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[2015] ZAGPPHC 581
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Franchising to Africa v SPKC Holdings (Pty) Ltd and Another (3253/2015) [2015] ZAGPPHC 581 (24 July 2015)
/SG
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
DATE:
CASE
NO: 3253/2015
DELETE
WHICHEVER IS NOT APPLICABLE
(1)
REPORTABLE:
YES
/NO
(2)
OF INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED
√
……………… ………………
..
DATE SIGNATURE
In
the matter between:
FRANCHISING TO AFRICA (PTY)
LTD
PLAINTIFF
And
SPKC
HOLDINGS (PTY)
LTD
1
ST
DEFENDANT
SUDESHAN
PILLAY
2
ND
DEFENDANT
JUDGMENT
JORDAAN, J
This is
an opposed application for summary judgment.
In
the application for Summary judgment the plaintiff claims:
1.
An amount of R258 438.40 plus interest in respect of
arrear rental.
2.
An amount of R52 183.59 plus interest in respect of
royalties.
3.
An order that the first and second defendants seize
making use of
the intellectual property of the
plaintiff. (See page 191 to 192 of
the papers)
It
is not an issue that on 1 February 2014 a franchise agreement between
the parties commenced. Also relevant is a sub-lease
agreement that was entered into and a surety agreement.
It
was argued on behalf of the plaintiffs that the defendants do not
disclose a single point that discloses a defence on
summary judgment.
It
is not an issue that the amounts payable in respect of rent and
royalties are in arrears. Since February 2014 only two payments
and a
further two short payments were made in respect of rental and no
payments were made in respect of royalties. The defendants
rely on
the
exceptio non adimpleti contractus.
In
respect of the amounts claimed for rental the defendants allege that
the amounts are inflated. I do not think that there is merit
in this
submission. The amounts claimed are inclusive of water and
electricity supplied by the municipality which will of course
vary
from month to month.
It
is also important to note that in its plea and counterclaims the
defendants do not raise the point that the amounts in
respect
of rental were miscalculated neither do they do so in correspondent
to the plaintiffs. See annexures “SP3”
“SP4”
and “SP5”.
The
main point raised by the defendants is that (amongst other
documentation) the plaintiff’s did not supply it
with an Operations Manual.
They allege that for
that reason they are not obliged to pay the amounts in
arrears.
In
its counterclaims the defendants claim amounts that are in excess of
the amounts claimed by the plaintiffs. The argument is
that there should be a
set off and that the
plaintiff’s claim is extinguished thereby. However, clause
5.3 of the franchise sub-lease agreement at page 73 of
the papers reads as follows:
“
All
monthly rent shall be
paid on or before the due date as per the
main
lease agreement, without any deductions or set off.”
It
was argued on behalf of the plaintiff, and I agree, that there is no
clause in the agreements that relates to the
exceptio
non adimpleti contractus.
As
stated above the main complaint by the defendants is that they were
not supplied with an Operations Manual as plaintiffs were
obliged to
do and they therefore do not have to pay the amounts in arrears. One
must accept that an Operations Manual was not supplied
but one must
keep in mind that the business that is run by the defendants is a
pizza outlet. One wonders what Operations Manual
is needed to bake a
pizza. Since the start of the business up to now, for about one and a
half years, the defendants made and supplied
pizzas to the public.
Nowhere in their papers is there any allegation that they were unable
to do so because they did not have
an Operations Manual. In my view
by no stretch of imagination can the supply of an Operations Manual
be an essential element of
the agreements warranting a complete
failure to pay any amount in rental or royalties to the plaintiffs.
Furthermore as correctly
pointed out during argument on behalf of the
plaintiffs the Operations Manual is in the interest of the
plaintiffs, not the defendants.
The
practical situation is that the defendants are in possession of the
premises without paying a cent.
I
agree with the argument on behalf of the plaintiffs that the
exceptio
is
not available as a
defence to its liquid claims for rent and royalty due to the fact
that the first respondent was already in default by the
end of March 2014.
Of
significance is the fact that on the front page of the Sale of
Existing Store and Franchise Agreement (page 23 of the papers)
provision is made for a cooling-off period of ten days during which
the agreement can be cancelled. Instead of complaining the
defendants
made initial payments in respect of rental but thereafter failed to
do so.
In
Minister of Public Works and Land Affairs and
Another v Group 5 Building Limited
[1996] ZASCA 63
;
1996 (4)
SA 280
(A) it was held:
“
Reciprocity of debt in law does not exist merely
because the
obligations which are claimed to be
reciprocal arise from the same
contract and each
party is indebted to the other in the same way or
the
other. A far closer and more immediate correlation than that is
required. See
BK Tooling (Edms)
Bpk v Scope Engineering (Edms)
Bpk
1979
(1) SA 391
at 415H-41 8C.”
The
payment of rent and the alleged non-providing of the manual could
never mean interdependent reciprocal obligations.
It
is important to note that only in September 2014 the Operations
Manual
was complained of, months after the
defendants have been in default.
Some
of the paragraphs in the answering affidavit on behalf of the
defendants need to be scrutinised.
In
paragraph 16 thereof it is alleged that financial statements books
and records have not been provided by the plaintiffs. It was
correctly pointed out on behalf of the plaintiffs that the defendants
did not buy shares in the business. They bought a going concern.
There was no obligation on the plaintiffs to provide these documents.
In
paragraph 17 thereof it is stated that not all of the claims of the
plaintiff are for a liquidated amount. This implies that
it is
admitted that some are.
In paragraph 27 it is complained that an invoice for the
payment of R627 000.00 for the franchise was not provided. Why the
defendants
want such an invoice is clear to me.
In
paragraphs 28 to 34 the defendants allege that the second contract
was
signed under considerable pressure and they
did not have time to peruse it or to seek legal advice. Fact of the
matter is they did
sign it and there was a
cooling-off
period provided for.
In
paragraph 35 the failure to provide the Operations Manual and
management accounts financial statements the business bank account
etc are bemoaned. Again the defendants lose sight of the fact that
bought going concern, not shares.
It is
also bemoaned in these paragraphs that the store did not generate the
profit that was conveyed to the defendants by the plaintiffs.
Clause
29 at page 57 of the papers expressly states that no representations
or guarantees regarding
inter
alia
the prospects of success of the business
were made and no party may rely on any representation not recorded in
the agreement.
Also of
fundamental importance in this regard is clause 35 at page 58 to 59
of the papers. This clause reads as follows:
“
Disclosure
and acknowledgement
The
franchisee and the principal(s) acknowledge and confirm that
35.1
Full and accurate written disclosure of all information
material to the franchise relationship was given to them
prior
to them signing this agreement.
35.2
This agreement was presented to them in consequence of
them
having expressed the desire to own and operate the
franchised
business.
35.3
They have read this agreement in its entirety and they are
entitled prior to signing this agreement in writing to
request
the franchisor to provide them with a
written explanation of
any terms or sections of
this agreement not fully understood
by them.
35.4
The franchisor has recommended to them that they submit
this
agreement to their legal advisors for perusal, explanation and
comment thereon.
35.5
The franchisor has recommended to them that in addition to the
abovementioned legal assistance, they also seek such other expert
advice as they may deem necessary regarding the commercial viability
and prospects of the business.
35.6
They recognise the importance of operating the business in strict
conformity with the system.
35.7 Investment in business involves business risks and
that the success of the business is primarily dependent on their
business
abilities and efforts.
35.8
All goodwill will endure to the benefit of
the franchisor.”
The
many changes made on the agreement in writing for example at page 38,
46, 47, 53, 54 and 55 is indicative of the fact that the
contract was
thoroughly went through.
Paragraphs
37 to 39 relates to alternative business premises the
defendants wanted to be relocated to. Although such
relocation was discussed
between the parties such
relocation was not reduced to a written undertaking.
The
agreement contains a non-variation clause in terms of which all
amendments to the contract shall only be valid and enforceable
if
reduced in writing.
Paragraphs
41 and 42 refer to letters sent
by the defendants to the
plaintiffs (SP3, SP4
and SP5).
I agree
with the submissions on behalf of the plaintiffs that with the
exception of the Operations Manual no clause in the agreement
is
referred to the plaintiffs are in breach of.
In the
result I am of the view that summary judgment should be granted in
the amounts set out in the application for summary judgment.
I,
however, agree with the contention of behalf of the defendants that
the relief sought in prayer 3 of the application for summary
judgment
cannot be granted in terms of rule 32.
Costs
The
matter was previously before ISMAIL J on 13 March 2015. He postponed
the matter due to certain defects in the papers. He directed
that the
costs of that day be argued at the final hearing of the matter. It is
clear to me that the blame for the defects in the
papers on that day
cannot be placed on the plaintiffs or the defendants. Costs for the
hearing on 13 March 2015 should therefore
follow the result.
The
following order is made:
In respect of claim 1 judgment is granted against the
first and second defendants in the amount of R258 438.40 plus
interest
a temore morae
at a rate of 9% per annum on the said
amount calculated from the date of summons to date of final payment.
In respect of claim 2 judgment is granted against the
first and second defendants in the amount of R52 183.59 plus interest
a
temore morae
at a
rate of 9% per annum on the said amount calculated from the date of
summons to date of final payment.
The defendants are to pay the costs of this application,
including the costs for 13 March 2015 jointly and severally, the one
paying
the other to be absolved.
E
JORDAAN
JUDGE
OF THE GAUTENG DIVISION, PRETORIA
Heard
on
:
For
the Plaintiff
:
Adv
Instructed
by
:
For the Defendants
:
Adv
Instructed by
:
Date of Judgment
: