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[2021] ZAGPPHC 373
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Macsteel Service Centre SA v (Pty) Ltd v Heavy Feather Trading 50 CC (24939/2015) [2021] ZAGPPHC 373 (2 June 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
(1)
REPORTABLE: NO
(2)
OF INTEREST TO OTHER JUDGES: NO
(3)
REVISED: YES
27
May 2021
APPEAL
NO: A 80/2019
CASE NO IN COURT A QUO: 24939/2015
In the matter between:
MACSTEEL SERVICE CENTRE
SA (PTY) LTD
Appellant
(Plaintiff
in court a quo)
and
HEAVY FEATHER TRADING 50
CC
Respondent
(Defendant in court a quo)
JUDGEMENT: APPEAL
(
The
judgement is delivered electronically in accordance with the
Directives regarding special arrangements during the Nation State
of
Disaster. The judgement will be uploaded onto Case Lines to the
electronic file of this matter and will be electronically submitted
to the parties/their representatives by Email. The date of handing
down is 27 May 2021).
BEFORE:
HOLLAND-MUTER AJ
, (
MABUSE J
&
BAM AJ
confirming).
[1] This is
an appeal against the judgement of Khumalo J, sitting as the court of
first instance on 9 March 2018. Khumalo J dismissed
the appellant’s
claim against the respondent and the appellant’s subsequent
application for leave to appeal. The appellant,
Macsteel Service
Centre of South Africa (“MSC”) petitioned and the Supreme
Court of Appeal granted leave to appeal
on 7 September 2018.
CONDONATION:
[2] MSC filed
an application for condonation for the late prosecuting of the appeal
and re-instatement of the appeal in terms of
Rule 49(6) (b) of the
Uniform Rules of Court. The reason for the application was inter alia
caused by a delay to timeously
obtain a copy of the
transcription of the record from Digital Audio Recording
Transcriptions.
[3] An
incomplete record was received and despite several attempts to
correct the situation, the record was filed a month late after
receiving the complete record. Kari Van Rooyen, the attorney seized
with the appeal, also stated that she was inexperienced in
this
regard and made a bona fide oversight when calculating the time frame
within which the record should have been prepared and
filed with the
registrar’s office.
[4] The
lodging of the record one month late in the court’s view does
not warrant the appeal to be struck. The respondent
did not oppose or
object to the application and in view of no prejudice, condonation is
granted.
CAUSE OF
ACTION:
[5] MSC
issued summons against the respondent (Heavy Feather Trading 50
CC referred to as “HF”) in the court a
quo claiming
payment of an amount of R 432 788,11 (Four Thousand and Thirty Two
Thousand Seven Hundred and Eighty Eight Rand and
Eleven Cents), the
alleged balance of an amount that a company called CC Trade 406 CC
trading as Xtreme Profiling (“XP”)
owed to MSC and that
HF agreed to pay the outstanding amount.
[6] MSC
alleges that the HF was in breach of the agreement in that it failed
to settle the balance on demand after agreeing to pay
the XP debt
towards MSC in full. HF denied being indebted to the MSC and pleaded
that the agreement was subject to the condition
that should HF not
take over the business of XP, the amounts paid by HF towards MSC will
be repaid by MSC (or to be set off against
any debts owed by HF to
the MSC)
[7] HF made
several payments towards the MSC and that on its own calculation,
taking into account the amounts it paid towards the
MSC, owed the MSC
the amount of R 166 439,89 (One Hundred and Sixty Six Thousand
Four Hundred and Thirty Nine Rand and Eighty
Eight Cents. This amount
was paid and the MSC admitted receiving such payment.
THE FACTS
IN THE COURT A QUO:
[8] In order
not to repeat all the evidence presented in the court a quo, the
following summary will suffice.
[9] MSC, or
one of its divisions (Macsteel Trading), was a major supplier of
steel in the Emalahleni/Middelburg area in Mpumalanga.
XP was a long
standing client of MSC and previously entered into a written credit
agreement with MSC on 12 April 2010. MSC supplied
XP with steel
products on credit in terms of the credit application agreement
between XP and MSC. XP fell into arrears towards
MSC for steel
received and was indebted to MSC in the amount of R 1 620 287,01
at the beginning of 2013.
[10] At that
stage HF was a shelf company with no ties with either MSC or XP. Mr
Kaplesh Dajee (“Dajee”), a businessman
in the wholesale
liquor business, for reasons not applicable on this matter, decided
to leave the liquor trade and to enter into
a business where the
handling of cash was not a daily part of business. For obvious
reasons the steel business in Middelburg seemed
to be the answer.
Dajee acquired HF with the purpose to use HF as the vehicle for the
proposed venture into the steel trade.
