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2024
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[2024] ZAMPMBHC 21
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Dynachem Holdings SA (Pty) Ltd v Michem Cleaning Supplies CC and Another (4832/2021) [2024] ZAMPMBHC 21 (26 March 2024)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(MPUMALANGA DIVISION,
MBOMBELA)
CASE NO: 4832/2021
(1)
REPORTABLE:NO
(2)
OF INTEREST TO OTHER JUDGES: YES
(3)
REVISED: YES
DATE: 26/03/2024
SIGNATURE
In the matter between:
DYNACHEM
HOLDINGS SA (PTY) LTD
Applicant
and
MICHEM
CLEANING SUPPLIES CC
First Respondent
MICHELLE
SUZANNE SCHNEPEL
Second Respondent
This judgment was
handed down electronically by circulation to the parties and/or
parties’ representatives by email. The date
and time for
hand-down is deemed to be 26 March 2024 at 10:00.
JUDGMENT
MASHILE J:
INTRODUCTION
[1]
This is an interlocutory application in terms of Uniform Rule of
Court 35(7) compelling
the Respondents to discover
certain
documents required in terms of uniform Rules of Court 35(3) and (6)
(“Rule 35 Notice”). The Respondents oppose
the
application on the grounds that the matter has firstly prescribed and
secondly, that the nature of the franchise agreement
(“the
agreement”), which is the subject matter of the main action,
between the parties is founded on reciprocity, which
entitles the
innocent party to the
exceptio non adimpleti
. As such, if the
Applicant (“Dynachem”) has failed to observe the terms of
the agreement, the Respondents cannot be
expected to comply, or put
differently, Dynachem must have adhered to its side of the bargain to
hold the Respondents to the letter
of the agreement. Dynachem
in
this application is the Plaintiff in the main action and the First
and Second Respondents are the First and Second Defendants
respectively.
FACTUAL MATRIX
[2]
The background facts are largely common cause and they are tersely
described in the
heads of the Respondents from which I intend to
borrow extensively. The main case to which I have alluded to above
was founded
on a franchise agreement but the parties did not furnish
this Court with the date of its conclusion or commencement. The
agreement
was, however, cancelled on 14 October 2021. On 22 November
2021, Dynachem initiated the action proceedings in the main case
against
the Respondents in this Court. The summons was served on the
Respondents on 25 November 2021 and the relief sought as per the
founding
papers, and as it pertains to this application, was, as
against the First Respondent, firstly, for the latter to deliver a
full
account, supported by vouchers, of all sales and gross revenues
made in each month for the period of January 2018 until 14 October
2021. Secondly, debatement of the aforesaid account.
[3]
The Respondents delivered their notice to defend the action and
served and filed their
plea on 17 January 2022. For purposes of this
application, the defence raised in the action is that they deny that
Dynachem is
entitled to demand and/or receive an account and
debatement thereof from the First Respondent. The Respondents did not
contest
that an agreement was concluded between the parties providing
for an account and debatement. However, they denied that Dynachem
had
complied with its obligations in terms of the agreement and was
therefore not entitled to demand compliance with the agreement
from
the First Respondent.
[4]
Subsequently, Dynachem served the Rule 35 Notice on 23 May 2022. The
Respondents denied
the right of Dynachem to discovery of the
requested documents at that juncture. To this end, they filed an
affidavit explaining
their approach on 21 June 2022. This was
followed by Dynachem delivering the present application in terms of
Rule 35(7) to compel
the Respondents to comply with the Rule 35
Notice on 17 October 2022. The Respondents served their answering
affidavit on 26 of
October 2022 wherein they explained that they
denied that Dynachem was entitled to claim performance in terms of
the agreement
between the parties in circumstances where it has
failed to comply with its reciprocal duties since entering the
agreement in 2006.
[5]
The Respondents further raised a special plea of prescription which
may have a material
bearing on the right of Dynachem to discovery of
all the requested documentation and information for the period
claimed. The basis
of the prescription defence is that the relevant
period commenced in January 2018 and culminated on 14 October 2021.
Considering
the fact that summons were issued on 25 November 2021,
part of the entitlement to the information demanded had already
prescribed
by the time the action was instituted.
