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[2015] ZAGPPHC 170
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Rumarch Investment Holdings (Pty) Ltd v Old Fashioned Fish and Chips (21168/2014) [2015] ZAGPPHC 170 (25 March 2015)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
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IN THE GAUTENG
DIVISION, PRETORIA
(REPUBLIC OF
SOUTH AFRICA)
CASE NO:
21168/2014
DATE: 25 MARCH
2015
NOT REPORTABLE
NOT OF INTEREST
TO OTHER JUDGES
In the matter
between:
RUMARCH
INVESTMENT HOLDINGS (PTY)
LTD
...................................................
1
st
APPLICANT
(Registration
Number: 2005/015490/07)
And
OLD FASHIONED
FISH AND CHIPS (PTY)
LTD
...........................................................
RESPONDENT
(Registration
Number: 2012/103847/07)
JUDGMENT
MSIMEKI J:
INTRODUCTION
[1] The applicant
seeks an order that the respondent be finally wound up in the hands
of the Master of the High Court and that the
costs of the application
be costs in the winding up.
[2] Advocate J L
Myburgh (Mr Myburgh) and advocate A Thompson (Ms Thompson) acted for
the applicant and the respondent respectively.
[3] The applicant
brought the application on the basis of the respondent’s
inability to pay its debts, alternatively on the
basis that it is
just and equitable that the respondent be wound up. The applicant
relies on Section 344 (f) read with Section
345 of the Companies Act,
61 of 1973 (“the old Act”) alternatively Section 344 (h)
of the Act, further alternatively,
Section 81 of the Companies Act,
71 of 2008 (“the New Act”).
APPLICANT’S
CASE
[4] The applicant’s
version is that the applicant and the respondent concluded a
franchise agreement on 11 December 2012.
This was after the
applicant, represented by Inbavathie Pather, the Executive Director
of the applicant, and the respondent represented
by Emilia de Sousa
(“Emilia”), the Chief Executive Officer, Nicol Mandonca
(Nicol) the respondent’s financial
Director and Paula Dos
Santos, its franchising consultant, had discussed the applicant’s
wish to obtain the right to operate
an Old Fashioned Fish and Chips
franchise in Beacon Bay, East London. The applicant and the
respondent, at the time, were not strangers
to each other. The
applicant owns a franchise in Queenstown. The respondent granted the
applicant a non-exclusive licence to operate
an Old Fashioned Fish
and Chips Franchise (OFFC) in Queenstown. The applicant was informed
that the area was available in Beacon
Bay. The respondent gave the
applicant an application form annexure “B” which the
applicant completed and returned
to the respondent. The area that was
available that the respondent referred to was shop 39 which was in
the Beacon Bay Retail Park
(“shop 39”). The shop,
according to the applicant, had already been secured for the
applicant by way a lease agreement
annexure “C” in
respect of shop 39 to the applicant. Pather’s son inspected and
took photographs of shop 39.
The photographs are annexures “D1”,
- “D5” to the founding affidavit. The respondent informed
the applicant
that its application for the Beacon Bay OFFC franchise
had been approved. On learning about the approval, the applicant then
paid
the franchise fee in an amount of R648 355.00. Early payment was
made because Emilia did not want other potential buyers to take
the
store. Annexure “F” is confirmation of the franchise fee
to the respondent’s nominated bank account. The
applicant and
the respondent represented by the deponent to the founding affidavit
and Paula, Emilia and Viki Shaw respectively
held a meeting on 11
December 2012 where the lease agreement was discussed and the
franchise agreement signed. Early in January
2013 Paula called Pather
and informed her that they could not attend to their initial
obligations, pursuant to the franchise agreement,
because the
respondent could not access shop 39. Growth-Point, the owner of shop
39, made it difficult for the respondent and the
applicant to enter
into any sub lease negotiations. It, by this time, became clear that
the applicant would not get shop 39 as
promised. No other suitable
premises, according to Paula, were available in Beacon Bay from which
OFFC franchise could be operated.
