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[2016] ZAGPPHC 599
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Spar Group Limited v Moremart Superstore (Pty) Limited; In re: Moremart Superstore (Pty) Limited v Spar Group Limited (51934/2015) [2016] ZAGPPHC 599 (12 July 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
Case
Number 51934/2015
DATE:
12 JULY 2016
In
the matter between:
THE
SPAR GROUP
LIMITED
...............................................................................................
Applicant
And
MOREMART
SUPERSTORE (PTY)
LIMITED
...............................................................
Respondent
In
Re:
MOREMART
SUPERSTORE (PTY)
LIMITED
.....................................................................
Plaintiff
And
THE
SPAR GROUP
LIMITED
..............................................................................................
Defendant
CANCA AJ
INTRODUCTION
[1]
This is an application for the
rescission of a default judgment granted by the Registrar of this
Court in favour of the respondent
on 18 May 2015 under Case Number
79897/2014 against the applicant. The judgment compels the applicant
to pay the respondent the
sum of R74 000.00 plus interest thereon
calculated at 2% above the prime rate charged by First National Bank
of South Africa on
overdraft facilities granted to its commercial
customers from 21 January 2015 plus costs. The application is opposed
by the respondent.
BACKGROUND FACTS
[2]
The applicant ("Spar") is a
public company duly incorporated and registered in terms of South
Africa's company laws. It
is the defendant in the main action.
[3]
The respondent ("the seller"),
a limited liability company incorporated and registered in terms of
South Africa's company
laws, is the plaintiff in the main action.
[4]
The parties entered into a written
agreement of sale ("the agreement") on 29 January 2013 in
terms of which the respondent
sold its supermarket business,
conducted under the name and style of Moremart Superspar ("the
business"), to Spar as
a going concern.
[5]
The following provisions of the
agreement are relevant to these proceedings:
5.1
In respect of the purchase price and the
payment thereof, the parties agreed as follows:
"5.
1
The purchase price payable by Spar to the seller in respect of the
sale of the business shall be the aggregate of-
5.1.1
the sum of R14 500 000.00
(FOURTEEN MILLION FIVE HUNDRED RAND) (sic) being in respect of the
goodwill R13 500 000.00 (THIRTEEN MILLION
FIVE) (sic) and equipment
R1 000 000.00 (ONE MILLION RAND); and
5.1.2
a sum equivalent to the value of
the stock-in-trade calculated as more fully set out in clause 6
below; and
5.1.3
the sum equivalent to all claims
for stock returned, credits, claims, rebates and any money owning to
the seller; and
5.2.1
Subject to the provisions of
5.5.2, the purchase price in 5.1 shall be paid at close of business
on the date prior to the effective
date into the account designated
by the seller... in such manner and form as to render the funds
immediately available to the seller
without the delay of prior bank
clearance on or before the effective date.
5.2.2
The purchase price shall be
applied as follows:
5.2.2.1
firstly in payment of all monies to be determined owing by the seller
to Spar as at close of business on the date prior
to the effective
date....
5.2.2.4
a further amount of R700 000.00 (SEVEN HUNDRED THOUSAND RAND) shall
be retained in the interest bearing trust account referred
to above
from the purchase price and kept for payment of drop shipment
purchasers where deliveries have been made to the seller
by the
suppliers but not yet invoiced. Within six weeks calculated from the
effective date Spar will account to the seller for
all drop shipments
purchases and after deducting the monies due to Spar for such
purchases the residue of the purchase price shall
be paid to the
seller. Likewise any deficiency shall forthwith be paid by the seller
to Spar."
5.1.2
Drop shipment suppliers are approved
suppliers of Spar supermarkets. Retailers such as the seller place
orders directly with the
drop shipment suppliers. Thereafter Spar
pays the suppliers. Spar then recovers the monies paid to those
suppliers from the retailers
in question. In practice, it often
happens that the drop shipment suppliers render their invoices to the
retailers after the lapse
of a substantial period of time after the
deliveries have taken place.
5.1.3
The R700 000.00 referred to clause
5.2.2.4 of the agreement was the agreed amount to be retained by Spar
in order to settle invoices
presented by the drop shipment suppliers
after the effective date.
5.1.4
The seller contends in its summons that
all the drop shipment suppliers had been paid and that Spar had
refused or failed to pay
the balance of R74 000.00 which remained of
the R700 000.00 referred to paragraph 5.1.3 above.
5.2
The seller also warranted, inter alia,
that during the period between the date of signature of the agreement
and its effective date,
"12.2.2
the assets which form part of the business will continue to be in
good order and condition and fully operational (where
appropriate)
apart from breakdowns arising in the ordinary course or any loss or
damage arising due to causes beyond the reasonable
control of the
seller; provided that any such loss, damage or destruction will be
fully replaced or repaired as the case may be
by the seller."
5.3
Under the heading “DOMILICIA AND
NOTICES" in the agreement, the parties elected for the purposes
of the service of legal
proceedings and for the giving or sending any
notice provided for in terms of the agreement, the addresses of their
respective
attorneys. Either party could vary its domicilium citandi
et excutandi address ("domicilium address") by written
notice
to any other address within South Africa. The domicilium
address of Spar was the erstwhile address of its attorney of record
who,
after the conclusion of the agreement, moved offices to a
different suburb of Johannesburg on 1 November 2013.
[6]
On 8 May 2014, the applicant's attorney
addressed a letter to the seller which was copied to its attorney on
12 and 19 May 2014.
The applicant's attorney's new South African
office address is visible on the top right hand corner of the
letterhead.
[7]
In this letter Spar's attorney states
that, on taking possession of the business, Spar ascertained that,
contrary to the warranty
referred to in paragraph 5.2 above, seven
air conditioning units were not functional. Spar had to repair and or
replace these air
conditioning units at a cost of
R150
537.00. Spar demanded payment of the aforesaid amount within ten days
from the date of the letter and threatened to appropriate
an amount
of R36 140.50 should the seller fail to comply with the demand.
[8]
The sum of R36 140.50 was apparently the
balance of the R700 000.00 retained by Spar to settle the seller's
drop shipment suppliers.
The letter also threatened the institution
of proceedings to recover from the seller any monies that remained
owing after setting
off the sum of R36 140.50 for the said repairs or
replacements.
[9]
The seller's attorney, Mr Kriel, who
appears to be the senior partner of that firm of attorneys, responded
to the aforesaid letter
on 1 July 2014. Kriel did not comment on or
query the contents of the 8 May 2014 letter but merely requested a
copy of the agreement.
A curious aspect of Kriel's letter is that
although the reference cited therein is that of the applicant's
attorney, Mr Moss, the
email address to which the letter was sent was
that of jdoods@mossmarsh.co.za who, on the letterhead appears to be
the Manager:
Construction Contracts Division based, at the
applicant's attorney's offices in France.
[10]
In his reply to Kriel's letter, Moss
attached a copy of the agreement as requested and pointed out in the
reply, which was dated
4 July 2014, that he was corresponding with
Kriel from his Kensington offices in Johannesburg and not from
France. Bruma (which
is where Moss' erstwhile office was situated)
and Kensington are different suburbs of Johannesburg.
[11]
On 30 October 2014 the seller caused a
summons to be issued out of this Court. The summons was served on
Spar's chosen domicilium
address, by attaching a copy of same on the
front door of the building in Bruma which housed its attorney's
erstwhile offices,
on 21 January 2015.
[12]
On 9 February 2015 the seller filed a
request for default judgment which was granted on 18 May 2015.
[13]
Spar's Divisional Financial Director for
its Northern Region, Mr Du Preez avers that: (a) he had no knowledge
of any legal proceedings
against the applicant by the respondent,(b)
the judgment in favour of the respondent only came to his knowledge
on 5 June 2015
when he received an updated !TC credit bureau report
on the applicant and (c) in choosing their respective attorneys'
office addresses
as their domicilium addresses, it was the parties
intention that any notice or legal process would receive their
respective attorney's
immediate attention.
LEGAL MATRIX
[14]
In terms of Rule 31 (2) (b) of the
Uniform Rules of Court, an applicant for rescission must show good
cause why the application
should be granted. What constitutes good
cause is trite and has been formulated in Grant v Plumbers (Pty) Ltd
1949 (2) SA 470
(O) at 476 - 477 to be as follows:
1.
The applicant must give a reasonable
explanation of his default. If it appears that his default was
willful
or that it was due to gross
negligence the Court should not come to his assistance;
2.
The applicant's application must be bona
fide and not made with the intention of merely delaying the
respondent's claim; and
3.
The applicant must show that it has a
bona fide defence to the respondent's claim.
See
also
Vosal Investments (Pty) Ltd v
City of Johannesburg
2010 (1) SA 595
at 599A-B.
THE MERITS
[15]
The respondent applied for condonation
for having filed its answering affidavit late by 15 days. As no
prejudice was indicated by
the applicant and in order to avoid an
unnecessary delay in the administration of justice, I granted
condonation.
[16]
It is not disputed that Spar and its
attorney were not aware that action had been instituted against it by
reason of the fact that
the summons had been served at its attorney's
erstwhile offices. Therefore Spar was not in wilful default in
failing to defend
the action. There is also no indication that this
application is made purely to delay the seller's claim.
[17]
The crisp issue in this matter is
whether or not the Spar has a bona fide defence to the seller's
claim.
[18]
Spar's defence to the seller's action is
two pronged. Firstly, Spar contends that after paying the drop
shipment suppliers only
an amount of R36 140.50 remained to the
seller's credit. This is the only amount the seller could possibly
have taken judgment
for, so the contention continued. This amount was
mentioned to both the seller and its attorney in the letter of demand
dated 8
May 2014 referred to in paragraphs 6 and 7 above. Rather than
respond to the contents of that letter or query the amounts mentioned
therein, the seller elected to issue summons for an amount of R74
000.00 without setting out how that amount was calculated.
[19]
In his answering affidavit on behalf of
the respondent, Mr Castro denied that the sum of R36 140.50 was the
only amount standing
to the credit of the respondent in respect of
drop shipment payments. In support of that averment, Castro cited the
contents of
correspondence between Du Preez and Mr Clark, a retail
management consulted appointed by the respondent, dated 31 October
2013
and 8 November 2013, which revealed that an additional sum of
approximately R 40 000.00 was due to the respondent. However, in his
replying affidavit, Du Preez annexed a document showing how the
amount of R 36 140.50 was calculated and that the R 40 000.00 had
been accounted for. The amount claimed and for which judgment was
granted is therefore in dispute and falls to be determined by
the
trial Court.
[20]
Spar's second defence is that it has a
counter claim against the seller in respect of the balance of the
amount it spent on the
faulty air conditioning units referred to in
paragraph 7 above. Spar contended that had it been aware of the
existence of the summons
it would have instituted a claim in
reconvention against the seller. Therefore, so the contention
continued, the counterclaim was,
in and of itself, a bona fide
defence to a claim sounding in money.
[21]
The seller challenges the contention
that Spar's alleged counter claim against it is bona fide. The seller
contends that Spar lacks
jurisdiction to bring such a claim. The
seller states that the air conditioning units, on which Spar bases
its counter claim, never
belonged to it but rather to the landlord
who owned the premises from which it had conducted the business. The
air conditioning
units were never defined as forming part of the
equipment which was sold and consequently were not incorporated in
the agreement,
the seller contended. The failure of a previous tenant
to maintain the air conditioning units was a dispute between that
tenant
and the landlord and did not concern Spar, so the contention
continued.
[22]
Spar countered this contention by
stating that, until deposing to its answering affidavit, the seller
had not denied liability for
ensuring that the air conditioners were
in good working order on Spar taking over the business. The seller
had been aware that
there was a dispute relating to the air
conditioners for quite a while prior to issuing the summons against
it. Reliance for this
proposition was placed not only on the letter
of 8 May 2014 but also on email correspondence between Du Preez and
Clark dated 8
November 2013. From this email it is evident that a
number of the air conditioning units were faulty and that according
to the
applicant, a representative of the seller had to ensure that
same were in working condition on the effective date.
[23]
The applicant has made some valid
propositions particularly in regard to the respondent's failure to
either attach any documentation
or provide any other evidence to
demonstrate how the debt was calculated when judgment was obtained.
The amount claimed by the
respondent and for which it obtained
judgment is clearly in dispute.
[24]
In my view the applicant has set out
sufficient averments which, if established at trial, would entitle
it, at the very least, to
a finding that the respondent took judgment
for an amount more than it was entitled to.
[25]
In the light of the above, it is not
necessary for me to determine whether or not the applicant's counter
claim defence has prima
facie prospects of success. It is sufficient,
to my mind, for purposes of this judgment, that I have found that the
applicant's
first defence is bona fide and has, prima facie,
prospects of success.
[26]
In the result, I order as follows:
1.
The late filing of the respondent's
answering affidavit is condoned.
2.
The default judgment granted on 18 May
2015 under case number 79897/2014 is set aside.
3.
The applicant is granted leave to defend
the action under case number 79897/2014, and the dies for the taking
of the next steps
in the proceedings are to be calculated from the
date of this judgment.
4.
The respondent is ordered to pay the
costs.
MP
CANCA
Acting Judge
of the High Court of South Africa,
Gauteng
Division, Pretoria. APPEARANCES:
For the
Applicant: Mr Z Schoeman
Instructed by:
Moss Marsh & Georgiev Kensington, Johannesburg.
For the
Respondent: Mr C A Kriel
Instructed by:
Machobane Kriel Inc. Brooklyn, Pretoria.
Heard on: 28
April 2016
Judgment on:
12 July 2016