Rebel Discount Liquor Group (Pty) Ltd t/a Picardi Liquors v Level Fields Advisors (Pty) Ltd (2014/27143) [2015] ZAGPJHC 231 (18 September 2015)

REPUBLIC OF SOUTH AFRICA

HIGH COURT OF SOUTH AFRICA,

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO 2014/27143

DATE: 18 SEPTEMBER 2015

In the Matter between:

REBEL DISCOUNT LIQUOR GROUP (PTY) LTD

T/A PICARDI LIQUORS.........................................................................................................Applicant

AND

LEVEL FIELDS ADVISORS (PTY) Ltd............................................................................Respondent

JUDGMENT

Sutherland J:

Introduction

1. The purpose of this application is to make six arbitration awards orders of court pursuant to section 31 of the Arbitration Act 42 of 1965.

2. The resistance to awards 4 and award 5 has been abandoned. They shall be made orders. The resistance to awards 1, 2 and 3 is based On a contention that they have all prescribed. The resistance to award 6 is based on the contention that the court should refuse to make the award an order of court because to do so would be, indirectly, to sanction illegality.

The history

3. The circumstances that gave rise to the arbitration can be briefly sketched.

4. The respondent in these proceedings was the lessor of premises. The applicant was its lessee. The applicant withheld rent. The reason for withholding rent was that the lessor had failed to provide a back door for its liquor outlet. The respondent regarded non¬payment of rent as a breach, purported to cancel the lease, and sought eviction. The applicant countered that by claiming specific performance of the lessor’s obligation to provide a back door and further claimed damages for loss of profits by reason of the absence of a back door.

5. These disputes were referred to arbitration. The arbitration was conducted over the space of two and a half years. Moreover the several issues were addressed in separated hearings.

It was in this context that six distinct awards were rendered. The chronology is important; the events occurred thus:

5.1. On 10 February 2011 the first award was given holding that the respondent was in breach of the lease and directing it to comply with its obligation to provide a back door.

5.2. Several costs and interlocutory orders were made from time to time thereafter on 22 March 2011, 21 July 2011, 29 October 2013, and 11 December 2013.

5.3. On 23 June 2014, the sixth award was given granting damages for loss of profits proven to arise from the respondent’s breach of its obligations to provide a back door to the applicant. The sum awarded is R2519714, plus mora interest at 15.5% from 1 July 2012.

5.4. The application to make these awards orders of court was instituted on 26 July 2014. The Prescription defence: Awards 1, 2 and 3.

6. It is undisputed that the relevant three year period has elapsed since these awards were given. No facts are provided why prescription might have been interrupted. In the absence of such facts, plainly, an award, being a debt as contemplated by the Prescription Act shall prescribe. ( Prime Fund Managers (Pty) Ltd v Rowan Angel (Pty) Ltd & Ano [2014] 2A11 SA 227 (GP) at [45]; Duet and Magnum Financial Services CC (In Liquidation) v Koster [2010] 4 All SA 154(SCA) at [24].)

7. The failure of the applicant to take steps to enforce the first award which was ad factum praestandum and was not dependent on any further eventuality for its immediate enforcement is not explained.

8. The second and third awards were costs orders. The explanation for not enforcing them earlier was that in accordance with conventional litigation practice costs orders were only presented for payment or taxation upon the conclusion of the litigation. It seems a pity tliat that understandable approach was taken. Of course, ordinarily, a costs order by a court would not prescribe for thirty years. An award granting costs is not in the same position, and to enjoy its benefits, it is necessary to make it an order of court.

Importantly, the point is that the right to have the award, per se, made a court order has indeed prescribed. (Cape Town Municipality v Allie NO 1981 (2) SA 1 (C) at 4F-H.)

9. There is, in these circumstances, a degree of unfairness apparent, but the predicament is not without ordinary remedies. As matter of practice, it may be appropriate for parties to an arbitration to expressly regulate this aspect of their contest to avoid the risk of the expense of running off to court to prevent being snookered later on.

10. Accordingly, it must follow that the first three awards have indeed prescribed.

The Illegality Argument: Award no 6

11. The contention advanced is inspired by the common cause fact that the applicant, in the course of trading, violated the terms of its liquor licence. The licence issued to it restricted it to selling liquor ‘retail’ to the general public. It was not licensed to sell to other traders who would in turn sell the liquor thus bought to their paying clientele. It is

supposed that the tavern trade would be typical of the class of customer thus ineligible to buy stock from the applicant.

12. The relevance of this illegal trade was taken into account in computing the quantum of the claim for loss of profits by the applicant, a case established before the arbitrator by way of expert evidence. Obviously, to calculate what the loss amounted to, required an assessment to be made of the legitimate trade to determine an amount. If the illegal trade had not been distinguished the quantum would have been inflated.