Pather established that the
respondent, indeed, had leased shop 39 from GrowthPoint since March
2012 but that the respondent had
failed to honour its obligation and
that the lease, as a result, had been cancelled by GrowthPoint which,
at the time, had leased
shop 39 to a different lessee. Pather advised
Paula that the franchise fee needed to the refunded. Paula promised
to inform Emilia
and revert to her. She then addressed an email to
Paula and Emilia annexure “H” informing them about her
desire to
have the franchise fee refunded. Subsequent to this email
the applicant was invited to a breakfast meeting of March 2013. The
meeting
was held but failed to address the issues that she raised in
her email of 7 February 2013. Meetings were arranged between the
applicant
and the respondent but were all cancelled by the
respondent. On 4 April 2013 she directed an email to Emilia and Paula
dealing
with the refund. Paula responded the same day and copied
Vivian Warland (Emilia’s personal assistant) (“Vivian”)
and Johan Potgieter the respondent’s project co-ordinator. The
email reads:
“
Hi
Charmaine,
Hoping
this email finds you well.
I
am really sorry about this whole Beacon
Bay
issue. I know it isn’t your fault. I was thinking would you
consider taking
Daku
in Port Elizabeth. The store is ready
.
All it needs is equipment. According to Johan the site is excellent
and it will do very well.
I
believe it is
an
industrial area. Please advise. If you not interested I will hand
your file
over
to Vivian for refund”,
(my
emphasis)
The applicant
declined the offer. This was communicated to Paula on 9 April 2013.
The refund of the franchise fee was again communicated
to Paula. An
email annexure “K” to the founding affidavit was directed
to Emilia on 30 April 2013. This was copied
to the respondent general
email. When no response was forthcoming the applicant decided to
approach Mr Heetesh Patel (“Heetesh”)
a franchisee and a
member of one of the respondent’s subcommittees for assistance.
This helped. On 15 May 2013 Vivian replied
from Emilia’s email
address directing the email to Heetesh. The email reads:
“
SUBJECT:
CHARMAINE PATHER- BEACON BAY
Dear Heetesh,
Trust you keeping
well. Your email addressed to Emilia De Sousa regarding the above
mentioned franchise has been brought to her
attention.
Emilia
advises that upon her return to office on 3
rd
June
2013 she will attend
to
these refunds
”
(my
emphasis)
This email is
annexure “M” to the founding affidavit. Heetesh has
provided a confirmatory affidavit in the form of annexure
“N”
to the founding affidavit. The franchise fee has to date not been
refunded.
[5] The respondent,
notwithstanding the respondent’s undertaking to refund the
franchise fee on 3 June 2013, has to date not
done so.
[6] The applicant,
on 4 September 2013, addressed a letter in terms of item 9 of
schedule 5 of the New Act, to the respondent. This
is annexure “O”.
The letter constitutes a demand in terms of section 345 of the Old
Act. The demand was duly served
on the respondent on 23 September
2013 at 15h15.
[7] Pather’s
testimony is that the applicant concluded the franchise agreement on
the assumption that the applicant would
operate the franchise
agreement from shop 39. It later became apparent that this would not
happen. The respondent was also unable
to provide any alternative
suitable locations from which the applicant could operate the
franchise in Beacon Bay. No effect, according
to the applicant, could
be given to the franchise agreement which had to be cancelled. The
applicant contends that the respondent,
notwithstanding the
undertakings, has failed to refund the franchise fee or any part
thereof.
THE
RESPONDENT’S CASE
[8] The respondent
agrees that the franchise agreement was concluded by the applicant
and the respondent. The respondent, however,
has proffered the
following defences:
1. It disputes that
it is indebted to the applicant alleging that the franchise fee paid
by the applicant is non-refundable under
the franchise agreement.
2. It contends that
it is solvent
3.
it contends that the applicant has no
locus
standi
to
bring the application
4. it lastly
contends that it is not just and equitable that the respondent be
wound up.
[9] The respondent
avers that the front cover of the franchise agreement states:
“
A
FRANCHISEE MAY CANCEL A FRANCHISE AGREEMENT WITHOUT COST OR PENALTY
WITHIN 10 BUSINESS DAYS AFTER SIGNING SUCH AGREEMENT, BY GIVING
WRITTEN NOTICE TO THE FRINCHISOR. THEREAFTER, ANY CANCELLATION IS
GOVERNED BY THE TERMS OF THIS AGREEMENT.”
The cooling off
period, according to the respondent, during which the applicant could
cancel the agreement has come and gone. The
terms of the franchise
agreement now govern the cancellation thereof.
[10]
The
respondent relies on
clause
8.1
of
the franchise agreement which reads:
“
The
franchisee shall pay to the franchisor an initial non-refundable
upfront franchise fee in the amount of R500 000.00 (five hundred
thousand rand) within Gauteng and/or the amount of R552 630.00 (five
hundred and fifty two thousand six hundred and thirty rand)
for any
other region within South Africa; plus Value Added Tax at 14% on the
amount which will be due and payable on signature
of this agreement.”
Clause
8.2
reads:
“
The
franchisee acknowledges that the non-refundable, initial franchise
fee, referred to in paragraph 8.1 above, is payable in respect
of:
8.2.1. Being granted
the right to operate the franchise business;
8.2.1. The right to
use and exploit the franchise business system;
8.2.3. Initial
training;
8.2.4. On - site
support;
8.2.5. Setting up
the physical premises and assistance from the franchisor with the set
- up of the franchise business.”
[11] Ms Thomson
submitted in their heads of argument that the store was located
outside of the Gauteng area in Beacon Bay where
the non- refundable
franchise fee would be R 552 630.00 plus Vat at 14% amounting to R77
367.00 together totalling R629 998.20.
The applicant’s claim
being R648 355.00 the difference between the two amounts would be R18
356.80 which, according to Ms
Thomson, the respondent, in a letter
dated 9 September 2014, unconditionally tendered to pay to the
applicant. This is a clear
indication that the respondent is, indeed,
indebted to the applicant.
[12] Clause 40.1.1
that Ms Thomson also referred to reads:
WAIVER
I
VARIATION
“
40.1.1.
This agreement constitutes the entire agreement between the parties
regarding the matters set out herein or related thereto
and no
representation or warranties not set out in writing in this agreement
shall be binding upon the parties. No variation, abandonment
or
waiver of rights or obligation under this agreement or consensual
cancellation of the agreement shall be binding unless it is
in
writing and signed by the franchisee and the franchisor.”
[13] The respondent
holds the view that the payment made by the applicant forming the
subject matter of its claim against the respondent,
is non -
refundable as evidenced by clause 38.4.5 which reads:
“
38.4.5.
The franchisee shall not be entitled to receive any rebate or refund
of any money paid pursuant to this agreement.”
The respondent, in
paragraph 18 of its answering affidavit, states:
“
The
refund of the franchise fee is a process which has to be followed. If
the applicant did not obtain shop 39 it was obliged to
seek
alternative premises. Annexure “H”, the email from Paula
Dos Santos does not state that the franchise fee would
be refunded.
The agreement clearly states that the payment is not refundable. One
of the biggest problems which the respondent
experiences is that
potential franchisee simply walk away. This they cannot do, they are
obliged to comply with the terms of the
Franchise Agreement.”
[14] The alleged
“offer to refund and undertaking to refund” that the
applicant relies on, according to Ms Thomson,
does not demonstrate an
unequivocal offer and undertaking as alleged by the applicant. Ms
Thomson contends that no clear waiver
by the respondent of its clear
contractual right to retain the deposit paid by the applicant, has
been demonstrated.
[15]
There is, according to Ms Thomson, a
bona
fide
dispute
relating to the applicant’s claim. It has, according to her,
not been established that the respondent is unable to
pay its debts.
[16]
Ms Thomson referred the court to the Badenhorst rule which came about
because of the matter of
Badenhorst
v Northern Construction Enterprises (Pty) Ltd
1956 (2) SA 346
(T) at
347-348
where
it was said that winding up proceedings ought not to be used to
enforce payment of a debt the existence of which is in dispute
on
reasonable grounds. The procedure is also not designed to resolve
disputes relating to the existence or no-existence of a debt.
I
agree.
[17]
Ms Thomson submitted that the applicant failed to establish its
locus
standi
as
a creditor of the respondent in terms of section 344 (f) read with
section 345 (1) (a) of the Old Act. This, according to her,
should
result in the dismissal of the application.
[18] The respondent
annexed the following bank statements to its answering affidavit:
1. Standard Bank
current account number 0[...] for the period 6 May 2014 to 5 August
2014.
2. Nedbank account
number 1[...] for the period 2 May to 31 July 2014.
3. Nedbank account
number 19[...] for the period 2 May to 31 July 2014. The respondent
did this to prove that it is able to pay
its debts as and when they
fall due.
