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2021
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[2021] ZAGPPHC 188
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Assen Iron Ore Mine (Pty) Ltd v Franco Le Roux Mining (Pty) Ltd (12441/2021) [2021] ZAGPPHC 188 (19 March 2021)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 12441/2021
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
ASSEN
IRON ORE MINE (PTY)
LTD
Applicant
and
FRANCO
LE ROUX MINING (PTY) LTD
Respondent
J
U D G M E N T
This
matter has been heard in terms of the Directives of the Judge
President of this Division dated
25
March 2020, 24 April 2020 and 11 May
2020
and revisions thereof. The judgment and order are accordingly
published and distributed electronically.
DAVIS,
J
[1]
Introduction
This is the judgment in an urgent
application wherein a small mining company seeks to enforce
compliance of an agreement reached
with a mining services supplier.
[2]
The agreement between the parties:
2.1
On 11 February 2021, that is little more
than a month ago, the applicant, Assen Iron Ore Mine (Pty) Ltd, an
emerging black-owned
and – run mining company entered into a
written mining services agreement with the respondent, Franco Le Roux
Mining (Pty)
Ltd.
2.2
The terms of the agreement relevant to the
current dispute are the following:
“
2.1.
The Service Provider delivers and/or provides the service for the
purpose of crushing calcific and iron ore
and the plant usage thereof
…
3.2
The Service Provider warrants that it had sufficient knowledge and
expertise in all aspects
of the services and has the level of skill
and experience to perform the services. The Services Provider
shall use its best
endeavours, care and skill in performing all its
obligations in terms of this agreement …
4.1
Notwithstanding the date of signature by all parties, this agreement
shall commence on the
effective date and shall continue for 12
(twelve) months period or until final delivery of the services per
this agreement …
7.
Equipment
7.1
The below equipment shall be utilised from time to time as the
specific needs require and
may accordingly be amplified and/or
reduced as may be required form the specific circumstances from time
to time:
Quality
Equipment
Capacity
1
Jaw
Crusher
22 000
kg 224 kw
2
Cone
Crusher
33 000
kg 310 kw
1
4.8
Screen
32 000
kg 88 kw
1
2.8
Screen
29 000
kg 98 kw
1
Excavator
with hydraulic breaker
25
ton
3
Front-end-loaders
20 800
kg 163 kw
1
Excavator
35
ton
1
Excavator
25
ton
7.2
The equipment may be used at the site identified and may not be
removed therefrom …
Fees and remuneration
9.1.1. Site establishment
being payable upfront: R 450 000,00; AGREEMENT TO PAY (R 250 000
upfront and R 200 000
ONCE EQUIPMENT ON SITE) …
9.1.4 The Service
Provider shall, within 2 (two) weeks after payment of the site
establishment fee, have the necessary
plant equipment and within 3
(three) weeks of such payment, crushing will commence.
12
TERMINATION, CANCELLATION AND BREACH OF AGREEMENT
12.1. This agreement
will commence on the effective date and remain in full force and
effect for the duration of the
agreement subject to the parties’
rights of termination as provided in clause 4 and as provided in
clause 11.
12.2. The Services
Provider may terminate this agreement by giving 30 (thirty) calendar
days’ notice to the COMPANY,
provided that nothing shall
preclude either party from terminating this agreement summarily for
any cause recognized in law as
sufficient …
12.4. COMPANY and
Service Provider, viz-a-viz may, by 24 (twenty-four) hours written
notice of termination to the other
party, terminated this agreement
and claim damages r elect to enforce this agreement if, in party’s
sale discretion, the
party:
11.4.1.
has abandoned this agreement or breached a material term
of this
agreement
11.4.2.
has breached any other terms of condition of this agreement
and has
failed to remedy the breach within a period of 2 (two) days after
receiving written notice of the breach
11.4.3.
has persistently or flagrantly neglected to carry out its
obligations
under this agreement …
15.1
Upon termination of this agreement, the COMPANY shall return to
Service Provider all property belonging to
Service Provider,
including but to limited to any equipment, plant equipment, books …
2.3
The “COMPANY” is a reference to
the applicant and the “Service Provider” is a reference
to the respondent.
