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[2015] ZAKZDHC 3
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Gani v Hassim, East Coast Access (Pty) Ltd v Gani (9006/2010,4554/2011) [2015] ZAKZDHC 3 (16 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
CASE NO:
9006/2010
In
the matter between:
ABDUL
GANI
...............................................................................................................
PLAINTIFF
and
ANICE
HASSIM
.......................................................................................................
DEFENDANT
CASE
NO: 4554/2011
And
in the matter between:
EAST
COAST ACCESS (PTY)
LTD
.........................................................................
PLAINTIFF
And
ABDUL
GANI
...........................................................................................................
DEFENDANT
JUDGMENT
Date:
16 February 2015
PLOOS
VAN AMSTEL J
[1]
The two actions which came before me as a consolidated trial arise
out of the sale of shares in a private company known as East
Coast
Access (Pty) Ltd (ECA). It carries on business as a provider of
access to the internet, servers, email facilities and maintenance
and
support relating thereto. It also provides hardware for these
functions. It owns a subsidiary, East Coast Internet (Pty) Ltd,
which
trades under the name ‘immedia’ and renders services
relating to software development, web design and strategic
decisions
relating to the internet.
[2]
The shares in the company were owned by Mr Abdul Gani and Mr Anice
Hassim. Mr Gani was involved in ECA on the technical side
while Mr
Hassim focused on immedia. In 2006 Mr Gani suffered a heart attack.
He decided to scale down on his working activities
and pay more
attention to his health and family. This led to his decision to leave
ECA and sell his 50 per cent shareholding to
Mr Hassim.
[3]
In one of the actions Mr Gani seeks payment of the balance of the
purchase price, alternatively the return of those shares which
have
not been paid for. In the other action ECA seeks damages from Mr Gani
arising out of the fact that he opened a new business
in competition
with it and allegedly lured away two of its key employees and some of
its clients.
[4]
The written agreement for the sale of the shares was prepared by Mr
Hassim. Mr Gani made some alterations to it and they signed
it. It is
unfortunate that they did not seek the input of an attorney, having
regard to the importance of the transaction to both
of them. The
agreement is poorly drafted and the proper meaning of some of its
provisions forms part of the dispute before me.
[5]
The agreement reads as follows:
‘
Agreement
between Anice A Hassim and Abdul R Gani effective 31 May 2007.
Hassim
agrees to purchase with immediate effect (31 May 2007) Gani’s
50% shareholding in East Coast Access Pty Ltd.
The purchase
consideration is R1 million per year with a balloon payment of R2
million at the end of Year 3. Mr Hassim will make
repayments at a
monthly rate of R83 400 and this will be contingent on the company
generating a profit of at least R1 million per
year.
At the end of the 3
years, providing the company has made a further R2.7 million in
profits over that period, Mr Hassim will pay
the remaining R2 million
to Mr Gani.
Mr
Gani will remain available to the company to provide information,
support and advice to ensure its continued operation during
this
term.
Mr
Hassim will assume immediate ownership of the company upon this
agreement, and all Mr Gani’s suretyships and guarantees
shall
lapse and be assumed by Mr Hassim. Mr and Mrs Gani will cease to be
officers, representatives or signatories to bank accounts
of the
company.
Mr
Gani shall have no further claim on the company or Mr Hassim beyond
the amounts specified in this agreement.
Should
Mr Hassim be unable to meet these financial obligations at the end of
the three years, shares to the value of the amount
unpaid shall
revert to Mr Gani or the term (sic) and conditions may be extended or
revised by mutual agreement.
’
[6]
Mr Hassim paid Mr Gani a sum of R3 million over a period of three
years. He however did not pay the ‘remaining’
amount of
R2 million (referred to in the agreement as a ‘balloon
payment’) as he contends that the profit target referred
to in
the agreement was not achieved. Mr Gani contends that the target was
achieved and that the remaining amount of R2 million
became payable
at the end of the three year period. The issue relates to the meaning
of the word ‘profits’ in the clause
which reads ‘At
the end of the 3 years, providing the company has made a further R2,
7 million in profits over that period,
Mr Hassim will pay the
remaining R2 million to Mr Gani’
.
