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[2019] ZAKZDHC 2
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Asmall v Tornotrim (Pty) Ltd (D6486/2018) [2019] ZAKZDHC 2 (22 February 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL LOCAL
DIVISION, DURBAN
CASE
NO:
D6486/2018
In the matter between:
OSMAN
ASMALL
Applicant
and
TORNOTRIM
(PTY) LTD
Respondent
ORDER
(a)
It is declared that the agreement between the parties relating to the
sale of the business
known as Nu-Store Tongaat has been validly
cancelled.
(b)
The respondent is ordered to return the said business to the
applicant against the return
by him of all amounts paid to him in
respect of the purchase price of the business. This order is without
prejudice to the applicant’s
right to claim such further
restitution from the respondent as he is able to prove.
(c)
The respondent is ordered to pay the costs of the application.
(d)
The registrar is directed to refer the papers in this matter,
together with a copy of this
judgment, to the South Applicant Revenue
Services and to the Director for Public Prosecutions, KwaZulu-Natal,
so as to enable them
to decide what steps, if any, they should take
in this matter.
JUDGMENT
Delivered
on:
22
February 2019
PLOOS
VAN AMSTEL J
[1]
This is an application for the return of a business pursuant to the
cancellation of
the agreement in terms of which it was sold to the
respondent. The only real issue on the papers is whether or not the
agreement
was validly cancelled.
[2]
The business is a clothing and shoe retail store in Tongaat, trading
as Nu-Store.
The applicant started the business in 1968 and ran it
successfully until he sold it to the respondent in June 2017. He says
in
the founding affidavit that the agreement was partly written and
partly oral. The written part of the agreement provided for a
purchase price of R2, 5 million, payable by way of a deposit of
R300 000; 38 monthly instalments of R55 000 each; and a final
instalment of R110 000. He says on the day when the written
agreement was signed he and the respondent, represented by its
shareholder and director, one Shaikh, orally agreed that the
respondent would pay an additional amount of R2 million, by way of
a
deposit of R300 000 and the balance in instalments of R50 000 per
month.
[3]
The deposits were paid, and the store was handed over to the
respondent at the end
of June. During July 2017 the respondent raised
certain issues about the store, pursuant to which a written addendum
was signed
in terms of which the purchase price was reduced by a sum
of R250 000 and the instalments referred to in the written agreement
were reduced to R50 000 each.
[4]
At the end of July two of the respondent’s cheques in respect
of the instalments
were dishonoured, which led to another meeting.
This resulted in a further reduction of the purchase price of
R675 000, and
an agreement that the monthly instalments would be
R105 000 each. To this end Shaikh signed a document in terms of which
the respondent
undertook to pay 20 instalments of R50 000 per month,
commencing on 31 July 2017, and a final instalment of R25 000 on 31
March
2019, together with 35 instalments of R55 000 per month,
and a final instalment of R25 000 on 30 June 2020.
[5]
The respondent continued to pay the monthly instalments, but
defaulted at the end
of February 2018. It raised various complaints
about the business and suggested a further reduction in the purchase
price. This
was rejected by the applicant and on 13 March 2018 his
attorney gave written notice to the respondent of its breach and said
if
it was not remedied within 14 days the agreement would be
cancelled. No further payment was made and on 6 April 2018 the
applicant’s
attorney notified the respondent that the agreement
was cancelled.
[6]
Counsel for the respondent submitted that it was not open to the
applicant to cancel
the agreement as the respondent was up to date
with the instalments in terms of the written part of the agreement,
and the applicant
could not rely on the oral agreement as the written
agreement provided that it was the only agreement between the
parties. The
obvious difficulty for the respondent is that it was
common cause on the papers that the purchase price consisted of the
amount
referred to in the written agreement plus the amount which had
been agreed orally. It would be unconscionable to allow the
respondent
to escape liability in respect of the oral agreement,
which it admitted, simply because it was recorded in the written
agreement
that it constituted the whole agreement between the
parties. Both parties knew that that was not the case and they
contracted on
that basis. In any event, the written undertaking
signed later by the respondent’s director provided for
instalments of R105
000 per month, which would have covered the full
balance of the purchase price. It was on the basis of the
respondent’s failure
to continue to pay these instalments that
the agreement was cancelled.
[7]
Counsel further submitted that the respondent was entitled to stop
paying the instalments
when it came to its notice that before the
handover stock had been removed unlawfully from the store. When the
respondent became
aware of the alleged fraud it had a number of
options available to it. It could have cancelled the agreement and
demanded its money
back; it could have elected to abide by the
agreement and claim damages; or it could have ignored the fraud and
continued with
the agreement. It was however not open to it to stop
paying the instalments, unless it cancelled the agreement. It did not
cancel
the agreement and its failure to continue to pay the
instalments was a breach. It failed to remedy the breach after it was
put
on terms to do so, with the result that the applicant was
entitled to cancel the agreement.
[8]
The applicant sought an order for the return of the business, but on
the papers did
not tender to return the payments which had been made
by the respondent. He suggested that he first needed to do a stock
take so
that he could calculate what restitution he was willing to
make. A tender to return the payments was however made in the
applicant’s
heads of argument. After some discussion in court
counsel for the parties were agreed that if I find for the applicant
I should
make an order declaring that the agreement was validly
cancelled, and order the respondent to return the business to the
applicant
against payment by him of the amounts which had been paid
in respect of the purchase price. It will then be left to the
applicant
to assess whether the return of the business to him
constitutes proper restitution, and if not, to take such further
steps as he
may be advised.
[9]
Counsel for the respondent submitted that the applicant should be
deprived of his
costs as he had tried to defraud the South African
Revenue Service by understating the amount of the purchase price in
the written
agreement. There is some merit in the suggestion, but
both parties took part in the fraud. I also think the respondent’s
challenge to the validity of the cancellation was without substance.
I intend however to refer the papers and this judgment to the
appropriate authorities.
[10]
The order that I make is as follows:
(a)
It is declared that the agreement between the parties relating to the
sale of the business
known as Nu-Store Tongaat has been validly
cancelled.
(b)
The respondent is ordered to return the said business to the
applicant against the return
by him of all amounts paid to him in
respect of the purchase price of the business. This order is without
prejudice to the applicant’s
right to claim such further
restitution from the respondent as he is able to prove.
(c)
The respondent is ordered to pay the costs of the application.
(d)
The registrar is directed to refer the papers in this matter,
together with a copy of this
judgment, to the South Applicant Revenue
Services and to the Director for Public Prosecutions, KwaZulu-Natal,
so as to enable them
to decide what steps, if any, they should take
in this matter.
—————————
Ploos
van Amstel J
Appearances:
For
the Applicant
:
L.
Olsen
Instructed
by
:
Shepstone & Wylie.
Durban
For
the Respondent
:
D Tobias
Instructed
by
:
Omar
Attorneys
:
Durban
Date
Judgment Reserved
:
15 February 2019
Date
of Judgment
:
22 February 2019