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[2013] ZAGPPHC 225
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Fourie v Schmidt and Another (67835/2011) [2013] ZAGPPHC 225 (1 August 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
Case
number: 67835/2011
Date:01/08/2013
In
the matter between : -
ANTON
LEONARD
FOURIE
...................................................
Plaintiff
and
HEINRICH
SCHMIDT
….............................................
First
Defendant
JOHANNES
LODEWIKUS WYDEMAN
..............
Second
Defendant
JUDGMENT
JANSE
VAN NIEUWENHUIZEN AJ
[1]
The plaintiff claims payment of an amount of R 200 000, 00 with
interest and costs from the defendants on the basis that the
defendants are personally liable for the debts of a close corporation
of which they are the members.
[2]
At the inception of the trial, Mr Levine, who appeared on behalf of
the plaintiff, informed me that default judgment had already
been
taken against the second defendant and as a consequence the trial
will only proceed against the first defendant.
PLEADINGS:
[3]
The following issues are common cause between the parties:
a)
the first defendant was, at the relevant time, a member of a close
corporation known as Just Jade Trading ("Just Jade");
b)
the first defendant actively participated in the business of the
corporation;
c)
Just Jade entered into a project investment agreement ("the
agreement") with the plaintiff in terms of which the plaintiff
would invest a sum of R 200 000, 00 in a project known as Erf 110
Buffelsdrift Nature Reserve ("the project"). I pause
to
mention that Just Jade did business in the building industry and the
project referred to was in respect of the building of a
residence on
the
property known as Erf 110 Buffelsdrift Nature Reserve;
d)
the amount of R 200 000, 00 was advanced to Just Jade;
e)
Just Jade did not finish the building project and did not receive a
final payment form the bank;
f)
the final payment by the bank, was made to the owner of the property,
Mr Hendricks.
ISSUES
TO BE DECIDED
[4]
The following issues are in dispute between the parties:
a)
the interpretation of clause 5 of the agreement that reads as
follows:
"Just
Jade agrees that it will utilize the funds so invested for the said
purpose and upon receipt of the funds confirms that
is indebted to
the Investor for the said amount being due and payable once the final
progress payment has been received from the
bank."
b)
whether the building work was executed in a proper and workmanlike
fashion;
c)
whether the first defendant's conduct resulted in the non-completion
of the project and was reckless, grossly negligent or with
the intent
to defraud the plaintiff or was for any other fraudulent purpose as
contemplated in section 64(1) of the Close Corporation
Act, No 69 of
1984.
LEGAL
PRINCIPLE
[5]
Section 64(1) reads as follows:
"(1)
If it at any time appears that any business of a corporation was or
is being carried on reckless, with gross negligence
or with intend to
defraud any person of for any fraudulent purpose, a Court may on the
application of the Master; or any creditor,
member or liquidator of
the corporation declare that any person who was knowingly a part to
the carrying on of the business in
any such manner, shall be
personally liable for all or any of such defects or other liabilities
of the Corporation as the Court
may direct, and the Court may give
such further orders as it considers proper for the purpose of giving
effect to the declaration
and enforcing that liability."
[6]
Mr Levine readily conceded, that the plaintiffs claim is not based on
fraudulent conduct, but rather on the reckless or grossly
negligent
conduct of the first defendant.
EVIDENCE
Plaintiff:
[7]
The plaintiff testified and called one further witness, to wit Mr
Hendricks.
[8]
The plaintiff confirmed Just Jade's indebtedness to him and
furthermore testified that he had not received any payment from
the
close corporation.
[9]
The plaintiff stated that he demanded the money from the first
defendant , but was told that Just Jade had been liquidated.
[10]
During cross-examination, the plaintiff conceded that he does not
have personal knowledge of the way in which the building
work was
executed. He stated that he relied solely on the evidence of Mr
Hendricks in this regard.
Mr
Hendricks
[11]
Mr Hendricks testified that the building work had proceeded until
roof height, when he decided not to make any further progress
payments to Just Jade.
[12]
He testified that he became increasingly dissatisfied with the
quality of the building work and continually brought defects
to the
attention of the first defendant.
[13]
At some stage he arranged a meeting at the building site with the
first defendant and took his father along to the meeting.
At the
meeting he directed the first defendants attention to several defects
in the building work. Notwithstanding the aforesaid,
the first
defendant failed to rectify the defects.
[14]
According to Mr Hendricks, the defects were visible and consisted of,
inter alia, the following:
a)
windowsills were skew;
b)
the walls were not built with a 90° angle;
c)
opposite doors were at different heights;
d)
the floor was uneven;
e)
bricks did not line up;
f)
walls inside the house that were built to form cupboards, could be
pushed over;
g)
the drain outside the house was installed too close to the house,
which resulted in damp problems.
[15]
All the aforesaid defects were brought to the attention of the first
defendant at the meeting attended by his father.
[16]
Mr Hendricks appointed a mediator, a certain Mr Bolhuis, to
facilitate the resolution of the dispute pertaining to the defective
building work. Notwithstanding the aforesaid, the disputes could not
be resolved. The first defendant thereafter, left the building
site
and Mr Hendricks appointed another building contractor to finalise
the work.
