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[2013] ZAKZDHC 37
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Wilbery (Pty) Ltd t/a Ecowash v Springforest Trading 599 CC and Another (2994/2013) [2013] ZAKZDHC 37 (31 May 2013)
7
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
REPORTABLE
CASE NUMBER: 2994/2013
WILBERRY (PTY) LTD t/a
ECOWASH
.......................................................
APPLICANT
And
SPRINGFOREST TRADING
599 CC
................................................
1
ST
RESPONDENT
COMBINED MOTOR
HOLDINGS
LIMITED t/a THE GREEN
MACHINE
...............................................
2
ND
RESPONDENT
JUDGEMENT
MADONDO J:
INTRODUCTION
[1] In this matter the
applicant seeks an order interdicting and restraining the first
respondent or any associated company or entity
acting though the
first respondent from promoting or selling any equipment or product
which competes with the applicant’s
equipment (its mobile
dispensing units) and the product being manufactured or marketed by
or on behalf of the applicant. Secondly,
interdicting the first
respondent from using and thereby promoting any mobile dispensing
units or cleaning products manufactured
, distributed or sold by the
second respondent or anyone else , save for the applicant, and from
using the name or brand “
Spring Forest Enviro Wash”
[2] The application has
been brought as one for an interim relief pending the final
determination of the legal proceedings to be
instituted within 30
days of this order. However, the envisaged legal proceedings are not
specified. Mr Stewart for the applicant
has stated from the bar that
an interim order is sought pending the applicant’s claim for
the recovery of rentals and for
damages arising from the first
respondent’s breach of the agreement. Mr Smithers for the first
respondent has argued that
the relief sought is the declaratory that
the agreement between the parities has been cancelled and the order
preventing the first
respondent from breaching clause 1.1 of the
contract. In his submission the relief sought is final, in substance
and effect. Nevertheless,
the appropriate approach in ascertaining
whether an order for interim or final relief is sought is to look at
the substance rather
than at the form.
See Stellenbosch Farmers
Winery Ltd v Stellenvalle Winery (Pty) Ltd
1957 (4) SA 234(C)
at 235;
BHT Water Treatment (Pty) Ltd v Leslie and another
1993 (1) SA 47
(WLD) at 55E.
[3] The substance of the
relief sought in this application appears to be interim pending the
claim for the recovery of rentals and
damages for breach of contract.
It, accordingly, follows that if the aforementioned proceedings are
not instituted within 30 days
of the order, the order sought shall
lapse. In the premises, I do not agree with Mr Smithers that the
relief sought is final, in
substance and effect. The relief sought
is, in my view, interim in nature, substance and effect. The
respondent resists the application
on the basis that the agreement in
question has been consensually cancelled by the parties.
PARTIES
[4] The applicant is
Wilberry (Pty) Ltd t/a Ecowash, a private company duly registered and
incorporated in terms of the Company
Laws of the Republic of South
Africa with its registered address at 8
th
Floor, 135
Musgrave Road, Durban and its principal place of business at Unit G9,
StrijdomCommercialPark, Tungsten Road, Randburg,
Gauteng.
[5] The first respondent
is Spring Forest Trading 599CC, a close corporation duly registered
and incorporated in terms of the
Close Corporations Act, no.69 of
1984
with its registered address at 1 Fairways Avenue, FairwaysPark,
Mount Edgecombe, KwaZulu-Natal (KZN).
[6] The second respondent
is Combined Motor Holdings Limited t/a The Green Machine; a public
company duly registered and incorporated
in terms of the Company Laws
of the Republic of South Africa with its registered address at 1
Wilton Crescent, Umhlanga Ridge,
KZN. The second respondent is cited
herein merely as an interested party, from whom no relief is sought.
FACTUAL BACKGROUND
[7] The applicant is the
developer and manufacturer of an innovative and efficient car wash
technology which reduces the water usage
per car wash from
approximately 250 litres down to about 1 litre (the Eco Wash system).
