Ringopro (Pty) Limited v Winter Castle Trading 44 (Pty) Limited and Others (698/2016) [2021] ZANWHC 3 (9 March 2021)

IN THE NORTH WEST HIGH COURT, MAFIKENG

CASE NO: 698/2016

Reportable:

YES/NO

Circulate to Judges:

YES/NO

Circulate to Magistrates:

YES/NO

Circulate to Regional Magistrate: YES/NO

In the matter between:

RINGOPRO (PTY) LIMITED

Plaintiff

and

WINTER CASTLE TRADING 44 (PTY) LIMITED

First Defendant

DAVID E MAREE

Second Defendant

ELIZA L MAREE

Third Defendant

MAJORMATIC 185 (PTY) LIMITED

Fourth Defendant

MULTIMEDIA ENTERTAINMENT AIR (PTY) LTD

Fifth Defendant

DATE OF HEARING

: 10 DECEMBER 2020

DATE OF JUDGMENT

:

09 MARCH 2021

FOR THE PLAINTIFF

:

ADV. VETTON

FOR THE DEFENDANTS

: ADV. VAN NIEWENHUIZEN

JUDGMENT

Delivered: This judgment was handed down electronically by circulation to the parties’ representatives by email. The date and time for

hand-down is deemed to be 10H00 on 09 March 2021.

ORDER

Consequently, the following order is made:

Judgment is entered against the first, second, third and fourth defendants, jointly and severally, the one paying the others to be absolved, for:

1. Payment of the amount of R1,527,948.55;

2. Interest on the sum of R1,527,948.55 at the rate of 7% per annum a tempore morae to date of payment.

3. Payment of the amount of USD147,750.54 or the South African Rand equivalent as at the date of payment.

4. Interest on the amount of USD147,750.54 at the rate of 7% per annum a tempore morae to date of payment.

5. Payment of the amount of R291,842.07;

6. Interest on the amount of R291,842.07 at the rate of 7% per annum a tempore morae to date of payment.

7. Costs of suit on the attorney and own client scale.

HENDRICKS DJP

[1] Ringopro (Pty) Ltd, the plaintiff, is a company that inter alia lease-out aircrafts as a business. The majority shareholder and director of the plaintiff is Mr. Ryan Forrester (Forrester). On 24 November 2014 the plaintiff, duly represented by Forrester and Winter Castle Trading 44 (Pty) Limited (Winter Castle / first defendant), duly represented by Mr. David Maree (Maree), entered into a written aircraft dry lease agreement (Winter Castle lease). This was as a result that Maree, who was known in the industry of leasing aircrafts, contacted Forrester and said he was in need of an aircraft.

[2] The express material terms of the Winter Castle lease agreement are that Ringopro leased to Winter Castle a Beechcraft 1900D aircraft with registration number ZS-ORV (“the aircraft”). The lease commenced on 12 January 2015 and endured for a period of one year until 11 January 2016. On expiry of the lease, Winter Castle would deliver the aircraft to Lanseria airport. Winter Castle would pay Ringopro an Aircraft and Maintenance Reserve (“A&R”) rental where, “A” is a basic monthly lease fee of USD38,000 per month excluding VAT. “R” is a reserve rate

in an agreed amount of USD285 excluding VAT for the first 45 hours and thereafter the rate of USD350 excluding VAT per hour. Winter

Castle would provide Ringopro with the hours flown each month by the third day of the following month to facilitate this billing. “CR” cycle rate is an additional fee of USD15 excluding VAT levied on engine cycles above and beyond one cycle per engine per flight hour flown. The average United States Dollar / South African Rand (ZAR) exchange rate as published by www.oanda.com at 12 noon on the 15th day of each month would provide the exchange rate conversion for the parties to compute the invoice value in ZAR.

[3] Ringopro would ensure that at delivery the aircraft would be currently serviceable, licenced, certified and maintained and would be delivered to Winter Castle in accordance with the delivery conditions attached as Schedule 2.

[4] Winter Castle would be liable for the costs relating to a pre-lease inspection to be carried out by Winter Castle or its contracted agent (five working days were allowed for this) at Winter Castle's costs. A copy of the pre-lease inspection was to be supplied to Ringopro.

[5] Winter Castle and/or its agent (at its own cost) was entitled to examine the aircraft and equipment therein or arrange to be examined on delivery at Lanseria airport in order to satisfy itself that the aircraft met the delivery conditions and the complete serviceability of the aircraft, its fitness for the purpose for which the aircraft and equipment were required, and was in good sound working order and fully serviceable per the original equipment manufacturer and in

accordance with the aircraft dry lease agreement. Winter Castle acknowledged and confirmed that it would ensure after its acceptance

of the aircraft that it would not be entitled to claim misrepresentation whatsoever.

[6] Winter Castle's signature on the aircraft acceptance certificate constituted acceptance that the aircraft met the criteria in clause 4 of the aircraft dry lease agreement, the delivery conditions and attached pre-lease inspection / pre-lease flight report.

[7] Winter Castle confirmed that at the time of delivery, the aircraft would be serviceable and free of any and all defects and/or requirement of maintenance in any form or manner. The aircraft had further complied with all service bulletins and airworthy directives requiring termination action prior to the delivery date and had a valid certificate of airworthiness.

[8] Winter Castle would ensure that at termination of the aircraft dry lease agreement, the aircraft would be currently serviceable and maintained and would be re-delivered to Ringopro in accordance with the provisions attached as Schedule 3.

[9] Winter Castle confirmed that at the time of re-delivery, the aircraft would be serviceable and free of any and all defects and/or requirement of maintenance in any form or manner, save for fair wear and tear excepted. Fair wear and tear excluded damage relating to harsh environments, abnormal operation of any nature to the aircraft, engines, propellers, undercarriages and/or systems, passenger abuse, abnormal or excessive cabin loading and operation on dirt or gravel airfields. The aircraft shall have complied with all service bulletins, airworthy directives requiring termination action during the term of the aircraft dry lease agreement and had a valid certificate of airworthiness.

[10] Save for the maintenance reserve items, Winter Castle would be liable for all charges incurred for the maintenance of the aircraft falling outside of the aircraft dry lease agreement, together with all positioning and repositioning costs which would include fuel, landing fees, navigation fees and approach fees. Ringopro would not be responsible for any such charges.

[11] All repairs and all spare parts (including engine accessories) would be for the account of Winter Castle (including freight, customs duty and insurance thereof) whilst under the aircraft dry lease agreement.

[12] Ringopro would be entitled to terminate the aircraft dry lease agreement with immediate effect in the event of inter alia any payment not being made by Winter Castle within seven (7) days of receipt of written notice calling upon Winter Castle to do so.

[13] Ringopro would not be responsible for loss of income to Winter Castle through damage to the aircraft irrespective of the cause of such damage or reason of downtime.

[14] The fact that Ringopro (plaintiff) and Winter Castle (first defendant) entered into this lease agreement as well as the aforementioned terms of the said Winter Castle lease agreement is not in dispute.

[15] At the time of the conclusion of the agreement, the second and third defendants, acting personally, and the fourth defendant, represented by the second defendant, bound themselves as sureties and co-principal debtors in solidum with Winter Castle, for all amounts payable by Winter Castle to Ringopro under and in terms of the aircraft dry lease agreement, including any interest and/or legal fees and/or disbursements. They agreed to make payment of all legal fees and disbursements that might be awarded against them on an attorney and own client scale. The first to fourth defendants do not dispute the signature of the Winter Castle's agreement, or its terms.

[16] The lease agreement stipulated that the lease would commence on 12 January 2015. At about that time, the plaintiff gave the first defendant a document setting out the full description of the aircraft, together with a pre-lease status report compiled on 12 January 2015. The pre-lease status report lists all of the components of the aircraft and itemises them with respect to their service intervals and due dates for next services.

[17] A test flight was conducted and a snaglist was compiled of things to be attended to before delivery of the aircraft. These things were subsequently attended to. A detailed aircraft pre-lease inspection was also performed and a report was compiled.

[18] Winter Castle took delivery of the aircraft during January 2015 as per delivery acceptance document signed by Maree. This much is common cause. It is also common cause that the said aircraft was used by Winter Castle. Invoices were presented on a monthly basis by Ringopro to Winter Castle for rental and other charges. These invoices were initially regularly paid by Winter Castle. However, at some stage Winter Castle fell into arrears due to the non-payment of invoices. Demands for payment of the said invoices were made, but to no avail. Winter Castle (Maree) terminated the Winter Castle lease agreement. This necessitated Ringopro to institute an action against the defendants.

[19] The action instituted consists of three (3) claims. Claim A is for arrear rental arising from the use of the aircraft for the period 12 January 2015 until the date of cancellation of the agreement on 14 September 2015; Claim B is for damages arising from the premature termination of the lease for the period between 15 September 2015 until 11 January 2016; and Claim C is for damages arising from the first defendant’s failure to have restored the aircraft to the condition it was at the commencement of the lease.