Mr Hassim contends that this was a
reference to profits after tax, while Mr Gani contends that the word
should be given its ordinary
meaning, which he says is profit before
tax. It was common cause before me that if regard is had to profit
after tax then the target
of R2, 7 million was not met, but if it is
profit before tax then the target was met.
[7]
The particulars of claim in the matter where Mr Gani is the plaintiff
is not a model of clarity and may be somewhat confusing
to someone
who reads it for the first time. It starts with a claim for
rectification, but the rectification is not relevant to
the main
claim for payment of the balance of the purchase price. It is
relevant to the alternative claim, which is premised on
the
non-achievement of the profit target. The main claim, for payment of
the balance of R2 million, raises the question of the
proper
interpretation of the agreement, to which I now turn.
The
Interpretation of the Agreement
[8]
In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[1]
Wallis JA set out the current state of our law with regard to the
interpretation of documents. It is sufficient in the present
case to
emphasize that the inevitable point of departure is the language of
the provision itself, read in context and having regard
to the
purpose of the provision and the background to the preparation and
production of the document. A sensible meaning is to
be preferred to
one that leads to insensible or unbusinesslike results or undermines
the apparent purpose of the document. In
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
[2]
Wallis JA referred with approval to the following passage in
Society
of Lloyd’s v Robinson
[3]
:
‘
Loyalty
to the text of a commercial contract, instrument, or document read in
its contextual setting is the paramount principle
of interpretation.
But in the process of interpreting the meaning of the language of a
commercial document the court ought generally
to favour a
commercially sensible construction. The reason for this approach is
that a commercial construction is likely to give
effect to the
intention of the parties. Words ought therefore to be interpreted in
the way in which a reasonable commercial person
would construe them.
And the reasonable commercial person can safely be assumed to be
unimpressed with technical interpretations
and undue emphasis on
niceties of language
’
.
[9]
Unfortunately neither Mr Gani nor Mr Hassim impressed me as
particularly reliable witnesses. There is clearly no love lost
between them, and it was my impression that both of them answered
some of the questions in a way which they thought was best for
their
cases and not necessarily in a genuine attempt to reflect the truth.
[10]
In seeking to find the proper interpretation of the contract evidence
as to what the parties intended is not admissible. Where
there is a
claim for rectification, however, evidence is admissible in order to
establish what the common intention of the parties
was. Both Mr Gani
and Mr Hassim were questioned about their respective intentions, on
the basis that this was relevant to Mr Gani’s
claim for
rectification. The evidence however sometimes strayed beyond the
boundaries of the claim for rectification, and I need
to make it
clear that in interpreting the contract I will endeavour to give the
language used the appropriate meaning, having regard
to the context
and purpose of the provision in question, with no regard to what the
parties testified their respective intentions
were.
[11]
Both Mr Gani and Mr Hassim said when the agreement was concluded
there was no discussion between them as to whether ‘profits’
would be before or after tax profits. Neither contends for
rectification or for a tacit term with regard to this issue. It is
purely a matter of interpretation and attributing to the provision a
meaning which is appropriate in the circumstances. It is necessary
at
the outset to consider the background to the agreement and the
purpose of the provision in question.
[12]
Mr Gani and his wife testified that they calculated and then rounded
off the amount for which Mr Gani would be willing to sell
his 50 per
cent shareholding to Mr Hassim, which came to R5 million. Mr Gani
said he and Mr Hassim agreed that he would be paid
in monthly
instalments of R83 400, over a period of three years, and the
remaining R2 million at the end of the three years.
Mr Gani was
thereafter advised by an accountant that he would have to pay capital
gains tax pursuant to the agreement of sale,
in spite of the fact
that he would only receive the purchase price over a period of three
years. He was also advised that this
would not be the case if his
receipt of the purchase price was made subject to a condition, in
which event he would only have to
pay the capital gains tax when the
condition was met. It was for this reason that the condition relating
to the achievement of
a specified profit target was inserted. Its
purpose was to delay the payment of capital gains tax.