The applicant supplies its EcoWash system
comprising, inter alia,
waterless car washing equipment, products and training to entities
and persons who are running their own
car wash operations in various
venues around South Africa including KZN. The Eco Wash system is
operated from a mobile dispensing
Unit (MDU), which does need to be
connected to a water or electricity supply, and from which a
specially formulated wash product
is sprayed on. Eco Wash system and
equipment is used in over 500 locations around South Africa,
including car dealerships, office
parks, shopping malls, golf clubs,
panel beaters, and auto fitment centres.
[8] On 28 April 2012 the
applicant and the first respondent concluded a written agreement,
annexure “B” to the founding
affidavit. When concluding
such agreement both parties were represented by their duly authorised
representatives and in terms of
which the applicant appointed the
first respondent as its executive operating agent for the province of
KZN for an initial period
of 48 months. The applicant granted the
first respondent the exclusive right to promote rent out and operate
itself or through
its agents, for its own account MDU’s in KZN.
The applicant would in terms of such agreement supply the MDU’s
to the
first respondent on its standard terms and conditions.
[9] The first respondent
undertook to rent the MDU’s directly from the applicant and
itself or through its agents, to conduct
car washes at office parks,
shopping centres, hospitals, hotels and the likes for its own account
at its own risk and for its own
reward .It was also the material
terms of the contract between the parties that the first respondent
would not itself or through
any associated company or entity, promote
or sell any equipment or product which competes with the equipment
and the product being
manufactured or marketed by or on behalf of the
applicant. The parties also, concluded 4 rental agreements (annexure
“C1
to C4”): The rentals payable by the first respondent
to the applicant for the MDU’s were in terms of the rental
agreement
due and payable on the 1
st
of each month.
According to the applicant the first respondent failed to pay the
rentals due on the 1
st
of February 2013. As a result of
the breach by the first respondent a meeting was held between Nigel
Keirby-Smith, the material
business development director of the
applicant, and Gregory Stuart Hamilton, the sole member of the first
respondent, to discuss
the matter. The matter came to a head on 25
February 2013 when Keirby-Smith and Walter Burger, a representative
of the first respondent
met, and the applicant made proposals as to
how it intended to resolve the first respondent’s breach. Mr
Hamilton undertook
to consider such proposals and revert to
Keirby-Smith. It was also an essential term of the agreement that any
variation or cancellation
of the rental agreements (and the exclusive
operating agent agreement) would be ineffective unless reduced to
writing and signed
by each party. The first respondent operated its
first car washing business from five sites under the agreements –
Gauteng,
Entabeni, Richardsbay, Inchanga and Mt. Edgecome Golf club.
The first respondent attributes its failure to pay rentals to the
applicant’s
onerous pricing structure and protracted spring and
summer rains which detrimentally affected the profitability of the
first respondent’s
car washing business. The purpose of this
meeting was to discuss the way forward and according to first
respondent also whether
the first respondent could continue to
operate under the applicant’s existing pricing structure. At
the meeting Keirby-Smith
explained to the respondent that it had,
inter alia
, an option to;
1) to pay a cash amount
of R 1600000,00;
2) cancel agreement and
walk away;
3) pay R 1000,00 per
month for five years with 15 % escalation.
[10] The meeting of 25
February 2013 was followed by emails between the parties as follows:
At 11h44; Hamilton wrote Keirby-Smith
seeking clarity on the options
set out above: once again at 11h56 Hamilton wrote Keirby-Smith and
asked him to clarify option 2;
“cancel agreement and walk
away”, he sought confirmation that should the first respondent
elect option 2, there would
be no further claim or legal action from
either side. In the third e-mail exchange Keirby-Smith confirmed that
should the first
respondent choose option 2, “cancel and walk
away”, there would be no further legal recourse (no further
claim or legal
action from either side) but subject to his last reply
to the agreement. In the last reply, the applicant told the first
respondent
that it was free to cancel the contract if it had paid all
the area rentals. It is common cause between the parties that the
area
rental was only paid in full in March 2013. At 16h02 Hamilton
notified the applicant that the first respondent had chosen to cancel
the agreement and walk away.
[11] Thereafter, the
first respondent entered into an agreement with CMH Auto Gas (Pty)
Ltd in terms of which the first respondent
hired mobile cleaning
devices from (C.M.H). The applicant avers that by so doing the first
respondent acted in breach of the Exclusive
Operating Agent Agreement
existing between the parties. The first respondent alleges that such
an agreement between the parties
was consensually cancelled by means
of e-mail exchanges on 25 Feb 2013. In the contention of the
applicant the exchange of e-mail
correspondences could not, and did
not constitute a: “Cancellation agreement entered into between
the parties, reduced to
writing and signed by each party or their
duly authorised representatives” as it is required by clause
11.1 of the agreement.
In the alternative, the first respondent
submitted that the applicant is estopped from denying the validity of
the consensual cancellation
on 25 Feb 2013. The first respondent
avers that the e-mail of Keirby-Smith and Wilkinson of 25 Feb 2013
constitutes a representation
by the applicant to the first respondent
that the first respondent was entitled to elect to cancel the
agreement, whereupon either
party would have any further claim
against the other, save that Feb 2013 rentals would remain due and
payable by the first respondent
to the applicant. The first
respondent avers that it relied on that representation and, that it
reasonably acted on its strength
to its prejudice. Keirby-Smith knew
at the time he communicated that information to the first respondent
that it was material to
the first respondent’s rights and
obligations, and on which the fist respondent would rely.
Issues
[12] Issues raised by the
facts of this matter are whether or not:
the exchange of e-mails
between the parties, if accepted as true, could constitute an
agreement “reduced to writing and
signed by the parties”;
the applicant made a
representation to the first respondent which could entitled to it to
an estoppel, as a defence; and,
the first respondent
itself or through any associated company or entity promotes or sells
any equipment or product which competes
with the equipment and
products manufactured or marketed by or on behalf of the applicant,
in violation of clause 11.1 of the
agreement.
[13] Clause 14.4 of the
agreement provides:
“…
no
variation… or consensual cancellation… shall be of any
force or effect unless reduced to writing and signed by
the parties…”
The first respondent
contends that the non-variation clause that a consensual cancellation
is required to be in writing is not a
requirement of law but a
requirement of this contract. Such requirement was met by e-mail
exchange of 25 Feb 2013.
[14] In
SA
SentraleKo-op GraanmaatskappyBpk v Shifren en Andere 1964 T (4) SA
760 (A)
, it was stated that a stipulation or condition in a
written contract which provides that “any variation in the
terms of this
agreement as may be agreed upon between the parties
shall be in writing otherwise the same shall be of no force or
effect”,
could not be altered verbally.
[15] In
Brisley v
Drotsky 2002 (4) SA (SCA)
the Supreme Court of Appeal held that
the principle laid down in SA
SentraleKo-op GraanmaatskappyBpk.
c
ase, that a term (entrenchment clause) in a written contract
providing that all amendments to the contract have to comply with
specific
formalities is binding and still remains in force. In this
regard at p 11 D – E the court stated the following:
“
Daar is ook
‘n algemeenheersende mite dathierdietipebepalingslegstenbate
van die ekonomiesmagtigebestaan en datdittotongelykheid
in
kontraksverbandaanleiding gee. Dit is waarskynlikwaaromdaar ‘n
beroep op die grondwetlikegelykheidsbeginselgemaak word.
Hierdie
pealing dienterbeskerming van beidepartye.”
[16] It is common cause
between the parties that an agreement between them contained a
stipulation to the effect that a cancellation
agreement would be
reduced to writing and signed by the parties, for it to have force
and effect. The first respondent avers that
such a stipulation was
complied with prior to the cancellation of the agreement, which the
applicant vehemently denied. The first
respondent based its
contention, in this regard, on the e-mail exchanges of 25 February
2013 between the parties as constituting
a written cancellation
agreement signed by both parties or their duly appointed
representatives.
[17]
Section 12
of
Electronic Communications Act no. 22 of 2002 (ECTA) provides:
“…
a
requirement in law that a document or information must be in writing
is met if the document or information is –
in the form of a data message; and
accessible in a manner useable for
subsequent reference.”
[18] In the contention of
the first respondent e-mails in terms of section 12 of ECTA meet any
requirement that information must
be recorded. This, in the argument
of the first respondent, means that the e-mail communications of 25
February 2013 met the requirement
that a cancellation agreement
between the parties should be “reduced to writing”. Be
that as it may, in my view, for
the 25 February 2013 e-mail
communications to be said to have met the requirement of clause 14.4
of the agreement, the minds of
the parties must have been ad idem
(met) to that the e-mail communications in question were intended to
constitute the written
cancellation agreement in compliance with
clause 14.4. In casu, there is nothing to show that the e-mail
communications of 25 February
2013 between the parties intended to
achieve that purpose, other than enquiry and clarification.
[19] The first respondent
enquired from the applicant if its election of option 2 would have
any legal consequences and the applicant
responded stating that there
would be no legal consequences provided all area rentals were paid.
Whereupon the first respondent
chose option 2, without any further
consequence. Nor were any attempts made by either of the parties to
have the purported agreement
to cancel the agreement reduced to
writing and signed by the parties, as it was required by clause 11.1
of the agreement.
[20] Section 2 ECTA
provides that the objects of this Act are to enable and facilitate
electronic communications and transactions
in the public interest. In
the contention of the first respondent ECTA recognises and seeks to
give legal effect to wide spread
use of electronic communications in
commerce and to this end, ECTA gives legal force and effect to
agreements concluded partly
or in whole by means of e-mail. The first
respondent, therefore, insinuates that the agreement was partly or
wholly concluded between
the parties by means of e-mail. Such,
insinuation is not supported by evidence. The first respondent opted
for option 2 and there
was nothing more. Both parties knew pretty
well that in order for a cancellation agreement to have any legal
force and effect it
must be reduced to writing and signed by each
party, which did not happen.
[21] With regard to
whether the requirement that the agreement should be signed by both
parties was met, Christie, The Law of Contracts
in South Africa 6Ed
at p 110 says the following:
“
Where the
signature is required by law and such law does not specify the type
of signature, the requirement is met only if an ‘advance
electronic signature’ is used. Where a signature is required by
the parties to an electronic transaction and they had not
agreed on a
type of electronic signature, the requirement is met if a method is
used to identify, the person and to indicate the
persons approval of
the information communicated, and having regard to all the relevant
circumstances at the time the method was
used, the method was as
reliable as was appropriate for the purpose for which the information
was communicated.”
See also section 13
(1) (3) (a) (b) of ECTA.
[22] In the submission of
Mr Stewart for the applicant the phrase “where the signature of
a person is required by law …”
section 13(1) should be
interpreted to include not only statute but instances where parties
in a written agreement impose their
own formalities, as the common
law, in such instances requires compliance with the formalities
agreed upon and any non-compliance
is rendered null en void.
Section 3 of ECTA enjoins
the courts not to interpret this Act so to exclude any other
statutory law or common law, and this section
provides:
“…
This
Act must not be interpreted so as to exclude any statutory law or
common law from being applied to, recognising or accommodating
electronic transactions, data messages or any other matter provided
for in this Act.”
[23] Under common law
parties are obliged to honour the terms and conditions of their
contract, as well as the formalities thereto,
and to this end the
provisions of section 13(1) of ECTA must be interpreted as to include
common law.
Section 13(3) of ECTA
provides:
“
Where an
electronic signature is required by the parties to an electronic
transaction and the parties have not agreed on the type
of electronic
signature to be used, that requirement is not in relation to a data
message if –
a method is used to identify a person
and to indicate a person’s approval of the information
communicated ; and
having regard to all the relevant
circumstances at the time the method was used the method was as
reliable as was appropriate
for the purpose for which the
information was communicated.”
[24] In the argument of
the first respondent since the parties have not stipulated the type
of electronic signature required, the
signature requirement would be
met by e-mails in which the sender identified himself/herself and
indicates his or her approval
of the information communicated. The
first respondent has submitted that such requirement was entirely met
by e-mails exchanged
between the parties on 25 February 2013.
[25] Section 13(3) does
not find application in this case since the parties did not specify
in their document an electronic signature
as a type of signature
required for variation or cancellation of the agreement. Further, the
agreement envisaged was a printed
document and it, therefore, follows
that it does not constitute and electronic transaction, as defined in
the Act. In the premises,
the e-mail communications of 25 February
2013 between the parties could not and did not constitute the
signature envisaged in clause
14.4 of the agreement. However, had the
parties been a
d idem
to that the e-mail exchange
communications would constitute written cancellation agreement,
surely, the signature requirement would
have been met by e-mails
exchange.
[26] In the contention of
the applicant there is no general requirement of law, save in certain
specific instances which are not
relevant to this case, that an
agreement between private contracting parties can only be varied or
cancelled by way of writing
signed by or on behalf of both parties.
This is merely a requirement the parties have imposed interse. Public
policy requires that
contracts should be enforced, so as the
formalities thereto. In
Reddy v Siemens Telecommunications (Pty)
Ltd
2007 (2) SA 486
(SCA) at p 500E-F,
it was stated that this is
consistent with the constitutional values of dignity and autonomy
therefore the respondent is required
to honour the agreement he had
entered into voluntarily and in the exercise of its own freedom.
ESTOPPEL
[27] The first respondent
has argued that if the exchange of e-mails of 25 Feb 2013 did not
satisfy the requirements of the law
or the agreement for a
cancellation of the contract, they give rise to an estoppel by
representation because they satisfy all the
elements for an estoppel
in law:
they relate to matters
of fact;
they are precise and
unambiguous, and were reasonably understood in the manner in which
they were intended;
the first respondent
acted on the correctness of the facts as represented;
the first respondent
acted to its detriment, in reasonable reliance on the
representations made; and
the representations were
made intentionally or at least negligently by persons who were
entitled to bind the applicant by means
of representation. (i.e.
Wilkinson and Keirby-Smith).
[28] The question arises
whether the applicant made any representation on which the first
respondent legitimately relied to its
prejudice. In
Universal
Stores Ltd v Ok Bazaars (1929) Ltd 1973(4) SA 747(A) at p761B-C, the
Appellate Division said:
“
An essential
element of estoppel is that there must have been a ‘representation’
of some kind consisting of words or
conduct, including acts,
omissions or silence.”
[29] In the contention of
the first respondent the e-mails of Keirby-Smith and Wilkinson of 25
February 2013 constituted a representation
by the applicant to the
first respondent that the first respondent was entitled to elect to
cancel the agreement, whereupon neither
party would have any further
claim against the other, save that February 2013 rentals would remain
due and payable by the first
respondent to the applicant. The first
respondent relied on that representation and acted on the strength of
it,and as a consequence,
the first respondent negotiated with CAM
Auto Gas (Pty) Ltd (CMH) and entered into an agreement in terms of
which the first respondent
would hire from CMH mobile cleaning
devices.
[30] The person who bases
a plea of estoppel on a representation made to him must establish
that he believed in the truth thereof
and that he acted on it to his
prejudice, must show that he was misled by the representation. In
addition, he has to show that
he acted reasonably in relying on the
representation. A person cannot be heard to say that he was misled
into relying on a representation
when he had knowledge of the true
facts and therefore knew that the representation was untrue or in
correct. In
Hauptfleisch v Caledon Divisional Council 1963(4) SA
53(C) at p 57C-D
it was stated:
“
If he knows
or believes, that the real facts are not as stated in the
representation, he cannot be heard to say the he was induced
to act
to his prejudice on the faith of the representation.”
See also
Van Rooyen v
Minister Van OpenbareWerke 1978(2) SA 835(A).
[31] In general, the
premise applicable in all circumstances is that the estoppel assertor
can only successfully rely on estoppel
if the reasonable person in
the street in the position of the estoppel assertor would have been
misled by the conduct on which
the estoppel is found. He has to prove
that his reliance on the representation was reasonable. He will
therefore have to show that
he did not know that the representation
was untrue and incorrect, that he did not have information which put
him upon enquiring,
or, if he did, that he exercised reasonable care
and diligence to learn the truth, and generally, that he was not
misled by a lack
of reasonable care on his part.
See Paradise Lost
Properties v Standard Bank of SA Ltd
1997 (2) SA 815(D)
p 820 G –
H.
[32] When the first
respondent enquired from the applicant whether its election of option
2, “cancel and walk away”,
would not have any legal
consequences and the applicant responded stating that there would be
no legal consequences provided all
the arrear rentals were paid,
shows that both parties had the provisions of clause 13 of the
Agreement in their contemplation not
clause 14.4. Clause 13 provides:
“
13.1 Save
where otherwise provided for in this agreement, should either party
(the defaulting party)commit a breach of any of the
terms of this
agreement or fail to make any payment due in terms hereof and fail to
remedy such breach or make such payment within
fourteen days from the
date of receipt by it if written notice calling upon it to remedy
such breach or failure, then the party
against whom such breach has
been committed (the aggrieved party) shall, without prejudice to any
other remedies it may have whether
under common law or in terms of
this agreement, have the right at its option to:
13.2 sue for due compliance by the
defaulting party with all of its obligations as detailed in this
agreement; or
13.3 cancel the agreement by notice to
the defaulting party whereupon the aggrieved party will be entitled
to proceed against the
defaulting party for recovery of such damages
as it shall have sustained.”
[33] This clause allowed
the applicant in this case to proceed against the first respondent,
as the defaulting party, for recovery
of any damages which it might
have sustained as a result of the first respondent’s breach.
Apparently, the first respondent
intended to protect itself against
such an eventuality.
[34] However, the
response by the applicant that there would be no legal consequences,
did not in any way entitle the parties to
cancel the agreement in
contravention of clause 14.4 which requires the “variation or
consensual cancellation of the agreement
to be reduced to writing and
signed by each party ”.
[35] The applicant did
not represent to the first respondent that it was entitled to cancel
the agreement in contravention of the
provisions of clause 14.4. Both
parties knew very well that cancellation of the agreement in
violation of clause 14.4 would have
the effect of rendering the
purported cancellation agreement null and void. The first respondent
could not therefore be heard to
say that it relied on such alleged
representation because, firstly, it has not been shown that the
applicant made it, and, secondly,
the first respondent knew that in
terms of the agreement such a conduct was prohibited. Even if the
applicant had said so, the
first respondent would have known what the
effect that conduct would have on the proposed cancellation agreement
if it were to
be done in violation of the provisions of clause 14.4.
Therefore, it could not be true that the first respondent relied on
the
strength of the alleged representation to its prejudice. Nor
could it be said that by so doing the first respondent acted
reasonably.
In the result, the first respondent has failed to show
that it is entitled to the benefit of estoppel, as a defence.
RELIEF SOUGHT
[36] It is common cause
that currently the first respondent is operating a car wash facility,
using car washing units manufactured
by Green Machine, which is in
direct competition with the applicant, and that, obviously, impinges
negatively on the applicant’s
business. In addition, the fact
that the first respondent is now in business with the third party
presents a serious risk to the
applicant’s business in that the
first respondent would, inevitably, promote the equipment and the
product of the third party
to the detriment of the applicant. This is
the risk the applicant seeks to protect itself against. As a party to
the agreement,
the applicant has a clear right to demand compliance
with the terms of the agreement and the formalities thereto.
Likewise, the
first respondent is obliged to honour the same. Should
the conduct of the first respondent be allowed to go uncurbed, that
will
ultimately diminish the applicant’s business. Therefore
the balance of convenience favours the applicant. The applicant has
no other legal remedy to prevent the continued damage to its
business, than the interim interdictory relief, pending the
institution
of the intended proceedings against the first respondent.
The evidence adduced in this case does not establish any consensual
cancellation
of the agreement between the parties. The applicant has,
in my view, made a case for the relief sought.
ORDER
[37] In the result, the
application for the interim relief sought is granted with costs.
It is further ordered
that in the event of the contemplated proceedings not being
instituted within 30 days of this order, the interim
order shall
lapse.
____________________
MADONDO J.
JUDGMENT RESRVED: 3
MAY 2013
JUDGMENT DELIVERED: 31
MAY 2013
COUNSEL FOR APPLICANT:
ADV. M E STEWART
Instructed by
BiccariBollo Mariano Incorporated
COUNSEL FOR FIRST
REPONDENT: ADV. M D C SMITHERS (SC)
Instructed by
Shepstone and Wylie Attorneys