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[2014] ZAWCHC 156
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Fulloutput 7 (Pty) Ltd t/a Petroport Touws River v Total SA (Pty) Ltd (11561/2013) [2014] ZAWCHC 156 (21 October 2014)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Appeal
no: A319/2014
Case
no: 11561/2013
In
the matter between:
FULLOUTPUT
7(PTY) LTD t/a PETROPORT TOUWS
RIVER
......................................
Appellant
and
TOTAL
SA (PTY)
LTD
..........................................................................................................
Respondent
Coram
:
BOZALEK, STEYN JJ et BLOMMAERT AJ
Heard:
29 AUGUST 2014 & 12 SEPTEMBER 2014
Delivered:
21 OCTOBER 2014
JUDGMENT
BOZALEK
J:
[1]
This is a full bench appeal, heard on an
urgent basis, against the judgment of Cossie AJ, delivered on 29 May
2014, dismissing the
appellant’s application for an interim
interdict
pendente lite
by discharging a rule nisi that had been in operation by agreement
between the parties. Cossie AJ also dismissed a counter-application
brought by the respondent and, also with her leave, that order is the
subject of a cross-appeal by the respondent.
BACKGROUND
[2]
The appellant has been trading as a Total
service station outside Touws River for more than 10 years. The
property on which it conducts
its business is owned by the
respondent, a major oil company. I shall refer to the parties
throughout as the appellant and the
respondent. The appellant also
conducts two other subsidiary businesses on the premises, a
convenience shop and a franchised restaurant.
[3]
From at least 2009 onwards difficulties
arose between the parties. The appellant was dissatisfied with
aspects of the business relationship
including the respondent’s
pricing and discount structures and its arrangements with large
customers which, the appellant
felt, had the effect of reducing the
volume of petrol products it sold. Much correspondence passed between
the parties, most of
it emanating from the appellant and having an
increasingly urgent tone.
[4]
It would appear that at the same time the
appellant was falling into arrears with what were agreed to be its
virtually concurrent
payments to the respondent for the purchase of
its petrol and/or diesel products sold on the appellant’s
forecourt. Attempts
to resolve the differences between the parties
failed. Finally, on 11 July 2013, the respondent’s regional
representative
wrote to the appellant’s owner, Mr K Dippenaar
(‘Dippenaar’), confirming an immediate suspension of the
respondent’s
supplies to the appellant by reason of its alleged
breach of the dealer agreement (‘the agreement’). In so
doing the
respondent purported to act in terms of clause 10.6 of the
agreement.
[5]
On 19 July 2013 the respondent’s
legal representatives wrote to Dippenaar stating that its client had
‘
validly cancelled the agreement …
as a result of (the appellant) having breached the agreement by
failing to make the payment
due by it.’
[6]
At around the same time the appellant
invoked an arbitration clause in the agreement with a view to
referring various disputes for
arbitration. Ultimately it was agreed
between the parties that these disputes would be determined in an
action in the High Court.
However, the appellant also launched an
urgent application for relief
pendente
lite
in the form of an order compelling
the respondent to restore delivery to it of petroleum products
subject to the appellant paying
for these on a cash on delivery
basis.
[7]
The parties thereafter agreed to a rule
nisi in terms whereof, pending the hearing of the urgent application,
the respondent would
supply petroleum products to the appellant on a
cash on delivery basis. The respondent filed a counter-application
for certain
declaratory relief and for an order evicting the
appellant from the premises. The applications were argued before
Cossie AJ on
8 October 2013 and on 29 May 2014 judgment was handed
down dismissing both the application and the counter-application.
[8]
In regard to one of the requirements for
relief
pendente lite
,
namely, a well-grounded apprehension of irreparable harm, Cossie AJ
held that the termination of fuel supplies by the respondent
could
not be relied upon by the appellant inasmuch as there was an existing
Court order providing for the purchase and sale of
petroleum products
pending the main action. In making this finding Cossie AJ clearly
misconceived the situation since that Order,
taken by agreement, was
no more than a temporary arrangement pending the outcome of the
urgent application. In the circumstances
this Court must look afresh
at the matter and consider whether the appellant established the
requirements necessary in order to
obtain interim relief.
[9]
In dismissing the counter-application
Cossie AJ found that the dispute between the parties was riddled with
material factual disputes
concerning the terms of the agreement which
could not be resolved in application proceedings and accordingly that
the ejectment
order could not be granted.
[10]
In view of the fact that the appellant
remains in possession of the premises but does not enjoy the supply
of petroleum products
to it by the respondent, the parties agreed to
obtain an urgent date for a Full Bench hearing. Argument was
duly heard on
29 August and 12 September 2014.
THE
REQUIREMENTS FOR AN INTERDICT PENDENTE LITE
[11]
In
LF Boshoff
Investments (Pty) Ltd v Cape Town Municipality
1969 (2) SA 256
(C) at 267B – D Corbett J (as he then was) set
out the requirements an applicant must prove to obtain an interdict
pendente lite viz:
‘
(a)
that the right which is the subject-matter of the main action and
which he seeks to protect by means of interim relief is clear
or, if
not clear, is prima facie established, though open to some
doubt;
(b)
that, if the right is only prima facie
established, there is a well-grounded apprehension of irreparable
harm to the applicant if
the interim relief is not granted and he
ultimately succeeds in establishing his right;
(c)
that the balance of convenience favours the
granting of interim relief; and
(d)
that the applicant has no other satisfactory remedy.’
THE
APPELLANT’S CASE
[12]
The appellant pointed out that there were
several main disputes between the parties which they had agreed to
adjudicate, not by
way of arbitration as the agreement provided, but
by way of action in the High Court. In due course the respondent had,
as plaintiff,
issued and served summons in an action for an order
confirming its cancellation of the dealer agreement and for the
appellant’s
ejectment from the premises. The appellant, as
defendant, filed a special plea, a plea and several counter-claims
thereto. That
case has yet to come to trial.
[13]
The appellant’s case is that,
notwithstanding the disputes awaiting determination, the respondent
took the law into its own
hands and, without any prior warning,
terminated all fuel supplies to the appellant on 11 July 2013. This
caused an immediate crisis
for the appellant since fuel sales are the
life blood of its service station business as well as the subsidiary
businesses which
it operates on the premises.
[14]
The primary dispute between the parties
relates to the appellant’s alleged indebtedness to respondent
principally for petroleum
products already supplied. In this regard
the appellant avers that it made out a very strong case casting
serious doubt on the
reliability and correctness of the respondent’s
calculations and, in particular, the accuracy of a certificate issued
by
the respondent in terms of the agreement certifying that the
appellant was indebted to it in the sum of approximately R8mil as at
August 2013. The appellant also pointed to further disputes between
the parties which led to it seeking a declaratory order in
the action
that certain clauses in the agreement were against the public
interest or in conflict with statutory provisions and
should be
declared null and void.
[15]
Amongst the provisions in the agreement
challenged by the appellant is clause 10.6, on the basis that it
gives the respondent an
unfettered discretion to be the sole
decision-maker as to whether the dealer’s conduct constitutes a
breach of the agreement
thereby entitling it to stop the supply of
fuel.
THE
RESPONDENT’S CASE
[16]
The respondent’s case is that by
reason of the appellant’s failure to pay amounts due in respect
of fuel products supplied,
the respondent eventually invoked its
contractual right to suspend the supply of such products to the
appellant and cancelled the
agreement. Its case further is that the
amount due and payable by the appellant as at 5 August 2013 was some
R8.5mil as confirmed
in a certificate of balance it issued in terms
of clause 25 of the agreement.
[17]
The respondent cited correspondence from
the appellant contending that it demonstrated that, irrespective of
the exact amount owing,
on the appellant’s own version it was
substantially in arrears with its payments. It pointed out that on
the appellant’s
own papers it had suffered losses and its cash
flow had been negatively affected allegedly by various steps taken by
the respondent
and that as a result the appellant had fallen into
arrears with its rent and petroleum payments to the respondent.
[18]
In the premises, the respondent contended,
it was entitled to stop petroleum supplies to th appellant in terms
of clause 10.6 of
the agreement and, in terms of clause 23, to eject
it from the premises. The respondent contended that the appellant was
free to
prosecute any counter-claim it might have, but in the interim
it had to pay its account without deduction or set off failing which
the respondent was entitled to stop supplies, cancel the agreement
and eject the appellant from the premises. In conclusion the
respondent contended that no prima facie case had been made out for
interim relief by the appellant, which, moreover, had an adequate
alternative remedy in the form of its claim for damages as a
counter-claim in the main action.
[19]
As regards the counter-application the
respondent argued that its dismissal on the basis that there were
major factual disputes
between the parties concerning the terms of
the agreement was unfounded. It contended that there was no dispute
in regard to clause
13.1.3 which prevents set-off and clause 23 which
entitled the respondent to cancel the agreement due to non-payment;
further that
the relevant terms of their agreement were common cause
although their interpretation was obviously a question of law.
Overall,
the respondent contended, once it was accepted that the
appellant was indebted to the respondent for fuel supplied, that such
debt
was due and owing but unpaid and that as a result thereof
respondent had stopped the supply of petroleum and cancelled the
agreement,
there was no answer to the counter-application for an
eviction order and it should have been granted.
THE
TERMS OF THE AGREEMENT
[20]
Whether the appellant was able to prove
that the right which it sought to protect by interim relief was clear
or, if not clear,
was prima facie established depends in no small
part upon an interpretation of the terms of the agreement. The
following
are some of the relevant terms.
[21]
Clause 6,
‘
Acknowledgment’
,
records the dealer’s (the appellant) obligation to sell the
respondent’s petroleum products and lubricants exclusively
and
to conduct at the designated premises the business of a fuel-filling
and service station with such additional business activities
as are
reflected in the annexures.
[22]
Clause 7 records the dealer’s
undertaking and agreement to conduct the business in accordance with
the policies and procedures
of the company (the respondent) from time
to time as well as a myriad other obligations which are not presently
relevant.
[23]
Clause 10, headed
‘
Petroleum
Products for sole use and display on the designated premises’
,
records the terms upon which the respondent supplies petroleum
products to the dealer. Clause 10.6 provides that ‘
The
Company shall be under no obligation to supply the dealer with the
Company’s Petroleum Products or any product or service
if the
Dealer is, in the Company’s opinion, guilty of conduct which
constitutes a breach of this agreement.’
It is to be noted that this last cancellation clause is widely cast,
on the face of it not restricting the Company’s right
to cease
supplies to the dealer only to breaches of clause 10.
[24]
Clause 23, dealing with ‘
Cancellation’
,
includes the following:
‘
23.1
Should the Dealer:
23.1.1.
fail to pay any amount due by the Dealer in terms of the Agreement on
the due date;
23.1.2.
commit any other breach of any term of the Agreement and subject to
clause 23.2 fail to remedy any such other breach or
observe such term
within a period of three days of the giving of written notice to that
(sic) by the Company to the Dealer or
…
then
‘
the
Company shall be entitled in addition to all other rights available
to it, to forthwith cancel the Agreement, without prejudice,
and
provided that: Should the breach refer to in clause 23.1.2 be one
which is not reasonably capable of remedied within the said
period of
three days, the Dealer may be allowed at the sole discretion of the
Company such additional period as is reasonably required
therefore;
23.2.
The Dealer agrees that it shall vacate the designated premises within
three business days of receipt of notice of cancellation.
The dealer
acknowledges that this clause is necessary in view of the difficulty
in assessing damages that may arise from the aforementioned
cancellation (if any), to preserve the continuity of the Company’s
business and to mitigate the damage to the goodwill arising
or which
may arise, in consequence of such cancellation.
23.3.
Should the Company cancel this Agreement and the Dealer disputes the
company’s right so to do and remain in occupation
of the
designated premises, then until the Dealer vacates the designated
premises the dealer shall continue to perform all of its
obligations
under this Agreement, including paying all amounts due by it in terms
of the Agreement on the due dates thereof. The
Company shall be
entitled to recover sue for and accept these payments, and at its
sole discretion, to continue to make deliveries
of the Company’s
petroleum products to the Dealer, without prejudice to and without
affecting the Company’s cancellation
of the Agreement or its
rights or any claim of any nature whatsoever.
23.4.
Should the dispute between the Company and the Dealer be determined
in favour of the Company the payments made to the Company
in terms of
clause 23.3 shall be regarded as damages for holding over.
23.5.
