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[2016] ZAGPPHC 309
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Odyssey Consultancy CC v Hurwitz (41191/2012) [2016] ZAGPPHC 309 (11 March 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION. PRETORIA
CASE
NO: 41191/2012
DATE:
11 MARCH 2016
In the matter
between:
ODYSSEY
CONSULTANCY
CC
........................................................................................
PLAINTIFF
And
DALE
HURWITZ
.............................................................................................................
DEFENDANT
JUDGMENT
RANCHOD J:
[1] This is an
action in which the plaintiff (‘Odyssey’) relies on two
liquid documents.
[2] First, a written
acknowledgement of debt dated 22 February 2012 furnished by the
principal debtor, GDCH Investment Holdings
Pty Ltd (‘GDCH’)
in which it acknowledges being indebted to Odyssey in an amount of
R1 821 820.00 together with interest
thereon at the rate of 10% per
month from 13 February 2012 until date of payment.
[3] Second, a deed
of suretyship also dated 22 February 2012 in terms of which the
defendant (‘Hurwitz’) personally
bound himself to Odyssey
jointly and severally as surety for and as co-principal debtor in
solidum with GDCH for the "...
due and punctual payment by ...
[GDCH] of an amount and debt and time payment specified in the
Acknowledgement of Debt plus interest
at 10% per month from 13
February 2012 until date of payment...”.
[4] It is common
cause however that prior to the conclusion of these two agreements
(the later agreements) Odyssey and GDCH had
entered into agreements
(and Hurwitz as surety for GDCH) which provided for a “profit-
share” of 10% per month by Odyssey
in return for providing
“investment” capital to GDCH dated 9th and 11th May
respectively ('the first and second written
agreements’).
[5] On 9 May 2011
Odyssey, represented by Mr Kevin Jenkins ('Jenkins’), and GDCH,
represented by Hurwitz, entered into the
first written agreement with
each other in terms of which Odyssey advanced R1 440 000.00 to GDCH
as the ‘investment* of a
capital amount for a period of 6
months, after which it was to be repaid.
[6] It is also not
in dispute that two days later on 11th May, Odyssey and GDCH again
represented by Jenkins and Hurwitz respectively,
entered into the
second written agreement in terms of which a further R280 000.00 was
invested as a capital amount by Odyssey which
also had to be repaid
within 6 months by GDCH.
[7] It is also
common cause that in both these agreements the return on the
investment was stated to be 10% “profit-share”
rather
than 10% “interest” - payable monthly. Hurwitz bound
himself as surety to the plaintiff for both these agreements.
[8] Whether it was
intended to be a profit-share or interest is the subject of the
present dispute.
[9] Prior to the
conclusion of th$ first and second agreements, Jenkins and Hurwitz
had discussions via e-mail about certain clauses
or terms in the
agreements which finally culminated as the ones signed on 9 and 11
May 2011 respectively.
[10] In an email
addressed to Hurwitz and sent on 9 May 2011 at 10h04 am Jenkins says:
“Have a look thru. Usual legal jargon
shit.” It is common
cause or not in dispute that what Hurwitz was asked to peruse was a
draft of the agreement concluded
later the same day.
[11] At 12h34 pm the
same day, Hurwitz replies in an email that “all seems in order
but please could you consider the following
... [GDCH] will also pay
10% interest per month before the 9th day of each month...’
[12] Jenkins
responds a little later at 1 h09 pm and says, inter alia,
"The month when
it starts is this month with profit share payment only being the 9th
of June, 2011.
Sorry 4.2 must
rather state 10% profit share rather than interest.”
[13] The agreement
signed on 9th May 2011 inter aiia provides:
“4.2 [GDCH]
will also pay 10% profit share per month...”.
4.3 The profit share
payable on the 9th day of each month will be calculated for the month
preceding the month in which the profit
share is payable.”
5.1 If GDCH... fails
to pay the interest as provided for in clause 4.2 Odyssey will notify
GDCH... in writing to remedy such breach
within (FIVE) days.
5.2 if payment is
not received within the five days as specified in paragraph 5.1 the
full outstanding amount of the capital will
be due and payable as
well as all interest which has accrued.” (My underlining).
[14] Hurwitz
contends that the email of 9 May 2011 at 1h09 pm shows that
profit-sharing was intended and not the payment of interest.
[15] Jenkins
referred to Mr Cedrik Puckrin SC (“Mr Puckrin") as his
partner Mr Puckrin had invested a portion of the
funds that Odyssey
provided to GDCH in terms of the agreement of 9 May 2011 but withdrew
his investment at some point. I will revert
to this aspect presently.
[16] Of importance
for present purposes is that the May 2011 agreements were cancelled
in terms of a written cancellation dated
22 July 2011 in which
Hurwitz confirmed:
“The two
agreements between GDCH ... and Odyssey ... will be cancelled as at 9
August 2011.
The total capital
amount of R1 720 000.00 (R1 440 000.00 + R280 000.00) plus interest
of R172 000.00 plus any outstanding interest
amounts will be paid in
full by no later than close of business on Friday 19th August 2011.
Once this has been
done there will be no further claims against GDCH ... by Odyssey../.
(My underlining)
[17] Thereafter the
acknowledgement of debt and suretyship agreements dated 22 February
2012 were concluded between the parties
and which, as I said form the
basis of the present action. These agreements provide for interest to
be paid at the rate of 10%
per month as from 2012. The acknowledgment
of debt also provides that this agreement supersedes and replaces all
prior instruments
of debt between the parties. The debt amount is
stated to be R1 821 820.00.
[18] In the
affidavit resisting summary judgment, Hurwitz says these agreements
are in conflict with the terms of the first and
second agreements and
that:
"... by slight
(sic) of hand, the plaintiff had misrepresented to me and convinced
me of the fact that GDCH had to pay 10%
interest per month on the
capital investment by the Plaintiff in GDCH.”
He alleges that a
fraud was perpetrated on him.
[19] During the
qourse of the trial Hurwitz, firstly, through his counsel and later
personally, apologised for the allegations of
misrepresentations and
deception he made in his affidavit resisting summary judgment of and
concerning Mr Puckrin which he had
persisted in even during the
pre-trial conference. He said he had bona fide believed that Mr
Puckrin “was behind the whole
thing”. This was apparently
with reference to the initial agreements and their later
cancellation.
[20] When facing
summary judgment, Hurwitz deposed to an affidavit resisting summary
judgment and referred to the role played by
a Mr Chris Schoeman
(‘Schoeman’), a former attorney and later, advocate, who
had negotiated the signing of the later
acknowledgment of debt and
the defendant’s suretyship. Hurwitz alleged that Schoeman had
initially befriended him and had
indicated to him that the plaintiff
and Mr Puckrin were taking advantage of him (Hurwitz) and his
brother. Lulledjnto a sense of
complacency by Schoeman he then signed
the acknowledgment of debt and personal surety and was purportedly
surprised and shocked
to find that Schoeman had all along been acting
for the plaintiff.
[21] Schoeman
testified on behalf of the plaintiff. He said he had from the start
indicated to Hurwitz that he had been acting on
behalf of the
plaintiff. In this regard it is to be noted that in his pleadings
Hurwitz did not persist in the allegations of alleged
inducement by
Schoeman. Having had the opportunity to carefully assess his evidence
in court and to observe him, I have no reason
to reject his version
of events in which he was involved in this matter.
[22] At this point
it is necessary to briefly state the background to the conclusion of
the initial agreements. GDCH was to provide
finance to a close
corporation viz. Dendoflo CC which had entered into joint ventures
with certain other entities for the supply
of coal to the Pretoria
West and Rooiwal Power Stations. GDCH sought investors to provide it
with the necessary funds to in turn
finance the coal project of
Dendoflo.
[23] Hurwitz is no
doubt a seasoned businessman. He is a director of several companies.
His family owns properties. He is apparently
involved in various
business ventures with his three brothers. It seems highly improbable
that he would sign documents in which
he commits (himself and his
business entity) to repayment terms without carefully perusing them.
In this regard it is to be noted
that it is Jenkins who initially
suggested that the term ‘interest’ be replaced by
‘profit-share’. Until
then, Hurwitz appears to have
accepted that the return on the investment would be in the form of
interest After the initial agreements
were concluded payments of the
return on investment were made at the rate of 10% per month without
reference to or determination
of what profit Dendoflo had made at
each stage when payment of 10% per month was made.
[24] Hurwitz says
this was because he trusted Jenkins as a long-time friend and
accepted his calculations of the amounts due. This
does not explain
that it was he (Hurwitz) who was in a position to determine or obtain
the figures of Dendoflo’s profits
at any given stage. The first
thing a person in his position would have done, if indeed
profit-sharing was intended was to inform
Jenkins or the plaintiff
that there was no profit hence there were no payments due by GDCH.
Hurwitz attempts to explain this by
saying that it was only during
consultation with his attorney after action was instituted by the
plaintiff that he came to realise
that if there was no profit then
“10% of R0.00 profit is RO.OO”. The inevitable inference
to be drawn is that this
is a defence he thought up after action was
instituted and in preparation for the affidavit resisting summary
judgment in which
he relied heavily on this defence.
[25] It is also to
be noted that in response to plaintiffs demand prior to the issuing
of summons Hurwitz’s attorney did not
raise the issue of
profit-sharing. Instead, the only issue raised was an allegation that
the plaintiff had not taken into account
the amounts already paid by
the defendant at that time, being four interest payments and the
repayment of the capital amount of
R5000.00, totalling R1 138 000.00.
However, it appears that even that allegation was factually
incorrect. In the affidavit resisting
summary judgment which followed
the aforesaid letter a prior document was annexed by Hurwitz as
annexure “0” thereto.
This was a document which Hurwitz
conceded Jenkins had previously furnished to him. The payments of R1
138 000.00 are reflected
therein and were in fact taken into account
in calculating the amount due by GDCH. It is therefore apparent that
his attorney’s
letter was incorrect and misleading.
[26] In these
circumstances, Hurwitz’s reliance on a different alleged
misrepresentation as raised in the affidavit for summary
judgment and
which I have referred to earlier was therefore not a bona fide
defence.
[27] Hurwitz also
alleged that the interest claimed in the acknowledgement of debt was
usurious and/or contra bonos mores. This
aspect was alluded to in
passing by defendant’s attorney in response to the letter of
demand from plaintiffs attorney. However,
it was not subsequently
pleaded nor relied on in the trial by Hurwitz as a possible defence.
This was probably because plaintiffs
attorney referred defendant’s
attorney to the case of African Dawn Property Finance 2 (Pty) Ltd
(234/10) [20J1] ZASCA 45
which dealt with the issue of usurious
interest However, I need not deal with that aspect as it has not been
raised as a defence.
[28] All the
witnesses were in agreement that the concept of interest is
fundamentally different to the concept of profit-sharing.
It is
improbable, in my view, that if profit-sharing was indeed what was
intended, that the parties would not have at least considered,
discussed or negotiated whose profit they were talking about; whether
it would have been the profit received from Dendoflo and
it’s
joint ventures or whether it would have been GDCH's profit received
from Dendoflo and whether it would have been gross
profit, nett
profit, profit before or after tax and so forth. When he testified,
Hurwitz could give no congent answer to this substantial
inherent
improbability.
[29] In my view, the
probabilities are overwhelming that the change of terminology was no
more than the use of different words (although
for reasons that are
not clear) while the parties had all along intended that the term
“interest” should be given effect
to. Hurwitz conceded
during cross-examination that at no stage was profit mentioned, at no
stage were any documents (reflecting
whether any profits were made by
Dendoflo) furnished to Jenkins and at no stage would Jenkins have
been in a position to know or
calculate what the profit was or what
the percentage profit sharing thereof was.
[30] In my view,
there can be no doubt that on a balance of probabilities, Hurwitz
had, well knowing the position of the parties,
agreed on behalf of
GDCH that it was indebted to the plaintiff in the sum of R1 821
200.00 on 13 February 2012 and had further
agreed that it would pay
interest thereon at 10% per month from that date in terms of the
acknowledgement of debt signed on 22
February 2012.
[31] It was
contended by defendant’s counsel that Jenkins was not a
reliable or credible witness. The first criticism is that
he had by
way of a scanned and modified copy (altering the percentage of 10%)
to 5% in the agreement of 9 May 2011) negotiated
a larger (or
possibly even secret) profit as against his one investor, Mr Hennie
de Kock. (He had not done this with investor Sharon
Capriatti and Mr
Puckrin. He had in fact paid Mr Puckrin 11.1% per month which is even
higher than the 10% per month received from
GDCH). The document
reflecting the modified percentage, of which the defendant had no
knowledge, was nevertheless discovered by
the plaintiff. Mr de Kock
is not a party to these proceedings. Whether Jenkins sought a secret
profit in relation to Mr de Kock
is not an issue before me.
[32] Jenkins was
further criticized by defence counsel because he used Mr Puckrin’s
name and reputation (and stature as a
senior counsel) in the
plaintiffs attempts at getting the defaulting and financially
floundering GDCH to make payments. It is important
to note that
Jenkins did this both in respect of monthly and in respect of
defaulting capital repayments (about which there was
no dispute).
This use does not amount to the fraudulent misrepresentation level
regarding the payment of interest rather than profit-
share which
Hurwitz contends was the case.
[33] Hurwitz was an
unsatisfactory witness insofar as his evidence differs from that of
the other witnesses or the ascertained facts
and must therefore to
that extent be rejected.
[34] All the
plaintiffs witnesses testified in a forthright and honest manner.
They made concessions when reasonably they had to
do so and their
evidence accords with all the common cause facts, the documents and
the probabilities.
[35] In all the
circumstances, judgment shall ensue in favour of the plaintiff.
However, there is one aspect that deserves to be
mentioned. The in
duplum rule provides that the capital amount ceases to attract
interest once the interest equals the capital
amount. This was
clarified in the matter of Paulsen v Slio Knot Investments 777 (Ptv)
Ltd
2015 (3) SA 479
(CC). There it was held that once the interest
equals the capital amount, the running thereof is suspended until
date of judgment,
from which date it runs afresh.
[36} Although the
written agreements provide for costs on the attorney and client
scale, plaintiffs counsel, in the written heads
of argument, asked
for the normal costs order. Hurwitz had launched two applications to
compel viz. an application to compel further
and better discovery and
an application to compel the provision of further particulars.
Shortly thereafter the applicant complied
and provided the further
discovery and the further particulars. Hurwitz is entitled to the
costs of the two applications.
[37] In the result
the following order is made:
1. Payment of the
amount of R1 821 820.00;
2. Interest on the
aforesaid amount at the rate of 10% per month from 16 June 2012 up to
a total of R1 821 820.00;
3. Interest on the
total of the aforesaid amounts at the rate of 10% per month from date
of judgment to date of payment thereof;
and
4. Costs of suit
including the reserved costs of the opposed application for summary
judgment.
5. The defendant is
awarded the costs of the two interlocutory applications referred to
above.
RANQMOD J
JUDGE OF THE HIGH
COURT
Appearances:
Counsel on behalf
of Plaintiff : Adv N. Davis (SC)
Instructed by. :
Tintingers Inc.
Counsel on behalf
of Defendant : Adv A. Bishop
Instructed by
:Peterson, Hertog & Associates
Date heard : 30
November 2015
Date delivered :
11 March 2016