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2023
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[2023] ZAECELLC 13
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De Wet and Another v Gambeno and Another (434/2022) [2023] ZAECELLC 13 (30 May 2023)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, EAST LONDON CIRCUIT COURT)
CASE
NO. 434/2022
In
the matter between:
GREGORY
DE WET First
Applicant
ENRICO
BLIGNAUT Second
Applicant
and
PHILIP
GAMBENO First
Respondent
BISE
ENGINEERING Second
Respondent
JUDGMENT
LAING
J
[1]
This is an application for leave to appeal. The matter concerns an
application
for an interdict against the first respondent in relation
to a business that supplies flexographic labelling, trading as PEG
Labels.
Background
[2]
Pending the finalisation of separate action proceedings, the
applicants sought
to interdict the first respondent from: instructing
suppliers to suspend the operation of any accounts that PEG Labels
held with
such suppliers; preventing the applicants from using such
accounts to place orders for stock and materials; and directing
suppliers
not to accept such orders and not to deliver any stock or
materials in accordance therewith.
[3]
Furthermore, the applicants sought an order directing the first
respondent to
reinstate all accounts held by PEG Labels with the
suppliers in question.
[4]
The court dismissed the application with costs. Subsequently, the
applicants
brought the present application for leave to appeal.
Basis
of application
[5]
The applicants have listed several grounds. The main argument,
however, rests
on two clauses contained in the partnership agreement
concluded by the parties on 23 March 2011. These provide as follows:
‘
8.
Withdrawal /
Death of a Partner
In event of a partner
withdraws or retires from the partnership for any reason including
death, the remaining partners may continue
to operate the company
using the same name. A partner withdrawing shall be obligated to sell
his shares in the partnership with
the remaining partners having the
first option to buy his shares. No partner shall transfer his shares
in the partnership to any
other party without written consent from
the remaining partners. In the event of death the shares of the
deceased will be transfer
to his next of kin along with any profits
accrued. If the next of kin of the deceased want to sell the shares
in the company the
remaining partners will have the first option of
sale.
9.
Non-Compete
Agreement
A partner who withdraws
from the partnership shall not directly or indirectly enter to a
partnership / starting of new company or
running of a company which
is or would be competitive with the existing or then anticipated
business of the partnership for a period
of 5 years, in the Eastern
Cape where the company is currently doing or planning to do
business.’
[1]
[6]
The
applicants contend, with reference to the principles set out in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
,
[2]
that the clauses in question permitted them to continue with the
operation of the business of the partnership, notwithstanding
the
first respondent’s later dissolution thereof on 7 March 2021.
Mindful of the text, context, and purpose, of the partnership
agreement, the applicants argue that the relevant portion of clause 8
should be interpreted as follows:
‘
If one partner
retires from the partnership, then the remaining partners have a
right to continue operating the business of the
partnership under the
same name.’
[7]
The above interpretation, say the applicants, would give rise to a
sensible
and business-like meaning. The partnership agreement was
drafted by laypersons, not lawyers, and they had intended the
continuation
of the business of PEG Labels, notwithstanding the
possible withdrawal or retirement of one of the partners at some
stage in the
future. The applicants assert that the restraint of
trade encapsulated under clause 9 reinforces such an interpretation.
[8]
The applicants do not dispute that the partnership was eventually
dissolved,
as the court found. They argue, nevertheless, that the
rights and duties created in terms of clauses 8 and 9 survived.
[9]
The example
of an arbitration clause is apt. To that effect, the applicants
referred to
Scriven
Brothers v Rhodesian Hides & Produce Co Ltd and others
,
[3]
where Tindall JA held as follows:
‘…
It is true
that a repudiation of a contract by one party may relieve the other
party of the obligation to carry out the other terms
of the contract
after the date of repudiation, but the repudiation does not destroy
the efficacy of the arbitration clause. The
real object of that
clause is to provide suitable machinery for the settlement of
disputes arising out of or in relation to the
contract, and as that
is the object it is reasonable to infer that both parties to the
contract intended that the clause should
operate even after the
performance of the contract is at an end. If, for example, this
contract had come to an end on a date stipulated
for its termination,
I do not think that it could have been contended successfully that
the arbitration clause was no longer operative.’