[19] It is
noteworthy that the financials that the respondent annexed to its
answering affidavit relate to a different entity and
not the
respondent. The documents relate to Old Fashioned Fish and Chips
Distribution. It is not very clear why this entity is
brought into
the picture. The respondent’s answering affidavit does not say
much about this entity. That wrong financials
were annexed to the
answering affidavit is common cause. The explanation given for
annexing wrong financials is that that was an
oversight. Again, it is
noteworthy that the annexures are many. One would have expected the
respondent to have noticed this and
to have properly dealt with the
problem as the name of the respondent is not even on the documents.
This, indeed, is inexplicable
and hard to understand.
[20] Once the
problem of the wrong entity was pointed out by the applicant, the
respondent then procured a letter from its auditors
which states:
“
As
at 28 February 2014 and in terms of the unaudited management accounts
we are satisfied that the company (being the respondent)
is solvent
and that the assets exceed the liabilities”.
One would have
expected the respondent to have procured the relevant and acceptable
financials. The auditors’ letter can hardly
be said to be
helpful. It is an unsubstantiated document which does not take the
respondent’s case anywhere. The accounts
are unaudited. There
is just nothing further to demonstrate that the respondent is solvent
and that its assets exceed the liabilities.
Failure to produce the
correct documents by the respondent speaks volumes. The letter from
the auditors, in my view, is unhelpful.
It fails to demonstrate that
the respondent is indeed solvent. The letter is unacceptable as proof
of what it purports to prove
or demonstrate.
JUST AND
EQUITABLE WINDING UP
[21] Ms Thomson
submitted that this ground was not helpful to the applicant in that
it failed to establish any of the recognised
grounds for the winding
up of the company (the respondent) on just and equitable grounds. No
further ground according to her has
been established. The submission
has merit. Mr Myburgh, in any event, and correctly in my view,
indicated that they were abandoning
the ground.
[22] Ms Thomson
submitted that the respondent has almost 400 successfully operated
franchises and that the winding up of the respondent
would have far
reaching consequences for the owners, operators and employees of
those 400 Old Fashioned Fish and Chips franchises.
This, in my view,
does not assist the respondent’s case. If the respondent is
insolvent and is unable to pay its debts as
and when they fall due
then there is no way in which the respondent can be rescued and
protected.
[23]
As Ms Thomson correctly submitted, the court always has a discretion
to refuse to grant a winding up order regardless of the
section of
the Act upon which the application is based.
(See
Kyle v Maritza Peterse Inc
[2002] 3 ALL SA 223
(T) at 225).
ANSWERING
AFFIDAVIT AND THE ANNEXURES
[24] The applicant
served and filed a Notice to remove cause of complaint in terms of
Rule 30. This, because the respondent filed
its answering affidavit
on 19 May 2014; the applicant’s replying affidavit was filed on
5 June 2014; and the respondent filed
a further affidavit on 12
September 2014. The further affidavit, according to the applicant,
ought to be disallowed as inadmissible.
The respondent was given 10
days within which to remove the cause of complaint alternatively
remedying the irregularities. When
nothing happened, the applicant
brought an application in terms of Rule 30.
[25] Regarding the
respondent’s answering affidavit a comedy of errors was pointed
out. Attorney Barry Whitter (Mr Whitter),
the respondent’s
attorney of record served and filed an answering affidavit in the
applicant’s application in terms
of Rule 30. He explains
therein that the bank statements referred to in paragraph 21 of their
answering affidavit had not been
attached at the time the affidavit
was commissioned or when the affidavit was filed.
[26] There were
errors when the answering affidavit was commissioned. This, according
to Mr Whitter, necessitated the recommissioning
of the affidavit. He
contends that this did not prejudice the applicant and that the Rule
30 application should be dismissed with
costs.
THE ISSUE
[27] The issue to be
determined is whether the respondent is commercially insolvent and
unable to pay its debt. Put differently
the question to be answered
is whether the applicant has made out a case for the relief that it
seeks.
[28] The applicant
attacked the respondent’s answering affidavit stating that it
never attained the status of an affidavit
and that it ought to be
disregarded when the matter was heard. The reasons advanced by the
applicant are as follows:
FORMALITIES
NOT COMPLIED WITH.
1. The affidavit
does not comply with the formalities that are prescribed by the
Justice of the Peace and Commissioner of Oaths
Act 16 of 1963 in that
the Commissioner of oaths wrote “no" to the question:
“
Do
you consider the prescribed oath to be binding on your conscience?
It was argued that
the Commissioner of oaths could not administer an oath but an
affirmation which was not done.
