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[2013] ZAGPPHC 87
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Amarel Africa Distributors (Pty) Ltd v Padayache (236/2011) [2013] ZAGPPHC 87 (28 March 2013)
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
(HELD
IN POLOKWANE CIRCUIT COURT)
CASE
NO: 236/2011
DATE:28/03/2013
In
the matter between:
AMAREL
AFRICA DISTRIBUTORS (PTY)
LTD
.............................................................
Plaintiff
And
ALVIN
PADAYACHE
...........................................................................................................
Defendant
JUDGMENT
LEGODI
J
INTRODUCTION
[1]
A written agreement that was entered into on the 30 June 2008 between
the plaintiff and defendant in terms of which the defendant
undertook
to pay to the plaintiff an amount of R1 650 000, became the subject
of a dispute before me.
[2]
The plaintiff is claiming from the defendant payment in the sum of R1
016 385 being the outstanding amount. The defendant is
resisting the
claim by the plaintiff on the ground that the plaintiff had failed to
comply with its obligation in terms of the
written agreement and
secondly, on the basis that his indebtedness in the amount of R1 650
000 was a product of misrepresentation.
BACKGROUND
[3]
The brother of the defendant, one Mr Esvay Vanan Padayache is the
owner of AMAREL LABORATORIES (PTY) LTD. The latter is a manufacturer
of certain products (referred to hereinafter as Amarel range of
products).
[4]
The Amarel range of products, are mainly used as hair products. Long
before the 30 June 2008, the defendant was the sole distributor
of
the Amarel range of products. The defendant’s rights of
distribution aforesaid, was later transferred by the defendant
to the
plaintiff, apparently the defendant having agreed to a certain
commission payable to him.
[5]
The plaintiffs rights to distribute Amarel range of products were
later terminated by concluding the written agreement which
has become
the subject of a dispute in this case. The relevant terms of the
agreement to the dispute herein can be summed up as
follows:
5.1
That the defendant is indebted to the plaintiff in the sum of R1 650
000 which debt was taken over by the defendant from Amarel
Laboratories (PTY) Ltd.
5.2
That the amount of R1 650 000 was payable to the plaintiff in a
monthly payments of R100 000.
5.3
That the plaintiff was to provide the defendant with all the
marketing contacts and leads of customers within Limpopo Province
and
outside Limpopo Province for the Amarel range of products,
5.4
That the plaintiff was prohibited from directly marketing the Amarel
range of products after the signing of the agreement,
5.5
That the plaintiff will not purchase the Amaret range of products
from any source except from the defendant,
5.6
That as at the date of the signing of the agreement, the plaintiff
was holding Amarel range of products, and that such stock
shall be
counted and sold to the defendant at a cost price and that payment
thereof will be decided upon between the defendant
and the plaintiff.
[6]
On the 10 May 2011, the plaintiff instituted the present proceedings
claiming that the defendant was in default in making payments
as
obliged in terms of the written agreement. The last monthly payment
in the sum of R100 000 was made on the 29 September 2008.
[7]
The defendant in his plea as amended raised a defence as follows:
7.1
That the plaintiff made a misrepresentation which led him into
concluding the agreement,
7.2
That the misrepresentation was to the effect that Amarel Laboraties
(PTY)Ltd was indebted to the plaintiff in the amount of
R1 650 000
for stock of the Amarel range of products when in fact the amount was
also for cement and petroleum jelly for a product
called “Baby
Time”.
7.3
That the representation by the plaintiff was false and induced the
defendant to enter into the agreement with the plaintiff
and had the
defendant knew of the true state of affairs, he would not have
concluded the agreement aforesaid.
7.4
That the plaintiff failed to provide the defendant with all its
marketing contacts and leads within and outside Limpopo Province
for
the Amarel range of products.
7.5
That the plaintiff directly marketed and sold the stock of the Amarel
range of products to FAB CASH & CARRY in Johannesburg,
which the
plaintiff was supposed to sell to the defendant at a cost price.
7.6
That the plaintiff informed the defendant that the stock in trade was
damaged when in actual fact the stock was sold to FAB
CASH &
CARRY in Johannesburg.
ISSUES
RAISED BY THE PLEA AND EVIDENCE
[8]
The following issues could be regarded as important issues that
deserve to be determined in this case:
8.1
Whether the plaintiff made misrepresentation that unduly influenced
the defendant to conclude the agreement?
8.2
Whether the plaintiff provided the defendant with marketing contacts
and leads within and outside Limpopo Province for the Amarel
range of
products?
8.3
Whether the plaintiff concluded an agreement with the defendant in
terms whereof, the plaintiff was permitted to market or sell
some of
Amarel range of products to other people or entities? And if not,
whether the plaintiff was entitled to sell the Amarel
range of
products at any price not stipulated by the defendant?
8.4
Whether the plaintiff provided the defendant with a counted stock
list and whether the plaintiff sold such a stock to the defendant
at
cost?
DISCUSSION OF THE ISSUES AND FINDINGS
[9]
Before I start discussing the issues identified in paragraph 8 above,
let me just deal with another issue which was raised as
a special
plea at the commencement of the trial on the 4 October 2012. The
decision on the special plea was stayed until at the
end of the case
on merits.
[10]
I now proceed to deal with the special plea. The special plea was
raised in the defendant’s amended plea. The special
plea is
that at the time of the institution of the action on the 10 May 2011,
the plaintiff was deregistered as a company, in brief,
the background
to the special plea is a follows:
10.1
On the 13 November 2009, a notice of deregistration of the plaintiff
was given by the Commission for Companies and Intellectual
Property.
On the 16 July 2010 the plaintiff was deregistered.
10.2
On the 10 May 2011, the plaintiff instituted the present action. As
at that time, the plaintiff was deregistered.
10.3
The defendant discovered on the 13 September 2011 that the plaintiff
was deregistered as a company.
10.4
Just as a matter of details, on the 13 September 2011 and after the
plaintiff had submitted an application for restoration,
by a way of a
letter from Companies and Intellectual Property Commission, the
plaintiff was informed as follows:
“
Your
application for restoration was successfully processed and the status
has been changed to IN DEREGISTRATION PROCESS.
The
enterprise status will change to IN BUSINESS once all annual returns
must be filed electronically on http:/ww,lipc.co.za’’
10.5
On the 14 September 2011, the plaintiff was further informed by the
Commission aforesaid as follows:
“
Your
filing for Annual Return(s) was successfully processed. For any
enquiries please quote, the tracking number for reference”.
10.6
Based on all of the above, I can find no basis to suggest that the
procedural aspect relating to reinstatement has not been
complied
with. On the 4 October 2012, being date of hearing of this matter,
the defendant filed notice to amend the special plea.
[11]
The defendant pleaded that the plaintiff lacks locus standi to
institute the action due to the fact that at the time it instituted
the action, it was deregistered.
[12]
The plaintiffs counsel did not object to the amendment, neither did
he raise any prejudice in proceeding with argument on the
special
plea.
[14]
The gist of the contention by the defendant’s counsel was that
the plaintiff ceased to exist as a legal entity when it
was
deregistered on the 16 July 2010. It meant that the plaintiff amongst
others could not institute legal action, so the contention
continued.
Deregistration put an end to the existence of the plaintiff. Its
corporate personality came to an end in the same way
that a natural
person ceases to exist when he or she dies, so it was argued. For
this submission, counsel for the defendant relied
on Miller and
Others v Naflos Investment Holding Co. Ltd and Others
2010 (6) SA 390
SCA.
[15]
it appears from the two letters the contents of which were quoted in
paragraphs 10.5 and 10.6 that the plaintiff was deregistered
in terms
of the 1973 Companies Act on the basis that it failed to file annual
returns. It was reinstated or restored in terms of
the 2008 Companies
Act which came into operation on the 1 May 2011.
[16]
The reinstatement of registration of a deregistered company in terms
of the 2008 Act, follows upon an application thereof in
terms of
section 82(4) read with regulation 40(6) and (7) and only after the
filing of outstanding annual returns and payment of
outstanding
prescribed fees in respect of the deregistered Company.( See Fintech
(PTY) Ltd v Awake Solutions (PTY) and Others
203 SA 570
(GSJ). For
the sake of completeness and clarity the section and the regulations
aforesaid read as follows:
Section
“82. Dissolution of Companies and removal from register- (1
...)
(2)
... (a) ....
(b)
...
(3)
(a)
...
0)
...
(H)
-
(aa)
(bb)
(b)
....
(i)
...
(ii)
...
(aa)
...
(bb)
...
(3)
If the Commission deregisters a company as contemplated in subsection
(3), any interested person may apply in the prescribed
manner and
form to the Commission to reinstated the registration of the Company,
Regulation
40. Winding-up, dissolution and deregistration of Companies and
external Companies
(1)
... (2) ... (3) ...
(a)
(a)
...
(i)
...
(ii)
...
(iii)
(4)
...
(a)
...
(b)
...
(5)
...
(6)
The Commission may reinstate a deregistered company or external
company only after it has filed the outstanding annual returns
and
paid the outstanding prescribed fee in respect thereof.
