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[2018] ZAGPJHC 575
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Selekane and Another v Legacy Ventures (Pty) Ltd and Others (16841/2015) [2018] ZAGPJHC 575 (19 October 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 16841/ 2015
Date
of Hearing: 14 March 2018
Date
of Judgment: 19 October 2018
In
the matter between:
BILLY
SELEKANE
First
Plaintiff
ABE
THEBYANE
Second
Plaintiff
And
LEGACY
VENTURES (PTY)
LTD
First
Defendant
ALBERT
NORMAN
WESSON
Second
Defendant
ALISTER
CLIVE
GORDON
Third
Defendant
JOHN
GRAIG
GLANVILLE
Fourth
Defendant
JUDGMENT
MASHILE
J:
INTRODUCTION
[1]
The First Defendant is a company in which the Second to the Fourth
Defendants hold equal shareholding. I shall henceforth refer
to the
First Defendant as Legacy Ventures and the Second to the Fourth
Defendants as the Defendants. To conduct business, Legacy
Ventures
needed to raise finance and to have sway in the right places in the
business community in the country. The Defendants
acknowledged that
the objective of Legacy Ventures would not be easily accomplished
without the recruitment of suitable black members
to act as a black
equity empowerment group (‘BEE’) to acquire shares in
Legacy Ventures. The Plaintiffs were then identified
for that
purpose.
[2]
On 12 October 2013 at Boksburg, the parties concluded a memorandum of
understanding (hereinafter referred to as ‘the MOU’),
In terms of the MOU the Plaintiffs agreed to pay into the account of
Legacy Ventures an amount of R406 000 and to assist to
influence
business in favour of Legacy Ventures. In exchange, the Defendants
agreed that they would dispose of 70% of their shareholding
in Legacy
Ventures to the Plaintiffs. In consequence of the relationship
between the parties, the shareholding of the Defendants
in the issued
share capital of Legacy Ventures would decrease to 10% each while the
Plaintiffs would share the remaining 70% equally.
[3]
Initially, the Plaintiffs deposited an amount of R306 000 into
the bank account of Legacy Ventures. At the request of the
Defendants, the Plaintiffs later added an amount of R200 000 to
the amount of R306 000 for the partial acquisition of
the 70%
shareholding. The cash component of the 70% was thus increased to
R506 000. The payment of the amount of R506 000
is,
as I understand it, a matter of common cause. However, whether or not
the Plaintiffs performed in terms of what is stipulated
in the
agreement is central to the parties’ dispute.
[4]
The Plaintiffs allege that they have complied with all the terms of
the agreement. Conversely, the Defendants have failed to
observe the
terms of the agreement in that they have failed to effect
registration of transfer of their shares in the issued share
capital
of Legacy Ventures amounting in all to 70% into the names of the
Plaintiffs. For that reason, the Plaintiffs at first sought
to claim
specific performance but later amended their particulars of claim to
seek restitution. Their entitlement to both remedies
having stemmed
from the Defendants’ breach of the MOU.
[5]
The Defendants deny that they are in breach of the MOU. They contend
that on a proper construction of the MOU, payment of the
amount of
R506 000 was made in respect of working capital and is not
refundable. In any event, maintain the Defendants, performance
by the
Plaintiffs did not consist in payment of the cash amount of R506 000
only but the obligations stated under Clauses
4.1 to 4.3 had to be
discharged. The Plaintiffs have failed to execute on their
obligations arising from the MOU. The Plaintiffs
are as such,
conclude the Defendants, not entitled to claim payment of the amount
of R506 000. Besides, the Defendants
point to the
defective manner in which restitution has been pleaded in the
particulars of claim.
[6]
The Respondents have counterclaimed in the amount of R5 000 000.
However, it appeared that there was no fervour to follow through
the
counterclaim. As a matter of fact, Counsel for the Respondents
did not mention the counterclaim during his argument,
not even in his
heads of argument. Counsel for the plaintiffs, however, referred to
the fact that the plaintiffs did not proceed
with the counterclaim
and I did not hear any objection. Accordingly, I regard the
counterclaim as withdrawn. As such, it does not
form part of this
judgment.
EVIDENCE
ON BEHALF OF THE PLAINTIFFS
[7]
In support of their claim, the Plaintiffs rely on the testimony of
the First Plaintiff. He testified as follows:
7.1 During 2012, he and
the Second Plaintiff were invited by the Defendants to become BEE
equity partners in a project called the
Legacy Project. Legacy
Ventures had already been identified as a vehicle that would be
suitable to run the project. The project
had prototype patented
products which would be exposed to Legacy Ventures once properly
structured as a BEE entity with the Plaintiffs
as shareholders. The
products would be set-up for industrial and commercial use. The
products are listed in the MOU as aqua sola
car wash system, sky
cleaner, trolley wash, takkie cleaner, escalator cleaner and blind
cleaner.
7.2 He and the Second
Plaintiff were specifically targeted because they were perceived as
above reproach candidates for BEE as they
were socially networked
persons and had business experience in their individual rights. They
were offered opportunity to act as
endorsing parties for the Legacy
Project. He testified that he is a motivational speaker and held
shares in other businesses. He
said that the MOU was the foundation
of the agreement between the parties whose purpose was to develop and
produce products on
an incubator model and the business model.
7.3 He and the Second
Plaintiff had anticipated the 70% stake to be transferred and
registered into their respective names in equal
share upon payment of
the sum of R406 000 mentioned in Clause 4.1 of the MOU. It is
common cause that the amount ultimately
paid to Legacy Ventures by
the Plaintiffs amounted in all to R506 000. He said that they had to
make a further payment of R100 000
because it so transpired that
Legacy Ventures found itself needing additional funds to attain
certain business goals. He testified
further that he and the Second
Plaintiff discharged their duties as they arise in terms of Clauses
4.2 and 4.3 of the MOU. In this
regard, he elaborated that:
7.3.1
He provided support to the Legacy Project and facilitated business
opportunity meetings with key potential clients and funders,
and
especially the Anglo Gold mines, the Small Enterprise Funding Agency
(SEFA), ADT and the Industrial Development Corporation;
7.3.2
Anglo went so far as to place an order and made partial payment
towards the placement of the prototype Aqua Sola machines;
7.3.3
SEFA granted approval for the submission of applications for funding.
7.4 His understanding was
that the reference to ‘Opportunity presented’ was in
reference to the 70% equity offered and
that the reference to
‘Requirements’ was in reference to clauses 4.2 and 4.3.
Comprehended in that manner, Clauses
4.2 and 4.3 merely required the
Plaintiffs to offer support to Legacy Ventures raising firstly, R5
million and later R10 million.
Supporting those fund-raising
processes did not impose obligations beyond. He believed that their
performance in terms of the agreement
consisted in paying the amount
of R506 000, supporting the Legacy Project by facilitating
meetings and deals with clients
and funders.
7.5 While they, as
Plaintiffs, have complied with the terms and conditions imposed in
terms of the MOU, the Defendants have failed
to appoint them as
shareholders. Furthermore, they did not observe the provisions of
Clauses 7.2 and 9 insofar as they did not
transfer and register
shares equivalent to a 70% stake into their respective names. The
Defendants had also failed to deliver the
prototype products to Anglo
notwithstanding that the latter had made payment for them. He added
that the Defendants have since
2014 been avoiding the Plaintiffs and
to date they still do not answer their calls.
7.6 Under
cross-examination, he testified that he addressed a letter to the
Defendants on 26 November 2014 requesting a meeting
of Legacy
Ventures. The essence of the message in the letter is that if he and
the Second Plaintiff were not bought out they would
take over
operations of Legacy Ventures to advance the project. However, he
added that the threat was subject to receiving all
necessary
documents from the Defendants. No meeting happened subsequent to the
letter. Accordingly, their objective of taking over
could not be
realised.
7.7 It was put to him
that mere support and introduction of Legacy Ventures to various
entities did not amount to leveraging. The
process according to the
Defendants consisted in the influence and ultimate conclusion of
business transactions with entities.
The Plaintiff as the chief
executive officer of Legacy Adventures had failed to accomplish this.
In response, he was persistent
that support involved the introduction
and promotion of Legacy project as pursued by Legacy Ventures. He
realised part of this
when Anglo-American gave them money and
support.
7.8 SEDA and SEFA gave
them what they required for the conclusion of business transactions
but the Third Defendant did not execute.
He put the blame squarely at
the door of the Third Defendant, the technical director. The attitude
of the Plaintiffs is that the
Defendants were responsible for the
failure of the Legacy Ventures. Asked who would have given them
letters of appointment, he
stated that he expected it to come from
the Third Defendant who was also the managing director of the Legacy
Ventures. This concluded
both the evidence and case for the
Plaintiffs.
EVIDENCE
ON BEHALF OF THE DEFENDANTS
[8]
The Third Defendant testified in support of the case for the
Defendants. His testimony is substantially similar to that of the
First Plaintiff except in some parts, which can be put down to
interpretation of events and matters. His testimony revolved mainly
around the agreement concluded between the parties and he stated
that:
8.1 He knows the
Plaintiffs. The MOU represented the initial understanding between the
parties. His explanation of Clauses 1 to
4 was that the Plaintiffs
were required to influence or have capability to network or open
doors for the Legacy Ventures. That
said, the primary purpose for
bringing the Plaintiffs on board was that they would assist in
raising funds for Legacy Ventures
to embark on the business project.
He conceded that the Plaintiffs brought certain people and entities
with the intention of raising
funds but this did not work.
8.2 SEFA and other
potential funders would not commit to anything before a working
business model. The Plaintiffs failed to comply
with Clauses 4.2 and
4.3 of the MOU. He added that Clause 7 dealing with shareholding was
conditional upon Clause 4 of the MOU
being attained. Opportunity
presented relates to the conditions set out in clause 4 of the MOU.
The First Plaintiff, as the chief
executive officer was expected to
satisfy the conditions stipulated in 4.2 and 4.3. Clause 9 states
that certain documents had
to be signed and executed. This clause
could not be enforced as the conditions were not discharged.
8.3 At a meeting of the
shareholders, the Plaintiff stated that Legacy Ventures would raise
the required capital through profit.
Consequently, subclauses 4.2 and
4.3 were rendered superfluous. In this regard, he referred to an
e-mail message dated 18 April
2013. He confirmed that the Plaintiffs
had proposed to take over the operations of Legacy Ventures but
subject to the Defendants
handing over the necessary documents. The
meeting that was meant to take place on 26 November 2013 could not
proceed because the
Defendants did not attend.
8.4 Under
cross-examination, he testified that Legacy Ventures was in existence
when the MOU was signed. He reiterated that insofar
as clauses 4.2
and 4.3 were concerned, the Plaintiffs performed partially. Second
Plaintiff opened the door to Anglo-American while
the First Plaintiff
facilitated a meeting with SEFA. Asked whether the Plaintiffs would
have succeeded had they been given the
essential documents relevant
to the running of Legacy Ventures, he said that they might have but
it would have depended on availability
of funding. Some machines from
Anglo-American were not delivered. Those machines that were delivered
by Anglo-American cost R80 000.
This marked the end of the
evidence and case of the Defendants.
PLEADINGS
[9]
In their original combined summons, the Plaintiffs based their claim
on specific performance alternatively; restitution but
later amended
their particulars to premise their claim squarely on
restitution. Lastly, a claim relying on the
condictio
furtiva
and misrepresentation. However, as
the papers of the Plaintiffs stand now, restitution is the only
remedy that arises as per the
amended founding papers of the
Plaintiffs whereas the others were raised during argument in Court or
in the Plaintiffs’ heads.
ISSUES
FOR DETERMINATION
[10]
At first glance, one of the issues to be decided is interpretation of
the MOU. In my view the need to decide on that issue
has been
obviated by the manner in which the Plaintiffs have pleaded their
case. I note that Counsel for the Defendant has gone
to great lengths
to demonstrate that on the plaintiffs’ version and
interpretation of the MOU, the Plaintiffs failed to perform.
On the
contrary, the Plaintiffs did not traverse the issue at all. The
central issue for decision has now become the determination
of
whether or not the Plaintiffs are entitled to payment of the amount
claimed having regard to the manner in which they have pleaded
their
case.
LEGAL
PRINCIPLES
[11]
Insofar as the mutability of the Plaintiffs’ case is concerned,
this Court per Heher J, as he then was, in
Jowell
V Bramwell-Jones and Others
1998
(1) SA 836
(W) at 898F – J
held:
‘
As
the parties are adversaries, it is left to each of them to formulate
his case in his own way, subject to the basic rules of pleadings…
For the sake of certainty and finality, each party is bound by his
own pleading and cannot be allowed to raise a different or fresh
case
without due amendment properly made. Each party thus knows the
case he has to meet and cannot be taken by surprise at
the trial.
The court itself is as much bound by the pleadings of the parties as
they are themselves. It is no part
of the duty or function of
the court to enter upon any enquiry into the case before it other
than to adjudicate upon the specific
matters in dispute which the
parties themselves have raised by their pleadings. Indeed, the
court would be acting contrary
to its own character and nature if it
were to pronounce upon any claim or defence not made by the parties.
To do so would
be to enter the realms of speculation…
Moreover, in such event, the parties themselves, or at any rate one
of them, might
well feel aggrieved; for a decision given on a claim
or defence not made, or raised by or against a party is equivalent to
not
hearing him at all and may thus be a denial of justice. The
court does not provide its own terms of reference or conduct its
own
enquiry into the merits of the case but accepts and acts upon the
terms of reference which the parties have chosen and specified
in the
pleadings. In the adversary system of litigation, therefore, it
is the parties themselves who set the agenda for the
trial by their
pleadings and neither party can complain if the agenda is strictly
adhered to. In such agenda there is no
room for an item called
“any other business” in the sense that points other than
those specified in the pleadings may
be raised without notice.’
[12]
The essence of the passage above is that a party cannot canvass one
approach in the papers and then adopt another in his heads
of
argument and/or during argument without having amended his papers to
be in line with his argument. The rationale behind is manifest
–
the other party must come to court knowing what case he is expected
to meet. Lack of adherence to that principle will inexorably
result
in injustice and unfairness on the other unsuspecting party. I intend
to approach the determination of this matter with
guidance from this
salutary principle.
EVALUATION
[13]
In consequence of the view that I take of this matter, it is not
necessary to decide on the interpretation of the MOU. That
approach
means that the only critical issue for the determination of this
matter leans on how the claim has been pleaded. The ‘agenda’
set by the Plaintiffs in their papers is one of restitution. This
Court is as such confined to that ‘agenda’. To emphasise
the restitution claim, the Plaintiffs’ prayer reads: ‘…
Pay an amount of R506 000.00(Five Hundred and Six Thousand
Rand) to
the Plaintiffs as a refund of the initial investment made by the
Plaintiffs;’
[14]
Although the claim of the Plaintiffs is based on the Defendants’
breach of the MOU, the prayer sought is incompatible
with the
particulars of claim insofar as the particulars of claim do not make
a case for restitution. An integral part of a claim
to restitution is
cancellation of the agreement, the MOU in this instance. In this
regard, it could be useful to refer to the case
of
Sackstein
v Proudfoot
SA (Pty)
Ltd
2006 (6) SA 358
(SCA) where it was
stated:
‘
The alternative claim is
clearly one for restitution following cancellation. This court said
in
Extel Industrial (Pty) Limited and Another v
Crown Mills (Pty) Limited
: ‘That a tender of
restitution, or the explanation and excuse for its failure, is a
requirement in proceedings for restitution
is indeed trite.’
[15]
The Plaintiffs’ failure to allege and prove cancellation of the
MOU is incurable. See in this regard,
Cash
Converters Southern Africa (Pty) Ltd V Rosebud Western Province
Franchise (Pty) Ltd
2002 (5) SA 494
(SCA), a
case to which the Defendants referred this Court. The Plaintiffs’
assertion during argument in court that the breach
by the Defendants
‘was so material’ such that lack of a cancellation clause
in the MOU is ‘rendered unnecessary’
is vain. If that
were the case and the cancellation so devastating, it makes it
aberrant why the Plaintiffs selected to be bound
by the MOU.
[16]
I agree with Counsel for the Defendants that the Plaintiffs’
dependence on
Singh v McCarthy Retail LTD t/a
mcintosh motors
[2000] ZASCA 129
;
2000 (4) SA 795
(SCA) is
misguided. One of the things that make Singh distinguishable from the
instant case is that the Plaintiff in that case
sued for cancellation
of the agreement, which the Plaintiffs have not done in this case.
[17]
I am mindful that the Defendants have entertained some of the
arguments raised by the Plaintiffs outside of their papers. I
have
strictly chosen to work within the four corners of the papers or
agenda of the Plaintiffs. I have deliberately refrained from
dealing
with the
condictio furtiva
and misrepresentation because they are not canvassed in the papers of
the Plaintiffs. In this regard, perhaps I should remind the
parties
of one of the principles established in the Jowell case supra –
‘…
each party
is bound by his own pleading and cannot be allowed to raise a
different or fresh case without due amendment properly
made…’
CONCLUSION
[18]
I have consciously decided not to explore the question of the
interpretation of the MOU. The reasoning behind that decision
is that
once the manner in which the claim has been pleaded is wrong, it
would be superfluous to decide on the correct interpretation
of the
MOU. In the result, the claim against the Defendants fails and I make
the following order:
1. The claim is dismissed with costs.
______________________________________
B
A MASHILE
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
APPEARANCES:
For the Plaintiffs: Adv.
M Mathaphuna
Instructed
by: Nyachowe Attoneys
For the Defendants: Adv.
J Bhima
Instructed
by: Bhika Inc