[13]
The accountant’s advice
[4]
was
set out in a letter
[5]
addressed
to both Mr Hassim and Mr Gani on 12 June 2007. He recorded that the
purchase consideration for the shares was R5 million
and that in
terms of the 8
th
Schedule to the Income Tax Act
[6]
the sale would attract capital gains tax. He pointed out that
sub-paragraph (4) of the definition of ‘proceeds’ in
paragraph 35 of the Schedule provides that where during any year of
assessment a person has become entitled to any amount which
is
payable on a date or dates falling after the last day of that year,
that amount must be treated as having accrued to that person
during
that year. He then considered whether there was a way to avoid the
payment of capital gains tax before the receipt of the
purchase
price. He considered paragraph 13 of the Schedule, which deals with
the time of disposal. In terms of sub-paragraph (1)
(a) the time of
disposal is, in the case of a change of ownership effected because of
an agreement which is subject to a suspensive
condition, the date on
which the condition is satisfied. Where the agreement is not subject
to a suspensive condition, it is the
date on which the agreement is
concluded. Mr Payne expressed concern as to whether the condition in
the draft agreement was a suspensive
or resolutive one, and then
considered the possible application of section 24N of the Act.
Sub-section (1) provides
[7]
that
where a person during a year of assessment disposes of equity shares
in the circumstances contemplated in sub-section (2),
the amount
payable to the seller must, to the extent that it is not due and
payable during that year, be deemed for purposes of
the Act not to
have been accrued to the seller in that year, and to the extent that
it becomes due and payable to the seller in
any subsequent year of
assessment, be deemed for purposes of the Act to have been accrued to
the seller during that subsequent
year. Sub-section (2) provides that
sub-section (1) applies in respect of the disposal by a seller to a
purchaser of any equity
shares in a company where,
inter
alia
,
more than 25 per cent of the amount payable for those shares becomes
due and payable after the end of the year of assessment of
the seller
and the amount payable is based on the future profits of that
company, and the purchaser is obliged to return the equity
shares to
the seller in the event of failure by the purchaser to pay any amount
when due.
[14]
Mr Hassim contends that the context indicates that Mr Gani was going
to be paid out of the profits of the company. He
says he would
have had to pay Mr Gani out of the dividends which he received, as it
was not permissible for the company to make
those payments or for him
to borrow money from the company to enable him to do so, having
regard to the provisions of section 38
of the Companies Act 61 of
1973, which prohibited the giving of financial assistance by the
company in connection with a purchase
of its shares. Counsel for Mr
Hassim submitted that the purpose of the condition regarding the
profit target was to ensure that
Mr Hassim would be able to pay the
purchase price out of the profits, and that it will therefore make no
sense to interpret the
word ‘profits’ as before tax
profits as, so he submitted, the company had to pay tax first and
then declare a dividend.
[15]
It is true that the agreement established a link between the amount
of profits achieved and the payment of the purchase price.
The
monthly payments of R83 400 were said to be contingent on the
company generating a profit of at least R1 million per year.
The
payment of the ‘remaining R2 million’ was conditional on
the company having made a further R2,7 million in profits
during the
period of three years referred to in the agreement. But there is
nothing in the contract which suggests that the purchase
price would
be paid entirely from dividends declared by the company, and Mr
Hassim himself testified that he would pay the purchase
price from
dividends or from his personal reserves.
[16]
The evidence and the probabilities in my view indicate overwhelmingly
that the purpose of the condition regarding the profit
target was to
delay the payment by Mr Gani of capital gains tax. This was the
evidence of Mr Gani and Mr Payne, and also Mr Hassim.
I do not accept
the contention that the purpose of the condition was to ensure that
Mr Hassim would be able to pay the entire purchase
price out of the
profit of the company. Its only purpose was to delay the payment of
capital gains tax by bringing the agreement
within the ambit of
paragraph 13 of Schedule 8 or section 24N of the Act.
[17]
The language used and the context must be considered together,
without the one predominating the other. In
The
New Shorter Oxford English Dictionary
[8]
the word ‘profit’ is defined, inter alia, as ‘the
excess of returns over outlay; the surplus of a company or
business
after deducting wages, cost of raw materials, interest, and other
expenses’. The phrase ‘profit and loss account’
is
defined as ‘a financial statement showing a company’s net
profit after offsetting all other ordinary expenses against
the gross
profit from trading’. ‘Profit margin’ is defined as
‘the amount by which revenue from sales exceeds
cost of sales’.
In
Sugar
Corporation of Malawi Ltd v Elgin Engineering Co (Pty) Ltd
[9]
Trollip JA said ‘profit’ usually means the excess of the
proceeds derived from supplying or disposing of something
over the
outlay incurred in acquiring, manufacturing, or supplying it.