Should the dispute between the Company and the Dealer be determined
in favour of the Dealer, the Company shall compensate
the Dealer for
any proven damages. The Company’s liability to the Dealer
shall, in absence of wilful bad faith on its part
at no time exceed
the cost directly and reasonably incurred by the Dealer in vacating
the designated premises and shall not include
any consequential
damages, including loss of profit or goodwill.
23.6.
Upon cancellation of the Agreement for any reason whatsoever the
Company shall not be liable to pay any compensation for goodwill,
cost of business or any other consideration benefits or the like to
the Dealer or its successors in title.’
[25]
Of particular relevance to the present
appeal is clause 23.3 which clearly envisages a situation where the
dealer disputes the company’s
right to cancel and remains in
occupation of the premises. During that period, presumably pending
the determination of that dispute,
the dealer has to perform all of
its obligations under the agreement including paying all amounts due
by it. In this period it
lies within the company’s sole
discretion to continue to make deliveries of petroleum products to
the dealer. If it does
so this does not affect its cancellation of
the agreement. In terms of clause 23.5 should the dispute be
determined in favour of
the dealer the company shall compensate it
for any proven damages but these do not include consequential
damages, only the costs
directly and reasonably incurred by the
dealer in vacating the designated premises. It is thus potentially
highly prejudicial for
the dealer to have to vacate the premises
since, even if it disputes the cancellation and prevails in a
subsequent arbitration
or litigation, its damages may well be limited
to direct costs incurred.
[26]
Reverting to the agreement, clause 12 deals
with transactions and provides inter alia as follows:
‘
12.7.
subject to clause 12.8 hereunder and the Company’s SOC
programme, the Dealer shall pay cash on delivery for all the
company
petroleum products and goods so delivered.
12.8.
any credit facility granted by the Company shall be in writing and …
same may be withdrawn or varied by the Company
with immediate effect
in the event of any payment due by the Dealer to the Company at any
time not being made on due date …
12.9.
neither the granting of credit facilities nor failure to enforce the
terms thereof rigidly shall prejudice the Company’s
right to
cancel this Agreement and eject the dealer from the premises for
failure by the Dealer to pay for the Company petroleum
products
supplied.’
[27]
Under the heading ‘
Payments’
,
clause 13.1 read with 13.1.3 provides that:
‘
All
payments to be made by the Dealer without the cost of transfer of
funds … and without the right of deferment or avoidance
by
virtue of any counter-claim or set-off unless such right of
deferment, avoidance or set-off is expressly permitted in this
agreement.’
[28]
Clause 21 deals with dispute resolution and
provides that:
‘
All
disputes between the parties shall, when all efforts to resolve such
dispute by negotiation have failed, be referred to arbitration
as
envisaged in clause 22 save if the parties agree to refer the dispute
to the High Court of South Africa.’
THE
DISPUTES WHICH AROSE
[29]
In the appellant’s founding papers
Dippenaar stated as follows regarding the respondent’s alleged
unilateral steps over
the past few years:
‘
[5.9]
Dit het in die proses vir die applikant geweldige finansiele skade
veroorsaak en het die applikant se kontantvloei onder sterk
druk
geplaas.
[5.10]
‘n Noodwendige gevolg hiervan was dat die applikant
‘agterstallig’ begin raak het met sy huur en brandstof
rekening aan die respondent (die fyner werking waarvan hieronder
bespreek sal word).’
[30]
Dippenaar went on to blame the respondent
for this state of affairs and continued:
‘
Die
huidige beweerde agterstallige bedrag is nie ‘n werklike
agterstallige skuld nie. Applikant aanvaar nie die respondent
se
rekeninge nie. Maar meer nog, die syfers waarmee die respondent werk
is ernstig skeef getrek deur die respondent se erg benadelende
en
onregmatige optredes teen die applikant geneem wat die applikant se
besigheid ondermyn het en nou op die punt staan om dit te
ruineer
weens die afsny van brandstof toevoer aan applikant. ‘n Dispuut
is daaromtrent verklaar.’
[31]
In paragraph 7 Dippenaar continued:
‘
[7]
Onverwags en sonder vooraf waarskuwing het die respondent op
Donderdag 11 Julie 2013 om 12h04 ‘n e-pos aan die applikant
gestuur waarin die respondent eensydig aankondig dat dit, met
onmiddelike effek, die verskaffing van enige verdere produkte aan
die
applikant sonder meer staak …
Die
applikant ontken dat dit enige gelde aan die respondent verskuldig
is. Die applikant het wesenlike eise vir regstelling van
die foutiewe
berekeninge tot op datum deur die respondent gemaak. Hier benewens
het die applikant ook eise vir skadevergoeding
teen die respondent
waarna hieronder verwys sal word.
Die
bedrae wat die respondent beweer aan dit verskuldig is word vêr
oorskadu deur die bedrae wat die respondent aan die applikant
verskuldig is.
[my emphasis]
[7.3]
Dit is inderdaad juis hierdie dispute tussen die partye wat volgens
die handelaarsooreenkoms gesluit, op arbitrasie (of by
eenkoms, in
die Hooggeregshof), besleg moet word’.
[32]
Dippenaar sets out a lengthy list of
complaints regarding the respondent’s business conduct which,
he alleged, were also,
a breach of the contract in various respects.
On the basis of these allegations, backed up by some further detail,
the appellant
alleged that it had claims totalling some R1mil against
the respondent for the loss of sales of diesel, for losses suffered
as
a result of reduced turnover in its subsidiary businesses as a
result of the aforementioned loss of petroleum sales and in respect
of the reduced market value of the appellant’s business.
WAS
THE APPELLANT IN ARREARS TO THE RESPONDENT?
[33]
Reviewing the correspondence attached to
the appellant’s founding and replying affidavit there are a
number of indications
that the appellant was indeed in arrears with
its payments to the respondent. On 18 June 2012 the appellant sent an
e-mail to the
respondent attaching proposals ‘
Re:
The way forward for Touws River.’
In those proposals it stated:
‘
Present
We
are experiencing a severe cash flow situation as a result of our
diesel procurement network to the extent that it is has impacted
on
our ability to service the Total account and hence the AOD we have
agreed to.’
AOD
was clearly an acronym for an acknowledgment of debt.
[34]
In the covering email Dippenaar stated:
‘
I
have had a discussion with Vanessa de Vries about the financial
situation of Touws River because I am concerned (scared?!) that
a
memo ends up on the General Manager’s desk and she decides to
pull the plug. I have indicated to her that we can now only
pay the
AOD and still have serious cash flow issues or improve our cash flow
and keep on trading and repay the AOD as soon as we
are in a better
position regarding cash flow and/or sales.
We
have since received some bridging (sic) from our arrangements. I
have, however, made the call to save our cash flow to an extent
and
we have started to repay the AOD, albeit in relatively small amounts
currently.’
[35]
On 21 February 2013 the respondent emailed
the appellant as follows:
‘
We
cannot wait until the meeting for you to confirm if you are in
agreement with AOD that was presented to you as the amount has
been
outstanding for some time …
Please
can you advise if you have completed your reconciliation if you are
in agreement with the outstanding balance. If not, please
advise what
you feel is outstanding and when you intend to settle?
In
our discussions this week …. the options with regards to the
debts are:
1.
Sign an AOD, if no agreement can be
reached. This will result in:
2.
A letter of demand - following by,
3.
Suspension of product followed by:
4.
Cancellation of the dealer
agreement.
Please
can you urgently come back to me by Friday 22 February 2013 on the
agreed amount outstanding and your intention to settle?’
[36]
On 18 March 2013 Dippenaar emailed the
respondent summarising discussions which had been held shortly
before. He stated inter alia:
‘
We
mention that we are not in dispute about an amount being owed on the
open account but are in dispute on the conditions of repayment
of the
amount. Our dispute arises from the disastrous effects of the change
to Route Africa and the subsequent loss of sales …’
[37]
The respondent replied by email:
‘
Of
critical importance is the fact of the outstanding debt. As noted the
terms requested by yourself as to the repayment are not
acceptable to
Total. The settlement of the debt cannot be extended beyond six
months as previously communicated due to the fact
that some of this
debt is now five months old and agreement must be reached as a matter
of urgency. In light of this please advise
your intentions by no
later than 20 March 2013. As advised at the meeting of 14 March 2013
failure to settle this debt or the signing
of the acknowledgment of
debt will result in a letter of demand for the full settlement of the
debt.’
[38]
On 20 March 2013, Dippenaar sent the email
which it identified in its founding papers as the appellant’s
first declaration
of dispute inter alia in the following terms:
‘
Regarding
the payment of the outstanding debt as referred to we are of the
opinion that we shall not reach an agreement on this
matter. In terms
of article 22.5 of the agreement we therefore declare a dispute on
the matter.
The
dispute is about:
·
The terms of repayment of the
outstanding amount due to the events leading up to the outstanding
debt.
·
We are also of the opinion that our
proposed solution to the issues has not been discussed properly
The
dispute is not about:
·
The amount of the debt and/or
·
Our willingness to repay the debt.’
[my emphasis]
[39]
The previous day, 19 March 2013, Dippenaar
had emailed the respondent stating inter alia as follows:
‘
I
am the dealer of Petroport Touws River which I believe is at the top
of your ‘blacklist’ and for which you are about
to issue
LOD and have us evicted soon … The shortfall on the open
account is at a constant value for the past year and the
sales at
Touws River is increasing … to the extent that it would be
possible to service the debt over a reasonable time.
We
are not blaming Total SA nor are we disputing the amount or that it
is owing
.
[my
emphasis]
…
We
are not requesting Total to write off any amounts nor to refrain from
charging a reasonable rent (sic) on outstanding amounts.
We are
humbly requesting that the period of repayment of the outstanding
amount be discussed and that the parties reach a viable
solution.’
In
context, LOD clearly refers to a letter of demand.
[40]
It appears that over the ensuing month or
two further discussions took place between the parties but they were
ultimately unsuccessful.
Matters culminated in the following email
from the respondent to the appellant on 11 July 2013:
‘
I
refer to our discussions yesterday afternoon 10 July 2013, regarding
the suspension of products supplied to the abovementioned
business.
As
much as this matter was not communicated to you in writing please be
advised that this communication serves to confirm the decision
by
Total to suspend supply with immediate effect. This decision is as a
result of non-payment to Total for the products sold and
delivered by
Total.’
The
correspondence thus clearly establishes that the appellant’s
claim that petrol supplies to it were suspended by the respondent
without warning was unjustified, if not false.
[41]
The appellant’s attorney first
intervened in the correspondence on 17 July 2013. There, for the
first time, it was alleged
on behalf of the appellant that there was
a dispute regarding the outstanding amount that it owed to the
respondent. This emerges
from the following passage:
‘
3.2.
The outstanding amount that your clients claim is due to it by our
client, is not correct. There is a bona fide dispute about
the
initial amount of approximately R3.5mil claimed by your client from
our client, which dispute persists. Furthermore, any further
arrears
that ran up since 24 June 2013 was caused by your client’s own
neglect as a result of your client having unilaterally
ceased to
collect payment from our client by way of a debit order granted to
your client.
..
All
such amounts need to be reconciled between the parties and this forms
part of a dispute previously declared by our client and
which is
again hereby declared in this letter and which dispute will have to
be settled upon arbitration in terms of the dealer
agreement
concluded between the parties.’
[42]
In the letter the appellant’s
attorney went on to formally declare six disputes, namely, damages
caused by unlawful action
taken and/or unfair business practices
pursued by Total in breach of contract and/or in breach of applicable
legislation, losses
suffered as a result of the new rental formula,
the diminution of the reasonable market value of the appellant’s
business,
a dispute regarding the appellant’s right to sell its
business, a claim for damages arising out of the termination by
respondent
of the supply of petroleum products to appellant and,
finally, the determination of the exact quantum of any debt either
party
might owe to the other.
In
the letter it was contended that the appellant’s claims against
the respondent amounted to R11 480 000 and concluded
as
follows:
‘
Our
client’s aforesaid claims against your client by far exceed
your client’s claim which we believe to be in the amount
of
approximately R7mil. Our client denies that it is indebted to your
client in this amount or any lesser amount for the reasons
aforesaid.’
[43]
The letter elicited a reply from the
respondent’s attorneys on 18 July 2013, the relevant portion of
which reads:
‘
Our
client denies your client’s assertion that it does not have any
right to interrupt the supply of petroleum products to
your client.