13. However, despite having participated in that debate during the arbitration, the respondent now contends that the exercise of severing legitimate trade from illegal trade was of no assistance to the applicant because, so the argument runs, once it is established that the applicant traded illegally, it is improper to award any amount in damages because, to do so would, albeit, indirectly, be tantamount to the court sanctioning an illegal course of conduct.

14. Counsel for the respondent sought to fortify this contention by flourishing the decision of the Constitutional court in Cool Ideas 1186CC v Hubbard & Ano 2014 (4) SA 474 (CC). That decision dealt with the question of whether or not a builder who had performed, at least, some of the work contracted for, and sued for a quantum meruit payment could obtain a court order enforcing his claim despite the builder not being registered as a home builder in terms of section 10(l)(b) of the Housing Consumers Act 95 of 1998. The section provided that no person could carry on the trade of a home builder or receive any consideration pursuant to a building contract in respect of a home being built, if not registered. After an arbitral process commenced the builder did become registered. The

majority of the court held that the builder could not recover and accordingly, the court could not make an award directing payment to be made an order of court.

15. The contention advanced in the present matter is that the illegal trade indulged in by the applicant is a criminal offence. Therefore, an award giving the applicant money, in effect, is a condonation of its illegal activity and cannot be countenanced.

16. In my view, the two sets of circumstances are starkly distinguishable and the decision in the Cool Ideas case is of no assistance to the respondent’s submission. The Constitutional court addressed a course of conduct which was expressly and unequivocally proscribed and in respect of which the penalty of non-recovery of payment for work done was imposed. The liquor Act does not provide for a deprivation of derived from the proceeds of unlicensed trade. Moreover to describe sales of liquor to taverns as ‘illegal’ is to obfuscate the true character of the activity. It is not ‘illegal’ to sell liquor to taverns, for a licence may be granted to do so. What is illegal is to violate the licence.

17. However, the thrust of the contention acknowledges that in the present case the ‘sanctioning’ of illegality would be indirect. In response to the fact of the severance of the illicit from the legitimate trade in the computation of the award, it is argued that severance does not help because the ‘taint’ of illegality that stains the applicant is indelible. This line of reasoning in my view transports the submission into the realm of what is contra bonis mores. There is no shortage of authority for the proposition that a court will not make itself an accomplice to activity that society frowns upon; ie gambling debts, the proceeds of prostitution, and so on. Is the selling of liquor to a class of persons not included in your liquor licence an activity that places liquor traders into this category of pariahs? I think not; at very least, if there, indeed, are considerations that would

reasonably propel the liquor trader in that direction they have not been revealed to me in this case.

18. Moreover, there remains the fact that the arbitrator rendered an award that disallowed any illicit trade to be taken into account. In my view, the potential for contamination by illicit activity was adequately excluded by such means, assuming a perspective, which I do not share, that selling licence outside the four comers of a liquor licence is an immoral activity that is contra bonis mores as traditionally understood.

19. The upshot is that no impediment stands in then way of making the sixth award an order of court.

Costs

20. It was argued that the parties’ degrees of success should dictate the outcome. That is correct. However, it would be mechanical to divvy up the number of awards to be enforced or not. Moreover, it is profoundly obvious that the money claim is the real prize. Success on that score must, sensibly, determine the outcome. The applicant has been substantially successful.

21. In addition, wasted costs of an aborted hearing before Coppin J on 11 May 2015 have been reserved be determined by me. The respondent’s heads of argument were filed late, on the day before the hearing. Applicant’s counsel sought a postponement to be able to address the arguments. The cause of the postponement was plainly the non-compliance by the respondent with the practice of this court. Non-compliance carries with it the risk being sanctioned. In my view the respondent should bear those costs.

The Order

22. An order is made as follows:

22.1. The application to make the awards dated 10 February 2011, 22 March 2011 and 21 July 2011 is dismissed.

22.2. The application to make the awards dated 29 October 2013, 11 December 2013 and 23 June 2014 are made orders of court.

22.3. The respondent shall pay the costs of the application, including the wasted costs occasioned by the postponement on 11 May 2015.

Roland Sutherland Judge of the High Court,

Gauteng Local Division

Hearing: 10 September 2015

Judgment delivered: 25 September 2015

For the Applicant:

Adv C Bester (Heads prepared by Adv M Blumberg)

Instructed by Bemadt Vukic Potash & Getzas regard the third remaining account.

For the respondent Adv M TA Costa

Instructed by Cliffe Dekker Hofmeyr