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[2019] ZAKZPHC 33
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Krishna v Magnet Electric Supplies (Pty) Limited (1097/18) [2019] ZAKZPHC 33 (10 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL LOCAL DIVISION,
DURBAN
CASE NO: 1097/18
In
the matter between:
ROSHAN
KRISHNA
APPLICANT
and
MAGNET ELECTRICAL SUPPLIES (PTY)
LIMITED
RESPONDENT
ORDER
1.
The
respondent is directed to pay to the applicant the sum of R560 000
within five (5) days of the date of this order.
2.
The
respondent is directed to pay interest on the above amount at the
prime rate, calculated from the due date of payment to the
date of
actual payment, both days inclusive.
3.
The
respondent is directed to pay the applicant’s costs of suit on
the attorney and own client scale.
JUDGMENT
HENRIQUES J
Introduction
[1]
The word “agreement” by its very definition suggests a
state of being
of the same opinion, concord or in harmony. Such
definition inadvertently equates to a non-sequitur when courts are
called upon
to intercede in resolving disputes emanating from the
conclusion of an agreement, which in current times, occurs more often
than
not. The present dispute between the parties which served before
me as an opposed application, is a typical illustration of the
above.
Background
[2]
The antecedents and factual matrix is of significant relevance in
this matter for
reasons that will become apparent later in this
judgment.
[3]
The applicant was employed by the respondent on or about 25 March
1993 and his working
relationship with the respondent endured for a
period of approximately twenty five (25) years. The applicant was
subsequently appointed
as a director of the respondent and acquired a
shareholding of 13 per cent in the respondent, which the applicant
held under Certificate
No.20.
[4]
The acquisition of the applicant’s shareholding in the
respondent was formalised
in a shareholder’s agreement dated 30
December 2004. It warrants mentioning that the parties are not in
consensus as to the
underlying basis on which the applicant became
the owner of such shareholding in the respondent. The respondent
seems to suggest
that the applicant was “given” such
shareholding, whilst the applicant contends that the allocated shares
were sold
by the respondent and paid for by him. The shareholder’s
agreement is silent on this issue. Nevertheless, this uncertainty
is
neither germane nor relevant to the material dispute in the present
application.
[5]
On 21 December 2016, the applicant and respondent entered into an
agreement described
as the “repurchase of shares agreement”
(the agreement), in
terms whereof the applicant agreed to sell his full shareholding to
the respondent. The applicant would continue
to be employed by the
respondent, albeit in a different capacity and the parties recorded
such agreement in a further formal employment
contract dated 21
December 2016
[6]
During October 2017, the applicant was charged by the respondent with
two (2) counts
of misconduct arising from a misappropriation of
the respondent’s assets breach of contract and breach of a
restraint
of trade. Pursuant to a disciplinary hearing held on 3
November 2017, the applicant was found guilty and a sanction of
summary
dismissal was conveyed to the applicant on 7 November 2017.
[7]
The applicant’s and respondent’s legal representatives
subsequently exchanged
correspondence, copies of which are annexed to
the papers, wherein the applicant demanded payment of the balance of
the purchase
price of the shares in terms of the agreement and the
respondent advanced its reasons and justification for not effecting
such
payments.
[8]
The above general factual matrix is common cause between the parties
and inherently
not in dispute.
A summary of the applicant’s
case
[9]
A brief summary of the applicant’s case is as follows:
(a)
The applicant, pursuant to the conclusion of the agreement, sold to
the respondent 13 ordinary
shares held under Certificate No.20 for a
purchase consideration of R2 673 808.25. The respondent,
subject to the fulfilment
by the applicant of certain conditions
undertook to effect payment of the purchase consideration by way of
an initial set off to
discharge the applicant’s loan account in
the respondent, and the balance by way of monthly instalment
payments.
[b]
The suspensive conditions as set out in clause 3 of the agreement
were fulfilled by
both the applicant and respondent, hence the
agreement became of full force and effect. It warrants mentioning
that such fact was
not disputed by the respondent, who however
challenged the validity and viability of the agreement on different
grounds.
[c]
The applicant contended that in having discharged his obligations in
terms of the
agreement and in light of the respondent’s breach
of the agreement in failing to pay the monthly instalments since
October
2017, he is entitled to claim performance from the respondent
in forma
specifica
.
[d]
The applicant accordingly instituted an application seeking inter
alia payment of
the amounts due by the respondent, being the balance
of the purchase price. By way of a supplementary affidavit filed
prior to
the hearing of the application, the applicant clarified the
total amount due by the respondent in terms of the agreement to be in
the sum of R560 000, the calculation of such amount not being
disputed by the respondent.
A summary of the respondent’s
case
[10]
Paragraph 4 of the respondent’s heads of argument refer to the
common cause facts. The
respondent in limine challenged the
applicant’s right to institute motion proceedings, averring
that the applicant was aware
of the material disputes of fact
pertaining to the viability of the agreement. These disputes of fact
are contained in para 5 of
its heads of argument
[11]
Apart from the point in limine, the respondent’s defences and
opposition to the relief
sought is as follows:-
[a]
it opposes the granting of the order and claims a reduction of the
purchase consideration
agreed for the shares arising from the
applicant’s alleged dishonest conduct;
[b]
it alleges the applicant’s breach of the restraint of trade
clause and the applicant’s
dishonesty in his dealings with it,
has caused it to suffer damages.
[c]
payment in terms of the agreement was suspended pending an assessment
of its claim
for damages.
[d]
it intended terminating or varying the agreement as a consequence of
the applicant’s
prejudicial conduct and misrepresentations
specifically in breaching the restraint of trade provisions in his
employment agreement.
[e]
the applicant committed acts of fraud and theft which has caused it
to suffer damages
assessed in an interim amount in the sum of
R252 714.60. Accordingly, the respondent has a counterclaim for
damages arising
out of the applicant’s alleged breach of the
restraint of trade provisions coupled with the claim for damages as a
result
of the applicant’s perpetrated fraud/theft against the
respondent.
[12] The
respondent further indicates that it intended to seek an order
declaring the repurchase of
shares agreement to be
void ab initio
,
alternatively an order for the variation of the purchase
consideration reflected in the agreement.
[13]
Consequently, the respondent contended that the present application
should be stayed pending
a determination of an action to be
instituted against the applicant, alternatively that the application
be referred to trial for
conjunctive determination, together with the
respondent’s proposed counterclaims.
[14] The
respondent also contended as referred in its heads of argument that
in consequence of the
applicant’s dismissal as an employee of
the respondent, he had no contractual right to payment of his shares
in the respondent.
Analysis
[15] As
referred to earlier, the applicant’s claim against the
respondent is premised on the
express provisions of the repurchase of
shares agreement. The applicant’s contentions relating to the
express written terms
of the agreement have not been challenged nor
disputed by the respondent.
[16]
The applicant has established the conclusion of the agreement, the
fulfilment of the conditions,
payments effected by the respondent and
the respondent’s failure to pay the balance of the purchase
price, hence the applicant’s
entitlement to claim specific
performance.
[1]
[17] The
onus of establishing a legal justification for suspending performance
of its obligations
in terms of the agreement accordingly shifts to
the respondent. The respondent in attempting to discharge such onus
relied on extraneous
factors pertaining to the conduct of the
applicant in his dealings with the respondent, which alleged conduct
has caused inter
alia damages to the respondent.
[18] The
respondent on its own version acquired constructive knowledge of the
applicant’s alleged
misconduct during the latter part of 2017
and on 31 October 2017, instituted disciplinary proceedings against
the applicant and
subsequently dismissed the applicant from its
employ.
[19] On
or about 24 January 2018, the respondent laid a formal complaint with
the South African Police
Service (SAPS) of fraud and/or theft against
the applicant wherein it claimed that the conduct of the applicant
had caused the
respondent to suffer a loss of R252 714.60.
[20] The
applicant instituted the present application on or about 31 January
2018 and the respondent
deposed to its answering affidavit on 07
March 2018. The application was enrolled as an opposed motion and set
down for hearing
on 20 November 2018.
