IN THE HIGH COURT OF SOUTH AFRICA
(ORANGE FREE STATE PROVINCIAL DIVISION)
Case Nr.: 3386/2005
In the matter of:
BASIL WEINBERG Applicant
and
PS 2033 INVESTMENTS CC 1st Respondent
CONSTANTINOS RETSINAS 2nd Respondent
_____________________________________________________
JUDGMENT: MATSEPE, AJ
_____________________________________________________
HEARD ON: 3 NOVEMBER 2005
DELIVERED ON: 24 NOVEMBER 2005
_____________________________________________________
INTRODUCTION
THE PARTIES
The applicant is a director of companies having his principal place
of business at Long Ridge Building 53, Ridge Road, Glenhazel,
Johannesburg. The 1 st respondent is a close corporation duly
incorporated in accordance with the company laws of the Republic
of South Africa, which formally traded as OK Grocer Botshabello.
The 2nd respondent is Constantinos Retsinas, a businessman
residing at number 93 Dan Pienaar Drive, Heuwelsig,
Bloemfontein.
The applicant is approaching the court by way of notice of motion
and makes an application for an order in the following terms:
Prayer A
1. Payment by the First Respondent of the sum of R1 641
288,79;
2. Interest on the aforesaid amount of R1 641 288,79 at the
rate of 15,5% per annum from the 10 June 2005 to date of
final payment;
3. Costs of suit;
4. Further and/or alternative relief.
Prayer B
5. Payment by the Second Respondent in the sum of R820
644,40, jointly and severally with Prayer A against First
Respondent, the one paying the other to be absolved;
6. Interest on the aforesaid sum of R820 644,40 at the rate of
15,5% per annum from 10 June 2005 to date of final payment;
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7. Costs of suit;
8. Further and/or alternative relief.
In support of the application the applicant filed his own affidavit
which is supported by way of annexures. The two respondents
filed notice of intention to defend supported by an opposing
affidavit by 2nd respondent together with annexures.
BACKGROUND
On the 4 th of December 2002 the 1 st respondent entered into a
sale of business agreement with Ligo Properties CC, to which I
shall refer to as “Ligo”, in terms of which Ligo sold its business with
effect from the 1st of April 2001 to the 1st respondent for a
purchase price of R6 000 000,00 (six million rand). Applicant is a
member of Ligo.
Applicant is also a member of a close corporation, Varese
Investments CC which I shall refer to as “Varese” which is the
owner of the property where 2 nd respondent was conducting his
business.
3
On the 20 th of April 2005 Ligo obtained a court order cancelling
the agreement of sale entered into between itself and 1st
respondent on the 4th of December 2002. It was also ordered that
1st and 2nd respondents, in that application, should restore the
business referred to, in the papers therein, to Ligo failing which the
sheriff was ordered to repossess the said business from 1 st and
2nd respondent and restore same to the applicant, Ligo.
On the same day Varese, of which applicant is a member,
obtained an order cancelling the lease agreement entered into
between Varese and 1st respondent on the 3rd of December
2002. The order also contained a prayer evicting the 1st
respondent and all persons claiming occupation through it from the
premises, being Shop Number OK Shopping Centre CBD, Erf 143,
Botshabello, Free State and for payment of the sum of R64 085,95
as well as interest on the outstanding amount at the rate of 2% per
month, a tempora morae and cost of the suit.
4
At the time that the sale and lease agreements were entered into
between Ligo, Varese and the 1 st respondent the 1 st respondent
entered into a franchise agreement with Shoprite Checkers (Pty)
Ltd which agreement was signed by 2 nd respondent as a member
of the 1 st respondent. As a condition for the granting of the
franchise agreement the applicant herein was required to sign an
unlimited deed of suretyship binding himself in favour of Shoprite
Checkers (Pty) Ltd as surety and coprinciple debtor for the due
and proper fulfilment of all the obligations of 1 st respondent and
for the due and proper payment of all amounts owing by 1st
respondent’s members to Shoprite Checkers (Pty) Ltd.
