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[2018] ZAKZPHC 18
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Ihlobo Footwear CC v Bata South Africa (Pty) Ltd and Another (3190/2018P) [2018] ZAKZPHC 18 (28 May 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO:
3190/2018P
In
the matter between:
IHLOBO
FOOTWEAR CC
Applicant
and
BATA
SOUTH AFRICA (PTY) LTD
First
Respondent
FUTURA
FOOTWEAR LIMITED
Second
Respondent
ORDER
(a)
The application for a declaratory order regarding contempt is
refused.
(b)
It is declared that the first respondent’s failure to comply
with para 2.2 of the
order made by Gorven J on 20 April 2018 was
unlawful, and it is ordered to comply fully with that order.
(c)
The first respondent is ordered to pay the costs of this application
on the attorney
and client scale.
JUDGMENT
Delivered
on: 28 May 2018
Ploos
van Amstel J
[1]
The
application before me is for an order declaring the first respondent,
Bata South Africa (Pty) Ltd, to be in contempt of an interim
order
made by Gorven J on 20 April 2018, and for an order directing it to
purge its contempt.
[2]
In the main application the applicant, Ihlobo Footwear CC, seeks an
order, pending the finalisation of arbitration proceedings,
suspending the purported cancellation of a written agreement between
the parties, and directing the first respondent to continue
to place
orders with the applicant as it had done before. In the alternative
it seeks an order declaring clause 29 of the agreement,
which
provides for termination by either party on 30 days’ notice, to
be unconstitutional and contrary to public policy.
The main
application is on the opposed roll on 22 June 2018. I refer to the
first respondent herein as ‘Bata’.
[3]
When the application came before Gorven J he made an interim order,
pending the hearing of the main application, suspending
the purported
cancellation of the agreement, directing Bata to continue to place
orders with the applicant as it had done before
the purported
cancellation, and directed that his order would not derogate from any
right (not contained in clause 29) to cancel
the agreement.
[4]
The basis on which the applicant seeks to hold Bata in contempt is
that, in defiance of the order of 20 April, it has placed
no orders
with it and has made it clear that it does not intend to do so. Bata
admits that it has placed no orders with the applicant
pursuant to
the order, but contends that it was not obliged to do so as it
cancelled the agreement on 24 April 2018, in response
to a
repudiation of the agreement by the applicant.
[5]
I have to decide therefore whether Bata’s cancellation of the
agreement on 24 April was valid, and if not, whether its
failure to
comply with the order of 20 April was wilful and therefore in
contempt.
[6]
The background of the matter is follows. In terms of a written
agreement signed on behalf of the applicant on 7 August 2015
it was
appointed by Bata (which was then known as ‘Futura Footwear
Ltd’) as an independent contractor to provide it
with the
services described in the agreement, which involved the cutting,
preparation, assembling and stitching of materials and
components in
the production of footwear. The agreement provided that Bata provided
no guarantees relating to the level of business
activity or
profitability other than as expressly stated in the agreement. The
applicant warranted and undertook that its personnel
would be
suitably trained, competent and skilled and have the necessary
experience to operate the equipment and timeously and efficiently
perform the services. The equipment referred to was specialised
equipment which Bata undertook to supply to the applicant for the
purpose of performing the services. Clause 29 provided that the
agreement could be terminated by either party by giving 30 days’
written notice to the other party.
[7]
The applicant was one of six independent contractors who signed
similar agreements and performed similar services.
[8]
The deponent to the applicant’s founding affidavit in the main
application says the applicant has been doing work for
Bata since
before 2010. He says the first written contract was introduced in
about 2010. In 2013 Bata asked the applicant to increase
its
production capacity, as a result of which the applicant moved its
plant from Colenso to Hammersdale and purchased new equipment
at a
cost of about R400 000. He says the most recent contract which
the applicant was asked to sign is the one of 7 August
2015, to which
I have referred. The vast majority of the applicant’s work has
been done for Bata, which is for all practical
purposes it’s
only customer. Its turnover is approximately R30 million per year and
it employs 280 permanent staff, most
of whom are African females.
[9]
Towards the end of 2017 the applicant was asked to sign a new
contract. It contained terms which caused concern for the applicant,
such as a requirement for personal suretyships and increased
penalties for defective and late deliveries. The six independent
contractors consulted an attorney, who provided comments on the
proposed agreement, which were submitted to Bata towards the end
of
January 2018. Its response, in so far as the applicant was concerned,
was a letter dated 27 February 2018, in terms of which
Bata gave the
applicant 30 days’ notice of its termination of the agreement.
[10]
The applicant says its attempts to discuss the matter with Bata came
to nought, and it has referred the purported cancellation
to
arbitration as provided for in the written agreement.
[11]
The applicant launched an application in this court on 15 March 2018,
in which it seeks an order, pending the finalisation
of the
arbitration proceedings, suspending the purported cancellation of the
agreement and directing Bata to continue to place
orders with it as
before. This is the application to which I have referred as ‘the
main application’ and which is due
to be heard on 22 June 2018.
[12]
When the application came before Gorven J he made orders regarding
the delivery of a notice in terms of rule 16A and further
affidavits,
and adjourned the matter to 22 June 2018. He also made the order to
which I have referred, pending the hearing on 22
June, suspending the
purported cancellation of the agreement and directing Bata to place
orders with the applicant as would have
been done if the purported
cancellation of the agreement had not taken place.
[13]
Gorven J made the interim order on 20 April. Bata placed no orders
pursuant to the order, and on 24 April its attorney addressed
a
letter to the applicant in which it purported to terminate the
agreement on the basis of a repudiation thereof by the applicant.
[14]
The first enquiry is whether the applicant had repudiated the
agreement in the respects contended for in the letter of termination.
It is not easy to determine from the letter precisely what the
alleged act of repudiation was said to be. The first part of the
letter refers to statements made in the applicant’s founding
affidavit regarding representations made to it by a Bata employee
(one Kazi) as to an expected increase in production, and the
applicant’s contention that this entitled it to reasonable
notice of termination of the agreement, as opposed to the 30 days for
which it provided. The letter then refers to emails sent to
the
applicant by Kazi, confirming the increased production, and states
that Bata has discovered that Kazi had sent the emails at
the request
of the applicant. Then follows an allegation that the applicant knew
that it did not have the capacity to produce 4500
pairs of shoes per
day, and therefore knew that Bata had not approved the increased
production. It should be noted that the letter
refers incorrectly to
an alleged contention by the applicant that the agreement had been
varied so as to guarantee work of 4500
pairs per day. There is no
evidence of such a contention by the applicant in the papers. Its
contention was rather that because
of the representation regarding
increased production it would not be fair to allow Bata to cancel the
agreement on 30 days’
notice. Be that as it may, this part of
the letter concludes with the allegation that the applicant and Kazi
had colluded to commit
a fraud.
[15]
Then follows a paragraph which reads as follows: ‘Moreover, in
contending as they have in the founding affidavit regarding
the terms
of the alleged agreement and in taking steps to enforce such alleged
terms, which are the product of their fraudulent
and collusive
dealings with Kazi, Ihlobo has repudiated the agreement concluded
with our client/s. Our client/s hereby accept such
repudiation and
forthwith terminate any and all agreements concluded with Ihlobo for
the provision of services.’
[16]
There was no suggestion in the founding affidavit that the terms of
the agreement had been varied by anything that transpired
between the
applicant and Kazi. The deponent did say that in January 2018 the
applicant was not given a specific figure for the
year but was told
that production would be higher than in 2017. He then makes the
averment that by this conduct either a tacit
agreement was concluded
or the written agreement was amended to provide that Bata would be
obliged to supply to the applicant the
same volume of work during
each year as it did the previous year, adjusted proportionately to
any change in Bata’s production
targets. This had nothing to do
with the alleged collusion between the applicant and Kazi. The
deponent refers to the email concerning
the 4500 pairs per day and
says the applicant wanted this in writing to support its application
for finance to purchase further
equipment. He does not contend that
this constituted a guaranteed minimum order. He does contend that in
the light of the representation
a much longer notice period should
apply for the termination of the agreement.
[17]
Bata’s answering affidavit in the main application was deposed
to on 23 March 2018. The deponent confirms that Kazi may
have
discussed production targets with the applicant, but maintains that
he had no authority to agree to a variation of the contract
or to
guaranteed minimum orders. There is no suggestion in the answering
affidavit of a repudiation of the agreement by the applicant.
The
first reliance on an alleged repudiation was in Bata’s further
supplementary answering affidavit, deposed to on 25 April
2018. The
change in stance appears to have been based on Bata’s
conclusion that there had been fraudulent collusion between
the
applicant and Kazi with regard to the expected increase production.
[18]
The applicant maintained throughout that there had been no collusion,
that Kazi had conveyed to it that the required production
would
increase and that it had asked him to confirm this in writing in
support of its application for further finance. No affidavit
by Kazi
was put up by Bata and the high water mark of its evidence in this
regard is that Kazi had no authority to make the statements
which he
is said to have made.
[19]
An analysis of Bata’s complaint is that the applicant contended
that it was entitled to more orders, on the basis of
what it had been
told by Kazi. The applicant also contended that because of its
additional financial commitments arising out of
the additional
equipment which it bought, Bata should continue to give it work for a
reasonable period, which it contended was
five years. All this
appeared in the applicant’s affidavits which formed part of the
record when Gorven J made the order
of 20 April.
[20]
It remains unclear to me what precisely Bata contended constituted a
repudiation which entitled it to cancel the agreement.
There was at
no stage any suggestion by the applicant that it did not intend to
fulfil its obligations to Bata in terms of the
contract or that it
intended no longer to be bound by it. In those circumstances it
cannot be said to have repudiated the contract.
See
Metalmil
(Pty) Ltd v AECI Explosives and Chemicals Ltd
[1994] ZASCA 96
;
1994 (3) SA 673
(A);
OK
Bazaars (1929) Ltd v Grosvenor Buildings (Pty) Ltd and Another
[1993] ZASCA 56
;
1993 (3) SA 471
(A) 480 I - J. It should also be noted that according
to Bata’s affidavits the applicant at no stage made any demand
relating
to the 4500 pairs referred to in the emails from Kazi.
[21]
Bata again purported to cancel the agreement on 3 May 2018. Its
attorney contended in a letter to the applicant’s attorney
that
the applicant only had 37 employees registered with the National
Bargaining Counsel for the Leather Industry as at December
2017, that
it had failed to pay its employees the prescribed minimum wage, and
that this constituted a further repudiation of the
agreement. The
letter states that Bata accepted this repudiation and again cancelled
the agreement. While this may have been a
breach of the applicant’s
obligations in terms of clause 20 of the written agreement, it did
not constitute a repudiation.
Bata’s remedy would have been a
notice calling on the applicant to remedy the breach and, failing
that, a notice of cancellation.
[22]
I conclude therefore that Bata has not shown that the applicant
repudiated the agreement and that its purported termination
of the
agreement on 24 April and 3 May was invalid and of no effect.
[23]
It follows that Bata’s failure to comply with the order of 20
April, by not placing orders with the applicant, was a
breach of that
order and unlawful. It remains to consider whether such failure was
wilful and constituted contempt of court.
[24]
In
Fakie
NO v CCII Systems (Pty) Ltd
[1]
Cameron JA said the test for when disobedience of a civil order
constitutes contempt has come to be stated as whether the breach
was
committed deliberately and
mala
fide
.
He said a deliberate disregard is not enough, since the non-complier
may genuinely, albeit mistakenly, believe him or herself
entitled to
act in the way claimed to constitute the contempt. In such a case
good faith avoids the infraction. Even a refusal
to comply that is
objectively unreasonable may be
bona
fide
,
though unreasonableness could evidence lack of good faith. He
added
[2]
that the offence is
committed not by mere disregard of a court order, but by the
deliberate and intentional violation of the court’s
dignity,
repute or authority that this evinces. Honest belief that
non-compliance is justified or proper is incompatible with that
intent.
[25]
An important change to the question of onus was brought about by the
decision in
Fakie
.
The majority judgment held that the common law should be developed in
accordance with constitutional principles so that a respondent
in
contempt proceedings is no longer required to disprove wilfulness and
mala
fides
on a balance of probabilities, but need only lead evidence that
establishes a reasonable doubt. In that case it was held on appeal
that the explanation offered by the Auditor-General established a
reasonable doubt as to whether the delay in complying with the
orders
in question had been wilful and
mala
fide
.
The court set aside the finding of contempt and the associated
penalty, but confirmed the declaratory order that the Auditor-General
had failed to comply fully with the court order, and a further order
putting him on terms to comply with the order.
[26]
Counsel for the applicant referred me to authority for the
proposition that a person may not disobey a court order on the basis
of legal advice which he takes at face value.
[3]
This seems to me to be generally correct, but, nevertheless, in each
case one needs to determine in the particular circumstances
whether a
reasonable doubt with regard to wilfulness has been established.
[27]
The circumstances here are somewhat unusual in the sense that the
conclusion that the applicant had repudiated the agreement
and that
Bata was entitled to cancel it, was reached during consultations and
preparations for the drafting of a supplementary
affidavit. Although
this aspect of the matter was not directly addressed in the answering
affidavit, it is probable in my view
that it was Bata’s legal
representatives who were responsible for the new approach. There may
well have been an over-zealous
attempt to find a basis on which Bata
could avoid placing further orders with the applicant. Those legal
representatives will do
well to bear in mind that in contempt
proceedings wilfulness may be found to be present in the form of
dolus
eventualis
.
[4]
A more responsible approach would have been to approach the court for
confirmation that in the light of the repudiation Bata was
no longer
obliged to place orders with the applicant in compliance with the
court order.
[28]
There is in my view a reasonable doubt with regard to the requirement
of wilfulness on the part of Bata, with the result that
I am not
willing to hold it in contempt.
[29]
I propose to follow the approach in
Fakie
,
and order Bata to comply fully with the order of 20 April 2018. I do
not consider it appropriate to order the furnishing of the
information requested by the applicant. This information is private
and belongs to its competitors. It should not be difficult
to
determine, having regard to the volume of the orders placed before
the purported cancellation, whether Bata is complying with
the
interim order. I do intend to order Bata to pay costs on a punitive
scale in order to demonstrate my displeasure at its failure
to comply
with the order of 20 April without seeking directions from the court.
[30]
The order is as follows:
(a)
The application for a declaratory order regarding contempt is
refused.
(b)
It is declared that the first respondent’s failure to comply
with para 2.2 of the
order made by Gorven J on 20 April 2018 was
unlawful, and it is ordered to comply fully with that order.
(c)
The first respondent is ordered to pay the costs of this application
on the attorney
and client scale.
_________________
Ploos
van Amstel J
Appearances:
For
the Applicant
:
A J Troskie SC (together with) S
Pudifin-Jones
Instructed
by
:
Hay and Scott
Pietermaritzburg
For
the Respondents
:
C A Nel
Instructed
by
:
Macgregor Erasmus Attorneys
Pietermaritzburg
Date
Judgment Reserved
:
17 May 2018
Date
of Judgment
:
28 May 2018
[1]
Fakie NO v CCII Systems (Pty) Ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) at para 9
[2]
At para 10
[3]
Heg Consulting Enterprises (Pty)
Ltd and others v Siegwart and others
2000 (1) SA 507 (C)
[4]
Supra 518