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[2018] ZAGPJHC 685
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Rainmaker Logistics (Pty) Ltd v Gravitas Capital (Pty) Ltd (45134/16) [2018] ZAGPJHC 685 (26 November 2018)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
LOCAL DIVISION, JOHANNESBURG)
CASE
NO:
45134/16
In
the matter between:
RAINMAKER
LOGISTICS (PTY)
LTD
Applicant
and
GRAVITAS
CAPITAL (PTY)
LTD
Respondent
JUDGMENT
KEIGHTLEY J
1.
This is an application
for an order directing the respondent, Gravitas Capital (Proprietary)
Limited (“Gravitas”) to
pay the applicant, Rainmaker
Logistics
(Proprietary)
Limited
(“Rainmaker”),
an amount of R1.8million.
2.
The application arises
out of two disputed agreements. In terms of the first
agreement, (“the initial sale agreement”),
Rainmaker sold
30% of its shares in a different (but similarly named) entity called
Bongani Rainmaker Logistics (Pty) Ltd (“BRL”),
and 75% of
Rainmaker’s claims as shareholder against BRL to Gravitas for
an amount of R3million.
3.
The dispute arising
from the sale agreement involves the suspensive conditions precedent
(“the conditions precedent”)
contained in clause 8.
In terms of the conditions precedent the parties were required to
enter into a shareholder’s
agreement, to sign a memorandum of
incorporation, and Rainbow was to conclude a service level agreement
with BRL, all before 28
February 2013. The sale agreement
further provided that if these conditions were not met, the sale
agreement would be void
ab
initio
and neither
party would have any claim against the other arising from it.
4.
It is common cause that
the conditions precedent were not met, although the parties continued
to conduct themselves as if they had
been. What is in dispute
for present purposes is the legal consequences of the failure to
comply with the conditions: Rainmaker
contends that the legal
consequences are that the agreement must be treated as if it was
never entered into, and hence, that there
never was a lawful and
binding transfer of shares to Gravitas in terms of the initial sale
agreement. Gravitas disputes this
for various reasons, which I
will deal with later.
5.
The second disputed
agreement is an oral agreement alleged to have been entered into
between Rainmaker and Gravitas on 24 February
2016 in terms of which
Rainmaker repurchased Gravitas’ shares in BRL for an amount of
R1.8million. I refer to this
as the repurchase agreement.
Rainmaker avers that the agreement was entered into with Mr
Schwankhart representing it, and
Professor Khumalo (“Prof
Khumalo”) representing Gravitas. Prof Khumalo is a
shareholder in Gravitas and he deposed
to the answering affidavit on
its behalf. Mr Schwankart is a shareholder in Rainmaker, and he
deposed to the founding affidavit.
6.
Prof Khumalo disputes
the existence of the repurchase agreement. He admits that he
received an amount of R1.8million soon
after 24 February 2016, but
his version is that this was a personal loan to him from Mr
Schwankart.
7.
Rainmaker’s claim
is based on unjustified enrichment. It says that because the
conditions precedent were not met, the
initial sale agreement never
took effect, although the parties continued to conduct
themselves on the
bona
fide
assumption
that it was effective. Acting on the
bona
fide
, but mistaken
belief that the initial sale agreement had taken effect, and thus
that Gravitas was the owner of 30% of the shares
in BRL, Rainmaker
agreed to repurchase the shares for R1.8million. It paid the
purchase price on 25 February 2016 in the
bona
fide
belief that
Gravitas held shares in BRL and was entitled to sell them. This
belief was mistaken: because of the underlying
and original
invalidity of the initial sale agreement, Gravitas had never lawfully
taken transfer of the shares under that agreement,
and could thus not
sell them back to Rainmaker under the repurchase agreement.
Consequently, Rainmaker concludes, the repurchase
agreement was void,
and it is entitled to the repayment of the repurchase price it paid
for the shares.
8.
There are two broad
issues of substance arising from Rainmaker’s claim, and from
Gravitas’ defence: firstly, what were
the legal consequences of
the failure to comply with the conditions precedent and, secondly,
whether the parties indeed entered
into the repurchase agreement as
claimed by Rainmaker. If Rainmaker is correct that the failure
to comply with the conditions
precedent in the sale agreement
rendered it void
ab
initio
, this
establishes one leg of its claim. However, to succeed
ultimately, Rainmaker must also establish that the payment of
R1,8,million on 25 February 2016 was a payment in terms of the
repurchase agreement. If Gravitas is correct that it was a
loan
to Prof Khumalo, unrelated to the business dealings between Rainmaker
and Gravitas, then no claim based on unjustified enrichment
will
follow.
