About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2019
>>
[2019] ZAWCHC 65
|
|
Primi World (Pty) Ltd v Scholtz and Another (13097/2018) [2019] ZAWCHC 65 (5 June 2019)
Republic of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case No:
13097/2018
Before: The Hon. Mr Justice Binns-Ward
Hearing: 5 June 2019
Judgment:
5 June 2019
In
the matter between:
PRIMI
WORLD (PTY)
LTD
Plaintiff
/ Respondent
and
DANIEL
JASON SCHOLTZ
First
Defendant / Excipient
DANIEL
JOHANNES JACOBUS SCHOLTZ
Second
Defendant / Excipient
JUDGMENT
BINNS-WARD J:
[1]
This matter concerns an exception taken by
the first and second defendants to the pleading of one of the claims
advanced in the
particulars of claim in the action instituted by the
plaintiff against them as sureties for, and co-principal debtors
with, Garden
Route Culinary (Pty) Ltd (‘GRC’). The
claims, which are pleaded as two components of the total amount in
which
a judgment sounding in money is sought against the defendants,
arise from GRC’s obligations to the plaintiff in terms of,
and
pursuant to, a franchise agreement GRC had entered into, qua
franchisee, with the plaintiff, qua franchisor. The essence
of
the defendants’ objection is that the particulars pleaded in
support of the first component of the money claim are lacking
in
allegations necessary to sustain the claim.
[2]
It is evident from the pleading that the
franchise agreement, which had been concluded on 19 August 2011,
had been entered
into for a period of ten years. It obligated
GRC during the currency of the franchise to pay the plaintiff a
‘royalty
and service fee’ in the amount of 10% of the
gross sales revenue of the enfranchised business. It is not
necessary
for present purposes to go into the somewhat complicated
provisions, including the application of the consumer price index
(‘CPI’),
regulating the finite calculation of the amounts
due in terms of this provision of the agreement. It suffices to
say that
payment of them was due weekly.
[3]
The plaintiff, as franchisor, also incurred
certain obligations to GRC as the franchisee under the agreement.
Various examples
of these obligations are identified at paragraph 22
of the defendants’ heads of argument in support of the
exception.
I shall mention but some of them. The
plaintiff was obliged to make available to GRC ‘the system and
trademarks’
identified in clauses 2.1 and 2.4 of the franchise
agreement; it also had to furnish GRC’s management with a
training program
for the operation of the enfranchised business and
make available operating manuals and ‘market and promote the
image of
[the franchise] in an endeavour to develop general public
recognition of the Trademarks and increase patronage of [the
enfranchised]
businesses in general (including advertising,
promotions, public relations and other marketing programs) …’.
[4]
It follows that the nature of the franchise
agreement was that of a bilateral contract, in which an exchange of
performance by the
principals was contemplated. After all, if
the plaintiff failed to provide the use of the trademarks and the
operating manuals,
training and marketing support required of it in
terms of the agreement, what possible commercial basis would there be
for GRC’s
assumption of the royalty and service fee obligations
of a franchisee? I think it is clear that the contract
demonstrates
a sufficient relationship between the relevant
obligations to be performed by the franchisee and the performance due
by the franchisor
as to indicate that the former were undertaken in
exchange for the latter.
[1]
[5]
Innes
JA pointed out in
Hauman v Nortje
1914 AD 293
at 300 that ‘in the absence of special agreement to
the contrary neither party can enforce [a bilateral contract] unless
he has performed or is ready to perform his own contractual
obligations’. The principle so stated gives rise to quite
self-evident implications for the proper pleading of a claim by a
party to such a contract for the enforcement of its rights thereunder
against the counterparty. The axiom is illustrated in the
following dictum of Corbett J in
ESE
Financial Services (Pty) Ltd v Cramer
1973 (2) SA 805 (C)
[2]
at 809F: ‘Where a plaintiff sues to
enforce performance of an obligation which is conditional upon
performance by himself
of a reciprocal obligation owed to the
defendant, then the performance by him of this latter obligation (or,
in cases where they
are not consecutive, the tender of such
performance)
is a necessary
pre-requisite of his right to sue and should be pleaded by him
.’
(Italicisation provided for emphasis.)
[6]
The plaintiff makes the following
allegations in its particulars of claim:
1.
That
GRC fell into default in respect of its obligation to pay royalties
and service fees.
2.
That
a demand was made on GRC on 14 September 2017 to pay the amount in
arrears in respect of royalties and service fees, inclusive
of
interest as provided for in the agreement, in the sum of R2 117 772.
3.
That
GRC stopped operating the enfranchised business in November 2017.
4.
That
consequent upon GRC’s breaches of the franchise agreement, the
plaintiff cancelled the contract on 18 March 2018.
[7]
In paragraph 15 of the particulars of claim
the plaintiff alleged:
15. As a result of GRC’s breaches the Plaintiff
has suffered damages in the sum of R8 762 521,00, made up
as follows:
15.1 R2 307 911,00 in respect of unpaid
royalties and service fees between 5 November 2012 and November 2017:
15.1.1. a summary of the unpaid royalties and service
fees is attached marked “
POC 5”
;
15.1.2. the details of every week’s royalties and
service fees is attached marked “
POC 6
”;
15.1.3. the interest calculations on the royalties and
service fees is attached marked “
POC 7
”;
15.1.4. GRC’s payments are set out in “
POC
8
”;
15.1.5. an interest rate history is attached marked “
POC
9
”;
15.1.6 a table of CPI rates is attached marked “
POC
10
”;
15.1.7. a table of GRC’s turnover history is
attached marked “
POC 11
”;
15.2 R6 454 610,00 in respect of minimum
royalties and service fees for the unexpired period of the franchise
agreement
as set out in “
POC 12”
hereto.
It is evident from the annexures to the particulars of claim that the
claim for payment of the aforementioned sum of R2 307 911
is in
respect of the balance of the royalties and service fees, including
interest, due and payable by GRC in terms of the agreement
up to and
including the end of November 2017.
[8]
The defendants’ exception to the
particulars of claim is predicated on the complaint that the
R 2 307 911 component
of the plaintiff’s claim
amounts to a claim in respect of accrued rights in terms of the
agreement before its cancellation
and is advanced in the pleading
without any allegation by the plaintiff that it had complied with its
reciprocal obligations under
the agreement. The point,
obviously made with regard to the principle discussed earlier in this
judgment, was encapsulated
in paragraph 4 of the notice of exception
as follows:
Although the amount of R2, 307, 911.00 is alleged to be ‘
damages
’,
the claim is in actual fact, a claim for specific performance in the
form of payment for ‘
unpaid royalties and service fees
’.
[9]
The plaintiff sought to argue that the
defendants’ objection ran against the express tenor of the
pleading, which on its face
represented the claim as being one for
‘damages’, not one for performance or the exacting of an
accrued right under
the agreement. The plaintiff’s
counsel (who did not draft the particulars of claim) emphasised that
for the purposes
of deciding an exception a court must proceed on an
acceptance of the pleaded allegations at face value.
[10]
In my view, notwithstanding that the
aforementioned contentions advanced on the plaintiff’s behalf
are in principle correctly
stated, they apply the principle too
simplistically in the context of the case in hand. If it is
evident
on the pleaded material
that what the pleader has chosen to label as ‘damages’ is
a misnomer in respect of the claim described in paragraph
15.1, the
court is not constrained by the misnomer when deciding whether an
exception to the pleading is good or bad. Adjudicating
an
exception requires of the court to read the pleading as a whole in a
fair manner, not being unduly astute to find fault with
it. If
on that approach it is evident
on the
pleading
that what the pleader has
chosen to label as ‘damages’ is in point of fact a claim
for a contractually accrued entitlement,
as distinct from damages for
breach of the contract, then the court will not be misled by the
misnomer.
[11]
It is well established law that the
cancellation of the agreement in March 2018 would not have
extinguished any rights accrued -
in the sense of accrued, due, and
enforceable at that time as a cause of action independent of any
executory part of the contract
- to any party to the contract prior
to its termination; cf.
Crest
Enterprises (Pty) Ltd v Rycklof Beleggings (Edms) Bpk
1972 (2) SA 863
(A) and
Walker's Fruit
Farms Ltd. v Sumner
1930 TPD 394.
[3]
The right to enforcement of such rights by the party in whose favour
they had accrued survives the cancellation; and the
character of a
claim for the enforcement of those rights is quite distinguishable
from that a claim for payment in damages in compensation
for the loss
the innocent contracting party suffers as a result of the
cancellation of the contract by virtue of the guilty party’s
breach.
[12]
In their most simple manifestation, the
first type of claim is for what is due under the contract, the
second, which properly falls
to be called ‘a claim for
damages’, is directed at placing the innocent party in the
financial position it would have
been had the contract not been
cancelled. In the current case the parties had agreed as to how
the franchisor’s damages
would fall to be calculated if the
contract were cancelled by reason the franchisee’s breach, but
that makes no difference
to the principle of the aforementioned
distinction between claims for the enforcement of contracts and those
for contractual damages
sustained as a consequence of the termination
of the contract as a result of the other party’s breach or
repudiation of the
agreement. It is clear
ex
facie
the pleading that the claim
advanced in terms of paragraph 15.1 of the particulars of claim is of
the first of the aforementioned
types. It is an enforcement
claim; and the pleader’s manifestly inaccurate description of
it as a ‘damages’
claim has not disguised its actual
character. As articulated in the dictum from
ESE
Financial Services
quoted earlier,
[4]
the discernibly pleaded claim requires to be supported by the
allegations that are necessary to sustain it. Put differently,
facts demonstrating the satisfaction of the legal prerequisites for
the claim’s viability have to be pleaded.
[13]
The particulars of claim do not contain any
allegation that the plaintiff had complied with its obligations in
terms of the agreement
with GRC. It was rightly not in
contention that in its claim against the defendants based on their
suretyship undertakings
the plaintiff had to make out in the pleading
a proper basis for its entitlement to payment against the principal
debtor, for such
entitlement was after all the very basis for the
alleged accessory obligations of the defendants in respect of which
the plaintiff
sought performance. In the circumstances it is
therefore evident that the exception was well taken.
[14]
The following order will issue:
1.
The
defendants’ exception is upheld with costs.
2.
That
part of the plaintiff’s claim set out in paragraph 15.1 of its
particulars of claim is struck out.
3.
The
plaintiff is afforded an opportunity to amend its particulars of
claim within 15 days of the date of this order in order to
remediate
the excipiability of the pleading.
A.G. BINNS-WARD
Judge
of the High Court
APPEARANCES
Excipient
defendants’ counsel:
D.J. Coetsee
Excipient defendants’
attorneys:
Martins & De Lange Attorneys
George
Michalowsky, Geldenhuys & Humphries Attorneys
Cape
Town
Respondent
plaintiff’s counsel:
P.S. Mackenzie
Respondent
plaintiff’s attorneys:
Davout Wolhuter & Associates
Claremont
André du Toit Attorneys
Cape Town
[1]
Cf.
ESE Financial Services (Pty) Ltd v Cramer
1973 (2) SA 805
(C) at 809 D-E.
[2]
A judgment of this court in which Van Winsen J concurred.
[3]
The judgment in
Thomas
Construction (Pty) Ltd. (in Liquidation) v Grafton Furniture
Manufacturers (Pty) Ltd
[1988] ZASCA
2
;
1988 (2) SA 546
(AD);
[1988] 2 All SA 228
confirmed (at 564
SALR), to the extent that might have been thought necessary, that
the principle embodied in the pertinent part
of the decision in
Crest Enterprises
was not confined to cases of rescission following upon repudiation
and applies in ‘all forms of breach culminating in
cancellation’.
[4]
In paragraph [5].