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[2018] ZASCA 18
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Budge and Others v Glyn-Cuthbert and Others (1046/2016) [2018] ZASCA 18 (16 March 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Non-reportable
Case
No: 1046/2016
In
the matter between:
BUDGE,
JONATHAN STUART
FIRST APPELLANT
BOON,
FARREL EAN N
O
SECOND APPELLANT
BUDGE,
VIVIEN BARBARA N O
THIRD APPELLANT
POLLOCK,
RICHARD N O
FOURTH APPELLANT
WAVELENGTHS
1147 CC (IN LIQUIDATION)
FIFTH APPELLANT
MIDNIGHT
STORM INVESTMENTS 256 (PTY) LTD
(IN
LIQUIDATION)
SIXTH APPELLANT
and
GLYN-CUTHBERT,
RUSSELL
FIRST RESPONDENT
SANTANA,
ANTHONY N O
SECOND
RESPONDENT
SANTANA,
LEANNE N O
THIRD
RESPONDENT
RUSKING
REAL ESTATE MARKETING (PTY) LTD
FOURTH RESPONDENT
COREFACTS
1069 CC
FIFTH RESPONDENT
COPPER
SUNSET TRADING 326 (PTY) LTD
SIXTH RESPONDENT
CENTRAL
LAKE TRADING 304 (PTY) LTD
SEVENTH RESPONDENT
DAVPROP
26 (PTY)
LTD
EIGHTH RESPONDENT
WEST
DUNES PROPERTIES (PTY) LTD
NINTH
RESPONDENT
LITTLE
SWIFT INVESTMENTS 338 (PTY) LTD
TENTH RESPONDENT
TURQUOISE
MOON TRADING 289 (PTY) LTD
ELEVENTH RESPONDENT
ALFA
BUSINESS VENTURES 33 (PTY) LTD
TWELFTH RESPONDENT
Neutral
citation:
Budge
& others v Glyn-Cuthbert & others
(1046/16)
[2018] ZASCA 18
(16 March 2018)
Coram:
Shongwe
ADP, Willis, Saldulker, Mbha and Van der Merwe JJA
Heard:
5 March 2018
Delivered:
16
March 2018
Summary:
Claims arising from an
agreement to dissolve a business relationship between two parties –
repudiation not established –
enrichment claims and ancillary
relief – appeal dismissed – cross-appeal partially
successful.
ORDER
On
appeal from:
The
Gauteng Local Division, Johannesburg (Mphahlele J sitting as the
court of first instance):
1
The appeal is
dismissed.
2
The cross-appeal is
upheld in respect of claims A, C and H and is also upheld
in respect
of the absence of a costs order in the court a quo when claim B was
dismissed.
3
The orders of the
court a quo in regard to claims A, C and H are set aside, and
in
respect of claim B the omission of the court a quo to make an order
as to costs is corrected and, in respect of these four claims
(ie
claims A, B, C and H), the following is substituted therefor:
‘
Claims
A, B, C and H are dismissed with costs
.’
4
The cross-appeal in respect of claim E is dismissed.
5
The appellants are jointly and severally liable to pay the
respondents’
costs in the appeal and cross-appeal, the one
paying the others to be absolved.
6.
The first appellant is to pay the costs of the application to amend
the quantum
of damages in claim B.
JUDGMENT
Willis
JA (Shongwe ADP and Saldulker, Mbha and Van der Merwe JJA
concurring):
Introduction
[1]
Although there are six appellants and twelve respondents in this
appeal and cross-appeal, the two lead actors among the dramatis
personae are Mr Jonathan Budge, (the first appellant) and Mr Russell
Glyn-Cuthbert, (the first respondent). The fifth, sixth,
seventh, ninth and tenth respondents played no part in the
litigation. The first appellant and the first respondent had been
business
partners from 2001 to 2007, mutually agreeing in November
2007 to go their separate ways and to divide up the assets built up
during
their partnership. It was in the dividing up of these assets
between the first appellant and the first respondent that the dispute
between the parties arose, leading to the litigation in the high
court and, subsequently, to this appeal and cross-appeal. In view
of
the fact that there are these two lead actors in the dispute and so
many other parties I shall, for convenience and in order
to avoid
confusion, take the unusual step of referring to the two lead actors
as the first appellant and the first respondent respectively
but to
the other parties by the names that have generally been used, both in
the court a quo and in this appeal.
[2]
The appeal and cross-appeal arise from a trial in the Gauteng Local
Division, Johannesburg (Mphahlele J). Judgment was delivered
on 3
June 2016. The main issue in the appeal is whether the court a quo
correctly found that the first respondent had not repudiated
a
dissolution of partnership agreement (the agreement), which he had
concluded with the first appellant. As a result of this
finding, the court a quo dismissed the first appellant’s claim
for damages based upon the alleged repudiation. The appeal
is also
concerned with whether the court a quo correctly dismissed a
liquidator’s claim, based on enrichment, for reimbursement
of a
management fee paid to the fourth respondent. A further issue in the
appeal is whether that court correctly dismissed a claim
by the first
appellant for costs that he has incurred in the winding up of certain
companies. The appeal to this court is with
the leave of the court a
quo
, which was granted on 9 September 2016.
[3]
The appellants were the plaintiffs in the court a quo. They brought
nine separate claims against the respondents. These were
claims A to
I respectively. The court a quo found partially in favour of the
first appellant in claim A but dismissed much of the
relief sought
thereunder, by reason of its finding that there had been no
repudiation of the agreement. It dismissed claim B, having
found that
there had been no repudiation of the agreement but made no order as
to costs in respect of that claim. Other than his
partial success in
regard to claim A, the first appellant succeeded in respect of his
claim H and the fourth appellant, who was
liquidator of companies in
which the first appellant and the first respondent had been
shareholders, was successful in respect
of claims C and E. The court
a quo dismissed the appellants’ respective claims D, F, G and
I. The appellants sought and were
granted leave to appeal to this
court in respect of claims A, B, D, F, G and I.
[4]
The cross-appeal by the respondents before this court has also been
heard with the leave of the court a quo. It had found for
the
appellants in respect of four of their claims (two of which were in
favour of the first appellant and two in favour of the
fourth
appellant). The respondents contend that the court a quo should have
dismissed the appellants’ claims in their entirety.
The
cross-appeal was in respect of the orders of the court a quo in
respect of claims A, C, E and H, as well as its failure to
make a
costs order when dismissing claim B.
[5]
Also in contention before us is an application made by the first
appellant, after leave to appeal had been granted, to amend
the
quantum of his damages. If the amendment were to be granted, it would
relate to claim B only. Self-evidently, as counsel for
both sides
agreed, if the appellants’ claim B were to fail, there would be
no need to consider the amendment. The amendment
is, in any event,
opposed by the respondents on the basis that it is not supported by
the evidence lead during the trial.
An
outline of the history of the matter
[6]
The first appellant and the first respondent came together as
business partners in order to own, develop and speculate in immovable
properties. To this end, they held equal shares and interests in
various private companies and close corporations respectively.
These
shares and interests were held either by them in their individual
personal capacities or through family trusts.
[7]
On 26 November 2007 the first appellant and the first respondent
entered into a ‘memorandum of agreement’, also
styled a
‘dissolution of partnership’ (the agreement aforesaid),
in terms of which their business relationship would
come to an end
with effect from 30 November 2007. Various of the corporate entities,
through which they had conducted their business
were also parties to
the agreement and have been joined in the action, either as
plaintiffs or co-defendants. Essentially, the
agreement provided that
the immovable properties would be sold and thereafter the proceeds
divided equally between the first appellant
and the first respondent.
The first appellant intended to go farming. The first respondent
intended to continue in the business
of property development. By
reason of the first respondent’s intention to continue, on his
own, in that line of business,
the agreement essentially provided
that he would buy or ‘take over’ various of the
properties that he and the first
appellant had owned together. The
agreement had been drawn up by the first respondent’s then
attorney.
[8]
The following clauses in the agreement are relevant to the
determination of the issues:
‘…
2.3
Wavelengths will continue to market and sell the developments
reflected in 2.2 above as it has been accustomed to. Wavelengths
will
endeavour to complete the developments by not later than the 28
th
February 2009. Should any units not be sold by this date, then the
parties will make a decision how to dispose of the units.
2.4
As and when income is received in the process of finalizing the
developments, the net proceeds, after all expenses have been
paid,
will be shared equally between Russell [the first respondent] and Jon
[the first appellant] or their respective holding trusts
.
…
5.2
The Companies [the companies reflected in annexure A to the
agreement] undertake to sell the properties to Rusco by not later
than June 2008 for an amount of R29 million gross.
5.3
The sum of R29 million will be paid to the Companies and the net
proceeds will be paid to Jon and Russell or their nominated
entities.
5.4
The balance outstanding due to Jon from time to time, will bear
interest at 4% below prime bank rate calculated from 30 June
2008
until date of payment to Jon. Jon will be paid in full by not later
than 28 February 2009 failing which Jon shall at his option
elect to
either increase the interest charged to the prime rate or demand that
the property be sold on the open market to realise
the capital.
…
12
BREACH
Should
any party (“the defaulting party”) commit a breach of any
of the provisions of the agreement, then the party
who is not in
breach (“the aggrieved party”) shall be entitled to give
the defaulting party written notice to remedy
the breach. If the
defaulting party fails to comply with that notice within fourteen
(14) days of the receipt thereof, subject
to any other provisions of
this agreement to the contrary, the aggrieved party shall be entitled
to claim specific performance,
or cancel the agreement, in either
event without prejudice to the aggrieved party’s rights to
claim damages. The foregoing
is without prejudice to such other
rights as the aggrieved party may have in common law or statute
.’
[9]
Clause 2.1 of the agreement lists some 29 ‘developments’,
as referred to in clause 2.2, quoted above. It also records
that
‘Savannah Falls Phase 1’ contains 65 stands. Under the
heading ‘General’ (clause 14), the agreement
contains the
standard clauses that variations and amendments thereto must be
agreed in writing and signed by both parties thereto,
as well as the
fact that any indulgence, leniency or extension of time, by one party
shall not affect his rights to enforce the
terms of the agreement.
[10]
In terms of the agreement, in order to ‘take over’ these
properties, the first respondent would form a company
to be known as
‘Rusco (Pty) Ltd’ (Rusco). Rusco would buy the
properties owned by Wavelengths 1147 CC, the fifth
appellant
(Wavelengths), Midnight Storm Investments (Pty) Ltd, the sixth
appellant (Midnight Storm), Turquoise Moon 289 Trading
(Pty) Ltd, the
eleventh respondent (Turquoise Moon), and Alfa Business Ventures 33
(Pty) Ltd, the twelfth respondent (Alfa Business
Ventures). These
appear in a schedule in annexure ‘A’ to the agreement. As
appears from the extract of the agreement
quoted above, the aggregate
sum agreed for these transactions was R29 million. The nett proceeds
of the sale of these properties,
listed in Annexure ‘A’,
were to be divided equally between the first appellant and the first
respondent (or their respective
nominees). The agreement provided
that Rusco would be paid R3 million as a management fee for
2008. It was expected that both
sides would receive about R12.4
million each. In terms of the agreement, the first respondent would
be liable in his personal capacity
as well as Rusco.
[11]
The first respondent purchased a so-called ‘shelf company’
known as ‘Rusking Real Estate Management (Pty)
Ltd’, the
fourth respondent, (REM) on 30 November 2007. During 2008 the first
respondent was responsible for paying a management
fee of R3.42
million from Wavelengths to REM and not to Rusco. Rusco was, in fact,
never formed.
[12]
As is apparent from clause 5.4 thereof, the agreement also provided
that if Rusco had not paid the sum of R29 million before
30 June
2008, it would be obliged to pay the first appellant interest at a
rate of four per cent below prime and if there were
arrears at 28
February 2009, the first appellant would be able to claim interest at
the prime rate. As from 30 November 2007, the
first appellant
discontinued any active participation in the business.
[13]
Davprop 26 (Pty) Ltd (the eighth respondent), (Davprop) one of the
entities in which the first appellant and the first respondent
held
equal shares, sold its immovable property to REM on 16 April 2008.
That sale was not finalised. Subsequently, the first appellant
and
the first respondent agreed to vary the dissolution agreement further
by the first appellant selling his shareholding in Davprop
to the
first respondent. That agreement is reflected in a resolution of the
Davprop board of directors dated 25 August 2008. On
16 April 2008
Turquoise Moon sold Plot 68 Kempton Park to Danking Properties (Pty)
Ltd for a purchase consideration of R7 million.
On the same day
Wavelengths sold Antonio Manor to REM for R4.8 million. On 26
September 2008 Midnight Storm sold 27 individual
stands to Rusking
Manor CC for R207 000.00 per stand. On 7 October 2008 Midnight
Storm sold 24 individual Cranford Glen stands
to Rusking Manor CC for
R192 000 per stand. On 24 May 2010 Midnight Storm sold Eagle
Rock to Turquoise Moon for R1 million.
On the same day, 24 May
2010, Wavelengths sold Maple Ridge to Turquoise Moon for R3.4
million. In each instance (enduring over
a period of more than two
years), the first appellant signed the offers to purchase on behalf
of each seller and the first respondent
accepted the offers on behalf
of the respective purchasers. In addition, the first appellant said,
in evidence, that the payment
of the 2008 management fee to REM
rather than to Rusco, made absolutely no difference to him. Those
monthly payments took place
without demur from the first appellant.
In the circumstances, the first respondent’s failure to
incorporate Rusco was entirely
immaterial to the dispute between the
parties. REM had served the purpose intended by the parties and, at
all material times, the
first appellant had been content that this
should be so.
[14]
In summary, during the period between the signing of the agreement
and the liquidation of
Wavelengths and Midnight
Storm, only one property, ‘Bastion Gate’ was transferred
in terms of the agreement. This was
effected by the first appellant
and the first respondent both signing an agreement on 1 March 2009,
in terms of which the first
appellant sold his 50 ordinary shares in
Turquoise Moon. On 22 February 2010 a ten million rand ‘interim
dividend’
was paid to the first appellant and first respondent
via Wavelengths and distributed such that the first appellant
received R8.5
million and the first respondent R1.5 million.
[15]
From the time that the first appellant and the first respondent met
on 8 December 2008 to discuss the state of affairs relating
to the
dissolution, the relationship between the two gradually deteriorated.
On 17 May 2010 the first respondent wrote to the first
appellant to
inform him that he, the first respondent, was in the process of
‘obtaining finance’ to perform his obligations
in terms
of the agreement. The appellants accept that, until that date, there
had been no repudiation by the first respondent.
[16]
In the process of trying to untangle their business relationship, the
first appellant and the first respondent entered into
a number of ad
hoc agreements, including payments, out of their partnership assets,
to the first respondent while he attempted
to sell the assets and
realise the proceeds. These are relevant not only to claims C and D
but also the overall picture. It is
clear that, at least as a result
of the financial crisis, the parties had agreed that the ‘cut-off’
date of 30 June
2008 (if one may indeed cast it in such imperative
terms) was not regarded by either of the parties as having been ‘cast
in stone’.
[17]
Meanwhile, during the periods 1 January 2008 to 31 December 2008, the
first respondent transferred a sum of R3.42 million as
a management
fee from Wavelengths to REM. This was paid in 12 monthly instalments.
The first respondent contends that this had
been agreed to between
the parties. The first appellant contests this. Similarly and again
similarly disputed, the first respondent
transferred R4.56 million
from Wavelengths to REM during the period 1 January 2009 to 31
December 2009. The first respondent contends
that this had been
agreed to between the parties. In March and April 2010 the first
respondent transferred a further sum of R300 000,
in two equal
instalments from Wavelengths to himself as ‘remuneration’.
The first respondent’s entitlement thereto
is also in dispute.
[18]
In respect of the allegation of repudiation, the first appellant
relied on the first respondent’s failure to incorporate
Rusco
as one of two grounds for his entitlement to cancel and claim damages
from the first respondent. The immateriality of this
issue to the
first appellant over a number of years (to which reference was made
in para 13 above), has the consequence that he
cannot rely on it as a
‘repudiation’. The other ground is a letter sent by
the first respondent’s attorneys,
Schwarz-North of 26 November
2010. It has been referred to by the parties as ‘the
repudiation letter’. It reads as
follows:
‘
Dear
Sir,
RE:
WAVELENGHTS // J BUDGE // R GLYN-CUTHBERT – YOUR REF B152891
1.
Your with prejudice email
of 19 November 2010 refers.
2.
Our client was, as your
client is fully aware, entitled to repayment of the amount
of
R3 000 000.00. Notwithstanding that your client has had
knowledge of this for a considerable period of time, your
client has
now sought to make this an issue. Your client has, at all material
times, had access to all the banking accounts (and
still does).
3.
The amount of
R3 000 000.00 represents amounts loaned by our client to
Wavelengths and which loans were always repayable at our client’s
election.
4.
Your client’s
contention that the repayment was not authorised is not correct
and
accordingly there exists no basis for the demand contained in your
email under reply. Your client is invited to disclose the
basis for
the contention that this was not authorised and that our client was
not entitled to repayment of the loans made.
5.
Both you and your client are well aware that our client disputes that
there is
an agreement as contended for in your email under reply.
6.
Our client’s
instructs us that Eagle Rock was sold by Wavelengths to Turquoise
Moon. Your client signed the agreement of sale on behalf of
Wavelengths (as seller) and our client signed the agreement on behalf
of Turquoise Moon (as purchaser). Our client further instructs us
that he has purchased your client’s shares in Turquoise
Moon
and paid an amount of R2 750 000.00 to your client. Despite
payment of this amount to your client, our client instructs
us that
your client is unlawfully refusing to transfer his shares in
Turquoise Moon to our client. Our client urgently requires
your
client to sign the relevant share transfer form. Please confirm that
your client will do so.
7.
Certain stands in
Buccleuch have been sold. Our client has already advanced an amount
of R2 250 000.00 to your client. Our client has, in
essence, paid your client for his share of Eagle Rock and Erf 368/370
Buccleuch. Insofar as there is a shortfall relating to your client’s
share in respect of Erf 335 Buccleuch (Antonio Manor),
our client
will instruct the transferring attorneys of Antonio Manor to pay such
shortfall directly to your client.
8.
To the extent that we have failed to deal with any of the allegations
contained
in your email under reply, our failure to do so is not to
be construed as an admission of any issue not pertinently dealt with
and all rights vested in our client to respond thereto in due course
and in the appropriate forum remain reserved.
Yours faithfully,
HP NORTH
SCHWARZ – NORTH INC’
[19]
In order to understand the context of this so-called ‘repudiation
letter’, it is useful to have regard to the preceding
e-mail
from the first appellant’s attorneys, Ramsay Webber, to which
the repudiation letter was a response. Ramsay
Webber’s
letter asserts conditions to payments which were not contained in the
dissolution agreement. Amongst other things,
the email from the first
appellant’s attorneys to the first respondent’s then
attorneys contains the following: ‘
…
we
understand that your client has sold Eagle Rock and possibly
Buccluech. Please note that our client will not allow transfer of
either of these properties unless payment pursuant to the agreement
between our respective clients is made to our client or the
funds
which are derived from the transfer of the funds is held in trus
t.’
[20]
An exchange of correspondence over the issue of these particular
properties continued in emails from the first appellant’s
attorneys and the first respondent’s then attorneys on 12 and
14 January 2011 and the response, by formal letter from the
first
respondent’s on 18 January 2011. At that time, the first
appellant was threatening to bring the liquidation applications,
to
which reference is made below. The first repondent had protested that
this would be unnecessary as progress was being made in
respect if
the sale of the hitherto unsold properties.
[21]
On 4 April 2011 the first respondent’s attorneys sent a letter
to the first appellant’s attorneys, referring to
the sale of
properties by Midnight Storm and Wavelengths and requesting the first
appellant to sign the necessary resolutions to
give effect thereto.
Even though the first appellant claimed that the first respondent
had, on several occasions, claimed that
he ‘had found a way to
get out of the agreement’ (this being something that the first
respondent denied having said),
it is clear that there were ongoing
attempts to give effect to the spirit of the agreement.
[22]
There was thus a live dispute over the sale of certain of the
properties and payment of the proceeds thereof. It is against
this
background that the statement in paragraph 5 of the ‘repudiation
letter’ must be understood. The dissolution agreement
does not
contain the provisions contended for in Ramsay Webber’s earlier
e-mail. Consideration must be given to the remaining
contents of the
repudiation letter in order to place the contested statement in
context. In paragraphs 6 and 7 first respondent’s
attorneys
clearly affirm the terms of the amended dissolution agreement in
respect of the sale of shares in Turquoise Moon and
the sale of the
Eagle Rock and Maple Ridge properties.
[23]
Relying, inter alia, on this exchange of correspondence, the first
respondent asserted in evidence that he had sought to give
effect to
the terms of the dissolution agreement to the extent that he could,
given the availability of funds and that it had been
the first
appellant who had, for quite some time, failed to give effect to the
terms of the dissolution agreement by refusing to
agree to the
transfer of the properties, which the first respondent had (through
various legal entities) offered to purchase at
the prices agreed to
in annexure ‘A’ to the dissolution agreement.
[24]
The first appellant’s stance was that the first respondent had
breached the terms of the dissolution agreement by failing
to acquire
the annexure ‘A’ properties by no later than 30 June 2008
as contemplated in clause 5.2 of the dissolution
agreement. The first
respondent’s response to this assertion has been that clause
5.4 of the dissolution agreement contemplated
the possibility of a
delay in the acquisition of the annexure ‘A’ properties
because express provision was made for
the first appellant to receive
interest, calculated from 30 June 2008 to date of payment. The first
appellant’s own evidence
is consistent with the inferences that
he gave effect to that election and claimed interest at the prime
rate calculated from 1
March 2009. The calculation of the first
appellant’s alleged damages reveals that the first appellant
has consistently claimed
interest at what he contends to be the
agreed rate. The first appellant accepted that he was aware at the
time of the conclusion
of the dissolution agreement that the first
respondent would need to obtain funding finance for the acquisition
of the annexure
‘A’ properties and that he did not have
R29 million to pay to the property-owning companies. The first
respondent contended
that an alternative option available to the
first appellant was to have the properties in annexure ‘A’
sold ‘on
the open market’ to procure the capital.
[25]
The first appellant and the first respondent
each held 25 per cent of
the issued share capital in Alfa Business Ventures, the twelfth
respondent. The immovable property, constituting
the only asset of
Alfa Business Ventures has been sold and the proceeds thereof have
been distributed to the parties entitled thereto.
The sum of
R501 088.91 due to the first respondent, is currently held in
the trust account of the first appellant’s
attorneys.
[26]
On 15 November 2011, Meyer J sitting in the Gauteng Local Division,
Johannesburg, granted final winding-up orders of both Midnight
Storm
and Wavelengths. He did so on the basis that it would be just and
equitable in terms of s 81(1)
(d)
(iii)
of the Companies Act 71 of 2008 (the new
Companies Act), even
though
the applications had erroneously been brought in terms of s 344
(h)
of the Companies Act 61 of 1973 (the old Companies Act). The
applications had been brought by the first appellant in the appeal
now before us. Relying on the well-known tests set out by Coetzee J
in
Rand
Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd
,
[1]
Meyer J referred to various factors, in particular the acrimonious
relationship that had developed between the parties and ‘the
complete breakdown of the relationship of trust that had once existed
between them’, to conclude that it would be just and
equitable
to make the orders that he did.
[2]
The judgment has since been reported as
Budge
NO & others v Midnight Storm Investments 256 (Pty) Ltd &
another; Budge N O v Wavelengths 1147 (Pty) Ltd
.
[3]
Although aspects of Meyer J’s judgment have been criticised by
this court in
Thunder
Cats Investments 92 (Pty) Ltd & another v Nkonjane Economic
Prospecting and Investment (Pty) Ltd & others
,
[4]
this has no bearing on the present case. The orders of liquidation
still stand.
[27] Shortly after Meyer
J granted these liquidation orders, Mr Richard Pollock, the fourth
appellant (Mr Pollock), was appointed
as the lead liquidator of both
Midnight Storm and Wavelengths. On 18 July 2012, Mr Pollock joined
the first appellant in instituting
the action that is the subject
matter of the appeal and cross-appeal now before us. The appellants
instituted nine separate claims
against the first, second, third,
fourth, eighth and eleventh respondents.
[28]
The trial ran for nine days. The first appellant and Mr Pollock
testified for the appellants. The first respondent and Mr Terrence
Hatkilson, a chartered accountant specialising in forensic audits,
testified for the respondents. Mr Hatkilson’s evidence
is
irrelevant for the determination of this appeal. There was a welter
of documentary evidence as well as transcripts of the insolvency
enquiry held in terms of
ss
414 and 415
of
the old Companies Act, arbitration proceedings between the parties in
2015 and the court records in the applications for the
liquidation of
Midnight
Storm and Wavelengths
.
The claims of the
appellants and the resulting orders of the court a quo
[29]
The first claim (claim A) was for an order declaring that the first
respondent had repudiated the agreement and that the first
appellant
was entitled to cancel it and that Mr Pollock be appointed to divide
up the assets equally between the two lead actors
and that the first
respondent should account and debate his transactions relating to the
dissolution. The second claim (claim B)
was for damages in an amount
of R2 483 552.96, arising from the repudiation, payable by the first
respondent to the first appellant.
The third claim (claim C) was for
REM to repay Wavelengths R3.42 million being the management fee
referred to above. The claim
was based on enrichment, alternatively
the provisions of s 42(3) of the Close Corporations Act 69 of 1984
(the
Close Corporations Act). The
fourth and fifth claim (claims D
and E) were similar to that of the third, save that they were for the
payment of R4.56 million
received by REM in 2009 and R300 000
received by the first respondent as a ‘salary’ in March
and April of 2010. The
sixth claim (claim F) was for the
rectification of the register of shareholders and directors in
Turquoise Moon, the eleventh respondent.
The seventh claim (claim G)
was
for
rectification
of the register of shareholders and the directorships in Davprop. The
eighth claim (claim H) was for an order authorising
the release of
the sum of R501 088.91 paid into the trust account of Ramsay Webber,
the appellants’ attorneys, in part satisfaction
of the debt
owed to the first appellant. The ninth claim (claim I) was for R187
861.80, being a claim for damages arising from
unpaid costs orders in
the winding-up applications heard by Meyer J. In respect of all
claims the appellants sought an order that
the respondents be made
jointly and severally liable, the one paying the others to be
absolved for the costs of the action.
[30] In respect of claim
A, the court a quo ordered the first respondent, within 15 days of
the order, to account to the first appellant
and to debate with him
all relevant dealings since 30 November 2007, the first respondent to
pay the costs. The court dismissed
claim B but made no order as to
costs. In respect of claim C, the court ordered REM to pay Mr Pollock
in his capacity as liquidator
of Wavelengths R3.42 million, the
fourth respondent to pay the costs. The court dismissed claim D, Mr
Pollock to pay the costs.
In respect of claim E the court ordered the
first respondent to pay Mr Pollock in the same capacity R300 000, the
first respondent
to pay the costs. The court dismissed claims F and
G, the first, second and third appellants to pay the costs. In
respect of claim
H the court granted the relief sought but made no
order as to costs. The court dismissed claim I, the first appellant
to pay the
costs.
The
issue of repudiation and
the conclusions of the
court a quo in respect of claims A and B
[31]
The court a quo correctly relied on the test in
Datacolour
International (Pty) Ltd v Intamarket (Pty) Ltd
,
[5]
that repudiation is not so much a matter of intention as it is of
perception.
[6]
The
judge went on to find that ‘the totality of the evidence
presented in court’, including ‘the conduct of the
parties during the period leading up to the alleged repudiation’
were such that she was unable to find that there was a valid
repudiation and therefore, cancellation, by the first appellant of
the agreement. This was the basis upon which the court
a quo
dismissed claim B and granted only partial relief in respect of claim
A. The court a quo’s conclusions concerning the
repudiation are
strongly contested by the appellants.
[32]
This court is not convinced that the conclusions of the court a quo
in respect of the repudiation are wrong. Consequently,
it correctly
decided that the appellants’ claims in respect of claim B had
to be dismissed. In regard to claim A, by reason
of its finding
concerning the question of repudiation, it also correctly dismissed
most of the relief sought by the appellants
thereunder. The order
concerning the accounting and a debate thereof is quite unnecessary.
In their particulars of claim, appellants
have already claimed all to
which they may have been entitled from the first respondent. In
regard to claim A, the correct order
is to dismiss it in its
entirety.
The
appellants’ other claims
[33]
The enrichment claims in claims C, D and E will now be considered
seriatim. They do not arise from the contract or agreement
between
the parties. For different reasons, the claims for rectification and
restoration of directorships in claims F and G as
well as the claims
for the release of funds in terms of claim H and the claim for
compensation for costs in claim I will, thereafter,
also be
considered separately.
[34]
Claim C is a claim by Mr Pollock in his capacity as liquidator of
Wavelengths for the repayment of R3.42 million made by it
as a
management fee to REM in 2008. As the first appellant had acquiesced
in this payment to REM and had agreed upon the amount
to be paid, it
hardly lies in his mouth to complain that it was made to the wrong
legal entity, especially as, on his own version
of events, it made no
difference to him whether it was Rusco or REM that had been paid.
Moreover, the claim was based on enrichment
but the enrichment was
not at the expense of Wavelengths. The court a quo therefore erred in
regard to claim C. The correct order
is to dismiss this claim, with
costs. The cross-appeal in respect of this claim succeeds.
[35]
Claim D is also for the repayment of a management fee paid by
Wavelengths to REM in 2009. The amount in question was R4.56
million.
This time, the first respondent contends that it was agreed between
the parties. Relying on
Stellenbosch
Farmers’ Winery Group Ltd & another v Martell et Cie &
others
,
[7]
the court a quo found, on a balance of probabilities, that a
management fee was likely to have been agreed as there was still work
to be done and the relationship between the parties had not yet
broken down. This finding cannot be disturbed. The appellants contend
that, even if this factual finding were to remain, the agreement to
pay this sum amounted to a variation of the agreement, which
has
given rise to the whole dispute and, as it constituted a variation
thereof, that was not reduced to writing, it could not be
enforced.
The agreement to pay this sum was not, however, a variation of the
original agreement between the parties but a separate
additional one.
The order made by it in
respect of claim D must, accordingly, stand. The appeal must be
dismissed.
[36] Claim E was
also
brought by Mr Pollock in his capacity as liquidator of Wavelengths
for the repayment of an amount paid to the first respondent
by it.
The amount was for R300 000, paid in two equal amounts of R150 000
each as a salary for the first respondent in March and
April 2010. It
is common cause that these amounts were paid and that there was no
agreement thereto. The first respondent’s
contention is that he
was entitled to assume, in the circumstances, that the first
appellant had ‘no objection’ thereto.
This defence cannot
be sustained. The court a quo correctly ordered that the money be
repaid. Counsel for the first respondent
conceded that, in regard to
claim E the cross-appeal had to be dismissed.
[37]
Claims F and G have fallen away. The first appellant’s family
trust has not persisted with its appeals and has tendered
costs to
the date of notification thereof. The trust’s claims related to
share transactions in Turquoise Moon and Davprop.
The latter company,
in which each of the first appellant and the first respondent had an
equal shareholding, sold its only property
to Rusco for R3 million.
This was provided for in terms of clause 4.2 of the agreement. There
is some confusion as to when, precisely,
this transaction was
completed but, in any event, the matter appears to have become
settled between the parties. As there is no
continuing appeal against
the order of the high court dismissing the claims in claims F and G,
nothing more needs to be said.
The orders of the court a quo
must stand.
[38]
Having concluded that claim H should succeed, the court a quo
declared that the sum of
R501 088.91, together with accrued interest, be released to the
first appellant in part-satisfaction
of ‘the plaintiff’s
successful claims in terms of this judgment’. In the end, the
first appellant, did not succeed
in any of its claims against the
respondents. Claim E, which was successful against the first
respondent, was brought not by the
first appellant but by the
liquidator of Wavelengths. The cross-appeal must succeed in respect
of this claim and Claim H should
be dismissed.
[39]
Claim I may briefly be disposed of. The first appellant made this
claim on the basis that, but for the first respondent’s
repudiation, the applications for the liquidation would not have been
incurred. I agree with the court a quo that, quite apart
from any
other considerations, because of the failure of the respondent’s
claims based on the repudiation, this claim must
accordingly fail.
The court a quo correctly dismissed claim I, with costs. In any event
Meyer J, when granting the liquidation
orders, ordered that the costs
be costs in the liquidation. The appeal against this order must be
dismissed.
Costs
[40]
Although the court a quo made no order as to costs in respect of
claim B, it did not provide any reasons therefor. This omission
clearly occurred per incuriam and should be corrected, such that
costs follow the result in respect of this claim. Two counsel
were
not employed in the trial itself. This must be reflected in the costs
orders that follow. The appeal is to be dismissed. The
costs thereof
must follow that result. The respondents were largely successful in
the cross-appeal. Costs must follow the result.
Although, in the
appeal and cross-appeal, the appellants employed two counsel but the
respondents did not. This will affect the
order as to costs.
Summary
of conclusions
[41]
In summary, the appellants’ appeals in respect of claims
A,
B, D, F, G and I must fail. The appeal must therefore be dismissed in
its entirety. The respondents’ cross-appeal in respect
of
claims A, C, and H succeeds. The cross-appeal in respect of the
absence, in the court a quo, of a costs order relating to the
dismissal of claim B also succeeds. The cross-appeal in respect of
claim E must, however, fail.
Order
[42]
The following order is made:
1
The appeal is
dismissed.
2
The cross-appeal is
upheld in respect of claims A, C and H and is also upheld
in respect
of the absence of a costs order in the court a quo when claim B was
dismissed.
3
The orders of the
court a quo in regard to claims A, C and H are set aside, and
in
respect of claim B the omission of the court a quo to make an order
as to costs is corrected and, in respect of these four claims
(ie
claims A, B, C and H), the following is substituted therefor:
‘
Claims
A, B, C and H are dismissed with costs
.’
4
The cross-appeal in respect of claim E is dismissed.
5
The appellants are jointly and severally liable to pay the
respondents’
costs in the appeal and cross-appeal, the one
paying the others to be absolved.
6.
The first appellant is to pay the costs of the application to amend
the quantum
of damages in claim B.
______________________
N P WILLIS
Judge of Appeal
APPEARANCES:
For
the Appellants:
L J Morison SC (with him, E J Keeling)
Instructed by:
Ramsay Webber,
Johannesburg
c/o Lovius Block,
Bloemfontein
For
the Respondents:
A R G Mundell SC
Instructed by:
Schwartz-North Inc,
Johannesburg
c/o Bezuidenhouts,
Bloemfontein
[1]
Rand Air
(Pty) Ltd v Ray Bester Investments (Pty) Ltd
1985
(2) SA 345
(W) at 349G-350H.
[2]
Budge N O &
others v Midnight Storm Investments 256 (Pty) Ltd & another;
Budge N O v Wavelengths 1147 (Pty) Ltd
[2011]
ZAGPJHC;
2012 (2) SA 28
(GSJ) paras 10-21.
[3]
Budge N O &
others v Midnight Storm Investments 256 (Pty) Ltd & another;
Budge N O v Wavelengths 1147 (Pty) Ltd
(supra)
fn 2
.
[4]
Thunder Cats
Investments 92 (Pty) Ltd & another v Nkonjane Economic
Prospecting and Investment (Pty) Ltd & others
[2013]
ZASCA 164
;
2014 (5) SA 1
(SCA) para 14.
[5]
Datacolour
International (Pty) Ltd v Intamarket (Pty) Ltd
[2000] ZASCA 82
;
2001
(2) SA 284
(SCA)
.
[6]
See especially
paras 16-19.
[7]
Stellenbosch
Farmers’ Winery Group Ltd & another v Ma
r
tell
et Cie & others
2003
(1) SA 11
(SCA) at 14I-15D.