The effective date was 11 February 2021
being the date on which the Respondent signed the agreement.
The agreement envisaged
some 20 000 tons of ore to be crushed
and a schematic version of the processes, annexed to the agreement,
indicated integrated
use of the screens and made provision for
stockpiling of ore and crushed products. The agreement
contained an arbitration
clause and made provision for interim relief
pending finalisation of any arbitration proceedings. The
reference in clause
12.1 to a clause 11, dealing with termination,
was clearly a reference to the sub-paragraphs of clause 12.4,
numbered 11.4.1 to
11.4.3.
[3]
Chronology
The following is a summary of the
chronology of events leading up to the hearing of the urgent
application:
3.1
On the date on which the applicant had
signed the agreement, 10 February 2021, it already paid the initial
R250 000,00 contemplated
in clause 9.1.1 of the agreement.
3.2
On the 11
th
of February 2021, the respondent delivered a diesel bund at the
applicant’s premises.
3.3
On 15 February 2021, the respondent
delivered the “jaw crusher”.
3.4
On 17 February 2021, the respondent
requested that the applicant provide accommodation for six of the
respondent’s employees,
which the applicant did, at its own
cost.
3.5
On 19 February 2021, the respondent
confirmed that it had delivered the “jaw crusher”, 2
stone crushers, a diesel tank
and an excavator, a stacker conveyer, a
water bowser, “jojo” tanks and another container on site.
3.6
On 25 February 2021 (that is two weeks
after the signing of the agreement), the respondent undertook to
deliver the following outstanding
equipment the next day: steelwork
for the 4,8 big screen and three front-end loaders. Of this,
only the steelwork for the
screen was delivered, but not the rest and
neither was the screen assembled.
3.7
As a result of the delays caused by the
respondent’s failure to proceed with bringing its equipment on
site so that crushing
can begin as agreed, the applicant sent a
letter to the respondent in 2 March 2021. As the respondent
sought to rely on the
contents of this letter for justification of
its later conduct, I quote the contents thereof in full:
“
Good
day Mr F Slabbert,
Assen is currently under immense
production constraints, hence there was a need to get additional iron
ore from different streams.
We have entered on this crushing
and screening contract in order to rectify and resolve our product
output decline.
However, were not satisfied with
delays and other late deliveries that have led to the crushing
process not to start on the agreed
date of 1
st
March
2021. We have explained and agreed with your project managers
the importance of resuming crushing on the 1
st
of March
2021, until now, after 2 weeks:
·
3 front end loaders have not arrived on
site as per agreement
·
Work delay on a 4.8 32t screen
(operators still waiting for Metso to set up)
This shows that we have lost ±1920t
product (or R1, 4m) from our mine production schedule because of
these delays, from yesterday
and today 2
nd
March 2021,
both 12 hr shifts, respectively. Assen will not be able to
recover from this opportunity cost, as we are still
greatly cash
constrained.
It is only fair that Franco Le Roux
to offset at least R 50k (fifty thousand Rand) per day from the
outstanding site establishment
while there is crushing delays.
I
hope this sincere letter finds attention and courtesy from your
company
”
.
3.8
There was no response from the respondent
and neither was there any compliance with its obligations.
Instead, the respondent’s
attorneys wrote a letter on 3 March
2021, advising, inter alia, as follows: “W
riter
confirm (sic) that our office act on instruction from Franco Le Roux
Mining (Pty) Ltd (our client) in the abovementioned matter
and on
(sic) whose behest and instruction this letter and demand is
addressed to you. Our office has been placed in possession
of
your correspondence dated 2 & 3 March 2021 (there was only one
letter) … Our office hold instruction that Assen Iron
Ore Mine
(PTY) Ltd (“Assen”) has failed, refused and/or neglecting
(sic), alternatively is not in a financial position
to attend to
payment of the upfront site establishment amount, which to date has
not been attended to, notwithstanding formal request
for payment,
constituting a formal and material breach of contract between the
parties. It has further been confirmed, on
Assen’s own
account that Assen is experiencing great cash constraints, causing
great concern of Assen’s foreseeable
financial circumstances
and payment obligations. The above, inter alia, constitute
sufficient ground(s) to cancel the agreement,
both as breach of
contract and common law. In the circumstances, out office has
been advised that the agreement …
has been formally cancelled
by our client, alternatively cancelled herewith. It is our
instruction to advise, which we hereby
do, that our client intend
(sic), and will attend to the site in order to collect and remove its
equipment … . should
Assen persist with its attitude and
further prohibit our client, our office shall approach the court on
an urgent basis for the
required relief …
”.
