Tilt Cool Tech CC v Onsite Gas International (Pty) Ltd (49661/2017) [2020] ZAGPPHC 160 (21 May 2020)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE: YES/NO

(2)

OF INTEREST TO OTHER JUDGES: YES/NO

(3)

REVISED

Case number: 49661/2017

Date: 21/5/2020

In the matter between:

TILT COOL TECH

CC

PLAINTIFF

AND

ONSITE GAS INTERNATIONAL (PTY) LTD

DEFENDANT

JUDGMENT

TOLMAY J:

INTRODUCTION

[1] Tilt Cool Tech CC ("Tilt") instituted four claims against On Site Gas International (Pty) Ltd ("OSG"). The first claim was for payment of R563 585-74 (five hundred and sixty three thousand five hundred and eighty five rand and seventy four cents). This claim was based on payments allegedly due by OSG to Tilt in terms of an oral agreement entered into during or about January 2014.

[2] Claim two was a claim for statement and debatement of account. Tilt claimed that in terms of a second agreement, entered into during July 2014, Tilt was allegedly entitled to a 60/40 split of the net profit for projects entered into under this agreement. Tilt claimed that in terms of the second agreement and the fiduciary duty of OSG to Tilt, it was entitled to a statement and debatement of account for purposes of, determining the net profit due by OSG to Tilt in order to determine the quantum of lilt's profit share. Once the amount payable was determined Tilt claimed it will be entitled to payment of the amount found to be due.

[3] The third claim was one for damages based upon an alleged material breach of the second agreement, pertaining to a project known as the Old library project and the consequential loss that Tilt allegedly suffered as a result in the sum of R720 000-00 (seven hundred and twenty thousand rand)

[4] OSG on the other hand instituted four counterclaims. The first was for a statement and debatement of account and repayment of an alleged overpayment by OSG to Tilt. The second counterclaim based on alleged theft was abandoned on the first day of the trial. The third counterclaim was for payment of an amount of R508 788-00 (five hundred and eight thousand seven hundred and eighty eight rand only) in respect of stock allegedly drawn in breach of what OSG referred to as the stock agreement. This was abandoned on the last day of the trial. The fourth counterclaim, was a claim for damages based on the alleged breach by Tilt of their agreement and the alleged loss suffered by OSG in the sum of R600 000-00 (six hundred thousand rand only), pertaining to the Old Library project.

[5] It was common cause between the parties that at all material times Tilt was duly represented by Mr Stephen and OSG was represented by Mr Giddish. OSG alleged that it was also represented by Mr Dennis Williams and Mrs Adri Van Der Westhuizen. Only Mr Stephens and Mr Giddish testified. No explanation was given for the fact that Mrs Van Der Westhuizen was not called as a witness, despite her very significant role in the interactions between Tilt and OSG. All emails and correspondence were sent to her regarding the business relationship between the parties .No evidence was led by OSG regarding the role that Mr Williams played in the business relationship between Tilt and OSG.

THE EVIDENCE

[6] Mr Stephens testified on behalf of Tilt that during or about January 2014 and at Pretoria, Tilt and OSG entered into the first agreement. According to Mr Stephens in terms of this agreement Tilt would perform certain mechanical work for and on behalf of OSG relating to heating ventilation and air-conditioning (HVAC) and HVAC site management, at Tilt's agreed prices. It was also agreed that OSG would pay Tilt sleeping-out allowances, travel expenses at R4-75 per kilometre,

additional materials and payments were to be made on date of invoice. These terms were conceded by Mr Giddish during cross­

examination, despite denying it in the pleadings and in the version of OSG put to Mr Stephens during cross-examination.

[7] On the pleadings OSG disputed that payment would be made on invoice and alleged, inter alia, that Tilt would only be paid once OSG was paid. Initially it was alleged that OSG's standard terms and conditions, which were attached to the pleadings would apply to the agreement. During cross-examination however Mr Giddish conceded that the standard terms, did not apply to Tilt. Notably these written standard terms and conditions were dated 19 June 2017, this document was accordingly dated long after Tilt and OSG parted ways. Mr Giddish also conceded that these terms applied between OSG as a sub-contractor and a main

contractor, and not to Tilt. He further conceded that these terms and conditions were never furnished to Tilt. It was accordingly clear that these terms and conditions never applied between the parties.

[8] Mr Stephens testified that he performed the HVAC work and site management and

confirmed the correctness of the invoices, and the correctness of the information contained therein save for two. All these invoices were sent to Ms Van Der Westhuizen, who never queried any of them. He pointed out that one invoice had a calculation error, which he corrected in his handwriting.

[9] Regarding a claim for certain materials that Mr Stephen testified that Tilt had bought in the amount of R43 095-23 (forty three thousand and ninety five rand and twenty three cents) and which was contained in the schedule attached to the pleadings. Mr Stephens testified that those materials, were additional materials bought by Tilt for OSG projects and stated that he handed those invoices to Mr Giddish during November 2016. These invoices were therefore not attached. Mr Giddish said that he could not remember it being handed to him, but under cross-examination conceded that if Mr Stephens confirmed this as a fact, he would accept it. Under these circumstances OSG was obliged to pay Tilt in respect of such materials, which formed part of the first claim.

[10] During cross-examination Mr Giddish confirmed, when he was referred to OSG's bank statements that

payments had been made in terms of the main contracts to OSG. In addition Mr Stephens testified and it was eventually conceded by Mr Giddish that initially payments were made to Tilt when invoices were presented to OSG. Mr Giddish's evidence made it clear that the failure of OSG to pay Tilt was due to the fact that OSG experienced cash flow problems and not because Tilt was only entitled to payment when OSG was paid.

[11] In cross-examination Mr Giddish confirmed the invoices that remained in dispute and confirmed the

amounts due and owing by OSG to Tilt, ·despite the denials contained in his pleadings and the version that was put on his behalf to Mr Stephens. Mr Giddish finally conceded during cross-examination that OSG owes Tilt the amount of R563 585-74 (five hundred and sixty three thousand five hundred and eighty five rand and seventy four cents) pertaining to the first claim. He actually conceded that OSG owed Tilt an amount in excess of the claimed amount.

[12] Mr Stephens testified that the total sum due by OSG to Tilt under the first agreement was R2 311 618-93 (two million three hundred and eleven thousand six hundred and eighteen rand and ninety three cents). Certain amounts were paid and he claimed that OSG owes Tilt R563 585-74 (five hundred and sixty three thousand five hundred and eighty five rand and seventy four cents)

[13] Mr Stephens further testified that during July 2014, at Pretoria Tilt and OSG entered into a second

agreement. In terms of this agreement Tilt was to execute HVAC work and site management in respect of new projects. Mr Stephens testified that in terms of the agreement OSG would pay Tilt 6.5% of the full value of the contract relating to HVAC scope of work, as a project management fee in respect of each project. A further' term was that it would pay Tilt R1 250-00 (one thousand two hundred rand) per day for each team of workers consisting of, two labourers with a light truck and tools that Tilt provided. OSG would also pay a sleeping out allowance for Tilt's staff and representatives, if required, at the actual cost of boarding and lodging. Tilt also alleged that the parties agreed that OSG would pay R4-75 per kilometre travel expenses to Tilt. During cross-examination Mr Giddish conceded that the travel expenses would be paid, but he claimed that he could not remember the exact rate but in the end conceded that it was probably correct. All the aforesaid terms were denied in the pleadings, and in the version put to Mr Stephen's, but Mr Giddish, in cross-examination conceded these terms. Accordingly the Court can accept that a second agreement, was entered into and the terms set out above were agreed upon between the parties

[14] Tilt further alleged on the pleadings and it was confirmed by Mr Stephens during evidence, that it would be paid for additional materials purchased and specialised labour when required and OSG would ensure that all amounts due were paid and provided for Tilt to proceed with the work. Although this term was also denied on the pleadings, Mr Giddish conceded that it was indeed agreed on.

