Hercules Cold Storage (Pty) Ltd v Blue Horizon Investments 63 (Pty) Ltd and Another (31108/17) [2017] ZAGPPHC 1059 (31 August 2017)

IN THE HIGH COURT OF SOUTH AFRICA,

GAUTENG DIVISION, PRETORIA

CASE NUMBER: 31108/17

31/08/2017

HERCULES COLD STORAGE (PTY) LTD

PLAINTIFF

And

BLUE HORIZON INVESTMENTS 63 (PTY) LTD

1st DEFENDANT

WILLEM PETRUS LOUW COETZEE

2nd DEFENDANT

JUDGMENT

LEGODI J,

[1] A meeting at a restaurant between Mr David Geordiades, Managing Director then of Hercules Cold Storage (Pty) Ltd (the plaintiff) and Dr William Petrus Louw Coetzee (second defendant), a director of Blue Horizon Investments 63 (Pty) Ltd (first defendant) resulted in the conclusion of an oral agreement during 2015 in terms of which a purchase of a generator described as 850 KVA generator, became the subject of a dispute in these proceedings.

[2] The agreement aforesaid was confirmed in what was referred to as a 'pro­ forma invoice' issued on 25 July 2015 by the first defendant in terms of which the unit price of the generator aforesaid

was indicated as R1 250 000.00 less trade in price of R300 000.00 for a KVA 300 generator belonging to the plaintiff and a discount of R75 000 credited to the plaintiff and thus bringing the total amount payable for 850 KVA generator to R875 000.00.

[3] The invoice aforesaid featured prominently in these proceedings, in particular, whether it was the first defendant who sold the 850KVA generator to the plaintiff or whether it was one Mr Jordaan of Heidelburg, Gauteng Province. And if so, whether the first defendant through· the second defendant acted as an agent in the purchase of the generator and issuing of the invoice for the sum of R1 250 000.00. The other issue raised in these proceedings was whether the second defendant by his conduct should be held liable jointly and severally with the first defendant for whatever amount the court might find the first defendant liable to the plaintiff.

[4] The issues briefly identified above were raised due to the relief

sought by the plaintiff against the defendants and the defence raised thereto. The relief sought is couched as follows:

"1 An order that it be declared that the Second Defendant is jointly and severally liable with the First Defendant for payment of the amounts claimed herein under and the relief sought against the First Defendant.

2 Payment of the amount of R875 000.00 (EIGHT HUNDRED AND SEVENTY FIVE THOUSAND RAND)

3 lnterenst on the amount of R875 000.00 at a rate of 9% per annum from the 301 of July 2015, alternative a tempore morae;

4 Return of the Plaintiff s 300KVA generator;

5 In the alternative to prayer 4, and if it be found that the First Defendant has alienated the 300KVA generator, the Plaintiff is entitled to the reasonable value thereof, namely R300 000.00 (THREE HUNDRED THOUSAND RAND), together with interest at a rate of 9% per annum from the 30th of July 2015;

6 Payment of the amount of R68 400 (SIXTY EIGHT THOUSAND FOUR HUNDRED RAND) ;

7 Interest on the amount of R68 400.00 at a rate of 9% per annum from the 30th of July 201, 7 alternative a tempore morae;

8 Payment of the amount of R1 059 076.08 (ONE MILLION FIFTY NINE THOUSAND AND SEVENTY SIX RAND AND EIGHT CENTS);

9 Interest on the amount of R1 059 076.08 at a rate of 9% per annum, a tempore morae;

10 Cost of suit, including cost on a scale as between attorney and client.

[5] In their plea the defendants averred that the second defendant that

is, Dr Coetzee ' merely acted as an agent between the seller of the 850KVA generator and the plaintiff and that 'the purchase price of the generator was not R1 250 000 and that as per the agreement between the plaintiff and the seller the purchase price was R600 000.00'. Furthermore, the defence was that at all times the purchase agreement between the plaintiff and seller stood separate from the agreement for collection, delivery, transport and installation.

[6] The defence as outlined above, clearly drew the battle-line between

the plaintiff and defendants. In addition, the plaintiff drew into the second defendant's improper conduct in the handling of the

affairs of the first defendant which conduct is articulated as follows in the plaintiff's particulars of claim:

"14.5 The Second Defendant inter alia traded the business of the First Defendant recklessly, with gross negligence and/or with the intent to defraud creditors of the First Defendant, more specifically the Plaintiff, and/or for a fraudulent purpose in the following regards:

14.5.1 By intentionally misrepresenting the experience and ability of the First and Second Defendant in the sale and/or installation of generators and/or their general knowledge of generators;

14.5.2 By intentionally misrepresenting the product sold by the First Defendant, alternatively by grossly negligently failing to ensure that the First Defendant will be able to perform its contractual obligations;

14.5.3 By failing and/or refusing to honour contractual obligations of the

First Defendant and/or having a total disregard to the consequences of their failure to honour contractual obligations, more specifically

having a disregard for damages caused to the Plaintiff.

14.5.4 By incurring debts and/or liabilities on behalf of the First Defendant, knowing that the First Defendant would not be able to pay such debts and/or all creditors of the First Defendant.

14.5.5 By making false declarations to creditors, more specifically the Plaintiff;

14.5.6 By not keeping financial records of the First Defendant, alternatively not keeping proper financial records of the First Defendant.

14.5.7 By directly and/or indirectly benefitting financially from the trading of the First Defendant to the prejudice of creditors of the First Defendant, specifically the Plaintiff.

14.6 In light of the aforesaid and in terms of the common law,

alternatively Section 218 read with Section 77 and Section 22 of the Companies Act, Act 71 of 2008, and further alternatively in terms of Section 424 of the Companies Act, Act 61 of 1973, the Second Defendant should be declared to be jointly and severally liable with the First Defendant for all debts of the First Defendant, more specifically the debt of the First Defendant towards the Plaintiff."

[7] Before I deal with the merits and or demerits of the evidence relating to the dispute, I just want to mention that this matter was allocated to this court on 22 February 2017 and the duration thereof

was indicated as 3 to 4 days. On the fourth day only the evidence of the witness Mr David Georgiades was concluded. As a result, the case was postponed to 10, 11 and 12 July 2017 for hearing of further evidence. The 10th July 2017 was preceded by the withdrawal of the defendant's attorneys of record on Friday 7 July 2017. On 10 July 2017 Dr Coetzee (second defendant) appeared unrepresented. He asked for a postponement of the case, which request was refused without giving reasons. I do so later in this judgement. I now turn to the relief sought against the defendants and the defence thereto.

Alleged agency between the plaintiff and first defendant

[8] Agency is a consensual relationship created by contract or by law where one party, (the principal) grants authority for another party (the agent) to act on behalf of and under control of the principal to deal with a third party. An agency relationship is fiduciary in nature and the actions and words of an agent exchanged with a third party bind the principal. The relationship requires the agent to exercise a duty of loyalty to the principal and to use reasonable care to serve and protect the interests of the principal. An agent who acts in his or her own interest violates the fiduciary duty.

[9] The evidence dispelling the alleged agency relationship in my view, is overwhelming against the second defendant as tendered not only on behalf of the plaintiff, but also the evidence on behalf of the

defendants. For example:

9.1 The pro-forma invoice issued to the plaintiff by the first defendant through the second defendant concerns the sale of a generator 850KVA and not a commission which would normally be the case in an agency

relationship.

9.2 Furthermore, in the invoice there is no mention of a third party to suggest any agency role played on behalf of the plaintiff for the purchase of the generator aforesaid. The invoice was issued by the first defendant through the second defendant to the plaintiff.