…
Our
client has suspended the supply … to your client as a result
of your client’s breach of the dealer agreement …
by
failing to pay amounts due by it to our client. In this regard, your
client’s attention is drawn to the provisions of
clause 10.6 of
the agreement which provides that our client is under no obligation
to supply your client with petroleum products
… if your client
is, in our client’s opinion guilty of conduct which constitutes
a breach of the agreement …’
[44]
Dealing with the disputes declared by the
appellant, the respondent’s attorneys suggested that all claims
and counter-claims
be resolved in the High Court. That arrangement
was accepted by the appellant in due course. In a separate letter
written on the
same day the respondent’s attorneys advised the
appellant’s attorneys as follows:
‘
Your
client is in breach of its obligations in terms of the dealer
agreement … in that it has failed to pay the amounts due
to
our client … your client is hereby informed that the agreement
is cancelled with immediate effect.
[3]
In accordance with clause 23.2 of the agreement your client is hereby
given three business days within which to vacate the premises
…
failing which our client will take the necessary legal steps to
ensure the eviction of your client.’
[45]
The following day the appellant’s
attorneys wrote to the respondent’s attorneys advising that the
appellant disputed
the validity of the purported cancellation and
would be seeking ‘
relief declaring
it to be invalid’
.
[46]
In its answering affidavit the respondent
duly alleged that the appellant had breached the agreement by falling
into arrears with
its payments. It annexed a notice of the aforesaid
breach dated 17 May 2013 wherein the respondent’s attorney
recorded its
instructions as being that the appellant was indebted to
the respondent in the sum of R3 494 360.50 in respect of
goods
sold and delivered including, but not limited to, petroleum
products, and calling upon the appellant to make suitable payments
arrangements failing which legal action would be taken against it.
[47]
It is common cause that this letter was
wrongly addressed to a PO box number in Bothaville. The respondent
also relied on a later
certificate of balance effected on 5 August
2013 reflecting the appellant’s indebtedness in the sum of
R8 515 000.
[48]
A central theme of the respondent’s
answering affidavit was that at all material times the appellant had
been substantially
in arrears with its payments to the respondent and
therefore that the respondent was not contractually obliged to supply
it with
products and would not do so (other than in the terms of the
interim arrangement made pending the return day of the agreed rule
nisi); further that the Court could not make a contract compelling a
party to perform contrary to the terms of the agreement.
[49]
In its replying affidavit the appellant
took issue with the accuracy of the amount claimed in the letter of
demand (sent to the
wrong address), namely, R3 494 360.57. It annexed
extracts from the respondent’s statement, in , for
the period
1 May 2013 to 31 May 2013 showing the balance carried
forward as R3 757 169.73 and the closing balance as
R4 124 829.03,
adding that ‘
screenshots
from the Excel format statement for the same period confirm the
integrity of the Excel file and read as follows’.
On
one of these extracts from this document (reproduced in the
affidavit) the balance owing by the appellant on 17 May 2013 varied
between R3 512 003.24, at its lowest, and R3 757 667.49
at its highest. The closing balance for that day appeared
to be
R3 613 870.14.
[50]
If these figures are compared to the letter
of demand bearing the same date, it appears that the amount demanded
by the respondent
was some R28 000 less than the lowest balance
appearing on its statements reflecting the appellant’s
liability on that
day. Significantly, the appellant took the question
of the balance owing no further, for example, by explaining in what
amount
it was indebted to the respondent at that stage, if at all,
and how this was calculated.
[51]
This
failure, in my view, amounts to a bald or tactical denial,
particularly seen in the light of the numerous indications in the
email correspondence that, until the respondent cancelled the
agreement, the appellant did
not
dispute that it was in arrears with its payments. It gives rise to a
situation analogous to that in the unreported case of
Stamford
Sales and Distribution (Pty) Ltd v Metraclark (Pty) Ltd
[1]
where the Court stated as follows in relation to an affidavit
opposing summary judgment:
‘
[17]
When faced with the specific claim for payment of R700 000 for
goods and/or services supplied to it during a defined period,
namely,
October 2010 – January 2011 it should have been a simple
exercise for Stamford to set out what goods or services
it received
from Quali Cool CC during this period, together with the payments it
made to Quali Cool CC. This would constitute a
sufficiently full
disclosure of the material facts to persuade a court that if proved
at trial Stamford would establish its defence
that it had paid the
cedent in full (Maharaj (supra) at 426A – D).’
[52]
The appellant went on to challenge, at
length and in detail, the accuracy of the certificate of indebtedness
issued by the respondent
in August 2013, reflecting the sum of some
R8mil. In my view that material is largely irrelevant, the critical
question being appellant’s
indebtedness around 17 May 2013 or
at the time of respondent’s cancellation of the agreement, on
18 July 2013.
[53]
Reverting to the requirements for interim
interdictory relief, one must first identify the right which is the
subject matter of
the main action which the appellant seeks to
temporarily protect and which it must establish at the very least on
a prima facie
basis. That can only be its right to continue trading
on the premises and to have products supplied to it by the respondent
and
must, inevitably, be determined with regard to the provisions of
the agreement governing the relationship between the parties. This
leads to the question of whether, through breach of these terms by
the appellant, it had forfeited this right.
[54]
The essence of the dispute between the
parties is the lawfulness of the respondent’s cancellation of
the agreement. Although
the appellant challenges the lawfulness of
the agreement in a variety of respects the core of its case for
interdictory relief
was that the respondent was not entitled to
cancel the agreement inasmuch as the appellant was not in arrears in
its payments and
therefore not in breach of the agreement.
[55]
If the cancellation was clearly unlawful,
or at least prima facie so, the appellant would, subject to proof of
the further interdict
requirements, be entitled to interim relief
pending the outcome of an arbitration or litigation to determine this
and possibly
other disputes. The question is, then, whether the
appellant has established a clear right in this regard.
[56]
In my view that question cannot be answered
in favour of the appellant for the simple reason it failed to produce
any facts or documentation
to support its allegation that it was not
in arrears in its payments to the respondent. Dippenaar merely
repeatedly asserts this
conclusion in the founding and replying
affidavits.
[57]
The
further question is then whether the appellant has made out a prima
facie case in relation to this right, although open to some
doubt.
Here the test is that mere acceptance of the appellant’s
allegations is insufficient but a weighing up of the probabilities
of
conflicting versions is not required. The proper approach is to
consider the facts as set out by the applicant (appellant) together
with any facts set out by the respondent which the applicant cannot
dispute and to decide whether, with regard to the inherent
probabilities and the ultimate onus, the applicant should on those
facts obtain final relief at the trial. Facts set up in contradiction
by the respondent should then be considered and if they throw serious
doubt on the applicant’s case the latter cannot succeed
[2]
.
[58]
There is no single document that
conclusively determines the question of whether the appellant was in
arrears at the critical period,
and if so, in what amount, since the
appellant ordered petrol on open account and paid for it on a running
basis. At best
for the appellant this leaves the question
evenly poised and the Court must have regard to the inherent
probabilities and the ultimate
onus. The documentation which passed
between the parties prior to cancellation is the strongest evidence,
the various statements
made by Dippenaar in emails on 18 June 2012
and 18, 19 and 20 March 2013 being of particular significance. In
these Dippenaar made
unequivocal admissions that the appellant was in
arrears (and by clear implication substantially so) with its payments
to the respondent.
Those admissions were, moreover, entirely
congruent with the general tenor of the correspondence from the
appellant to the respondent
complaining that, on the existing terms
and business arrangements, it was experiencing financial difficulties
and seeking more
favourable terms in order to become more profitable.
Nor do I consider that the weight of the admissions can be discounted
on the
basis that Dippenaar was merely seeking to remain on good
terms with the respondent. By 20 March 2013 matters had reached such
a pass that the appellant formally declared a dispute with the
respondent. This was clearly a serious step yet in that same email
the appellant specifically noted that it did
not
dispute the amount owing to the respondent.
[59]
Also relevant to this aspect is the notice
of breach abortively sent by the respondent’s attorneys to the
appellant on 17
May 2013 alleging that the appellant was in arrears
in the amount of R3 494 360.50. As mentioned, although the
appellant
challenges the accuracy of this figure it goes no further
than pointing out that it did not correspond exactly with the
respondent’s
own statement as per an Excel format. The manner
in which the appellant dealt with this critical issue in its
affidavits amounted
to little more than a bald denial of facts which
were within its own knowledge and concerning which it should have
been able to
produce countervailing evidence if the respondent’s
assertions were indeed materially inaccurate. The correspondence
between
the parties as a whole, furthermore, made it clear that long
before the cancellation the respondent had been troubled by the
appellant
being in arrears.
[60]
Having regard to all these circumstances
and looking at the probabilities as a whole, I regard it as
overwhelmingly probable that
the appellant was in substantial arrears
as at the time of cancellation. It follows that in the main action
the appellant has very
limited prospects, if any, of establishing
that it was not in material breach of the agreement.
[61]
The next question is what the rights of the
parties were in this situation. In this regard the dealer agreement
is clear. Clause
10.6 stipulates that the respondent is under no
obligation to supply the appellant with petroleum products if in the
respondent’s
opinion the appellant was guilty of conduct which
constituted a breach of this agreement. Clause 12.7 required the
dealer to pay
cash on delivery for all petroleum products delivered
and clause 12.9 records the respondent’s rights to cancel the
agreement
and eject the dealer from the premises for failure by the
dealer to pay for petroleum products supplied.
[62]
Reinforcing these provisions is clause
13.1.3, which precludes the reliance by the dealer on any right of
deferment or avoidance
by virtue of any counterclaim or set off, and
the cancellation clause, which provides in 23.1.1, read with 23.1.9,
for the respondent’s
right to forthwith cancel the agreement
should the dealer fail to pay any amount on the due date.
Furthermore, clause 23.2 records
the dealer/appellant’s
agreement to vacate the designated premises within three business
days of receipt of a notice of cancellation
and records reasons why
such an onerous clause is justified.
[63]
Finally, clause 23.3 deals with the
situation where the agreement is cancelled but the dealer disputes
the company’s right
to do so and remains in occupation of the
premises. It expressly stipulates that in this interim period the
company ‘
at its sole discretion’
may continue to make deliveries of its products to the dealer
(against payment) without prejudice to its cancellation of the
agreement.
Although designed to deal with the situation where the
dealer does not accept a cancellation and refuses to vacate, these
provisions
serve also to operate as indirect confirmation of the
primary right of the company to withhold the supply of petroleum
products
to the dealer where that party is in breach of the agreement
and which has led to a cancellation.
[64]
Argument was directed by the appellant’s
counsel at the alleged draconian nature of clause 10.6. I do not
agree. In any contractual
dispute a party which considers that it is
prejudiced by a breach by the other contracting party must, in the
first place, be the
judge of the materiality of that breach and act
accordingly. Should it incorrectly treat the breach as material and
cancel the
contract, it may well suffer the consequences and,
conceivably, even be interdicted from acting on the basis of that
cancellation.
All other things being equal it can hardly be the
position that the party alleged to be in breach must be the judge of
whether
there has been a breach or that there must be agreement
between the parties on this score.
[65]
The respondent’s exercise of its
power in terms of clause 10.6 was also challenged by the appellant on
the basis that that
clause gave the respondent a free and unfettered
discretion to decide whether the dealer is guilty of conduct which
constituted
a breach of the agreement and then, based on that
decision, to stop fuel supplies to the dealer. It was submitted that
the clause
was against public policy in that it entitled one party to
the contract to unilaterally usurp the function of a court and
thereby
to exclude the jurisdiction of the courts. It was submitted
further that it was ‘
akin’
to the pure potestative condition
si
volam
of the Roman law and was not
enforceable, void for vagueness and unconstitutional in that it
infringed upon the appellant’s
constitutional right of access
to court.
[66]
The
court was referred to a number of cases in support of this
argument
[3]
and also referred to
the writings of various academic works dealing with the principles of
the law of contract. In my view, however,
none of these cases were on
point and the arguments raised by the respondent are either misstated
or overstated. Clause 10.6 does
not, on its own terms, exclude the
jurisdiction of the court nor does it in my view amount to the
company/respondent stipulating
for its own prestation in the contract
between the parties.
[67]
In discussing this matter under the heading
‘
Contractual
Powers or Discretion’
the
authors Van Der Merwe et al in Contract: General Principles, 4
th
Edition state the general position in the following terms:
‘
There
is authority for a rule, phrased in quite general terms, that
“
[no]
contract is legally enforceable if it is made to depend solely upon
the will of one of the parties what part of it he should
perform.”