Ms Thomson, for the
respondent, submitted that the “no” was erroneously
written. The deponent to the affidavit deposed
to another affidavit
explaining that that indeed had been an error. The explanation, in my
view, is acceptable.
SIGNING BEFORE
COMMISSIONER OF OATHS
2.
The deponent did not sign the affidavit in the presence of the
Commissioner of Oaths. This, because the Commissioner of Oaths
fails
to identify the deponent as either male or female. The gender in this
matter was indicated as “he/she”. Neither
the “he”
nor “she” was deleted to properly denote that the
deponent is “he” or a “she”.
This in my view,
is common occurrence in documents. This is clearly an error. The
matter of
ABSA Bank
Ltd v Botha NO and Others 2013 (5)SA 563 (GNP)
which
the applicant relies on is distinguishable. The facts of the two
cases are indeed distinguishable. In ABSA Bank case the incorrect
gender had been recorded whereas
in
casu
no
specific gender was indicated. That has been left as “he/she”.
The “he" should have been deleted. The
fact that the oath
is not contained or set out in the document does not mean that the
oath was not uttered. The certificate of
the Commissioner of oaths
clearly shows that the oath was uttered. The certificate reads:
“
I
certify that the deponent has acknowledged that he/she knows and
understands the content of this declaration
which
was
sworn to before me
and
the declarant’s signature was placed thereon in my presence."
(my emphasis)
3. NO COMMISSIONER
Ms Thomson’s
submission that the handwriting of the Commissioner of oaths is ugly
and leaves much to be desired does not render
the seal a nullity.
Indeed people’s handwritings will never be the same. Ms
Thomson’s submission has merit.
4. ALTERATION
AFTER SIGNATURE
The submission on
behalf of the respondent is that the addition of annexures after
signature of the answering affidavit was an error
just as the
omission to include the annexures referred to in paragraph 21 of the
answering affidavit clearly was an error. Ms Thomson
further
submitted that the errors were removed once the affidavit was
recommissioned. Mr Whitter in his answering affidavit in
the
applicant’s application in terms of Rule 30 explained that the
affidavit served on 12 September 2014 which the applicant
complains
of is exactly the same as the answering affidavit that was filed on
19 May 2014. The difference in the two affidavits
relates only to the
recommissioning of the affidavit and the inclusion of the omitted
annexures. According to him, there can be
no prejudice to the
applicant. This seems to be the case. In any event, the inclusion of
the annexures seems to bolster the applicant’s
case.
[29] In Erasmus:
Superior Court Practice, the following at B1-193 under subrule (3) is
said :
“
The
court has a discretion and it is not intended that an irregular step
should necessarily be set aside. The discretion must be
exercised
judicially on a consideration of the circumstances and what is fair
to both sides. The court is entitled to overlook
in proper cases any
irregularity which does not work any substantial prejudice to the
other party.”
See
also Northern Assurance Co Ltd v Somdaka
1960 (1) SA 588
at 595B;
Trans-African Insurance Co Ltd v Maluleke
1956 (2) SA 273
(A); Meyer
Curtis v Meyer
1973 (1) SA 363
(T) at 367F; Cape Sheet Metal Works
(Pty) Ltd v J J Calitz Builder (Pty) Ltd
1981 (1) SA 697
(0);Standard
Bank of South Africa Ltd and Another v Malefane and Another: In re
Malefane v Standard Bank of South Africa and Another
2007 (4) SA 461
(TK) and Radue Weir Holdings Ltd t/a Weirs Cash & Carry v
Galleus Inv Cc t/a Bargain Wholesalers
1998 (3) SA 677
(E).
[30] Having due
regard to the matter I resolved that it would be prudent and in the
interest of justice that no evidence be disregarded.
[31] The
respondent’s case is that:
1. It is not
indebted to the applicant in that the money that the applicant paid
to it is non-refundable;
2. It is not
insolvent; and
3. It disputes that
it is just and equitable that it be wound up.
THE
RESPONDENT’S INDEBTEDNESS TO THE APPLICANT
[32] The respondent
in paragraph 18 of the answering affidavit states that “the
refund of the franchise fee is a process which
has to be followed”.
The respondent adds that such process is discretionary. This clearly
evinces that notwithstanding the
statement that the franchise fee is
non-refundable, refund can still take place. It is not a blanket
“no".
[33] The franchise
agreement has a non-refundable clause which reads:
“
No
variation, abandonment or waiver of rights or obligations under this
agreement or consensual cancellation of the agreement shall
be
binding unless it is in writing and signed by the franchisee and the
franchisor.”
[34] Paula’s
email to Charmaine dated 4 April 2013 clearly invites the applicant
to accept a refund of the franchise fee if
it is not interested in
taking Daku in Port Elizabeth as shop 39 is gone. Pather directed an
email dated 9 April 2013 which is
annexure “J” on page
137 of the papers to Paula Dos Santos communicating that the
applicant was not taking Daku in
Port Elizabeth. The applicant,
instead, preferred a refund. Mr Myburgh’s interpretation of the
two emails, in my view, is
correct. The refund was offered, and the
applicant, by way of its email of April 2013, accepted the offer. Mr
Myburgh submits that
the emails were in writing and were signed by
Paula and Charmaine on behalf of the respondent and the applicant
respectively. Any
other interpretation attachable to the two emails,
according to Mr Myburgh, will not be in line with common sense and
logic. I
agree.
[35] Mr Myburgh,
correctly in my view, holds the view that:
1. the respondent
repudiated its obligation in terms of the franchise agreement and
offered alternative performance - to refund
the franchise fee.
2. the applicant
accepted the respondent’s repudiation and accepted the
respondents offer to refund the applicant’s
money.
3. the franchise
agreement was cancelled and a new agreement came into being - the
undertaking by the respondent to refund the applicant’s
money
which the applicant accepted.
IN THE
ALTERNATIVE
4. the franchise
agreement was varied to enable the respondent to refund the
applicants money. The non-variation clause, according
to Mr Myburgh,
does not find application if the old franchise agreement was
cancelled and replaced with the new agreement to refund
the
applicant’s money. However should it be found that the
franchise agreement was varied to enable the respondent to refund
the
applicant’s money, then the non-variation provisions of the
franchise agreement finds application and the provisions
of the
Electronic Communications and Transactions Act 25 of 2002 (ECTA) also
finds application.
[36]
In Natal
Municipality Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
the
court, dealing with interpretation of documents, said:
“
The
present state of the law can be expressed as follows: interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument or
contract having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into
existence”.
Consideration, in
the process, must be given to the language used in the light of the
ordinary rules of common grammar and syntax,
the context, the
apparent purpose to which it is directed and the material known to
those responsible for its production. The process
is objective not
subjective. A sensible meaning is to be preferred to one that leads
to unsensible or unbussinesslike results or
document. The context and
the language are paramount in the process of interpreting the
documents.
[37] It is important
to have regard to sections 1, 12, 13 (1) and 13 (2) and 22 of
Electronic Communications and Transactions Act No 25 of 2002
.
Section
1
deals with definitions. Of significance in this section are the
definitions of data, data message and electronic signature.
“
data
means electronic presentations of information in any form.
“
data
message” means data generated, sent, received or stored by
electronic means and includes:
(a) Voice where the
voice is used in an automated transaction; and
(b) A stored record.
“
electronic
signature” means data attached to, incorporated in or logically
associated with other data and which is intended
by the user to serve
as a signature.
[38]
Section 12
provides:
“
12.
Writing
-
A requirement in law that a document or information must be in
writing is met if the document or information is -
(a) In the form of a
data massage; and
(b) Accessible in a
manner usable for subsequent reference.”
Section 13
(1), (2)
and
3
provides
“
13
Signature
-
(1) where the signature of a person is required by law and such law
does not specify the type of signature, that requirement in
relation
to a data message is met only if an advanced electronic signature is
used
(2) subject to
subsection 1, an electronic signature is not without legal force and
effect merely on the grounds that it is in electronic
form.
(3) where an
electronic signature is required by the parties to an electronic
transaction and the parties have not agreed on the
type of electronic
signature to be used that requirement is met in relation to a data
message if-
(a) A method is used
to identify the person and to indicate the person’s approval of
the information communicated: and
(b) Having regard to
all the relevant circumstances at the time the method was used, the
method was as reliable as was appropriate
for the purpose for which
the information was communicated.”
Section 22
provides
“
22
formation
and
variation
of
agreements.
-
(1) An agreement is not without legal force and effect merely because
it was concluded partly or in whole by means of data messages.”
(2) An agreement
concluded between parties by means of data massages is concluded at
the time when and place where the acceptance
of the offer was
received by the offerer.”