9.3 In the plea, the defendants allege that the purchase price for the generator was R600 000.00 whereas the invoice mentions a figure of R1 250 000.00. That being so, neither of the defendants can claim to have acted in good faith Instead, they advanced their own interest by benefitting or seeking to benefit improperly from the agreement. For example:

9.3.1 In an email dated 25 May 2015, the second defendant pretended to the plaintiff that the seller of the generator was requiring a deposit of R600 000.00 when in actual fact the purchase price was R600 000.00 as also confirmed by the seller of the 850KVA generator.

9.3.2 The first defendant and or second defendant benefited unduly by more than R500 000 for the generator when it was only bought for

R600 000.00. Inasmuch as the first and or second defendants might have wanted to suggest that the amount of over R500 000.00 in

addition to the R600 000.00 purchase price initially mentioned as a deposit, is for transportation and installation as so intimated in the plea, this detracts from any notion that there was a relationship of agency between the plaintiff and the defendants.

9.3.3 Mr Jordaan (the seller of 850kva generator) refuted any suggestion that he sold the generator 850 KVA aforesaid to the plaintiff. This assertion by the seller ultimately in the course of the second defendant's evidence became common cause when Dr Coetzee somewhat conceded that he sold the generator in question to the plaintiff.

[10] The allegation of agency is clearly a fabrication which finding in my view should be seen as being fatal to the defendants' case. This is the only defence which was pleaded against the plaintiff's cause of action. The version on behalf of the defendants in this regard is accordingly rejected as false. This then brings me to another defence raised in evidence.

Defence of voetstoets

[11] In his evidence, the second defendant suggested that 850KVA generator was sold to the plaintiff 'as it is' and that therefore the fact that the generator is not capable of generating power to the plaintiff's business is not any of the defendants' responsibility. This defence is obscured and inconsistent with the suggestion that the first defendant did not sell the generator to the plaintiff. Firstly, it is not the defendants' defence that they sold the generator to the plaintiff 'as it is'. But, rather that Mr Jordaan sold it to the plaintiff. This assertion even if it was to be considered, it was vehemently denied by Mr Jordaan. He had the discussion with the second defendant and as a result agreed to sell the generator in question to the first defendant for R600 000.00

[12] The suggestion that Mr D Georgiades was present when Mr Jordaan confirmed on a speaker-phone that the generator was being sold to him as it is, was denied not by Mr D Georgiades, but also by Mr Botha who testified on behalf of the defendants. According to Mr Botha, no speaker phone was used during the discussion between the second defendant and Mr Jordaan. This allegation as I see it, was intended to be an alternative defence. That is, in the event the court was to find that an agreement was concluded between the plaintiff and first defendant, then the court must find that the 850KVA generator was sold as it is with its defects.

[13] This defence introduced in evidence ought to be rejected outright. It is not pleaded and the evidence in this regard is effectively inadmissible insofar as the second defendant wanted to introduce it as a defence. However, even if one was to be wrong with regard to rejection of the evidence relevant to a defence in the alternative, there are other factors which militate against the defence.

[14] The second defendant in his affidavit deposed to on 15 January 2016 resisting the application for summary affidavit, inter alia, stated:

"..... / informed him (referring to Mr Jordaan), that the plaintiff was interested in purchasing a generator. The seller described the generator as being a used 850 KVA 3 phase twin Turbo Diesel generator with a switch over board, and despite same not having been used in many years, it only had approximately 70 hours operational time recorded.

[15] This guarantee of 'approximately 70 hours operational time recorded', attributable to Mr Jordaan has also been vehemently denied. The second defendant insofar as he sought not to attribute the statement to himself, should be found to be false and that he intended to mislead the plaintiff who was represented Mr Georgiades into buying the generator in question.

[16] Mr Jordaan denied having made any such guarantee to the second defendant and neither has he ever spoken to Mr Georgiades. So, the "70 hours operational time recorded" would only have come from the second defendant himself as testified by Mr Georgiades, and this in a way corroborates the plaintiff's version that an interest was shown into buying the said generator after the second defendant told Mr Georgiades that the generator in question recorded less than 75 operational time and thus suggesting that the generator was relatively new and operational. That being so, the second defendant

cannot claim that the generator was sold "as it is" for an amount over R1 million.

[17] I therefore find that the first defendant has breached the contract and this entitles the plaintiff to cancellation thereof with the resultant claim for restitution and payment of the money paid to the plaintiff. On 25 May 2015 the plaintiff paid R600 000.00 to the fist defendant as deposit for the outstanding balance of R875 000.00 after

having made certain deductions out of the purchase price of R1 250 000.00 as indicated in paragraph (2) of this judgment. So, the first defendant should be found liable to pay the R875 000.00 paid by plaintiff to the first defendant and return the KVA 300 generator

which was traded in for R300 000.00.

Automatic switchover board

[18] In terms of the oral agreement the generator in question was to have automatic over switch board. It however came without an automatic over switch board. In the quotation a pro-forma invoice, the 850 KVA generator included the switch over board. The second defendant however sought to suggest that the parties never agreed on an automatic switch over board.

[19] The denial of the automatic switch over board ought to be rejected. The witness (Mr Georgiades) for the plaintiff indicated that it became their requirement to have a generator that would switch on automatically once electricity is off and switch off automatically once it is on. This was clearly indicated to the second defendant during the negotiations, so was the evidence on behalf of the plaintiff.

[20] When it was discovered that the delivered generator did not have automatic switch on, the plaintiff bought one for R68 000.00 hoping that the generator would become functional. It did not and this amount forms the subject of a claim against the first defendant. It is common cause that the generator came without an automatic switch on board.

[21] As I said for the following reasons, the supposed defence that it was never intended by the parties to have automatic switch on generator, ought to be rejected. The agreement was concluded during the time when power-cuts were a daily occurrence. It was therefore of paramount importance to the plaintiff to have a generator with automatic switch overboard taking into consideration the nature of its products which required cold storage. The first defendant should therefore be found liable for the costs occasioned to the plaintiff for the purchase of the automatic switch over board.

Restitution of the 300 KVA generator

[22] The 300 KVA generator belonged to the plaintiff and was traded in for R300 000.00. That together with the R75 000.00 discount extended to the plaintiff by the first defendant reduced the purchase price of R1 250 000.00 for the 850 KVA twin turbo generator to R875 000.00.

[23] The 300 KVA generator was removed from the plaintiff’s premises immediately upon delivery of 850 KVA generator. The transportation was arranged by the second defendant's brother who also introduced the second defendant to Mr Jordaan. The second defendant's brother testified on behalf of the plaintiff. He was operating his business at a premises rented from Mr Jordaan. The generator was left by him at the said premises and was given the liberty of selling it to recoup inter alia, his expenses in transporting the generator from the plaintiff's premises. He is no longer operating his business from Mr Jordaan's premises. However, the 300 KVA generator is still at Mr Jordaan's place who is now claiming to have a lien over the generator as the first defendant through the second defendant instead of paying the full purchase price of R600 000.00 for the 850KVA generator only paid R550 000.00 making a short fall of R50 000.00. That was despite the fact that the plaintiff paid the deposit of R600 000.00 on 25 May 2013 and thereafter the balance outstanding on the sale of the generator.

[24] So, for any restitution order this court may made, should be subject to such claims by the second defendant's brother and or Mr Jordaan who indicated that they could be willing to have the 300KVA generator released to the plaintiff provided their claims are settled. I now turn to deal with the other claim against both defendants.

Claim for damages

[25] The claim for R460 563.10 is premised on the fact that on the 16 September 2016 there was power cut for duration of several hours from morning until late in the afternoon of that day. In paragraph 13.6.1 of the particulars of claim the plaintiff inter alia, pleaded

" 13.6.1 The plaintiff has experienced power outages at the business premises of the plaintiff for two full working days after the first defendant failed to deliver and install the agreed generator namely on the 16th of June 2015 and 16th of September 2915, resulting therein that the Plaintiff was unable to produce product.