The 2nd respondent also signed an unlimited surety as co
principal debtor for the due and proper fulfilment of all the
obligations of 1st respondent who was trading as “OK Grocer
Botshabello” to Shoprite Checkers. The surety agreement
provided the following:
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1. That it would be in the discretion of Shoprite Checkers to
determine to the extent, nature and duration of the
facilities and that all admissions and acknowledgements
of indebtedness by the franchisee (the First Respondent)
would be binding of the sureties;
2. That a certificate rendered by Shoprite Checkers and
certified by the manager thereof or the manager of any
office thereof, showing the amount of the First
Responent’s indebtedness from time to time and interest
thereon accrued and dividends and interest received out
of the proceeds of any sale, would be prima facie proof of
the correctness thereof;
3. The 2 nd respondent waived all benefits arising from the
legal exceptions ordinis seu excussionis et devisionis and
de duobus vel pluribus reis debend;
The applicant was the previous franchisee of the same store which
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the 1st respondent acquired from Ligo and it was because of this
that he was required to sign a surety in favour of Shoprite
Checkers for the obligations of the 1 st respondent. This deed of
suretyship was signed by the applicant on the 23 rd of January
2002, as it appears that this was a prerequisite for the granting of
the franchise by Shoprite Checkers to the 1 st respondent. At the
time of the cancellation of the sale and lease contract, the 1 st
respondent, was the franchisee of Shoprite Checkers (Pty) Ltd and
was operating its business in accordance with the franchise
agreement.
On the 21st of April 2005, Shoprite Checkers demanded payment
from the applicant in the amount of R1 632 795,23 on the basis of
an acknowledgement of debt signed by the 2 nd respondent on
behalf of the 1st respondent on the 20th of April 2005. The same
day the orders were granted in respect of goods sold and
delivered to the 1 st respondent. First and second respondents
failed to make payment of any amount in terms of the said
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acknowledgement of debt and after adjustments were made,
payment was made to Shoprite Checkers in the amount of R1 641
288,79 which according to the applicant was paid as follows:
1. A cheque deposit in the amount of R650 000,00 on the 6 th
of May 2005.
[As this point is raised by the respondents as part of their
defence, it is to be noted that this cheque was issued by M.
Weinberg (Pty) Ltd in favour of Shoprite Checkers and
annexed as annexure “BW8”, in applicants founding
affidavit.]
2. A payment of R991 288,79 which was an electronic transfer
from applicant’s Investec account to Shoprite Checkers. A copy of
the proof of such payment was also annexed as annexure “BW9”.
It is thus common cause that the amount of R1 641 288,79 was
paid to Shoprite Checkers.
It is submitted by the applicant that the 2nd respondent became
surety and coprincipal debtor for the due payment and the
8
obligations of the 1st respondent to Shoprite Checkers (Pty) Ltd for
an unlimited amount, that the 1st respondent was indebted to
Shoprite Checkers in the sum of R1 664 275,79, but failed to pay
the said sum or any amount to Shoprite Checkers on the due date,
or at all and that applicant paid the full indebtedness of the
principal debtor (the 1 st respondent) to Shoprite Checkers having
been called upon by Shoprite Checkers to do so. Thereafter he
demanded payment from the 1st and 2nd respondents on the 19th
of July 2005 respectively. Reference can be made to annexures
“BW10” and “BW11” of the papers wherein he respectively claims
R820 644,40 from Mr. Constantinos Retsinas (the 2nd respondent)
and Mrs. Irene Retsinas and R1 641 288,79 from the 1st
respondent. No payment has been made by any of the
respondents to the applicant notwithstanding demand.
DEFENCES
First and second respondents oppose the application and raise
9
three defences in the alternative. I intend to deal with the three
defences separately:
1. Applicant did not pay. The respondent points out
correctly that in order for the applicant to succeed he must,
inter alia alleged and proof that he has discharged the
principal debt and that the discharge secured the release of
the 1 st and 2nd respondents. It cannot be disputed that
the principal debt has been discharged and as such the
release of the 1st and 2 nd respondents from their
obligation to Shoprite Checkers was ensured.