3.9
Hereafter the applicant in writing reminded
the respondent of the terms of the agreement and that the second of
the two site establishment
payments is only payable once all the
equipment has been delivered (and “established”) on
site. A full breakdown
of the calculation of the losses
suffered as a result of the respondent’s delays, in the amount
of R 34 400 200.00,
was furnished. The applicant
demanded that site establishment take place and, if not, that the
dispute be referred to arbitration.
3.10
The respondent did not proceed with site
establishment and via a letter from its attorneys, dated 4 March
2021, confirmed its purported
cancellation and demanded the return of
its equipment in the following terms: “
you
may proceed to arbitration, should you wish, at your own peril, after
our client has removed its equipment from site
”.
3.11
The next day, Friday 5 March 2021 the
applicant wrote that it “…
would
like to find solutions to the challenges we are currently
experiencing and which has delayed the crushing to commence on the
agreed times as per signed agreement …
”.
As a solution to resolve the impasse, a proposal was made that the
applicant rent the necessary outstanding equipment,
that the costs
thereof be set off against the second site establishment payment and
that the parties proceed thereafter to implement
the agreement.
A meeting with the respondent was requested by Monday 8 March 2021.
The respondent, however, would have
nothing of this and still wanted
to remove its equipment, before any negotiation, which the applicant
refused.
3.12
This led the applicant to draft the current
urgent application in respect of which both the founding affidavit
and notice of motion
had been respectively deposed to and signed on 9
March 2021. The urgent application was issued on 10 March
2021. In
it, the applicants, inter alia, claim an interdict
preventing the removal of equipment from site and an order forcing
compliance
with the agreement. This was done on the basis that
the respondent’s purported cancellation of the agreement had
been
unlawful.
3.13
The interdictory relief had, in the
meantime and unbeknown to the applicant, been thwarted by the
respondent who had, ex parte and
without notice, obtained a
provisional order in the Magistrates Court for the attachment and
removal of the equipment by the sheriff.
By the time the urgent
application was heard in this court on 16 March 2021, the respondent
had executed the interim order (the
return date thereof is 31 March
2021).
[4]
Evaluation
4.1
On the papers before the court, no demand
was ever issued by the respondent to the applicant for payment of the
second portion of
the site established fee of R 200 000.
The applicant was not placed in mora and the notice requirements of
clause 11.4.2,
on which counsel for the respondent vainly sought to
rely on in oral argument, had not been fulfilled.
4.2
There was no dispute that, with reference
to clause 9.1.1., that the aforesaid second payment was in any event
only payable after
the necessary equipment had been brought on site
and “established” thereon. This is also how clause
9.1.4. had
to be interpreted, i.e by reading the word “first”
therein. No contrary contention was made by the respondent,
neither in the papers, nor in argument. The respondent’s
counsel, however valiantly tried to argue that the 4.8 screen
and the
three front-end loaders was not necessary at the time (with reference
to the introduction part of clause 7) but this contention
was not
supported by the evidence. In fact, the respondent’s
undertaking of 25 February 2021 referred to in paragraph
3.6 above,
states exactly the opposite.
4.3
The grounds on which the respondent,
through its attorney, sought to rely on as justification for its
cancellation of the agreement,
did not exist:
-
The applicant did not “fail, refuse
and/or neglect” to make the second payment. The payment
was not yet due and
there was never any failure or refusal as
alleged.