[4]
[10]
The
applicants point out that the above principles were also followed in
De Goede
v Venter
,
[5]
where the court held that an arbitration clause had survived the
cancellation of a commercial contract. There was no reason why
the
same principles did not apply in the present case, say the
applicants, where the original partnership agreement had provided
for
the consequences of dissolution.
[11]
Accordingly, the applicants argue that the provisions of clause 8
were triggered by the first respondent’s
instruction to his
attorneys to ‘terminate’ the partnership. The provisions
allowed them to continue with the operation
of the business of PEG
Labels, whether as individuals or associates or otherwise. They
indeed did so, until the conduct of the
first respondent prompted the
need for the relief sought in the main application. The provisions in
question created the right
relied upon by the applicants for an
interdict against the first respondent.
Opposition
to the application
[12]
The respondents have opposed the application for leave to appeal.
They argue, firstly, that the language
of clauses 8 and 9 simply does
not permit the sensible and business-like meaning advanced by the
applicants and emphasise that
Natal Joint Municipal Pension Fund
warned against too liberal an interpretation of the text. The
relevant portion of the judgment stated as follows:
‘…
Judges
must be alert to, and guard against, the temptation to substitute
what they regard as reasonable, sensible or business-like
for the
words actually used. To do so in regard to a statute or statutory
instrument is to cross the divide between interpretation
and
legislation; in a contractual context it is to make a contract for
the parties other than the one they in fact made. The “inevitable
point of departure is the language of the provision itself”,
read in context and having regard to the purpose of the provision
and
the background to the preparation and production of the document.’
[6]
[13]
The language of clauses 8 and 9, assert the respondents, is too
contradictory or ambiguous to allow
the interpretation ascribed
thereto by the applicants. The respondents argue, secondly, that the
common law provides that the partnership
agreement only constrains
the conduct of the first respondent to the extent necessary for the
proper liquidation and distribution
of the assets of the erstwhile
partnership. Any business carried out by the applicants, after the
dissolution of the partnership,
must be considered as the business of
a new partnership unless the opposite was indicated in the original
partnership agreement.
Discussion
[14]
The usual
position, in terms of the common law, is that no provision of a
partnership agreement is binding after dissolution. There
is an
exception to this where the contrary appears from either the
partnership agreement itself or the dissolution agreement.
[7]
Henning observes as follows:
‘
Deeds of
partnership often contain provisions which are intended to apply
after dissolution, for instance, provisions restraining
a former
partner from trading, arbitration clauses relating to disputes
arising from the dissolution and / or liquidation of the
partnership,
clauses regulating the manner of liquidation of the partnership and
provisions concerning the continuation of the
business and the
succession to the rights and liabilities of the partnership on its
dissolution. Provisions such as these will
in general remain
effective notwithstanding the termination of the partnership, but it
has been suggested that it would be advisable
to ensure that the
partnership agreement contains an express provision to this
effect.’
[8]
[15]
From the above, it can well be argued that clauses 8 and 9 of the
partnership agreement constitute
a set of provisions concerning the
continuation of the business of PEG Labels upon its dissolution. The
sensible and business-like
meaning to be given thereto, as contended
by the applicants, is not unreasonable. As laypersons, they would not
have appreciated
the niceties of the common law and had clearly
intended the business to continue, notwithstanding the possible
withdrawal or death
of a partner. It cannot be said that the
applicants’ argument is entirely devoid of merit.
[16]
The
provisions of
section 17(1)(a)
of the
Superior Courts Act 10 of 2013
stipulate that leave to appeal may only be given where the judge
concerned is of the opinion that the appeal would have a reasonable
prospect of success or there is some other compelling reason why the
appeal should be heard. In
Land
and Agricultural Development Bank of South Africa and another v Van
den Berg and others
,
[9]
Opperman J observed as follows:
‘…
The
interpretation of the Rules and the law has evolved in case law since
2013:
1.
In numerous cases the view is held that the threshold for the
granting of leave to appeal was raised
with the inauguration of the
2013 legislation. The former assessment that authorisation for appeal
should be granted if “there
is a reasonable prospect that
another court might come to a different conclusion” is no
longer applicable.
2.
The words in
section 17(1)
that: “Leave to appeal
may only
be given…” and
section 17(1)(a)(i)
that: “The
appeal
would have
a reasonable prospect of success” are
peremptory. “
If
there is a reasonable prospect of
success” is now that: “
May only
be given if there
would be
a reasonable prospect of success.” A
possibility and discretion were therefore, in the words of the
legislation and consciously
so, to a mandatory obligatory requirement
that leave may not be granted if there is not a reasonable prospect
that the appeal will
succeed.
3.
It must be
a reasonable prospect of success; not that another court may hold
another view. The court
a
quo
may
not allow for one party to be unnecessarily put through the trauma
and costs and delay of an appeal…’
[10]
[17]
The test for the granting of leave to appeal, since the enactment of
the
Superior Courts Act 10 of 2013
, has clearly become more
stringent.
[18]
The court previously found, in relation to the main application, that
the partnership had conducted
the business of PEG Labels until 7
March 2021, when it was dissolved by the first respondent.
Consequently, the partnership agreement
had been rendered
non-binding. The business of PEG Labels could not simply have
continued unabated. It appeared, moreover, that
it was being
conducted by the second respondent, trading as PEG Labelling. It was
probable, so the court found, that the second
respondent dealt with
the applicants, in law, as employees and paid them accordingly.
[19]
Having
assessed, nevertheless, the arguments of the applicants in relation
to the present application, the view of the court is
that the
interpretation contended for clauses 8 and 9 is not unreasonable. If
the meaning to be given thereto is that indicated
by the applicants,
then the provisions thereof could well be held to have applied upon
the withdrawal or death of a partner and
to have survived the first
respondent’s dissolution of the partnership. This would have
the implication, in turn, that the
applicants have demonstrated that
they have a protectable right. It would have the further implication
that it could well be found
that the first respondent has interfered
with the applicants’ right to continue the operation of the
business of PEG Labels,
whether as individuals or associates or
otherwise, and that the applicants are entitled to interdictory
relief upon a proper examination
of the remaining requirements.
[11]
In relation to the second respondent, it could well be found that it
conducts an entirely separate business altogether.
[12]
Relief
and order
[20]
The above arguments and implications were not closely considered in
the court’s judgment in the
main application. Consequently, the
court is of the opinion that the applicants’ appeal would have
a reasonable prospect
of success.
[21]
In the circumstances, the following order is made:
(a)
leave to appeal is granted to the applicants; and
(b) the
costs of the present application are those in the appeal.
JGA
LAING
JUDGE
OF THE HIGH COURT
APPEARANCE
For
the applicant:
Adv Cole SC, instructed by Allams
Attorneys,
East London.
For
the respondents: Adv
Miller, instructed by Bate Chubb & Dickson Inc.,
East London.
Date
of hearing:
19
April 2023.
Date
of delivery of judgment: 30 May 2023.
[1]
Sic.
[2]
2012
(4) SA 593
, at paragraph [18].
[3]
1943
AD 393.
[4]
At
401.
[5]
1959
(3) SA 959 (O).
[6]
Natal
Joint Municipal Pension Fund
,
supra
,
n 2.
[7]
JJ
Henning, ‘Partnership’, in
LAWSA
(LexisNexis, vol 31, 3ed, February 2022), at paragraph 491. See,
too,
Rogers
v Mathews
1926 TPD 21
;
Scriven
Brothers
,
op
cit
;
and
Beiles
v Glazer
(1947) 2 PH A79 (W).
[8]
Ibid.
[9]
[2022]
1 All SA 457
(FB).
[10]
At
paragraph [16].
[11]
The
court only dealt with the question of whether the applicants had
demonstrated a
prima
facie
or clear right. Insofar as the court suggested that the pending
action proceedings constituted an alternative remedy, this was
limited to the protection of the applicants’ rights in
relation to the liquidation and distribution of the assets of the
erstwhile partnership.
[12]
The
first respondent asserted, in his answering affidavit to the main
application, that the second respondent trades as PEG Labelling
(not
PEG Labels).