9.
Gravitas raises a
third, and procedural issue: it contends that prior to the launch of
the application, in an email dated 30 July
2016 addressed to
Rainmaker, Prof Khumalo categorically denied that he had sold his
(i.e. Gravitas’) shares to Rainmaker.
This averment
relates, of course, to the alleged repurchase agreement.
Gravitas contends that Rainmaker accordingly must
have known that the
dispute involved a material dispute of fact (i.e. as to whether the
parties had indeed concluded the repurchase
agreement).
Gravitas requests, in the interests of justice, that the matter be
referred to trial, alternatively to oral evidence
for a proper
determination of this disputed issue.
GRAVITAS’ POSITION
AT THE HEARING
10.
Both parties filed
heads of argument for purposes of the hearing. In its heads,
Rainmaker addressed all of the issues in dispute.
However,
Gravitas elected only to address the question of whether the matter
ought properly to be referred to oral evidence or
trial in view of
what it contended were material disputes of fact on the papers.
In Gravitas’ practice note, it advised
the court that: “
Because
Respondent maintains there is an intolerable dispute of fact, it is
submitted that whilst all the papers should be read,
they need only
be read as to ascertain that there is such a dispute of fact.
”
11.
When the matter was
called in court, there was no appearance (by either counsel or an
instructing attorney) for Gravitas.
I was advised by counsel
for Rainmaker, Mr Whittcutt, that there had been no prior
communication emanating from Gravitas’
attorney, or its counsel
to indicate that they would not be at court. I was provided
with copies of three letters sent from
Rainmaker’s attorney to
Gravitas’ attorney advising, among other things, of the set
down date of the hearing for 29
October 2018. I was advised
that no response was forthcoming.
12.
As things transpired,
counsel for Rainmaker, and its instructing attorney eventually
ascertained on the morning of the hearing,
and shortly before court
was due to commence, that there would be no appearance for Gravitas.
13.
In light of these
events, counsel for Rainmaker submitted that it would be proper for
me to deal with the matter as if it were a
default judgment. In
view of the fact that I was favoured with a full answering affidavit
from Gravitas, and a set of heads
(albeit on the limited issue
described above), despite Gravitas failure to appear at the hearing,
I deal with the merits of the
matter fully in this judgment.
14.
It will be convenient
to start with Gravitas’ contention that the matter ought
properly to be referred to trial or oral evidence.
If this
contention is correct, then it will be for the trial court to make a
determination on the merits of the other substantive
issues raised.
As will become apparent from my treatment of this issue, below, it
overlaps with, and as it turns out,
is decisive of, the merits of the
matter on the substantive issue of the existence of the repurchase
agreement.
THE REQUEST BY RESPONDENT
FOR A REFERRAL TO ORAL EVIDENCE OR TRIAL
15.
Gravitas submits that
there is a total dispute of fact that cannot possibly be decided on
the papers. This dispute, it is
submitted, revolves around the
purpose of the payment of R1.8million: was it the purchase price in
terms of the repurchase agreement,
as claimed by Rainmaker, or was it
a personal loan to Prof Khumalo, as Gravitas contends? It is on
this basis that Gravitas
requests a referral to oral evidence or
trial.
16.
Rainmaker’s
contention is that although Gravitas disputes the existence of the
repurchase agreement, and relies instead on
a personal loan as the
cause for the payment of the R1.8million, this is not a “true”
dispute of fact which, on the
authorities, should be referred to oral
evidence or trial. It contends that the matter can be decided
on the papers.
Furthermore, in line with the applicable
authorities (which I refer to later), Rainmaker submits that
Gravitas’ version is
so untenable that it should be rejected,
and judgment granted in favour of the applicant, Rainmaker.
17.
As to the competing
versions of the parties, Rainmaker makes out its case for the
existence of the alleged repurchase agreement
on the following
factual averments:
(a) In February 2016
Gravitas, through Prof Khumalo initiated negotiations to re-sell its
shares in BRL to Rainmaker, as Gravitas
was anxious to obtain cash.
(b) Prof Khumalo
contacted Mr Schwankhart late on the evening of 24 February 2106 and
was anxious to meet immediately.
(c) They duly met and
conducted the negotiations for the resale of the shares in the space
of less than an hour.
(d) The outcome of the
negotiations was that the parties (with Rainmaker represented by Mr
Schwankhart, and Gravitas by Prof Khumalo)
entered into an oral
agreement in terms of which Rainmaker repurchased Gravitas’
shares in BRL for R1.8million.
(e) The material terms of
the agreement included that payment of the purchase price would be
made by 12h00 on 25 February 2016.
(f) A copy of proof of
payment was annexed to the founding affidavit.
(g) Mr
Schwankhart made numerous attempts thereafter to get Prof Khumalo, as
the representative of Gravitas, to sign a written version
of the oral
repurchase agreement and the necessary paperwork to give effect to
it. However, Prof Khumalo became evasive and
refused on
numerous occasions to sign any of the paperwork.
18.
Much of the answering
affidavit is devoted to dealing with the question of the conditions
precedent. Prof Khumalo, on behalf
of Gravitas, also deals, at
relative length with what appear to be extraneous issues, such as
corporate governance in the entities,
the action proceedings pending
between the parties, documents that Gravitas requested in terms of
rule 35(14), allegations that
BRL may not have been acting in
accordance with the B-BBEE Act, and allegations that Rainmaker is
denying Gravitas access to documents
etc. There is relatively
little by way of a response to Rainmaker’s averment that the
R1.8million was the purchase
price under the repurchase agreement
agreed between the parties.
19.
What Prof Khumalo does
say about this issue may be summarised as follows:
(a) The payment of
R1.8million was paid to him in his personal capacity, and not into
Gravitas’ bank account, as it was never
intended to constitute
the proceeds of a sale of Gravitas’ shares in BRL.
(b) The manner of payment
was consistent with the manner in which Mr Schwankhart personally had
made loans to him before.
(c) The loan was made to
him by Mr Schwankhart personally.
(d) The payment to him
was unrelated to both Gravitas and Rainmaker.
(e) There could not have
been a repurchase agreement as none of the formalities set out in
BRL’s memorandum of incorporation
for the sale of Gravitas’
shares were even considered.
(f) Furthermore, Prof
Khumalo was not authorised and therefore not able to sell the shares
through the repurchase agreement.
(g) Prof Khumalo refuted
the allegation that Gravitas had sold its BRL shares to Rainmaker in
an email of 30 July 2016. This
was in response to Mr
Schwankhart’s email of 27 February 2016, in which “
he
first raised the allegation that I, on behalf of Gravitas, had sold
my shares in BRL
”. A copy of both emails is attached
to the answering affidavit.
(h)
The issue of the purported sale of the shares was “
a
stratagem
” to
ensure that Gravitas relinquished its shares in BRL.
20.
In its replying
affidavit, Rainmaker submits that Prof Khumalo’s version that
the payment of R1.8million was a loan is patently
implausible:
(a) It attaches extracts
from its books of account reflecting the amount of the payment and to
whom it was made. Rainmaker
submits that this is dispositive of
the fact that the payment was not made by Mr Schwankhart personally
to Prof Khumalo as a personal
loan.
(b) Rainmaker
acknowledges that the payment was made into Prof Khumalo’s bank
account but contends that this is not evidence
that it was a personal
loan. It states that this was the account nominated by Prof
Khumalo into which he requested that the
R1.8million be paid. A
text message from Prof Khumalo contemporaneous with the time when
Rainmaker says that Prof Khumalo
and Mr Schwankhart met to conclude
the repurchase agreement is attached to the replying affidavit as
evidence of this fact.
(c) It avers that the
formalities required for the sale of shares in BLR’s MOI were
considered. As evidence of this,
a resolution from the other
shareholder in BLR, Eratis Technologies (Pty) Ltd is attached to the
replying affidavit. The
resolution notes that Rainmaker wishes
to buy Gravitas’ shares in BRL and its loan capital.
Eratis agrees to waive
its pre-emptive rights to the sale of the
shares in terms of BRL’s MOI, and, as a shareholder, it
authorises BRL to enter
into the sale agreement. The resolution
is dated 24 February 2016. Rainmaker avers that the resolution
was provided
in accordance with clause 7.3 of the MOI.
(d) In addition,
Rainmaker attaches emails between Mr Schwankhart and Prof Khumalo
which it says bear out its version that the money
was paid in
accordance with the repurchase agreement, and not a loan.
(e) It
also attaches pages of text messages between the same parties
reflecting what Rainmaker says were its repeated requests to
Prof
Khumalo to sign the repurchase agreement so that his exit from BRL
could be finalised.
21.
As far as the law is
concerned, the dictum of the Supreme Court of Appeal in
NDPP
v Zuma
is often
cited as more recent authority for the principles applicable to
disputes of fact in motion proceedings:
“
It
is well established under the Plascon-Evans rule that where in motion
proceedings disputes of fact arise on the affidavits, a
final order
can be granted only if the facts averred in the applicant’s ...
affidavits, which have been admitted by the respondent
... together
with the facts alleged by the latter, justify such order.
It
may be different if the respondent’s version consists of bald
or uncreditworthy denials, raises fictitious disputes of
facts, is
palpably implausible, far-fetched or so clearly untenable that the
court is justified in rejecting them merely on the
papers
.”
[1]
(Emphasis
added)
22.
Rainmaker submits that
Gravitas, through Prof Khumalo’s denial of the existence of the
repurchase agreement as being the
causa
for the payment is fictitious, palpably implausible and a transparent
attempt at trying to evade its obligations under that agreement.
On this basis, Rainmaker submits that Prof Khumalo’s version,
on behalf of Gravitas, falls to be rejected on the papers.
23.
In
its submissions, Gravitas refers to the authorities that warn courts
against taking too robust an approach to disputes of fact
on the
papers in motion proceedings. It relies on
Soffiantini
v Mould
,
[2]
in
which it was held that due consideration should be given to the
advantages of the court hearing
viva
voice
evidence in these circumstances, rather than deciding them on the
papers. Gravitas relies also on two full bench decisions
of the
KwaZulu-Natal High Court.
[3]
It
submits that what emerges from these cases is that where a material
dispute of fact exists in motion proceedings, a respondent’s
version should only be rejected if it demonstrates “clear
falsity”. Gravitas submits that even if certain
inconsistencies
can be identified in its version, they are not so
clearly false as to warrant rejection without a referral to oral
evidence or
trial.
24.
On
my reading of the full bench decision in one of the cases referred
to, viz.
South
Coast Furnishers CC
(see below), the court did not purport to supplant the
well-established principles for determining when it is permissible to
reject
a respondent’s version where disputes of facts arise in
motion proceedings. In fact, the court not only cited the above
dictum from
NDPP
v Zuma
,
but also applied those principles in upholding the appeal.
[4]
Where
the court in
South
Coast Furnishers CC
makes reference to the need for “
clear
falsity
”
to emerge from the papers, it is in the context of the evaluation of
the creditworthiness of a witness. It does not
seem to me to
have been intended to introduce a stricter test than the one already
laid down by the courts to determine when it
is appropriate to reject
a respondent’s version on the papers.
[5]
25.
What does appear to be
clearly demonstrated in
South
Coast Furnishers CC
is that a court must consider the nature of any alleged
improbabilities in the respondent’s version before being robust
in rejecting them. These probabilities must be considered
within the context of all the evidence before the court, including
the applicant’s own papers. The court stated in this
regard that:
“
These
submissions (of the applicant regarding the alleged improbabilities
in the respondent’s version) have some force.
However,
they cannot be viewed in isolation. There are features of the
applicant’s case which must be weighed against
the apparent
improbabilities on which the applicant relies.”
[6]
26.
In that case, the
respondent had given a detailed explanation of facts which it said
supported its case. The court found that
while there were some
improbabilities with the respondent’s version, the applicant
itself had elected not to respond to them
in reply. This was
one of the reasons why the court found that despite the existence of
a measure of improbability, the court
a
quo
had erred in
rejecting the respondent’s version on the papers rather than
referring the matter to oral evidence.
27.
Unlike the respondent
in
South Coast
Furnishers CC
,
Gravitas does not provide much detail in support of its version that
the payment of R1.8million was a personal loan to Prof Khumalo
rather
than payment of the agreed purchase price under the repurchase
agreement. In essence, it relies on a statement by
Prof Khumalo
to this effect in the answering affidavit; an averment that Prof
Khumalo did not have authority to sell the shares;
an averment that
the formalities for the sale as provided for in BRL’s MOI were
not even considered; and the fact that payment
was made into Prof
Khumalo’s personal bank account. There are no details
provided about when the loan agreement was
entered into or its terms.
28.
Tellingly, the
answering affidavit does not specifically deal with paragraph 11 of
the founding affidavit, in which Mr Schwankhart
describes a late
night call from Prof Khumalo on 24 February 2016 saying that he
needed cash and wanted to negotiate the sale of
his (i.e. Gravitas’)
shares in BRL. It was this approach that Rainmaker says led to
the negotiations that evening and
the conclusion of the oral
repurchase agreement. Gravitas provides a generalised answer in
paragraph 69 by offering a broad
denial of the content of paragraphs
10 to 13 of the founding affidavit and simply states: “
...
it was never my intention to dispose of, or sell or engage in any
process to relinquish Gravitas’shares in BRL.
”
29.
It is common cause that
the R1.8million was paid the next day, on 25 February 2016. It
is telling, in my view, that Gravitas
provides no response to the
allegations that there was a telephone call, followed by a meeting
between the parties, followed by
the payment of the money the next
day. Save for the generalised denial of the contents of the
relevant paragraphs in Rainmaker’s
affidavit, we do not know,
on Gravitas’ version, whether indeed a meeting took place or
not. We do not know, in the
event that the parties did meet as
contended by Rainmaker, what was discussed, if not the repurchase
agreement. Instead,
there is silence from Gravitas as to what
precipitated the payment (in the face of a factual version put up in
the founding affidavit),
and the court is left with impression that
the loan contended for by Gravitas simply dropped from the air.
30.
Gravitas’
inadequate response to the averments made in the founding affidavit
support Rainmaker’s contention that its
denial of the existence
of the repurchase agreement as the basis for the payment of the
R1.8million does not raise a genuine dispute
of fact on the papers.
31.
Not only is there
silence from Gravitas about what precipitated the payment, but there
are contemporaneous text messages that support
Rainmaker’s
version. In its founding affidavit Rainmaker says that it
subsequently made numerous attempts to get Prof
Khumalo to sign the
written version of the oral repurchase agreement on Gravitas’
behalf, and that Prof Khumalo became evasive,
and refused a number of
times to sign. Once again, in its answering affidavit, these
averments are met with a broad denial,
together with an explanation
that Prof Khumalo refused to sign because the documents “
sought
to create a sale ... in circumstances where this was neither
envisioned nor desired by either myself or Gravitas.
”
32.
Rainmaker provides
copies of text messages dated 25 February 2016. The first, from
Mr Schwankhart says: “
Prof,
my brother can assist so I will be able to make the payment.
I’m waiting for the funds to clear. I need
some help from
you too please, which is to sign our original shareholders agreement
when you
exit
, its
the only protection we will have against the new guys. Are you
okay to do that for us please?
”
And later: “
R1m
has been paid. Balance when my brother’s money clears.
Will let you know when that is paid. Good luck
Prof.
I
hope this decision changes your fortunes
.
”
(Emphasis added) Prof Khumalo simply responds: “
Fantastic!
”.
He does not query what Mr Schwankhart is referring to when he talks
about his “
exit
”
or “
the new
guys
”.
He also doesn’t comment on what Mr Schwankhart is referring to
by the “
decision
”
that may change his fortunes. Bearing in mind that Gravitas
does not give a version as to what may have been discussed
in the run
up to these payments, the text messages can only be understood as
referring to the negotiations of the evening before
as described in
the founding affidavit concerning the sale of Gravitas’ shares,
thus leading to Prof Khumalo’s exit
from BRL consequent on that
sale.
33.
An email (although not
contemporaneous with the events of 24 and 25 February 2016) attached
to the replying affidavit provides further
background to Rainmaker’s
version. The email is sent from Mr Schwankhart to Prof Khumalo
on 23 September 2016.
In it, Mr Schwankhart says: “
At
the root of this finality, is the agreement reached at Tashas, in
Morningside, on 24 February 2016 at around 21h30, where you
agreed to
sell Gravitas’ stake in the Company for a cash payment of
R1.8million and the assumption of the R825,000 loan account
the
Company has against you in your personal capacity. I remember,
vividly, how reluctant you said you felt about your exit
- given your
fond feelings towards the Company - but that matters greater than
your shareholding in Rainmaker required your immediate
attention; and
how you implored me to make payment before 12h00 the following day
(25
th
February) so that you would be able to secure your other, more
pressing, business interests. I remember also you offering
your
regret about meeting late at night to conclude a discussion around
your exit that had been brewing since you first announced
this
intention at an informal meeting of the board in August, 2015, and
how you asked me to allow you time to communicate your
exit to
Lennox, Willem and the staff in person. At the closing of the
meeting, I remember standing to say that it was a big
and sad day
that you had decided to leave the Company since this had never been
our wish, and that I could only imagine the enormous
pressure you
were under at the time. I assured you I would do my utmost to
make payment within your tight deadline.
I confirmed the
critical details of the agreement, we looked each other in the eye
and shook hands. The next day, I complied
with and delivered on
all our obligations. Payment was indeed made, and this payment
was accepted by you, thus completing
the transaction.
”
The email is consistent with the contemporaneous text messages sent
on 25 February, discussed earlier, which refer
specifically to the
exit of Prof Khumalo.
34.
There is also further
evidence to back up the reference by Mr Schwankhart in the 23
September 2016 email to earlier discussions
in August 2015 regarding
the exit of Gravitas from BRL. An email from Mr Schwankhart to
Prof Khumalo on 24 August 2015 is
attached to the replying
affidavit. The email states that: “
I
think that it’s important for us to make sure your exit from
Bongani Rainmaker is properly managed and is complete in all
its
detail. As a starting point, I suggest that we compile a single
document that deals with the following ... agreement
on the
re-purchase price of your equity ... agreement on how to deal with
and settle your loan account to the company... managing
the statutory
requirements of your exit regarding CIPC requirements as well as the
associated transfer of shares ... .
”
It seems quite clear from this that the exit by Gravitas from BRL
through the repurchase of its shares had been on
the agenda for some
time before the alleged meeting and agreement on 24 February 2016.
This lends the lie to Gravitas’
assertion that Rainmaker’s
reliance on the repurchase agreement was merely a stratagem to
exclude Gravitas from BRL.
35.
There are also numerous
text messages attached to the replying affidavit that confirm
Rainmaker’s averment that it tried over
and over again to get
Prof Khumalo to meet and to sign the written repurchase agreement and
other documents to finalise Gravitas’
exit from BRL. For
example, on 10 March there is a text message from Mr Schwankhart to
Prof Khumalo asking when they can
meet with “
Leon
and Willem (who were involved in BRL) so that we can update the guys
and conclude the paperwork
”.
(words in brackets added). After no response, Mr Schwankhart
writes again on 4 April 2016 saying: “
Are
you around we need to finalise our paperwork please
”.
Prof Khumalo responds: “
Hallo
Oli. I got your message. I shall revert.
”
Two weeks later, on 19 April, Mr Schwankhart writes: “
Hi
Prof, pls don’t forget about me
”.
Prof Khumalo responds: “
I
will call you later this morning. Pardon my delayed
response”. Then on 5 May, Mr Schwankhart texts more
anxiously that: “
I
am taking some pressure getting our rainmaker governance in order.
I have needed to break rank and
have
asked Simon to Draft your exit documents
.
I need to conclude with our Durban friends and am literally stuck
Prof and need your support to conclude these dealings.
Please
make time for me so that we can tie up the loose ends please
”
(my emphasis). Then almost 3 weeks later, from 24 May 2016 all
the way up to 18 June there are repeated texts from
Mr Schwankhart to
meet with Prof Khumalo. Eventually, it seems that on 19 June
arrangements were made to meet, although from
later texts, it appears
that further meeting requests were made. In mid-July, Mr
Schwankhart was still texting Prof Khumalo
saying that they needed to
meet and that they needed to resolve the paperwork. The last
text message attached was from Prof
Khumalo saying that he could not
meet that day (25 July 2016) as he was not well.
36.
Two days later, Mr
Schwankhart sends an email to Prof Khumalo. A copy was attached
to Gravitas’ answering affidavit.
In the email, Mr
Schwankhart says, amongst other things in a paragraph numbered 1:
“
For clarity
and completeness, I have also attached the sale of share agreement
which formalizes the sale of your shares in Feb 2016
for R1,8m which
was paid at the time at your request, on trust and on a handshake
plus R825,000 paid previously - so a total of
R2,6m for your 10% of
your shares that had vested, the balance of the 20% being invested
and revert to Rainmaker as the original
owner
.”
It was this email that led to Gravitas’ first denial of the
existence of the repurchase agreement. In
his response on 30
July 2016, Prof Khumalo states: “
I
reject your assertions in the sub paragraph numbered 1. In your
email and deny that I have disposed of, sold or engaged
in any
process to relinquish in any way my shares or stake [or any part
thereof] in the Company. I ask that this subject,
“for
clarity and completeness”, be discussed in all its aspects
(including loans) at the requested meetings, most particularly
the
SGM.
”
In its answering affidavit, Gravitas (through Prof Khumalo) says that
this was the first time that Rainmaker had raised
the allegation that
he had sold Gravitas’ shares in BRL.
37.
From the text messages
referred to earlier, it is plain that Gravitas’ exit from BRL
had been referred to many times between
Mr Schwankhart and Prof
Khumalo in the previous months. It simply cannot be true that
this was raised for the first time
in the email of 27 July 2016.
Nor had Prof Khumalo ever queried what Mr Schwankhart meant when he
referred to his “
exit
”
from the company and the need to finalise the relevant documents.
38.
What is also critical,
in my view, is that Prof Khumalo’s denial of the agreement in
his email of 30 July 2016 is stated in
broad terms. Although in
his 27 July email Mr Schwankhart made specific reference to the
payment of R1,8 million as being
for the repurchase of the shares
Prof Khumalo does not assert in response that the payment of
R1.8million was a personal loan.
Had this truly been the
position, it is reasonable to expect that he would have made this
assertion then and there, rather than
waiting for the present
proceedings to raise this defence.
39.
If Gravitas’
version is considered in light of all the evidence before the court,
it is patently lacking in substance and
plausibility. The other
factors relied upon by Gravitas do not take the matter further, in my
view. The payment of
the money into Prof Khumalo’s
account is neither here nor there without the existence of further
evidence to lend substance
to his assertion that it was a personal
loan. The averment that he did not have authority to sell the
shares is made as a
bald averment. He does not explain why he
did not have authority when, on the papers, it is clear that for all
intents and
purposes, Gravitas was treated as Prof Khumalo’s
entity, and the shares were referred to interchangeably as being both
his
and Gravitas’. This bald assertion that he did not
have authority to sell the shares is not sufficient to raise a
genuine
dispute of fact. The same holds true of Gravitas’
bald assertion that no consideration was given to the formalities
for
the sale of shares. In any event, Rainmaker demonstrates that
important formalities were considered.
40.
The improbabilities of
Gravitas’ version are significant. It’s reliance on
a personal loan to Prof Khumalo as
being the source of the payment of
R1.8million is not backed up by any plausible evidence, and does not
go much beyond a bald assertion.
Gravitas fails to provide
answers to important averments relating to the events that
precipitated the payment. Further, in
the critical email in
which it denies what it says was the first assertion by Rainmaker
that Gravitas had sold its shares, Gravitas
inexplicably fails to
assert that the payment of R1.8million was not for the sale of its
shares but was a personal loan from Mr
Schwankhart to Prof Khumalo.
41.
For all the above
reasons, in my view, this is one of those cases where a robust view
is justified and there is no necessity for
a referral to oral
evidence or trial. I am further satisfied that the version put
up by Gravitas is so palpably implausible
and so clearly untenable
that it falls to be rejected on the papers. I find,
accordingly, that Rainmaker has established
that the parties entered
into the repurchase agreement, and that Rainmaker duly paid the
R1.8,million in fulfillment of its obligations
under that agreement.
THE VALIDITY OF THE SALE
AGREEMENT
42.
As I indicated earlier,
in order to succeed, Rainmaker must establish not only the existence
of the repurchase agreement, but also
the invalidity of the initial
sale agreement in terms of which Gravitas purchased its shares in
BRL. It is this invalidity
that will establish that the
repurchase agreement consequently also had no basis in law, and hence
that the R1.8million was paid
in error.
43.
In its answering
affidavit, Gravitas did not dispute that the suspensive conditions
precedent were never fulfilled. However,
it disputed that this
had the consequence that the initial sale agreement was void
ab
initio
. It
relied on a number of grounds in support of this.
44.
Gravitas said that the
conditions precedent were waived. There can be no merit in this
assertion, as the sale agreement specifically
provided for waiver by
Gravitas of this conditions “
by
written
notice
”
(my emphasis) by the purchaser to the other parties (clause 8.3).
Gravitas does not contend that it ever gave written
notice of waiver
to the other parties.
45.
It further contended
that by virtue of the parties’ conduct, a new agreement came
into existence between the parties in terms
of which the conditions
precedent were waived. There is some overlap here with the
initial waiver point, but there is additional
reason for why there
can be no merit in it. In addition to the specific requirement
for waiver, referred to earlier, the
sale agreement specifically
provides that no amendment to the agreement could be effected except
by written agreement between the
parties (clause 11.6).
Accordingly, to be effective and binding, any waiver by agreement
between the parties would have to
have been reduced to writing and
signed by the parties. It could not have been effected by
conduct.
46.
Gravitas relied on the
fact that the parties conducted themselves as if the sale agreement
was valid, and that both parties intended
that Gravitas would acquire
the shares. It contended that for these reasons, Rainmaker
should be estopped from relying on
the non-fulfillment of the
conditions precedent. Further, that the fulfillment of the
conditions precedent were mere formalities
and thus their
non-fulfillment did not affect the validity of the sale agreement.
47.
Again,
there is no merit in these contentions. The terms of the sale
agreement are clear: clause 8.4 provides that in the
event that the
suspensive conditions precedent are not fulfilled, the agreement
“
shall
be void ab initio
”.
In
Africast
(Pty) Ltd v Pangbourne Properties LImited
,
[7]
the
Supreme Court of Appeal ruled on the issue of the non-fulfillment of
suspensive conditions precedent in an agreement of this
nature.
It held as follows:
“
A
contract containing a suspensive condition is enforceable immediately
upon its conclusion but some of the obligations are postponed
pending
fulfilment of the suspensive condition. If the condition is fulfilled
the contract is deemed to have existed
ex
tunc
.
If the condition is not fulfilled,
then
no contract came into existence
.
Once the condition is fulfilled, ‘[T]he contract and the mutual
rights of the parties relate back to, and are deemed
to have been in
force from, the date of the agreement and not from the date of the
fulfilment of the condition, ie
ex
tunc
.’”
[8]
(my
emphasis)
48.
As in the present case,
in
Pangbourne
,
both parties had believed the agreement to have been valid and
binding despite the non-fulfillment of the conditions precedent.
The defence of estoppel was also raised by the respondent in that
case. The SCA nonetheless stated the legal position to
be that:
“
Upon
signature of the agreement an inchoate agreement came into being,
pending the fulfilment of the suspensive condition.
In the
event that the suspensive condition was not fulfilled, neither party
would be bound to the agreement. ... The terms
of the
suspensive condition were not met. It follows that the
contractual relationship between the parties lapsed due to
non-fulfilment of the suspensive condition.”
[9]
49.
The legal position is
thus clear. The sale agreement expressly provided that failure
to fulfill the conditions precedent would
lead to invalidity (or
voidness)
ab
initio.
Thus,
it simply cannot be that the conditions were a mere formality, as
suggested by Gravitas. Nor can Gravitas rely on estoppel:
estoppel cannot be used to revive an agreement that by law never
received the breath of life to begin with.
50.
For all of these
reasons, I am satisfied that Rainmaker has established that the
initial sale agreement was void
ab
initio
. I am
satisfied, too, that despite this, like Gravitas, Rainmaker
bona
fide
but mistakenly
believed that the sale agreement was valid, otherwise it would not
have paid R1.8million for the repurchase of the
shares. In the
circumstances, I find that Rainmaker has established its claim for
the repayment of the repurchase price.
ORDER
51.
I make the following
order:
1. The respondent is
directed to make payment to the applicant of the amount of
R1.8million (“the principle debt”).
2. The respondent is
directed to pay interest on the principal debt at the rate of 10.5%
per annum per tempore mora
from 17 November 2016 (being the
date of the letter of demand) to the date of final payment.
3. Respondent is directed
to pay the costs of suit, including the costs of senior and a junior
counsel.
_____________________
R
M, KEIGHTLEY
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
LOCAL DIVISION, JOHANNESBURG
DATE
OF HEARING: 29 OCTOBER 2018
DATE
OF JUDGMENT: 26 NOVEMBER 2018
APPEARANCES
APPLICANT’S
COUNSEL: C WHITCUTT; FR MCADAM
INSTRUCTED
BY: NORTON INCORPORATED
RESPONDENT’S
COUNSEL: DG TOBIAS
INSTRUCTED
BY: NDAMASE INCORPORATED
[1]
2009 (2) SA
277 (SCA)
[2]
1956 (4) SA
150 (E)
[3]
Sewmungal
and Antoher v Regent Cinema
1977
(1) SA 814
(N);
South
Coast Furnishers CC v Secprop 30 Invesgtments (Pty) Ltd
2012 (3) SA 431 (KZP)
[4]
See at
433G-434A; 439H-I
[5]
At 439E-F
[6]
At 438G
[7]
2014 JDT
0616 (SCA)
[8]
At para
[39], with reference to R H Christie and G B Bradford The Law of
Contract in South Africa 6th ed (2011) at 151-153; S
W J Van der
Merwe, L F van Huyssteen, M F B Reinecke and G F Lubbe Contract
General Principles 4th ed at 253 and the authorities
cited there at
footnote 276.
[9]
At para
[40]