Capital Outsourcing Group (Pty) Ltd (Previously known as Capital Contracting Services CC) v Screening & Earthworks (Pty) Ltd (Previously known as Screening & Earthworks CC) and Another (1199/2005) [2008] ZANWHC 21 (17 July 2008)

CASE NO: 1199/2005

In the matter between:

CAPITAL OUTSOURCING GROUP (PTY) LTD Plaintiff

(Reg. No. 2002/013684/07) (previously known as CAPITAL

SCREENING & EARTHWORKS (PTY) LTD 1 st Defendant

SCREENING & EARTHWORKS CC) (CK 95/15811/23)

MARIA MAGDALENA JANSEN VAN RENSBURG 2 nd Defendant

CIVIL MATTER

DATE OF HEARING : 19 JUNE 2008

COUNSEL FOR THE PLAINTIFF : ADV SEGAL

________________________________________________________________

HENDRICKS J :

[A] Introduction :-

[1] The Plaintiff instituted action against the Defendants jointly and severally for payment of an amount of R280 441-70 plus interest.

[2] The claim against the First Defendant is in respect of services rendered and against the Second Defendant in her capacity as surety and co-principal debtor in solidum with the First Defendant.

[3] The Plaintiff, in the cause of action in the main claim as pleaded in its amended declaration, alleges that on or about 17 March 2003, the parties entered into a written agreement in terms whereof the Plaintiff agreed to render labour broking services to the First Defendant against payment of a fee.

[4] The Defendants in their plea deny that the agreement on which the Plaintiff relies was concluded with the Plaintiff and states that it was concluded with a different entity. Consequently, they deny being indebted to the Defendant in the amount of

R280 441-70 or at all.

[5] The First Defendant filed a counterclaim for damages in an amount totalling R3 099 537-30. At the commencement of the trial, I ruled that Plaintiff’s claim in convention be disposed of separately from the First Defendant’s counterclaim and that all further proceedings in relation thereto (the counterclaim) be stayed until Plaintiff’s claim in convention has been disposed of. The quantum of Plaintiff’s claim is not disputed which means that if the Plaintiff succeed with its claim on the merits, the amount need not be proven.

[B] Background :-

[a] Capital will provide temporary employees for purposes of carrying out services to its clients who place an order for such temporary employees;

[7] During March 2004 the old Capital sold its business including all its assets rights and obligations to Bush Hill Risk Management 35 (Pty) Ltd (Bush Hill) in terms of a written agreement. The effect, so it is believed, was that all of the rights and obligations of the old Capital, including its rights and obligations under the abovementioned agreement with the First Defendant, were ceded and transferred to Bush Hill.

[9] First Defendant also changed from a close corporation to a private company with effect from 2 April 2003.

[C] The Claims :-

[11] Certain alternative claims are also pleaded by the Plaintiff. These alternative claims relates to the fact that the Plaintiff is the successor in title of the old Capital and that Plaintiff had rendered services in terms of an agreement to which that First Defendant had assented to or deemed to have assented to; alternatively , that Plaintiff acted as agent for and on behalf of the old Capital; further alternatively , that First Defendant is unjustifiably enriched at the expense of the Plaintiff, who rendered the labour broking services.

[D] The Winding-up application :-

[E] The Contract :-

“ 15. General Provisions :-

15. 2 no agreement varying, adding to, deleting from or cancelling this agreement and no waiver of any rights under this agreement shall be effective unless reduced to writing and signed by or on behalf of the parties;

15. 3 no party may rely on any representation, which allegedly induced that party to enter into this agreement, unless the representation is recorded herein;

15. 4 no party may cede any of its rights or delegate or assign any of its obligations in terms of the agreement without the prior written consent of the other party.”

[14 ] It is common cause between the parties that this agreement was never cancelled. First Defendant also did not consent to any cession ór delegation ór assignment of any of the rights or obligations of the old Capital to the Plaintiff.

[F] Evidence tendered on behalf of the Plaintiff :-

[16] The old Capital complied with the agreement by supplying labour broking services at a fee. There was no problem initially with payment but problems were subsequently experienced. The company was sold and its name changed. It became a black owned company.

[17 ] After the change in structure (and name) of the company during April 2004, business with the First Defendant carried on as usual.

[18 ] He was present on one occasion when Mr. Andy Fenn , one of the Chief Executive Officers of the Plaintiff was introduced to Mr. Gert van Rooyen of the First Defendant. This happened about three months after the company had been bought. On 21 December 2004 Mrs. Vivianne Smit , who did the administration, informed him that he must withdraw the people (staff) from the First Defendant, which he did.

[19 ] He confirmed the existence of the non-variation clause in the agreement (paragraph 15.2 thereof) and that there was no written consent by the First Defendant authorising the take over of the old Capital by the Plaintiff.

[20 ] No new agreement was entered into between the Plaintiff and the First Defendant. He did not hear of any such new agreement when he attended the meetings with Mr. Andy Fenn . No permission was also sought for the take-over. He conceded that they used the stationary of the old Capital long after the change in name after the company was sold.

[21 ] A pro forma letter which purports to notify clients of the sale of business (buy-out) is dated 30 April 2004. He doesn’t think that such a letter was send to Mr. Gert van Rooyen or Mr. Henry van Zyl . He doesn’t know that the said letter was send because that was part of the administration resorting under Mrs. Vivianne Smit . The take-over was during March 2004 and Mr. Andy Fenn was only introduced to Mr. Gert van Rooyen and Mr. Henry van Zyl thereafter, during April 2004. The initial contract was never cancelled.

[22 ] Mrs. Vivianne Smit joined the old Capital in 2000 and holds a position of Regional Manager. The administration resorts under her management. She dealt with Mr. Gert van Rooyen and Mr. Henry van Zyl of the First Defendant. First Defendant was one of their clients for whom they provided labour broking services. The owner of the old Capital, Mr. Wayne Steynford sold his business. Mr Andy Fenn and Mr. Shaun McCormack were introduced by the end of 2003. The company was then known as Medu Capital with Mr. Andy Fenn and Mr. Shaun McCormack as joint Chief Executive Officers (CEO’s). They were introduced as such to the clients.

[23] The invoices that were send to the First Defendant was paid up until December 2004. Thereafter, problems were experienced with regard to payment. She negotiated payments with Mr. Gert van Rooyen and received part-payment.

[24 ] The stationary of the old Capital was used for a considerable period of time after the buy-out of the company. She did not personally post or fax the pro-forma letters notifying their clients of the sale of business nor does she know for a fact that it was posted or faxed.

[25 ] She cannot recall that she told Mr. Gert van Rooyen or Mr. Henry van Zyl that a new company is buying over the old Capital. No written consent was asked from Mr. Gert van Rooyen or Mr. Henry van Zyl (of the First Defendant) for the cession of the rights or assignment or delegation of the obligations in compliance with the contract with the old Capital.

[26 ] Mr. Shaun McCormack is a joint CEO of the Plaintiff, with Mr. Andy Fenn . He and Mr. Andy Fenn signed the deal. The initial sale of business agreement indicates that the old Capital was sold to Bush Hill, being a shell company.

[27 ] He was introduced to Mr. Gert van Rooyen and Mr. Henry van Zyl of the First Defendant during May or June 2004. The stationary of the old Capital was still used and the logo only changed during June 2004.

[28 ] He initially testified that the First Defendant consented to the transfer of rights and obligations to the new company through conduct . “It was business as usual” seeing that they knew about the new owners and they continued to trade with them.

[29 ] Later on he conceded that they erred in not obtaining the required written consent. He was introduced to Mr. Gert van Rooyen and Mr. Henry van Zyl after the sale of business agreement was already concluded.

[30 ] He conceded also that Mr. Gert van Rooyen and Mr. Henry van Zyl did not on a particular day by way of conduct consented to the take-over. The contract was never cancelled and no new contract was concluded between Plaintiff and the First Defendant. He was aware of the provisions of paragraph 15 of the contract. The First Defendant, currently a private company (Pty Ltd), was not a party to that contract.

[31 ] It was never conveyed to the First Defendant that the business of the Plaintiff is a different business from the old Capital. They continued and it was “business as usual”.

[32 ] Mr. Andy Fenn , the other joint CEO of the Plaintiff, is entrusted with the financial management. Medu Capital possess 70% of shareholding in Plaintiff whilst he and Mr. Shaun McCormack each possess 15%. The Plaintiff is thus a Black Economic Empowerment (BEE) company. Bush Hill was set up as a shell company to acquire the old Capital. According to him, there was a name change but the legal entity remained the same.

[33 ] There were a number of activities to inform clients about the sale of business which included a road show and letters send to customers (including the account numbers of the new bank account).

[34 ] He met Mr. Henry van Zyl and Mr. Gert van Rooyen and explained the take-over to them as well as the fact that they will now be debtors of the new company. They continued with business as usual until they experienced problems with payment during August 2004. These problems could not be solved and it was resolved that they stop dealing with the First Defendant. A legal opinion was obtained in respect of the contract and it was opined that there was no need for the consent of the First Defendant. They only needed to send letters in order to inform their clients of the take-over.

[35 ] He testified that they did render services in terms of the agreement by conduct . He cannot state with certainty that the pro-forma letter informing their clients of the take-over was in fact send to and received by the First Defendant.

[G] Application for absolution from the instance :-

[36 ] At the close of the case for the Plaintiff, the Defendants apply for absolution from the instance.