[18]
The word ‘cost’ is defined in the
New
Shorter Oxford Dictionary
as ‘what
must be given in order to acquire, produce or effect something; the
price (to be) paid for a thing’. ‘Outlay’
is
defined as ‘an act or the fact of spending; (an) expenditure’.
[19]
It seems plain that income tax is not part of the expenses of a
business in order to determine its profit. Tax is paid out
of the
profits of a business. In the words of the Earl of Halsbury LC in
Ashton
Gas Company v Attorney-General and Others
[10]
,
income tax is part of the profit itself. He added:
‘
The
income tax is a charge upon the profits; the thing which is taxed is
the profit that is made, and you must ascertain what is
the profit
that is made before you deduct the tax- you have no right to deduct
the income tax before you ascertain what the profit
is. I cannot
understand how you make the income tax part of the expenditure.
’
[20]
It seems to me that a sensible and businesslike interpretation is
that the word ‘profits’ in the agreement means
profit
before tax. That is, I think, what business people mean when they ask
how much profit a business made. I see nothing in
the context or
purpose of the agreement, or the background, which militates against
this interpretation.
[21]
It follows that the condition regarding the further profit of R2,7
million was met and that Mr Hassim became obliged to pay
the
remaining R2 million to Mr Gani.
[22]
This finding makes it unnecessary to deal with the issue as to the
consequence of the profit target not having been met. I
nevertheless
deal with it briefly, in case I erred in my main finding. The clause
in question reads as follows:
‘
Should
Mr Hassim be unable to meet these financial obligations at the end of
the three years, shares to the value of the amount
unpaid shall
revert to Mr Gani or the term (sic) & conditions may be extended
or revised by mutual agreement
’
.
Mr
Gani contends that if he is not paid the remaining R2 million, shares
to that value must revert to him. Mr Hassim disputes this
and says
the provision for the return of shares related to the obligation to
pay the R3 million and has nothing to do with the
remaining R2
million. On his construction Mr Gani receives nothing further if the
target is not met – neither the money nor
the shares. This is a
most unbusinesslike interpretation. It would mean that if the target
of R2,7 million is achieved Mr Gani
would receive the further R2
million, but if the target is missed by, say R1000, he would receive
no further payment and no shares
would revert to him. This
interpretation is absurd and contrary to the context and purpose of
the agreement. The clause was plainly
inserted with reference to
section 24N (2) (d) of the Income Tax Act, as appears from Mr Payne’s
letter of 12 June 2007.
The reference to ‘these financial
obligations’ seems to me to refer to payment of the R3m and the
remaining R2 million.
This is how Mr Hassim himself construed the
agreement in March 2010 when he sold shares in the company to Mr
Bevan Andries. There
is nothing in the context of the agreement or
its purpose or the background to suggest that the proper meaning of
the clause is
as now contended for by Mr Hassim. The interpretation
which he suggests is in my view an afterthought and an opportunistic
attempt
to benefit from the clumsy wording of the agreement. The
proper meaning of the clause in my view is that if Mr Hassim does not
pay any part of the purchase price of R5 million (as computed in the
second and third clauses), shares to the value of the amount
unpaid
shall revert to Mr Gani. In other words, if the further amount of R2
million is not paid to him because the profit target
of a further
R2,7 million was not achieved, then 20 per cent of the shares in the
company must revert to him.
Rectification
[23]
It is also unnecessary to deal with the issue of rectification. I
nevertheless make a few observations in case the matter ends
up in a
higher court.
[24]
The first rectification point related to the purchase price. Mr Gani
maintained that it was R5 million while Mr Hassim was
adamant that it
was R3 million. The difference is more apparent than real as they
were agreed that a sum of R3 million was payable
by way of
instalments over a period of three years and, provided that the
company had made a total of R5,7 million in profits over
that period
(R1 million per year for three years plus a further R2,7 million), a
further sum of R2 million would be paid. This
is what the written
agreement provides and it seems to me to be in accordance with the
common intention of the parties. There is
therefore no need for
rectification as far as the purchase price is concerned.
[25]
The next point relates to what would happen if the company failed to
make a further R2,7 million in profit over the three year
period. The
proposed rectification provides that in that event the remaining R2
million would be paid from the further profits
of the company
according to a ratio of 3:1. Mr Hassim’s first draft of the
agreement contained the following clause:
‘
At
the end of the 3 years, providing the company has made a further R2,
7 million in profits, the R2 million will be paid at a 3:1
ratio of
profits being Mr Gani: Mr Hassim respectively until the R2 million is
discharged.’
Mr
Gani changed this clause and removed the reference to a ratio of 3:1.
He explained this by saying that the ratio was irrelevant.
If the
further profit of R2,7 million was made he would be entitled to the
remaining R2 million at the end of the three years and
if it was not
made he would be entitled to the return of shares to the value of the
unpaid amount. The clause in the agreement
is therefore not
inconsistent with the common intention of the parties and there is no
need for it to be rectified.
[26]
The last point seeks to replace the words ‘
be
unable to meet these financial obligations at the end of the three
years’
with the words ‘
fail
to pay any amount when due’.
There
was no evidence that the clause as it stands does not accord with the
common intention of the parties.
[27]
During Mr Gani’s evidence he was asked to read the written
agreement carefully and to identify which part of it was there
due to
a mistake. His answer was that he had agreed to all of it. He was
then asked to specify what should be in the agreement
but, due to a
mistake, was not there. He said what should have been in the
agreement was a clause giving Mr Hassim the option,
in the event of
the target of a further R2,7 million not having been met at the end
of the three years, to pay the remaining R2
million out of future
profits in a ratio of 3:1, instead of returning shares to him. He
agreed however that this may be catered
for in the last clause, which
provides that the terms and conditions could be extended or revised
by mutual agreement.
[28]
In those circumstances I do not consider that a case for the
rectification of the agreement was established.
The
Defence of a Reduced Purchase Price
[29]
My finding that Mr Gani is entitled to payment of the remaining R2
million is subject to the defence pleaded by Mr Hassim,
which is a
novel one. He contends that the purchase price for the shares must be
reduced because Mr Gani breached the agreement
by competing with ECA
and luring away two of its employees and some of its customers,
thereby damaging its goodwill and causing
it to suffer a loss of
profits. He contends that the agreement contained a tacit or implied
term that Mr Gani would not do anything
to undermine the goodwill of
the business.
[30]
It is not necessary to deal in any depth with the question whether in
law Mr Hassim can claim a reduction in the purchase price
(which
seems a doubtful proposition), or whether the tacit or implied term
contended for formed part of the agreement, as the evidence
did not
establish the conduct complained of. I proceed to deal with the
evidence in this regard.
[31]
It was common cause that when Mr Gani told Mr Hassim that he was
leaving, Mr Hassim asked him to sign a restraint of trade
agreement.
It was also common cause that he did not do so. They disagreed in
their evidence as to what was said in this regard.
Mr Gani said he
told Mr Hassim that he was going to start a small business which
would sell access to the internet, while according
to Mr Hassim he
said he was going to operate as a consultant. The fact of the matter
is that there was no express agreement which
prevented Mr Gani from
competing with ECA once he had left. The only clause in the agreement
which placed an obligation on him
after he had left was one which
provided that he would remain available to the company to provide
information, support and advice
to ensure its continued operation
during the period of three years referred to in the agreement. Mr
Gani’s uncontested evidence
was that he complied with this
obligation and provided advice and assistance whenever he was asked
to do so. This is borne out
by numerous documents in the bundles of
documentary exhibits.
[32]
There was no evidence that Mr Gani solicited or encouraged or
persuaded any of ECA’s customers to leave it and support
Infostream, which was his new business. It was not disputed that no
more than five of ECA’s approximately fifteen hundred
customers
later used Infostream, and did so because they became dissatisfied
with the service provided by ECA. The two key employees
who left ECA
were Mrs Gani and Ismail Paruk. Mrs Gani testified that she intended
to leave with her husband, but agreed to stay
on for a specific
period in order to train the person who was going to perform her
duties. She said this was made clear to Mr Hassim
from the outset.
This is supported by the fact that the sale agreement records that
she would cease to be a signatory to the company’s
bank
account. Mr Paruk was a senior employee on the technical side in ECA
and took over most of Mr Gani’s duties. He said
he had been
unhappy with ECA for a substantial period and had applied for
numerous positions with other companies. He went for
a number of
interviews but could not find anything acceptable. He eventually
decided to leave and went to work for Infostream.
