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[2014] ZAGPPHC 315
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Mirchandani v Unica Iron And Steel (Pty) Ltd and Another (2846/2011) [2014] ZAGPPHC 315 (4 June 2014)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
CASE
NO: 2846/2011
DATE:
04 JUNE 2014
In the matter
between:
SURECH
MIRCHANDANI
........................................................................
Plaintiff
And
UNICA IRON AND
STEEL (PTY) LTD
.........................................
1st
Defendant
MUHAMMAD ASIF
QASIM
.........................................................
2nd
Defendant
JUDGMENT
MATOJANE, J
[1] This action
concerns a claim for specific perfomance instituted by the Plaintiff
against his former employer based on a hand
written agreement signed
by the parties on 28 September 2010. The Defendant denies the
validity and enforcement of the agreement
and pleaded that the
handwritten document was an incomplete and provisional document that
was subject to the signing of a further
formal agreement which was
never done, that the parties lacked animus contrahendi for the
conclusion of the final agreement. The
Defendant further pleaded
that the house referred to in clause 2 of the handwritten agreement
is not the property of the First
Defendant and therefore cannot be
transferred by it.
[2] The essential
facts giving rise to the dispute between the parties can be
summarised as follows: The Plaintiff, (Mirchandani)
is an Indian
Citizen with vast experience in the manufacturing and marketing of
iron and steel. He came into the country in 2005
with the aim of
setting up a steel processing plant. After negotiations with the
directors of the First Respondent, Mr Irshad
Ul haq (‘Ul haq’)
and Mr Mohammed Asif Qasim (‘Qasim’) a steel processing
business was setup.
[3] Mr Mirchandani
testified that he identified business premises, went to India in 2006
to purchase plant mechinery and brought
technical staff from India to
assist him in running the plant and introduced all his previous
suppliers from India to the First
Respondent. He together with other
directors arranged finance with the Department of Trade and Industry
and based on his technical
expertise they were granted a loan at a
concessional rate of interest. A residential dwelling was purchased
for Mr Mirchandani
in the name of Second Defendant because the First
Defendant was at that stage not yet in existence and could not obtain
financing
in its name. After incorporation, First Defendant made
bond repayments over the property.
[4] On the 21 May
2007 the parties entered into an employment agreement. The parties
agreed as follows:
1. That Mr Suresh
Mirchandani will be working as a Technical Director on profit sharing
basis. He will be a key person and under
his leadership and guidance,
Unica will source, commission and run the plant successfully.
2. Mr Suresh
Mirchandani will be entitled for 17% of the profits of Unica defined
herein as follows:
3. Profits will be
calculated before tax after providing for depreciation and interest
on Shareholders loans.
4. Mr Suresh will be
drawing a salary of R40000-00 per month which will be deducted from
his profit share at the end of the year;
If Unica does not achieve
profits it will carry to the next years until Unica achieves
sufficient profits of which 17% is equal
or higher than the total
drawings till that date.
5. As Mr Suresh is
sharing profits with Unica and his association with Unica will be on
long term basis and unrestricted.
[5] Pursuant to the
agreement, Mr Mirchandani caused the First Defendant’s steel
processing plant to be successfully intalled
and commissioned. As a
Technical Director, Mirchandani testified that he used to work at the
factory until 10 at night and worked
on Sundays. Initially the
business was running at a loss but later it became a success. During
2009 a dispute arose between the
parties concerning Mirchandani’s
profit share and other matters. He was served with a retrenchment
notice. Mirchandani testified
that in response to an email he sent
the other directors about his concerns, the other directors wanted
him to form a new company
to produce oxygen and resign from the First
Defendant. He was presented with a settlement agreement in respect
of the termination
of his employment with the First Defendant and a
shareholders agreement for a new company to be formed. He refused to
sign the
agreement.
[6] On the 28
September 2010 Mirchandani was called to an urgent meeting with Mr
Qasim and Ul haq. He testified that he was offered
a tax free
amount of R3.5 million (three million five hundred thousand rands) to
end his contractual relationship with the First
Defendant. He
insisted that he obtain the cash amount after tax and Mr Ul haq
phoned the First Defensant’s auditors to discuss
how this could
be done. After the auditors had confirmed that a tax directive would
be required from SARS, Mr Qasim added the
word ‘net’ in
paragraph 2 of the agreement and deleted the words ‘Tax to be
discussed’. The agreement was
reduced to writing by Qasim
during the meeting, Mr Qasim read the agreement back to Mirchandani
point for point and was discussed.