-
The allegation of financial inability to
make payment, held “on instruction” by the attorneys, is
without foundation.
-
The reference to cash constraints of the
applicant, was a reference by the applicant to the pressure placed on
it by the damages
suffered as a result of the respondent’s
breaches. The applicant even referred to lost opportunity
costs. The
later letter set out the details of the losses.
Had the respondent performed, not only would the losses have been
avoided,
but the respondent itself would have made money.
-
There was no statement by the applicant
that it could not pay the establishment costs. At best for the
respondent, the applicant
merely suggested that it would be “fair”
in the circumstances to set off some of the losses against the site
establishment
costs. This was a suggestion, not a demand and
never put on the basis that it would be necessary to do so otherwise
the amount
would or could not be paid.
-
What “common law breach” the
attorney otherwise had in mind, was not explained.
-
There was no demand made by the respondent
prior to cancellation, as alleged.
4.4
The consequences of the above is that the
cancellation was unlawful and not authorised in terms of the
agreement.
4.5
From the facts, it appears that it was in
fact the respondent who had breached the agreement.
4.6
The clandestine fashion in which the
respondent had approached the magistrates court for an order for the
return of the equipment,
amounts to an abuse of process. In the
founding affidavit in that court, the respondent’s deponent
even stated that
the respondent (in this application) had “complied
with its obligations in terms of the agreement” and that the
current
applicant had breached the agreement by having failed to pay
the establishment costs “notwithstanding proper request and/or
demand to do so”. On the papers before me, both these
statements are false. The current respondent’s deponent
even went as far as to allege that the applicant (a company) had
committed a deed of insolvency. This is equally not supported
by the evidence.
4.7
Equally unsupported by any evidence (save
for that referred to in the last sentence of paragraph 3.11 above) is
the respondent’s
deponent’s statement to the magistrate
that it had attempted to reach an amicable solution, but to no avail
and the allegation
that, should the applicant get wind of the
clandestine application, it will “dismantle, attempt to
dismantle, strip, hide
or attempt to hide the equipment”.
4.8
The applicant has sufficiently otherwise
satisfied the requirements for an interdict, but the difficulty is
the nature of the relief
claimed, now that the respondent has already
contrived to remove the equipment. However, once the
cancellation is found to
have been unlawful, as I have already found
above, an order holding the respondent to the terms of the agreement
(prayer 4 of the
applicant’s notice of motion) will require it
to abandon reliance on the order that it has “sneaked”
(in colloquial
terms), return the equipment as well as the 4.8 screen
and the three front and loaders. This will, in turn oblige the
applicant
to make payment of the balance of R 200 000.00
establishment fees. The damages will have to be a dispute for
another
day and another court than the urgent court.
[5]
Costs
The general rule is that costs should
follow the event and I find no grounds to deviate therefrom.
Moreover, the respondent’s
conduct, particularly that referred
to in paragraphs 4.6 and 4.7 above, in an attempt to frustrate the
applicant’s rights
or an attempt to avoid its own obligations,
justify a punitive costs order, as claimed by the applicant.
[6]
Order
1.
It is ruled that his matter is urgent as contemplated in Rule
6(12).
2.
The respondent is ordered to forthwith abide by and comply with
the
terms and conditions of the agreement entered into between the
parties on 11 February 2021 and in particular the site establishment
obligations contained therein, including the delivery of the 4.8
screen and three front-end loaders and other euipment contemplated
in
clause 7 of the said agreement.
3.
The respondent is ordered to pay the costs of this application
on the
scale as between attorney and client.
N
DAVIS
Judge
of the High Court
Gauteng
Division, Pretoria
Date
of Hearing: 16 March 2021
Judgment
delivered: 19 March 2021
APPEARANCES:
For
the Applicant:
Adv. A Mahafha
Attorney
for Applicant: BM Mudzuli
Attorney, Johannesburg
c/o
Ernest Nemusombori Attorney, pretoria
For
the Respondent:
Adv. S F Fisher-Klein
Attorney for
Respondent: Phillip Venter Attorney, Pretoria