ASSERTIONS
[6]
Dynachem contends that in terms of the agreement between the parties,
it is entitled
to a full account supported by vouchers of all sales
and gross revenues made in each month for the period of January 2018
until
14 October 2021 and debatement of the aforesaid account.
Dynachem asserts further that the issue whether or not it is entitled
to a full account should be decided simultaneously with the question
of debatement of the account. In short, it is arguing that
it will be
convenient to decide the two issues together at one sitting.
[7]
The Respondents, on the other hand, assert that Dynachem has not made
a case entitling
it to a full account and debatement thereof from
MCS. The Respondents are convinced that Dynachem’s
characterisation of the
defence of the Respondents is completely
misguided hence its insistence on full account and debatement
thereof. In setting the
record straight, the Respondents point out
that they never denied that the agreement concluded by the parties
provided for an account
and debatement.
[8]
Their defence, they state, is anchored on
exceptio non-adimpleti
contractus
. Fundamental to the
exceptio non-adimpleti
contractus
is the notion of reciprocity. A party wishing to
demand compliance with the contractual terms of an agreement can only
do so in
circumstances where it has itself, observed and performed in
line with those terms. The Respondents denied that Dynachem complied
with its obligations in terms of the agreement between the parties.
As such, Dynachem is not entitled to demand compliance with
the terms
of the agreement from the First Defendant unless, of course, it
demonstrates that it has complied.
ISSUES
[9]
The main issue for determination is whether or not Dynachem is
entitled to a full account and debatement of the account. Put
differently,
are there grounds on which the Respondents can refuse to
furnish the alleged required documents. Assuming that they are,
should
this Court consider the question of entitlement to a full
account discretely from the debatement of the account or decide the
two
simultaneously at one sitting?
LEGAL FRAMEWORK
[10]
To the extent that the Respondents argue that the
exceptio
non adimpleti contractus
finds application o
n
the facts of this matter, it could be useful to refer to the matter
of
Beadica
231 CC & Others v Trustees, Oregon Trust & Others
[1]
where
the Constitutional Court endorsing
BK
Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk
[2]
held as follows:
"...The
exceptio permits a party sued for non-performance of a contract to
resist judgment by showing that the other party
did not perform their
side of the bargain ..."
[11]
To the extent that franchise agreements have as their component,
reciprocity, the Court In
TH
Restaurants (Pty) Ltd v Rana Pazza (Pty) Ltd and others
[3]
,
concluded that
exceptio
non adimpleti contractus
was available for invocation by parties to a franchise agreement. In
this regard the Court said the following at Para 30:
“
As
stated in the preceding paragraph, in bilateral contracts, the
exceptio is available as a defence in those circumstances where
the
parties’ obligations are reciprocal. The issue to
determine, therefore, in the determination of the question as
to
whether the first respondent can invoke the exceptio as a defence is
the question as to whether, based on a proper interpretation
of the
contract, the parties’ obligations are closely linked with one
another to justify a finding that the one obligation
has to be
undertaken in return for the other. In short, the question to
be answered, based on a proper interpretation of
the contract, is
whether the parties’ obligations are reciprocal to justify the
invocation of the exceptio as a defence against
the applicant’s
claim. This, invariably, will involve an analysis of the parties’
obligations in terms of the contract.”
[12]
The elements of this type of action were stated and explained in
Doyle &
Another v Fleet Motors PE (Pty) Ltd
[4]
where the Court said:
“
In the absence
of rules, the following general observations might be helpful:
1.
The Plaintiff should aver
(a)
his
right to receive an account, and the basis of such right, whether by
contract or by fiduciary relationship or otherwise;
(b)
any
contractual terms or circumstances having a bearing on the account
sought;
(c)
the
defendants’ failure to render an account.
2.
On proof of the foregoing, ordinarily
the Court
would in the first instance order only the rendering of an account
within a specified time. ....
3.
The Court might find it convenient to prescribe the time and
procedure of the debate, with leave to the parties to approach it for
further directions if need be.
Ordinarily the parties
should first debate the account between themselves. If they are
unable to agree upon the outcome, they
should, whether by pre-trial
conference or otherwise, formulate a list of disputed items and
issues. These could be set down
for debate in Court
.
Judgment would be according to the Court’s finding on the fact.
4.
The Court may, with the consent of both parties, refer the
debate to a referee ....”
EVALUATION
ENTITLEMENT TO A FULL
ACCOUNT
[13]
It is the argument of Dynachem that it is entitled to a full account
and debatement because the
franchise agreement contains such
provision and that the information furnished by the Respondents so
far is insufficient. The Respondents
deny that they have supplied any
information at all. On the contrary, they aver that they have not and
will not because Dynachem
has failed to perform in line with its
reciprocal duties arising from the agreement. Those respects are that
Dynachem:
13.1
Has not provided the MCS with the exclusive right and licence to
manufacture, market, supply and distribute
the relevant products
within the territory of Mpumalanga as agreed;
13.2
Has not supplied the First Respondent with all technical expertise,
formulations, know-how and information
to manufacture and distribute
the products as provided for in the agreement;
13.3
Has not supplied MCS with sufficient technical and marketing
information to market the products as provided
for in the contract;
13.4
Has failed to supply MCS with the formula to enable First Defendant
to manufacture the relevant products
as provided for in the
agreement;
13.5
Has failed to provide MCS with advice, know-how, assistance,
guidance, support and training for the operation
of its business as
provided for in the agreement.
[14]
In replying to the respects of its failure to adhere to the
performance of its obligations, Dynachem
merely made a bare denial.
It is common cause that the franchise agreement is bilateral in
nature and that each party has obligations
that arise from the
agreement, which each is anticipated and obliged to observe. In
short, it contains reciprocal terms. It being
settled that the
exceptio non adimpleti contractus
is part of our law:
Beadica
231 CC and Others
supra
and that it applies to franchise
agreements:
TH Restaurants supra
, it must be available to the
Respondents.
[15]
As such, Dynachem is not entitled to the information that it seeks
from the Respondents as it
has not adhered to its side of the
bargain. Consequently, it has lost any right that it might have had
to them. I agree with the
Respondents that Dynachem appears to be at
cross purpose with the contention of the Respondents insofar as it
persists that the
information that has been supplied is insufficient.
The question of sufficiency or insufficiency does not arise in this
instance
at all. It is only the determination of entitlement to the
full account that ought to be considered. It is only upon
finalisation
of entitlement to the full account that the issue of
debatement will arise. This is clearly set out in the matter of
Doyle
supra
.
[16]
Given my conclusion that Dynachem is not entitled to a full account,
it will be gratuitous to
proceed to consider the question of
sufficiency. In fact, this is the end of the road for Dynachem.
Besides, other than Dynachem
being not entitled to a full account as
a result of its failure to observe and perform in terms of its
obligations arising from
the agreement, entertaining this kind of
relief would result in untold prejudice and unfairness on the
Respondents. That has to
be the case because Dynachem has upon
termination of the franchise agreement with the Respondents opened a
similar business venture
in the same territory that is in direct
competition with the business that the Respondents are conducting.
[17]
The information will arm Dynachem with detail of the First
Respondent’s client basis and
the identity of its clients.
Furthermore, if granted, it will provide Dynachem with the detail of
the MCS’s business model
and trade secrets. As stated earlier,
in consequence of the private nature of the information requested, it
will turn out to be
exceptionally prejudicial to the business of the
Respondents especially where it might turn out that Dynachem was not,
as is the
case here, entitled to a full account in the first place.
[18]
Mindful of the further defence of prescription raised by the
Respondents, I do not think that
it is warranted to explore the
question as the
exceptio non adimpleti contractus
has already
warded off the relief sought by Dynachem. In the result, the
application fails and I make the following order:
The
application is dismissed with costs of two Counsel, where so
employed.
B A MASHILE
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA
MPUMALANGA DIVISION,
MBOMBELA
APPEARANCES:
Counsel
for the Applicant:
Adv
JT Lindhout
Instructed
by:
STBB
Attorneys
C/O
Hack Stupel & Ross
Counsel
for the Respondent:
Adv
JG Cilliers SC
Adv
M Van Rooyen
Instructed
by:
Date
of Judgment:
26
March 2024
[1]
2
020
(5) SA 247 (CC)
[2]
1979 (1) SA 391
(A)
[3]
2012 (5) SA 378 (BCC)
[4]
1971 (3) SA 760
(A) at 762 E