[15] Mr Stephens finally testified that Tilt and OSG agreed that they would split the net profit in respect of projects pertaining to the second agreement on a 60/40 basis. Tilt would be entitled to receive 60% of the net profit. Therefore Tilt is entitled to a statement and debatement of account for purposes of determining the net profit due by OSG to Tilt. Mr Giddish denied the profit share term, but conceded that if it was proven, that Tilt would indeed be entitled to a statement and debatement of account. Invoices sent to Ms Van Der Westhuizen made provision for the profit share, something that was never queried by Ms Van Der Westhuizen or Mr Giddish in any correspondence during the course of the existence of the business relationship between the parties.

[16] Mr Stephens testified that pursuant to the second agreement Tilt performed in terms of the agreement and invoiced OSG as detailed in a schedule that was attached to the particulars of claim. He also confirmed the content of the invoices. Tilt invoiced OSG in terms of this second agreement for R4 166 912-33 (four million one hundred and sixty six thousand nine hundred and twelve rand and thirty three cents). Tilt attached the invoices regarding the second agreement to its pleadings. All these invoices were sent to Ms Van Der Westhuizen.

[17] OSG in writing acknowledged being indebted (AOD) to Tilt in the sum of R380 000-00 (three hundred and eighty thousand rand only) plus a further amount that was to be confirmed at finalisation of the projects. The AOD was required by Tilt ,according to Mr Stephens, to obtain financing, as it was exceeding its overdraft, due to the fact that OSG did not make payment in time. The AOD was created as proof of security for the Bank relating to Tilt's overdraft. This AOD dated 4 November 2016 stated that the amount of R380 000 (three hundred and eighty thousand rand only) was the current outstanding balance at the time. It also stated that the estimated balance to become due on project finalisation would be confirmed in due course. The AOD was signed by Mr Giddish. Mr Giddish, under cross-examination, confirmed that OSG was, at the aforementioned date, at least indebted to Tilt in the aforementioned amount.

[18] As set out above the only disputed term of the second agreement, in the end was the profit

share term, which Tilt alleged entitled it to a 60% net profit share. In this regard the Court was confronted with two mutually destructive versions. The Court must make findings on the credibility of the witnesses, their reliability and the probabilities.[1] As a result the credibility and reliability of the two witnesses, and the

probabilities must be evaluated.

[19] Mr Stephens was a credible witness. He made concessions and pointed out certain mistakes that he made. His evidence accorded with what was pleaded, with the correspondence and WhatsApp messages exchanged between the parties.

[20] Mr Giddish on the other hand did not impress as a reliable witness. His version in Court

contradicted the pleadings, the version put on his behalf and the affidavit that he deposed to in opposing a summary judgment application, where he, for example, disputed the conclusion of a second agreement. He conceded during evidence that an amended agreement was indeed concluded. He even conceded all the terms of the second agreement, but for the profit share term, despite initially

denying it.

[21] To further illustrate Mr Giddish's unreliability as a witness, he for example denied in the summary judgment application, under oath, that a management fee was ever agreed on, this denial was repeated in the pleadings and in the request for further particulars. It was even stated that there was only one instance where such a fee was agreed on. The concessions made by Mr Giddish during cross-examination were also contrary to what was put to Mr Stephen's on his behalf. Mr Giddish was evasive and could not recollect an astonishing number of issues put to him. He was a very poor witness, whose credibility cannot be accepted.

[22] If one considers the probabilities, it is important to note that correspondence between OSG and Tilt

referred repeatedly to the 60/40 profit split, with no indication of OSG disputing it at any point. Invoices specifically set out the profit share due by OSG to Tilt. Not a single email from OSG disputed the correctness of this term. OSG even made payment in terms of some of these invoices.

