Hillingdale Capital (Pty) Ltd v Dust-A-Side Holdings (Pty) Ltd and Another (065752/2024) [2024] ZAGPPHC 1261 (2 December 2024)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Case Number: 065752/2024

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED: NO

DATE: 2/12/24

SIGNATURE

In the matter between:

HILLINGDALE CAPITAL (PTY) LTD

Applicant

and

DUST-A-SIDE HOLDINGS (PTY) LTD

First Respondent

SANLAM INVESTMENT MANAGEMENT (PTY) LTD Second Respondent

Summary: A claim for specific performance – dispute of fact- (validity of the contract – economic duress).

Motion proceedings inappropriate. The issue of validity of the contract is incapable of being resolved on affidavits. Rule 6(5)(g) of the Uniform Rules invoked. The costs of the motion converted to trial must be borne by the applicant. Had the applicant not instituted the motion and instead institute an action –dispute of fact foreseeable – the motion could not have been launched. The applicant having failed to obtain the relief through motion proceedings, the principle of costs following the results must apply in respect of the aborted motion proceedings. Held: (1) The issue of the validity of the contract on application of the economic duress defence is referred to trial together with other related issues in the motion in accordance with rule 6(5)(g) of the Uniform Rules. Held: (2) The applicant is to pay the costs of the aborted motion on a party and party scale taxable at scale B.

JUDGMENT

MOSHOANA, J

Introduction

[1] This is an application, in terms of which, the applicant, Hillingdale Capital (Pty) Ltd (Hillingdale) seeks a declaration of breach of a contract with a consequential relief of specific performance against

the respondent, Dust-A-Side Holdings (Pty) Ltd (Dust). The present application was initiated as one of urgency. This Court, per my learned colleague Makhoba J, on 25 June 2024, struck the application off the roll due to lack of urgency. I interpose to state

that where an application is struck off due to lack of urgency, the applicant, if still desirous of obtaining a relief, would enrol the application on the normal motion roll. In practice, this process of securing a place on the normal opposed motion roll is complex and takes time. Miraculously, the present application was able to return to the opposed motion roll within a period of four months. This miraculous situation caused Dust some disquiet. A rule 30 application was launched to deal with the disquiet. That rule 30 application was not before me. Nevertheless, a full opposed application served before me.

[2] Pertinent to this judgment, on 19 June 2024, Dust, in its answering affidavit, alleged that there was a material dispute of fact occasioned by the challenge on the validity of the Service Level Agreement (SLA), which Hillingdale was seeking specific performance relief on. On the basis of that averment, Dust prayed for the dismissal of the motion. Nevertheless, Hillingdale forged ahead with motion proceedings. This judgment seeks to address the disputed issue of the fact and does not resolve any other issues arising out of this application. Any such issues, in line with the approach taken by this Court, shall appropriately be attended to by the trial Court.

Pertinent background facts to the present application

[3] Regard being had to the approach this Court takes at the end, it shall be obsolete for this Court, in this judgment, to fully narrate the facts relating to the dispute between these litigants. It suffices to mention that on 17 April 2024, Hillingdale and Dust signed a written agreement titled, “Agreement for the procurement of services and service level agreement” (SLA). The relevant clause, for the purposes of this judgment, provides as follows: -

“4 Fees and Payment

4.1 The Retainer:

4.1.1 The Client [Dust] agrees to make payment to the Contractor [Hillingdale] of a monthly retainer fee in the amount of R30, 000.00…

4.1.2 The first payment shall be due and payable immediately of the Effective date of this Agreement.

4.1.3 Subsequent payments shall be due and payable within 7 days of receipt of an invoice by the Contractor, for the entire term of the Agreement.”

[4] A day before the signature of the SLA, a message was sent to Dust’s representative which stated the following: -

“Hi Craig, please let Rohan know about the SLA before 12pm today. In the event we can’t reach an agreement on the SLA, we will inform Sanlam today to put the deal on hold while we sort out the SLA over the next few weeks. We are doing multiple deals with Sanlam at the moment, so I need to let them know if there is an issue. Unfortunately, we can’t

change the 5-year term because that is the term of loan.”

[5] The secured loan amount deal with Sanlam was in the region of R75 million. It is now contended in this motion that Dust considered the contents of the above message as a form of economic duress and it now seeks to void the SLA on the strength of the alleged economic duress. Hillingdale disputed this contention on two bases; namely (a) the defence of economic duress is bad in law; and (b) that the factual averments in its support are unsubstantiated, patently false and were denied.

[6] Based on the above factual matrix, the parties debated before this Court whether there are disputes of fact and if so, whether the alleged disputes are genuine and capable or incapable of being resolved on affidavits or not. As indicated at the dawn of this judgment, the question whether there is a dispute of fact and the consequences thereof in motion proceedings will occupy the attention of this judgment.

Analysis

[7] Motion proceedings are not designed to deal with dispute of facts. When a dispute of fact arises, the Court must invoke the provisions of rule 6(5)(g) of the Uniform Rules. As established in the Plascon-Evans matter, when final relief is sought, as it is the case in the present application, a procedure is in place to enable the granting of such final relief. In order to invoke the provisions of rule 6(5)(g), the jurisdictional requirement is that a dispute of fact must exist. The question before Court is whether a dispute of fact exists or not. Counsel for Hillingdale made two propositions. First, he submitted that there is no dispute of fact in the present application. Secondly, he submitted that, if such a dispute exists, it is fictitious, far-fetched and could be rejected off hand based on affidavits. It is not common cause in this matter that a valid contract exists. The issue of duress, if proven, affects the validity of a contract. The enquiry whether a dispute of fact exists is a factual one.[1]

[8] Indisputably, Dust challenges the validity of the SLA. The factual and legal basis of the challenge of the validity is placed in dispute by Hillingdale. The final relief sought by Hillingdale is one of specific performance. In order to succeed, a valid contract must exist. It is indeed so that Hillingdale placed before Court what may prima facie be considered as a written agreement. However, the other party to the self-same agreement challenges its validity. In this Court’s view, this challenge clearly creates a serious dispute of fact, one which is not far-fetched qualifying to be rejected on the papers. As it was confirmed in Tomassini v Dos Remendos and another (Tomassini)[2] where the validity of a contract is being challenged, a relief of specific performance is incapable of being decided on affidavits. In a situation where the written contract and its validity are common cause, a contractual remedy of specific performance may be obtained in motion proceedings.

[9] Generally, breach of contract claims are launched through action proceedings for the simple reasons that dispute of facts are inherent in such claims. Amongst those disputes could be challenges over the signatures of the parties, interpretation of certain clauses, which necessitates consideration of the surrounding circumstances, and, as it is the case herein, the issue of the validity of the agreement. In this particular instance, although Hillingdale suggests that a dispute of fact was not foreseeable, the correspondence exchanged before the launch of this application points to the fact that Dust did not require it, is in my view, sufficient to raise the red flag concerns regarding the validity of the SLA. Although,

misrepresentation was not specifically pleaded in casu, the correspondence, objectively viewed, suggests misrepresentation of some form on the part of Hillingdale. This question, whether Dust needed Hillingdale, puts into question the validity of the SLA.

[10] Accordingly, in my view, a serious dispute of fact over the validity of the SLA was foreseeable. Foreseeability is around a dispute and not the exact nature of the dispute. It may be so that Hillingdale could not have foreseen a specific challenge predicated on economic duress. As a general principle, duress affects the validity of a contract. The question of lawfulness of economic duress defence aside, where a meeting of minds did not happen a contract may

not be consummated in law. Nevertheless, in my view, a challenge on the validity of the SLA must have been foreseen when Dust audaciously

informed Hillingdale that it does not need it. This statement of Dust not needing Hillingdale, in the circumstances where it signed a contract with it, threatens the very substratum of the basis of the relationship between the parties, the SLA. Ordinarily, a party conscious of a legal agreement would not act in a manner indicative of not being bound by an agreement. A party acting in that manner is one that says, the legal agreement is not binding. Hence, in a contractual parlance, Dust was repudiating the agreement. Hillingdale when faced with a repudiation, is put to an election, whether to cancel and sue for damages or challenge the repudiatory conduct and insists on specific performance. It must be axiomatic that whatever election Hillingdale makes, a dispute of facts is inherent.

[11] Another important aspect to consider in breach of contract claims is that specific performance is a discretionary remedy. Its alternative or flipside, as it were, is an award of damages. Contractual damages are generally unliquidated. In Economic Freedom Fighters and others v Manuel[3] the SCA confirmed that an unliquidated claim for damages must be pursued by institution of an action.

[12] Contrary to the submissions by counsel for Hillingdale, the veritable issue, is not whether the defence of economic duress has been accepted or rejected in our law. The issue, is whether there is factually a dispute of fact incapable of being resolved on affidavit. The factual bases of the contended economic duress defence are outlined in the replying affidavit of Hillingdale. Those bases are (i) Hillingdale insisted that the SLA entered into after Dust and Sanlam had already concluded their term sheet; and (ii) Dust was held in ransom at a very late stage of the deal. These facts are incapable of being decided on affidavits. This Court does state en passant that contrary to what was held in Trident SA (Pty) and another v Shainne John Taylor and others (Trident)[4] the defence of economic duress was not rejected by the SCA in Medscheme Holdings (Pty) Ltd and Another v Bhamjee (Medscheme)[5]. Recognising the fact that the debate over this issue may detain another judge in this Division, in due course, this Court finds it inappropriate to, in detail, discuss this issue. It suffices to mention that in other jurisdictions, economic duress is a recognised

defence. Section 232 of the Constitution of the Republic of South Africa, 1996, provides that customary international law is law in the Republic unless it is inconsistent with Constitution or an Act of Parliament. Section 39(2) of the Constitution provides that when interpreting the Bill of Rights, a Court, tribunal or forum may consider foreign law.

[13] Accordingly, this Court takes a view that a dispute of fact exists and such a dispute is incapable of being resolved on affidavit. Thus, the provisions of rule 6(5)(g) of the Uniform Rules must be invoked

in this application. Where a Court invokes the rule, two options are available to it; namely; (a) to dismiss the application; or (b) to make an order it deems fit with a view to ensuring just and expeditious decision. In ordering the latter, a Court may direct that oral evidence be heard on a specified issue or refer the matter to trial with an appropriate direction as to pleadings or definition of issues. In the circumstances; it will be unjust for this Court to dismiss the application as implored by Dust’s counsel. It will be just and expeditious to refer this matter to trial. What then remains is the issue of costs.

[14] Counsel for Dust submitted that Hillingdale must pay the costs of this application. In retort, counsel for Hillingdale submitted that the costs of the aborted application must be costs in the cause. With considerable regret, this Court cannot agree. Prior to the launch of this motion, Hillingdale was in the know that Dust audaciously stated that it does not need it. This was, as already mentioned, a red flag around the validity of the SLA. Howbeit, on 19 June 2024, the challenge on the validity of the SLA was indubitably pronounced. Hillingdale simply ignored this dispute and forged ahead with motion proceedings. Even if, it could be argued that when motion proceedings were initiated, this dispute could not have been foreseen, upon receipt of the Answering Affidavit the dispute was made perspicuous. From that point on, Hillingdale should have known that motion proceedings would have been aborted sooner rather than later. Accordingly, Hillingdale must pay the costs of the aborted application. In Adbro Investment Co Ltd v Minister of Interior (Adbro)[6], it was confirmed that a cost order is appropriate in an instance where at the launch of the proceedings it was foreseeable that a serious dispute of fact was bound to develop. In my view, this principle should be extended to situations similar to the present

application. Clearly, after the motion was struck off the roll for want of urgency, Hillingdale should have realised that a serious

dispute of fact was bound to develop. To then proceed and miraculously enrol an opposed motion proceedings was, in my considered view, reckless. Nothing would have stopped it to apply that the matter should be converted into trial since it was as clear as daylight that the validity of the SLA is being challenged. It appears foolhardy, in my respectful view, to blindly proceed to seek

specific performance of a challenged agreement. Issues of a validity of a contract are incapable of being resolved in motion proceedings,

given their nature.

Order

[15] For all the above reasons, I make the following order:

1. The application is referred for trial

2. The founding affidavit shall serve as combined summons; the answering affidavit shall serve as a plea; and the replying affidavit shall serve as a replication. The parties may amend their respective pleadings, where necessary, in conformity with the rules appertaining amendments of pleadings.

3. The applicant is to pay the costs of this aborted application on a party and party scale taxable or to be settled at scale B.

GN MOSHOANA

JUDGE OF THE HIGH COURT

GAUTENG DIVISION, PRETORIA

Delivered: This judgment was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the parties/their legal representatives by e-mail and by uploading it to the electronic file of this matter on Caselines. The date for hand-down is deemed to be 2 December 2024.

APPEARANCES:

For the Applicant: Mr N C De Jager Instructed by: Bowmans Inc, Cape Town For the Respondent: Mr H S H Ali Instructed by: Dikgale Inc, Johannesburg Date of the hearing: 19 November 2024 Date of judgment: 2 December 2024

[1] See South African Football Association v Mangope (2013) 34 ILJ 311 (LAC) at para 10.

[2] 1961 (1) SA 226 (WLD)

[3] 2021 (3) SA 425 (SCA).

[4] (B2149/23) dated 6 February 2024 per the learned De Vos AJ.

[5] 2005 (5) SAA 339 (SCA)

[6] 1956 (3) SA 345 (AD).