[26] The first defendant elected not to plead to these averments neither did the second defendant when he testified in his defence and that of the first defendant sought to suggest any defence to the averments. The initial amount for damages was for two days. However in the course of the trial only a claim for one day was persisted with and the amount was reckoned as R460 563.10 to which there was no defence the defendants having elected not to plead thereto. The plaintiff should therefore be entitled to payment in this regard.

Alleged reckless trading of first defendant

[27] In the particulars of claim, the plaintiff inter a/ia, asked for an order that it be declared that the second defendant is jointly and severally liable with the first defendant of the amounts that the court finds payable to the plaintiff by the first defendant.

[28] The grounds for the declaration order are quoted in paragraph [6] of this judgment. Both the first and second defendants through their attorneys DLBM Attorneys Incorporated filed a plea on behalf of the defendants on 2 March 2016. During the first hearing of this matter from 20 to 22 February 2017 the defendants were represented by counsel. Despite all of this, the defendants failed to plead to the averments quoted in paragraph [6] of this judgment. This alone is fatal to any suggestion seeking to refute declaratory relief or order sought.

[29] Even if one was to be wrong in this regard, viva voce evidence was tendered through Mr Karen de Villiers, the accountant of the first defendant who at all material times was doing the firsts defendant's books. For example, no tax returns was ever submitted as the first defendant neither did the second defendant sign financial statements to facilitate submission of tax returns. The first defendant also operated as a (Pty) Ltd company without being duly registered. All of the above, and failure to plead to the serous averments made against the second defendant in my view, signifies lack of defence to the averments and evidence tendered on behalf of the plaintiff. The second defendant should therefore be declared to be jointly and severally liable to the plaintiff.

Costs

The plaintiff has succeeded in its claims against the defendants and should therefore be entitled to costs. In a draft order prepared for the convenience of the court it is stated:

"7 The first and second defendants are ordered to pay the costs of the action, including costs on a scale as between attorney and client, and which costs shall include the reserved costs of 2 d of February 2017 and the qualifying, consultation, preparation and reservation costs and the attendance fees, where applicable, of the following experts:

7.1 Mr Willem Johannes Botha (it is noted that Mr Botha attended the trial on the 2dh, the 21st and the 2 d of February 2017 , and was

reserved to attend the trial on the 23'° of February 2017 , and attended the trial on the 1dh of July 2017) ;

7.2 Mr Gabriel Nicolaas van den Berg (it is noted that Mr Van den Berg attended the trial on the 2dh of February 2017 , and was reserved to attend the trial on the 21s t , the 2 d and the 23'° of February 2017) ; and

7.3 Mr Nicholas Jacobus van Jaarsveld (it is noted that Mr Van Jaarsveld was reserved to attend the trial on the 20th , the 21s t , the 2 d and 2Y'd of February 2017

[30] I do not think a punitive costs order is justified neither do I think the costs for Mr Botha, Mr Van den Berg and Mr van Jaarsveld whose presence, involvement and or attendance was not brought to the attention of the court, is justified.

Dismissal of a request for a postponement

[31] On 22 February 2017, the trial was interrupted in the course of the first witness's evidence. The trial could have proceeded on that day until the 23 February 2017. It was indicated that the second defendant who was indisposed was not willing to have the case proceeded with in his defence. This was despite the fact that his brother and Mr Jordaan have been attending court and that they were due to give evidence on 22 February 2017 and or 23 February 2017.

[32] The case was subsequently postponed to the 10-12 July 2017. On 7 July 2017 the defendants 'attorneys withdrew as attorney of record. On 10 July 2017 the second defendant appeared unrepresented and asked for the matter to be postponed. The court refused to have the matter postponed and did not give reasons for the refusal. I now do so.

[33] The court has a discretion as to whether an application for a postponement should be granted or refused[1]. The discretion must be exercised in a judicial manner, and for substantial reasons. An application for postponement seeks an indulgence. The applicant must show good and strong reasons. That is, the applicant must furnish a full and satisfactory explanation of the circumstances that give rise to the application. The application must be made timeously and must always be bona fide and not simply as tactical manoeuvre for the purpose of delaying the proceedings, an advantage of which he or she is not entitled to.

[34] The right to legal representation is a corollary of the right of access to justice. Nevertheless, a litigant may not benefit from his own misconduct or other careless approach seeking to obtain legal representation, especially where the right of the litigants are prejudicially affected and the scales inevitably in favour of the refusal of a postponement sought for purposes of obtaining legal representation.[2]

[35] Mere withdrawal of a practitioner or the mere termination of a mandate does not, contrary to popular belief entitle a party to a postponement as a right[3], as it appears to have been the belief in the present case. After the case was part-heard in February 2017 and postponed to 10 July 2017, the second defendant was called upon by his lawyer to resolve his woes relating to the fees he owed, including other matters litigated upon on his behalf.

[36] Despite timeous pleas by his lawyers to settle his bills and pay certain amount to enable counsel engaged in the present case to attend court on 1O to 12 July 2017, he still failed to do so. This led to his attorneys withdrawing as attorneys of record at the eleventh hour for him, the second defendant representing the first defendant as its Chief Executive Officer and apparently the only director and shareholder of the first defendant was found not to have succeeded in showing that they were entitled to a postponement.

Order

[37] Consequently, an order and judgment is hereby granted as follows:

37.1. It is declared that the second defendant is jointly and severally liable with the first defendant for payment to the plaintiff of the amounts stipulated hereunder.

37.2. The first and second defendants are ordered to make payment to the plaintiff the amount of R875 000 (EIGHT HUNDRED AND SEVENTY FIE

THOUSAND RAND), together with interest on the amount of R875 000.00 at a rate of 9% per annum from the 18th of August 2015.

37.3. The first and second defendants are ordered to return to the plaintiff 300KVA generator within 7 (seven) days after the granting

of this order, subject to lien by Mr Jordan and the second defendant’s brother regarding their claims against the defendants and upon failure, that the first and second defendants, jointly and severally are ordered to pay the plaintiff the amount of R300 000.00 (THREE HUNDRED THOUSAND RAND), together with interest at a rate of 9% per annum from the 18th of August 2015.

4. The first and second defendants are entitled to remove the generator delivered to the plaintiff's premises subject to payment of

the amount owed by the defendants to the plaintiff.

5. The first and second defendants are ordered to make payment to the plaintiff the amount of R68 400.00 (SIXTY-EITHT THOUSAND FOUR

HUNDRED RAND), together with interest on the amount of R68 400.00 at a rate of 9% per annum from the 18th of August 2015.

6. The first and second defendants are ordered to make payment to the plaintiff of the amount of R460 563.10 (FOUR HUNDRED AND SIXTY

THOUSAND FIVE HUNDRED AND SIXTY-THREE RAND, TEN CENTS), together with interest on the amount of R460 563.10 at a rate of 9% per annum from the 15th of September 2015.

7. The defendants to pay the costs of the action on a party and party scale.

MF LEGODI

JUDGE OF THE HIGH COURT

COUNSEL FOR THE PLAINTIFF: ADV. N.C HARMAN

INSTRUCTED BY:

VORSTER & BRANDT

INC 161 GARSFONTEIN ROAD

ASHLEA GARDENS, PRETORIA

TEL: (012) 346 5680

REF: C BRANDT/LK/CH0145

FOR THE DEFENDANT:

ADV. M VAN TWISK

INSTRUCTED BY:

DLBM INCORPORATED

14 SPANTOU AVENUE, WAPEDRAND

PRETORIA

TEL: (012) 807 4025

REF: R DE LEEUW/KW/8548

[1] Grootboom v National Prosecuting Authority 2014 (2) SA 68 (CC) at 75G and 798.

[2]Magistrate Pangarker v Botha 2015 (1) SA 503 (SCA) at 512 C-H

[3] Tast and Save Trading CC v Standard Bank of South Africa Ltd 2004 (4) SA 1 SCA at 4H-SB, see also Magistrate Pangarker supra at 510D-F