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[2015] ZAGPPHC 511
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John Dore Carpets Franchise CC v Floro Pro Pretoria [previously John Dore Carpets Menlyn] and Others (42145/2012) [2015] ZAGPPHC 511 (9 July 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 42145/2012
DATE:
09 JULY 2015
In the matter
between:
JOHN
DORE CARPETS FRANCHISE
CC
.............................................................................
Plaintiff
And
FLOR
PRO PRETORIA
[previously
JOHN DORE
CARPETS
MENLYN]
....................................................................................................
First
Defendant
PIETER
WILLEM DU
PLESSIS
..............................................................................
Second
Defendant
MARYNA
DU
PLESSIS
...............................................................................................
Third
Defendant
HERMAN
DICKS
.......................................................................................................
Fourth
Defendant
JUDGMENT
Ismail
J:
Background
[1]
This matter concerns a franchise agreement entered into between the
plaintiff, as franchisor, and the first defendant as franchisee.
The
franchise agreement related to a carpet and wooden floor business.
[2]
Initially plaintiff and First Defendant entered into a franchise
agreement during 2006 regarding a John Dore shop in Menlyn.
This
business was referred to as “ John Dore Menlyn”.
[3]
During 2010 the plaintiff sold two further franchises to the Second
and Third defendants. These franchises were known as the
John Dore
Fourways and John Dore Westrand stores. The franchise model relating
to these stores was that of an existing John Dore
store.
Plaintiff’s
claims against the Defendants
[4]
The plaintiff instituted proceedings against the defendants due to
their failure to comply with the written agreement. The defendants
failed to comply with the written agreement in that they without just
reason cancelled the John Dore Menlyn and John Door Westrand
agreements.
[5]
The plaintiff claims two amounts from the defendants, arising out of
a franchise agreement entered into between the plaintiff
and the
first defendant, for the amounts of R475 739.81 and R93 995,24.
[6]
The defendants pleaded that the amounts claimed by the plaintiff were
due to the plaintiff, however they alleged that the amounts
due are
to be set off against the amount claimed by them in their
counterclaim.
[7]
The plaintiff also sought an order that the defendants in respect of
all three franchise agreements render a full and proper
account,
supported by documents specified in its claim of the full turnover of
the franchises since the inception thereof until
the cancellation
thereof.
[8]
During the trial the plaintiff led the evidence of three witnesses in
furtherance of its case. The defendants in turn called
Mr Du Plessis,
the second defendant as a witness to substantiate the counterclaim.
The plaintiff led
the evidence of Mrs Leta Sehanke, a procurement Manager, of the
plaintiff to testify. Her evidence related to
how the franchisor
ordered goods on behalf of the franchisee, and that the franchisor
would settle the account with the distributor.
The franchisor would
than on a monthly basis invoice the franchisee for the purchasers
over that period. Her evidence was not challenged.
[9]
Whilst Mrs Shanke was testifying, the matter stood down and the
parties agreed upon the amount in respect of claim 2 between
them to
be R58 616, 70 instead of the amount originally claimed, namely R93
995, 25
[10]
The second witness for the plaintiff was one, Mrs Drepaniotis. She
stated that she was the sole member of the plaintiff, close
corporation, since 2008. The plaintiff supplied carpets and wooden
floors to franchisees. She sketched the relationship with the
defendants in respect of their first franchise in Menlyn and their
subsequent franchises in Fourways and Decorpark.
She testified
that the franchisee did the royalty calculations. She requested the
books from the franchisee, however they never
furnished her with the
books. She also asked Mr Du Plessis for the financial statements and
once again he did not respond to her
request.
Mrs Drepaniotis
was referred to the client summary
[1]
and asked who completed those forms and she stated that it was
received from the client. Those documents do not indicate any pending
jobs and she testified that she did not receive payments in the
majority of instances for pending or outstanding jobs.
She
testified about a letter
[2]
which her attorneys Jarvis Jacobs
Raubenheimer
wrote on her behalf. At paragraph 4 of the letter the following
appears:
“
4
In accordance with the provisions of clause 9 of the franchise
agreement, you are hereby afforded a period of 14 days from date
of
this notice to remedy your breach by payment of the amount specified
herein above into our trust account with details as set
out herein
under, failing by (sic) our client shall execute upon its contractual
common law remedies which shall include but will
not be limited to:
4.1
Cancellation of the franchise agreement
reserving its rights to claim damages;
4.2
calling upon for an order for specific
performance of the agreement.”
The
amount referred to in the letter which the second defendant was
instructed to pay was an amount of R309 308,03. This amount
is an
error and the amount ought to have been R209 308.05.
[11]
This amount reflects the amount which plaintiff seeks for the
purchase of the Fourways franchise in the sum of R600 000,00
of which
only R290 691,97 was only paid.
[12]
The defendants in their counterclaim seek the return of the sum of
R290 691, 03 which they paid. They allege that the plaintiff
failed
to comply with it’s end of the agreement by not handing over
the customer book containing the list of customers to
the business.
[13]
It is self- evident that the claim referred to in par [9], supra, on
behalf of the plaintiff and the claim referred in par
[11 supra
arises out of the sale of the Fourways franchise which for the amount
of R600 000.00.
[14]
Regarding this claim for the payment of the balance of the purchase
price of the Fourways franchise, and the concomitant claim
in the
counterclaim for the refund of the money which was paid to the
plaintiff, the court must examine the evidence of Mrs
Drepanotis; Mr
Dicks and Mr Du Plessis. The version of Mr du Plessis was that the
client book was not given to the defendants.
The failure to hand over
the client book was a material or and significant failure or breach
on the part of the plaintiff which
rendered the agreement to be
cancelled.
[15]
The evidence of Mrs Drepaniotis on the other hand was that there was
a client book available although she could not say with
certainty
that Mr du Plessis received it.
[16]
Mr Dicks on the other hand testified that the book was at all times
at the franchise business. Mr Dicks testified that he was
a
shareholder together with Mr du Plessis in the Fourway franchise. He
also managed the Fourways franchise. He testified that when
he was
given the task to manage the branch there was a client book which was
received from Mr Van der Berg. He also testified that
before the
business was closed there was a request from Mrs Drepaniotis for the
financials of the franchise store.
[17]
In
determining this issue in particular, as well as the case as a whole
the court is bound to look at the probabilities, in view
of the two
mutually opposed versions presented to the court. I am therefore
enjoined to follow the approach laid down by Nienaber
JA in
Stellenbosch
Farmers’ Winery Group Limited and Another v Martell et Cie and
Others
[3]
.
I do not for reasons of prolixity incorporate the principle to be
followed as it is well known to the litigants.
[18]
Mr du Plessis whilst testifying before me came across as a confident
and astute businessman. I did not gain the impression
that he was a
novice in business or that he was inexperienced. His manner of
testifying was that that of a confidence and hubris.
He testified
that he requested the
client book
verbally from Mrs Drepaniotis on several occasions. No dates were
given when those request were made. Even if one is
to assume that he
requested the client books during the first quarter or even the
second quarter of the purchase of the franchise,
and that no client
book was forthcoming, it boggles the mind why he personally did not
write a letter or send an e mail to Mrs
Drepaniotis for the client
book. After all his evidence was that the client book was part of a
going concern which he purchased.
He testified that he had to start
the business as if it was a new business.
I
find his failure to demand the client book to be out of kilter
considering that he is an astute businessman and he failed to discuss
this with Mrs Drepaniotis.
[19]
The
first time that a letter
[4]
is dispatched regarding the client book is on the 22 August 2011.
[20]
The letter is on a John Dore letterhead and the author thereof is Mr
Du Plessis, the second defendant. The letter gives a breakdown
of
figures regarding the Fourway franchise and queries the outstanding
amount which differs with the plaintiff’s. Of significance
is
what appears in the letter under 1.
“
1.1
never received any client list or any
sort of documentation regarding the client basis- goodwill-that I
have every right to”
[21]
I have the following difficulties with this letter, namely:
(1) that it was
only sent in August 2011 when the premises were already occupied in
July 2010. The point being made is that the
letter was sent some 13
months after the purchase of the
franchise
(2) the letter is
not addressed to anybody specifically nor does it have an address on
it;
(3) it is not an
e-mail as it does not indicate details regarding when, to whom and
from whom it was sent;
(4) it is not a
facsimile as it does not have a fax transmission report;
(5) the letter is
merely addressed to “ Dear It does not say dear madam; or dear
Carol or dear Mrs Drepaniotis ; and
(6) when Mr du
Plessis testified he never stated that the letter was hand delivered,
nor does the letter itself indicate that it
was hand delivered.
[22]
These aspects must be viewed together with the version of Mrs
Drepaniotis who denied having received the letter. This must
also be
seen in the light of Mr Dick’s testimony, who was the fourth
defendant in this matter, that there was a client book.
[23]
The
probabilities favour the plaintiff’s version that the second
defendant had the client book, for the reasons referred to
above,
coupled with the objective evidence of Mr Dick’s. Counsel for
the plaintiff submitted that Mr Dick’s had no
reason to lie as
he was a co-defendant in this proceedings. I am in agreement with
counsel’s submission in this regard. In
any event I heard his
testimony and it was straight forward and to the point, above all his
mendacity was not challenged at all.
See
President
of the Republic of South Africa and Others v South African Rugby
Football Union and Others
[5]
[24]
On
this issue namely the question of whether the outstanding amount
should be paid as damages after the cancellation of the contract,
or
whether the defendants counterclaim should succeed and for that
reason the purchase price should be repaid to the defendants,
Mr
Maritz, submitted that the defendants did not tender restitution of
the business to the plaintiff. For that reason the counterclaim
should be dismissed on this aspect
[6]
.
[25]
In the plea the defendants stated that they returned the business to
the plaintiff, however when Mrs Drepaniotis testified
the following
question
was
asked of her.
Q: The defendants
stated in their plea that they returned the business to you, was it
returned?
A:
No- they did not.
In argument
before me Mr Kruger, for the defendants, submitted that there was
nothing left to return to the plaintiff. If that was
so why does the
plea indicate the contrary view. The view expressed in the plea could
only come from one or other of the defendants
which ultimately was
exposed as being false. Apart from this the defendants relied on a
tacit term which was not pleaded in their
plea. The tacit term
conflicted with an express term of the agreement. In this regard see
Transnet
Ltd v Rubenstein.
[7]
[26]
Mr du Plessis in my view was not a good witness. He repeatedly evaded
questions and at times questions had to be repeated twice
or thrice
before he answered the question. He refused to make simple
concessions and eventually had to concede after he was doggedly
cross
examined by plaintiff’s counsel.
The
fact that he was not a good witness does not
perse
mean that the plaintiff’s case has ipso facto been proved.
[27]
The two claims for R475 739.81 and R58 616.70 on behalf of the
plaintiff had been conceded and those claims clearly must succeed.
The third claim for payment of the balance of the purchase price or
damages claim in my view should also succeed as the overwhelming
probabilities favour the plaintiff’s case.
Counterclaim:
[28]
The defendants in their counterclaim raised three claims against the
plaintiff. In brief they can be referred to as: Firstly
the insurance
claim; the second claim is what was referred to as the ‘vat on
vat claim’ relating to the franchise fee
calculations and the
claim for the return of the purchase price of the sale of the
Fourways franchise.
[29]
Regarding the Fourways franchise and whether the defendants are
entitled to the refund of the money paid, this aspect has been
deait
with above in par [18 ] to [23 ],
supra.
In my view the letter referred to in par [19] and [20] is an after-
thought on the part of the second defendant who for some or
other
reason intended to cancel the agreement and. The client book was a
pretext to terminate the agreement. For fear of repeating
myself, the
second defendant is a savvy businessman and the timing of the letter
indicates the point I wish to make. Why did he
wait for thirteen
months before demanding the book.
I
will not deal with the sale of the Fourways franchise any further, as
I believe this aspect has adequately been dealt with.