(7)
An application to re-instate a deregistered company or external
company must be made in form COR 40.5 and must comply with such
conditions as the Commission may determine.
[16]
Unlike the 1973 Act which specifically provided retrospectivity
arising from restoration, the 2011 Act does not. In the Old
Act,
section 73(6) specifically made a provision for an application for
restoration to court or for the court to order restoration
of
deregistered company. Both in the matter of Peninsula Eye Clinic
(PTY) Ltd v Newlands Surgical Clinic (PTY) Ltd and Others
2012 (4) SA
484
(WCC) and Fintech (PTY) Ltd referred to in paragraph 15 above,
the issue relating to automatic retrospective effect without more,
was left open. However, in the latter matter for example, Van Oostein
J dealt with the matter based on its facts when he considered
the
status of Awake in the period from deregistration to the
reinstatement or cancellation of deregistration in terms of 2008 Act.
He found and declared that all acts done by or against Awake
Solutions (PTY) Ltd from the date of its reinstatement were validity
done and that these acts are of full force and effect.
[17]
A discretionary power in terms of the 1973 Act was given to the court
to determine whether a deregistered company ought to
be restored.
Section 73(6) thereof provided as follows:
(6)(a)
The court may, on application by any interested person or the
Registrar, if it is satisfied that a company was at the time
of its
deregistration carrying on business or was in operation, or otherwise
that it is just that the registration of the company
be restored,
make an order that the said registration be restored accordingly, and
thereupon the company shall be deemed to have
concluded in existence
as if it had not been deregistered,
(b)
Any such order may contain such directions and make such provision as
to the court seems just for placing the company and all
other persons
in the position as nearly as may be, as if the company had not been
deregistered".
[18]
The new Act makes no similar provision or provisions to guard against
any injustices. Secondly, the power to reinstate or to
restore
deregistered entities is that of the Commission as it would be seen
from the provisions quoted in paragraph 15 above.
[19]
However, I do not think such an authority to deal with deregistration
and or reinstatement by the Commission excluded the court
from
deciding on the fairness of such an action by the Commission, more so
that it is apparent that the Commission in terms of
section 82(4) and
regulations 40 (6) and (7) has to be satisfied on a narrow
consideration. Prejudice will be major consideration
for the court to
take care of.
[20]
As I said earlier in this judgment, counsel for the defendant did not
seem to want to argue prejudice. His argument was simpiy
that the
plaintiff could not be allowed to proceed with the matter because
when the action was instituted it was not in existence.
In effect,
the contention was that the proceedings were null and void abnitio as
they were instituted by an entity that did not
have legal authority
to do so.
[21]
It was not his contention that retrospective effect brought about by
reinstatement or restoration would have prejudicial effect
on his
defence or in the conduct of his case. Perhaps rightly so he did not
make this an issue. Remember, the case for the plaintiff
on the
pleadings is set out in paragraphs 5.1 to 5.6 of this judgment. The
defence thereto is set out in paragraphs 7.1 to 7.7
above.
[22]
In the course of argument, counsel for the defendant sought to
suggest that the re-registration of the plaintiff was done only
to
cure the defect of instituting an action when deregistered. In the
course of this, he further stated as follows:
“
The
plaintiff is not trading anymore. The trade of, he is not in business
anymore”
[23]
The statement does not constitute evidence. Neither did the defendant
seek to introduce evidence dealing with the non-operational
status of
the plaintiff. This is despite the fact that when the court decided
to proceed with the matter on merits, it also indicated
that parties
could come back to the special plea later if they wanted to. This did
not happen. Neither did any of the parties lead
evidence to this
effect at any stage of the trial. During evidence on merits, there
was no suggestion whatsoever that the defendant
would be prejudiced
in the conduct of his defence due to the plaintiff’s
reinstatement or restoration.
[24]
Based on all of the above, I have no difficulty in coming to the
conclusion that the defendant would not be prejudiced by proceeding
to determine the issues raised in paragraphs 8.1 to 8.4 of this
judgment. I do so on the basis that the plaintiff having been
reinstated, the acts done by the plaintiff or against the plaintiff
from the dates of its reinstatement should be regarded as having
been
validly done and that more such acts should be regarded as being of
full force and effect. I therefore now proceed to deal
with the
issues on merits.
WHETHER
THE DEFENDANT AGREED OR ALLOWED THE PLAINTIFF TO SELL
SOME
STOCK FORMING THE SUBJECT OF THE WRITTEN AGREEMENT?