[37 ] The correct approach to an application for absolution from the instance is set out by Harms JA in Gordon Lloyd Page & Associates v Rivera & Another 2001 (1) SA 88 SCA at 92 E – 93 A:-

“ [2] The test for absolution to be applied by a trial court at the end of a plaintiff’s case was formulated in Claude Neon Lights (SA) v Daniël 1976 (4) SA 403 at 409 G-H in these terms:-

‘… (W)hen absolution from the instance is sought at the close of plaintiff’s case, the test to be applied is not whether the evidence led by plaintiff establishes what would finally be required to be established, but whether there is evidence upon which a Court applying its mind reasonably to such evidence, could or might (not should, nor ought to) find for the plaintiff. ( Gascoyne v Paul and Hunter 1917 TPD 170 at 173; Ruto Flour Mills (Pty) Ltd v Adelson (2) 1958 (4) SA 307 (T).)’

This implies that a plaintiff has to make out a prima facie case – in the sense that there is evidence relating to all the elements of the claim – to survive absolution because without such evidence no court could find for the plaintiff ( Marine & Trade Insurance Co Ltd v Van der Schyff 1972 (1) SA 26 (A) at 37 G – 38 A; Schmidt Bewysreg 4 th ed at 91-2 ). As far as inferences from the evidence are concerned, the inference relied upon by the plaintiff must be a reasonable one, not the only reasonable one ( Schmidt at 93 ). The test has from time to time been formulated in different terms, especially it has been said that the court must consider whether there is ‘evidence upon which a reasonable man might find for the plaintiff’ ( Gascoyne ( loc cit ) ) – a test which had its origin in jury trials when the ‘reasonable man’ was a reasonable member of the jury ( Ruto Flour Mills ). Such a formulation tends to cloud the issued. The court ought not to be concerned with what someone else might think; it should rather be concerned with its own judgment and not that of another ‘reasonable’ person or court. Having said this, absolution at the end of a plaintiff’s case, in the ordinary course of events, will nevertheless be granted sparingly but when the occasion arises, a court should order it in the interest of justice.”

See also :- Oosthuizen v Standard General Versekering Bpk 1981 (1) SA 1032 A at page 1035 H – 1036 A;

[H] The claim based on the written contract :-

[39 ] There is no written document that proves that representatives of the old Capital and the First Respondent vary, add, delete, cancel or waive any of the rights under the contract for which both signed.

[40 ] It is also clear that the First Defendant did not consent that the old Capital can cede any of its rights or delegate or assign any of its obligations in terms of the agreement to the Plaintiff.

[41 ] The evidence tendered on behalf of the Plaintiff does not proof that the letter dated 30 April 2004 was in fact send to or received by the First Defendant.

[42 ] Adv Segal , on behalf of the Plaintiff, submitted that the court can infer that the said letter must have been send by one of the clerks of the Plaintiff and must have been received by the First Defendant. He based his submission on the fact that if it is part of a routine procedure that letters are mailed, then it can be inferred that it was indeed done. He referred the Court to the cases of:-

“ A presumption of fact arises from the course of business in private offices, that is to say, an inference may be drawn (though it need not necessarily be drawn) from the fact that a general course of business exists in a private office, according to which a certain act would ordinarily be done.”

Ebrahim v Excelsior Shopfitters and Furnishers (Pty) Ltd 1946 TPD 226 at page 234 where it is stated:-

“ Thus, the evidence of posting may be given by proving that a letter was delivered to a clerk who in the ordinary course of business would have posted it, or that it was put into a box, which is cleared every day by the postman. The Court draws inferences from the facts and the Court is entitled to draw an inference that that has been done which would in the ordinary course of business have been done.”

See also :- S v Shepard and Others 1966 (4) SA 530 (WLD) at page 532 H.

[43 ] The present case is quite distinguishable from the cases quoted above. Furthermore is it also distinguishable from the case of McWilliams v First Consolidated Holdings (Pty) Ltd 1982 (2) SA 1 AD in which the following appears on page 10 H:-

“ I have no doubt that appellant’s silence and inaction after receipt of the letter justify an inference adverse to him.”

(My underlyning.)

[44] The surrounding circumstances and facts of the present case does not support the drawing of such an inference. In the McWilliam ’s case ( supra ) the evidence proved that the letter was indeed received but no response was forthcoming.

[I] The tacit term of the contract :-

[46] In the case of Caterham Car Sales & Coachwords Ltd v Birkin Cars (Pty) Ltd [1998] ZASCA 44; 1998 (3) SA 938 SCA at page 952 I the following appears:-

“ A party who relies on an express contract is not entitled to invoke a tacit contract on appeal ( Roos v Engineering Fabricators (Edms) Bpk 1974 (3) SA 545 A at 550 F). in addition, this line was not foreshadowed during the trial ….”

(My underlining.)

[47 ] In Standard Bank of SA Ltd v Ocean Commodities Inc 1983 (1) SA 276 AD the following is stated on page 292 A – C:-

“ Moreover I do not think that the tacit agreements alleged can be inferred from the facts on record. In order to establish a tacit contract it is necessary to show by a preponderance of probabilities unequivocal conduct which is capable of no other reasonable interpretation than that the parties intended to, and did in fact, contract on the terms alleged. It must be proved that there was in fact consensus ad idem .”

See also the other authorities cited.

In Triomf Kunsmis (Edms) Bpk v AE & CI Bpk en Andere 1984 (2) SA 261 (WPA) this dictum was applied at page 267

[48 ] In Muhlmann v Muhlmann 1984 (3) SA 102 AD at page 124

A – C it is stated:-

“ In regard to the process of inference which is to be applied to the facts, however, counsel for the plaintiff called our attention to the following remarks in the judgment of the Court below [1981 (4) SA 632 (W) at 635 B – C] in regard to the degree of proof required to establish the existence of a tacit agreement:-

‘ Before tacit agreement can be held to have been reached in any case it must be clear that the conduct relied upon it not only consistent with the making of the contract alleged but is consistent with no other reasonable interpretation . ’

(My italics.) Counsel for the plaintiff submitted that the words italicised in the above passage pitched the logical requirement too high against the plaintiff; and that the true inquiry was simply whether it was more probable than not that a tacit agreement had been reached. I agree with that submission. See Plum v Mazista Ltd 1981 (3) SA 152 (A) and the authorities there cited.”

[49 ] In the Gordon Lloyd Page case ( supra ) Harms JA states in paragraph 11 on pages 95 – 6:-

“ I am obliged somewhat to restate the ordinary test for proof of a tacit contract ….. It was, at that stage, [ with reference to an application for absolution from the instance ] at least necessary for the appellant to have produced evidence of conduct of the parties which justified a reasonable inference that the parties intended to, and did, contract on the terms alleged, in other words, that there was in fact consensus ad idem .”

[50 ] The evidence tendered on behalf of the Plaintiff does not support a finding that there was a tacit term to the contract. There is no proof of unequivocal conduct on the part of the First Defendant that there was the necessary intention (on the part of the First Defendant) to contract with the Plaintiff. Neither is there any proof on a preponderance of probabilities, that the First Defendant and the Plaintiff intended to and in fact did contract on the terms as alleged.

[J] The implied term of the contract :-

[52 ] In the case of Roberts Construction Ltd v Dominion Earthworks Ltd 1968 (3) SA 255 A at page 260 G – H the following is stated:-

“ The decision is to the effect that it is not required of a pleader to state whether a contract is express or implied, with the corollary that, unless otherwise stated, it is assumed to be express…

[53 ] The evidence tendered on behalf of the Plaintiff does not proof that it can be implied that the parties intended that Plaintiff would render the said service at a fee. Again, like with the tacit term of the contract, sight should not be lost of the fact that there was no express consent on the part of the First Defendant for the old Capital to cede its rights to the Plaintiff.

[K] The claim based on agency :-

[L] Contractual terms of conditions :-

“ The rule is that the litigant, whether the plaintiff or the defendant, relying on a contract that is subject to a condition must plead and prove the condition and its fulfilment.”

The said contract is subject to conditions. Plaintiff did not plead these conditions neither is there evidence to proof that Plaintiff had fulfilled these conditions or obligations.

[M] Waiver :-

“ That is certainly so in regard to waiver. The party alleging a waiver of a contractual right retains throughout the proceedings the overall onus of proving that the other party had full knowledge of the right when he allegedly ab andoned it.”

See also :- Netlon Ltd and Another v Pacnet (Pty) Ltd 1077 (3) SA 840 (AD) at page 872 G-873 H.

[N] Unjustified enrichment :-

[O] The claim against the Second Defendant :-

[58] The claim against the Second Defendant is in her capacity as surety and co-principal debtor. Second Defendant did bind herself as surety with regard to the contract that exists between the First Defendant and the old Capital.

[59] It stands to reason that because there is no contract between the Plaintiff and the First Defendant, in terms of which the First Defendant is liable to the Plaintiff, the Second Defendant can equally not be held liable.

[P] Conclusion :-

[Q] Costs :-

[62] Furthermore, seeing that the Defendants (First and Second Defendant) are the successful parties, the costs of the winding-up application must also be awarded to the First Defendant. First Defendant successfully opposed the winding-up application.

[R] Order :-

[63] Consequently, the following order is made:-

[iii] The costs include also the costs of the winding-up application.

ATTORNEYS FOR THE PLAINTIFF : ORELOWITZ INCORPORATED; c/o KGOMO, MOKHETLE & TLOU ATTORNEYS