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[2024] ZAMPMBHC 82
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Mnaka Diamonds (Pty) Ltd v Engen Petroleum Limited (1753/2023) [2024] ZAMPMBHC 82 (20 November 2024)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(MPUMALANGA DIVISION,
MBOMBELA)
CASE NO: 1753/
2023
(1)
Reportable: Yes/No
(2)
Of Interest to other Judges: Yes/No
(3)
Revised: Yes/No
20 November 2024
Date
Signature
In the matter between:-
MNAKA DIAMONDS (PTY)
LTD
Plaintiff
and
ENGEN PETROLEUM
LIMITED
Defendant
JUDGMENT
Mazibuko AJ
INTRODUCTION
[1]
The plaintiff brought an application for default judgment alleging
that the plaintiff
had
suffered pecuniary loss due to the
defendant's actions
of
taking possession of the
site, refusing or failing to return same to the plaintiff, and
refusing to compensate the plaintiff.
PARTIES
[2]
The plaintiff is Mnaka Diamonds (Pty) Ltd (Mnaka), a
proprietary
company duly registered and incorporated in accordance with the laws
of the Republic of South Africa pertaining to companies.
Also, a
franchisee or a dealer
using
Engen's trademarks and a holder of a retail licence duly issued by
the Controller of Petroleum Products in accordance with
the Petroleum
Products Act
[1]
and the
Regulations.
[2]
[3]
The defendant is Engen Petroleum Limited, a public company (Engen)
duly registered and incorporated
in accordance with the laws of the
Republic of South Africa pertaining to companies, a holder of a
wholesaler licence, and a franchisor.
BACKGROUND
[4] In
April 2017, the parties, in their respective capacities as a licenced
retailer and
licenced wholesaler, entered into a written franchise
agreement.
[5]
In 2021, Mnaka sought to sell the business operations subject to
Engen's approval of the buyer.
Engen approved the terms of the sale
of the business agreement between Mnaka and a buyer.
[6]
Before signing the agreement between Mnaka and the buyer, Engen
demanded that Mnaka hand over
the site to it. The site's operations
came to a halt. Mnaka received no payments for the selling price and
the stock on hand. Engen
had not compensated Mnaka for the loss of
business and sale, nor was it for the value of the stock on the day
of the handover.
[7]
In April 2023, Mnaka instituted proceedings against Engen by serving
combined summons claiming for payment of damages
suffered by Mnaka in the amount of R6 800 000.00 and R500 000.00,
interest at
the legal rate calculated from the date of service of
summons upon Engen until the date of final payment and costs of suit.
[8] Summons
was served on Engen on 4 May 2023. Engen's failure to enter an
appearance to
defend the matter prompted Mnaka to seek leave from the
court to
apply
for default judgment in terms of Rule 31 of the Uniform Rules
[3]
.
The matter was enrolled for a hearing in August 2024 to proceed on
merits and quantum.
THE EVIDENCE
[9] In
order to succeed with its claim, Mnaka tendered the evidence of its
sole director,
Mr Shadrack France Mashele (Mashele) and called no
other witnesses.
[10] Mashele
testified and confirmed his sole directorship of Mnaka
following the demise of the
other director. He testified that in
April 2017, in their respective capacities as a licenced retailer and
licenced wholesaler,
Mnaka and Engen entered into a written franchise
agreement, being Engen's standard franchise agreement, to enable
Engen to have
its proprietary products offered and sold on the open
market to consumers by way of Mnaka
at
Chris Hani Street,
KaNyamazane, Mpumalanga province (the site).
[11] In
2021, Mnaka sought to sell its business as a going concern to the
buyer, which Engen approved.
Subsequent to Engen's recommendation of
Thrive Retail (Pty) Ltd (Thrive) as a buyer, a written sale of the
business agreement was
proposed between Mnaka and Thrive, represented
by their respective owners. The agreed final selling price was R6.8
million, which
is made up of R6.5 million as contained in a principal
agreement and R300. 000 included in an addendum, excluding stock on
hand
and dealer assets. Engen approved the terms of the agreement
between Mnaka and Thrive. Engen directed Mnaka to share the necessary
documentation, including financials, with Thrive.
[12]
Pursuant to the engagement between Mnaka and Thrive, and acceding to
a request from Nokuthula Yembe of Engen,
Mnaka handed over the site
keys to Ntombi of Engen on 1 June 2022, even though the sale price
and stock were not paid yet to Mnaka.
On this date, Mnaka seized
operations.
Mnaka, through Mashele,
contacted Thrive; however, Thrive informed him it was told by Engen
not to engage with them further. The
proposed agreement between Mnaka
and Thrive was accordingly not signed per Engen's instructions.
[13]
He further testified that
he handed
over the site to Engen in good faith. When the site was handed over,
the stock valued at R500 000 was in the site's fuel
tanks.
[14] In
July 2022, Mnaka, in correspondence to the Controller of Petroleum
Products, yielded to Engen's request
by agreeing to surrender its
petroleum retail licence for Thrive to succeed in its application for
a new retail licence for the
site previously operated by Mnaka.
[15]
Engen continued with the proposed sale and finalised the agreement
with Thrive after Mnaka handed the site
to Engen.
Thrive commenced to trade.
However, despite demand, Engen had
not compensated Mnaka for the ongoing retailing potential of the
site, the value of fixtures,
fittings and equipment in the amount of
R6.8 million and R500 000 for stock at the time of handing over.
[16]
Concluding his testimony, Mashele stated that
Mnaka
would have ordinarily handed over the site to Thrive, the buyer. The
stock price would have been determined on the day of
the takeover by
two stocktake teams from Mnaka and Thrive by sharing stock sheets and
agreeing on the value thereof. However, at
the insistence of Engen,
that was not done as the handover was done to Engen, not the buyer.
ISSUES
[17]
The issues for determination are whether Mnaka made out a case for
default judgment against Engen, particularly
establishing the
wrongfulness element for a delictual claim arising out of Engen's
actions causing pure economic loss.
LEGAL PRINCIPLES
[18]
Rule 31(2)(a) reads: 'Whenever in an action the claim or, if there is
more than one claim, any of the claims
is not for a debt or
liquidated demand, and a defendant is in default of delivery of
notice of intention to defend or of a plea,
the plaintiff may set the
action down as provided in subrule (4) for default judgment and the
court may, after hearing evidence,
grant judgment against the
defendant or make such order as it deems fit.'
[19]
Rule 31(4) provides that the proceedings referred to in subrules (2)
and (3) shall be set down for hearing
upon not less than five days'
notice to the party in default, Provided that no notice of set down
shall be given to any party in
default of delivery of notice of
intention to defend.
[20]
The South African law of delict is based on three pillars: the actio
legis Aquiliae, the action iniuriarum
and the action for pain and
suffering.
The primary object of an award for
damages is to compensate the person who has suffered harm.
[21]
Regarding the action legis Aquiliae, the following elements are
essential to
prove
liability:
a)
harm must take the form of patrimonial loss.
b)
the conduct must take a form of a positive act or an omission or
statement.
c)
the conduct must be objectively unreasonable and without lawful
justification.
d)
one must be at fault, and the blameworthiness must be in a form of
intention or negligence.
e)
there must be causation both factual and legal.
[22]
Patrimonial
loss … has been defined as the dimunition in the utility of a
patrimonial interest in satisfying the recognised
needs of the person
entitled to such interest. It has also been defined as the loss or
reduction in value of a positive asset in
someone's patrimony or the
creation, increase or acceleration of a negative element of a
person's patrimony (a patrimonial loss).'
[4]
[23]
The
purpose of awarding damages for patrimonial loss is to place the
plaintiff in the financial position, to the extent that money
can do
so, that the plaintiff would have been in had the delict or breach of
contract not been committed, thereby redressing the
dimunition (or
probable dimunition) in his or patrimony caused by the defendant.
[5]
[24]
Damages for patrimonial loss are of the same nature as the impaired
patrimonial interest and can thus be
a true equivalent for such
damage. In non-
patrimonial loss, there
is no real relationship between money and loss.
[6]
[25]
The Supreme Court of Appeal has dealt with a delictual action in the
context of a contract in Standard Bank
of South Africa Ltd v
Coetsee
[7]
and stated the
following: 'In my view, it is not necessary, generally, in a
delictual action based on a fraudulent misrepresentation
that it
should be alleged and proved that the representor intended to
occasion the loss which the representee suffered. All that
is
necessary to allege and prove is that
the
representor made a false representation which he intended, whatever
his motive might have been, the representee to act upon.
The
loss or damages which the representee suffered need not have been
intended by the representor, it must simply have followed
as a result
of the representee acting upon the false representation.'
[26]
In Country Cloud Trading v MEC, Department of Infrastructure
Development,
[8]
the
Constitutional Court summarised the approach our law takes to
wrongfulness by pointing out that the wrongfulness enquiry focuses
on
'the
[harm
causing] conduct and goes to whether the policy and legal convictions
of the community, constitutionally understood,
regard it as acceptable. It is based on the duty not to cause harm –
indeed to respect rights – and questions the reasonableness
of
imposing liability'.
DISCUSSION
[27]
The evidence established that summons was properly served upon Engen
by the sheriff. Engen did not file a
notice of its intention to
defend. To that extent, Mnaka was entitled to approach the court for
a default judgment without serving
upon Engen a notice of setdown of
the default judgment application.
[28]
Regarding a claim in terms of the Aquilian action, it has been
settled law that the purpose is to restore
the plaintiff's patrimony
and, as far as possible, to place him in the position he would have
been had the delict not been committed.
The plaintiff bears the onus
to place sufficient evidence before the court with regard to the
merits and the quantum. For quantum,
the evidence must show a
reasonable assessment of damages. Where the damages cannot be worked
out precisely, the court may exercise
its own judgment based on the
relevant facts and evidence.
[29]
The evidence presented by Mashele on behalf of Mnaka was persuasive,
and I have no hesitation in accepting
its truthfulness. He also
referred to documentation, agreements and email correspondences,
which I heard no reason not to admit.
[30] I
find that the premature handing over of the site to Engen was not due
to Mnaka's negligence. Mnaka believed
it was necessary to expedite
the process of concluding the sale of the business agreement. When it
learned that Thrive had been
advised not to communicate with them
further and not to sign their proposed agreement, the site had
already been handed over to
Engen, the franchisor.
[31]
However, it is not clear why Mnaka proceeded to hand over its retail
licence for the site to the Controller
for Thrive to successfully
apply for its own before receiving payment. There is no evidence
suggesting Mnaka acted recklessly or
negligently. Its explanation
that, in good faith, it believed Engen's request could be acceded to
as part of the sale process could
not be challenged as the matter was
not defended. This court has no ground not to accept such an
explanation.
[32]
Mnaka averred in its particulars of claim that after taking
possession of the site, Engen sabotaged the sale
by advising Thrive
not to sign the written agreement between Mnaka and Thrive. Acting on
this advice, Thrive defaulted on the agreement.
[33]
Mnaka, through its counsel, Adv Fourie, argued that Mnaka
surrendered its business premises and petroleum retail licence on the
insistence of Engen under the guise that same was necessary for the
sale of the business to Thrive. Engen was the sole cause of
the
business sale between Mnaka and Thrive not being finalised. As a
result of Engen's actions, Mnaka no longer had any business
entity,
stock, or petroleum retail licence to sell. The direct damages
suffered by Mnaka due to Engen were the proposed purchase
price for
Mnaka's business being R6.8 million, the stock at hand being R500 000
and the costs of this action.
[34]
Mnaka's case was that Engen's conduct in sabotaging the sale
agreement constituted unfair and unreasonable
contractual conduct
under the equitable standard, which conduct was directly responsible
for the loss of business and sale thereof,
and that Mnaka was
entitled to be compensated the fair value of the retail potential of
the business and the stock at hand at the
time of the handover of the
site to Engen.
[35] In
my view, Engen's demanding the premature handover to itself instead
of Thrive induced Mnaka to act the
way it did, thereby causing harm
to Mnaka. That conduct resulted in Mnaka losing the sale and stock
prices as Thrive did not sign
the agreement and never made payment.
[36]
Engen made demands to Mnaka, which were intended for Mnaka to act
upon. Mnaka did act upon such demands.
Such
demands
were not warranted in terms of the agreement, and same caused Mnaka
to suffer pure economic loss. The process of concluding
the sale
would have been for the handover to Thrive upon Thrive's payment of
the selling price and the stock value on the day of
the handover.
[37]
Although, Thrive had not made the payments to Mnaka. Mnaka
reasonably played its role when it acceded to Engen's request to hand
over the site to Engen and surrendered its retail licence to the
Controller to allow Thrive to apply for its own successfully.
[38]
Consequently, Engen concluded a transaction with Thrive after Mnaka
handed the site to Engen. In my view,
Mnaka's claim against Engen for
the payment of R6.8 million for the selling price and R500 000 for
the stock on hand at the time
of handover ought to succeed.
[39] I,
accordingly, make the following order:
Order:
1.
The application for default judgment by Mnaka against Engen is
granted.
2.
Engen is to pay R6.8 million and R500 000 to Mnaka with
interest at the legal rate calculated from the date the summons was
served
on Engen to the date of final payment.
3.
Engen will pay the costs of suit.
_______________________
NGM MAZIBUKO
Acting Judge of the High
Court of South Africa
Mpumalanga Division,
Mbombela
This judgment was
handed down electronically by circulation to the parties'
representatives by email.
Representation
For the plaintiff:
Adv H F Fourie
Attorneys
for the plaintiff
:
Murray Kotze & Associates
For the defendant:
No appearance
Attorneys
for the defendant
:
Hearing date:
27 August 2024
Delivery date:
20 November 2024
[1]
Act
120 of 1977.
[2]
The
Regulations regarding Petroleum Products Site and Retail Licences,
(GN R286 of 2006).
[3]
Act
59 of 1959.
[4]
HJ
Erasmus and JJ Gauntlett (updated by PJ Visser), “Damages”
in The Law of South Africa, Volume 7, 2nd edition (2005)
at page 11,
paragraph 11; PJ Visser et al “Visser and Potgieter’s
Law of Damages” (2nd edition) (2003) at page
4.
[5]
D
Hutchison, “Back to Basics: Reliance Damages for Breach
of Contract Revisited” in SALJ, Vol. 121 (2004) 51
at page 52;
HJ Erasmus and JJ Gauntlett (updated by PJ Visser), “Damages”
in The Law of South Africa, Volume 7, 2nd
edition (2005) at page 27,
paragraph 25.
[6]
PJ
Visser et al “Visser and Potgieter’s Law of Damages”
(2nd edition) (2003) at page 33.
[7]
Standard
Bank of South Africa Ltd v Coetsee
1981 (1) SA 1131
(A) at 1145A-B.
[8]
Country
Cloud Trading v MEC, Department of Infrastructure Development
[2014]
ZACC 28
;
2015 (1) SA 1
(CC).