[4]
The
authors go on to state that a clause empowering a debtor to decide on
the very existence of an obligation is objectionable and
destructive
of the validity of the agreement. An agreement to this effect, for
example, an undertaking of liability should the
debtor so wish, the
so-called condition
si voluero
, is abortive. This is the case,
not so much because there is uncertainty about the contractual
content but, more fundamentally,
because such a provision excludes an
intention to create an obligation, at least where the discretion is
vested in the debtor in
respect of its own performance and not
restricted by objective considerations. The authors cite examples of
contractual powers
of such a nature which are not problematic and
state:
‘
(
a)
provision requiring a debtor to perform a mutually agreed upon
performance to the satisfaction of the creditor is valid:
a
power to determine whether a breach of contract has occurred does not
render the contractual content uncertain
.
To counter the possibility of abuse, the courts recognise the
exercise of such powers to be subject to their control, both as
regards the preconditions for and the reasonableness of the decision
arrived at.’
[my underlining]
[68]
In my view clause 10.6 falls within the
last-mentioned observations and does not necessarily imply an ousting
of the jurisdiction
of an arbitrator or the courts. It will be
recalled that clauses 21 and 22 of the agreement provide for dispute
resolution and
an arbitration mechanism. In addition clause 23.2
explicitly recognises the dealer’s right to dispute a
cancellation by the
company and remain in occupation of the premises
pending, presumably, an order of ejectment. In any event the
question of
whether clause 10.6 is void by reason of its draconian
nature does not, in my view, arise in this application. The nature of
the
breach upon which the respondent relies, substantial arrears on
the part of the appellant, is, if proved, so material as to render
academic the question of whether the appellant’s opinion in
this regard is sufficient to justify cancellation.
[69]
A
further argument on behalf of the appellant was based upon the
respect which the courts will accord to the process of arbitration
as
exemplified in
Lufuno
Mphaphuli and Associates (Pty) Ltd v Andrews and Another
[5]
.
It was submitted that the appellant was relying upon its contractual
right to continue trading on the premises and to that end
to continue
to purchase petroleum products from the respondent until a court (in
lieu of an arbitration) had determined whether
there had been a
breach of the agreement, justifying the respondent’s
cancellation of the agreement and the eviction of the
applicant from
the premises. In my view this mischaracterises the right which the
appellant was seeking to protect.
[70]
In any event the agreement does not provide
for an automatic freezing of the contractual rights and obligations
of the parties simply
because there has been a referral of a dispute
to an arbitrator by one such party. Nor is
Lufuno
Mphaphuli
authority for any such
proposition. That case concerns, in broad terms, the deference which
a court will pay to the arbitral process
where this has been agreed
between parties. There is nothing in the wording of the arbitration
clause in the agreement, nor implied
in its terms, suggesting that
ordinary trading arrangements between the parties must continue
pending the outcome of any dispute.
[71]
In conclusion, the evidence in the papers
establishes that at the time of cancellation the appellant was in
arrears in a substantial
sum to respondent for petroleum products
supplied and that it had been in arrears for some time. The
indications are that the arrears
were in the region of R3.5mil when
the supply of products was stopped by the respondent and the
agreement cancelled.
[72]
I am prepared, for the purposes of
determining this application, to accept that the appellant
established a well-grounded apprehension
of harm and that the balance
of convenience favoured it. I am also prepared to assume that an
action for damages will, in the circumstances
of this matter, not be
an adequate remedy for the appellant. One factor that weighs in this
regard is the limitation on the damages
which a dealer may claim in
these circumstances in terms of clause 23.5 and 23.6.
[73]
Be that as it may, having regard to the
appellant’s proven material breach of the dealer agreement it
failed, in my view,
to establish a clear right or even a prima facie
right, although open to doubt.
[74]
The relief sought in the notice of motion
relating to the appointment of an arbitrator has fallen away because
the parties agreed
to litigate in the High Court. Leave to appeal was
not sought by the appellant in respect of the relief claimed
requiring obligatory
mediation of the disputes between the parties.
In any event such relief is misconceived since the agreement makes no
provision
for mediation, merely that a dispute shall be referred to
arbitration if all efforts to resolve such disputes by negotiation
have
failed. The correspondence in this matter makes it abundantly
clear that such a process was embarked upon but was unsuccessful.
[75]
Accordingly for these reasons I consider
that the appeal against Cossie AJ’s judgment in the application
must fail.
THE
COUNTER-APPLICATION
[76]
The respondent counterclaimed for a
declaratory order confirming the purported cancellation of the dealer
agreement and for an eviction
order against the appellant. Cossie AJ
dismissed the counter-application on the basis that there were ‘…
major disputes of facts between the
parties concerning the clauses of the Agreement which cannot be
resolved in application proceedings.
’
The learned judge did not specify what these major disputes of facts
were. As mentioned the principal dispute between the
parties was the
question of the appellant’s indebtedness to the respondent
between 17 May 2013, when the respondent stopped
supplies of
petroleum products to the appellant, and 18 July 2013, when the
respondent formally cancelled the agreement.
[77]
In dealing with the application, I have
found that on the overwhelming probabilities the appellant was in
substantial arrears with
its payments to the respondent at the
material time, in the region of approximately R3.5mil. It follows
that the appellant was
in material breach of the agreement and the
respondent was entitled to cancel and, in terms of clause 23.2, to
require the dealer
to vacate the premises.
[78]
It must be borne in mind that, once the
respondent had decided to halt supplies to the appellant, the service
station which stands
on its property was no longer functioning as
such with the consequent loss of revenue to it as well.
[79]
The appellant raised a plethora of points
as to why the counter-application was improper. These included that
that it was not properly
brought or enrolled and constituted an abuse
of the process of court, that it was in contempt of a court order
granted on 12 May
2014 in the main action, that the defences which it
raised in the appellant’s answering affidavits were uncontested
inasmuch
as no replying affidavit was filed and, finally,
non-joinder. It also made much of the fact that the
counter-application sought
final relief. However, applying the
Plascon Evans rule to the determination of facts, I find that the
appellant’s substantial
arrear liability at the material time
can be taken as a proven fact notwithstanding its pro-forma denial by
the appellant.