[21] As
at the date of hearing, the respondent had not instituted any action
against the applicant
in respect of its alleged losses nor any
proceedings to vary or challenge the validity of the agreement.
Counsel for the respondent
submitted that the respondent’s
failure to institute any proceedings against the applicant was
primarily due to the respondent’s
ongoing investigations into
the applicant’s conduct and the computation of its total
damages.
[22]
The respondent, as is evident in its attorneys’ letter dated 11
December 2017,
[2]
reserved all its rights against the applicant subject to the
completion of its investigations and recorded that its performance
under the agreement would be held in abeyance.
[23]
The respondent’s stance as set out above, is untenable and
unsustainable as a defence to
the applicant’s claim. In
Merry
Hill (Pty) Ltd v Engelbrecht
[3]
the Supreme Court of Appeal expressly gave approval to the statement
of Friedman JP in
Bekazaku
Properties (Pty) Ltd v Pam Golding Properties (Pty) Ltd
:
[4]
‘
When
one party to a contract commits a breach of a material term, the
other party is faced with an election. He may cancel the contract
or
he may insist upon due performance by the party in breach. The
remedies available to the innocent party are inconsistent. The
choice
of one necessarily excludes the other, or, as it is said, he cannot
both approbate and reprobate.
Once
he has elected to pursue one remedy, he is bound by his election and
cannot resile from it without the consent of the other
party
.
’
[24]
Further, in the matter of
Sasol
Pension Fund & another v Love Bitez CC t/a Love Bites &
another
,
[5]
the court was tasked with adjudicating the effect of
misrepresentation and fraud on a contract and considered the remedies
available
to a party including the doctrine of election.
[25]
Both Friedman JP and Legodi J relied on the dictum expatiated by
Innes CJ in
Bowditch
v Peel and Magill
:
[6]
‘
A
person who has been induced to a contract by the material and
fraudulent misrepresentations of the other party may either stand
by
the contract or claim a rescission.
Voet
z
4.3, secs 3, 4, 7). It follows that he must make his election between
those two inconsistent remedies within a reasonable time
after
knowledge of the deception. And the choice of one necessary involves
the abandonment of the other. He cannot both approbate
and
reprobate.’
[26] It
is patently clear that the respondent’s approach is contrary to
the principles of election.
The respondent, confronted by the
applicant’s breach as alleged, whether such breach was actual
or anticipatory, was obliged
to elect a remedy within a reasonable
time. In addition, the respondent’s failure to take any
positive steps in instituting
proceedings against the applicant,
armed with information allegedly establishing misconduct on the
applicant’s part is inexplicable.
[27] The
respondent’s submission that the applicant’s failure to
act in good faith and
specifically the applicant’s breach of
the restraint of trade provisions in the employment agreement, is
tantamount to a
repudiation of the agreement is equally without
substance or merit.
[28] The
repurchase of shares agreement was perfected to the extent that the
parties complied with
the conditions contained therein and the
applicant handed over his shares to the respondent. In the absence of
any proceedings
to challenge the validity of the agreement, the terms
and conditions contained in the agreement are both binding and
enforceable.
[29]
After careful analysis of the provisions of the agreement and the
contract of employment, no
real impediment affected the respondent in
instituting proceedings challenging the viability of the agreement or
any other proceedings
arising out of the alleged breach of the
restraint of trade provisions in the contract of employment. At the
very least, the respondent
on its own version had constructive
knowledge of the damages it allegedly suffered as a consequence of
the applicant’s conduct
as set out in its criminal complaint
referred to earlier.
[30] It
further warrants mentioning that the above findings are not an
expression of any views in
regards to the respondent’s
allegations against the applicant as such proceedings are not before
this court and accordingly,
the veracity of the respondent’s
allegations ought to be the subject matter for consideration by
another court. There is
accordingly no restriction to the respondent
instituting such proceedings.
[31] The
respondent further submitted in view of the dispute of fact, that
this court should exercise
its discretion to refer the application
for the hearing of oral evidence in conjunction with the respondent’s
action to be
instituted.