There was no
evidence that Mr Gani influenced him to do so. On the contrary, his
evidence was that when he complained to Mr Gani
that he was unhappy
at ECA, Mr Gani encouraged him to stay there and make the best of it.
[33]
There is no basis for a finding that Mr Gani undermined the goodwill
of ECA or actively prevented it from earning the profit
target. It
was in his interests that the target be met. Nor was there any
evidence that ECA lost any clients as a result of competition
by
Infostream. Those who left did so because they were not satisfied
with the quality of the service which they received, and Kagiso
Media, which was a large client, left because they decided to provide
the service in-house, and not in order to go to Infostream.
[34]
I should add, in any event, that I am unpersuaded that the evidence
of Mr O’ Leary established the reduction in value
of the
shareholding relied on by Mr Hassim. The basis of his valuation was
that the company had failed to grow at a compound rate
of 8 per cent
per annum since March 2007. It was demonstrated later that if the
earnings of the Geek Patrol division, which was
part of ECA, were
included the company had in fact achieved that growth. This
undermined the very basis of his valuation.
[35]
I will nevertheless allow myself a brief reference to the legal
position. If Mr Gani had breached the agreement in a material
respect, Mr Hassim would have had an election as to whether to cancel
the agreement or abide by it. He took no steps to cancel
it and it
remained in force. Both parties therefore had to perform their
obligations in terms of the agreement. An innocent party
who elects
to abide by the agreement in spite of a breach is nevertheless
entitled to claim damages if he suffered any as a result
of it. Mr
Hassim did not claim damages. Instead he claimed, as a defence, that
the purchase price should be reduced. I am not aware
of a legal basis
for such a defence in the circumstances of this case. The obligations
in question were not reciprocal and the
decisions in
BK
Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
[11]
and
Thompson
v Scholtz
[12]
,
relied on by counsel, provide no support for this defence.
Claim
for Damages by ECA
[36]
This brings me to the claim by ECA for damages. It contends that Mr
Gani was obliged, in terms of the agreement between him
and Mr
Hassim, not to undermine the goodwill of ECA’s business or
actively to prevent it from earning the profits referred
to in the
agreement. It also contends that Mr Gani was obliged, for a period of
three years, not to carry on any business, or render
any service to a
business, in direct competition with ECA, or to utilise any of its
confidential information, approach any of its
customers or persuade
any of its employees to resign and take up employment with a
competitor.
[37]
There are no such express terms in the written agreement. ECA
contends that these were tacit or implied terms, that they were
for
its benefit and that it accepted such benefit. The claim for the
existence of a
stipulatio
alteri
and the acceptance thereof was made for the first time in an
amendment to its particulars of claim on 29 August 2011, some four
years after the agreement was concluded. There was no contract
between Mr Gani and ECA before the purported acceptance of the
stipulatio
alteri
.
If such acceptance was proper, then a contract came into being when
the acceptance was communicated to Mr Gani. The difficulty
is that
the conduct complained of, and which forms the basis of the claim for
damages, took place long before the purported acceptance
of the
stipulatio
alteri
,
in other words, at a time when there was no
vinculum
iuris
between Mr Gani and ECA. I do not accept the contention that a
contract was created retrospectively and that a claim for damages
can
be founded on conduct which occurred before the contract came into
being and was not a breach when it occurred. This is contrary
to
principle and there is no authority for it. I am in any event not
persuaded on the evidence that any of the terms of the agreement
between Mr Gani and Mr Hassim was intended to be a
stipulatio
alteri
in favour of ECA. There is the further difficulty that a
stipulatio
alteri
has to be accepted within a reasonable time, which it was not.
[13]
[38]
I am also not persuaded that it was a tacit term of the agreement
that Mr Gani would not compete with ECA. He was not willing
to sign a
restraint of trade agreement and testified that he told Mr Hassim of
his intention to start a new business, albeit on
a small scale. Mr
Hassim conceded that he knew from the outset about Mr Gani’s
new business, and never complained about it
until ECA’s action
was instituted some four years later, after Mr Gani had sued for the
balance of the purchase price. There
is no need to consider whether
the other terms pleaded were tacit or implied terms of the agreement,
as the evidence did not establish
the alleged breach. The evidence
did not establish that Mr Gani used any of ECA’s confidential
information, solicited its
customers or lured its employees away. I
should add that ECA did not establish the quantum of its alleged
losses either. For all
these reasons its claim for damages cannot
succeed.
[39]
During the interlocutory stages the question of costs was reserved on
a number of occasions. Mr Hassim applied for the consolidation
of the
two actions some three weeks before the trial date of the first
action, which had been set down for two days, commencing
on 26 August
2013. The application was granted, which made it inevitable that the
trial had to be postponed. The wasted costs occasioned
by the
adjournment were reserved for the decision of the trial court. While
it made good sense to consolidate the trials, Mr Hassim
should have
brought the application earlier. On the other hand, Mr Gani should
have agreed to the consolidation when it was first
mooted
[14]
,
and the matter could have been removed from the trial roll by
agreement. Both parties are open to criticism and I think it will
be
fair to order each of them to pay their own costs. The same will
apply to the occasions when the consolidation application was
adjourned and the costs were reserved. There is no need for me to
make an order with regard to the costs of the application to
separate
the issues as Gorven J ordered those to be costs in the cause. The
application for security for costs was settled and
those costs were
not reserved for my decision.
[40]
The order which I make is as follows:
Case
9006/2010
(i)
The defendant is ordered to pay to the
plaintiff the sum of R2 million, together with interest thereon at
the rate of 15, 5% per
annum from 1 June 2010 until 30 September 2014
and thereafter at the rate of 9% per annum until the date of payment.
(ii)
The defendant is ordered to pay the costs
of the action, including those occasioned by the employment of two
counsel.
(iii)
With regard to the application for the
consolidation of the two actions the parties are each ordered to pay
their own costs relating
to the postponements on 13 and 21 August
2013, and the same order is made with regard to the wasted costs
occasioned by the adjournment
of the trial on 26 August 2013.
Case
4554/2011
(i)
The defendant is absolved from the instance
with costs.
(iv)
The plaintiff is ordered to pay the costs
of the action, including those occasioned by the employment of two
counsel.
________________
Ploos
van Amstel J
Appearances:
Case
no: 9006/2010
For
the Plaintiff:
Adv. G D Harpur SC /
Adv. W A J Nicholson
Instructed
by:
PR Maharaj & Company
Durban
For
the Defendant :
Adv. C J Pammanter SC
/
Adv. R Pillimer
Instructed
by:
Larson Falconer Hassan Parsee
Durban
Case
no: 4554/2011
For
the Plaintiff :
Adv. C J Pammanter SC
/ Adv. R Pillimer
Instructed
by :
Nichols Attorney
Durban
For
the Defendant:
Adv. G D Harpur SC /
Adv. W A J Nicholson
Instructed
by:
PR Maharaj & Company
Durban
Date
of Hearing:
6, 7, 8, 9, 10, 13, 14, 15,
16 October 2014
14
January 2015 argument
Date
of Judgment:
16 February 2015
[1]
2012
(4) SA 593 (SCA)
[2]
2014
(2) SA 494
(SCA) para 12 fn 7
[3]
[1999]
1 All ER (Comm) 545,551.
[4]
The
accountant was Mr Brian Payne, who was at the time an associate
director of KPMG Services (Pty) Ltd.
[5]
The
potential problem was first discussed with Mr Payne at a meeting on
29 May 2007, where both Mr Gani and Mr Hassim were present.
[6]
Act
58 of 1962.
[7]
My
paraphrasing.
[8]
4
th
ed 1993
[9]
1977
(3) SA 594
(A) at 603C
[10]
1906
AC 10
at 12. This case was referred to with approval in
Commissioner
for Inland Revenue v Oppenheimer & Co
1951
(1) SA 618
(TPD) at 625G. Also see
Edwards
v Saunton Hotel Co Ltd
[1943] 1 All ER 176
at 178.
[11]
1979
(1) SA 391 (A)
[12]
1999
(1) SA 232 (SCA)
[13]
Sentrale
Kunsmis Korporasie (Edms) Bpk v NKP Kunsmisverspreiders (Edms) Bpk
1970 (3) SA 367
(A) at 404A-B
[14]
At
a pre-trial conference on 27 June 2013.