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[2012] ZAGPPHC 310
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Armcoil Afrika (Pty) Ltd v Torre NO and Others (A760/2010) [2012] ZAGPPHC 310 (30 November 2012)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
(REPUBLIC OF SOUTH AFRICA)
CASE
NUMBER: A760/2010
DATE:30/11/2012
In
the matter between:
ARMCOIL AFRIKA (PTY)
LTD
..................................................................
APPELLANT
And
PHILIPPUS
GIOVANNI TORRE
NO
.......................................................
FIRST
RESPONDENT
RICHARD
CASSIM
NO
............................................................................
(Jointly referred to as First
(In
their joint capacity as the joint
liquidators
......................................
Respondent
a quo)
Of
Armcoil Africa Holdings (Pty) Ltd, in Liquidation)
ABSA
BANK
..............................................................................................
SECOND
RESPONDENT
…
..................................................................................................................(
Fourth
Respondent a quo)
JUDGMENT
TLHAPI
J
[1]
This is an appeal against the orders, particularly those contained in
paragraphs 34.2, 34.3 and 34.4, of the judgment of Van
Loggerenberg
AJ sitting as court of first instance. The matter is before us
partially with the leave of the court a quo and with
the leave of the
Supreme Court of Appeal against the said orders that are recorded in
the judgement as:
‘
34.2
the introductory sentence of paragraph 3 of the notice of motion is
amended to read as follows:
“
An
order, as against repayment of the subscription price of R998 000.00
together with interest thereon at the rate of 15, 5% per
annum from 2
October 2004 to date of payment by the first applicant to the first
respondent”
34.3
An order in terms of paragraphs 1, 2, 3(as Amended), 4 and 5 of the
notice of motion is granted
34.4
An order of costs against the first applicant in favour of the first
and fourth respondents is granted... ’
[2]
The appellant (Armcoil Afrika) launched an application for the
following relief:
“
1.
An order declaring the Shareholders Agreement, attached as annexure
‘X’ to the founding affidavit of Peter Jacques
Flint to
have lapsed, alternatively to have been discharged, further
alternatively to be null and void;
2.
An order declaring the Subscription Agreement, attached as annexure
‘Y’ to the founding affidavit of Peter Jacques
Flint, to
have lapsed, alternatively to have been discharged, further
alternatively to be null and void;
3.
An order, as against the tender, alternatively repayment of the
subscription price of R998, 000.00 by the first applicant to
the
first respondent:
3.1
declaring the issue and allotment by the first applicant to the first
respondent of the 499 ordinary par value shares as reflected
in Share
Certificate No. 11 and attached as annexure ‘Z’ to the
founding affidavit of Peter Jacques Flint, to have
been effected
without legal cause, alternatively to be void;
3.2
restoring the aforesaid 499 ordinary par value shares to the status
of authorised, but unissued, shares and/or share capital
of the first
applicant; and
3.3
that the said Share Certificate No.11, attached as annexure Z’
to the founding affidavit of Peter Jacques Flint, be cancelled
forthwith;”
[3]
Armcoil Holdings were liquidated on 5 November 2008, that is,
subsequent to the launch of the application and were substituted
by
the present first respondents in their representative capacities of
Armcoil Holdings in Liquidation. For convenience the parties
shall be
referred to as they did in the court a quo.
[4]
The application was opposed by ABSA. Condonation for the late
submission of appellants Heads of Argument was not opposed and
the
court granted condonation with costs on an opposed scale.
[5]
The Supreme Court of Appeal granted leave to appeal against the
dismissal of the application for leave to appeal in respect
of the
sub-
paragraphs
in the amended notice of appeal as noted in paragraph 4 of the order
of Van Loggerenberg AJ, of the 31 May 2010 and ordered
that:
“
The
costs order of the court a quo in dismissing the application for
leave to appeal is set aside AND the costs of the application
for
leave to appeal in this court and the court a quo are costs in the
appeal..."
[6]
In the furtherance of their business interests and ventures and, in
compliance with the black economic empowerment policy of
the
Government of the Republic of South Africa, Armcoii Afrika identified
business partners, Mr E S Ntshihlele and Mr SS Mabulu
(second and
third respondents in the court a quo) and, in a joint venture,
Armcoil Holdings was formed to hold the black economic
empowerment
stake in Armcoii Afrika and, the partners so identified were
appointed directors in the holding company . On 2 August
2004 a
shareholders agreement (Armcoil Afrika Shareholders Agreement) was
concluded in which the Armcoil Holdings would hold 49.9%
(499
shares), of the issued share capital in Armcoil Afrika. This
agreement was subject to the suspensive condition to be fulfilled
or
waived no later than the 15 September 2004 that a shareholders
agreement be concluded between Armcoil Holdings, its directors
and
ABSA. Clauses 3.2 and 3.3 of the agreement provided:
“
3.2
Each of the parties will use its best endeavours to procure
fulfilment of the suspensive condition as soon as is reasonably
possible after the signature date.
3.3
Unless the suspensive conditions have been fulfilled or waived by not
later that the 15 September 2004 or such later date as
may be agreed
in writing by the parties, the provisions of this agreement will fall
away and be of no further force or effect and
the status quo ante
will be restored as near as may be. In that event any cost incurred
arising from the negotiation of this agreement
or its subject matter
will be borne by the party incurring such costs. Neither party shall
have a claim against the other in terms
hereof or arising from the
failure from breach of the provisions of clause 3.2;”
[7]
The subscription agreement between Armcoil Afrika and its initial
shareholders and Armcoil Holdings was concluded on the 11
August 2004
and this agreement was subject to its own suspensive condition to be
filled or waived no later than 1 October 2004.
[8]
The shareholders agreement between Armcoil Holdings, its directors
and ABSA was also concluded on the 2 August 2004. According
to this
agreement Mr Ntshihlele would hold 54% shares, Mr Mabulu 36% shares
and ABSA 10% shares and, the latter would lend an amount
of R1 000
000.00 to Armcoil Holdings. This agreement was subject to a
suspensive condition to be met on or before the 31 August
2004
failing which it would lapse alternatively become null and void. On
the 8 September 2004 Armcoil Holdings paid to Armcoil
Afrika the
agreed subscription price for the shares in the amount of R998
000.00.
[9]
Clauses 4.2 and 4.3 of the subscription agreement between Armcoil
Holdings, its directors and ABSA were only concluded on the
22
February 2005 and it provided:
“
4.2
Each of the parties will use commercially reasonable endeavours to
procure the fulfilment of the suspensive conditions as soon
as
reasonably possible after the signature date. The suspensive
conditions had been inserted for the benefit of all parties and
will
therefore only be capable of waiver by agreement in writing between
the parties.
4.3
Unless the suspensive conditions are fulfilled or waived by not later
that the 1 October 2004 (or such later date as may be
agreed upon in
writing between the parties) the provisions of this agreement, will
never become of any force and effect and the
status quo ante will be
resorted to as near as may be. Neither party shall have any claim
against the other in terms hereof or
arising from the failure of the
suspensive conditions, save for any claims arising from a breach of
the provisions of clause 4.2.”
[10]
The joint venture operated without any hitch from 2004 to 2007 and in
July of 2007 certain ‘discrepancies and/or illegal
conduct’
in the day to day running of the company were discovered by Armcoil
Afrika and reported to ABSA. On the 12 July
2007 Mr Ntshihlele
resigned as director of Armcoil Afrika. During April 2008 Armcoil
Afrika learnt for the first time that the
suspensive conditions in
the Armcoil Shareholders Agreement as well the Armcoil Subcription
Agreement were never fulfilled, that
consequently the agreements were
null and void as if no such agreements had been concluded. On 28 June
2006 Armcoil Holdings, its
directors and ABSA entered into an
agreement to re-enter and amend the Armcoil Holdings Shareholders
Agreement and the said addendum
provided:
“
3.
EXTENSION OF FULFILMENT PERIOD
3.1
The suspensive conditions referred to in clause 3.1 of the
Shareholders Agreement (the Armcoil Holdings Shareholders Agreement)
were not all fulfilled or waived by 31 August 2004.
3.2
The Shareholders Agreement is hereby re-entered into and the date of
fulfilment of the suspensive conditions of the Shareholders
Agreement
is hereby extended to 31 July 2006”.
[11]
Armcoil Afrika contended that due to non-fulfilment, the agreements
had consequently lapsed, alternatively became null and
void. Armcoil
Afrika tendered repayment to Armcoil Holdings of the sum of R988
000.00.
[12]
In the answering affidavit ABSA averred that it had launched an
application for the winding up of Armcoil Holdings and, in
the
winding up papers annexed to the answering affidavit, ABSA contended
that Armcoil Afrika had not tendered to pay interest on
the
subscription price of R988 000.00, therefore the tender was
defective.
[13]
The issue to be determined in this appeal is whether:
13.1
the court a quo ‘ erred in finding that Armcoil Afrika fell in
mora immediately upon non-fulfilment of the suspensive
conditions and
had to pay mora interest from 2 October 2004 to date of payment by
virtue of the provisions of section 1(1) of the
Prescribed Rate of
interest Act, 55 of 1975 (‘the Act’);’
13.2
‘the learned Judge erred in not finding that there were special
circumstances as contemplated in the Act which militated
against an
order that mora interest was payable by Armcoil Afrika’
[14]
The court a quo determined that the payment of R988 000.00 by the
applicant to the Armcoil Holdings was a debt which had arisen
ex
contractu and found that it was a case of mora ex re, where payment
was not dependent upon prior demand and that it ‘became
due and
enforceable on 2 October 2004’ .
SUBMISSIONS
FOR THE APPELLANT:
[15]
It is submitted for the appellant that
15.1
the agreement between the parties had not stipulated a date for
performance in the event of the lapsing thereof and that it
had been
the intention of the parties that the status quo ante would be
resorted to within a reasonable period after the lapsing
of the
agreement;
15.2
since the non-fulfilment of the relevant suspensive conditions fell
within the peculiar knowledge of Armcoil Holdings ‘it
could not
have been the intention of the parties that Armcoil Afrika would be
obliged and become liable to repay the subscription
price in
circumstances where:
15.2.1
‘It would not immediately have known of the non- fulfilment of
the suspensive condition and the consequent lapsing
of the
agreement;’
15.2.2
The return of the shares would have taken some time’
15.3
that based on the finding of the court a quo, Armcoil Holdings was
‘the creditor, claiming payment of the subscription
price and
interest;’ since mora debitoris arose only where the debt was
due and payable, where the debtor had a good defence
to any action
against him to ‘enforce the obligation, he was not in mora\
consequently if Armcoil Holdings wanted interest,
it should have
brought a counter application, which it failed to bring.
15.4
the appellant questioned the procedure adopted by the court a quo in
amending prayer 3 to provide for payment of interest;
15.5
that ‘irrespective of the extraordinary nature of the
proceedings’ or whether the issue of interest was determined
by
agreement between the parties, mora on the part of Armcoil Afrika
would only have arisen once there had been a tender on the
part of
Armcoil holdings for the return of the shares;
15.6
Armcoil Afrika was not in culpable default; Armcoil Afrika in the
position of the debtor would be entitled to rely on an excusatio
a
mora;
15.7
that special circumstances existed justifying an order that no
interest was payable and that the court a quo erred in not exercising
its discretion and ordering that no interest was payable by Armcoil
Afrika on the subscription price;
SUBMISSIONS
FOR THE RESPONDENT
[16]
It is submitted that
16.1
the appellant knew or ought reasonably have known of the requirements
pertaining to the fulfilment of the suspensive conditions
to because
the agreements were inter-dependent on each other; upon failure of
the agreements the status quo ante had to be restored
by no later
than the 2 October 2004; ‘the time for performance was the
failure of the agreement;’
16.2
the contract having fixed the time of performance, the appellant fell
in mora ex re immediately upon non-fulfilment of the
suspensive
conditions; that the principles relating to mora ex re were
consistently applied by the a courts and ‘where a
debtor could
by the exercise of reasonable care have ascertained the facts’,
the creditor was not expected to make demand
or interpellate;
therefore, the appellant was obliged to pay mora interest from the 2
October 2004;
16.3
the court a quo found no reason not to award interest at the
prescribed rate (as provided in the
Prescribed Rate of Interest Act
55 of 1975
) and that the discretion so exercised should not be
interfered with unless the court had erred in a material respect;
[17]
It is common cause between the parties that the principles of
restitutio in integrum are applicable. In Extel Industrial (Pty)
Ltd
& Another v Crown Mills
[1998] ZASCA 67
;
1999 (2) SA 719
(SCA) at 732 B - C the
court held ‘that a tender of restitution, or the explanation
and excuse for its failure, is a requirement
in proceedings of
restitution is indeed trite. A contracting party who demands
restitution upon a purported rescission of the contract
must tender
the return of what he himself has received under the contract or its
equivalent in money (Feinstein v Niggli and Another....)
and his
failure or inability to do so may effectively preclude or nullify his
election to resile from the contract.’
[18]
As stated in the amended notice of appeal, the court a quo did not
find that the performance for the status quo ante was reciprocal
or
that performance had to take place simultaneously. When Mr Stoop’s
submission on the enrichment claim, conditio causa
data causa non
secuta, was rejected, the court a quo found that the clauses relating
to the restoring of the status quo ante were
severable from the
balance of the two agreements. These clauses remained operative and
enforceable despite the two agreements being
void. In terms of these
enforceable clauses both parties had to restore what they had
received in terms of the contract upon non-fulfilment
of the
suspensive condition and, the court a quo endorsed the applicability
of the principle restitutio in integrum, and formulated
it as
follows:
“
25.1
Ex contractu, and in terms of the clauses referred to in paragraphs
19 and 20 above, the status quo ante have to be restored
as near as
may between the first applicant and the first respondent in the event
of the suspensive conditions not having been fulfilled.
25.2
The first applicant and the first respondent has, therefore agreed
that restitution in integrum should take place on non-fulfilment
of
the suspensive conditions:
25.4
Immediately upon non-fulfilment of the suspensive conditions:
25.4.1
the first applicant became entitled to re-transfer of the shares;
25.4.2
the first respondent became entitled to payment of R998 000.00”
[19]
In my view, it was therefore correctly submitted by counsel for the
appellant that the contracts in themselves envisaged that
performance
for the status quo ante had to occur simultaneously.
[20]
It was submitted for the respondent that the appellant had
misconstrued the legal position and that the failure to tender shares
by Armcoil Holdings did not stop the running of interest from the
time it fell due by operation of law. Reliance was had to the
approach by Binns- Ward AJ in Trustees Mitchel’s Plain Islamic
Trust v Weeder and Another
[2001] 2 All SA 629
at 646, that the
respondents could still institute a claim. Furthermore that in those
circumstances the appellant could have been
entitled to raise a
defence of being excused from payment until the shares had been
tendered. In my view this case did not deal
with a situation where
suspensive conditions were applicable and where the principle of
restitution in integrum applied as explained
in paragraph [13] above.
[21]
It is further argued for the respondents that they could not offer
the return of the shares because the shares did not exist;
they were
issued in terms of a contract that never came into existence. The
first respondent therefore need not in terms of the
principle of
resitutio in intergrum tender the return of the shares and therefore
mora ran from 2 October 2004.
[22]
The meaning of mora was examined in Scoin Trading Pty Ltd v Bernstein
NO
2011 (2) SA 118
in the following paragraphs:
“
[11]
The term mora simply means delay or default. This concept is employed
when the consequences of a failure to perform a contractual
obligation within the agreed time are determined. The date may be
stipulated either expressly or tacitly and there must be certainty
as
to when it will arrive. Thus when the contract fixes the time for
performance, mora (mora ex re) arises from the contract itself
and no
demand (interpellate) is necessary to place the debtor in mora. The
fixed time, figuratively, makes the demand that would
otherwise have
to be made by the creditor.
[12]
In contrast, where the contract does not contain an express or tacit
stipulation in regard to the date when performance is
due, a demand
(interpellate) becomes necessary to put the debtor in mora. This is
referred to as mora ex persona”
[23]
Where there was no tender by Armcoil Holdings for the return of the
shares, Armcoil Afrika could not be held to be in mora
and that it
could not be said that interest was payable merely on the ground that
it had tendered return of the R988 000.00. As
I see it, the clauses
relied upon could not be interpreted to mean or to determine in
retrospect the date of performance as being
the 2 October 2004. It
was therefore correctly submitted for appellant that Armcoil Afrika
should have been placed in mora debitoris,
meaning that Armcoil
Holdings claim as creditor had to be enforceable. The debtor (Armcoil
Afrika) must have failed to perform
on a specified date made known to
him and the mora must have been due to the fault of the debtor.
Legogote Development Co v Delta
Trust and Finance Co 1970 (1) SA (T)
at 587 C - E. Even though there was an understanding that interest
would be determined, the
court a quo should have decided the issue
from the premise that no case had been made out on the papers for
such an order by the
respondents.
[24]
In the founding affidavit appellant averred that it had proceeded
with the joint venture on the assumption that all was well
and there
was nothing in the answering papers to controvert this. To hold that
the appellant was in mora ex re immediately upon
non-fulfilment of
the suspensive condition would be to ignore the basis upon which mora
debitoris should have been established.
Furthermore, the appellant
played no role in the fact that the respondents failed to comply with
the suspensive conditions, and
no case was made out on the papers to
suggest that Armcoil Afrika should reasonably have been aware of the
non-fulfilment of the
suspensive conditions. Armcoil Afrika was not a
party to the agreements Armcoil Holdings and its directors entered
into with ABSA.
It was therefore correctly submitted that on the
common cause facts Armcoil Afrika could not have been aware that the
agreement
had lapsed.
[25]
The court a quo was not called upon to make a finding on whether
special circumstances existed justifying the non-payment of
interest.
It was submitted for the appellant that it would have been possible
to order that interest at whatever rate be paid from
a different date
‘e.g. from date of any tender made by Armcoil Holdings for the
return of the shares or interest could have
been zero rated. The
following special circumstances were mentioned:
25.1
the appellant on taking legal advice in April 2008 was made aware
that the suspensive conditions had not been fulfilled;
25.2
the respondents failed to inform the applicants and failed to obtain
their consent with regard to the ‘re-entering’
into the
conclusion of the addendum which purported to extend the date upon
which the suspense conditions had to be fulfilled;
25.3
the fact that the court a quo held that there were reasonable
prospects of success appeal including a finding that appellant’s
ignorance of the non-fulfilment of the suspensive conditions was
reasonable;
25.4
had the shares been returned they could have been re-allotted;
[26]
I agree with the submission that the court a quo on the order given
regarding interest payable, could have exercised its discretion
and,
found that valid reasons as stated in appellants heads of argument
existed, for a finding that special circumstances were
present,
qualifying the court to determine a different interest rate. However,
taking into consideration that the respondents have
to date not
tendered the return of the shares and having regard to the conclusion
reached above, that until such time that Armcoil
Holdings tendered
the return of the shares and placed Armcoi! Afrika in mora debitoris,
the R988 000.00 was not due and no interest
was payable.
POTTERILL
J
[27]
I read the judgment of Tlhapi J and agree with the content and
result. I wish to add the following thereto.
[28]
On behalf of the respondents it was furthermore argued that they
could not offer the return of the shares because the shares
did not
exist; they were issued in terms of a contract that never came into
existence. The first respondent therefore need not
in terms of the
principle of resitutio in intergrum tender the return of the shares
and therefore mora ran from 2 October 2004.
[29]
This argument must be rejected. The court a quo correctly found that
the non-fulfilment of the suspensive conditions rendered
the two
agreements null and void ab initio. The court a quo was also correct
in finding that the clauses relating to the restoring
of the status
quo ante were severable from the balance of the two agreements and
these clauses remained operative and enforceable
despite the two
agreements being void. In terms of these enforceable clauses both
parties had to restore what they had received
in terms of the
contract upon non-fulfilment of the suspensive conditions;
restitution in integrum is a reciprocal duty.
[30]
The appellant tendered the re- payment of the subscription price upon
the cancellation of the share certificate and the restoration
of the
receipt of the shares whereas the first respondents never tendered
the return of the shares. In a reciprocal contract there
can be no
mora debitoris until there is a tender of return, in casu by the
first respondent. As there was no tender by the first
respondent the
appellant was not placed in mora or differently put, the appellant
was entitled to raise the non-tender as a dilatory
defence.
[31]
The appellant tendered restitution the moment it obtained legal
advice that the contracts were void. The appellant could not
have
known prior to that date that the contracts were void because the
appellant was not a party to the subscription contract.
The appellant
could thus not be in mora because they were not culpable.
[32]
The appellant did not fall into mora the moment there was non-
fulfilment of the suspensive conditions. The restoring of the
ante
quo was not to be effected on 2 October 2004 because this was the
date agreed to upon which the obligation arose and not the
performance. A date for the performance was not agreed upon and
therefore mora ex persona is required. The appellant cannot be
held
to be in mora until the first respondent as a creditor sought the
re-payment of the amount which the first respondent never
did. The
court a quo thus erred in amending the prayer of the appellant in the
notice of motion to include interest payable.
[33]
It is trite that costs follow the event. The appellant succeeds on
appeal and thus entitled to costs. The Supreme Court of
Appeal
ordered the costs of leave to appeal in the court a quo and those of
Supreme Court of Appeal respectively to be costs in
the appeal.
[34]
In the result the following order is made:
34.1
The appeal is upheld with costs which shall include:
34.1.1
the costs of application for leave to appeal in the court a quo
34.1.2
the costs of application for leave to appeal in the Supreme Court of
Appeal
34.1.3
the costs of two counsel where so employed;
34.2
The orders stipulated in paragraphs 34.2 and 34.4 of the court a
quo’s judgment are hereby set aside and replaced with
the
following:
34.2.1
the points in limine raised by the second respondent are dismissed;
34.2.2
an order is granted in terms of paragraphs 1, 2, 3, 4 and 5 of the
notice of motion;
34.2.3
the first and second respondents are jointly and severally ordered to
pay the costs of the first applicant which costs include
the costs
consequent on the employment of two counsel, when so employed.
M
TLAPI
(JUDGE
OF THE HIGH COURT)
AML
PNATUDI
(JUDGE
OF THE HIGH COURT)
S
POTTERILL
(JUDGE
OF THE HIGH COURT)
On
behalf of the Appellant: Friedland Hart Solomon & Nicolson
Suite
301, Block 4 Monument Office Park 799 Steenbok Street Monument Park
Pretoria
Adv.
F.H. Odendaal SC Adv. A Lamprecht
On
behalf of the Respondents: Lowndes Dlamini
C/O
Adams & Adams 1140 Prospect Street Hatfield Pretoria
Adv.
P.G. Robinson