[32]
Counsel for the applicant and respondent relied on the authority of
Room
Hire
Co
(Pty) Ltd v Jeppe Street Mansions (Pty) Ltd,
[7]
wherein it was stated:
‘
It
is certainly not proper that an applicant should commence proceedings
by motion with knowledge of the probability of a protracted
enquiry
into disputed facts not capable of easy ascertainment. . . .’
[33]
A dispute of fact must be bona fide and genuine on all material
aspects before a court in the
exercise of its discretion should refer
a matter to trial or for the hearing of oral evidence.
[8]
For the reasons referred to above, the disputes raised by the
respondent cannot be viewed as being bona fide nor genuine on
material
aspects in this application. I readily align myself with the
submission by applicant’s counsel that the viability of the
agreement, particularly in the absence of any proceedings instituted
by the respondent, is a question of law and not an enquiry
of fact.
[34] The
respondent’s submission that the applicant’s application
should be stayed pending
the adjudication of its counter-action to be
instituted is neither reasonable nor equitable. The respondent did
not see fit to
institute any application for such stay of this
application and in any event could not advise the court as to when
its suggested
counter-action would be instituted. In such
circumstances, it is neither equitable nor judicious for this court
in the exercise
of its discretion to grant an order staying the
application.
[35] In
the premises, the inevitable conclusion is that the respondent cannot
succeed in establishing
just and legal cause for its failure to
perform in terms of the agreement and it axiomatically follows that
the application should
succeed.
[36] The
applicant filed a supplementary affidavit dealing with the quantum of
the relief initially
sought when the application was instituted and
at the time the application was argued. Such amendment to the quantum
was foreshadowed
in the notice of motion and there can be no
prejudice to the respondent.
Costs
[37] It
is trite that the issue of costs is inherently within the discretion
of the court. The agreement
concluded between the parties however
provided for attorney and own client costs in the event of a breach.
I can find no legitimate
reason to deviate from the written
provisions of the agreement regarding costs.
Order
[38]
In the result the following orders will issue:-
1.
The
respondent is directed to pay to the applicant the sum of R560 000
within five (5) days of the date of this order.
2.
The
respondent is directed to pay interest on the above amount at the
prime rate, calculated from the due date of payment to the
date of
actual payment, both days inclusive.
3.
The
respondent is directed to pay the applicant’s costs of suit on
the attorney and own client scale.
HENRIQUES J
CASE
INFORMATION
APPEARANCES
Counsel for the Applicant
:
Advocate J F
Nicholson
Instructed
by
: Shepstone & Wylie
24 Richefond Circle
Ridgeside Office Park
Umhlanga Rocks
Ref: MJB/fac/KRIS33521.1
Tel: (031 575 7512)
Fax: (086 688 7672)
Email:
bagwandeen@wylie.co.za
Counsel for the Respondent
:
Advocate K
Gounden
Instructed by
: Woodhead Bigby Incorporated
92 Armstrong Avenue
La Lucia
Durban
Ref: JSB/MAT13468
Tel: 031 360 9700
Email:
jamesb@woodhead.co.za
Date of Hearing
: 20 November
2018
Date of Judgment
: 10 June 2019
[1]
Basson &
others v Hanna
2017
(3) SA 22 (SCA).
[2]
Index to application – Volume 1
page 57.
[3]
Merry Hill
(Pty) Ltd v Engelbrecht
2008
(2) SA 544 (SCA).
[4]
Bekazaku
Properties (Pty) Ltd v Pam Golding Properties (Pty) Ltd
1996
(2) SA 537
(C) at 542E-F.
[5]
Sasol Pension
Fund & another v Love Bitez CC t/a Love Bites & another
(26492/2013)
[2016] ZAGPPHC 530 (20 April 2016).
[6]
Bowditch v Peel
and Magill
1921
AD 561
at 572-573.
[7]
Room Hire
Co (Pty) Ltd v
Jeppe Street Mansions (Pty) Ltd
1949 (3) SA 1155
(T) at 1162.
[8]
Minister
of Land Affairs and Agriculture & others v D & F Wevell
Trust & others
2008
(2) SA 184
(SCA)
.