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2015
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[2015] ZAGPPHC 6
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Smith v Strydom and Another (5032/10) [2015] ZAGPPHC 6 (27 January 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE NUMBER: 5032/10
In the matter between:
DEWALD
SMITH
........................................................................................................
PLAINTIFF
and
RAY
STRYDOM
.........................................................................................
FIRST
DEFENDANT
STRYDOM PUMP ERECTION
CC
.....................................................
SECOND
DEFENDANT
JUDGMENT
Moseamo AJ
Introduction
[1] The plaintiff claims interest
against first and second defendant for interest on the amount of R500
000 paid by him into the
account of the second defendant.
[2] I firstly wish to deal with the
issue of the defendants’ plea which was a contentious issue.
During the hearing counsel
for the plaintiff referred me to the plea
of the first defendant dated 18
th
May 2010. The plea
referred to was amended by court order dated 12
th
November
2014. As a result I will not consider the submissions made in
relation to the plea dated 18
th
May 2010.
Testimony of the plaintiff
[3] Plaintiff testified and did not call
any witnesses. He testified that he has known first defendant for
about 8 years. First
defendant had bought lubricants from Antec,
which is the plaintiffs company, for years. During 2007 first
defendant proposed that
plaintiff invest money in his cattle business
and they will share in the offspring of the cattle. He rejected this
proposal because
the place where he rented the farm was next to
Orange Farm and it was risky. A year passed and the first defendant
approached him
with another proposal, he proposed that the plaintiff
invest an amount of R100 000 and he, defendant would pay him interest
of
2% per month, which works out to 24% per annum. Plaintiff agreed
to this proposal and defendant gave him banking details. He deposited
the amount of R100 000 into the account of the second defendant. Even
though the agreement was between plaintiff and the first
defendant,
he had no problem with depositing the money into the second
defendants’ account. He made subsequent payments in
the sum of
R400 000 on the same terms.
[4] He further testified that first
defendant said he can claim the money during April or December which
is a busy time during which
they will be selling. After 7 months he
felt he could use the money differently. They had a meeting and they
agreed that the plaintiff
will keep his money invested until April
2009. After the meeting first defendant called the plaintiff and told
him that his wife
said that he must pay him out with ‘past’
interest. According to plaintiff, first defendant said that his wife
had
indicated that the longer they keep the money the more they will
have to pay and they may even suffer a loss. Plaintiff offered
to
compile a summary of the interest calculation, which he did. He sent
it to first defendant who brought it back and disputed
the figures,
second defendant said that the amount due to plaintiff was R74 000.
[5] First defendant refunded the
plaintiffs R500 000 without the interest. Plaintiff was not happy
with the defendant’s failure
to pay his interest so he went to
the police station to open a case against first defendant. The police
said it was a civil matter
but one police officer undertook to help
plaintiff resolve the matter. The police officer who attempted to
mediate the dispute
gave him a document from the first defendant
(defendants’ interest calculation) indicating total interest of
R84 000. Plaintiff
never asked about the finances of the second
Defendant as they were not important to him. He asked for the money
after the financial
year end.
[6] During cross examination plaintiff
stated that he understood joint venture to be ‘people going
into a venture together
with each person in the venture having
different responsibilities’. He reiterated that his
understanding was that he will
provide money to buy cattle while
first defendant will earn interest on the money and he confirmed this
to be in line with his
understanding of a joint venture. Plaintiff
reiterated that in terms of the oral agreement he would get 2%
interest per month.
The capital was to be paid on termination in a
lump sum. He was asked about the interest calculation prepared by him
which is on
page 9 of the prescription bundle (plaintiffs interest
calculation). He did not only charge interest until the agreed date
of termination
but he charged interest up until the day defendant
paid.
[7] He stated that he charged interest
until 9
th
July 2009 and first defendant was not in
agreement and prepared his own calculations which plaintiff obtained
from the police officer.
He was confronted with the letters from his
attorneys, it was put to him that he was confused about the interest
and that there
was no agreement regarding interest and further that
it was an after thought on his part. He was confronted with the
different
amounts of interests claimed. He stated that he agreed with
the defendant’s calculation of interest which is R84 000 and
stated that an amount of R15 000 should be added to that amount.
[8] Plaintiff testified in a clear
manner, made concessions some of which were not in favour to his case
and did not try to conceal
the truth. There were however external
contradictions with what was pleaded on his behalf and his testimony:
(a) date the contract
would terminate; (b) the amount of interest due
to him.
Evidence on behalf of the defendants
[9] First defendant and his wife
testified on behalf of the defendants. Hanette Strydom testified that
she is responsible for preparing
management financial statements and
not audited financial statements as she is related to the first
defendant. She does not know
the plaintiff and has never spoken to
him. She knows that there was a joint venture agreement in terms of
which plaintiff would
invest money and share in the profit in
relation to the cattle. She knows about the payment made to the
plaintiff. She did not
prepare defendant’s interest calculation
but rather she did a profit calculation. The profit calculation was
done at the
instance of the first defendant who wanted to know where
they were standing seeing plaintiff wanted to pull out of the
agreement.
They were four to five months into the venture when she
was asked to calculate the profit. She compiled the formal report
after
plaintiff indicated that the first defendant owe him interest.
The report only relates to the farming operation and not the entire
close corporation.
[10] She further testified that on two
occasions first defendant was upset because plaintiff wanted to
withdraw his investment as
soon as he was informed of the risk. First
defendant said to her that if plaintiff was going to do that, then he
must take his
money. She said that if defendant told her that he was
entering into an agreement on the terms alleged by the plaintiff, she
would
have advised against it because it is unsustainable. She
prepared the report in 2009 after the cancellation of the agreement.
She
denied having compiled the defendant’s interest
calculation. She only saw the document the day prior to her giving
evidence
in this matter. When asked who could have prepared the
defendant’s interest calculation, she stated that defendant
could
have asked one of the people at his office to do it. She said
either Anarieta Du toit or another personal assistant could have done
it. She said that there was no dispute about the capital however
there was no obligation to pay interest as there was no profit.
[11] During cross examination she was
asked why plaintiff would invest more money despite his concerns
about the risk and she said
that it is because he accepted their
conditions. She admitted that plaintiff never had anything to do with
financials of the second
defendant. When she was asked by the first
defendant how they were doing she did not prepare anything in writing
but did a quick
calculation and told him. She prepared the report
from the financials of the second defendant. She said that the second
defendant
did not incur a loss but the farming division suffered a
loss. She indicated that the business had to borrow R250 000 to pay
plaintiff.
She said that the amount of money paid in by the plaintiff
will not be reflected as an investment but as a current liability
because
they already knew that they had to pay him out that year.
They knew by February 2009 that they have suffered a loss. She
admitted
that the business made a profit the following year and that
profit was not shared with the plaintiff because he had already
pulled
out.
[12] Regarding why the defendant’s
interest calculation was prepared, she said that ‘first
defendant wanted to see what
the plaintiff was doing’. She said
that defendant’s interest calculation was prepared because
first defendant wanted
to negotiate with plaintiff. He wanted to
reach an amicable solution. When asked why the defendant paid out the
capital if it was
a joint venture agreement, she said that one cannot
have a partner who is ‘one time in and another time out’.
[13] Ray Strydom, the first defendant,
testified that he knew plaintiff from his dealing with Antech,
plaintiff’s company,
over a period of 10 years. First defendant
was involved in a cattle breeding business but the location was not
good as it was next
to Orange Farm. He, acting on behalf of the
second defendant, entered into feedlot business with the plaintiff.
It involved buying
cattle, feeding them to a particular weight then
slaughtering and selling. The feedlot business was moved to
Hydelburg. He supposed
that the plaintiff agreed to enter into the
feedlot business after it moved to Hydelburg taking away the risk of
Orange Farm. He
and plaintiff discussed the business of Sparta which
is also a feedlot business. They discussed how well the Sparta
business was
doing. The initial agreement was for a R100 000. The
agreement was that the first defendant had the fascilities and staff
while
plaintiff would invest cash and their joint purpose was to make
a profit. They further agreed that they will check the profit at
the
end of the financial year.
[14] He further testified that plaintiff
brought up the question of risk for the first time after the second
payment before August
2008. The discussion started off with how well
the Sparta brothers were doing and then he made a point of discussing
risk. He gave
plaintiff examples of risks that can be encountered in
the feedlot kind of business like a lightning bolt or foot and mouth
disease,
which both have a potential to kill all cattle. He further
informed plaintiff that Sparta never lost all their cattle so they
could
get rich. Plaintiff decided to invest more at that meeting. The
issue of termination was not discussed at the first meeting it only
came up after the second agreement. He told the plaintiff who was
concerned about risk that if the issue of risk came up again
they
would then terminate the agreement. During February 2009 plaintiff
told him that he could do better by investing his money
in a car deal
or car parts. He told plaintiff that if he terminated the agreement,
the calculation stops. He said that once the
agreement is terminated
the plaintiff would be paid his capital and a ‘recon’
would be prepared. He said that payment
of plaintiff’s capital
would be made after easter.
[15] He further stated that prior to
April plaintiff showed him plaintiffs interest calculation. He
however denied that there was
was fixed interest. He said that with
an agreement like that they would have had to make 48%. He paid the
plaintiff in cash but
the plaintiff did not give him a receipt for
the R250 000. He panicked when he received a letter from plaintiffs
attorney claiming
R250 000 as he thought plaintiff wanted to deny
that he had been paid. He agreed that the defendant’s interest
calculation
was prepared at his instruction as he wanted to make
sense of what plaintiff meant. He however denied that the preparation
of defendant’s
interest calculation is an admission but simply
duplication of plaintiffs interest calculation. He agreed that he met
with the
police officer who attempted to resolve their dispute and he
took with him the plaintiff’s interest calculation and
defendant’s
interest calculation to the meeting. He gave
defendant’s interest calculation to the police offficer. He
further testified
that the second defendant suffered a loss. He
lodged a counterclaim for the loss suffered by the plaintiff.
[16] During cross examination he was
asked whether the issue of interest ever came up between him and the
plaintiff and he said
‘ interest could have been discussed but
I can’t remember. It could have never been in this context...’
He stated
that the patnership endured until approximately 8
th
April 2009. He said that their agreement was not for one year but was
supposed to be ongoing based on the Sparta Model. He gave
the
defendant’s interest calculation to the police officer in
exchange for a receipt for the R250 000 he paid in cash to
the
plaintiff. He denied that the presentation of the defendant’s
interest calculation is an admission. He denied that the
defendant’s
interest calculation was prepared by him, he stated that he cannot
remember who prepared it but admitted that
he put his name on the
document. He however reiterated that it was not an admission that he
owed plaintiff interest.
[17] I must state that I found the
second defendant to be vague, evasive and long-winded. He argued with
counsel and he was inconsistent.
[18] The following are common cause or
not seriously disputed: (a) There was an oral agreement that was
entered into and plaintiff
paid an amount of R500 000 into the
account of the second defendant as a result of that agreement; (b)
the money was to be used
by the first defendant to purchase cattle
through second defendant; (c) plaintiff was never involved in the
running of the feedlot
business; (d) all the meetings relating to the
feedlot business were held at plaintiff’s offices; (e) when the
agreement
was terminated plaintiff prepared a document in which he
calculated interest due to him by the defendant(s) and gave it to the
first defendant; (f) according to the plaintiff’s interest
calculation the total interest amounted to R117 571; (g) defendant
had another document prepared, which showed the total interest to be
R84 000.
[19] It is also common cause that
plaintiff paid the amount of R500 000 as follows: (a) R80 000 on the
5
th
May 2008; (b) R20 000 on the 7
th
May 2008;
(c) R100 000 on the 14
th
August 2008; (d) R100 000 on the
2
nd
July 2008; (e) R200 000 on the 21
st
August
2008.
Issues
[20] Whether the agreement between the
parties is a partnership agreement. Whether the plaintiff is entitled
to interest claimed
by him or whether the defendants are entitled to
loss suffered by the feedlot business.
[21] The parties are not in agreement as
to the terms of the agreement. The defendants submitted that the
agreement was a partnership
agreement between second defendant and
plaintiff where the parties would share the profits equally. The
plaintiff stated that the
agreement could be called a partnership
agreement or a joint venture agreement, it did not matter. However
the plaintiff insisted
that it was agreed that the defendant(s) would
pay him interest on his contribution at the rate of 2% per month.
I now turn to consider whether the
agreement was a partnership agreement.
[22] A partnership agreement is defined
as ‘a contract between two or more parties under which each
contributes or undertakes
to contribute towards an enterprise to be
carried on jointly by them with the object of making a profit and of
sharing it between
them’. See Business Transaction Law, seventh
edition, by R Sharrock at 457.
[23] The essential elements of a
partnership agreement are (a) each party had to contribute something;
(b) the enterprise was being
conducted for the joint benefit of both
parties; (c) with the object of making a profit.
[24] It is important to note that even
if all the essential elements are present in an agreement, the court
will hold that it is
not one of partnership if its terms as a whole,
the conduct of the parties, and the sorrounding cicumstances, show
that the parties
did not intend to enter into a partnership. See
Business Transaction Law at 460
[25] It is not in dispute that the
plaintiff contributed R500 000 (Five Hundred Thousand Rand) while the
defendant(s) contributed
fascilities and labour. It is also not in
dispute that the agreement was entered into for the benefit of the
parties. The parties
however do not agree on their intention for
entering into the agreement. Plaintiff contends that he entered into
the agreement
to earn interest on his investment while defendant
contends that the agreement was that the parties would make a profit
and share
it equally.
