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[2019] ZAWCHC 32
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Brocsand (Pty) Ltd v Full Score Trading 145 CC and Others (23172/17) [2019] ZAWCHC 32 (26 March 2019)
THE
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 23172/17
In
the matter between
BROCSAND
(PTY)
LTD PLAINTIFF
AND
FULL SCORE TRADING 145
CC FIRST
DEFENDANT
GLOBAL PACK TRADING 370
(PTY) LTD SECOND
DEFENDANT
TIP TRANS RESOURCE (PTY)
LTD EXCIPIENT/THIRD
DEFENDANT
JUDGMENT DELIVERED 26
MARCH 2019
THULARE
AJ
[1]
This is third defendant’s exception against the particulars of
claim on the ground that they disclose no cause of action;
and
plaintiff’s application under Rule 28(4) for leave to amend its
particulars of claim. It was agreed between the parties
that the two
issues be heard together.
[2] Plaintiff’s
underlying case is based on a combination between the doctrine of
notice and the special mechanism pertaining
to rights of first
refusal recognized in Associated SA Bakeries (Pty) Ltd v Oryx &
Verenigde Backereien (Pty) Ltd
1982 (3) SA 893
(A) at 907. The
special mechanism, hereinafter referred to as the Oryx mechanism, was
translated as follows in
Mokone v Tassos Properties CC and another
2017 (5) SA 456
(CC) at para 56:
“
In
the event that a seller concludes a contract of sale with a third
party in breach of a right of pre-emption, the holder [the
holder of
the right of pre-emption] may, through a unilateral declaration of
intent, step into the position of the third party.
A contract of sale
is then deemed to have been between the seller and the holder of the
right of pre-emption.”
[3]
The first defendant was the holder of a mining right in relation to
certain minerals on Bloemendaalz Fonteyn 702 and 703 near
Malmesbury,
known as the Red Hill Mine (Red Hill). The second defendant was the
holder of a right to mine sand at Doornkraal 831
near Malmesbury
(Doornkraal).
[4]
On 12 October 2010 first defendant appointed plaintiff as the
exclusive contractor to mine the minerals on Red Hill and plaintiff
would purchase the minerals from first defendant. The agreement would
endure until 30 October 2015. The agreement contained a proviso
that
upon expiry of the agreement the plaintiff shall have the right of
first refusal to enter into a new agreement with the first
defendant
as the exclusive contractor to render mining services in respect of
the minerals on Red Hill.
[5]
On 30 January 2015 the first defendant, the second defendant and the
third defendant concluded an agreement. In terms of the
agreement the
third defendant would be entitled to act as mining contractor at Red
Hill and Doornkraal with the underlying mining
rights held by the
first and second defendants respectively. The takeover at Red Hill
would be 1 November 2015. The takeover at
Doornkraal commenced on 22
May 2015 and endured until 21 May 2035. The third defendant was given
the right of first refusal for
further mining-related activities.
First, Second and third defendant had prior knowledge of the
plaintiff’s right of first
refusal in respect of Red Hill when
they entered into the 30 January 2015 agreement.
[6]
Plaintiff became aware of the 30 January 2015 agreement when it was
disclosed. On 21 August 2015 the plaintiff conveyed to the
defendants
its unilateral declaration of intent to the effect that it stepped
into the shoes of the third defendant and that an
independent
contract equivalent to the 30 January 2015 agreement but involving
the plaintiff as a party came into existence.
[7]
According to plaintiff, as regards Red Hill, it was effectively
entitled to replace the third defendant as mining contractor.
According to plaintiff, as regards Doornkraal, it was effectively
entitled to replace third defendant as mining contractor until
21 May
2035. It is plaintiff’s case that the Red Hill aspect of the 30
January 2015 agreement (directly involving first and
third defendant)
and the Doornkraal aspect of the same agreement (directly involving
only the second and third defendant) were
deliberately mixed up and
conflated by the defendants through embodying them in the same
document in a legally impermissible attempt
to frustrate or
circumvent the plaintiff’s right of refusal.
[8]
In its exception, the third defendant’s case is that the
plaintiff is currently in occupation and is actively mining on
Red
Hill. The third defendant has no interest in that mine, has never
interfered with the plaintiff’s mining activities on
that mine
and that plaintiff has no claim against it in relation to that mine.
In respect of Doornkraal, third defendant said that
plaintiff’s
particulars of claim fail to disclose a cause of action against it in
that:
(a) neither second nor
third defendant were party to the Red Hill agreement which made
provision for the plaintiff’s pre-emptive
rights in relation to
Red Hill.
(b) if the court found
that plaintiff’s pre-emptive rights in terms of the Red Hill
agreement have been infringed the plaintiff
cannot by unilateral
declaration of intent and by implementation of the Oryx mechanism
acquire newfound rights against the second
and third defendants.
(c) The Oryx mechanism is
aimed at preserving existing rights and not creating new rights.
(d) The plaintiff cannot
avail itself to either the Oryx mechanism or the doctrine of notice
to create new contractual rights against
the third defendant in
relation to Doornkraal.
(e) Alternatively, if it
is found that the plaintiff is entitled to assume the rights and
obligations of the third defendant in
terms of the 30 January 2015
agreement as regards Doornkraal, the plaintiff, on its own version,
replaces the third defendant as
a party to that agreement;
(f)
the effect thereof is that the third defendant is no longer a party
to the 30 January 2015 agreement or any “deemed agreement”.
[9] As regards the
plaintiff’s claim for damages against the third respondent the
plaintiff’s particulars of claim do
not disclose a cause of
action according to third respondent in that:
(a) no contractual
obligation exists between the plaintiff and third defendant as
regards Doornkraal.
(b) plaintiff cannot by
way of a unilateral declaration of intent acquire rights against
second and third defendants who were not
party to the Red Hill
agreement.
(c)
alternatively, if the court found to the contrary, by operation of
law, the plaintiff would have stepped into the shoes of the
third
defendant and have effectively replaced it as a party to the
agreement and would not have vested a new multilateral agreement
to
which the plaintiff and all three defendants are party.
[10] As regards the
ejectment of the third defendant from Doornkraal, the third defendant
said the particulars of claim do not disclose
any cause of action in
that:
(a) no contractual rights
and obligations exist between the plaintiff and the third defendant
which contractual rights the plaintiff
may rely upon to eject third
defendant.
(b)
plaintiff does not aver that it has
locus
standi
to claim the
ejectment of the third defendant nor does it aver that the defendant
is in unlawful occupation of Doornkraal.
[11] The plaintiff seeks
to amend paragraph 25 and 27 by insertion of words, identified by my
underlining, to the existing paragraphs.
The envisaged paragraph
25
amendments read as follows:
“
The
first, second and third defendants have generally repudiated the
deemed contract
in
the case of the third defendant, not on the basis that it is a party
to that contract, but on the basis and in the sense that
it refuses
to accept that as a consequence of the deemed contract it has been
ousted from the 30 January 2015 agreement and that
the plaintiff has
accordingly stepped into its shoes as pleaded in paragraphs 16.3,
20.2 and 22.2 above,
and
have unlawfully refused to recognize its existence and implications,
including (without thereby implying any limitation) by
virtue of the
following circumstances and conduct on their part.”
The envisaged paragraph
27 amendment read as follows:
“
The
first, second and third defendants have accordingly breached the
deemed contract, in the case of third defendant not on the
basis that
it is a party to the contract, but on the special basis pleaded in
paragraph 25 above, and continue to be in breach
thereof despite
repeated written demands by the plaintiff that they cure such
breach.”
The
envisaged amendment is opposed on the grounds that it does not
rectify and remove the cause of complaint as set out in the exception
and that the particulars remain excepiable as it does not disclose a
cause of action.
[12]
The plaintiff never had any agreement with the second defendant, the
holder of the mining rights over Doornkraal, in respect
of
Doornkraal. Third defendant had not at any stage occupied Red Hill or
conducted business activities there. In essence, plaintiff
seeks to
rely on its agreement with first defendant in respect of Red Hill, to
step into the shoes of its competitor, third defendant,
and replace
third defendant as the mining contractor in a contractual
relationship between third defendant and second defendant
in relation
to Doornkraal.
[13]
The issue is whether the Oryx mechanism extends to allow for a person
to step into the shoes of their competitor and replace
such
competitor in a contractual relationship between such competitor and
a different person in relation to a different subject.
In this case,
the question is whether the right to bring about an agreement through
a unilateral declaration of intent by the holder
of the right to
first refusal, to wit the plaintiff, extends to all the terms of a
written instrument with the third party, including
matters beyond the
original agreement or whether it is limited to only the subject
matter of the original agreement between the
seller and the holder of
the right of refusal. Can the Oryx mechanism result in a deemed
contract with plaintiff in respect of
Doornkraal?
[14] The point of
departure should be the agreement between the parties in my view. In
their agreement, plaintiff and first defendant
defined the material
terms as follows:
(i) “Contractor”
means Brocsand (Pty) Ltd a company duly incorporated with
registration number 2001/022698/07;
(vi) “Holder”
means Full Score Trading CC a duly incorporated closed corporation
with registration number 2002/066484/23;
(xii)
“the Property” means the farm Bloemendaalzfonteyn 702 &
703, District of Malmesbury.”
[15] The further material
term of the agreement is clause 3.2 which reads as follows:
“
3.2
This agreement shall commence on 1 November 2010 and, unless
terminated in accordance with the provisions of clause 18 or the
other provisions of this Agreement, shall endure until 30 October
2015: Provided that upon expiry of the Agreement the Contractor
shall
have the right of first refusal to enter into a new agreement with
the Holder for the appointment as the exclusive contractor
to render
mining services in respect of the Minerals on the Property.”
Plaintiff’s
right of refusal in terms of the agreement is in respect of Red Hill
only.
[16]
An excipient has the duty to persuade the court that upon every
interpretation which the plea can reasonably bear, no cause
of action
is disclosed
[Ocean
Echo Properties 327 CC and Another v Old Mutual Life Assurance
Company (South Africa) Ltd
at para 9].
[17] What is clear in
this matter is that plaintiff has no right of first refusal in
respect of Doornkraal. As a consequence, there
is no breach of
plaintiff’s right of first refusal in respect of Doornkraal.
There is no wrong which amounts to an infringement
of plaintiff’s
interest, which entitles the plaintiff, as an injured party, to a
claim on Doornkraal. There is no unlawfully
inflicted injury to
plaintiff in respect of Doornkraal which would invoke the Oryx
mechanism, whose essential character is liability
and resultant
remedy for such wrongs. There is no harm to plaintiff, to which the
Oryx mechanism would be redress in respect of
Doornkraal. In the
absence of harm for which the mechanism is invoked to award
compensation, there is no basis to assuage and as
a consequence no
basis for liability in respect of Doornkraal. There are no facts that
beget the plaintiff’s cause of action.
The mechanism itself, as
a conclusion of law, can only be drawn and invoked from the facts
upon which the plaintiff rely to establish
a cause of action.
[18]
In my view, the application of the Oryx mechanism is the second stage
of an enquiry as to the ultimate liability. The first
stage is the
establishment of the facts that beget the invocation of the
mechanism. The essence of the mechanism is that the plaintiff
steps
into the shoes of the third respondent in the other agreement which
breached the right of first refusal agreement. In the
first stage of
the enquiry the size, make and fitness for purpose of the shoes
should be determined. In this matter, the inclusion
of Doornkraal,
amongst others, present a bigger shoe size to that ordinarily worn by
plaintiff on Red Hill in respect of the agreement.
The purity of the
mechanism, on its own, is not sufficient to merit application of the
rule in respect of Doornkraal. The plaintiff,
without more, cannot
just walk into the shoes of third defendant in respect of Doornkraal.
It is simply not the same shoe size
to the Red Hill shoes which found
the right of refusal, on the facts. The shoe does not fit.
[19]
The damage-producing activity together with its consequences for a
plaintiff, which makes it actionable harm, is required to
undergo the
value judgment. The mechanism is invoked not by its mere existence in
our law, but when there are interests which should
enjoy legal
protection. As a matter of policy, it is applicable where the
plaintiff’s loss merits the intervention of the
law. The
conduct of a party, the nature of the fault and the nature of the
harm are determining factors at the root of the value
judgment, in
order to correctly reflect what is reasonable and proper. Conscious
and careful judicial attention is necessary to
keep this legal remedy
within the bounds of reason and morality.
[20]
It seems to me that plaintiff seeks an interpretation of the
mechanism which develops it to be far-reaching in its scope, without
pleading any facts upon which such development is justifiable. The
Oryx mechanism is not a bargaining chip to be used to gain an
advantage when trying to make a business deal. The mechanism is also
not a springboard that can bend and with its embedded spring
help
others to jump higher in legal gymnastics. It remains a doctrine,
which is a framework established through precedent in the
common law.
It is a concept and a value. It is a rule that has to be followed as
part of our law. It finds its utility in law when
it is applied to
the facts with an underlying cause of action. The essence of its
character is in the nature of redress for harm
suffered by the
pleader for its application.
For
these reasons I make the following order.
The exception is upheld
with costs. The application for amendment is dismissed with costs.
________________________________
DM
THULARE
ACTING
JUDGE OF THE HIGH COURT
Counsel
Appellant: Advocate A De
La V La Grange
3
rd
Respondent: Advocate A Moller
Instructing Attorneys
Appellant: Werksmans Inc
1
st
Respondent
and 2nd
Respondent: Smit Kruger Incorporated
3
rd
Respondent:
Lucas Deysel Crouse
JUDGMENT READ AND DAY(S)
IN COURT: 26 March 2019