[11] XP was
indebted to MSC at that stage in the amount of R 1 332 788,
11 for steel products sold and delivered in terms
of the existing
credit agreement between XP and MSC. It was known that XP was in a
financial struggle. Dajee heard about XP’s
predicament in his
quest to enter the steel business and entered into negotiations with
the members of XP, inter alia at first
to purchase three machines
from XP and to consider a possible takeover of the XP business at a
later stage if viable.
[12] XP
needed a cash injection of about R 1 million resulting in Dajee (via
HF) purchasing three machines from XP for the amount
of R 1 million
during August 2013. XP had two other machines subject to lease
agreements with Nedbank which Dajee did not purchase.
[13] Dajee
(HF) ventured into the steel business and started trading for own
account from the same building premises from which
XP was operating
its own business. HF initially bought steel from suppliers (including
MSC) for cash and HF was operating
its business apart from XP’s
business for own account.
[14] Dajee
approached MSC and negotiated with Hoffman representing MSC for HF to
purchase steel from MSC. MSC at first supplied
HF with steel for cash
but Dajee later approached Hoffman (MSC) for credit facilities and
they entered into a credit facility agreement
on 12 September 2013.
[15] Dajee
and Hoffman differ from one another on the terms of the oral
agreement between the parties. Hoffman testified that they
agreed
that HF will unconditionally pay all outstanding debts (R 1 602 000,
00) owed by XP to MSC in exchange for a credit
facility. Dajee’s
version is that he (HF) agreed to make monthly payments towards MSC
in respect of XP’s outstanding
debts
on condition
that
should HF ultimately take over the business of XP as a running
concern, the payments made (the initial post-dated cheques for
R
50 000 per month) will be set off against the outstanding XP
debts, but should HF not take over the business of XP, MSC
will repay
those payments made to HF (or set off will apply if HF owed MSC any
monies for steel received from MSC).
[16] Hoffman
further contended in the court a quo that should the court accept
Dajee’s version of the contract, the court
should in the
alternative find that HF ultimately took over the business of XP and
that the condition was fulfilled. Dajee denied
that the takeover
occurred. According to Dajee the reason why HF was interested in
taking over XP was because of its client base
and to
springboard
it into the steel industry. This did not materialize because of
the massive existing debts of XP amounting to more than R 9 million
and disagreement with the members of XP regarding the building as an
asset and that XP was too deep in debt.
[17] There
were other different nuances between the versions of Hoffman and
Dajee as to the number of meetings held between the
parties,
Hoffman’s interpretation of HF’s proposed takeover of XP
shares by HF and whether the actions of HF indeed
amounted to the
takeover of XP’s business. Dajee was clear that HF did not take
over the business of XP for reasons set out
above. Dajee’s
uncontested evidence was that when HF started operating from the same
building where XP was, XP had no stock
to trade. It later became
clear to Dajee that it was not financially viable to take over XP
with its existing debts and nothing
came about the possible purchase
of XP shares by HF. There were also other reasons why Dajee decided
against a takeover regarding
the members of XP and the building from
where XP operated.
[18] The
following aspects were also raised in the Court a quo:
(a) The identity of the plaintiff (appellant):
There
was some confusion as to the identity of the appellant. The issue was
whether the appellant was MSC or Macsteel Trading (“MT”).
It seems that there was/is a group of entities generally known as the
Macsteel Group operating in such close collaboration that
even Mr
Hoffman (who was the main witness on behalf of MSC) did not know
exactly how it was structured and whether the one entity,
Macsteel
Trading, was deregistered. He was called a director but was never
reflected as a director on the Cipro documents. This
point was not
taken further. It seemed that all transactions by MT were purportedly
ascribed to MSC. The trial court obiter found
that because this was
not part of the discourse before the court, the matter could not
escape scrutiny. There were unsatisfactory
explanations that previous
registered entities were dormant and/or became divisions of MSC. This
confusion does not have any bearing
on the dispute between the
parties but reflected on the credibility of Hoffman.
(b) The terms of the agreement:
The
appellant made much of the origin of a letter dated 8 April 2014 but
the trial court ruled in favour of the respondent as to
the origin
and the value thereof. The court a quo ruled that MSC did not prove
on a balance of probabilities that the email originated
from Dajee.
The finding of the trial court took much of the sting out of MSC’s
argument. The court will deal below with the
credibility finding of
the court a quo and when a court of higher instance will intervene
with a credibility finding.
(c) The series of cheques:
The
Parties initially agreed that HF would give MSC a series of 12
post-dated cheques in the amount of R 50 000 per cheque.
The
cheques amounted to R 600 000 and is less than 50 % of XP’s
outstanding debt. If it was a term of the agreement
that the cheques
were given as future payment of XP’s debt like Hoffman avers,
one would expect that the total of the amounts
of the cheques would
be equal to the outstanding debt of XP. When the cheques were later
returned and exchanged for cheques of
R 25 000 each, these
amounts of the cheques still did not equate to the full outstanding
debt. This supports the version by
Dajee’s that these payments
were to be set off against the debt of XP after MSC granted HF credit
on account for steel products
and not as an unconditional payment of
XP’s debts.
(d) The version of the agreement:
Hoffman
testified that the agreement was unconditional and that HF would
receive credit facility from MSC in return for the payment
of XP’s
debt. Dajee’s version was that the monthly payments were made
on behalf of XP towards MSC
on condition
that should HF
take over XP’s business, the payments will be credited to HF’s
account. Should it not realize, MSC will
refund HF the balance after
clearing HF’s account with MSC. The later replacement of the
cheques with new post-dated cheques
in the amount of R 25 000
did not alter the terms of the agreement according to Dajee. The
court a quo held that if it was
that the cheques were for HF to pay
the full debt of XP the appellant would have required HF to furnish
post-dated cheques for
the full outstanding amount. The first series
of cheques covered only half of the outstanding debt. The dispute
with regard to
the condition remained unresolved between the parties.
The trial court held that this confirmed Dajee’s version that
the
payments were conditional. The Court a quo held that because the
suspensive condition was not fulfilled, HF was entitled to repayment
of the payments made. See
Barenblatt v Son & Dixon
1917 CPD
319
and
Rhoode v De Kock
[2013] 2 All SA 389.
(e) HF’s claim to set off of the payments
made against the credit it received
from MSC was not replied to by the appellant resulting
in it being
uncontested. HF claimed that in terms of the credit
facility HF ceded all
of its rights, title and interest in the debt MT owed to
HF in the amount
of R 575 000 to MSC, being the amount paid by HF to
MT in
anticipation of the possible takeover of XP by HF. The
takeover did not
materialized and after the set off, HF was indebted to
MSC on the
credit facility in the amount of
R 166 439,89. This amount was paid on
21 April 2015 and HF was no longer in debt to MSC.
(f) The court a quo made a credibility finding in
regard of Hoffman,
Schoeman and Dajee and found that the version of Dajee
was
consistent, probable and logic when compared with that
of Hoffman
and Schoeman. Their versions were rejected.
(g) The court a quo accepted Dajee’s version that
HF did not take over the
business of XP but merely purchased the three machines
from XP. The
question of whether HF needed the vendor number of XP to
enter
and continue in the steel market was denied by Dajee and
it is not
contested that HF obtained its own vendor number and
proceeded
with trading in the steel business. XP remained in
possession of two
other machines and remained on the premises to continue
with
business. HF did not take over the business of XP but
started its own
business from the premises.
ON APPEAL:
[19] The
thrust of argument on behalf of the appellant by Mr Rossouw in his
heads of argument were the following:
(a)
The trial Judge ignored the methodology to be
followed as summarised
in
Stellenbosch Farmers’ Winery Group
Ltd v Martel & Cie 2003(1) SA;
(b)
The version of the respondent was inherent absurd
in that once it has received and utilized the credit of R 1 million
it can simply
say it is no longer taking over XP’s business;
(c)
That HF undertook to pay the full outstanding
amount owed by XP to MSC as “
counter
performance”
for a credit facility of R
1 million to allow HF to
enter
the steel industry and to conduct business from the same premises as
XP; and
(d)
The court erred in finding that Dajee’s
version was more probable
despite
displaying a questionable relationship with the truth;
[20] Mr
Wesley argued that the court a quo was correct in finding in favour
of HF and that HF did not take over the business of
XP but purchased
three machines from XP to enter the trade.
EVALUATION:
[21] The
technique generally used by the courts when confronted with two or
more irreconcilable versions is well known as set out
in the
Stellenbosch case supra par 5.
To come to a conclusion, a
court will find on (i) the credibility of various factual witnesses;
(ii) their reliability and (iii)
the probabilities.
[21] The
argument that the trial court ignored the methodology to be followed
as set out in the
Stellenbosch case supra
is without merit. A
court does not have to mention a reported case to indicate the
application thereof. It is clear from the discussion
by Khumalo J
that she applied the test when confronted by two irreconcilable
versions. The court is satisfied that the court a
quo indeed
evaluated the evidence as required. Khumalo made credibility findings
with regard to the witnesses and the probabilities
after evaluating
the evidence in its totality. The court disagrees with Mr Rossouw on
this aspect.