[30]
During the trial the matter stood down and the parties thereafter
agreed that the amount due to the defendants in respect of
the
insurance claims equates to R114 336. 24. Therefore this amount
should be paid to the defendants. Although the claim was in
excess of
the amount agreed. The original amount claimed by the defendants was
for
R335
693, 17. A substantial amount had prescribed.
[31]
This leaves me then with the question of the defendants claim in
respect of the ‘vat on vat’ calculations. The
defendants
allege that they had to pay what has been described as VAT on VAT in
calculating the franchise fee. The evidence indicated
that this
amount was calculated by the defendants personally when they tendered
the franchise fee due to the plaintiff.
[32]
In the absence of the so called vat on vat calculation being
contra
bonis mores
there is nothing precluding the parties to a
contract negotiating such terms. It would appear that the defendants
raised their
dissatisfaction in the manner the franchise fee was
calculated, however the plaintiff was adamant on this aspect and the
agreement
was concluded between them. The agreement prescribed the
manner in which the franchise fee was to be calculated. The principle
of our law is
pactum sunt servanda-
namely that agreements are to be observed.
[33]
A I understood Mr Kruger’s submissions, this aspect although
not waived, was conceded. This claim should therefore not
succeed. Mr
Maritz raised the question how would the defendants prove this claim
when the plaintiff was seeking a debatement of
account and financials
in order to verify whether the franchise fee was correctly calculated
or not.
[34]
Accordingly I am of the view that the so called vat on vat claim
should be dismissed.
Costs
[35]
The plaintiff submitted that the costs should follow the results and
that it proved its claims and succeeded on all the claims
in the
counterclaim but for the insurance claim. For that reason it
should be
awarded
costs of the in respect of its claim as well as the counter claim.
[36]
On behalf of the defendants it was submitted that the plaintiff
should be awarded costs on its claim and on those claims where
the
defendant established in the counter-they should be awarded costs.
[37]
The granting of costs is within the discretion of the court. In this
matter
there were claims on behalf of the plaintiff and counterclaims by the
defendant. Where the counterclaim is quite distinct
from the claim as
in the case of the insurance claim, such costs are generally awarded
to the party who succeeds on it.
[8]
[38]
Accordingly I make the following order:
Defendants are
ordered to pay the plaintiff jointly and severally the one paying the
other to be absolved
(1) payment in
the amount of R534 355,51 to the plaintiff (i.e
R475 739.81 plus
R58 616,70);
(2) payment in
the amount of R209 308,05;
(3) Interest on
the aforementioned amounts calculated at a rate of 15.5% per annum a
tempore morae;
(4) The first to
Third defendants are ordered to render to the plaintiff the following
documents:
4.1 Bank
statements of the first defendant from October 2006 until 31 December
2011;
(6) Plaintiff is
ordered to pay the costs of the counterclaim in respect of the
insurance claim on a party and party scale.
M.
Ismail Judge of the High Court
APPEARANCES:
For
the Plaintiff: Adv S Maritz instructed by Jarvis Jacobs
Raubenheimer
Inc, Pretoria.
For
the first to third Defendants Adv T P Kruger instructed by De Klerk
Mandelstam
Inc, Pretoria.
Date
of hearing: 29 May 2015; 1 June 2015 and 2 June
2015;
and 24 June 2015.
Judgment
delivered : 09 July 2015
5
2000 (1) SA 1
(CC) see paragraphs [61],
[63] [64] and [65] at 36J-37B-C and 37D-38C
[1]
From pages 138 -140; 147; 150; 152-155
[2]
Dated 6 September 2011 ( appearing at pages 19 and 20 of bundle
marked A)
[3]
2003 (1) SA 11
(SCA) at 141-15D, par [5]
[4]
Letter appears on pages 236-237 of exhibit A
[5]
Marks Ltd v Laughton
1920 AD 12
at 21; Van Zyl v Credit Corporation
od south africa Ltd 1960 (4) SA
582
(AD) at 589-590 and Feinstein v Niggli and another 1981 (2) SA 684
(A).
[7]
[2005] 3All SA 425
(SCA) at para par [18] and [25].
[8]
Fripp v Gibbon & Co
1913 AD 354
; Ihlenfeldt v Rieseberg
1960
(2) SA 455
(T).