[26] Since the parties cannot agree on
the terms of the agreement, it is important for me to consider the
conduct of the parties
and the sorrounding circumstances. It is not
in dispute that: (a) plaintiff deposited the money into the account
of the second
defendant; (b) the plaintiff was never involved in the
running of the feedlot business; (c) plaintiff prepared his interest
calculation
after the parties agreed to terminate the agreement; (d)
plaintiff attempted to open a criminal case against the first
defendant
after his capital was refunded without the interest.
[27] It is also not in dispute that: (a)
the first defendant approached the plaintiff with an intention to
enter into feedlot business;
(b) the meetings regarding the business
were all held at the plaintiffs offices as and when the first
defendant travelled to Vereeniging;
(c) the defendant(s) refunded the
plaintiffs capital after the agreement was terminated; (d) the first
defendant had a member of
his office prepare the defendant’s
interest calculation after receiving plaintiffs interest calculation;
(e) first defendant
took along plaintiffs interest calculation and
defendant’s interest calculation to the meeting with the police
officer; (f)
first defendant gave the defendant’s interest
calculation to the police officer.
[28] I find it improbable that a person
who is adamant that there was no agreement regarding interest would
have prepared interest
calculation instead of calculating whether the
feedlot made a profit or a loss. I find it highly probable that the
first defendant
disagreed with the plaintiff’s calculation of
interest and had a member of his office prepare another interest
calculation
which turned out to be a lower amount than the amount the
plaintiff claimed was due. He could not provide an explanation why he
had the defendant’s interest calculation prepared. This in my
view indicates that the first defendant disagreed with the
amount of
interest rather than the payment of interest as a whole.
[29] The first defendant and his wife
who is an accountant could not explain why the plaintiffs capital was
refunded. The refund
of the plaintiffs capital is in complete
contrast with the defendant’s contention.
[30] In Business Transaction Law at 458
it is stated that ‘Whatever is given must be given entirely.
If, for instance, capital
is contributed, it must share in the risk
of the enterprise, so that, if the enterprise fails, the party
concerned cannot recover
it. If a party is entitled to reclaim his
contribution irrespective of the fortunes of the business, the
contract is not a partnership,
but a loan.’
[31] The conduct of the parties and in
particular the refund of the plaintiff’s capital contribution
does not support the
contention that the agreement was a patnership
agreement. Had the parties intended for the agreement to be a
partnership agreement,
the plaintiff would not have been entitled to
his capital contribution, he would have in addition to losing his
money have been
liable for the loss suffered by the partnership. The
preparation of the defendant’s interest calculation is also in
stark
contrast with the defendants’ version. In my view the
above lends support to the plaintiffs version that there was an
agreement
for payment of interest.
[32] I however find that the plaintiff
was not successful in proving how he arrived at the amount of R 101
322. The amount of R15
000 that he said must be added to the R84 000
was not clearly explained.
[32] Despite criticism leveled against
the evidence of the plaintiff, I am nonetheless satisfied that the
version of the plaintiff
stands to be accepted as true while the
version of the defendants stands to be rejected as false. See
National Employers General
Insurance v Jagers
1984 (4) SA 437
(E)
I now turn to consider whether the
agreement was between plaintiff and first defendant or the second
defendant.
[33] In his particulars of claim the
plaintiff indicated that the agreement was that the first defendant
would purchase cattle through
the second defendant. Plaintiff
admitted that he did not have a problem with depositing money into
the account of the second defendant
even though he initially thought
he was contracting with the first defendant.
[34] The first defendant’s
explanation that the agreement was between plaintiff and the second
defendant was also not convincing.
He testified that the plaintiff
must have known that he was dealing with the second defendant as he,
first defendant, personally
had no cattle.
[35] I am of the opinion that the
agreement was between plaintiff and both defendants.
In the result I make the following
order:
1. First and second defendant are
jointly and severally liable to pay interest to the plaintiff as
calculated by the first defendant
in the sum of R84 000 plus interest
at a legal rate a
tempore morae;
2. First and second
defendant are liable to pay plaintiffs costs of suit.
P D MOSEAMO
ACTING JUDGE OF THE HIGH
COURT
On behalf of the Plaintiff: Rossouw
& Prinsloo Inc.
C/O Van Rensburg
Koen & Baloyi
198 Blackwood
Street
Arcadia
Pretoria
Adv. B.L. Roode
On behalf of the Defendant: Lombard
& Partners Inc
992 Justice Mohamed
Street
Brooklyn
Pretoria
Adv. S. Strauss