[17]
During cross-examination it was put to Mr Hendricks that the first
defendant denies that any of the defects referred to in
his
testimony, existed at the time the first defendant left the building
site. Mr Hendricks responded by referring to a host of
e-mails that
was forwarded to the first defendant in respect of the defects. He
could, however, not produce a single e-mail in
court.
[18]
Mr Hendricks admitted that Just Jade issued summons against him for
the balance of the building contract price. He testified
that he
received advice not to defend the matter and admitted that default
judgment was granted against him.
[19]
Mr Hendricks was visibly upset and emotional during his testimony and
at one stage during cross-examination became argumentative.
His
emotional state is understandable, if one takes into account that he
was very excited about his new house and disgruntled with
the turn
that events took.
[20]
His emotional state unfortunately influenced the quality of his
evidence and he was unnecessary hostile during cross-examination.
First
defendant:
[21]
After the plaintiff closed his case, Mr Keet applied for absolution
from the instance, t did not grant the application.
[22]
The first defendant testified and did not cail any further witnesses.
[23]
I must, at the outset, state that the first defendant was an
impressive witness. He was at ease and gave his testimony in a
logical and clear manner. He remained at ease during
cross-examination and answered questions without difficulty.
[24]
The first defendant denied that the defects, referred to by Mr
Hendricks, existed. He testified that he has been in the building
industry for a considerable period of time and the fact that owners,
during the cause of the building operations, point out defects
is not
uncommon. These defects are attended to as and when it is pointed
out.
[25]
He denied receiving any e-mails from Mr Hendricks in respect of
alleged defects and stated that the e-mails that were exchanged
pertained to the color of paint, the type of finishings, etc.
[26]
He testified that the house was 85% - 90% completed when Mr Hendricks
refused to make further progress payments.
[27]
The first defendant admitted that he had a meeting with Mr Hendricks
and his father at the building site. He testified that
general
defects were pointed out, for instance the shower floor that was not
to the liking of Mr Hendricks. He denied that the
defects referred to
by Mr Hendricks in his evidence, were pointed out to him during the
meeting.
[28]
The first defendant testified that the dispute with Mr Hendricks
arose when he requested a further progress payment. Mr Hendricks
apparently completed the necessary forms to be submitted to the bank.
The bank's inspector inspected the site and approved the
progress
payment.
[29]
The payment was, however, not forthcoming and upon enquiry Mr
Hendricks informed him to speak to his representative, Mr Mike
Bolhuis. He made an appointment with Mr Bolhuis and was simply told
to leave the building premises. He was also warned not to bother
Mr
Hendricks and his family in future.
[30]
The first defendant testified that the builders were at that stage
busy with rectifying the defects pointed out by Mr Hendricks.
His
team was, however, shortly after the meeting with Mr Bolhuis, denied
access to the premises and consequently Just Jade was
not afforded an
opportunity to finish the project
[31]
The first defendant could not recall that he forwarded an sms to the
plaintiff informing him that Just Jade had been liquidated.
He
testified that he could not imagine why he would have sent such a
message, as Just Jade was still operational at that stage
and has
never been liquidated.
[32]
Just Jade thereupon issued summons against Mr Hendricks claiming
payment of the outstanding amount of R 354 896, 00 in terms
of the
building contract. Although Just Jade obtained default judgment
against Mr Hendricks, the judgment could not be executed
because Mr
Hendricks applied for the voluntary surrender of his estate.
[33]
The first defendant, further, testified that the money due to the
plaintiff was not paid by Just Jade, because Just Jade did
not
receive the full contract price from Mr Hendricks.
[34]
The first defendant dealt fully with each and every defect referred
to in evidence by Mr Hendricks and in each instance gave
a plausible
explanation as to why such defect could not and did not exist when he
was still busy with the building project.
AMOUNT
DUE AND PAYABLE?
[35]
First of all and before the conduct of the first defendant is
examined, it is necessary to determine whether the monies in
terms of
the agreement was due and payable to the plaintiff.
[36]
It is common cause that the plaintiff elected not to institute action
against Just Jade for the contract amount. The Plaintiff
did not
provide any proof that Just Jade has in fact been liquidated and the
failure to institute action against Just Jade remains
a mystery.
[37]
Be that as it may, it is clear from the first defendant's evidence
that the payment would in any event not have been made due
to the
fact that the full contract price was not received from Mr Hendricks.
[38]
The important question is, however, whether the payment was due at
all.
[39]
Clause 5 of the agreement referred to earlier, stipulates that
payment of the contract amount is "due and payable once
the
final progress payment has been received from the bank."
[40]
The clause does not state to whom the final payment should have been
made.
[41]
Mr Levine argued that the only possible interpretation of the clause
could be that a final payment from the bank triggers the
obligation
to pay. Whether Just Jade in fact received the payment or nor is,
according to him, not relevant.
[42]
If a clause in a contract is vague and the parties thereto disagree
on the meaning of an express provision, the nature, purpose
and
context of the contract should first of all be examined. [See: Swart
en 'n ander v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
A.]
[43]
The purpose of the agreement between the plaintiff and Just Jade
appears clearly from clause 2:
"The
investment is specifically limited to the provision of bridging
capital for a dwelling to be erected on the above stand
where the
owner has already obtained the necessary bond to finance the building
of the dwelling."
[44]
When confronted with the proposition that the clause should be
interpreted to mean that Just Jade's obligation only arises
upon
receipt of the final progress payment from the bank, Mr Levine
disagreed.
[45]
Mr Levine contended that such an interpretation would lead to an
absurd result, in that the plaintiff would never be able to
enforce
payment of the sum invested if Just Jade simply decides to abandon
the building project.
[46]
I do not agree. If Just Jade, through its own conduct, makes
performance of the contract impossible, the plaintiff has contractual
remedies to enforce payment.
[47]
Should Mr Levine's submission be accepted, Just Jade would still have
to pay the plaintiff, even if the owner refuses to make
any payment
in terms of the contract.
[48]
In my view, the bridging finance was aimed at erecting a residence
for Mr Hendricks on his property. Mr Hendricks, however,
had to
obtained finance for the bank for this purpose. This much is clearly
stated in clause 2 of the agreement. The money advanced
by the
plaintiff would consequently be
due
and payable as soon as the project was completed and Just Jade had
received
the final progress payment from the bank.
[49]
If this is not the case, reference in clause 2 of the agreement, to
the finance obtained by Mr Hendricks from the bank, would
not have
made any sense.
[50]
The parties did not foresee the eventuality that arose in this matter
and consequently made no provision therefore. If the
plaintiff
intended to receive payment even if Just Jade did not receive any
payment from Mr Hendricks, the agreement should have
contained an
express clause to that effect.
[51]
In the premises, I am of the view that the amount owed to the
plaintiff did not become due and payable.
RECKLESSNESS
/ GROSS NEGLIGENCE
[52]
Even if I am wrong in this regard, I do not consider the first
defendant’s running of the business of Just Jade in relation
to
the building project, reckless or grossly negligent.
[53]
The plaintiff bears the onus to establish on a balance of
probabilities that the first defendant's running of the business
of
Just Jade was reckless and/or grossly negligent and that such conduct
resulted in Just Jade's inability to satisfy the plaintiffs
debt.
[54]
The clear dispute in respect of the first defendant's conduct
revolves around the quality of the building work on Mr. Hendricks'
property.
[55]
In my view both the evidence and probabilities favour the first
defendant. Insofar as the evidence of Mr Hendricks contradicts
that
of the first defendant, I accept the first defendant's version of
events.
[56]
The visible defects Mr Hendricks testified to, were denied by the
first defendant.
[57]
The most obvious witness to confirm Mr Hendricks's version of events,
would have been his father, who visited the site with
him, when he
allegedly pointed out these serious defects to the first defendant..
His father was, however, not called nor was any
explanation tendered
for the failure to call him.
[58]
The next witness who would have been in a position to confirm the
faulty work, was the building contractor who completed the
building
work. Similarly, he was not called to give evidence.
[59]
Furthermore, Mr Hendricks is apparently in possession of a valuator's
report substantiating his version of events. Notwithstanding
the
aforesaid, the plaintiff elected not to call the valuator nor did the
plaintiff tender any expert evidence to substantiate
his version that
the building work was so defective that the only reasonable
conclusion to be drawn, is that the first defendant
was reckless
and/or grossly negligent in completing the work.
[60]
The fact that Just Jade issued summons against Mr Hendricks for the
outstanding contract price, supports the first defendant's
version
that the defects in the work was minor and capable of rectification,
should Just Jade have been afforded an opportunity
to do so.
[61]
I find Mr Hendricks' explanation in respect of his failure to oppose
the action instituted by Just Jade unconvincing. Mr Hendricks
testified that he had to incur substantial costs to rectify the
defective building work. Notwithstanding the claim against him,
he
neither defended the action
nor
did he institute action against Just Jade to claim the alleged
damages he suffered as a result of the defective work.
[62]
There are portions of the first defendant's evidence that would have
led to further probabilities in favour of the first defendant.
This
evidence was, however, not put to Mr Hendricks and I can consequently
not take the evidence into consideration. [See: President
of the
Republic of South Africa and Others v South African Rugby Football
Union and Others
2000 (1) SA 1
CC at par. 63]
[63]
In the end result, I am not satisfied that the plaintiff proved its
case on a balance of probabilities and the action cannot
succeed.
ORDER:
I
make the following order:
The
action against the first defendant is dismissed with costs,which
costs include the costs reserved on 22 March 2013.
N
Janse van Nieuwenhuizen
Acting
Judge of the North Gaqtejfig High Court, South Africa
Attorneys:
Alan Levy attorneys - Counsel : Mr K Levine c/o Jacobson and Levy
Inc.
(
For Plaintiff)
AJ
van Rensburg Inc - Counsel : Mr De W Keet c/o JB Haasbroek attorneys
(For 1st Defendant)