[20] Forrester testified in detail about the lease agreements. Upon signing of the Winter Castle lease agreement it became apparent that the first defendant was not in possession of a aircraft operation certificate (AOC) or licence and that its associated company, Multimedia Entertainment Group Air (Pty) Ltd, the fifth defendant, apparently had an AOC. There was an exchange of correspondence in this regard. One of the suggestions was that Winter Castle be placed on the AOC of Multimedia Entertainment Group Air (Pty) Ltd, the fifth defendant, in which Maree also had an interest. To enable this, a “dummy” lease was entered into between Ringopro and the fifth defendant (“the Mega lease”). The aircraft was placed on the fifth defendants’ AOC in order to permit it to operate. The first and fifth defendants were co-insured. The commencement date of the lease agreement was 12 January 2015 and the duration thereof would be until 11 January 2016. It is apparent that two lease agreements were entered into by the plaintiff for the same period in respect of the same aircraft for the first and fifth

defendants.

[21] The Winter Castle lease agreement was for a dry-in lease in which the aircraft was supplied for a monthly lease fee. The lessee is responsible for the furnishing (crew, maintenance, insurance, ect). They could elect for example which maintenance company they want to use to maintain the aircraft whilst they were operating it. They chose Tynay. A pre-lease inspection was held. A pre-lease status report was compiled by Tynay and submitted. The aircraft acceptance form was signed and a lease pack was given to Maree. The invoices were made out to and were paid Winter Castle, the first defendant.

[22] Winter Castle, fell into arrears with the monthly lease instalments. Maree on behalf of the first defendant sent a letter of breach of the contract. There was notification to ground the aircraft sent to Maree. The aircraft was dropped-off or abandoned at the main terminal building at Lanseria airport. A post-lease inspection was conducted and a report was obtained from Tynay. Upon request, it was said that the logbooks of the aircraft were in Lichtenburg and not with the flight engineer. The post-lease findings were that maintenance was required to be performed on the aircraft. The work, to the value (costs) of R291 842.07, was done. (Claim C). Ringopro (the plaintiff) never contracted with the fifth defendant with the aim of concluding

a second contract. This was only a “dummy” contract for obtaining an AOC.

[23] Forrester was the only witness who testified for and on behalf of Ringopro, the plaintiff. After his testimony, the case of the plaintiff was closed. The defendant also closed its case without calling any witness. Written submissions as well as oral arguments were presented by counsel acting on behalf of the respective parties and judgment was reserved.

[24] It deserves mentioning that after conclusion of the evidence-in-chief by Forrester, counsel for the defendants, Mr. Van Nieuwenhuizen, asked the question whether Ringopro (the plaintiff) contracted with the fifth defendant (Mega) with the aim of signing a second contract. The reply was that Ringopro did not contracted with Mega to sign and enter into a second contract. This was only a “dummy” lease contract. The matter was adjourned and the defendants amended their plea. The validity of this contract was also contested. This was because of the evidence by Forrester that the “dummy”

lease agreement was not concluded with the intention that a lawfully binding commercial agreement was concluded, but was rather to assign the operational rights and obligations to the fifth defendant, Mega.

[25] The amendment to the defendants’ plea elicited a replication. The replication contained certain admissions and raised estoppel as a defence to the expanded validity defence. With respect to the breach defence, and aside from denying the breaches, it pleaded that the grounds of breach were not raised during the term of the lease, nor were the grounds of breach material and sufficient to justify a cancellation of the Winter Castle lease. There then followed a rejoinder on the issue of estoppel as well as a request for trial particulars to the replication and an answer thereto.

[26] Mr. Vetten on behalf of the Ringopro (plaintiff) submitted that the issues to be decided by this Court are narrow, namely, (i) was the lease with Winter Castle invalid or impossible to perform by virtue of the fact that (a) Winter Castle not having an AOC or an air service licence; or (b) the alleged absence of prior written approval from the Director of the dry lease; or (ii) novated by the Mega Lease. Furthermore, can Ringopro claim interest on Claim B sounding in US dollars. He contended that if the operational rights and obligations under the Winter Castle lease were assigned to Mega, then the defence raised about the absence of prior written approval from the Director of the dry lease and the novation by Mega falls away. He submitted that because the defendants did not offer any evidence or a contrary version through testimony, the plaintiff’s version as

presented by Forrester must be accepted which means that the facts are not in dispute. It is only the legal interpretation to be given thereto which contain meaningful contestation. This seems to be the nub of this case and I will deal with these issues herein below.

[27] With regard to the question whether the Winter Castle lease is valid and enforceable and whether the operational rights and obligations under the Winter Castle Lease were assigned to Mega, the following. From the evidence tendered by Forrester, which is undisputed, Maree contacted him in order to lease an aircraft to Winter Castle. Both Forrester and Maree intended to enter into a valid lease agreement of the aircraft for and on behalf of Ringopro and Winter Castle, respectively. The lease agreement documentation that were signed relates to Ringopro and Winter Castle. The correspondence exchanged for and on behalf of parties clearly indicate that the contract of lease was intended to be concluded between Ringopro and Winter Castle. This was the intention of both Forrester and Maree. The “agreement” between Ringopro and Mega was a “dummy” lease for AOC (licence) purpose. It was a “dummy” lease and not a valid commercial lease.

[28] Mr. Vetten submitted that the communique clearly demonstrated that Winter Castle remained the contracting party but that the operational rights and obligations were transferred to Mega, as permitted in terms of Clause 21.3 of the Winter Castle lease. The correspondence is completely inconsistent with the defendant’s pleaded case that the Winter Castle Lease was (i) subject to a condition precedent that was not met; (ii) impossible to perform, (iii) void ab initio; (iv) cancelled; (v) novated, replaced or substituted. To reiterate, no evidence was presented by the defendants to substantiate their pleaded case.

[29] As alluded to earlier, the Winter Castle lease was carried into effect and not the Mega lease. After the signing of the Winter Castle lease, the documentation pertaining thereto as well as a pre-lease status report, was compiled with regard to the Winter Castle lease and not the Mega lease. After conducting the test flight, a snaglist was compiled in respect of the Winter Castle lease and not the Mega lease. The delivery acceptance document was signed in relation to the Winter Castle lease and not the Mega lease, when the aircraft was delivered. No delivery acceptance document was prepared in relation to the Mega lease. A lease pack comprising of all the relevant documents in relation to the Winter Castle lease was given by Ringopro to Winter Castle. No such lease pack of documents was given to Mega. This illustrated the fact that Mega was never purported to

exercise any rights under its lease agreement for reason that it was not intended to encapsulate rights to Mega, other that the right to register the aircraft on its AOC and operate it under that licence. All other rights and obligations remained with Winter Castle. This is consistent with the assignment of rights pleaded by the plaintiff, Ringopro, as submitted by Mr. Vetten.

[30] The fact that Winter Castle paid the invoices submitted to it by Ringopro stands uncontested. No such invoices for the rental of the aircraft were submitted to Mega on a monthly basis. The invoices were paid by Winter Castle and not Mega. Maree contacted Ringopro and cancelled the Winter Castle lease and not the Mega lease, as the aircraft was flown under the Winter Castle lease and not the Mega lease.

[31] With regard to the assignment of the Winter Castle lease, Mr. Van Nieuwenhuizen submitted that there are two difficulties with this proposition. At first, once prior approval is required before a contract can be entered into, absent such prior approval constitute a nullity of the contract entered into ab initio. This, he contended, is exactly what happened in this matter. The Civil Aviation Regulation (CAR) 48.03.1 stipulates:

“Dry lease-in

48.03.1 (1) (a) An operator who intends to dry lease-in an aircraft for the purpose of providing an air service therewith, shall submit an application to the Director in the appropriate prescribed form signed by both parties, together with the appropriate fee as prescribed in part 187 for prior approval to dry lease-in the aircraft.”

[32] According to Mr. Van Nieuwenhuizen, there were no rights or obligations in existence at the onset that could be transferred or delegated. The Winter Castle lease is void and no rights and/or obligations can be assigned, transferred or delegated to or by the Mega lease. No one can cede more rights then what (s)he has. Reliance was placed on the matter of Brayton Carswald (Pty) Ltd and Another v Brews 2017 (5) SA 498 (SCA).

[33] Secondly, the purported assignment in the form of a patently identical dry lease agreement signed between Ringopro and Mega sought to circumvent the fact that Winter Castle did not have a valid AOC. The “dummy” lease so entered into was to “dummy” the Director of the South African Civil Aviation Authority (SACAA). Such circumvention is illegal.

[34] Mr. Vetten submitted that the contention by the defendants that CAR 48.03.1 stipulates that an application be made to the Director of Civil Aviation to approve a dry lease, fails at a number of levels. Firstly, if the assignment of the lease has occurred, then the defendants has not adduced any evidence to show that the Director did not approve the Mega lease, which is the pertinent lease as far as CAR 48.03.1 is concerned. No such document was discovered by the defendants and the inference to be drawn is that approval was granted by the Director in respect of the Mega lease, otherwise Mega would have been operating the aircraft completely illegal from the inception. Secondly, such an application is not a condition to the validity of the lease. It is a requirement which the operator (lessee/Winter Castle) must meet in order to be able to lawfully operate the aircraft. It is not prior approval of the lease, but prior approval to the right to dry lease-in the aircraft that is to be sought and required. If the operator (lessee) does not achieve this, then it is in breach of the agreement, particularly when the agreement requires the lessee to cause the aircraft to be validly operated in accordance with the laws. That does not mean that the agreement is invalid.

[35] On the only evidence presented, it is possible that an aircraft can be on three AOC’s. This means that multiple leases can co-exists in respect of the same aircraft for the same period. The aircraft was under lease to Winter Castle but on the AOC’s of Megair, Owen Air and United Charter. This seems to be common practice. These are also the entities whose interest were noted on the insurance policy. No evidence was adduced by the defendants to prove the contrary.

[36] Even if the requirements are one that pertains to the lease rather than the right to lease-in, which is not the case, there is no indication that non-compliance would invalidate the lease. There is nothing in CAR 48.03.1, as subordinate legislation, which indicate that the regulator intended that the agreement to be void, absent compliance. It is not stipulated that such an agreement is void ab initio. There are numerous penalties for non-compliance with the regulations that emphasize that it does not mean that the lease agreement is void. CAR 48.03.1 (3) for example gives a discretion to the Director to impose certain conditions, if need be, but it does not mean that the agreement is void ad initio.

[37] I am in full agreement with the submissions by Mr. Vetten that the defence, (if it may be called one), that the agreement is a nullity and void ab initio is nothing more than an opportunistic attempt by Winter Castle to avoid its obligations to pay despite having had full use of the aircraft. In any event, Winter Castle is estopped from contending that its lack of authorisation invalidates the lease. This Court finds that the lease agreement between Ringopro and Winter Castle is valid and enforceable and it was not novated, substituted or cancelled by the conclusion of the agreement with Mega. The agreement with Mega was merely to facilitate the operating of the aircraft on a valid AOC (licence), held by Mega.

[38] No evidence whatsoever was adduced by the defendant to prove otherwise. Speaking of which, no evidence was adduced by the defendants to prove any breach of any of the conditions or obligations by Ringopro (the plaintiff). There is also no basis for the valid cancellation of the agreement, as Winter Castle did not give any notice of an alleged breach to Ringopro in order for it to remedy or rectify such breach. Winter Castle had uninterrupted use of the aircraft until it abandoned it at Lanseria airport.

[39] I am satisfied that Ringopro proved its claims (A, B and C) as well as the interest thereon, on a balance of probabilities and that it is entitle to judgment in its favour with regard to these claims. As far as costs are concerned, it should follow the result as there exist no cogent reason to order otherwise. Mr. Vetten contended that such costs be awarded on the punitive scale as between attorney and own client. This submission is based on the fact that the parties, Ringopro and Winter Castle, agreed as such and furthermore to mark this Court’s disquiet and disapproval with the unwarranted attack on Forrester’s credibility by labelling him a liar or that he was lying and lack bona fides. I am in full agreement with this submission by Mr. Vetten, especially because no evidence was adduced in an attempt to substantiate the unfounded and unwarranted attack on the integrity of Forrester, Ringopro’s (the plaintiff’s) witness.

Order

[40] Consequently, the following order is made:

1. Payment of the amount of R1,527,948.55;

2. Interest on the sum of R1,527,948.55 at the rate of 7% per annum a tempore morae to date of payment.

3. Payment of the amount of USD147,750.54 or the South African Rand equivalent as at the date of payment.

4. Interest on the amount of USD147,750.54 at the rate of 7% per annum a tempore morae to date of payment.

5. Payment of the amount of R291,842.07;

6. Interest on the amount of R291,842.07 at the rate of 7% per annum a tempore morae to date of payment.

7. Costs of suit on the attorney and own client scale.

_______________

R D HENDRICKS

DEPUTY JUDGE PRESIDENT OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG