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[2018] ZAGPPHC 728
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Mofokeng v Franchising To Africa (Pty) Ltd t/a Gold Brands (69578/2015) [2018] ZAGPPHC 728 (19 March 2018)
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
CASE NO.: 69578/2015
19/3/2018
In
the matter between:
ZACHARIA
SEHLOHO
MOFOKENG
PLAINTIFF
and
FRANCHISING
TO AFRICA (PTY) LTD t/a
GOLD
DEFENDANT
BRANDS
JUDGMENT
VAN
DER WESTHUIZEN, J
[1] During
2014 the plaintiff attended an EXPO in respect of franchise
opportunities.
The plaintiff was particularly interested in a
franchise of the defendant with specific reference to that known as
CHESANYAMA.
[2]
Thereafter,
the plaintiff attended at the defendant's offices in Centurion. His
attention was drawn to a specific opportunity of
an existing shop in
Sunward Park Mall, Boksburg. He investigated the opportunity and was
satisfied of the viability thereof.
[3]
It
is common cause that the parties thereafter entered into a written
franchise agreement that was signed by the plaintiff on 17
October
2014. The franchise agreement is attached to the plaintiff's
particulars of claim. It is further common cause that the
attached
franchise agreement is that concluded between the parties.
[4] The
plaintiff took over the said existing franchise operation on 1
November 2014
and commenced conducting that business from that date.
[5]
The
plaintiff was unable to secure a lease with the landlord in respect
of the premises at which the said business was operating.
[6]
During
or about June/July 2015, the Sheriff attached the assets of the
business and locked the premises on the strength of a warrant
of
attachment and a warrant for eviction following on a judgment in
favour of the landlord.
[7]
The
plaintiff instituted action proceedings against the defendant. The
plaintiff claimed repayment of the amount that the plaintiff
had paid
to the defendant in respect of the purchase price of the said
operation. The plaintiff claims an amount of R700 000.00.
However,
that amount is now limited to repayment of the actual amount paid,
namely R500 000 .00 .
[8]
The defendant defended the action and
counterclaimed for payment of amounts owing and due in terms of the
provisions of the said
franchise agreement. The defendant also
claimed upon a written acknowledgement of debt signed by the
plaintiff. The defendant further
claimed an amount that is
conditional upon a third party instituting proceedings against the
defendant for payment in that amount.
However, the defendant seeks
that that claim be postponed
sine
die.
[9]
Initially a firm of attorneys represented the plaintiff. However, the
attorneys withdrew
during February 2017. Consequently, the plaintiff
represented himself at the trial. He indicated that he did not wish
to engage
the services of another legal representative. The plaintiff
would act in his own stead. Mr Stone appears on behalf of the
defendant.
[10] The
plaintiff's claim for repayment of the paid purchase price is
premised upon an alleged misrepresentation
that allegedly induced him
to enter into the said written franchise agreement. The alleged
misrepresentation related to the defendant
falsely indicating that it
had entered into a lease agreement in respect of the premises. It is
further alleged that the intention
of the defendant was to induce the
plaintiff in entering into the written lease agreement whilst knowing
that the representation
was false. The plaintiff further alleges that
he, so induced, entered into the written agreement and paid the
purchase price. The
plaintiff then alleges that had he known the true
facts, he would not have purchased the franchise operation at all.
The plaintiff
tendered return of the franchise operation against
repayment of the amount paid.
[11]
In conducting his own defence, the
plaintiff testified and did not call any witnesses in support of his
evidence or his case.
[12]
A claim premised upon misrepresentation
either relates to a fraud committed, or an innocent representation or
a negligent representation.
A fraudulent representation can either be
based upon a contract or a delict. Considering the plaintiff's
allegations recorded above,
it appears that the claim may be premised
upon an alleged fraudulent representation that led to the conclusion
of the franchise
agreement. The representation that is relied upon
does not in my view fall within the ambit of either innocent or
negligent representation.
In this regard, it is not alleged that the
representation was material and that it was foreseeable that the
representation could
induce the party to whom the representation is
made to conclude the agreement. It is trite that a party relying on
either innocent
or negligent misrepresentation has
to
prove the aforementioned two
requirements in addition to that required in respect of fraudulent
misrepresentation.
[1]
[13]
The plaintiff did not allege in his particulars of claim, nor did he
state in evidence, that
the representation complained of was material
and/or that the defendant foresaw that the plaintiff would act upon
that negligent
misrepresentation and enter into the said franchise
agreement.
[14]
It follows that the plaintiff is required to prove that a fraudulent
representation was made upon which he was induced
to enter into the
said franchise agreement. It is trite that fraud is not easily
inferred. In this regard the requirements that
are to be proven are:
(a)
A
representation made by the defendant or its agent;
(b)
Fraud,
i.e. knowledge on the part of the agent or principle that the
representation is false;
(c)
Causation,
i.e. that the representation induced the plaintiff to so act.
[15] The
plaintiff relies upon the terms and conditions of the said franchise
agreement attached to
his particulars of claim. It is gleaned from
that agreement, and in particular with reference to the provisions of
clauses 8.1
and 8.2 thereof, that the plaintiff was obliged to either
take over the existing lease agreement or to enter into a new lease
agreement.
Those clauses provide as follows:
(a)
"8.1
The parties record that the Franchisor has entered into a lease
agreement for the Store with the Landlord. A copy of the
Lease
Agreement is attached hereto as Schedule E."
(b)
"8.2
The Franchisee is obliged to either take over the lease agreement,
alternatively to enter into a new lease agreement with
the landlord
as and when requested to do so by the Franchisor, and in any event
within in a period of not more than two months
calculated from the
Take - Over Date."
[16] It is
further gleaned from the afore quoted clauses, that although it is
recorded that the
defendant has entered into a lease agreement with
the landlord in respect of the relevant premises, the plaintiff
nevertheless
was obliged to take-over that lease agreement, or to
enter into a new lease agreement. That obligation was to have been
complied
with within a period of two months from the date of
occupation, i.e. in the present instance from 1 November 2014.
[17] Furthermore,
clause 8.3 of the said franchise agreement stipulates that
notwithstanding
the non-take over of the lease or the entering into a
new lease agreement with the landlord, the plaintiff is obliged to,
and is
liable for, payment of the required monthly rental payments as
if the plaintiff is a party to the lease agreement.
[18] It follows that in
so far as a representation is made in clause 8.1 of the franchise
agreement, such
presentation is to be read in conjunction with the
stipulations of clauses 8.2 and 8.3 of the franchise agreement.
[2]
[19] Consequently,
the representation in clause 8.1 is qualified in clauses 8.2 and 8.3
of the franchise
agreement. It remained the plaintiff's obligation to
continue to pay the monthly rental in respect of the relevant
premises.
[20]
It
follows that the plaintiff has failed to prove that a representation
was fraudulently made on the part of the defendant that
induced him
to enter into the said franchise agreement. Further in that regard,
the plaintiff admits in his evidence to paying
the rental for
November 2014 and that he was liable to pay the rental of each
succeeding month.
[21]
The
plaintiff alleged in his evidence under cross-examination that he has
in fact made all subsequent rental payments. However,
he could only
prove the payment for November 2014. He had no documentary proof of
the payments of the subsequent due monthly rentals
that accrued. In
correspondence relied upon by the plaintiff that originated from his
erstwhile attorneys on his admitted instructions,
no mention is made
of payment of any rentals in respect of the relevant premises.
[22]
Furthermore, the defendant's erstwhile attorneys do not indicate in
the correspondence to either the
defendant or to the landlord that
any misrepresentation had been made upon which the plaintiff was
induced to enter into the said
franchise agreement.
[23]
The
plaintiff admitted that he had not taken over the existing lease or
that he had entered into a new lease within the period of
two months
as stipulated in clause 8.2 of the said franchise agreement. But for
his evidence that he has paid the due rentals,
no proof thereof was
presented.
[24]
It
follows that the plaintiff has not proven any alleged
misrepresentation, whether fraudulent, innocent or negligent.
[25]
The
plaintiff further admitted that the franchise operation was no longer
conducting any business since July 2015. The closure of
the business
and the plaintiffs eviction from the premises on the part of the
Sheriff prevented that.
[26]
It is further common cause that the plaintiff could not tender return
of the assets of the said
franchise operation that were attached by
the Sheriff. Despite a threat on the part of the plaintiffs erstwhile
attorneys to institute
interpleader proceedings in respect of the
attached assets, no such proceedings were instituted.
[27]
Accordingly, the plaintiff cannot honour his tender of the return of
the business against repayment
of the amount paid in respect of the
purchase price.
[28] It
follows that the plaintiff has not proven his claim for repayment of
the amount of R500 000.00 and
his claim stands to be dismissed.
[29] There
remains the issue of the defendant's counterclaim. The gist of the
counterclaim is recorded above.
[30] The
defendant elected not to call any witnesses in support of its
counterclaim and argued the various
counterclaims with reference to
the provisions of the said franchise agreement and the conclusion of
an acknowledgement of debt
on the part of the plaintiff.
[31] As
recorded above, the conditional claim, claim 1 in the counterclaim,
is to be postponed
sine die,
the fulfilment of the condition
not arising as yet.
[32] The
defendant claims, in respect of its second claim, payment of
royalties under the franchise agreement
that would have accrued to
the defendant had the said franchise agreement not come to an end,
but for the cancellation of the said
franchise agreement. In that
regard, the defendant alleges that the said franchise agreement would
have endured for a further period
of 50 months from 1 September 2015
until 31 October 2019. Clause 13.2 of the said franchise agreement
provides for the payment
of royalties to the defendant. The amount
stipulated in respect of the royalties payable is R2 500.00 per
month, which amount will
increase annually at 10% on a compounded
basis.
[33]
Clause 23.4 of the said franchise agreement provides as follows:
"Termination of the
Agreement by the Franchisor, as
a
result of the
default or breach thereof by the Franchisee will be without prejudice
to any existing rights and/or claims that the
Franchisor may have
against the Franchisee and the Franchisee will be liable, in addition
to any other claims that the Franchisor
may have against the
Franchisee for damages or otherwise, to pay to the Franchisor all
Royalties that would have been paid for
the remainder of the Term of
this Agreement, but for such default or breach, and which royalties
will become immediately due, owing
and payable."
[34] The
term of the said franchise agreement is defined to be for a period of
five years from the take-over
date, in the present instance since 1
November 2014
[35]
The defendant has calculated the mount
of royalties in accordance with the provisions of the said franchise
agreement and has recorded
that calculation and the amount due, owing
and payable in its counterclaim.
[36]
The plaintiff accepts his liability in
respect of the royalties as provided for in the said franchise
agreement and the amount calculated.
His only defence being that
where the franchise operation has ceased on the closing thereof as a
result of the Sheriffs execution
of the warrants issued, he no longer
conducts the business in respect of which he can pay the royalties.
There is no merit in that
defence.
[37]
The defendant's third claim relates to
the plaintiff's refusal to pay the royalties payable for the month of
August 2015 timeously
or at all. In that regard, an amount of
R2850.00 is due, owing and payable to the defendant. Claim 3 also
includes the non-payment
of market fund contributions, as provided
for in the said franchise agreement, for the month of August 2015. An
amount of R570.00
is due, owing and payable. The plaintiff raises a
similar defence as in the case of the royalties of claim 2, namely
that the business
was not operational during August 2015 and hence no
payment is due. The plaintiff further alleges that the defendant did
not undertake
any marketing. In this regard, clause 18.3 of the said
franchise agreement provides for the contribution to a Marketing
Development
Fund of the franchisor in the amount of RS00.00 per month
(excluding VAT) that would increase at the rate of 10% per annum on a
compounded basis.
[37]
Claim 4 of the counterclaim relates to
an acknowledgment of debt signed by the plaintiff on 28 May 2015. In
that acknowledgment
of debt the plaintiff admitted liability for the
payment of the amount of R38 405.28 that was due and payable in
respect of services
rendered and goods sold and delivered. The
plaintiff admitted his liability in respect of the acknowledgment of
debt and conceded
that his signature appears thereon. No defence was
raised against this claim.
[38]
There has been no compliance with the
terms of the said acknowledgment of debt and the plaintiff is liable
to pay the amount of
R33 420.00 in respect thereof.
[39]
In my view, the defendant has proven
claims 2, 3 and 4 contained in the counterclaim and is entitled to
the relief claimed in that
regard.
[40] There
remains the issue of costs. Mr Stone submitted that the plaintiff is
liable to pay cost on the
scale as between attorney and client in
terms of the provisions of clause 23.2.3 of the said franchise
agreement. Although the
issue of costs fall within the court's
discretion, it is trite that when the parties have an agreement in
respect of the scale
of costs, the court would not likely interfere
with that agreement.
I
grant the following order:
(a)
The plaintiffs claim is dismissed;
(b)
Judgment is granted in favour of the
defendant against the plaintiff for:
(i)
Payment
of the amount of R180 294.36;
(ii)
Interest
a tempore morae
on
the amount of R180 294.36 at a rate of 9% per annum to date of final
payment;
(iii)
Payment
of the amount of R3 420.00;
(iv)
Interest
a tempore morae
on
the amount of R3 420.00 at a rate of 9% per annum to date of final
payment;
(v)
Payment
of the amount of R33 640.62;
(vi)
Interest
a tempore morae
on
the amount of R33 640.62 at a rate of 9% per annum to date of final
payment;
(c)
Plaintiff
is ordered to pay the defendant's costs on a scale as between
attorney and client;
(d)
Plaintiff's
first counterclaim (claim 1) is postponed
sine
die.
C
J VAN DER WESTHUIZEN
JUDGE
OF THE HIGH COURT
On
behalf of Applicant:
In person
Instructed
by:
On
behalf of Respondent: J S Stone
Instructed
by:
Hatting & Ndzabandzaba Attorneys
[1]
See
Phame (Pty) Ltd v Paizes
1973(3) SA 397 (A)
[2]
Provisions of a contract must be read in the context of the whole
document. See
Natal Joint Municipal Pension Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA