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[2016] ZAGPPHC 208
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Schickerling NO and Another v Chickenland (Pty) Ltd t/a Nando's (22712/2016) [2016] ZAGPPHC 208 (15 April 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION,
PRETORIA)
15/4/2016
Case Number: 22712/2016
Not reportable
Not of interest to other
judges
Revised
In the matter between:
JOHN FREDERICK
SCHICKERLING N.O.
(In his capacity as
duly appointed business
Rescue practitioner
for Ashraf Alli Gani
Investments
CC)
First
Applicant
ASHRAF ALLI GANI
INVESTMENTS CC
Second
Applicant
and
CHICKENLAND (PTY) LTD
t/a
NANDO’S
Respondent
JUDGMENT
POTTERILL J
[1] The applicant is
applying on an urgent basis that a mandatory interdict be granted in
favour of the second applicant in terms
of which the respondent is
ordered to fulfil all its obligations towards the second applicant in
terms of the provisions of the
franchise agreement entered into by
and between the second applicant and the respondent on 1 December
2009. The second applicant
offers reciprocal performance of its
obligations in terms of the same agreement. This mandatory
interdict is pending the
outcome of the pending action between the
second applicant and the respondent under case number 3880/2015.
The applicants
are also requesting that the respondent be ordered to
notify all suppliers to the second applicant to continue to supply
the second
applicant with product in terms of the provisions of the
agreement on the same cash on delivery basis as before.
Background facts
[2] The first applicant
is the business rescue practitioner of the second applicant Ashraf
Alli Gani Investments CC.
[3] The respondent is
franchisor of a chain of fast foods commonly known as Nando’s.
[4] The second applicant
and the respondent on 18 February 2009 concluded a franchise
agreement. This agreement was subject to an
option for the renewal of
the contract which was to expire on 30 November 2014.
[5] The option to renew
the franchise agreement is before this court under case number
3880/2015 and set down for trial on 31 October
2016.
[6] On 28 November 2014
the members of the second applicant adopted a resolution to commence
business rescue proceedings. On 19
February 2015 the applicant
proposed a business rescue plan which was adopted.
[7] In the business
rescue plan the following proposal was adopted:
“
PROPOSALS
Pending the outcome of
the action under case number 3880/15 the company will continue to
trade under the name and style of a Nando’s
branded franchise
from the current leased premises and undertake to substantially
comply with the franchise agreement concluded
with Chickenland (Pty)
Ltd, to the extent that it is consistent with the adopted business
rescue plan.
That the practitioner
may appoint any individual from time to time, at his sole discretion,
to attend the training provided in terms
of the franchise agreement
with Chickenland (Pty) Ltd.”
[8] On 24 February 2015
the attorney of the respondent gave a written undertaking which reads
as follows:
“
(1) Pending
finalisation of the declaratory issued under case number 3880/15,
Ashraf Alli Gani Investment CC (in business rescue)
(“the
franchisee”) and Chickenland (Pty) Ltd (“the franchisor”)
will comply with their respective contractual
obligations provided
for in the franchise agreement concluded between the parties on 18
December 2009, as if the franchise agreement
was still in existence.
(2) It is recorded
that the franchisor agrees hereto in order to avoid unnecessary costs
in litigation and does not hereby waive
any rights that it has
flowing from the expiry of the franchise agreement on 30 November
2014, alternatively determination thereof
by the franchisor.
(3) Insofar as supply
of products through Vector Logistics (Pty) Ltd and other suppliers
are concerned, the continued supply thereof
is dependent upon the
franchisee meeting its obligations with such suppliers.”
[9] On 22 March 2016 the
respondent sent a letter to the four sureties and co-principal
debtors as well as to the first and second
applicant. The
relevant paragraph reads as follows:
“
3. Since
inception of the business rescue proceedings our client has had cause
on no less than four occasions to place the Corporation
in breach of
its obligations under the Franchise Agreement. In such regard
you are referred to the contents of our letters
dated 31 July 2015,
21 October 2015 (breach notices), 8 December 2015 (operational
directive), 15 January 2016 (breach notice)
and 18 January 2016
(breach notice). These letters are in the possession of your
client and the contents thereof are incorporated
herein be reference.
4. Moreover, our
instructions are that your client has failed to pay the royalty fees
and other amounts due to our client for February
2016 in the amount
of R88 000.00. Your client has also not paid the December
2015 nor January 2016 royalty and fees
in the respective amounts of
R102 665.48 and R94 791.57.
5. Accordingly your
client is currently indebted to our client in the sum of R285 457.06
which amount is due, owing and payable.
6. On 25 January 2016
we addressed a letter to Mr Derick Schickerling (a copy of which is
attached hereto) requesting that he provide
our client with
information regarding why the outstanding royalties had not been paid
and enquiring that he indicate the ability
of the Corporation to
continue to pay its future debts. Our client is yet to receive
answers to the questions posed in the
letter of 25 January 2016.
11. Accordingly, and
with full reservation of our client’s rights, your client is
hereby advised that should the arrear royalty
fees and other amounts
due to our client in the amount of R285 457.06 being calculated
as per the attached statements, not
be paid and reflect in our
client’s bank account as cleared and available funds by no
later than Tuesday, 29 March 2016,
that our clients rights are
reserved to proceed to terminate the interim franchise arrangement
and seek its recourse against not
only the Corporation but also the
sureties and the business rescue practitioner, Mr Schickerling.”
[10] Paragraph 17.1.2 of
the franchise agreement reads as follows:
“
17.1
Notwithstanding any other provision contained in this agreement it is
agreed that this agreement shall terminate, at the FRANCHISOR’s
sole and absolute discretion at any time subsequent to the happening
of any of the events listed below, notwithstanding that there
may be
a delay between the event and the exercising of the election in the
event that the FRANCHISEE:-
17.1.1 …
17.1.2 fails to
timeously pay the franchise, royalty, marketing fee or any other
amount due and owing by it to the FRANCHISOR; …”
[11] The royalties were
not paid but were paid in on 30 March 2016 reflected at the
respondent on 31 March 2016.
Applicants’
version
[12] The applicants
contend that the termination letter does not comply with the
franchise agreement in that the letter of termination
was not
addressed to the second applicant nor delivered to the second
applicant’s domicile as required in terms of clause
25.3.3 of
the franchise agreement.
[13] The current status
of the business rescue plan has achieved the purpose of business
rescue as required in the Companies Act
and will benefit all the
interested parties including the body of creditors.
[14] The respondent is
deliberately attempting to frustrate the business rescue proceedings
by bringing out vexatious and exaggerated
performance reports, has
failed to allow for and provide training of the staff of the
applicant as required by the business plan
and franchise agreement.
The work force of the second applicant has also been enticed away
from the business through neighbouring
franchises. The
employees are informed that the second applicant’s business is
in dire straits and that they should
leave the employ and join other
franchises. It is averred that these dire consequences of the
respondent’s vexatious
attack culminated in the so-called
letter of termination.
[15] The respondent also
informed all the suppliers as follows:
“
Please note
that Nando’s Laudium has been closed with immediate effect.
Please stop all supply.”
[16] The respondent also
acted contrary to the provisions of section 134 of the Companies Act
by on 5 April 2016 disabling the computer
based point of sale
software programme installed at the business. The first
applicant submitted that he did not in terms
of section 134(1)(c)
grant permission for the respondent to disable the computer
software.
[17] All of the above
actions are detrimental to the body of creditors and the ten
remaining employees.
[18] The applicant has
accordingly complied with urgency as well as the requisites for an
interim interdict.
The respondent’s
version
[19] The respondent
denies that the application is urgent. The reason for this is
the applicants already on 22 March 2016
knew that termination was
threatened with if the royalties were unpaid. The applicants
since 30 March 2016 have been aware
that the respondent terminated
the agreement. Yet they only served the urgent application on 8
April 2016, 17 days after
22 March 2016. There are no reasons
set out as to why it took 17 days, neither did they explain the 8
days which elapsed
after receiving the notice of termination.
The applicant also failed to give the respondent prior notice of the
application.
The respondent was on the papers afforded half a
business day to answer to the urgent application. In
Gallagher
v Norman’s Transport Lines (Pty) Ltd
1992 (3) SA 500
(W)
at 503B the reason for the deviation must be set out and
applicant’s actions is contrary to
Luna Meubels
Vervaardiger v Makin and Another
1977 (4) SA 135
(W)
at
137A-E.
[20] The respondent
further submitted that the termination was valid and therefore the
applicants do not have a
prima facie
right to approach the
court. The royalties for December 2015 and January and February
2016 were unpaid. Clause 17.1.2
of the franchise agreement
constitutes a
lex commissorio
. Reliance was placed on
Oatorian Properties (Pty) Ltd v Maroun
1973 (3) SA
779
(A)
at 785A that a
lex commissorio
is enforceable and
in law and the court does not enquire into the conscionableness or
unconscionableness thereof.
[21] The termination is
valid because the business rescue practitioner in terms of section
140(1)(a) of the Companies Act has “full
management control of
the company in substitution of its board and pre-existing
management.”
[22] Furthermore in terms
of
Swart v Vosloo
1965 (1) SA 100
(A)
at
112H-113A the respondent
in casu
has proved that it came to
the knowledge of the applicants and therefore failure to the address
the notice under contract of a designating
domicilium
did not
invalidate the notice.
[23] The applicant has
accordingly not established a
prima facie
right entitling him
to continue to operating the franchise after the valid termination
thereof.
[24] The respondent also
raised the point that there is no irreparable harm because the
applicants can still operate a restaurant.
The alternative
sources of suppliers etc. are well-known to the applicants.
Paragraph 25 of the answering affidavit set out
all these
alternatives to which the only answer in the replying affidavit is
that the suggestions set out in paragraph 25 is a
figment of the
imagination of the respondent and in fact an impossibility.
[25] The applicants also
seek an order that the interim interdict should operate pending the
outcome of the main action. The issue
in the main action is however
not at all related to non-payment of royalties leading to a breach
and termination. It is thus
unclear on what basis the interim
relief suggested could be granted.
Reasons
for decision
[26] I find the matter to
be urgent. I entertain it, but non-compliance with the rules and
directives pertaining to “urgents”
may impact on the
costs order. The test to be applied in assessing whether the
applicant has past the hurdle for obtaining
an interim interdict is
set out in
Reckitt & Colman SA (Pty)
Ltd v S C Johnson & Son (SA) (Pty) Ltd
1995
(1) SA 725
(T)
on 730B:
“
When the
applicant cannot show a clear right, and more particularly where
there are disputes of fact relevant to a determination
of the issues,
the Court’s approach in determining whether the applicant’s
right is prima facie established, though
open to some doubt, is to
take the facts set out by the respondent which the applicant cannot
dispute , and to consider whether,
having regard to the inherent
probabilities, the applicant should (not could) on those facts,
obtain final relief at the trial
in the main action. The facts set
out in contradiction by the respondent must then be considered and if
serious doubt is thrown
upon the case of the applicant it cannot
succeed.”
In
Spur Steak
Ranches Ltd v Saddle Steak Ranch
1996 (3) SA 706
(CPD)
at
714D-H the following is stated:
“
The proper
approach is to take the facts set out by the applicants together with
any facts set out by the respondents, which the
applicants cannot
dispute, and to consider whether having regard to the inherent
probabilities the applicants should, not could,
on those facts obtain
final relief at the trial.
It is also necessary
to repeat that although normally stated as a single requirement, the
requirement for a right prima facie established,
though open to some
doubt, involves two stages. Once the prima facie right has been
assessed, that part of the requirement
which refers to the doubt
involves a further enquiry in terms whereof the Court looks at the
facts set up by the respondent in
contradiction of the applicant’s
case in order to see whether serious doubt is thrown on the
applicant’s case and if
there is a mere contradiction or
unconvincing explanation, then the right will be protected.
Where, however, there serious
doubt then the applicant cannot
succeed. See
Webster v Mitchell
1948 (1) SA 1186
(W)
at
1189;
Gool v Minister of Justice and Another
1955 (2) SA 682
(C)
at 688.”
[27] The crux of this
matter is thus the cancellation. If there was a valid
cancellation of the contract then the applicants
do not have a
prima
facie
right open to some doubt to approach this court on a
cancelled agreement.
[28] I am satisfied that
on the common cause facts the royalties were only paid after the date
set out in the cancellation letter.
I am satisfied that clauses
17.1 read with 17.1.2, the cancellation clause, constitutes a
lex
commissorio
. Thus even if the respondent is an unwilling
party to the current
de facto
and
de jure
situation it
does not affect the
lex commissisorio
and the cancellation.
[29] I find that the
letter of cancellation came to the knowledge of the first applicant.
I find that it should have come
to his notice as the business rescue
practitioner who was responsible to ensure payment of these
royalties. This is further
enunciated by section 140 of the
Companies Act. Even if I am wrong and there must be compliance
with the franchise agreement
in that the second applicant must
receive notice of the termination at the
domicilium
address
reflected in the contract I am satisfied that in fact the second
applicant had knowledge of this letter of termination.
It was
served on his attorneys via e-mail and more bizarrely the applicants
never in the founding affidavit set out that the second
applicant had
no knowledge. I am accordingly satisfied that there was a proper
cancellation of the agreement.
[30] The only question
the court must then ask itself is whether the adopted business rescue
plan can in any way impact on the cancellation
of the agreement.
The applicant could not provide any section in the Companies Act, or
any case law, that the mere fact that
there are business rescue
proceedings impacting on the cancellation. Upon a perusal of
the sections in the Companies Act
relating to business rescue no such
prohibition could be found. When interpreting the Companies Act
the Act must be interpreted
and applied in a manner that gives effect
to the purpose of section 7. It could be argued that the
cancellation does not
conform to the purpose of section 7(d).
Section 7(d) reads as follows:
“
reaffirm the
concept of the company as a means of achieving economic and social
benefits”.
The employees have
already been approached to work at other franchises and it would seem
that they could receive social benefits.
The fact that the
royalties were not paid for three months by a third party did not
reaffirm the concept of the company as a means
of achieving economic
benefits.
[31] The mere fact that I
do not address the other issues raised does not infer that I have not
considered them.
[32] The urgency of the
matter requires that I only refer to the crux.
[33] I accordingly make
the following order:
The application is
dismissed with costs.
__________________
S. POTTERILL
JUDGE OF THE HIGH
COURT
CASE NO: 27712/2016
HEARD ON: 13 April 2016
FOR THE APPLICANTS: ADV.
J. KLOPPER
INSTRUCTED BY: Lacante
Henn Incorporated
FOR THE RESPONDENT: ADV.
A.C. OOSTHUIZEN SC
INSTRUCTED BY: Ashersons
Attorneys
DATE OF JUDGMENT: 15
April 2016