He testified that the word “net
“ was included in the agreement to indicate that he was not
liable to pay tax on the
package. The mood was tense during the
meeting and after the meeting Qasim gave him the registration papers
of the vehicle and
said he should take the house that he was living
in. For reasons that will follow I quote the agreement as it was
handwritten:
“Agreement
Between Mr Suresh
Mirchandani
And
Unica Iron and Steel
(PTY) LTD
Following was agreed
upon:-
1. Mr. Sureash will
be leaving Unica from 30th September 2010 and he will not be involved
in Unica at all. Subject to signing of
agreement the completion of
following.
2. Unica will pay
him as follows for golden hand shake:
→
R1,420000,00 - One million four hundred & 20 Thousand Rand only
(Net)
Will be paid upon
signing of the agreement.
→ Car which he
is using will be transferred to his name upon signing of agreement.
→ House will be
transferred to his name after within 3 months of signing the
agreement. Transfer and other costs for 3 months
will be paid by
Unica.
3. All other
expenses for Mr. Suresh currently paid by Unica will be transferred
for his account or will be cancelled as agreed
upon:-
- Car insurance
- Telephone (all
cell incl.)
- Medical Aid
- Life insurance
- Petrol Card
- DSTV
- Car tracking
System.
4. He will not be
engaging himself in any business directly in competition with Unica
Steel/Unica plastic.
5. Mr Suresh will
inform all our associates local/overseas including suppliers about
this development and will introduce Mr Asif.”
[7] It is common
cause that pursuant to the signature of the above agreement,
Mirchandani vacated his office the following day
after drafting an
email which Qasim approved, introduced Qasim to First Defendant’s
suppliers in India. Mirchandani further
took over the payment of car
insurance, petrol card and the car tracking system. He cancelled the
medical aid and life insurance
policy and had the Dodge Journey
registered into his name. On the 3 November 2010 First Defendant
paid Mirchandani an amount of
R100 000.00.
[8] Mr Ulhaq
testified on behalf of the First Defendant. He is a director of the
First Defendant. He testified that Mr Mirchandani
facilitated the
commission of the plant and got his fees as a consultant. He
confirmed that it was agreed that Mr Mirchandani’s
remuneration
was 17% of the net profit and all his expenses were paid by the First
Defendant. He testified that their relationship
with Mr Mirchandani
became strained when he started raising many issues and involving
himself in many other projects outside of
his work. They served Mr
Mirchandani with a retrenchment notice but later offered to finance
an oxygen plant provided he resigned
from the First Defendant in an
attempt to accommodate him.
[9] When they
realised that the oxygen project was not workable they met with Mr
Mirchandani to finalise his exit. He testified
that they agreed to
do the heads and the attorneys will finalise a proper agreement. The
clauses were discussed and reduced to
writing. He testified that the
words “ subject to the signing of the agreement” meant
that a formal agreement will
be signed by the parties. He then
telephoned the auditors who said they will first have to apply for a
tax directive. They paid
a sum of hundred thousand rand into the
account of Mr Mirchandani as he was not getting a salary and they
thought that he will
sign the final agreement. The tax directive was
issued later and the tax liability was more than what was expected
and they requested
Mr Mirchandani to pay 50% thereof. Mr Mirchandani
refused to pay part of the tax liability and also refused to sign the
final
agreement. They resolved to remove him as a director.
[10] Mr Qasim also
tesfified for the First Defendant. He is the third director of the
First Defendant and has his own separate
company. He testified that
the relationship with Mr Mirchandani got strained when he got
involved in other businesses and asking
questions about wastage and
accusing other directors of cheating him. Because they could not
work with Mr Mirchandani, they offered
to partner with him in an
oxygen plant, set it up and later sell their shares to him. When
they realised that the oxygen plant
was not viable, they met with Mr
Mirchandani on the 28 September 2010 where they agreed on heads that
were to be sent to the attorneys
to be formalised into an agreement.
[11] Mr Qasim
testified that the word “net” in the agreement meant
“cash” and “Tax” was scratched
out as they
were awaiting the tax directive. He testified that “on signing
of the agreement” refers to the agreement
that was to be drawn
by attorneys later. It was decided to remove Mr Mirchandani as a
director when he refused to sign the formal
agreement.
[12] Counsel for the
Defendants submitted in his heads of argument and in court that the
use of the words “subject to”
by the parties, clearly
intended that the provisional agreement was to be superseded by a
later formal written agreement drafted
by the Defendants attorneys
after the obtaining of the tax directive, alternatively the three
parties who signed the agreement
were not ad idem that no real or
final agreement on the document was reached.
[13] The immediate
difficulty I have with this submission is that the parties clearly
intended there and then to create a final
contract. The written
agreement was not a mere proposal in the course of negotiations
which, if successful might lead to the conclusion
of the final
contract. The agreement had contractual force. See Pitout v North
Cape Livestock Co-op Ltd
1977 (4) SA 842
(A) at 850D. As per clause
1 of the agreement, Mr Mirchandani vacated his office after signature
of the agreement and did not
receive a salary thereafter. He
introduced Mr Qasim to the First Defendant’s business
associates in an email approved by
Mr Qasim in terms of clause 5 of
the agreement. Mr Mirchandani took over the car insurance,
telephone, petrol card, DSTV and car
tracking system and cancelled
the medical aid and insurance after signing the written agreement in
terms of clause 3. This in
my view, clearly shows the parties
intention as expressed in the contract.