Respondents argue in this regard that the discharge and
the release was in part not effected as a result of payment
by the applicant but was a result of payment made in part
by a company H Weinberg (Pty) Limited, registration
number 05/16594/07 and that, notwithstanding the fact that
applicant states that such payments was made on his
behalf by the said company, it cannot be said that such
payment was made by the applicant himself. In arguing
this point the respondents state that because there are no
10
particulars given as to why company H Weinberg (Pty) Ltd
paid an amount apparently on behalf of the applicant, it
cannot be concluded that such payment was made on
behalf of the applicant. Because the applicant constantly
referred to the difference between him and other legal
entities, he cannot now claim that such legal entity paid on
his behalf.
In this regard an observation by Van Heerden, DCJ in the
matter of INFO PLUS v SCHEELKE AND ANOTHER 1998
(3) SA 184. On 192 C – D is apposite. There the following
was stated:
¡°In the present case it was, of course, not the appellant but the
second respondent who paid the aforesaid sum of R61 436,52 to
Wesbank. However, if that sum was paid in settlement of the
balance outstanding under the instalment sale agreement, the
condition in question would have been fulfilled. For it is hardly
necessary to say that a debt owing by A to B may be extinguished
by a payment made by a stranger to B in discharge of that debt
even if A is unaware of such payment.”
11
What the respondents are therefore arguing is that
because it cannot be determined why the “stranger”
company, H Weinberg (Pty) Ltd paid the amount, the
applicant is therefore not entitled to claim that the amount
was paid by him although it did cause the extinguishing
and thus discharge of the debt (even if partially).
The probabilities are in the favour of accepting the version
of the applicant that the payment was indeed made by H
Weinberg (Pty) Ltd on behalf of the respondent and that
such payment contributed to the discharge of the debt
due and payable to Shoprite Checkers.
It is consequently found that respondents defence on the
basis of this ground, considered separately, fails.
2. Applicant should have defended the matter. As far as
this defence is concerned it is argued by the respondents
that the applicant should have refused to pay the claim of
Shoprite Checkers because Shoprite Checkers had failed
12
to tender ownership of the goods to the applicant and
correctly asserts that it is trite law that if a surety upon
whom demand by the creditor for performance in terms of
a contract of surety is made, has any defence at his
disposal that the principal debtor might have against the
creditor, he should raise such defence against the
creditors claim. In this regard reference is made to the
case of IDEAL FINANCE CORPORATION v COERTZER
1970 (3) SA (1) A. It is further argued that when a
contracting party asks for specific performance of a
contract, is required when there are reciprocal obligations
to tender, alternatively prove that he has complied with an
antecedent or reciprocal obligation.
It must be born in mind that as decided in the Ideal
Finance Corporation matter, supra such a defence should
be a defence in rem. See page 8, paragraph FG of the
cited case, where the following observation is made:
¡°Die verskil wat daar in ons reg getref word tussen verwere in
rem, waarop die borg hom kan beroep, en verwere wat slegs met
13
die persoon van die hoofskuldenaar saamhang en waarop die
borg hom nie kan beroep nie, gaan terug na die Romeinse reg.”
The question therefore that needs to be answered is
whether there was a defence in rem that the applicant
could have raised against Shoprite Checkers. In this
regard the case of CORRANS v TRANSVAAL
GOVERNMENT 1909 (1) (TS) 605 at 626 is cited as
authority for the view that the surety must be regarded as
if he was the debtor and the following is quoted:
¡°Or we may say that the sureties who complete the work
abandoned by the principal debtor step into the shoes of the
debtor so far as the latter’s rights and duties under the contract
are concerned. The sureties who complete the contract – which,
as I have said, is one and indivisible – must be regarded as if they
were the debtors. That being the case, they were entitled, before
they handed over the work, to claim from the creditor the
payment of the moneys still due under the contract. Any other
view would appear to me most inequitable as over against the
sureties.”
14
It is on the basis of the Corrans decision supra that it is
argued that applicant was entitled to ask for ownership of
the goods sold and delivered and only subsequent to this,
would he be obliged to make the payment to Shoprite
Checkers (Pty) Ltd. In the matter of Info Plus supra the
Court found the argument that in a hire purchase
agreement, where delivery of the merx to the purchaser
has been effected, there should be a further agreement
between the parties, in the sense of a mutual intention at
the time of fulfilment of the condition that ownership shall
be transferred to the purchaser, somewhat artificial, and
the court a quo concludes that:
¡°The real agreement is reached when delivery takes place,..”
Vide page 190, paragraph IG and page 191 paragraph
H:
¡°At the risk of repetition I stress that at that time both
requirements for transfer of ownership are satisfied in as much
as conditional delivery ipso iure becomes an unconditional
15
one.”
Counsel for the applicant argues that delivery of the
goods sold had already taken place at the time of
payment by the surety and that such goods were
delivered to the 1 st respondent and that the ownership
therefore passed to the 1st respondent ex lege. He
further argued that, at the least when cancellation of the
purchase contract as well the lease contract was effected,
the goods in question were in the possession of the 1 st
respondent and further that such ownership could
therefore not have been transferred to the applicant.
In this regard he relied heavily on the decision of Info Plus
supra, where it was decided that the debtor in a hire
purchase contract became the owner of the vehicle even
when he was no longer in possession thereof once the
debt owing was extinguished.
16
The respondent relies on paragraph 20 of the franchise
agreement between Shoprite Checkers (Pty) Ltd and 1 st
respondent which reads as follows:
¡°20.1 All goods purchased by the FRANCHISEE from OK
Distribution Centre or OK Suppliers shall be deemed to
have been purchased by the FRANCHISEE as agent for
the COMPANY, and shall remain the property of the
COMPANY until payment in full of all amounts owing
by the FRANCHISEE …”
and
¡°20.2 Ownership of the COMPANY products will not pass to
the FRANCHISEE unless and until the purchase price is
paid …”
It is clear from the above that once full payment had been
made ownership of the products passed on to the
franchisee who is the 1 st respondent. As the relevant
goods were delivered to the 1 st respondent and the debt
had been extinguished it follows that the 1 st respondent
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ex lege became the owner of the goods so delivered. It
can therefore not be found that the applicant could have
raised this defence in the light of the fact that he, would
not be entitled to ownership of the goods. Thus it cannot
be held that the applicant negligently failed to raise the
defence which was open to the principal debtor as indeed
such a defence would not have succeeded for the
reasons set out above.
The circumstances in the Corrans matter supra, can be
distinguished from those in the present case as that case
refers to a building contract whereas in this case we are
dealing with transfer of ownership.
It is therefore found that respondent’s defence on this
ground, considered separately, must fail.
3. Applicant’s exercise of his right to the counter
performance.
The respondent avers alternatively that applicant or Ligo
gave affect to the applicant’s rights to the counter performance
18
due in terms of the contract between the 1st respondent (applicant
or Ligo) and Shoprite Checkers (Pty) Ltd, in that it started trading
and selling the stock on or about on 2nd April 2005. Further,
respondents are aware that applicant benefited from these alleged
payments in the sense that he became the owner of the stock and
proceeded to sell it, alternatively donated it in the further
alternative he sold it to Ligo Properties CC. Applicant denies that
he took possession of the stock as alleged and state that Ligo took
possession of the premises, after the court’s decisions, and
restocked the store and commenced trading. Respondent
attached photographs which were taken on the 20th April 2005 of
stock which was on the premises.
Despite a letter written by attorneys for Shoprite Checkers
dated the 21st April 2005 stating:
“It is of utmost importance to do a proper stock take and it
will be also in the interest of Mr. Basil Weinberg to do a
proper stock take.”
there is no indication on the papers that this was done
and as such there appears to be a dispute of fact as to
how much stock was on the premises and its value. In
any event applicant’s case is that when the court ordered
the cancellation of the sale and lease agreement on the
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20th of April 2005, it was Ligo and not the applicant which
took possession of the business as the order granted by
the court was not in favour of the applicant but in favour of
Ligo.
Applicant denies that he started trading with the stock as
he lives in Johannesburg. He further submits that if it was
believed by the respondents, that Ligo took possession
then Ligo should have been made a party to these
proceedings. Respondents should have instituted 3rd
party proceedings to join it which they chose not to do.
Applicant further denies that the supermarket was fully
stocked implying that much of the stock which forms the
subject matter of the payment made by the applicant to
Shoprite Checkers had already been sold by the 1st
respondent. He consequently denies that the stock that
Ligo Properties took possession of was worth R1,6 million
and as such that the stock value was common cause
between the parties. He further submits that the stock
was not the subject matter of this application and for that
20
reason did not deal with it further. He refers to annexure
“RA2” of his replying affidavit which is a letter written by
applicant’s attorneys to respondent’s attorneys on the
19th of April 2005 which amongst other states in
paragraph 3 thereof:
¡°On the contrary, your client is in unlawful possession of the
premises and business and by selling goods is effectively
stripping the business of its assets.”
Applicant denies that he sold any stock to Ligo or donated
it to Ligo and states that Ligo took control of the premises
after obtaining the court order. The taking of the stock at
that time is regarded by the applicant as irrelevant and he
submits that in any event the value of such stock did not
exceed R700 000,00. Applicant then refers to annexure
“A” of respondent’s annexures to his opposing affidavit
which is a letter written by 1 st respondent’s attorneys to
the applicant’s attorneys wherein amongst others it is
stated that:
21
¡°Our instructions are that the business known as OK Foods
Botshabello was returned to Ligo Properties CC as a going
concern on the 20 th of April 2005 and that when
possession was taken from PS 2033 Investments CC
business was stocked to the value of R1 600 000,00 and
the safe and tills also contained cash on hand. The
business commenced trading shortly thereafter despite
requests by ourselves to receive a detailed inventory
from Ligo Properties CC of the stock and the cash on
hand at date of takeover, same has not been delivered.”
(It is to be noted that 1st respondent was at least on the 21st of
July 2005 of the view that OK Foods Botshabello, was returned to
Ligo Properties CC as a going concern on the 20th April 2005 and
not to applicant.)
Respondent’s third defence is inescapably linked to the
issue of the value of the stock which was at hand at the
time when Ligo took possession of the premises and by
its very nature raises a dispute of fact. It is therefore
necessary to consider the relevance of this dispute.
Since, as has already been found that the ownership of the stock
22
was transferred to the 1st respondent, and further that the
applicant could not have raised a defence based on ownership,
the question whether respondents third defence is relevant to the
adjudication of this application becomes pertinent.
The dispute that needs to be determined on facts outside the
papers filed herein, is therefore a dispute between 1 st respondent
and Ligo, which is not a party to this action.
To hold, as respondent seems to be arguing, that the applicant
would be unduly enriched to the value of the stock that appellants
left on the premises, when Ligo took over, would negate the fact
that applicant never become owner or took possession of the
stock.
To hold that it would be equitable to allow the respondents to raise
setoff as it were, of the value of the stock in dispute, against the
claim of applicant would equally ignore the fact that, he, applicant
never took possession of the stock and that the stock was
returned to Ligo, which fact is admitted by respondents in their
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letter dated 21st July 2005.
The issues that gave rise to the dispute herein, can sufficiently be
dealt with on the papers. The dispute of fact that can only be
evaluated and decided upon, at a trial are issues that relate to a
dispute between Ligo and 1st respondent. Such a dispute is
therefore subject of another inquiry.
The respondents’ third defence also fails in the circumstances.
The following order is made:
Against 1 st respondent:
1. Payment of the amount of the sum of R1 641 288,79.
2. Interest on the amount of R1 641 288,79 at the rate of
15,5% per annum from 10 th June 2005 to date of final
payment.
3. Costs of the suit.
24
Against 2 nd respondent:
1. Payment in the sum of R820 644,40, jointly and severally
against 1 st respondent, the one paying the other to be
absolved.
2. Interest on the sum of R820 644,40 at the rate of 15,5% per
annum from the 10th of June 2005 to date of final payment.
3. Costs of the suit.
______________
V. MATSEPE, AJ
For the applicant: Adv. A.F. Jordaan SC
Instructed by:
Symington & De Kok
BLOEMFONTEIN
For the 1st and 2nd
respondents: Adv. S. Grobler
Instructed by:
Saffy & Associates
BLOEMFONTEIN
25
/em
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