[22] A
similar approach is to be found in
Dreyer v Axzs Industries
2006
(5) SA 548
SCA and in National Employers’ General Co Insurance
v Jagers
1984 (4) SA 437
E at 440D.
The court a quo did weigh and
compare the different versions before coming to the conclusion that
the version of Dajee is more probable
than that of Hoffman. The court
a quo had the opportunity to observe the witnesses also with regard
to demeanour before ruling
in favour of the defendant (HF). The
trial court also made an adverse credibility finding in respect of
the appellant’s
witness Schoeman. This court did not have that
opportunity to observe the witnesses and will only intervene when it
is very clear
that the trial court erred in this regard.
[23] It is
trite that a court of appeal is very reluctant to reverse the
decision of the court of first instance and to upset the
findings of
the trial court. The trial court had the opportunity to hear the
witnesses, to observe their demeanour and comparing
all the
witnesses’ performances when evaluating the evidence as a
whole. Although a litigant is entitled to a rehearing,
it is limited
to the principles as summarized in
R v Hlatswayo & Another
1948 (2) SA 677
A at 705-6
and
Herbtsein & Van Winsen, The
Civil Practice of the Supreme Court of South Africa 4
th
ED p 916-918.
[24]The
version by Hoffman that HF would not be able to trade without XP’s
vendor number was denied by Dajee. He testified
that HF did not need
XP’s vendor number but that HF obtained its own vendor number.
There was no evidence that HF was indeed
struggling without a vendor
number and that MSC refused HF sales without XP’s vendor
number.
[25]The issue
of the shares of XP was raised by Schoeman on behalf of MSC and Dajee
did not make much thereof but stated that after
investigation of the
financial position of XP, it made no business sense to purchase the
shares. The court a quo held that Dajee’s
version with regard
to the shares was the more probable version.
[26] A
further aspect in favour of HF’s version to deliver the
post-dated cheques to MSC is that if it was as stated by Hofmann,
all
that HF would receive for payment of R 1 million to MSC is a credit
facility. This makes no business sense at all for HF.
[27] It is
highly unlikely that the reasonable business person would enter into
such an agreement where his business has to pay
R 1 million only to
receive a credit facility in return thereof. On Hofmann’s
version HF would pay R 1 million for a credit
facility alone
but
will still have to pay for all other purchases made on account. The
opposite is more probable in that payments made will be returned
to
HF should HF’s taking over of XP did not materialise or that
the payments would be set off.
[28] The
alleged
inherent absurdity
as referred to by Mr Rossouw
in his heads of arguments (par 10) is not persuasive at all. There is
no merit in arguing that HF would
after utilising the credit facility
to turn around and say: “
Thank you for the credit but I am
not taking over XP’s business”.
MSC would by way of
ordinary contractual principles be entitled to recover the full
purchase price from HF for any steel sold and
delivered on credit
irrespective of any other payments made or not made.
[29] It ought
to be remembered that MSC was in the process of winding up XP but
withdrew its application for some undisclosed reason.
Without
speculating, it is a reasonable inference that MSC by receiving
“payment” from HF for XP would receive full
payment from
HF for XP preferring it above other creditors and thereby avoid the
consequences of the Insolvency Act of probably
receiving a small
dividend or be obliged to contribute to the liquidation process.
[30] If
Hoffman’s version is accepted, MSC would benefit by receiving
full payment on behalf of XP and full payment by HF
for any sales
made while HF will be worse off by more than R 1 million for a mere
credit facility. Such a proposition is highly
improbable and makes no
business sense and on this alone the version of Hofmann cannot stand.
Hoffmann’s version is most
unlikely and improbable if compared
with the version of Dajee. This version by Hoffman makes no financial
sense.
[31] This
court finds no misdirection by the trial court in any way and the
appeal can therefore not succeed.
We therefor
make the following order:
The appeal is
dismissed with costs.
J
HOLLAND-MUTER
Acting Judge
of the Pretoria High Court
P MABUSE
Judge of the
Pretoria High Court.
N BAM
Acting Judge
of the Pretoria High Court
(Appeal heard
on 28 April 2021.
Judgement on
CaseLines on 2 June 2021)
On behalf
of Appellant
Counsel:
A B ROSSOUW
SC :
alwynrossouw@icloud.com
Attorney:
Jonker
Vorster Inc c/o Phillip Venter Attorneys.
Kari van
Rooyen : kari@pvlaw.co.za
On behalf
of Respondent:
Counsel:
C P WESLEY:
advwesley@vodamail.co.za
Attorney:
Friedland
Hart Solomon & Nicolson :
Mr Stolp
adb@fhsn.co.za