Central African Road Services (Pty) Ltd v Tyres 2000 (Jet Park) (SA) (Pty) Ltd and Another (29071/2016) [2017] ZAGPJHC 80 (17 February 2017)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NUMBER : 29071/2016

Reportable: No

Of interest to other judges: No

Revised.

17/2/2017

In the matter between

CENTRAL AFRICAN ROAD SERVICES (PTY) LTD Applicant

and

TYRES 2000 (JET PARK) (SA) (PTY) LTD First

Respondent

PIRELLI TYRE (PTY) LTD Second

Respondent

REPORTABLE

ANDRÉ GAUTSCHI AJ :

[1] The applicant (“CARS”) is a cross-border road haulier. The first respondent (“Tyres 2000”) is a tyre merchant in Jet Park, Gauteng. The second respondent is Pirelli Tyre (Pty) Ltd (“Pirelli”), which is a tyre manufacturer and supplier.

[2] CARS claims restitution following repudiation and cancellation of R506 929.50 which it had paid to Tyres 2000 for tyres purchased but not delivered.

[3] The relevant facts, largely undisputed, are the following :

3.1 CARS placed orders on Tyres 2000 for 140 of certain Pirelli truck tyres (“old stock tyres”), was invoiced for those tyres in the amount of R675 906, and paid the purchase price to Tyres 2000. I shall refer to this as “the supply agreement”.

3.2 Tyres 2000 had purchased the 140 old stock tyres from Pirelli. The precise nature and terms of their agreement are not canvassed in the papers before me.

3.3 Tyres 2000 delivered eight of these tyres to CARS. The balance was kept in storage by Tyres 2000 for CARS. I shall address the basis on which they were stored later in this judgment.

3.4 CARS tested the eight old stock tyres as well as another eight supplied to it directly by Pirelli, and experienced certain technical difficulties with those tyres. Accordingly, during April 2016, Pirelli agreed to exchange the 140 old stock tyres with a new type of tyre (“new Pirelli tyres”), at no additional cost. The nature of this arrangement is critical to this matter, and I shall deal with it later in this judgment. In the meantime I shall refer to this as the “exchange agreement”.

3.5 Tyres 2000 returned only 105 of the old stock tyres to Pirelli. The balance of the 140 old stock tyres are initially accounted for as follows :

3.5.1 Eight delivered to CARS as stated above.

3.5.2 24 tyres were retained by Tyres 2000 at its premises.

3.5.3 Three tyres were sold by Tyres 2000 to a third party.

3.6 Instead of exchanging the 105 old stock tyres for new Pirelli tyres, Pirelli issued a credit note to Tyres 2000 for those tyres.

3.7 At a later stage, the balance of the tyres were accounted for as follows :

3.7.1 Tyres 2000 paid CARS an amount of R16 005.60 in respect of the three tyres which it had sold to a third party.

3.7.2 The 24 tyres were tendered for delivery to CARS, but Tyres 2000 delivered only 22 of those to CARS, and then only on 27 October 2016, after CARS had cancelled the agreement.

3.7.3 Tyres 2000 sold another two tyres to a third party, and paid CARS another R8 133.90 for those two tyres.

3.8 On 17 August 2016 CARS through its attorney demanded of Tyres 2000 delivery of 132 old style tyres by 5 pm the next day. On 19 August 2016 CARS’ attorney addressed another letter to Tyres 2000, recording that it had failed to deliver the 132 tyres, accepting the repudiation and cancelling the supply agreement.

[4] A preliminary question that needs to be addressed is the status of the 132 old stock tyres held in stock by Tyres 2000. Counsel for Tyres 2000 submitted that ownership of those tyres had passed to CARS, delivery having taken place by constitutum possessorium. This is not backed up by any facts in the affidavits. In summarising the common cause facts in the replying affidavit, CARS referred to these tyres as “the property of CARS”. That is a conclusion of law, not based on any facts and, as I see it, erroneous in that there were no facts from which the conclusion could be drawn, let alone to allege that it was common cause. The arrangement is loosely described by CARS as an arrangement to keep the tyres in stock from which CARS would draw from time to time. That does not make these tyres the property of CARS. Indeed, there is a suggestion in the papers that Pirelli had not been paid for these tyres, and it is likely that it had a reservation of ownership clause in its contract with Tyres 2000. The fact that it issued a credit note for the tyres returned seems to support the fact that it had not yet been paid for those tyres. Accordingly, the construction which I place on the status of the old stock tyres held in stock by Tyres 2000, is that they were being held by Tyres 2000 as purchaser for delivery to or collection by CARS as and when required by it, having already been paid for. They therefore were owned either by Pirelli or by Tyres 2000 at that stage.

[5] I then turn to the exchange agreement. Pirelli agreed with CARS, and addressed an email to that effect to CARS and copied Tyres 2000, to exchange the 140 old style tyres for 140 new Pirelli tyres. Given my finding that CARS was not the owner of the old stock tyres at that point in time, it is my view that Tyres 2000 of necessity had to be a party to that agreement. It had purchased the old stock tyres from Pirelli, for onward sale to CARS, and the merx now had to be exchanged for a different merx. Clearly the end purchaser (CARS) had to be a party to that agreement, but so had Tyres 2000, since this was a variation of its purchase agreement with Pirelli.

[6] In terms of the exchange agreement, Pirelli had an obligation to exchange the old stock tyres delivered to it for new Pirelli tyres. It did not honour that obligation but instead furnished a credit note. It may be that the credit note was a temporary measure, since the correspondence indicates that the new Pirelli tyres were “on the water”. Nevertheless, Pirelli at no stage thereafter exchanged the old stock tyres delivered to it for new Pirelli tyres. It would have been incumbent upon Tyres 2000 to have enforced that obligation, so that it could deliver the new Pirelli tyres to CARS, which had already paid for them (the exchange would have been at no extra cost). Instead, Tyres 2000 accepted the credit note, did not repay CARS, and was content to sit back.

[7] Tyres 2000’s counsel submitted that CARS should have addressed Pirelli directly. Although there was in my view a tripartite agreement involving all three parties, Pirelli had to deliver the new Pirelli tyres to Tyres 2000, which had to keep those tyres in stock for delivery to CARS as and when required. In my view the obligation to force Pirelli to comply with its obligations lay on Tyres 2000, since it had to be able to perform in terms of the supply agreement.

[8] The repudiation is based on a demand for delivery of 132 old stock tyres. At that stage Tyres 2000 apparently still had 24 (or at most 22) old stock tyres in its possession. It did not deliver those even though it was able to do so. As far as the 105 tyres are concerned, it contends, with some force, that it had delivered those tyres to Pirelli, in effect, at the request of CARS. I must confess that this aspect gave me some concern, but I believe that the correct approach is that Tyres 2000 had the right to demand from Pirelli either delivery of the new Pirelli tyres, or, if that was not possible, to demand return of the old stock tyres, or return of its money (which was done in the form of a credit note). I believe that the demand was a good one, and that the repudiation is well founded, at least in respect of the 24 tyres which Tyres 2000 should have delivered but did not (as least not until two months later, when it was too late), but also in terms of the 105 old stock tyres, which was one of the remedies available to Tyres 2000 to demand from Pirelli.

[9] The cancellation of the first agreement is accordingly valid, and CARS is in my view entitled to demand restitution of the outstanding

money, for which it has not received tyres, which is the aforesaid amount of R506 929.50. There is no dispute as to the calculation of that amount.

[10] Accordingly, I make the following order:

1. The first respondent is ordered to pay the amount of R506 929.50 to the applicant.

2. The first respondent shall pay interest on the aforesaid amount to the applicant at the rate of 10.25% per annum from 16 July 2016 to the date of payment.

3. The first respondent shall pay the applicant’s costs of the application.

ANDRÉ GAUTSCHI ACTING JUDGE OF THE HIGH COURT Date of hearing : 14 February 2017 Date of judgment : 17 February 2017 Counsel for the applicant : Mr C van der Merwe Attorney for the applicant : Marius Swart Attorneys Sunnyridge Germiston (Mr M Swart) Counsel for the first respondent : Mr HP West Attorney for the first respondent : M Strydom & Associates Edenvale (Mr M Strydom) No appearance for the second respondent