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[2022] ZAFSHC 360
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Cheetah Fire Services CC and Another v Koorsen and Others (A24/2022) [2022] ZAFSHC 360 (22 December 2022)
IN THE HIGH COURT OF SOUTH AFRICA
(FREE STATE DIVISION, BLOEMFONTEIN)
Case number: A24/2022
Reportable: YES/NO
Of Interest to other Judges: YES/NO
Circulate to Magistrates: YES/NO
In the matter between:
CHEETAH FIRE
SERVICES
CC
1
st
Appellant
DORAH MOSILI
NTSIKA
2
nd
Appellant
And
BELINDA
KOORSEN
1
st
Respondent
GERHARD
JACOBUS
KOORSEN
2
nd
Respondent
LEONI
SNYMAN
3
rd
Respondent
CORAM:
NAIDOO, J, DANISO, J,
et
POHL, AJ
JUDGMENT
BY:
POHL, AJ
HEARD
ON:
02 DECEMBER 2022
DELIVERED
ON:
22 DECEMBER 2022
INTRODUCTION:
[1]
This is an appeal to the Full Bench of this Division against a
judgment of Boonzaaier,
AJ delivered on 18 June 2021. Leave to appeal
to the Full Bench was granted by Mathebula, J on 11 February 2022.
[2]
The Appellants however failed to timeously apply for a date for the
hearing of this
appeal as envisaged by Rule 49(6)(a) of the Uniform
Rules of Court and that caused the appeal to lapse. The Appellants
thereafter
applied for condonation and the reinstatement of the
appeal in terms of Rule 49(6)(b), which was not opposed by
Respondents. This
Court found that the Appellants have shown good
cause for the reinstatement of the appeal. In the premises, and at
the outset of
the arguments before this Court, condonation was
granted to the Appellants for the non-adherence to the time period
for the filing
of their application for leave to appeal and the
Appellants were ordered to pay any costs occasioned thereby.
THE BACKGROUND:
[3]
In essence, this appeal involves an application which was launched by
the Appellants
in the Court
a quo
seeking to enforce a
restraint of trade, the protection of confidentiality and the sale of
goodwill. This followed the sale of
the business referred to below.
[4]
In this Court, the Appellants were represented by Advocate Paul
Zietsman SC and the
Respondents were represented by Advocate A
Sander.
[5]
The relevant portion of the Notice of Motion that served before the
Court
a quo
reads as follows:
“
2.
That a rule nisi be hereby issued, calling upon the Respondents to
show
cause, if any, on or before 29 April 2021 at 09h30 why an order
in the following terms should not be made final:
2.1
Ordering the Respondents to return all confidential information of
the Applicants,
including but not limited to the First Applicant
’
s
documentation as particularised and listed in annexure “NOM1”
appended hereto and any other documentation of the Applicants
which
is currently in the Respondents or any of the Respondents’
individual possession, or stored on the data base of the
respective
Respondents, to the Applicants with immediate effect.
2.2
Ordering the Respondents to thereafter, destroy and/or delete in the
presence
of the Applicants
’
representatives,
any confidential information of the Applicants, as particularised and
listed in annexure “NOM1” appended
hereto and/or any
other documentation of the Applicants which is currently in the
possession or on the data base of the Respondents
or any of the
Respondents’ individual possession.
2.3
Ordering that Third Respondent to provide the Applicants with a
signed copy
of the employment agreement entered into between herself
and the Applicants within 24 hours
’
of
this order having been granted.
2.4
That the Respondents are interdicted and restrained from issuing any
correspondence,
placing any orders or acting in any manner on behalf
of the First Applicant.
2.5
That the Respondents are interdicted and restrained from acting
forthwith under
the name and style of the First Applicant.
2.6
That First, Second and Third Respondent be interdicted and/or
restrained from
utilising in any manner, the confidential information
and trade connections of the Applicants.
2.7
That the First, Second and Third Respondents be interdicted and/or
restrained
from contacting or soliciting or continuing to deal with
the Applicants
’
clients,
agents and suppliers.
2.8
That the Respondents are interdicted and restrained from directly or
indirectly
using or disclosing the confidential information and/or
proprietary interests of the First Applicant, in any manner or for
any
reason or purpose whatsoever.
2.9 That the
First Respondent is interdicted and restrained from:
2.9.1
making available any document and/or information pertaining to the
First Applicant
and any person or the general public without the
written consent of the Second Applicant;
2.9.2
conducting business in either direct or indirect competition with the
First Applicant
for a period of ten (10) years with effect from 25
May 2020 and in the Free State or Northern Cape, in any capacity
whatsoever,
directly or indirectly.