[25]
The defendant in his plea raised as a defence breach of the agreement
by the plaintiff. The breach is characterized in the
plea as follows:
“
5.2
The Defendant specifically pleads that the plaintiff breached the
conditions as set out in paragraphs 4, 5, 6 and 7 of Annexure
A of
the plaintiff’s particulars of claim in that:
5.2.1...
5.2.2
The plaintiff directly marketed and sold the stock of the Amarel
range of products to FAB CASH & CARRY in Johannesburg
which the
plaintiff was supposed to sell to the Defendant at cost”.
[26]
It was not in dispute that the plaintiff had sold the stock in
question as averred
and
testified by the defendant. Clause 5, 6 and 7 of the written
agreement
read
as follows:
“
5.
AAD agrees that it will not purchase the Amarel range of products
after this agreement is signed.
6.
AAD agrees that it will not purchase the Amarel range of products
from any source except from AP.
7.
AAD may purchase the Amarel range of products from AP provided that
AAD agrees to sell the products at the stipulated price set
by AP 12
ADD is holding stock of Amarel products at the date of this agreement
Such stock will be counted and sold to AP at cost.
Payment terms for
the stock will be decided upon between AAD and AP at the time"
[27]
AAD refers to the plaintiff and AP refers to the defendant. As I said
earlier, it was not in dispute that the plaintiff marketed
and sold
the Amarel range of products to FAB CASH & CARRY. The plaintiff
however, wished to rely on an oral agreement to thwart
the
defendant’s defence. The defendant is said to have refused to
take some of the stock forming part of the written agreement.
He
allegedly indicated that such a stock in particular, the 5 litre hair
product was not selling fast. Therefore, the defendant
allegedly
agreed that the plaintiff can take and sell the stock aforesaid.
[28]
The plaintiffs cause of action as an entitlement to payment of R1 016
385.00 arising from indebtedness in the amount of R1
650 000 is based
on clause 3.c of the written agreement The entire cause of action is
founded on the written agreement. Therefore,
the plaintiff cannot
seek to thwart the defendant’s defence by relying on such an
oral agreement which is not even pleaded.
Just on this point alone,
the plaintiff ought to fail in its claim against the defendant.
[29]
Even if I was to be wrong as stated above, I do not think that the
plaintiff has succeeded in establishing the alleged oral
agreement.
In terms of the written agreement, the plaintiff is prohibited from
marketing Amarel range of products. There is no
provision in the
written agreement where the defendant allowed the plaintiff to sell
any of the Amarel range of products.
[30]
Now the plaintiff in evidence sought to suggest that the defendant
refused to take the sought stock on hand. This is said to
have
happened in July 2008 after the conclusion of the written agreement.
The defendant is said to have visited the plaintiffs
warehouse to
view the stock on hand. The defendant’s brother, who is the
owner of Amarel Laboraties (PTY) Ltd and a signatory
to the
agreement, was allegedly phoned. He was phoned by the plaintiff. The
defendant’s brother on behalf of Amarel Laboraties
also
declined to take the stock which the defendant did not want. When all
had failed, the defendant then agreed that the plaintiff
could sell
the stock for his own account so was the evidence on behalf of the
plaintiff.
[31]
Two witnesses testified on the allegations set out in paragraph 30
above. The allegations were however denied by the defendant
and in
certain respects by two if his brothers who testified on his behalf.
The two bothers included the owner of Amarel Laboraties
(PTY) Ltd.
The latter firstly denied that the 5 litre hair care products are
slow selling. It is mostly used by salons and it sells
fast to the
hair salons owners. This was also said by the defendant. The
defendant in his evidence indicated that he was mainly
dealing with
hair salons owners and he had established a large clientele in that
regard.
[32]
The defendant’s brother also indicated that he could not recall
ever having been phoned by Mr Munshi on behalf of the
defendant
wherein he was asked to take the stock which the defendant did not
want. If he had been called and asked to take the
stock he would
certainly have agreed thereto, because they are fast selling. The
targeted market for the 5 litre containers of
the Amarel hair care
products are the hair salons. Secondly, his products had to be
disposed within a reasonable period. It could
be dangerous to the
hair care users if very old products are used and this could have a
negative image on the goodwill of the business
regarding its
products.
[33]
Clearly, the plaintiff was required to prove the alleged meeting in
which the defendant refused to take some of the stock and
agreed to
allow the plaintiff to sell the stock in question. On probabilities I
am not satisfied that the plaintiff succeeded in
establishing such an
arrangement regard been had to the followings:
33.1
The stock on hand must have played a major role in the defendant
agreeing to take over the liability of Amarel Laboraties (PTY)
Ltd
(hereinafter referred to as Amarel). The amount of R1 650 000 is
regarded as an advance payment by the plaintiff to Amarel
for the
latter’products to be marketed and to be sold by the plaintiff.