[39]
In Spring Forest
Trading 599 CC v Wilberry (725/13)
[2014 ZASCA 178
(21 November 2014)
the
Supreme Court of Appeal of South Africa had to deal with a situation
which is similar to the facts of the case
in
casu.
The parties in the
Spring Forest case concluded an agreement in terms of which the
appellant was appointed as the respondent’s
operation agent.
The agreement contained a non-variation clause which required any
consensual cancellation to be in writing and
signed by the parties.
The appellant was unable to meet its rental commitments towards the
respondent. The parties had a meeting
and as a way of solving the
problem the appellant was given four options to choose from. On 25
February 2013 at 11 h44 the appellant
addressed an email to the
respondent requiring it to confirm the four options that were given
to it by the respondent. At 12h18,
on the same day, the respondent
using an email confirmed that the four options had been correctly
recorded in the email. On the
same day, at 04h02, the appellant using
an email informed the respondent that it had accepted the second
option. The appellant
contended that the agreement was validly
cancelled and that the cancellation met the requirements for the
information to be recorded
in writing and signed by the parties in
terms of
section 13
(3) of ECTA. The respondent held a different view
explaining that the emails did not meet the requirement of
section 13
(1) of ECTA which provided that an advanced electronic signature was
required. The agreement, according to the respondent, was
not validly
cancelled.
[40] The SCA had to
decide whether cancellation of an agreement by email was valid in
circumstances where the agreement, like in
the current case,
contained a non-variation clause which required cancellation to be in
writing and signed by the parties. The
SCA rejected the respondent’s
contention stating that the emails had been clear and unambiguous.
The formal requirement of
writing and signature imposed by statute or
the parties, according to the SCA, can generally be satisfied through
electronic transaction.
The court found that a legal requirement for
an agreement to be in writing is satisfied if it is in the form of a
data message
and emails meet the requirement. The crux of the matter
is that where the law requires a signature
section 13
(1) applies
whereas
section 13
(3) applies where parties to an electronic
transaction themselves require a signature but have not specified the
type of electronic
signature to be used, the requirement if a method
is used to identify the person and to indicate the person’s
approval of
the information communicated the requirement is met and
in that case
section 13
(3) applied. The SCA further found that as
long as the data in the email is intended by the user to serve as a
signature and is
logically connected with other date in the email the
requirement for an electronic signature is met.
[41] The names of
the parties at the foot of the emails identify the users and
constitute data that is logically associated with
the data in the
body of the emails. This is in line with the definition of electronic
signature described above. The names authenticate
the information
contained in the emails.
[42] The
respondent’s affidavits demonstrate no dispute regarding the
reliability of the emails, the accuracy of the information
communicated or the identities of the persons who appended their
names to the emails. The Spring Forest case is on all -fours with
the
current case.
[43] Mr Myburgh
submitted that the requirement for an amendment to be in writing is
satisfied because the emails exchanged between
the respondent and the
applicant constitute a data message referred to in ECTA. The
requirement for the amendment to be in writing
was, according to him,
satisfied. The emails, according to him, are clear and unambiguous
and constitute an offer and an acceptance.
They satisfy the
requirement of the non- variation clause in the franchise agreement.
[44] Ms Thomson
argued that the applicant could not rely on the provision of the ECTA
as it placed no reliance on the ECTA, in its
affidavit. Mr Myburgh
dismissed the argument adding that the agreement was flawed and
untenable in law. This, according to him,
is caused by a failure to
appreciate the distinction between formal (procedural) law and
(substantive) law. ECTA according to him,
does not create or define
rights and obligations and does not form part of substantive law. He
submitted that procedural law is
not pleaded. Practitioners simple
follow it while the courts apply it.
[45] The emails
clearly and in so many words demonstrate that the respondent, once
shop 39 could not be obtained, and the applicant
did not want to take
Duka in Port Elizabeth, realised that the franchise fee paid as
deposit had to be refunded. The emails are
clear on this issue. The
respondent can hardly be heard to say that the franchise agreement
was not cancelled. The respondent can
also not be heard to
say that the
applicant was not informed in so many words that the money would be
refunded.
[46] The emails
between the applicant and the respondent satisfy the requirements of
the non- variation clause, the cancellation
of the franchise
agreement and the coming into being of the new agreement in terms of
which the respondent would refund the money
that it received from the
applicant.
[47] Applying the
principles which found application in the Spring Forest case to the
facts of the current case it becomes clear:
1. that the
non-variation provisions of the franchise agreement do not apply to
the new agreement
2. that the emails
were in writing
3. that the emails
were signed by the applicant and the respondent
4. that the emails
satisfy the requirement of writing
5. that the
requirement of the signature is satisfied by the writing of a name at
the end of the email
6. that
section 13
(3) and not 13 (1) of the ECTA applies to the current case
7. that it is not
necessary to refer to ECTA in the affidavits
8. that the
respondent is indebted to the applicant in the amount of R648 455.00
9.
that the applicant has the necessary
locus
standi
to
bring this application
10. that the defence
that the respondent does not owe the applicant because the franchise
fee is non-refundable has been destroyed
by the emails.
[48] The defence
that the respondent is solvent has no substantiation. The respondent
annexed wrong documents relating to a different
entity in an
endeavour to prove that it is solvent. No sound explanation was
proffered because the correct documents were never
produced. It is
doubtful if the correct documents exist. Indeed if they existed same
would already have seen the light of the day.
[49] The respondent
avers that it has 400 successful operating franchises and a
distribution centre, namely Old Fashioned Fish and
Chips Distribution
Centre (Pty) Ltd. It is noteworthy that this entity was placed under
provisional winding up in the hands of
the Master of the High Court
on 5 December 2014 under case number 31745/2014 (South Gauteng High
Court). Old Fashioned Fish and
Chips Distribution Centre (Pty) Ltd
was placed under final winding up in the hands of the Master of the
High Court under the same
case number on 2 February 2015.
[50]
The document that the respondent’s auditors provided it with is
unhelpful. It demonstrates nothing in terms of the respondent’s
solvency. The respondent was served with the demand in terms of
section 345 of the Old
Companies Act. The
respondent, for three
weeks, failed to pay the money that the applicant demanded. The
respondent, accordingly, pursuant to the
provisions of section 345 of
the Old Act was duly deemed unable to pay its debts. Ms Thomson, in
their heads of argument, submitted
that the respondent, in its letter
dated 9 September 2014, unconditionally tendered to pay to the
applicant the amount of R18 356.80.
This amount, to date, has not
been paid. The applicant, is indeed, a creditor of the respondent and
has the necessary
locus
standi
to
bring this application.
[51] The respondent
is in no way assisted by the annexures that it has attached to its
opposing affidavit. The documents are evidently
an irrelevant balance
sheet and an out-dated unsigned irrelevant and inadmissible financial
statement all relating to a completely
different entity. The
documents in terms of section 345 of the Old Act, do not enable the
respondent to rebut the presumption of
its inability to pay its
debts. This clearly demonstates and supports the presumption that the
respondent is indeed, commercially
insolvent.
Mr Myburgh submitted
that the Old Act applies to the facts of this matter because the
respondent is commercially insolvent. He,
accordingly, implored the
court to grant and order for the wingding up of the respondent in
terms of the provisions of section
344 (4) read with section 345 (1)
(a) of the Old Act.
[52] The cases Ms
Thomson referred the court to are unhelpful to the respondent because
the facts of the case clearly demonstrate
that the applicant has been
able to make out a case for the relief that it seeks.
[53] I do not agree
with Mr Myburgh where he requests the court to grant an order finally
winding up the respondent in the hands
of the Master of the High
Court. Those that have interest in the matter deserve to be given a
chance to show why the respondent
should not be finally wound up. The
circumstances of the matter warrant an order provisionally winding up
the respondent.
[54] I, in the
result, make the following order:
1. The respondent is
placed under provisional winding up in the hands of the Master of the
High Court.
2. The respondent
and all other interested parties must show cause on why a final order
should not be granted.
3. the costs of this
application shall be costs in the winding up.
M.W MSIMEKL
JUDGE OF THE
GAUTENG DIVISION
PRETORIA
COUNSEL FOR THE
APPLICANT: ADV J L MYBURGH
INSTRUCTED BY: S
E ARCHARY JNCORPORATED
COUNSEL FOR THE
RESPONDENT: ADV A THOMPSON
INSTRUCTED BY:
GEO ISSEROW & T L FRIEDMAN ATTORNEYS
C/0 FRIEDMAN HART
SOLOMON & NICOLSON
DATE OF HEARING:
17 NOVEMBER 2014
DATE OF JUDGMENT: