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[2012] ZANCHC 52
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Momentum Group Ltd v Le Grange; Momentum Group Ltd v Saunderson (2/12, 3/12) [2012] ZANCHC 52 (12 September 2012)
9
IN THE HIGH COURT OF SOUTH AFRICA
NORTHERN CAPE HIGH COURT, KIMBERLEY
Date: 14 September 2012
Case No: 2/12
In the matter between:
MOMENTUM GROUP LTD
............................................................
PLAINTIFF
LE GRANGE AJ
............................................................................
DEFENDANT
AND
In re:
Case No: 3/12
MOMENTUM GROUP LTD
...........................................................
PLAINTIFF
SAUNDERSON CP
........................................................................
DEFENDANT
JUDGMENT
[1]
The plaintiff instituted two actionsfor
provisional sentenceagainst the defendants respectively. The cases
were heard simultaneously
since the causes of action are the same and
the arguments, exceptfor the application for the amendment of the
summons in the matter
against Le Grange, are the same.
[2]
The plaintiff’s claims for provisional
sentence are based on the documents headed “OFFER: INDEPENDENT
CONTRACTOR”
which were attached to the summons as annexure “A”
respectively. The plaintiff contended that the documents constituted
acknowledgment of indebtedness by the defendants. The defendants in
turn, although acknowledging their signatures on these documents,
challenged their liquidity.
[3]
In the Le Grange matter, the plaintiff
alleges that on 21 June 2010 at Kimberley the plaintiff in writing
offered to pay the defendant
an amount of R1 300 000.00. In the case
of Saunderson the amount involved is R600 000.00and the offer was
made on 29 June 2010
at Kimberley. The offers in both matters were
subject to the following terms:
3.1. Should the defendants accept the offer they would
be bound by the plaintiff’s standard agreements applicable to
Independent
Contractors, which they were required to sign.
3.2. The defendants’ entitlement to the amounts of
R1 3000 000.00 and R600 000-00 respectively depended,
inter alia
,
upon the condition that the defendants should remain Independent
Contractors for 48 months from date of signature of the contracts.
3.3. The defendants agreed to repay to the plaintiff
100% of the amountsthey received should they resign or should the
Independent
Contractor agreement for any reason whatsoever be
terminated within 24 months from date of the contract by either
party. If terminated
any time after 24 months they would be liable to
pay 75% of the amount paid to them respectively.
[4]
It is common cause that the defendants
accepted the offers by signing the contracts as Independent
Contractors with the plaintiff.
Le Grange signed on 7 July 2010 and
Saunderson on 1 August 2010.The plaintiff paid theamounts of R1 300
000.00 and R600 000.00
less statutory tax to the defendants
respectively.
[5]
Le Grange resigned as IndependentContractor
on 28 February 2011 and Sanderson resigned on 15 March 2011. The
termination of the
Independent Contractor’s agreements by the
defendants occurred less than 24 months from the date of receipt of
the money,
and according to the plaintiff 100% of the amounts of R1
300 000.00 and R600 000.00 became immediately due and payable to the
plaintiff.
The defendants failed or refused to pay to these said
amounts to the plaintiff.
[6]
In response to the
plaintiff’s claims the defendants have raised two
points
in limine
in addition to their defence on the
merits. The first point
in limine
is
to the effect that the documents on which the plaintiff’s
claimsare based do not record an unconditional liability of
indebtedness. They contend that at most they create a conditional
liability namely, that liability will only arise if the defendants
do
not remain Independent Contractors for plaintiff for 48 calendar
months. For this reason, they contend, thedocument isnot a
liquid
document.
[7]
The second point
in
limine
raised by the defendants is to the
effect that although the plaintiff relies on annexure “A”
which it attached to the
summons, it also on own version, hold the
defendants to the Financial Planner’s Agreement as part of its
causa
, meaning that
there is no
causa
on
Annexure “A” alone. The defendants contend further that
the Financial Planner Agreement was only introduced in the
action in
the replying affidavits and it expressly replacesany previous
agreementsthereby nullifying annexure “A”.
The
plaintiff’s claims are therefore not founded upon a liquid
document that is in force. They further contend that the plaintiff
failed to comply with Rule 18(6)
1
by attaching the Financial Planner Agreements to its
summons.
[8]
The defendants further took the point that
the agreements provided that any party may cancel the agreement by
giving 14 days written
notice to the other and it shall not be
required of such party to furnish reasons for such cancellation. The
agreementsprovided
further that a certificate signed by a department
head of the plaintiff may serve as liquid document in any competent
Court of
Law for the purposes of provisional sentence, default
judgment or summary judgment or any other legal proceedings. The
defendants
contend that such certificate was deliberately not
presented to this Court because doing so would be an admission by the
plaintiff
that its Annexure “A” to the summons is not a
liquid document thereby rendering these provisional sentence
proceedings
incompetent. They contend further that by providing that
the certificate should serve as a liquid document, the intention was
that
Annexure “A” would not constitute a liquid document.
[9]
On the contents of Annexure “A”
itself the defendants’ defence is as hereunder.
10.1. The defendants were in the process of becoming the
plaintiff’s Financial Planners. The defendants had been brokers
for
various insurance companies. The plaintiff recognised that in
consequence of them becoming its Financial Planners, they would
experience
a loss of commission flows and or fees because they were
expected to terminate any agreement that they had with any other
financial
services provider and were obliged to submit all insurance
and investment applications they recruited to the plaintiff.
10.2 The plaintiff then calculated the total amount of
money that would represent the loss of commission flows or fees to
the defendants
and paid the said money to them to neutralize their
financial situation and to compensate them for the loss that they
would experience
when they entered into a Financial Planner
Agreements with the plaintiff.
10.3. The defendants’ contention is therefore that
Annexure “A” is not an unconditional acknowledgment of
indebtedness
because indebtedness would only arise in the event of
the contractual relationship, of which the plaintiff is the author,
not bear
fruit, resulting in defendants resigning or the contracts
with the plaintiff being terminated for any reason whatsoever. The
amount
of indebtedness also depended on the time at which the
contracts are terminated.
10.4. The defendants contended further that the effect
of the offer that was accepted by them was nothing more than an
agreement
in terms whereof the defendants had to change all their
existing clients from the opposition to the plaintiff for payment of
the
amounts of R600 000-00 and R1300 000-00 respectively in return.
They argued that the plaintiff’s conduct amounted to piracy,
dishonesty and disregard to the duty that the plaintiff and
defendants had to each other and to any insured. It also constitutes
conflict of interest and unfair competition. The defendants submitted
further that the plaintiff acted in direct contravention
of the
Financial Advisory and Intermediary Service
Act
,
2
and the
General Code of Conduct
promulgated therein. Theycontend that the agreement is
therefore illegal and unenforceable.
[10]
Le Grange has also
referred to operational problems he encountered with the plaintiff’s
personnel in conducting his business
with the plaintiff. These
problems related to lack of support as was required in terms of the
agreement and he as a result suffered
losses. He avers that plaintiff
undertook to compensate him for that loss. Since there was no
assistance from the plaintiff’s
side, he was left with no
option but to resign in order to mitigate his damages. He contends
that he has a counterclaim against
the plaintiff in the amount of R1
811 000.00 being the damages he suffered as a result of the
plaintiff’s conduct. The plaintiff
has denied the allegations
made by Le Grange and maintains that it did what was required in
terms of the agreement and that it
was Le Grange who failed to comply
with his part of the contract.
[11]
Saunderson also alleges
that he was unable to perform as required in terms of the agreement
due to lack of support by the plaintiff
and has as a result suffered
damages in the amount of R1000 000-00 which the plaintiff is liable
to pay. The plaintiff denies these
allegations and its liability to
Saunderson for any damages.
[12]
It is trite that
provisional sentence procedure provides a process whereby a creditor
who has sufficient documentary proof with
a speedy remedy for the
recovery of money due without having to go through an expensive,
cumbersome and often dilatory machinery
of an illiquid action. A
creditor who has a liquid document is able to obtain an enforceable
provisional judgment speedily without
having to wait for the final
determination of the dispute between the parties.
3
[13]
A judgment granted in
terms of this procedure is founded upon the presumption of
indebtedness evidenced by the document which is
truly liquid without
requiring assistance of extrinsic evidence. The position was stated
as follows in
First National Bank Ltd v
Avtjoglou
4
;
“
A liquid document which a party seeking
provisional sentence must prove is defined as one which evidences by
its own terms, without
the need for extrinsic evidence, an
unconditional acknowledgment of indebtedness in an ascertained sum of
money the payment of
which is due. Rich and Others v Lagerwey
1974
(4) SA 748
(A) at 754. The document may make payment by a defendant
dependent on the happening of a simple event or the fulfilment of a
simple
condition. The law, however, distinguishes between
indebtedness being subject to the happening of a specified event and
the payment
being so subject. The latter situation will not affect
the liquidity of a document. Union Share Agency & Investment Ltd
v Spain
1928 AD 74
at 80-1; Joosub v Edelson
1998 (3) SA 534
(W).”
[14]
In Joosub vEdelson
5
the court held that the enquiry when provisional
sentence is sought is a two-fold one:
“
One must first determine whether the
debt in question falls within the parameters set in cases such as
Union Share Agency &
Investment Ltd v Spain [1928]AD 74 at 80-1]
and Inglestone v Pereira
[1939 WLD 55
]. If it does, one then
examines the condition to ascertain whether it qualifies as a simple
condition. If it is, then one can
merely allege in the summon and, if
necessary prove, fulfilment thereof. If the claim fails the first
tests, however, one does
not proceed tothe second phase of the
enquiry.”
[15]
In order to escape
provisional sentence on a liquid document the defendant must satisfy
the court on a prepondence of probability
that it is unlikely that
the plaintiff will succeed in the principal case.
6
[16]
It was persuasively
contended on behalf of the defendants that Annexure“A” is
not a liquid document. On its wording
it states that the amount of
money paid to the defendants by the defendant is compensation for
loss of commission flows or fees.
The quantum of the loss is based on
the earning capacity of the defendant over a period preceding the
conclusion of the Independent
Contractor agreements. Once the amounts
of money are paid by the plaintiff, it appears the parties are in
equal positions and what
is required of the defendants is to work for
the plaintiff for a contracted period and be paid for their services.
An obligation
to pay does not appear
ex facie
the document but depends on the future event. It also
depends on the length of the period served by the defendants and what
amount
should be payable. On consideration of the points taken and
examination of the documents the plaintiff is relying on I am not
persuaded
that the documents the plaintiff’s claims are based
constitute clear and unequivocal acknowledgment of debt.
[17]
In addition either party
has a right to terminate the agreement for any reason whatsoever
which provision may be found to be unconscionable.
The defendants
have also raised some alleged contraventions of the
Financial
Advisory and Intermediary Services Act and the Competition Act
which cannot be ignored. They go to the legality and
enforceability of the very agreements that the plaintiff bases its
claims for
provisional sentence
7
.
Furthermore, there is a dispute about the cause ofthe termination of
agreements. The defendants are likely to succeed with their
counterclaims should they successfully prove at trial that the
plaintiff breach the agreement and that they suffered damages as
a
result. It is interesting to note that should the defendants be
unable to complete the contracted period by a few days they would
be
expected to pay 75% of the amounts they received.
[18]
In the case of Le Grange the plaintiff filed
an application for amendment of its summons. The purpose of the
amendment is to substitute
Annexure “A” with another
document to be marked Annexure “AA” which was concluded
by the parties subsequent
to Annexure “A”. The purpose of
the amendment is to replace the amount of R1 300 000-00 with an
amount of R1500 000-00.
The defendant has a good point that the
amendment is only made in the replying affidavit and when the matter
has already been enrolled
for hearing without affording him
sufficient time and space to oppose the application. However, in
light of my finding on the merits
of the provisional sentence claims,
I am inclined to accede to the application for amendment. The fact
that Annexure “AA”
was concludedbetween the plaintiff and
Le Grange is common cause and does not materially affect Le Grange’s
defence to the
provisional sentence claim. It merely increases the
plaintiff’s quantum and the duration of the contract between
the two
parties from 48 months to 60 months. In my view, costs of the
provisional sentence proceedings should be costs in the cause of the
action.
[19]
In the circumstances the following ordersare
made:
Case no. 2/12 (Le Grange):
1. The Application for the amendment of the summons
is granted.
2. Provisional sentence is refused.
3. The summons is to stand as a simple summons and
the defendant is deemed to have served a Notice of Intention to
defend today
(14 September 2012 being the date of this judgment and
order). Thereafter the rules of Court are to apply regarding the
filing
of further pleadings.
4. The costs of the provisional sentence proceedings
shall be costs in the course of the action.
Case No: 3/2012 (Saunderson):
Provisional sentence is refused.
The summons is to stand as a simple summons and the
defendant is deemed to have served a Notice of Intention to defend
today (14
September 2012 being the date of this judgment and
order).Thereafter the rules of Court are to apply regarding the
filing of further
pleadings.
The costs of the application for provisional
sentence shall be the costs in the course of the action.
__________________________
L P TLALETSI
JUDGE: NORTHERN CAPE HIGH COURT
Appearances:
For the Plaintiff: Mr Fletcher
Instructed by: Gerings Attorneys
For the Defendants: Mr P Visagie
Instructed by: Theron&Vennote
1
Rules
for the conduct of Proceedings in the High Courts of South Africa.
2
Act
37 of 2002
3
Rule
8 of the Rules for the Conduct of the Proceedings in the High Court;
Herbestein& Van Winsen: The Civil Practice of the
High Courts of
South Africa. 5
th
ed. Juta.Page 1313.
4
2000(1)
SA 989 (c) at 994 F-H
5
1998(3)
SA 534 (W) at 538 C-E.
6
De
Atouquia v Braz 1989 (2) 807 (A); Syfrets Mortgage Nominees Ltd v
Cape St Francis Hotels (Pty) Ltd
1991 (3) SA 276
(SE). Van
Winsen&Hepstein (supra): p1315; 1395-1402.
7
Cassimjee
v Naidoo ;Cassimjee v Sing and another
1959 (4) SA 139
(N) at 141
B-C. IntergritasOuditeureingelyf v Crous [2002]1 ALL SA 583(T).