This appears clearly from the Preamble of the agreement
in which it
is stated as follows:
“
Also
in this agreement, AL owes AAD monies arising from advance payment
made for stock ordered which was not delivered”
33.2
It is unlikely that the defendant would have refused to take the
stock forming the subject of his liability to the plaintiff
in the
amount of R1 650 000. Although there was an attempt to argue that the
amount of R1 650 000 was not confined only to stock
seen in the light
of the wording thereof, I cannot agree that the Amarel range of
products were
insignificant
to the defendant’ liability of R1 650 000. The defendant had to
sell the stock in order to be able to pay the
R1 650 000.
33.2.1
Firstly, there was no evidence to suggest that the liability did not
relate to advance payment for Amarel products. During
evidence the
question revolved around whether some of the items on the statement
forming the basis of liability were for something
else and not for
Amarel range of products. For example, there was a suggestion by the
defendant that one other item related to
cement which had nothing to
do with Amarel range of product. The statement AL owes AAD a total of
R1 600 000 from which the amount
R250 000 (per para b) is to be
deducted has to be seen in the context of the background relationship
between the parties and also
the Preamble to the written agreement.
33.2.2
Secondly, the plaintiff did not agree that any item on the statement
was for cement. Its evidence and main contention was
that everything
that appears on the statement provided by Amarel and used to
calculate liability to the plaintiff was in respect
of advance
payment for the Amarel range of products.
33.3
If indeed the defendant had agreed to the sale of the stock that he
did not want, he would in my view, have invoked the provisions
of
clause 7 by fixing the price at which such goods had to be sold.
Clause 7 was quoted earlier in paragraph 26 of this judgment.
Secondly, the plaintiff did not plead authorisation to sell at a
stipulated price, neither did the plaintiff testify to this effect.
In terms of clause 5, the plaintiff is not allowed to directly market
Amarel range of products after the signing of the agreement.
It did,
but no allegation and no evidence of a stipulated selling price by
the defendant as required in terms of clause 7.
33.4
The other difficulty I find in the plaintiff’s case is the sale
of Amarel range of products forming part of the stock
on hand at the
conclusion of the agreement. The stock was sold to other entities
without a benefit to the defendant. Before the
conclusion of the
agreement on the 30 June 2008, the defendant had given his
distribution rights of Amarel range of products to
the plaintiff. He
was in turn getting a commission. Now according the alleged
arrangement, the plaintiff would have been entitled
to retain the
stock in question and to sell it at profit margin of his own choice
and at the same time still insist on the outstanding
indebtedness in
the sum of R1 016 385.00. This had the effect that the defendant lost
out on the stock that he could sell at a
profit which profit he could
probably have used to reduce his indebtedness to the plaintiff.
[34]
Based on ail of the above, the probabilities do not favour the
plaintiff’s contention that there was an agreement allowing
the
plaintiff to market and sell some of the stock on hand as at the time
of the conclusion of the written agreement signed on
the 30 June
2008. The plaintiff must therefore be found to have breached clauses
5 and 7 of the written agreement.
[35]
There was a further contention to the issue under discussion. That
is, the breach even if it was to be found to exist, such
a breach or
breaches did not make any difference, so it was contended. Any breach
that might have occurred was branded as being
immaterial or
irrelevant in that the defendant elected not to take any action
within a reasonable time based on the alleged breach.
35.1
A contract may be cancelled in the event of a breach, by agreement or
by notice. A party wishing to rely on the cancellation
of a contract
because of its breach must allege and prove a breach of contract and
that the breach is material. (See Singh v McCarthy
Retail t/a
Mclntoch Motors
2000 (4) SA 295
(SCA). An act of cancellation must be
clear and unambiguous. (See Nedcor Bank Ltd t/a Nedbank v Mooipan
Voer & Graan Verspreiders
cc
2002 (3) ALL SA 477
(T).
35.2
As a relief, the innocent party is entitled to cancel the contract
and claim for a declaratory order that the contract was
cancelled
properly or he or she can claim for judicial cancellation. (See
Joubert v Bester
1977 (4) SA 560
(T).
35.3
While the right to cancel must be exercised within a reasonable time,
mere delay does not result in the loss of that right.
(See Mahaveer v
Sharma NO
1985 (3) SA 729
(A). Whether an innocent party had made an
election to cancel is a question of fact to be decided on the
evidence (See Peters NO
v Schoeman
[2000] ZASCA 152
;
2001 (1) SA 872
SCA par 12).
35.4
It is common cause that the defendant after he had made three
payments, stopped paying. This was after the defendant had on
more
than one occasion demanded the stock list and customers’
contacts and leads from the plaintiff. I deal with this aspect
in
more details from paragraph 36 hereunder. It suffices for now to
mention that I am satisfied that on the facts of the case,
the
defendant made an election to no longer be bound by the agreement
when he stopped paying in terms of the agreement for the
reasons that
are dealt with hereunder.
35.5
Insofar as the plaintiff might have wanted to avert the defendant’s
defence based on a breach by arguing that the election
to cancel was
not
made within a reasonable time, in the circumstances of the case, I am
not satisfied that the defendant had lost such a right
based on
unreasonable delay in cancelling or making an election to cancel. As
I said, failure to pay in terms of the agreement
in my view,
signifies an intention to no longer be bound by the agreement.
35.6
Any breach of clauses 4, 5 and 12 of the agreement quoted earlier in
this judgment in my view, cannot be construed as being
immaterial and
irrelevant. Any such breach will justify election to cancel, also
seen in the light of the reasoning for taking
over the liability of
Amarel.. Therefore, the contention that any breach that is alleged
and proved is immaterial and irrelevant
ought to be rejected.
WHETHER
OR NOT THE PLAINTIFF PROVIDED THE DEFENDANT WITH
CUSTOMERS’
LIST AND STOCK LIST
[36]
In terms of clauses 4 and 12, the plaintiff was obliged to provide
the defendant with marketing contacts and leads for the
Amarel range
of products and also to sell to the defendant counted stock of Amarel
products at a cost price. The plaintiff's version
was that the terms
and conditions in both clauses 4 and 12 had been fulfilled or
complied with. This was denied by the defendant
and his witness.
[37]
The onus is on the plaintiff to establish on the balance of
probabilities that clauses 4 and 12 had been complied with. For
this
purpose, the plaintiff relied on the evidence of the two witnesses,
namely; the owner of the plaintiff Mr Munshi and one Mr
Mohammed. The
latter was the manager of the plaintiff at warehouse.
[38]
It was during or about July 2008 when the defendant allegedly arrived
at the warehouse. The stock on hand was counted. The
defendant was
there. He then rejected the five litres of hair products, alleging
that they were not fast selling. I dealt with
this aspect earlier in
this judgment. He then collected the stock that he chose to take. He
only came on that particular day for
the stock. On the very same day,
he was provided with contacts and leads. The stock was taken once by
the defendant and what remained
was what the defendant did not want
and was sold by the plaintiff.
[39]
Contrary to the plaintiff’s evidence, the defendant and his
witnesses denied any suggestion that the stock list, the
contacts and
leads particulars were provided. Firstly, according to the defendant
he collected the stock about three times from
the plaintiff warehouse
and not once as suggested. Secondly, the plaintiff charged three
percent to the cost of the stock which
was supposed to be sold to the
defendant only at a cost as envisaged in clause 12 of the written
agreement. One of the defendant’s
brothers worked for the
defendant as from the third or fourth quarter of 2008. Initially he
worked for Amarel Laboraties (PTY)
Ltd.
[40]
On several occasions he was instructed by the defendant to get stock
list, customers’ leads and contacts from Mr Mohammed
who was
working for the plaintiff. Mr Mahommed was the warehouse manager for
the plaintiff. On all occasions Mr Mahommed is alleged
to have made
excuses and promises to provide the list, but it was never done
[41]
There are therefore two contradictory versions mainly by two
witnesses from both sides. Both the stock list and the customers’
leads and contacts were generated or printed out from a computer. A
copy thereof was allegedly given to the defendant on that occasion
when he allegedly came to collect the stock. When he collected the
stock, an invoice would have been issued to him and he would
have
signed a copy to acknowledge the stock he had bought and collected.
[42]
The plaintiff however failed to produce any invoice relating to
either, the stock list, or a document containing customers’
contacts and leads. The explanation given was that none of the
documentation so printed out of the computer and allegedly given
to
the plaintiff could be found. Interestingly, no explanation of
efforts taken to procure such documents was given. The plaintiff
contended itself with mere assertion that such documents could not be
found. I found this to have been very unsatisfactory.
[43]
For the plaintiff to want to enforce payment in terms of the written
agreement, it has to establish on the balance of probabilities
that
for its part, it had fulfilled its obligations in accordance with the
terms and conditions of the written agreement and in
particular
clauses 4 and 12.
[44]
The defendant and his witness impressed the court as good witnesses.
Their evidence around non-receipt of the customers’
leads and
contacts and counted stock list was not in any way destroyed. They
corroborated each other in material respect. For example,
that on
several occasions the plaintiff was requested to provide the
defendant with stock list and customers’ leads and contacts.
[45]
One can assume that the customers' leads and contacts were very
important to the defendant. For him to be able to sell the
stock that
was to be sold to him by the plaintiff at a cost, he would have
required to have contacts and leads of new customers
that the
plaintiff established during the time it was still distributing
Amarel range of products. The defendant would have needed
the extent
of the stock on hand which formed part of the written agreement
concluded on the 30 June 2008. I therefore find the
defendant’s
version to be
more
probable than that of the plaintiff. I now come to deal with another
issue raised earlier in this judgment
WHETHER
THE PLAINTIFF MADE CERTAIN FALSE REPRESENTATIONS
TO
THE DEFENDANT?
[46]
In his plea, the defendant averred as follows:
“
2.2
The defendant specifically pleads that the plaintiff made a
misrepresentation which lead me to enter into the agreement which
is
attached to the plaintiff’s particulars of claim as Annexure “A
2.3
This misrepresentation which the plaintiff made was that, Amarel
Laboraties (PTY) Ltd was indebted to the plaintiff in the amount
of
R1 650 000 for stock of the Amarel range of products when in fact the
monies was in respectfully for a product called “Baby
Time”.
2.4
The representation by the plaintiff was false and induced the
defendant to enter into the agreement with the plaintiff. The
defendant would not have entered into the agreement with the
plaintiff if he knew that the representation was false".
[47]
A party relying on fraud or misrepresentation must not only plead it,
but must also prove it clearly and distinctly (See Countney
- Clarke
v Bassingthwaighte
1991 (1) SA 684
(NM) 689). The onus is the
ordinary civil onus, bearing in mind that fraud is not easily
inferred.
[48]
It is not sufficient to allege that the representation was ‘false’
because the word implied no more than that the
representation was
untrue. The mental element must be alleged (see Breeds v Elsie Motors
(Edms) Bpk
1963 (3) SA 525
(A). The representor or his agent must
have had the intention that the representee will act on the
representation.
[49]
The representation must have included the representee to act or
conclude the agreement. (See Seven Eleven Corp of SA (PTY)
Ltd v
Cancun Trading no. 150 CC
2005 (5) SA 186
(SCA).
[50]
If reliance is placed on fraudulent non-disclosure, facts giving rise
to the duty to disclose must be set out. It is also necessary
to show
that the duty to disclose was deliberately breached in order to
deceive. (See (2) SA 915 (A) and Movie Laundry Co (PTY)
Ltd v Van Wyk
2003 (2) ALL SA 291
(C).
[51]
If fraud or misrepresentation led to the conclusion of a contract,
cancellation of the contract may be claimed. (See North
West
Provincial Government v Tswaying Consulting CC
2007 (4) SA 452
(SCA).
The innocent party may elect to keep the contract alive and claim
damages.
[52]
If cancellation of the contract is claimed, restitution must be
tendered. The defendant is claiming dismissal of the plaintiffs
action and cancellation of the written agreement. The breach
contention has been raised as a defence and regard being had to the
facts of the case, the defendant has nothing to return or to tender
as a restitution or compensation.
[53]
Now, coming back to the issue under discussion, the document relied
upon as the basis for misrepresentation, is a statement
issued on the
31 June 2008 by Amarel Laboraties. The statement is directed to the
plaintiff. It shows the amount in respect of
which Amarel Laboraties
was indebted to the plaintiff. As one can see, the statement was
issued on the very same day the written
contract was signed by or on
behalf of the plaintiff, defendant and Amarel Laboraties.
[54]
it is also important to mention that and as it would also appear from
the written agreement, the three parties have had a meeting
on the 18
June 2008, just before the conclusion of the written agreement. The
statement consists of seven pages. It shows the date,
description or
transaction, debits and credit amounts and then the balance
outstanding as due to the plaintiff. The due amount
is in respect of
advance payments by the plaintiff to the defendant for stock that was
supposed to be delivered to the plaintiff.
As at the time of the
conclusion of the agreement, not all the stock paid for in advance
was delivered to the plaintiff. The total
amount was summed up and
recalculated by hand and it came to R1 646 403.31. The R1 650 000
indicated on the written agreement is
said to be a round figure of
the said sum of R1 646 403.31.
[55]
The defence of misrepresentation was first set out in paragraph 2 of
the plea dated the 15 December 2011. Then on the 11 February
2013,
and after the defendant had already testified, the plea was amended
as quoted in paragraph 46 of this judgement to include
the following
averments to paragraph 2:
55.1
At the end of paragraph 2.3 of the plea by adding: and petroleum
jelly for a product called “Baby time”
55.2
By adding another paragraph as follows: “2.4 the representation
by the plaintiff was false and induced the Defendant
to enter into
the agreement with the plaintiff. The Defendant would not have
entered into the agreement with the plaintiff if he
knew that the
representation was false”
55.3
A party wishing to rely on fraud or misrepresentation in order to
escape his obligations in terms of the agreement, must not
only
allege facts upon which fraud or misrepresentation is based, but must
also adduce evidence to prove such facts or allegations.
The timing
of the representation inducing a party to conclude an agreement which
he or she will not have concluded, had he or she
have known of the
true state of affairs, is very important.
[57]
The defendant did not testify on the alleged representation, the
nature of the representation and what was actually said to
him by
whom, when, where and what influence the representation had on him to
conclude the agreement. As at the time of the conclusion
of the
defendant’s evidence during 2012, he had not as yet made
allegations as quoted in paragraph 55.1 and 55.2 above, neither
did
he apply to be recalled so that the new allegations could be
substantiated. Just on this point alone, his defence of
misrepresentation
ought to fail.
[58]
There is of course, another difficulty confronting the defendant. The
question is who had made the representation, if any?
His cause of
complaint was based on some of the items in the statements issued by
Amarel Laboraties and not by the plaintiff. The
items relate to
cement and the petroleum jelly for a product called “Body
Time”.
[59]
As a brief background, the owner of Amarel Laboraties testified on
behalf of the defendant. The plaintiff apparently advanced
money to
Amarel Laboraties to enable the plaintiff to buy cement that was
targeted at a certain building project. When the project
did not
materialise, Amarel Laboraties remained indebted to the plaintiff in
the sum of R250 000. According to the evidence, when
the cement or
building project did not succeed, the advance of the amount by the
plaintiff to Amarel Laboraties was treated as
an advance for Amarel
range of products. It was therefore included in the statement as a
liability towards the plaintiff. In the
light of all these, it cannot
be said false representation was made and that it was made by the
plaintiff. On this basis, the defendant
should be found not to have
succeeded in making a case for misrepresentation against the
plaintiff.
[60]
As regards, the petroleum jelly for a product called “Baby
Time,” again this had a bearing on Amarel Laboraties.
The item
for this was
included
in the statement prepared by the latter It forms part of Amarel
Laboraties’ indebtedness to the plaintiff. It is
included in
the R1 650 000 liability by Amarel Laboraties. The Baby Time product
came as a result of an arrangement between the
plaintiff and Amarel
Laboraties, through payments by the plaintiff in advance to the
Amarel Laboraties,. The latter was to purchase
petroleum jelly in
drums from Durban. Out of the petroleum jelly, Amarel manufactured
the Baby Time (baby care products) which
was then delivered to the
customers designated by the plaintiff. This clarity came during the
evidence of the last witness for
the defendant who happens to be the
defendant’s brother and the owner of Amarel. The representation
if any, was not made
by the plaintiff and no evidence was adduced to
attribute the alleged false representation to the plaintiff.
[61]
Having regard to what is stated in paragraphs 59 to 60 above, the
wording of clause 3.c raised another issue with regard to
the alleged
misrepresentation. At the risk of repeating myself, it reads as
follows: “AL owes AAD a total of R1 650 000 from
which the
amount of R250 000 (per paragraph b) is to be deducted”.
[62]
Whilst one can accept that R1 650 000 was in respect of the stock not
delivered to the plaintiff, after the plaintiff had made
an advance
payment in connection thereof, The suggestion that the liability was
intended to be limited to Amarel range of products
only, ought to be
seen in the context of what is stated in paragraphs 59 and 60 of this
judgment Therefore the contention around
this ought to be rejected.
However, the plaintiff’s action is destined to fail seen in the
light of my findings regarding
the other issues on the breach.
[63]
Consequently, an order is hereby made as follows:
63.1The
plaintiff’s action is hereby dismissed with costs,
63.2
The written agreement concluded on the 30 June 2008 is hereby
cancelled.
MF
LEGODI
JUDGE
OF THE HIGH COURT (NORTH GAUTENG HIGH COURT)
THE
PLAINTIFF’S ATTORNEYS: DOCKRAT INC ATTORNEYS
C/O
AM
CARRIM
16 WITKLIP STREET
LADAMA,
POLOKWANE
TEL:
015 2931666
FAX:
015 2931700
REF:
AM CARRIM/MSM-72/2011
DEFENDANT’S
ATTORNEYS
14
LANDDROS MARE STREET
POLOKWANE
TEL:
015 295 6045
REF:
JP MORTON/ib/15995