2.10 That the Second
Respondent is interdicted and restrained from:
2.10.1
conducting business in either direct or indirect competition with the
First Applicant for a
period of ten (10) years with effect from 2
March 2021 and in the Free State or Northern Cape, in any capacity
whatsoever directly
or indirectly;
2.10.2
making available any document and/or information pertaining to the
First Applicant or any person
or the general public without written
consent of the Second Applicant.
2.11 That the Third
Respondent is interdicted and restrained for a period of one (1) year
with effect from 1 March 2021 and
in the Free State, in any capacity
whatsoever, directly or indirectly, from:
2.11.1
involved as a shareholder, partner or member of any close corporation
or director of a company
carrying on or in any other capacity
whatsoever in any business conducted in competition with the First
Applicant in any manner
whatsoever, whether directly or indirectly;
2.11.2
making public any of the confidential information of the First
Applicant, without the consent
of the Applicants.
3.
That the orders set out in paragraph 2 above shall operate as an
interim interdict
pending the finalisation of this application.
”
[6]
The First and Second Respondents built-up a business over some 14
years which was
operated as Cheetah Fire Services CC (the First
Appellant). This business was then sold to the Second Appellant as a
going concern.
The member’s interest in the First Appellant was
sold to the Second Appellant by the First Respondent in terms of a
written
sale agreement concluded at Bloemfontein on 25 May 2020
(hereinafter referred to as “
the sale agreement
”).
The sale agreement was concluded between the Second Appellant,
personally, and the First Respondent, personally. A copy
of the sale
agreement is appended to the founding affidavit as annexure “FA4”.
It is important to note that the Second
Respondent and the Third
Respondent were not parties to the sale agreement.
[7]
In terms of clause 7 of the agreement of sale, the purchase price for
the business
amounted to R100.00 which was payable on or before 1
June 2020.
[8]
What is of extreme importance in this matter is that in clause 20 of
the sale agreement,
which contains the suspensive conditions and,
more particularly, clause 20.2.1, the parties agreed that the Second
Appellant would
employ the Second Respondent for a period of ten (10)
years on the basis that he would be remunerated at a rate of R65
000.00 per
month.
[9]
In the said clause 20 the parties agreed that the First and Second
Respondents would
be subject to a restraint of trade for a period of
ten (10) years in the area of the Free State and Northern Cape. The
Second Respondent
on the basis that he is, as indicated above,
remunerated for his employment at the said rate of R65 000.00
per month.
[10] In
paragraph 20 of the Respondents’ answering affidavit, attested
to by the First Respondent,
she declared that the purchase price
sought for the business by her was R7.8 million. In paragraph 22 of
the said answering affidavit
the Second Respondent declares that the
Appellants’ attorney, Willers, advised that due to the Second
Appellant, not being
able to pay the purchase price in one lump sum
and for purposes of capital gains tax, the business should be sold
for R100.00 to
the Second Appellant and that the First Appellant
(seller) then pay the Second Respondent a salary for ten (10) years
and that
payment of the salary would constitute payment of the
purchase price. The Second Respondent had to be paid R65 000.00 per
month.
R65 000.00 x 12 months x 10 years = R7,8 million. This aspect
was not contradicted by the Appellants in the replying affidavit and
the contract itself reflected this in clause 20.2.1.
[11]
Clause 20.9 of the sale agreement, which forms part of the
abovementioned suspensive conditions,
placed an obligation on the
Second Appellant to take out an income protection policy in favor of
the Second Respondent. The Second
Appellant failed to do so.
[12]
After the sale of the business, the Appellants fell into
arrears with the payment of the Second
Respondent’s salary. The Second Respondent then resigned from
his employment on
2 March 2021.
His
letter of resignation appears at page 59 of volume 1 of the record of
appeal. In this letter of resignation, the Second Respondent
indicates that the reason for his resignation is the fact that he was
not paid his salary for two months. At the time the Appellants
were
thus in arrears with the payment of the Second Respondent’s
salary in the amount of R130 000.00. Put differently, only
R390 000.00 (or 5%) of the true purchase price of R7.8 million
was paid by the Appellants by then.
[13] The
abovementioned application with the
rule nisi
first served
before Mhlambi, J. After arguments on behalf of both the Applicants
and the Respondents at that stage, he granted the
rule nisi
with
the said return date. Boonzaaier, AJ thus dealt with the matter on
the eventual return day.
[14]
Boonzaaier, AJ ordered as follows on 27 May 2021:
“
1.
The application against the First, Second and Third Respondent is
dismissed.
2.
Costs to follow suit on a party and party scale.
”
[15] She
then gave her reasons for the order on 18 June 2021.
THE APPLICABLE LEGAL FRAMEWORK:
[16] It
is trite that in appeals, the appeal lies against the order and not
the reasons therefor.
[17] It
was submitted on behalf of the Appellants that it is common cause
that the sale agreement
was
perfecta
and that the business was
therefore sold. It was however contended on behalf of the Respondents
that the abovementioned clause
20 of the written contract, contained
a number of suspensive conditions and that these suspensive
conditions were not fulfilled.
The submission was further that the
resultant effect of the non-fulfilment of the suspensive conditions
is two-fold, firstly, it
avoids the contract being validly concluded
and secondly, if validly concluded, there was a material breach of
the terms of the
agreement by the Appellant preceding the alleged
breaches by the Respondents.
[18] The
first question that falls for decision is whether or not the contract
was indeed
perfecta
as submitted by Mr. Zietsman. In the
decision of
Starways Trading 21 CC (in liquidation) and others v
Pearl Island Trading 714 (Pty) Ltd and another
2019 (2) SA
650
(SCA) the following
dicta
is found at page 654
paragraph [9]:
“
[9]
It is trite that at common law the risk and benefit in respect of the
thing sold pass to the purchaser when
the contract of sale becomes
perfecta, even though delivery may take place thereafter. A contract
of sale becomes perfecta when
agreement is reached on the two (2)
essential elements for the thing sold and the price,
and
the contract is not subject to a suspensive condition.
(my
emphasis)
See
:
Glover Kerr’s
Law of Sale and Lease, 4
th
Edition (2014) pp. 306 and 310;
Hackwill,
Mackeurtan’s Sale of Goods in South Africa, 5
th
Edition (1984), p. 180.
”
[19] The
relevant portion of the abovementioned clause 20 of the written
contract of sale,
inter alia
reads as follows:
“
Hierdie
ooreenkoms is onderhewig aan die volgende,
gesamentlike
opskortende voorwaardes,
naamlik:
20.1.1
Die verkoper onderneem en stem toe dat hy nie in direkte of indirekte
kompetisie met die koper sal handeldryf in die area soos
gespesifiseer hieronder nie vir
‘
n
periode van tien (10) jaar na die bepaalde datum nie.
20.1.2
Die gebied soos hierbo genoem is as volg:
20.1.2.1 Vrystaat en
Noordkaap.
20.2.1
Die koper kom ooreen om Mnr Gerhard Jacobus Koorsen aan te stel vir
‘
n periode van tien (10) jaar
teen vergoeding van R65 000.00 per maand netto.
20.2.4
Mnr Gerhard Jacobus Koorsen se aanstelling is ook onderworpe daaraan
dat hy homself ook bind
aan die handelsbeperking en stilswyende
klousule op dieselfde terme en voorwaardes vermeld in paragraaf 20.1
hierin.
20.9
Die koper sal toesien dat ‘n inkomstebeskermingspolis of ander
soortgelyke
produk uitgeneem word tot voordeel van Mnr Koorsen indien
hy ongeskik raak om welke rede ookal as sleutel werknemer.
[20] It
is therefore, in my judgment, clear that the contract was subject to
suspensive conditions.
On a proper reading of the contract, it is to
my mind clear that the enforceability of the restraint of trade and
the payment of
the Second Respondent in the amount of R65 000.00 per
month were part and parcel of the “gesamentlike opskortende
voorwaardes”.
The Second Appellant (purchaser) did not honor
her obligation to pay the Second Respondent’s monthly
remuneration of R65
000.00. The policy referred to in clause 20.9 was
also never taken out. The suspensive conditions were thus not
fulfilled. In the
clear wording of Clause 20, the whole agreement was
subject to the “joint” (“gesamentlike”)
suspensive
conditions. The agreement thus never came into being,
including the restraint of trade relied on by the Appellants. The
same applies
to the sale of the goodwill and the confidentiality
applicable to the sale of the business because it is inextricably
linked to
the validity of the agreement and whether or not it came
into being. In this Court’s judgment, the agreement of sale
thus
never became
perfecta.
[21]
Even if this Court is wrong with regards to accepting the
abovementioned suspensive conditions
as such, then at the very least,
the contract is a simulated contract with regards to the purchase
price. The purchase price was
never R100.00 but instead it was R7,8
million as indicated above. If the actual purchase price amounts to a
factual dispute, it
should in my judgment be dealt with by applying
the so-called
Plascon-Evans
-rule.
It is trite that this rule
emanates from the well-known case
of
Plascon-Evans Paints Limited v Van
Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A). In essence, it
entails that the relief an Applicant claims should only be granted if
the facts stated by the Respondent, together
with the admitted facts
in the Applicant’s affidavits justify such an order. In
applying this rule, it follows that since
the Respondents, as alluded
to above, clearly stated that the R65 000.00 monthly payment over a
period of ten (10) years constitutes
the purchase price, and given
the fact that the Appellants did not dispute that in reply, justifies
the inference that the true
purchase price was in fact R7,8 million.
This is furthermore fortified by the clear provisions of clause
20.2.1 of the contract.
The true purchase price was thus never
R100.00.
[22] It
is trite that when parties enter into a simulated transaction, the
Court must give effect
to the true intention of the parties. In this
regard this Court in the decision of
Long Oak Ltd v Edworks (Pty)
Ltd,
1994 (3) as 370
(SE), dealt with this aspect
when it quoted, with approval, the decision of
Zandberg v Van Zyl
1910
AD 302
at 309
:
“
Now, as a
general rule, the parties to a contract express themselves in
language calculated without subterfuge or concealment to
embody the
agreement at which they have arrived. They intend the contract to be
exactly what it purports; and the shape which it
assumes is what they
meant it should have. Not frequently, however (either to secure some
advantage which otherwise the law would
not give or to escape some
disability which otherwise the law would impose), the parties to a
transaction endeavor to conceal its
real character. They call it by a
name or give it a shape, intended not to express but to disguise its
true nature. And when a
Court is asked to decide any rights under
such agreement, it can only do so by giving effect to what the
transaction really is;
not what in form it purports to be. The maxim
then applies plus valet quod agitur quam quod simulate concipitur.
But the words
of the rule indicate its limitations. The Court must be
satisfied that there is a real intention definitely ascertainable,
which
differs from the simulated intention. For if the parties in
fact mean that the contract still have effect in accordance with its
tenure, the circumstances that the same object might have been
attained in another way will not necessarily make the arrangement
other than it purports to be. The enquiry, therefore, is in each case
one of fact, for the right solution of which no general law
can be
laid down.
”
It is in my judgment clear that if one
applies this test to the facts
in casu
, it justifies the
inference that the parties intended to disguise the true purchase
price of R7.8 million, as stated in the answering
affidavit, for
purposes of avoiding capital gains tax and mainly because the Second
Applicant was not able to pay the purchase
price in one lump sum.
[23]
What is however patently clear is that the contract has reciprocal
obligations. See in this regard
Van Der Merwe, Van Huyssteen,
Reinecke, Lubbe,
Contract, General Principles, Third Edition at
p388 to p398. What the Appellants were attempting to do in this
application that
served before the Court
a quo
, was to enforce
the restraint of trade on the Respondents, without honoring their own
reciprocal obligations, namely to pay the
Second Respondent the R65
000.00 per month remuneration for a period of ten (10) years. Put
differently, the Second Appellant paid
the Second Respondent the
monthly remuneration for a short period of time but now wants the
Court to sanction the restraint of
trade for the full ten years and
this despite paying only 5% of the purchase price.
[24]
In this Court’s judgment, the Appellants are not entitled to
claim enforcement of the contract
(the restraint, confidentiality and
goodwill), when they themselves are in breach thereof. The Court
a
quo
was
therefore correct to dismiss the application, even though it was for
different reasons. In view of this Court’s finding
with regard
to the true nature of the contract as indicated in paragraphs [18] to
[23], supra, it matters not whether the Appellants’
claims
relate to confidentiality, goodwill, or restraint of trade. The
Appellants have not made out a case for the relief sought
for one or
more or all of the abovementioned reasons.
[25]
Insofar as the relief sought by the Appellants against the Third
Respondent, it is clear that
this relief had become moot as the
restraint of trade sought to be imposed against the third Respondent
was for a period of one
(1) year effective from 1 March 2021, which
period would have expired on 1 March 2022.
CONCLUSION:
[26] In
this Court’s judgment the Court
a quo
was correct in not
confirming the
rule nisi
. It should however have discharged
the
rule nisi
and then dismissed the application, and to that
limited extent the appeal succeeds. The Respondents were however
substantially successful
in the appeal and there is no reason why the
order as to costs should not follow suit.
ORDER:
[27] The
following order is thus made:
1.
The appeal is dismissed with costs.
2.
The order of the Court
a quo
is set aside and substituted with
the following order:
“
1. The
rule nisi issued on 29 March 2021 is discharged.
2. The
application is dismissed, with costs.
”
L LE R POHL AJ
I concur:
S NAIDOO, J
I concur:
NS DANISO, J
On behalf of the
Appellants:
Advocate Paul Zietsman SC
Instructed
by:
Stander & Associates, Bloemfontein
On behalf of the
Respondents:
Advocate A Sander
Instructed by:
Hill, McHardy & Herbst, Bloemfontein