[14] Mr Qasim
testified under cross examination that he asked Mr Mirchandani to
sign the agreement so that the lawyers can see what
they have agreed
upon and so that Mr Mirchandani cannot the next day claim more. He
stated further that he would not have permitted
Mr Mirchandani to
change any term unilaterally and the attorneys could not add or
change what they had agreed upon. It follows
therefore that the
terms contained in the written agreement were those that were agreed
upon and no further terms were outstanding.
[15] The golden rule
of interpretation is that language in contracts is to be given its
ordinary grammatical meaning unless this
results in some absurdity or
repugnancy or inconsistency with the rest of the instrument. See
Coopers and Lybrandt and others
v Bryant
[1995] ZASCA 641995
(3) SA
761. The ordinary gramatical meaning of the word “net”
in clause 2 of the agreement is unambiguos, it was
agreed that Mr
Michandani will be paid a golden handshake of one million four
hundred and twenty thoudand rands after taxes, allowances
and
deductions. Mr Ul haq being a chartered accountant and Mr Qasim, a
businessman could never have understood the word “net”
to
mean “cash” as alleged by Mr. Qasim, this in my view,
explains why the words “tax to be discussed” was
deleted
by Mr Qasim.
[16] The First
Defendant has pleaded that the house, referred to in paragraph 10.2.4
of the particulars of claim and clause 2 of
the handwritten agreement
is not the property of the First Defendant. On this basis it was
submitted that it could therefore not
be transferred by it. Once
again, the immediate difficulty I have with this contention is that
clause 2 clearly state that the
parties agreed that the First
Defendant would cause the property to be transferred into the name of
the Mr Mirchandani. The rule
of interpretation on actions based on
contract was clearly set out by Greenberg JA in the matter of Worman
v Hughes and Others
1948 (3) SA 495
(A) at 505 where he stated that:
“It must be
borne in mind that in an action on a contract, the rule of
interpretation is to ascertain, not what the parties
intention was,
but what the language used in the contract means, i.e. what their
intention was as expressed in the contract. As
was said by Solomon,
J, in Van Pletsen v Henning (1913 A.D., p. 82 at page 89): ‘The
intention of the parties must be gathered
from their language, not
from what either of them may have had in mind’.”
[17] It was
submitted on behalf of Mr Mirchandani, correctly in my view, that if
the parties had intended that the hand written
agreement be depended
on the drafting of a full and proper agreement and the obtaining of a
tax directive, the parties would have
said so. I also agree that the
words “subject to the signing of agreement” in the
preamble and elsewhere, simply refer
to the agreement itself.
[18] In view of my
finding that the hand written agreement is not provisional but a
completed contract, there is no room for the
implication of prayers
(a) and (b) of defendant’s counterclaim which falls to be
dismissed.
[19] In the result
the following order is made: Judgment is granted in favour of the
Plaintiff as follows:
1. Payment of
R1,320.000.00 together with interest at 15.5% per annum from 1
October 2010 to date of payment;
2. Payment to the
bondholder of such amount as may be outstanding in respect of the
bond currently registered over the property
situated at 30 Blesbuck
Avenue, Aldo Manor, Centurion, Pretoria (‘the immovable
property’);
3. Defendants are
ordered to transfer the immovable property into the name of the
Plaintiff;
4. Payment to the
Plaintiff of the amount income tax may become due and payable to SARS
as a result of payment of the amount of
R1,420,000.00 to Plaintiff
and the transfer of the Dodge Journey (registration number YRV552GP)
and the immovable property into
the Plaintiff’s name;
5. Second Defendant
is ordered upon demand to sign such documentation as may be necessary
to effect registration of the immovable
property into the name of the
Plaintiff;
6. Should Second
Defendant and/or the Defendant refuse to sign such documentation as
may be necessary to give effect to the order
in paragraph 3 above,
the Sheriff of the Honourable Court is authorised and ordered to sign
such documentation on behalf of the
Second Defendant and/or the
Defendant to give effect thereto;
7. Costs of suit;
8. The relief sought
in prayers a), b), c) of Defendants counterclaim is dismissed with
costs;
9. The relief sought
in prayers 4 and 5 of Plaintiff’s Particulars of Claim and the
relief sought in prayer d) and e) of the
Defendant’s
Counterclaim is postponed sine die.
MATOJANE J
JUDGE OF THE HIGH
COURT OFSOUTH AFRICA
GAUTENG DIVISION
PRETORIA