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[2016] ZAGPPHC 1228
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Faer SA Kitchen Cupboards (Pty) Ltd t/a Faer Furniture Technology (52746/2014) [2016] ZAGPPHC 1228 (5 December 2016)
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE NO: 52746/2014
NOT REPORTABLE
NOT OF INTEREST TO OTHER
JUDGES
REVISED
In
the matter between:
FAER
S.A. KITCHEN CUPBOARDS (PTY) LTD
t/a
FAER FURNITURE
TECHNOLOGY
Plaintiff
and
PHILIP
JAMES DEJONGH
KIRBY
First
defendant
EASYLIFE
KITCHENS MANUFACTURING CAPE (PTY) LTD
Second
defendant
EASYLIFE
KITCHENS MANAGEMENT CAPE (PTY) LTD
Third
defendant
EASYLIFE
KITCHENS MANAGEMENT (PTY) LTD
Fourth
defendant
EASYLIFE
KITCHENS MANUFACTURING (PTY) LTD
Fifth
defendant
JUDGMENT
BaqwaJ
Contract-
Formation of- Whether alleged
agreement of sole distributorship between the plaintiff and Italian
manufacturer binding in South
Africa
-
Only oral agreement supplemented by
e-mail correspondence alleged
-
No
proof
of
signed
agreement
-
Supply
of kitchen furniture components
- No
presumption or contractual obligation
not to supply anyone else particularly when supply through an
overseas subsidiary not party
to agreement between manufacturer and
the plaintiff
-
Plaintiff
failing to establish even
prima
facie
that sole distributorship
agreement between itself and manufacturer
-
Mere knowledge and dealing with
defendants and defendants franchisees not sufficient to impute
knowledge of nature of contract between
the plaintiff and
manufacturer
-
Plaintiff
failing to establish basis for alleged interference with contract
-
Plaintiff failing to establish basis for
delictual liability.
Summary
Volpato
was a manufacturer of kitchen furniture components in Italy and the
plaintiff who was involved in the same industry sought
to establish
an agency/distributorship relationship with the manufacturer. Even
though they ended up not entering into a signed
contract, the
plaintiff was given the go-ahead to do business in South Africa on a
commission basis. The defendants are kitchen
furniture manufacturers
in South Africa and operate mainly from Johannesburg and Cape Town
not only as manufacturers but also as
franchisors. They sourced
Volpato kitchen products from the plaintiff for a period of about ten
years
.
A misunderstanding arose during that period causing the
defendants to source Volpato components through a local supplier,
Eclipse,
which in tum purchased the products from a distributor of
the manufacturer ATI located in China. The plaintiff was informed of
that relationship by the manufacturer. The latter had no objection to
the ATI relationship between Eclipse and the defendants. The
plaintiff instituted action against the defendants on the basis that
they had induced the manufacturer to breach an alleged sole
distributorship contract entered into between the plaintiff and the
manufacturer. The plaintiff alleged that the defendants had
acted
unlawfully and that they were delictually liable. These allegations
were denied by the defendants.
Held,
that the plaintiff had failed to prove
the existence of contract of sole distributorship.
Held,
that the plaintiff had failed to prove
awareness on the part of the defendants of such a contract and that
they could not thus have
induced a breach of same
.
Held,
that in any event, even if such a sole
distributorship had been in existence, it would be untenable to bar
other individuals or
companies from sourcing the product from parties
who had not been participants in the sole distributorship contract as
that would
be clothing such a contract with a status of a patent
which would in tum be contrary to ordinary consequences of
competition and
the
boni mores.
Annotations:
Reported
cases
Atlas
Organic Fertilizers v Pikkewyn Ghwano
1981 (2) SA 173
(N) at 186 D
Taylor & Home (pty) Ltd v Dentall (Pty) Ltd
1991 (1) SA 412
(A)
at 422G-423B Wilkins NO v
Voges
[1994] ZASCA 53
;
1994 (3) SA 130
AD 138 H-137 C
Tor
Industries (Pty) Ltd v Gee Six Superweld CC and Others 2001(2) SA 148
W at
154A-B
Stellenbosch
Farmers' Winery Group Ltd and Another v Martell et Cie and Others
2003 (1) SA 11
SCA
Introduction
[1]
This is a delictual claim for damages ensuing out of an alleged
unlawful interference with the contractual relationship between
the
plaintiff and an Italian manufacturer (Volpato).
The
Parties
[2]
The plaintiff is FAER S. A. Kitchen Cupboards (Pty) Ltd
t/a
Faer Furniture Technology (Faer) a
private, for profit company with limited liability, registered in
accordance with the Company
Law of the Republic of South Africa, with
registration number 1997/000229/07 and with registered address at
Cabernet House West,
Brandwacht Office Park, Trumall Road,
Stellenbosch, Western Cape.
[3] The first defendant
is Philip James de Jong Kirby, an adult businessman residing at
Bryanston Court Houses, Peter Place, Bryanston.
The first defendant
is the Managing Director of the third and fourth defendants and a
director of the second and fifth defendants.
[4] The second defendant
is Easylife Kitchens Manufacturing Cape (Pty) Ltd, a private for
profit company with limited liability,
registered in accordance with
registration number 2003/031123/07 with registered address at 381
Ontdekkers Road, Florida Park Extention
3, Roodepoort.
[5] The third defendant
is Easylife Kitchens Management Cape (Pty) Ltd, a private company
with limited liability, with registration
number 2003/031740/07 with
its main place of business at Units B1 and B2 Steel park, Modderdam
Road, Bellville - South and with
registered address at 381 Ontdekkers
Road, Florida Park Extension 3, Roodepoort 1709.
[6]
The fourth defendant is Easylife Kitchens Management (Pty) Ltd, a
private company with limited liability, with registration
number
1995/000678/07 and with registered address at 381 Ontdekkers Road,
Florida Park Extension 3, Roodepoort 1709.
[7] The fifth defendant
is Easylife Kitchens Manufacturing (Pty) Ltd, a private company with
limited liability, with registration
number 1996/011710/07 and with
registered address at 381 Ontdekkers Road, Florida Park Extension 3,
Roodepoort 1709.
Background
[8]
The parties herein are companies involved in the kitchen
manufacturing industry. Faer concluded an agreement with an Italian
manufacturer of kitchen components, namely Volpato lndustrie Societa
Azioni (S.P.A)
"Volpato".
In
terms thereof Faer was appointed as distributor, that is an entity
which would purchase Volpato products on its own account and
then
sell them with a view to making a profit. Faer would buy at a
discount to Volpato's cost price to enable it to on-sell to
its
customers.
[9] There is however a
dispute between the parties mainly on two issues, the first one being
whether Faer had an exclusive right
to distribute Volpato products in
South Africa (sole distributorship). The second issue is whether
Volpato was prohibited from
selling its products to any other
distributor if that distributor intended to sell them to any customer
or former customer of Faer
in South Africa.
The
Pleadings
[10]
According to the plaintiff's particulars of claim, the plaintiff
represented by Armandt Kotze and Volpato lndustrie Societa
Azioni
(S.P.A)
("Vo/patoj
represented
by Gulio Baldon, en red into a partly written partly oral
distribution agreement dated 29 August 2002. In terms of that
agreement Volpato would produce components for kitchen and furniture
retailers and the plaintiff would act as an agent and would
distribute the products throughout South Africa.
[11] The relevant express
alternatively tacit terms of the agreement were briefly that:
11.1
The agreement would commence on or about February
2003 and unless terminated by either party on written notice, for
whatsoever reason,
would continue for an indefinite period of time.
11.2
The agreement could not be terminated by Volpato
whilst orders for customers who had already been canvassed were being
processed
and on less than reasonable, being at least one year
notice.
11.3
Volpato would supply the products to the plaintiff at an agreed
retail price which was payable within 60 (sixty) days of delivery.
11.4
The plaintiff agreed to use its best endeavours to
promote the distribution and sale of the products throughout the
Republic of
South Africa and the SADC countries in which, according
to plaintiff, it had an exclusive agency to distribute Volpato
products.
11.5
The plaintiff would purchase products from Volpato
according to agreed retail prices per specified product but with a
25% discount.
[12] The plaintiff
further alleges that during May 2011 the first defendant approached
one Chisini, acting on behalf of Volpato,
Italy, together with one
Willis, of Eclipse with a proposal that the defendants and Eclipse
import Volpato products to South Africa
directly, without the
involvement of the plaintiff.
12.1 Chisini advised the
first defendant and Willis that Volpato had an agreement of sole
distributorship with the plaintiff and
that the proposed course of
action only be taken by agreement with the plaintiff.
12.2 Kotze on behalf of
the plaintiff having become aware of the defendants' intention to
import directly, asked Chisini to provide
a letter of confirmation
that it was the Volpato distributor in South Africa which Chisini
duly did. Kotze sent this document to
the first defendant who
disregarded it because he was not going to be deterred by the
contractual relationship between Volpato
and the plaintiff.
12.3 On 9 November 2011
and at the instance of Kotze (for the plaintiff), Chisini, Kotze and
the first defendant met in Johannesburg,
at which meeting the
possible direct supply by Volpato to the defendants and Eclipse was
discussed. At that meeting Chisini made
it clear that such direct
imports could only take place provided an agreement to that effect
was reached between the plaintiff,
the defendants and Eclipse.
12.4 An interim
acknowledgement of liability to pay commission to the plaintiff was
made regarding two sales it had made to Eclipse
and the defendants
during the course of 2011.
12.5 It was only during
May 2012 that Volpato for the first time through one Bilotto
repudiated the agreement with Faer at the instance
and the unlawful
conduct of the defendants.
[13] According to the
plaintiff, the defendants induced and/or procured the breach of the
agreement between the plaintiff and Volpato
and the plaintiff's
agreements with the defendants' franchisees without justification. As
a consequence of the defendants' actions
Volpato breached and/or
repudiated the agreement and the plaintiff cancelled alternatively
accepted Volpato's repudiation thereof.
[14] As a further
consequence of the defendants' aforesaid actions, the plaintiff
claims damages in the sum of R3 604 400.00 being
loss of profit the
plaintiff would have made on the sale of Volpato products in South
Africa to the defendants , its franchisees
and/or Eclipse but for the
defendants' breach of the contract and distributorship relationship
between the plaintiff and Volpato
and estimated damages in respect of
the period up to February 2022, in the amount of R24 million being 8
years at an average profit
of R3 million per year.
[15] The defendants
pleaded that at all relevant and material times they did not have
knowledge of the terms of the agreement between
the plaintiff and
Volpato. They admitted however that during the course of 2002, the
plaintiff represented by Armandt Kotze and
Volpato represented by
Giulio Baldan entered into a partly written, partly oral agreement.
[16]
They pleaded that the relevant express, alternatively tacit terms of
the agreement were,
inter alia,
that
the plaintiff would purchase products from Volpato according to
agreed retail prices per specific product, which include the
25%
discount and that the plaintiff would be liable for payment of the
amount invoiced on the Volpato invoices, payable in 60 (sixty)
days
after delivery.
[17] The defendants also
admitted that the third and fourth defendants, on occasion, purchased
products from the plaintiff, which
included Volpato products and that
certain franchisees that trade under the same name and style of
Easylife Kitchens conducted
business with the plaintiff. They however
denied that the agreement between the plaintiff and Volpato had been
expressly or tacitly
entrenched and confirmed during the ensuing
period in the manner alleged in the plaintiff's particulars of claim.
[18] The first defendant
pleaded that he approached Chisini of Volapto together with Andrew
Willis of Eclipse and Enrico Fontana
of E & M (later ATI) to
discuss the possibility of E & M purchasing Volpato products for
on-sale to Eclipse in South Africa
and potential on-sale of some
products to an ELK entity or entities. The first defendant further
pleaded that he was informed by
Chisini that Volpato was not
precluded from being a party to such arrangement and that there would
be no problem in supplying Volpato
goods to ATI for on-sale to
Eclipse in South Africa.
[19]
It was also admitted that on 18 July 2011 Kotze provided the first
defendant with a letter from Volpato in which it was stated
that
Volpato was renewing, for the year 2011, the agreement with the
plaintiff as
"agent for SADC
region".
[20]
The first defendant replied to Kotze's email on 19 July 2011 stating
inter alia,
that
he did not know what was contained in the agency agreement and that
he was not party to such an agreement. He denied that the
letter from
Volpato established that the plaintiff had a sole distributorship.
[21]
It was also admitted that the second defendant since late 2011 and
the fourth defendant during the period October to November
2011,
purchased goods from Eclipse who in turn purchased the said goods
from ATI who purchased such goods from Volpato. It was
further
admitted that the fifth defendant similarly purchased goods since May
2012.
[22] The second, fourth
and fifth defendants admitted that they purchased the aforesaid goods
without the involvement of the plaintiff
and that they utilised
Volpato products in their kitchen manufacturing processes. They
however denied receiving such goods from
Volpato or that Volpato
breached or repudiated its agreement with the plaintiff.
[23] The defendants
further denied that they intentionally induced and/or procured a
breach and/or repudiation of such agreement
between the plaintiff and
Volpato. The defendants pleaded that each of the second to fifth
defendants are separate corporate entities
which cannot be held
jointly liable in the manner as set out in the plaintiffs particulars
of claim.
[24] In the alternative
they pleaded that in the event of the court finding that Volpato had
breached the agreement and that one
or more defendants with knowledge
of the terms of the agreement had intentionally induced or procured
the breach or repudiation
then the defendants pleaded in
justification that
24.1 During or about 2006
the plaintiff sold and supplied the third and fourth defendants with
inferior, substituted plinth legs
falsely representing that they were
Volpato legs;
24.2 During a meeting
held between the first defendant and Kotze, representing the
plaintiff, during or about 2006 and at the factory
of the fourth
defendant situated in Strijdom Park, Johannesburg, Kotze admitted the
sale of inferior substituted plinth legs. As
a consequence thereof
the first defendant informed Kotze that the third and fourth
defendants would discontinue their business
relationship with the
plaintiff.
24.3 The third and fourth
defendants wound down their purchases from the plaintiff by ordering
remaining Volpato stock from the
plaintiff only on occasion and no
longer on a large scale. The second, third and fourth defendants from
2006 sourced comparable
products from a company known as Raiel.
24.4 In response to the
decision not to conduct business with the plaintiff, the plaintiff
proceeded to interfere unlawfully and
unethically with the
contractual business relationship between the defendants and Easylife
Kitchen franchisees by resorting to
discredit the plinth leg sourced
from Raiel and causing discord between the said defendants and the
franchisees.
24.5 In the circumstances
and as a result of the plaintiff’s unlawful conduct, the
defendants' conduct was justified, and
neither wrongful nor unlawful
nor dishonest nor unfair.
[25] The defendants
pleaded further that the plaintiff was seeking to recover the same
damages which it sought to recover from Volpato
in its counter claim
in the arbitration between itself and Volpato before arbitrator Smit
SC.
[26] The arbitrator
determined that the plaintiff suffered damages in the sum of R767
237.00 which sum, together with interests
and costs, he ordered
Volpato to pay. Volpato paid the said damages together with interest
and costs. The defendants pleaded that
any claim which the plaintiff
might have was extinguished when Volpato paid the damages and that
alternatively the sum of R767
237.00 ought to be deducted from any
award this court might make against the defendants.
Separation
of Issues
[27] At the commencement
of these proceedings an order was made by the court in terms of which
certain issues were to be determined
at the first hearing and others
to be determined at a second hearing. In this hearing it was ordered
that the court determines
the merits of the plaintiff's claim against
each of the defendants and all elements of causation of loss and if
it should be found
that the defendants (or any of them) are liable
for damages, how such damages are to be determined, but not the
quantification
or calculation of such damages, which would be
determined at a subsequent hearing. As regards the quantum of the
claims the court
was asked to determine,
inter alia,
whether
the damages for breach of contract paid by Volpato to Faer fall to be
deducted from the damages for which the defendants
might be found
liable to the plaintiff.
Terms
of an Agreement
[28]
The determination of the terms of an agreement involves not only the
weighing of the evidence presented by the parties but
also the
contents of the contemporaneous documents. The approach was
succinctly summarised by Nienaber JA in
Stellenbosch
Farmers' Winery Group Ltd and Another v Martell et Cie and Others
2003 (1) SA 11
SCA para 5 when he held
as follows:
"The
technique generally employed by courts in resolving factual disputes
of this nature may conveniently be summarized
as
follows: To come to a conclusion
on
the disputed issues
a
court must make findings
on
(a) the credibility of the various
factual witnesses; (b) their reliability; and c) the
1
probabilities. As to a), the court's
finding
on
the
credibility of
a
particular
witness will depend on its impression about the veracity of the
witness. That in turn depends on
a
variety of subsidiary factors, not
necessarily in order of importance, such
as
(i) the witness's candour and demeanour
in witness-box, (ii) his bias, latent and blatant, (iii) internal
contradictions in his
evidence, (iv) external contradictions with
what was pleaded
or
put
on his behalf, or with established fact with his own extra curial
statements
or
actions
(v) the probability or improbability of particular aspects of his
version, (vi) the calibre and cogency of his performance
compared to
that of the other witnesses testifying about the same incident or
events. As to b), a witness' reliability will depend,
apart from the
factors mentioned under (a) (ii), (iv) and (v) above, on (i) the
opportunities he had to experience or observe the
event in question
and (ii) the quality, integrity and independence of his recall
thereof. As to (c), this necessitates an analysis
and evaluation of
the probability or improbability of each party's version on each of
the disputed issues. In the light of its
assessment of (a), (b) and
(c) the court will then, as a final step, determine whether the party
burdened with the onus
of
proof
has succeeded in discharging it. The hard case, which will doubtless
be the rare one, occurs when
a
court's
credibility findings compel it in one direction and its evaluation of
the general probabilities in another. The
more
convincing the former, the less
convincing the latter. But when all factors are equipoised
probabilities prevail.”
[29]
In
casu, the court has to consider not only
the purpose of the agreement between the plaintiff and Volpato but
also the words used
in the contract and any possible ambiguity in
those words. The court has also to consider the contextual setting in
which the contract
was carried out and the subsequent conduct of the
parties not only between themselves but also with regard to the
subsequent business
agreements and the consequences and inferences
that may be drawn therefrom.
Tacit
Term
[30] It is not alleged in
the plaintiff's pleadings that Volpato would not be entitled to sell
its products, directly or indirectly,
to any other person or entity
in South Africa without the involvement of the plaintiff. In other
words this was not an express
term in the agreement. Logically
therefore the plaintiffs case is that this was an unexpressed
provision of the contract or a tacit
term.
[31] It was held in
Wilkins NO v Voges
[1994] ZASCA 53
;
1994 (3) SA 130
AD 136 H - 137 C as
follows:
"Being
unspoken
a
tacit
term is invariably
a
matter
of inference. It is an inference
as
to
what both parties must or would have had in mind. The inference must
be
a
nece
sary one: after all, if several conceivable terms are all equally
plausible, none of
them
can
be said to be axiomatic. The inference
can
be drawn from the express
terms
and from admissible evidence of surrounding circumstances. The onus
to prove the material from which the inference is to be
drawn rests
on the party seeking to rely on the tacit term. The practical test
for determining what the parties would necessarily
have agreed on the
issue in dispute is the celebrated bystander test. Since one may
assume that the parties to a commercial contract
are intent on
concluding a contract which functions efficiently, a term will
readily be imported into a contract if it is necessary
to ensure its
business efficacy; conversely, it is unlikely that the parties would
have been unanimous on both the need for and
the content of a term,
not expressed, when such a term is not necessary to render the
contract fully functional."
The
Evidence
[32] The evidence
presented by both parties consisted of testimony by witnesses,
documentary evidence and portions of testimony
which had been given
by some of the witnesses in an arbitration which was concluded before
this hearing.
[33]
The plaintiff called only one witness, Armandt Kotze who was the
founder and owner of the plaintiff. The defendants' evidence
was
presented by seven witnesses, namely; Chisini, Billoto, Kirby,
Hauser, Dammerman, van der Straaten and Tersia de Wet. Kotze's
testimony was by and large in support of the pleaded case. He
testified how he had engaged Balden in 2002 and sought to establish
an exclusive agency or distributorship agreement. They were still in
negotiation when Baldan agreed that Kotze could launch even
before an
agreement was signed. He was provided the price lists and Baldan
confirmed his entitlement to a 25% discount thereon.
A draft contract
was subsequently forwarded to Kotze but was never signed.
Kotze
testified further about how he went on to supply the defendants with
kitchen accessories, training and showroom designs. In
particular, he
supplied them with Volpato products such as sink trays and legs which
were uniquely designed and had hitherto not
been widely used in the
South African market. This relationship had continued until 2006 when
the defendants began utilising products
procured from a company known
as Raiel. Kotze tried to prove to the defendants that Raiel legs were
of an inferior quality and
in doing so tried to convince some of the
defendants' franchisees against the use of Raiel legs. This did not
please the defendants
and more specifically the first defendant who
advised Kotze to desist from his conduct. Kotze denied that he was
the cause of the
breakdown of the relationship between himself and
the defendants.
[34]
More particularly he stated that in 2006 the defendants had utilised
more than 60 000 legs which they had forecast and that
he had offered
to source more legs from a company known as Mepla at a higher price.
He testified that the Mepla legs were Volpato
legs. This was contrary
to the defendants who maintained that Kotze had fraudulently supplied
them with non-Volpato legs without
informing them.
[35] Kotze denied that
the defendants stopped ordering Volpato products from him from 2006
because of the alleged fraudulent conduct
and that business had
continued as usual until they began doing business directly with
Volpato.
[36] According to Kotze
the defendants were in competition with him as directed by the first
defendant and they had devised a strategy
to source products directly
from his supplier whilst he as sole agent had been excluded and that
they then sold those products
directly to his customers. Kotze
however did concede that it would be cheaper if the defendants dealt
directly with Volpato.
[37] The defendant's case
was presented in the main by Philip Kirby (Kirby). Kirby was the
Financial Director of the company known
as Easylife Kitchens. He
later became its Managing Director in 2004. The company operated in
Johannesburg and Cape Town and was
managed separately in the two
regions even though there was collaboration in policy and operational
matters. ELK in the main, manufactured
carcasses for franchises who
constituted about ninety five per cent (95%) of its customer base.
The accessories would be added
by the franchisee purchasers and they
were sourced from various suppliers. The plaintiff was one of those
suppliers. According
to Kirby ELK was the protector of the brand for
the franchisee network and he was the co-ordinator of the activities
between ELK
(Cape) and ELK (Johannesburg).
Evaluation
of the Evidence
[38] Baldan was not
called as a witness even though he managed Volpato and was the
initiator of the relationship between the plaintiff
and Volpato. He
received the proposal for the plaintiff to become the Volpato
distributor in Southern Africa and they exchanged
copious
correspondence to try and agree the terms on which they would do
business, but no actual written agreement was entered
into and
signed. Evidence tendered in this regard was in the form of e-mails
between Balden and the plaintiff and subsequently
e-mails between
Chisini and the plaintiff. Chisini was Baldan's successor.
[39]
Baldan testified at the arbitration which took place before this
hearing and a record of those proceedings was made available
to the
court by agreement by the parties. Baldan denied in those hearings
that the plaintiff would have
'exclusive'
mandate for South Africa and the SADC
countries. He testified that no such agreement had been finalised. It
was therefore understood
even before this trial commenced that it was
not common cause that the agreement for the distributorship agreement
to commence
by Baldan implied acceptance of exclusivity on his part.
[40] Baldan who testified
that a written contract would be required before exclusivity could be
agreed to and that the procedures
and investigations necessary for
the appointment of Faer as a sole distributor had never taken place.
[41] What needs to be
borne in mind however in weighing Baldan's testimony at the
arbitration proceedings is the plaintiff's letter
of 2 June 2016
(2503) which stated as follows:
"In
any event, the exchanged correspondence
and
discussions with Chisini superseded same
(
i.e.
whatever .was agreed with Baldan) and preceded your client's actions
which were the subject of our client's claim herein. It
is therefore
those facts which will be determinative of this issue.”
The
case which the defendants were called upon to meet was therefore
limited to exclusivity commitments given or confirmed by Chisini.
This brings us to the question of whether Chisini contractually
committed Volpato to the disputed terms alleged by the plaintiff.
[42] What is common cause
however is that Kotze did not have any contractually relevant
dealings with Chisini prior to the May 2011
meeting which took place
at the Volpato headquarters in Italy. When Chisini took over from
Baldan the business relationship simply
carried on as before with the
plaintiff purchasing on own account at a 25% discount (for on-sale to
its customers) and receiving
the 10% commission on Volpato sales.
The
May 2011 Meeting
[43] Regarding the May
meeting both Kirby and Chisini testified that Chisini assured those
present that as far as Chisini was concerned,
there was no reason why
ATI could not purchase goods from Volpato for on-sale to Eclipse
and/or ELK entities. Chisini was therefore
effectively discounting
any suggestion that the plaintiff had any exclusivity rights.
[44]
The plaintiff's counter was to suggest that subsequently, after the
May meeting Chisini subsequently confirmed exclusivity
in the form of
documentary evidence such as
"declaration"
(274) and an e-mail from Chisini to
Kotze dated 30 September 2011 in which he stated
"As
I said our intention is to go on with you
as
distributor and exclusive agent..."
[45]
These documents do not, in my view support the
plaintiff's contention as the declaration does not state that the
plaintiff was appointed
as an exclusive distributor. It does not even
hint at the suggestion that as against Volpato the plaintiff. was the
only distributor
Volpato was permitted to appoint in the SADC region.
[46] It was common cause
that as a result of Kotze being upset with the ATI imports, Kotze
attempted to negotiate an agreement in
terms of which the plaintiff
would be paid a commission regarding the imports by certain entities
which would include Eclipse and
ELK. Correspondence was exchanged in
this regard in terms of which Chisini confirmed his intention to
continue to negotiate the
terms of a written agreement yet to be
concluded which could then provide for the plaintiff to be a
distributor and exclusive agent.
[47] Chisini was offering
these terms to the plaintiff but he expected something in return such
as the proposal that the intended
agreement would contain a clause
imposing penalties on the plaintiff should the latter in future fail
to pay by due date for goods
ordered. He further proposed that there
would be customers
"treated on commission basis and supplied
directly”.
One would presume that this was a reference to
customers such as Eclipse and ELK. It was upon compliance with these
conditions that
Chisini contemplated conferring the plaintiff with
the status of
"distributor and exclusive agent in SADC'.
Conduct
of the Parties
[48] It is quite apparent
from the conduct of both Chisini and Kotze that they both understood
that they were engaged in negotiations
aimed at an intended
agreement. Chisini's e-mail of 11 November 2011 (2132) and the
enclosed specimen contract (2133) demonstrates
this, more
particularly where he states:
"Give
me
your
opinion and state which points you would like to modify or add. This
is a draft based on which we'll prepan, the official contract."
This
in my view demonstrates beyond any doubt that there was no exclusive
distributorship between the plaintiff and Volpato and
that this was
known to both Chisini and Kotze otherwise these negotiations and
exchanges of e-mails would not make any sense.
The
November 2011 Meeting
[49]
Another significant event in the engagement between the plaintiff,
Chisini, Kirby and Willis was the meeting of November 2011.
Prior to
this meeting, Chisini had already been involved in the negotiations
referred to above which included a possible commission
to the
plaintiff. Kirby and Willis were not participants to the said
negotiations nor were they informed of the contents thereof
by
Chisini and Kotze. At the said meeting however, which was confirmed
by both Chisini and Kotze, both Willis and Kirby were quite
upfront
in their declaration that they would not be willing to purchase goods
from the plaintiff. Kotze seemed to accept their
stance but asked to
be reimbursed for certain samples whereupon Kirby promised to
consider the request.
[50] Chisini seemed to
understand that he could not dislodge Kirby and Willis from the stand
they had taken but he was still keen
to try and retain the plaintiff
as a client by coming to an agreement with it regarding a mutually
acceptable business arrangement.
This was the context which Chisini
privately proposed paying Kotze a commission without suggesting
thereby that that was because
of the existence of a contractual
exclusivity right
Knowledge
by the Defendants of an Exclusivity Right
[51]
The plaintiffs case as pleaded is that the defendants
"intentionally
induced and/or procured, a breach of the agreement
between
Volpato and the plaintiff. It is further pleaded that
·the
first defendant, and therefore by implication the second to fifth
defendants, were aware of”
the
disputed contractual terms. The onus is on the plaintiff to prove
such awareness and that being aware
,
the
defendants “
intentionally"
induced Volpato to breach or repudiate
the contract between itself and the plaintiff.
[52]
According to Chisini and Kirby's testimony, at the May 2011 meeting
Chisini had assured the visiting party that there was no
obstacle to
orders being placed on E & M/ATI and delivered to the South
African end-users. The meeting took place because what
was being
proposed was that Eclipse would purchase goods from ATI and that the
latter would purchase same from Volpato. The meeting
took place in
May 2011 and the ELK management board placed the first order in July
2011. The inference that this court can draw
from the set of facts is
that the May meeting took place because the delegation that met
Chisini was not aware of the terms of
the agreement between Volpato
and the plaintiff. In other words the ELK Johannesburg Management
Company had no knowledge of any
contractual exclusivity right held by
the plaintiff. There is no suggestion anywhere in the plaintiffs
evidence that the defendants
had been apprised of the existence of
such exclusivity save in a subsequent transmission of the
"declaration"
document
(274) as a basis for such exclusivity.
[53] The plaintiffs
pleaded case was not that the defendants should reasonably have been
aware of the exclusivity right but that
the defendants were aware of
it. The plaintiff has however failed to prove such awareness. Mere
production of 274 was a belated
and inconclusive attempt to prove
such awareness. 274 was produced to Kirby and not to the other
defendants and it would be rather
far fetched to impute his
knowledge even if he had it, to the other defendants. Such imputation
would be even less credible
in light of the evidence by Tersia de Wet
who testified that the directors of the Cape Management and Cape
Manufacturing companies
had no knowledge of Kirby's initial dealings
with Chisini and that they did not place any orders via Eclipse until
April 2013.
Ms de Wet was aware of Kirby's receipt of 274 and had
opined that that document
was
not in itself an agreement and that Kotze had to be invited to
produce the real agreement which he alleged existed. Kotze failed
to
do so.
Absence
of Inducement/Procurement of Breach
[54]
The undisputed evidence which was tendered by way of invoices showed
that Volpato sold goods to ATI and was paid by ATI. The
evidence
further shows that ELK orders were placed on Eclipse and that Eclipse
placed orders on E & M/ATI. In tum ATI placed
orders on Volpato
and the relevant invoices were rendered to and paid by the parties
concerned.
[55]
It was Chisini's evidence that he only became aware of the initial
ATI order when he noticed that the boxes prepared for collection
by
ATI were labelled for delivery to South Africa. He subsequently
communicated with Kotze in this regard which in my view further
demonstrated his
bona fides
in
his dealings with the plaintiff. He would not have drawn Kotze's
attention to the ATI transaction if he was engaged in an underhand
relationship with the parties involved in that transaction.
[56]
It is quite apparent from the evidence that none of the defendants
induced Volpato to do anything regarding its contract with
the
plaintiff. It was ATI which procured orders from Volpato, paid for
them and ensured their delivery to South Africa. In the
circumstances
the proper delict (if any) would in law lie with either ATI or
Eclipse neither of whom have been sued
in
casu.
It was
Eclipse which wrote to Chisini on 27 September 2011 (2124) in the
following terms:
"We
would like to continue purchasing your
products, through Enrico, but will have nothing to do with Armand. If
you would like to continue
the current relationship that is your
decision."
In
the premises there does not exist a basis for concluding that any of
the defendants committed a delict against the plaintiff
and in the
result joint and several liability of the defendants does not arise.
The
Passing off Incident
[57]
It is also necessary to deal briefly with what has been dubbed the
"passing off
incident.
This is the incident which explains from the defendants' point of
view their actions in discontinuing purchases of Volpato
products
from the plaintiff and the lawfulness of their subsequent actions in
obtaining these products from Eclipse/ATI to the
exclusion of the
plaintiff.
[58] ELK Management
(Johannesburg) discontinued purchasing Volpato legs from the
plaintiff in 2006 and they sourced alternative
legs from a supplier
known as Raiel. According to Kirby the reason for the change was the
fact that the plaintiff had supplied
or substituted non-Volpato legs
to ELK without disclosing it whilst continuing to charge Volpato
prices. Kirby further stated that
a meeting was subsequently held to
discuss the issue of the non-Volpato legs. He states that it was also
attended by Dammennan
and Van der Straaten. He testified that Kotze
represented the plaintiff and that he admitted and explained that he
had been short
of legs, hence the substitution.
[59]
Kotze denies that the incident ever
took place. He also denies a meeting at which he confessed the
substitute products. Dammerman
also did not recall such a meeting but
Kirby's evidence was corroborated by Van der Straaten.
[60]
The tables are however turned against Kotze when one considers the
evidence he gave at the arbitration hearing. Whereas at
the hearing
Kotze also denies the passing off event, upon being questioned by the
arbitrator, he came up with a new version namely,
that he had with
the approval of Van der Straaten substituted a different type of
Volpato leg which he sourced from Mepla. Strangely
however, this
version was never put to Van der Straaten when he later came to
testify at the arbitration.
[61] In the present
hearing Kotze again stated that he ran out of stock and that the
plaintiff was compelled after an alleged discussion
with Van der
Straaten, to provide substitute legs from Mepla. He further testified
that he experienced stock shortages regarding
the legs due to
erroneous forecasts given to him by ELK Management. He also testified
that some 40 000 legs had to be substituted.
[62] What Kotze's
latterday evidence does is that it gives credence to the version that
was tendered by the defendants. Stated differently,
even on Kotze's
version there was an incident when 40 000 legs were substituted. The
probabilities are that once that was brought
to Kirby's notice, the
matter would have been discussed and there would have been
consequences. This inference is drawn because
Kotze's initial stance
that no such incident ever took place is inconsistent with his
subsequent explanation. This leads me to
the conclusion that Kirby's
version which is corroborated by Van der Straaten is the more
credible one and that Kotze was not a
credible witness.
[63]
This leads to another portion of Kotze's evidence to the effect that
even after the 2006 incident it was business as usual
between the
plaintiff and the defendants. The defendants refute this by providing
documentary evidence which supports the version
that orders by ELK
Management were only in support of the franchisees and not for their
consumption save for incidents like when
Kotze requested assistance
to get rid of Volpato stock which he could not dispose of, the
so-called
"aflosplan"
which took place in May 2008.
Even in this regard I did not find Kotze to be a credible witness.
Causation
[64]
What is evident from the lengthy testimony given at this hearing is
that after the
"passing off'
incident, relations between Kirby and
Kotze were never the same. What is also apparent from the meeting of
November 2011 is that
Mr Willis of Eclipse and Kirby informed Kotze
in Chisini's presence that they were no longer willing to purchase
Volpato products
through the plaintiff.
[65] What is also
apparent from the evidence is that ELK Management which included
Tersia de Wet and Kirby had taken a stance where
they would have
continued using Raiel legs rather than source Volpato legs through
the plaintiff and that they were moving towards
sourcing a European
manufactured product from an alternative supplier to Volpato.
Alternative companies were mentioned during the
evidence such as
OPES, SCILM and UNION PLAST together with German manufacturers such
as HENKE and HETTICH, which could have been
utilised by the
defendants to supply products similar to the ones they were utilising
in their business.
[66]
It is therefore unlikely that, if the defendants were unable to
purchase Volpato products through Eclipse or ATI, they would
have
gone back to source them through the plaintiff. Kirby had long
searched alternative European products. He regularly visited
major
international fairs such as
lnterzum
where hardware components were
displayed and
Eurocucina
which
is an end-user show and where complete kitchen units were displayed.
He had also become aware of the substantial financial
benefits of
sourcing and importing products in bulk. He testified that by 2010
the ELK entities (Johannesburg) were in a position
to afford
purchasing kitchen component in bulk and to keep such products in
stock for long periods.
[67] In the
circumstances, the plaintiff has not succeeded to prove on a balance
of probabilities that the defendants would have
continued to buy from
it from 2011 to February 2014 regarding the past damages claimed in
the sum of R3, 6 million or from any
foreseeable future date up to
February 2022 regarding future damages of R24 million.
Unlawfulness
or Delictual Wrongfulness
[68] Having discussed
various aspects of the evidence tendered by the parties it now
becomes necessary to determine whether the
conduct of the defendants
was unlawful or delictually wrongful.
[69]
Similar facts were considered in
Tor
Industries Pty Ltd v Gee-Six Superweld CC and
Others
2001 (2) SA 146
in which Wunsh J
dismissed an application for an interdict. The third respondent in
that case (DovaTech) was a manufacturer of
welding equipment, based
in the USA. The applicant alleged that DovaTech was bound by a
contract in terms of which the applicant
had an exclusive right to
distribute DovaTech's products in South Africa. The first respondent
(Gee-six) was purchasing products
manufactured by DovaTech from one
of its sub-subsidiaries which operated as a distributor in Germany
(D Tech). The applicant
applied for an interdict preventing
Gee-six from purchasing products from DovaTech or its subsidiaries
for resale in South Africa,
alleging in a manner similar to the
plaintiff in the present case that1 because this interfered with its
contractual exclusivity
right, it was delictually wrongful for
Gee-six to purchase the products from anyone other than the
applicant.
[70] It was noted by the
court that the applicant's claim was based on the existence of an
exclusive distributorship agreement with
the third respondent and
that the applicant contended that the interference by the first
respondent with that contractual relationship
was wrongful. On the
evidence the court was not persuaded that the exclusivity agreement
alleged by the applicant had been proved.
The court stated as follows
at p 157 A - C:
"I
shall deal with further problems that face the applicant with regard
to the alleged interference with its contract with
DovaTech. Assuming
that DovaTech agreed that it would not sell Weldcraft products to any
other party in South Africa, why should
this have precluded any other
trader, including Gee-six Superweld, from being supplied with such
products by D-Tech. It is
a
separate
corporate entity, carrying on business in Germany. The applicant's
premised right to be the only purchaser in South Africa
of the
Weldcraft Products from DovaTech was never stated to extend to any of
its subsidiaries that were not party to the agreement.
There was
nothing to preclude another South African trader from importing
Weldcraft products from someone who is entitled to sell
it (Taylor &
Home (Pty) Ltd v Dental/ (Pty) Ltd
1991 (1) SA 412
(A) at 422
G
-
423 8). Indeed, the applicant does not
dispute that Gee six Superweld acquired Weldcraft products from
a
supplier in Italy before the problems
arose
in
this
case."
[71]
In casu, even if it was accepted that the plaintiff had an exclusive
distributorship agreement with Volpato, there is nothing
to preclude
ELK entities (defendants) from being supplied with Volpato products
by Eclipse or E & M/ATI (ATI). ATI was not
under any legal
obligation which barred it from supplying Volpato products to
Eclipse. There was therefore nothing to preclude
Eclipse or any of
the defendants from importing Volpato products from ATI. As was found
by Wunsh J in Tor Industries, their conduct
in purchasing such goods
from ATI was neither delictually wrongful nor unlawful even if the
plaintiff had had the contractual exclusivity
which it has claimed
but failed to prove.
[72]
In reaching this conclusion, Wunsh J relied on the views expressed by
Van Heerden JA (four other judges of the Appellate Division
concurring) in Taylor & Horne (supra) at 422 G to 423 B. Similar
to the present case Taylor & Home was a claim for delictual
damages. The manufacturer based in West Germany (ESPE), had conferred
an exclusive distributorship for South Africa on the plaintiff.
The
defendant procured supplies of ESPE's products from other
distributors in Europe by recourse to so-called
"grey
marketeering".
Van Heerden JA
noted that the plaintiff had conceded, rightly in his view, that the
defendant had not acted unlawfully in obtaining
its supplies of the
product and went on to hold that the defendant had not acted
unlawfully in disposing of its supplies in competition
with the
plaintiff. More significantly Van Heerden stated as follows:
"In
the result it seems clear that the appellant must stand or fall by
the contention that because of the existence of the
exclusive supply
agreement between it and ESPE, nobody may lawfully market lmpregnum
in the Republic in competition with the appellant.
Acceptance of this
contention would certainly lead
to
startling consequences. It would mean
that for
as
long
as
the
sole agency endures the appellant would enjoy
a
monopoly akin to that derived from
a
patent, in regard to the commercial
distribution of lmpregnum in this country. It would also mean that
the
agreement
which created purely contractual rights between the parties thereto
would in effect bind would-be competitors no matter
from what source
or however honestly they obtained supplies of lmpregnum. A further
result would be to impose an unwarranted restriction
on the right of
ownership of a person who legitimately acquired supplies of lmpregnum
(cf Consumers Distributing
Co
Ltd
v Seiko Time Canada Limited 10 DLR (4th) 161 at 174)."
[73] The Appellate
Division sent a clear message that contractual exclusivity does not
and cannot trump the normal consequences
of competition. The fad,
therefore that the defendants sourced Volpato products through
Eclipse which in turn acquired them from
ATI was in the context of
normal competition and was not unlawful.
[74] In amplification of
this reality the Appellate Division further stated as follows (at
421
J):
"It
has often been said that competition is the lifeblood of commerce. It
is the availability of the same, or similar, products
from more than
one source that results in the public paying
a
reasonable price therefor. Hence
competition as such cannot be unlawful, no matter to what extent it
injures the custom built up
by
a
trader
who first marketed a particular product or first ventured into
a
particular sphere of commerce."
[75]
A claim for damages in South Africa arising from unlawful competition
is based on the principles of
lex
Aquilla.
See
Atlas
Organic Fertilizers
v
Pikkewyn
Ghwano
1981 (2) SA 173
(N) at 188 G - H
and the norm to be applied in determining the dividing line between
lawful and unlawful interference with a trade
of another was
enunciated by the court in Atlas Organic Fertilizers
(supra)
as follows:
"According
to Van Heerden Grondslae van die Mededingingsreg at 15-18 and 46-50
the criterion for unlawfulness in competition
is in Germany boni
mores and in the Netherlands the care required by society with
reference to the person or property of another
(“die
sorgvuldigheid wat in die maatskaplike verkeer ten aansien van 'n
ander
se
person
of good betaam”). What is needed is a legal standard firm
enough to afford guidance
to
the
Court, yet flexible enough to permit the influence
of
an inherent sense
of
fair play. I have come to the conclusion
that the norm to be applied is the objective one of public policy.
This is the general
sense of justice of the community, the boni
mores, manifested in public opinion. In determining and applying this
norm in
a
particular
case, the interests of the competing parties have to be weighed,
bearing in mind also the interests of society, the public
weal."
Applying
this norm
in casu,
I
do not find that the defendants acted outside the parameters
ordinarily set and accepted generally in commerce for lawful
competition.
[76]
The principle to be gleaned therefore from Taylor & Horne and Tor
Industries is that it is delictually not wrongful for
a customer or a
rival supplier to obtain or sell goods in a manner which interferes
with an existing supplier's sole distributorship
contract with the
manufacturer. The underlying reason is that it is against the
boni
mores
to allow a contractual exclusive
distributorship right to be elevated to a legal right or monopoly
effective as against third parties.
Such a monopoly would impede
competition and that would be inimical to public interest. This
principle goes to the heart of the
present case.
[77] In the
circumstances, having considered an the facts, the law and
submissions I
make
the following findings:
77.1
The plaintiff's contract with Volpato was not on the terms it
alleges
.
More specifically the plaintiff failed
to prove on a balance of probabilities that it had entered into an
exclusive distributorship
contract with Volpato.
77.2 The plaintiff failed
to prove that the defendants
were
aware
of the sole distributorship and even when they put him
on terms by asking for proof of such distributorship he was unable to
provide
conclusive proof of same.
77.3 Logic dictates
therefore that it would not be possible for the defendants to induce
Volpato to act in breach of a contract
which they had no knowledge of
and which the plaintiff was unable to prove even when given an
opportunity to do so.
77.4
The authorities referred to
(supra)
demonstrate that even if the court were
to find in the plaintiff's favour in respect of 77.1; 77.2 and 77.3
above, the plaintiff's
case as a matter of public or legal policy
would fail.
[78] In the result, I
make the following order:
ORDER
78.1 The plaintiff’s
case is dismissed.
78.2
The plaintiff is ordered to pay the
costs of suit, including
the costs of two counsel.
---------------------------------------
S.A.M.
BAQWA
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
Heard
on
: 1, 2, 4, 5, 8, 10, 11, 12, 15 and
19 August 2016
Delivered
on
:
05 December 2016
For
the Applicant:
Advocate R. S. van Riet
SC
Instructed
by:
Dirk
Kotze Incorporated
For
the First Respondent:
Advocate A. J.
Freund SC
Advocate
A. M. Heystek
Instructed
by
: Stefan Swart Attorneys