which would indicate
that it was made for stock and not for
royalties. The "S"
referred to is a hand written mark which I could not verify if that
was "S" as submitted
by Mr Kellermann. Mr Broodryk's
efforts to introduce the defendants' bank statement bearing similar
inscription were objected to
on hearsay basis. Mr Broodryk submits
that the auditor whose handwriting it is has since died. I ruled that
such evidence is inadmissible.
[29] Mr Kellermann
refers me to Nel v Cloete 1972(2) SA 150 (A) and
to Christie; Law of
Contract, 4th Edition, page 584
7
where the principle of general rule of law is that obligations for
the performance of which no definite time is specified are
enforceable forthwith.
[30] Much as I
accept the rule is trite, I find that a debt cannot be enforceable
forthwith without it being due and payable. For
a debt to be due and
payable, an invoice or a statement must be issued to bring to the
debtor's attention that such a debt is due
for payment. It is
empirical to "demand" payment and place the debtor in
mora
The plaintiff failed in my view, to
demand or place the defendant in
mora
from
April 2008 in that no invoices or statements were issued to that
effect notwithstanding her allegation of having same "somewhere"
in her office. In my view, the plaintiff fails to prove on a balance
of probabilities that defendants are indeed indebted to her
in the
amount of R14, 000.00 as claimed. Cancellation of a contract may be
performed without the assistance of the court. A court
order would,
however, simply confirm that which the party seeking cancellation had
already carried out. It is, however, desirable
to have a court order
of cancellation for certainty of the contract's status. The plaintiff
had already cancelled the contract
which stands to be confirmed.
[31] On the
defendants' claim of non performance by the plaintiff, the defendants
rely on various breaches by the plaintiff. In
terms of the franchise
agreement, the plaintiff is obliged to:
6.1 Make the
systems, procedures and know-how AVAILABLE TO THE Franchisee on
signature of this contract;
6.2 Equip the
APPROVED PREMISES with equipment as specified in annexure "C"
attached hereto;
6.3 Train the
FRANCHISEE'S staff with regard to The SYSTEMS, PROCEDURES and
KNOW-HOW;
6.4 Obtain at the
FRANCHISOR'S cost, all the necessary trading licenses to enable the
FRANCHISEE to carry on the business from the
APPROVED PREMISES;
6.5 Have the
necessary sign writing affixed to the APPROVED PREMISES including the
logo;
6.6 Save for the
installation of the three phase electricity and the straightening of
the walls, which shall be for the cost of
the FRANCHISEE, fit out the
APPROVED PREMISES, including the tilling, plumbing and the
installation of the gas accessories.'
8
[32] The defendant
testified in his examination in chief that the plaintiff failed to:
• equip the
approved premises with equipment specified in annexure
C.
9
• Train the
defendant staff in re, system, procedures and know- how.
• Obtain on her
costs, the trading license for the premises and
• Fit and equip
the premises including tiling and plumbing.
[33] In evaluating
the defendant's testimony, I find it difficult to comprehend how a
person can buy a business and continue to
trade without manual and
the operational system of the business which he is not acquainted
with. The defendant denied under cross
examination to have been
furnished with the Operations Manual.
10
He further denied having been provided with any "KNOW HOW".
He says that' made it
s Annexure A to the
agreement, page 32 pleadings on 145 evidence bundle difficult for him
to prepare the russians properly because
they kept on bursting in the
boiling oil and would at times come out hard like a biltong.
[34] He concedes
that all equipment specified in annexure C have been delivered and or
installed save for 1(one) wash basin
11
,
and a hand wash basin.
12
[35] In evaluation
the evidence to equipping the premises, I find the plaintiff to have
promptly complied with her duty. The non
delivery of the hand wash
basins cannot, in my view, sustain a claim of non performance.
[36] The defendant
conceded under cross-examination that training took place. He,
however, allege that the said training was not
proper. He says his
staff did not know how to peal the potatoes or how to braai or warm
the russians or cheese viannas. He further
conceded that the
plaintiff and Mr Vumase were indeed in the premises on the opening
day and conducted training on some of his
staff members though not
enough. He says they only came for 2 days whereas the plaintiff's
evidence is that they conducted training
for two weeks.
[37] I find in my
evaluation that training was indeed conducted by the plaintiff or Mr
Vumase at the instance of the plaintiff.
It is clear from the photos
annexed that Mr Vumase was indeed in the premises. I accept Mr
Vumase's unchallenged evidence that
he trained the defendants staff
including the defendant himself. He conceded that some of the staff
members were from Thembisa,
another franchise opened almost the same
time as that of the defendants. Of importance, I find that training
was conducted on the
defendants' staff members by the plaintiff at
Vermeulen Street.
[38] On the
plaintiff's obligation to obtain a trading license to enable the
defendant to carry on the business from the approved
premises, the
plaintiff testified that she gave the defendant the relevant form to
complete. She testified that the defendant undertook
to procure a
license. The defendant denies this. He says the Plaintiff failed to
obtain the said license. He was later summoned
by the relevant
authorities to pay a fine to that effect. He subsequent thereto
applied for the license but to no success.
[39] Mr Kellermann
refers me to
Manufacturers Development CO and Others 1975(2) SA
276 W)
.
13
On
perusal of the law report as cited I find the case being different
from the one Mr Kellermann refers.
[40] On perusal of
the clause 6.4 of annexure A,
14
I find the franchisor to have had a duty to "obtain" at the
franchisors' costs, all the necessary trading licenses
15
to
enable the franchisee to carry on with the business." The
plaintiff testified that she gave the defendant a form to complete.
It is not clear from her evidence what form it is and where she got
it from. She could not even say from which office she got the
form
from. In my view, the clause places a stringent duty on the
franchisor to ensure that the franchisee is awarded or granted
a
licence by the relevant authorities to enable him/her to carry on
with the business. I thus find that giving the franchisee a
"form"
to complete not being enough for obtaining a license.
[41] However, the
Defendant proceeded to conduct a business without the said licence.
The defendants' never complained or placed
the plaintiff on terms
with regard to the license issue. The defendant took a risk and
operated without the required license. The
non compliance with the
contract does not render the contract void.
[42] The question to
consider is whether the plaintiff's' non compliance rendered the
defendants' performance impossible. The defendant
accepted the
premises and proceeded to conduct business notwithstanding all such
non compliance. I enquired from him if he accepted
the business from
the plaintiff on the day it was handed over to him despite all the
alleged breach. He concedes that he accepted
the business
notwithstanding all that complained of. I, on that basis, thus find
the plaintiff's non compliance not having hampered
the defendants
from conducting the business.
[43] The principle
set out in Palmer v Poulter
1983 (4) SA 11
(T), is
that; "If the
appellant, with full knowledge of the facts has so conducted herself
that a reasonable person would conclude
that he had waived his
accrued right to cancel the agreement or had affirmed the agreement,
a mental reservation to the contrary
will not avail him."
[44] I find the
principle fits like a glove in a hand with the matter before me. I,
in the result thereof, equally find the defendant
to have failed
prove his claim on a balance of probabilities and thus not entitled
to restitution of the purchase price.
[45] It is trite
that costs follow the event. The defendant succeeded in defending the
main claim. Equally, the plaintiff succeeded
in defending the
defendants' counterclaim.
[46] I thus make
the following order.
[46.1]
Cancellation of the franchise agreement
entered into by and
between the parties on the 18 January 2008 is hereby confirmed.
[46.2] The
plaintiff's claim is dismissed
[46.3] The
defendants' counterclaim is dismissed
[46.4] There is
no order as to costs
AML PHATUDI
JUDGE OF THE NORTH
GAUTENG HIGH COURT
Heard on: 23 to 26
August 2010
For the Appellant:
Adv BROODRYK
Instructed by:
Messrs GROENEWALD VAN DYK INC
For the Respondent:
Adv KELLERMANN
Instructed by:
Messrs WNA ATTORNEYS.
Date of Judgment: 3
SEPTEMBER 2010
1
Page
13 and 14 Pleading bundle
2
referred
to as rent holiday
3
Page
44 pleadings bundle
4
FASA is an association that regulate and control all franchise in
South Africa
5
Page
154 Evidence bundle
6
Page
1 evidence bundle
7
4
,h
edition has since been replaced by 5
th
edition and no such page in 5
th
edition was found.
8
Item
2 annexure C, page 154 evidence bundle
9
Page
154 evidence bundle
10
Page 28-42 evidence bundle
11
Item 2 annexure C, page 154 evidence bundle
12
Item
3, annexure C, page 154 evidence bundle
13
Page
14 of his HOA
14
See
para
[28]
15
My
underline