[80]
The first point taken by the appellant was
based on the fact that the counter-application was not provided for
in the Court order
taken by agreement regulating the further conduct
of the interdict for temporary relief. That Order did not
specifically preclude
the respondent from bringing a
counter-application which clearly was a corollary to the application
for a temporary interdict and
it was, in my view, entirely sensible
for it to be heard together with those proceedings. The Court a quo
was apparently content
to hear the counter-application on the date
which had been arranged for the application on semi-urgent roll and
it was not persuaded
that there was anything irregular in the
bringing of the counter-application. In the circumstances I do not
consider that this
point has any substance.
[81]
The appellant then raised non-joinder in
respect of the franchisor of its restaurant and the appellant’s
55 employees on the
basis that their eviction was also sought by the
respondent. The appellant alleged that the franchisor was a party to
a tri-partite
agreement concluded between the appellant and the
respondent. However, the respondent did not specifically seek an
order of eviction
against the franchisor and in these circumstances I
can see no warrant for it to be joined. Nor is there any requirement
in law,
of which I am aware, or to which we were referred to by the
appellant, that before an eviction order can be issued against a
party,
such party’s non-resident employees have to be joined.
[82]
Next, the appellant submits that the appeal
was in contempt of an order made by Traverso DJP in November 2013,
whilst the parties
were awaiting judgment from Cossie AJ, dismissing
an application for summary judgment by the respondent in the main
action. Part
of the relief sought in that action was a declaration
that the respondent’s cancellation of the dealer agreement was
lawful
and an order of eviction against the appellant.
[83]
Respondent’s counsel advised that
prior to the hearing of this appeal a notice of amendment withdrawing
the prayer for relief
in relation to the eviction order had been
filed in the main action. It is not this Court’s function
to regulate proceedings
in the main action and nor does the issue of
the respondent allegedly being in contempt of an order by Traverso
DJP arise in this
appeal.
[84]
On the merits the appellant raises a host
of points, most of them centering around its disputing of the precise
amount owed to respondent
and the accuracy of the certificate of
indebtedness which the respondent relied upon. This is largely a
diversion since, as I have
found, the real issue is whether there
were substantial arrears between 17 May and 18 July 2013 and whether
there is any credible
evidence from the appellant disputing this.
[85]
The appellant’s argument that in the
absence of a replying affidavit from the respondent the defences
which it raised in its
answering affidavit in the counter-application
must be taken to have been conceded is simply unfounded. It relied
also on its challenge
to the validity of several of the clauses in
the dealer agreement but, as stated earlier, these issues are
properly the subject
of the trial action. These challenges are
certainly not such as to justify a court at this stage in effect
re-writing the agreement
and compelling the respondent to supply
petroleum products to the appellant pending the outcome of the main
action notwithstanding
the appellant’s material and continuing
breach of the agreement.
[86]
On the appellant’s own case the
action will not come to trial before late 2015 and, given the
vagaries of litigation, it might
even be considerably later. In these
circumstances refusing the respondent an eviction order could well
mean that the site stands
unused, at least as an outlet for the
respondent’s petroleum products, for several years. Should the
respondent’s cancellation
of the agreement eventually prove to
have been unlawful the respondent will retain its right to claim
damages, albeit that these
have been limited.
[87]
In the circumstances I am persuaded that
there is no real dispute as to the single most material alleged
dispute of fact, namely,
the appellant’s substantial arrears as
at the time the petroleum supplies were stopped and the agreement
cancelled. In the
final analysis I agree with the respondent’s
case that the appellant was free to prosecute any counterclaim it
might have
but, in the interim, had to pay its outstanding arrears
without deduction or set off, failing which the respondent was
entitled
to stop the supply of petroleum products, cancel the
agreement and eject the appellant from the premises. In the absence
of a tender
to make payment of such arrears, if needs be under
protest, the respondent in my view was unable to establish a prima
facie right,
even one open to some doubt, and, it follows, had no
answer to the counter-application.
[88]
Since the question of the validity of the
cancellation of the contract is one of the principal issues which is
said to come before
the trial court, it is obviously not appropriate
to grant the declaratory relief sought by the respondent in this
regard.
[89]
Accordingly I consider that the
cross-appeal against Cossie AJ’s judgment must succeed and an
eviction order must follow.
COSTS
[90]
The respondent sought the costs of both the
application and the counter-application. I can see no reason to
depart from the ordinary
rule that costs follow the result.
Respondent also sought the costs of two counsel which is also
appropriate given that both parties
used two counsel. It also sought
costs on the attorney/client scale but advanced no reasons as to why
a special order should be
made, nor are such reasons apparent.
[91]
In the result the following order is made:
1.
The appeal against the dismissal of
the application in convention is dismissed with costs including the
costs of two counsel where
employed;
2.
The appeal against the dismissal of
the counter-application is upheld with costs including the costs of
two counsel where employed
and the order of the court a quo in
respect of the counter-application is replaced with the following:
2.1
Applicant and all those holding or occupying Erf 1340 Touws River,
also known as the Total Service Station (Petroport Touws
River) on
the N1 National Road, Touws River, Western Cape (‘the
premises’), are ordered to be ejected from the premises;
2.2
in the event the applicant and/or all those holding or occupying the
premises do not vacate the premises within 7 calendar days
of the
date of service of this Order, the Sheriff or his lawful Deputy are
authorised, directed and empowered to eject applicant
and/or all
those holding or occupying the premises from the premises;
2.3
the costs of the counter-application are to be paid by the applicant.
______________________
BOZALEK
J
I
agree.
______________________
STEYN
J
I
agree.
______________________
BLOMMAERT
AJ
APPEARANCES
For
the Appellant: Mr Rosenberg SC
Mr
TJ Nel
Instructed
by:
Hayes
Inc
For
the Respondent: Mr S Burger SC
Mr
A Kantor
Instructed
by:
Denton
[1]
Case
676/2013
[2014] ZASCA 79
(29 May 2014)
[2]
Webster
v Mitchell
1948
(1) SA 1186
(W) at 1189
[3]
Bredenkamp
and Others v Standard Bank of SA Ltd
2010
(4) SA 468
(SCA);
Barkhuizen
v Napier
2007 (5) SA 323 (CC)
[4]
The
authority for this being from
Shell
SA (Pty) Ltd v Corbitt and Another
1986
(4) SA 523
(C) 525
.
[5]
2009
(4) SA 529
(CC) at 585 to 599.