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[2017] ZAGPPHC 102
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NEAH GES (Pty) Ltd and Another v Lamprecht and Others, Lamprecht v NEAH GES Africa (Pty) Ltd (33286/16) [2017] ZAGPPHC 102 (14 February 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
14/02/2017
CASE
NUMBER: 33286/16
(The
Restraint application)
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
NEAH
GES AFRICA (PTY)
LTD
First Applicant
GES
AFRICA (PTY)
LTD
Second Applicant
and
DE
VILLIERS
LAMPRECHT
First Respondent
WELTRACT
(PTY)
LTD
Second Respondent
LI
LOTRIET
Third Respondent
QUEMIC
DYNAMICS (PTY)
LTD
Fourth Respondent
ANNA
MARGARETHA
VILJOEN
Fifth Respondent
AMBER
BAY INVESTMENTS 19 (PTY)
LTD
Sixth Respondent
CASE
NUMBER: 31747/2016
(The
Liquidation application)
In
the matter between:
OE
VILLIERS
LAMPRECHT
Applicant
and
NEAH
GES AFRICA (PTY)
LTD
Respondent
MOTHLE
J
Introduction
[1]
In this matter there are two applications and a counter
application, all concerning disputes arising out of an agreement for
the
purchase/sale of shares in a company. Under case number
33286/2016
(the restraint application)
Neah Ges Africa (Pty)
Ltd
(Neah
Ges) and Ges Africa (Pty) Ltd
(Ges Africa)
as
applicants, seek interdictory orders against De Villiers Lamprecht
(Lamprecht),
cited as first respondent and as shareholder in
the following companies; Weltract (Pty) Ltd
(Weltract),
the
second respondent; Quemic Dynamics (Pty) Ltd
(Quemic Dynamics);
the fourth· respondent and Amber Bay Investments 19 (Pty)
Ltd
(Amber
Bay), the sixth respondent. The third respondent is
Li Lotriet
(Lotriet),
a former manager of Ges Africa, having
resigned in March 2016 and presently a director, together with
Lamprecht, in Weltract. The
fifth respondent is Anna Magaretha
Viljoen
(Viljoen),
who, in addition to opposing this restraint
application, has filed a counter application against Neah Ges for
payment of her portion
of the outstanding purchase price.
[2]
Under case number 31047/2016, Lamprecht is the only Applicant,
seeking an order for the liquidation of Neah Ges
(the liquidation
application)
for failing to pay the outstanding purchase price in
terms of the agreement. Neah Ges, as the only respondent, opposes
this application.
[3]
The two applications and counter application resulted in
documents that are prolix, in excess of 2,100 pages. The restraint
application,
which is was brought by way of urgency, could thus not
be heard in the urgent Court. The parties approached the Deputy Judge
President
who then gave directives that the applications be
consolidated and heard together in a special motion court set down
for November
2016.
Background
[4]
The disputes in this matter arise from the purchase and sale
of shares as a means of acquisition of ownership of a company. The
following are the salient facts:
4.1
Neah Ges is an international group of companies that sought to
establish business in South Africa. Prior to 2013, Neah Ges
established
an entity in South Africa known as Neah Gas Africa (Pty)
Ltd
(Neah Ges).
It used this entity as a vehicle through which
to acquire businesses in South Africa;
4.2
From 2013 Neah Ges became interested in the group of companies
in which Lamprecht had shares, which companies were conducting
business
in the security industry, in particular in Mpumalanga. Neah
Ges commenced negotiations to acquire ownership by offering to
purchase
the shares held by Lamprecht and other shareholders in these
companies;
4.3
In July 2015, Neah Ges concluded an agreement for the purchase
of shares in acquisition of a.com·pany known as Quemic (Pty)
Ltd in which Lamprecht had 88% of shares and Viljoen had 12% of
shares. This agreement was concluded after extensive negotiations
that commenced in 2013;
4.4
In terms of the agreement, Neah Ges had to pay a purchase
price for the company shares in the amount of US $2.5 million. The
terms
of payment were that upon signature ·of the agreement
Neah Ges, as purchaser, would pay an amount of US $2 million to the
sellers and thereafter pay the outstanding balance of US $500,000 in
24 monthly instalments starting in January 2016, until the
full
amount is paid;
4.5
It was a further term of the agreement that should Neah Ges
fail to pay any of these instalments the amount outstanding will
become
due and payable. Neah Ges paid the US $2 million in July 2015
when the agreement was signed;
4.6
After acquiring the ownership of Quemic (Pty) Ltd, Neah Ges
changed the name of the purchased company to Ges Africa (Pty) Ltd
(Ges
Africa),
a wholly owned subsidiary of Neah Ges;
4.7
In January 2016 when the first instalment of the outstanding
US $500,000 became due, Neah Ges failed to effect payment to the
sellers,
Lamprecht and Viljoen. Instead, Neah Ges launched an urgent
application, the restraint application, seeking interim relief
pending
institution of action
The
issues before court:
[5]
In the restraint application, Neah Ges seeks an interim order
restraining Lamprecht and his companies from soliciting its customers
and staff. The interim order sought is pending action proceedings to
claim damages, alternatively for a reduced payment of the
outstanding
balance. In addition, Neah Ges claims that Lamprecht misrepresented
certain facts contrary to the provisions of the
agreement of purchase
and sale of shares, which misrepresentations amounted to fraud.
[6]
Neah Ges further contends that by utilising his other
companies to do the same business as the company that he sold,
Lamprecht placed
himself in unlawful competition to the company he
had sold. Neah Ges contends further that as a result of Lamprecht's
conduct,
it then refused to pay the monthly instalment of the
outstanding purchase price when it became due and payable. This
refusal to
pay, according to Neah Ges, is based on the common law
principle of
exceptio non adempleti contractus.
I shall return
to this principle later in this judgment.
[7]
Lamprecht and Viljoen in their answering affidavits denied the
claims of misrepresentation as well as solicitation of customers and
unlawful competition. In response, Viljoen counterclaims for payment
of the outstanding amount of the purchase price as a former
shareholder of the company that was sold. Lamprecht on the other hand
claims for liquidation of Neah Ges for failing to pay the
outstanding
balance of the purchase price. In his defence, he contends that the
restraint of competition clause that Neah Ges relies
on has become
void due to failure by Neah Ges to pay the instalment due on demand,
as stated in the agreement.
The
restraint application
[8]
In this application Neah Ges seeks relief in the form of
interim order, essentially on the following grounds:
8.1
An alleged breach of warranties, expressly made by the sellers
in the agreement, including alleged fraudulent representation in
regard to the non-disclosure of;
(a)
the tax liability of the purchased company at the conclusion
of the sale of shares agreement. It is alleged that as a result of
the loan made to Quemic Ghana, SARS levied a
"deemed dividend
tax")
for the 2013 financial year based on the 2012
financial figures;
(b)
the inter-company loans that were not fully disclosed;
(c)
the purchased company's registration concerning the
Compensation for Occupational Injuries and Disease Act, 130 of 1993
("
CO/DA").
The allegation is that it has become
apparent that the purchased company was incorrectly registered with
the Workmens' Compensation
Commissioner as a risk management
consultancy when it should have been registered as providing security
services;
(d)
the correct employment equity relating to the purchased
company. The allegation is that Lamprecht and Viljoen deliberately
falsified
information submitted to the Department of Labour in
relating to the generation of Quemics's employment equity element on
the BBEEE
score card.
8.2
It is further alleged that Lamprecht failed to disclose a
liability pending between the purchased company and one of its
clients
Shambala Game Reserve which was overbilled to the extent of
R550,000, a liability which allegedly is still outstanding.
8.3
There is a further allegation that Lamprecht, through the use
of his other companies, solicited staff and customers of the company
he sold, Ges Africa, and set up his other companies cited in the
restrain application to be in competition with Ges Africa. Further,
it is alleged that Lamprecht's companies are using similar
advertising and marketing material that is used by Ges Africa, in
breach
of copy rights of Ges Africa.
[9]
In support for the restrain application, Neah Ges contends
that the interim relief claimed is required presently, as it may
prove
impossible to properly quantify the damages in the pending
action, due to the continued nature of the breach of the terms of the
agreement by the respondents.
Discussion
[10]
The trite and tested requirements for an applicant to successfully
obtain relief in an application for an interim interdict
are stated
in the seminal case of
Setlogelo
v Setlogelo
[1]
,
which
was applied with approval and modification in a line of subsequent
decisions.
[2]
Essentially,
for the applicant to succeed, he/she or it must allege and prove:
10.1
A
prima facie
right to the relief sought;
10.2
A well-grounded apprehension of irreparable harm, if the interim
relief is not granted;
10.3
The balance of convenience must favour the granting of interim
relief; and
10.4
There must be no other ordinary remedy that is available to give
adequate redress to the Applicant.
[11]
It
is not in dispute that Neah Ges paid the initial agreed amount of US$
2,000,000 on signature of the agreement, but failed to
pay the first
instalment of the outstanding amount of US $500,000 in January 2016
as agreed. Lambrecht contends that as a result
of failure to effect
this payment, a letter of demand was made in terms of section 345 of
the Companies Act
[3]
thus
activating clause 13 of the agreement that provides for the
cancellation of the restraint of trade protection for Neah Ges.
This
contention forms the basis of the opposition of Lamprecht to the
restraint order sought in this interim application. In essence,
Lamprecht argues that by failing to pay the January 2016 instalment,
clause 13 of the agreement, which otherwise protects Neah
Ges from
trade competition, becomes invalid by its own terms and the
protection offered by the restraint of trade clause no longer
applies.
[12]
Clause 6.1 (b) of the agreement provides for the purchase
price and the manner of payment. It concludes as follows:
"...
The failure by the purchaser to make any payment towards the
remaining amount on the due date for the performance thereof will
have
the effect of the outstanding capital of the remaining amount
becoming due and payable on demand. In addition to the acceleration
of payment of the remaining amount the working and effect of clause
13 (restraint of trade) shall be cancelled on the date on which
such
a demand is delivered".
[13]
The agreement contains clauses providing for non-solicitation
of staff and customers of the company which is the subject of the
sale. It was agreed in clause 13 of the contract that should the
purchaser
(Neah
Ges) fail to pay the outstanding balance; a
formal demand communicated will have the effect of cancelling the
protection offered
by the restraint of trade (non-solicitation)
clauses in the agreement.
The
exceptio non adempleti contractus
principle
[14]
Neah Ges contends in essence that its failure to pay the
instalment due was induced by a breach of warranties as well as the
breach
of the non-solicitation and restraint of trade clause of the
agreement. It is contended that this breach occurred on the part of
Lamprecht, Loriet, Viljoen and the companies cited. Neah Ges further
contends that on the basis of the principle of
exceptio non
adempleti contractus,
(the
exceptio)
it should be excused
from paying the instalments on the balance of the purchase price,
pending the institution of an action for
recovery of damages
altematively
a claim for reduction of the balance of the
purchase price in terms of the
actio quanti minoris
principle.
[15]
The
exceptio
is
aptly described in
Thompson
v Scholtz
[4]
as
a defence that a party may raise against a demand for performance by
the other contracting party, whose own reciprocal performance
has not
been rendered partly or in full. It applies in instances where there
is an obligation for reciprocal performance by both
parties. In
Motor
Racing Enterprises (Pty) Ltd (In Liquidation) v MPS Electronics
Ltd
[5]
,
the
appeal court had this to say about the mutual obligations to perform
in the context of the principle:
"Firstly
it is well established that the exception presupposes the existence
of mutual obligations which are intended to be
performed reciprocally
and that the parties' intention is to
be
sought primarily in
terms of their agreement..
Secondly,
in Rich
&
Others v Lageway (supra) Wessels JA rightly said
that common sense seems to indicate that inter-dependent promises are
prima facie
reciprocal, unless
a
contrary intention appears
from
a
consideration of the terms of the agreement ..."
[16]
In
essence Neah Ges contends that it paid the initial amount of US $2
000 000 on signature of the agreement, but refused to pay
the first
instalment of the outstanding balance of US $500 000 when it fell due
in January 2016 because by then it had already
realised that the
sellers had, in their view, acted and continue to act in breach of
the terms of the agreement. Neah Ges is asserting
its right to
withhold its performance in the form of further payment until the
sellers have performed.
[6]
[17]
Consistent with the requirement that the party claiming payment had
to have discharged its obligation to perform prior to or
simultaneous
with the refusal to pay
[7]
, Neah
Ges further contends that it should be excused from making any
further payments pending the institution of action proceedings
which
might result in respondents having to pay for damages or Neah Ges
being entitled to a reduction of the payment on the outstanding
amount.
[18]
I agree with the submission by Neah Ges's counsel that before
determining whether Neah Ges should be excused from paying the
instalment in terms of the
exceptio non adempleti contractus
principle, the Court has to make a determination whether, as
contended, Neah Gas has a
prima facie
claim for damages
alternatively
a reduction of the purchase price in terms of
the
actio quanti minoris.
[19]
I have considered the respondents' answer to the allegation raised by
Neah Ges on which it claims may give rise to claims for
damages. It
seems to me that of the allegations raised by Neah Ges, there are at
least three grounds raised by Neah Ges to which
the respondents have
either provided no response or provided inadequate response to the
allegations. The three grounds raised by
Neah Ges in support of this
application are the alleged breach of the non-solicitation of staff
and customers clause of the agreement;
failure to provide the
requested financial records and information and the issues relating
to non-disclosure of liability to SARS.
[20]
I now turn to deal briefly with each of these grounds.
Breach
of the non-solicitation clause.
[21]
The respondents' defence to this allegation is mainly that the
restraint clause has become void as a result of Neah Ges's failure
to
pay the first instalment due on the outstanding amount. Lotriet does
not even make an attempt to deal adequately with the allegations
that
prior to his resignation in March 2016, he had been in contact with
and soliciting Ges Africa's customers and a service provider.
It
speaks volumes that on his resignation from Ges Africa armed with the
confidential information of that company; he joined Weltract
as a
director together with Lamprecht. The allegation of solicitation of
customers mentioned in annexure "A" to the founding
affidavit in particular, would obviously have a direct impact on the
ability of Neah Ges to perform by making payment in terms
of the
agreement. There is, in my view, a
prima facie ground
for a
claim for damages.
Non
-disclosure of financial records
[22]
In regard to non- disclosure of the financial records, the emails
exchanged by the parties indicate that the concerns and
dissatisfaction with the seller's non- performance in terms of the
agreement, had already being raised prior to January 2016 when
the
instalment was to become due. The demand for financial records,
according to correspondence between the parties, predates the
conclusion of the agreement and to date have not been properly
responded to. Therefore it appears from the reading of the emails
that at the time Lamprecht issued a letter of demand for the payment
of the outstanding amount, he had been made aware, at the
very least,
of the allegations of non-performance as a seller in the agreement.
It seems to me that failure to supply this information
and records as
requested is an obligation reciprocal to the payment of the
outstanding amount and a
prima facie
breach of the agreement
which appears to justify an action for damages.
Liability
to Sars
[23]
The evidence of communication from Sars demonstrates that the
sellers in the agreement did not adequately make a full disclosure.
The issue here is not whether there is a plausible explanation of the
transactions with Sars. The explanation provided in the answering
affidavit in the restraint application, the replying affidavit in the
liquidation application and other supplementary affidavits
filed by
the respondents, fails to deal adequately with the reasons for non
disclosure. Lamprecht offers an explanation of
the transactions
concerning Sars, which at this stage of the proceedings does not
explain the allegation why it was not disclosed.
I am of the view
that Neah Ges has a
prima facie
right to institute the pending
action for damages in this regard.
[24]
On these grounds alone, I am of the view that Neah Ges has
made out a
prima facie
case that there are prospects of a
successful claim for damages,
alternatively,
a reduction of
the outstanding amount in terms of the
actio quanti minoris.
Consequently, I find that the defence of
exception non
adimpleti contractus,
is at this stage of the proceedings, good
in law to excuse Neah Ges from payment of the outstanding balance,
pending the institution
of an action for damages alternatively a
reduction of the payment due to the sellers, on the basis
of actio
quanti minoris.
[25]
The other grounds on which Neah Ges relies, such as unlawful
competition and passing off, have evoked the kind of responses that
result in numerous disputes of fact, which are not capable of being
resolved on the affidavits, and may accordingly be dealt with
in the
action proceedings. Several persons and entities referred to in the
allegations and responses may have to be summoned to
present oral
evidence in order to subject the versions submitted in support of
either the applicants or the respondents, to credibility
tests.
The
counter application
[26]
Viljoen had 12% shares in the company that was sold, Quemic,
now renamed Ges Africa. As one of the sellers, she claims to be
entitled
to a percentage of the outstanding purchase price. Neah Ges,
the purchaser, failed to pay the instalments due. Viljoen, as one of
the sellers, became entitled to the whole outstanding amount which
became due and payable. She therefore instituted a counter
application to Neah Ges's application. The counter application has to
be adjudicated together with Neah Ges's claim.
The
liquidation application
[27]
Lamprecht, also as one of the sellers of the shares in Quemic,
chose not to institute a counter application. On failure by Neah Ges
in January 2016 to pay the first instalment of the outstanding
balance, Lamprecht then issued a letter of demand in terms of section
345 of the Companies Act, 1973, instituting liquidation proceedings.
Neah Ges in its defence, alleges that it purposefully failed
to pay
the instalments as a result of the alleged breach of the agreement by
Lamprecht.
[28]
I am of the view that in light of the findings made in this
judgment concerning Neah Ges's interim relief, it will be in the
interest
of justice that the liquidation proceedings be stayed1
pending the prosecution of the claims by Neah Ges. The reason being
that
should Neah Ges succeed in its claim, this might have a bearing
on the outstanding amount to be paid. On the other hand, should
Neah
Ges fail in the prosecution of their claim, they would have an option
to pay the outstanding amount or face liquidation.
[29]
Consequent to the findings I made in regard to the interim
relief sought by Neah Ges, I will therefore not adjudicate on both
the
counter claim and the liquidation applications.
[30]
In the premises I make the following order:
1.
Pending the institution of an action for damages in this Court by the
Applicants against the Respondents within 15 days from
the date of
this order;
1.1
it is declared that Clause 13 of the Sale of Shares Agreement
pertaining to solicitation of clients and staff of the Second
Applicant as well as restraints of trade has not become void and is
still binding and applicable to all parties to the agreement;
1.2
that all the Respondents, including the Fifth Respondent, are
interdicted from soliciting the customers of the Second Applicant
as
set out in Annexure "A" to the Applicants' founding
affidavit;
1.3
that the Second and Third Respondents are interdicted from utilising
advertising and marketing material and images in competition
with the
Second Applicant;
1.4
that the First to the Fourth Respondents are interdicted and
prohibited from competing with the Second Applicant by soliciting
the
business of the clients listed in Annexure "B" attached to
the Applicants' founding affidavit;
1.5
All Respondents are interdicted from stating false information in
respect of the business of the Second Applicant to the clients
mentioned in Annexures "A" and "B" attached to he
Applicants' founding affidavit in the restraint application;
2.
The liquidation application is stayed, pending the final adjudication
of the action for damages or failure by the Applicants
to institute
such action;
3.
The counter application by the Fifth Respondent may be heard together
with the action for damages;
4.
In the event the Applicants fail to institute proceedings against the
Respondents within 15 days from the date of this order1
this order
shall lapse;
5.
The costs of these applications are reserved pending the outcome of
the action proceedings or failure to institute proceedings
whichever
occurs first.
______________________
S
P MOTHLE
Judge
of the High Court Gauteng Division, Pretoria
For
the Applicants
:
Adv SW Davies
Assisted
by
:
Adv M Louw
Instructed
by
:
Wiese & Wiese Attorneys
Arcadia,
Pretoria.
For
the First, Second, Third, Fourth and Sixth Respondents:
Adv
JP Vorster SC
Assisted
by
:
Adv AM Heystek
Instructed
by
:
Japie Van Zyl Attorneys
C/o
Couzyn
Hertzog & Horak
Attorneys
Brooklyn,
Pretoria.
For
the Fifth Respondent
:
Adv. S Guldenpfennig SC
Assisted
by
:
Adv. R Grundlingh
Instructed
by
:
Nasima Khan Attorneys
Clysdale,
Pretoria.
[1]
1914 AD 221
at p227
[2]
Some of which are Ericson Motors Ltd
v
Protea
Motors
1973 3 SA 685
(A) at 691 C-E; Webster
v
Mitchell
1948 1 SA 1186
(W); Ladychin Investments v South African National
Roads Agency
2001 3 SA 344
(N) at 353 F-J
[3]
Act 61 of 1973. This section provides that a company is deemed to be
unable to pay its debts if a creditor, to whom the company
is
indebted, has served a demand requiring the company to pay the sum
due.
[4]
[1998] ZASCA 87
;
1999 (1) SA 232
(SCA)
[5]
1996 (4) SA 950
(A).
[6]
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
1979
(1) SA 391
(A) at
416
A
[7]
Motor Racing Enterprise supra