[23] Tilt emailed a "master payment schedule" to OSG on a regular basis that indicated reference to the invoices. Mr Giddish could not give any reasonable or acceptable explanation for the lack of response from OSG. These emails were sent to Ms Van Der Westhuizen and she never queried any of them and was not called as a witness by OSG.

[24] The negotiations between the parties leading up to the conclusion of the second agreement also supported

the conclusion that a 60/40 profit share term was agreed on. OSG requested Tilt to provide it with Tilt's representatives' qualifications and details of its projects and experience. This information was included in OSG's profile as part and parcel · of OSG's representation to prospective clients, which is indicative of the fact that Tilt was at that point not a mere sub­ contractor of OSG.

[25] Mr Stephens explained that the commercial rationale behind this term was that OSG's only risk was to require the additional funding. Once materials were obtained, payment would be made for these plus a mark-up, from that point the project would fund itself. Tilt did all the work, quoted at cost and had the experience to perform the work. OSG's role was only to provide the funding

[26] Mr Giddish alleged that payments due to OSG were delayed. He had however to concede the contrary, when he was referred to OSG's bank statements, which indicated that payments were being made within approximately a week of claims being made to their clients.

[27] It is in my view abundantly clear that Tilt proved on a balance of probabilities that a second agreement was concluded and all the terms as alleged, including that there was an agreement of a 60/40% profit share.

[28] It is trite that the object of a claim for statement and debatement of an account is to enable a claimant to establish the amount of the indebtedness. The duty to render an account may arise from a fiduciary relationship between the parties, which obliges a party to provide an account to the other party and a contractual obligation to render an account.[2]

[29] In Teague v Zest Electric Motors (Pty) Ltd and Another (the" Zest Electric Motors matter' ),[3] it was held that:

"[41] in our law a duty to account is not established by the mere fact that one person potentially owes another an amount of money, and the latter is unable to compute the amount owed.[4] Self-evidently, an agreement to account would establish such an obligation, as would a statutory obligation to render an account. But our law has also recognised that in addition, a fiduciary relationship between two parties may found such a duty[5] ….”[6]

[30] In the Zest Electric Motors matter, where a profit-sharing agreement was also in issue, but in an employer-employee relationship, the court having found a duty to state and debate the account based on both a tacit term of the agreement between the parties and a fiduciary duty, granted an order for a statement and debatement of account.

[31] OSG's fiduciary duty is based on the fact that OSG is the only party in this action, which had been privy to payments that had been made in terms of the projects referred to in the second agreement schedule and is the only party that had knowledge of the net profit in respect of the projects completed. As a result Tilt is entitled to a statement and debatement of account.

[32] In terms of the second agreement Tilt is entitled to a statement and debatement of account for purposes of determining the net profit due by OSG to Tilt, as well as the quantum of such profit share.

[33] Tilt's third claim related to damages allegedly suffered and claimed, it was confirmed by the evidence of Mr Stephens that in terms of the second agreement, OSG was obliged to ensure that all amounts due were paid and materials were provided in order for Tilt to proceed with the work in respect of the second agreement's projects. OSG was also obliged to make payment to Tilt in respect of the second agreement Mr Giddish conceded the terms of the second agreement during cross­ examination. One of the projects of the second agreement was the Old Library Project.

[34] It was alleged by Tilt, that if the project was cancelled Tilt would suffer a loss of profit, being a sum equal to Tilt's profit share of such agreement. The Court had already concluded above that Tilt proved the profit share term of the second agreement. Counterclaim four of OSG was also based on loss of profit by virtue of the cancellation of the Old Library Project. It was thus clearly within the contemplation of the parties that a profit loss would occur, if the project was cancelled.

[35] Mr Stephens testified that OSG and Tilt agreed that the minimum profit that would be generated from the Old Library Project would be the sum of R1 200 00-00 (one million two hundred thousand rand only). Mr Giddish signed an email confirming what the profit would be in respect of the Old Library Project. He also stated that the estimate was conservative. Mr Stephens testified that the actual profit would have been much higher and that mark-up on projects like this was anything beaten 35% to 40% therefore the profit calculated at 18% of the contract value was indeed conservative.

[36] The contract value was R9 022 930-29 (nine million and twenty two thousand nine hundred and thirty rand and twenty nine cent) multiplied by 18% which equals R1 624 127-45 (one million six hundred and twenty four thousand one hundred and twenty seven rand and forty five cents). Mr Stephens testified that he did the costing on the Old Library Project and therefore had personal knowledge of the net profit that would be generated. In the light of the evidence the amount of R1 200 00-00 (one million two hundred thousand rand only) constitutes a reasonable estimate of the quantum.

[37] This project failed because OSG did not supply Tilt with the necessary funding to do the work required under the contract. Mr Stephens testified that Tilt requested compliance by OSG and specifically to provide the necessary funding, OSG failed to do so and as a result Tilt was unable to complete the project. This was admitted by Mr Giddish ·during cross-examination.

[38] It can accordingly be concluded that as a result of OSG's failure Tilt suffered R720 000-00

(seven hundred thousand rand only) damages as 60% of R1 200 000-00 (one million two hundred thousand rand only) equals R720 000-00 (even hundred thousand rand only).

[39] No evidence was led by OSG regarding amounts allegedly overpaid by OSG to Tilt, as a result no claim for statement and debatement of account, as claimed under counterclaim one was proven. Counterclaim two, for damages based on alleged theft was abandoned on the first day of the trial, as stated above. The third counterclaim was abandoned on the last day of the trial as set out above.

[40] The fourth counterclaim for damages for the alleged breach of the agreement by Tilt during the Old Library Project amounted to R600 000-00 (six hundred thousand rand only). OSG failed to prove any breach of the agreement on the part of Tilt. Mr Giddish conceded that the Old Library Project failed, due to lack of funding from OSG at the time.

COSTS

[41] Based inter alia on the conduct of Mr Giddish during the trial, the deceit that was exposed during cross examination in the trial, the counter claims (alleging serious misconduct on the part Tilt and Mr Stephens) that were simply withdrawn, during the course of the trial, OSG was warned in cross examination that Tilt would seek a cost order on an attorney and client scale in this matter. Tilt moved for an amendment in this regard and sought a punitive cost order against OSG.

[42] During the trial, on the first day of trial, OSG withdrew its counter claim two against Tilt (which was based on alleged theft). On the last day (fifth day of trial), OSG withdrew its counter claim three against Tilt, which was based on breach of the alleged "stock agreement", and which contained serious allegations of impropriety on the part of Tilt. Serious allegations were made of theft, just to have these withdrawn during the course of the trial, with no explanation or apology whatsoever. In addition Mr Giddish was dishonest and perjured himself by lying under oath in the summary judgment application and contradicting the version put on his behalf during cross-examination. Dishonesty should not be tolerated by the Court and the Court is entitled to show its displeasure by granting a punitive costs order.

[43] I make the following .order:

1. CLAIM 1:

1.1 The defendant is ordered and directed to make payment to the plaintiff in the sum of R563,585.74 (five hundred and sixty three thousand five hundred and eighty five rand and seventy four cents).

1.2 The defendant is ordered and directed to make payment to the plaintiff of interest on the aforesaid sum calculated at the mora interest rate of 10.25% per annum from 17 January 2017, being the date of demand (T7), to date of final payment.

2. CLAIM 2:

2.1 It is declared that the plaintiff is entitled to payment by the defendant of 60% of the net profit in respect of the projects referred to in T3 to the particulars of claim (the "second agreement schedule" ).

2.2 The defendant is ordered and directed to render to the plaintiff, within 30 (thirty) days of date of this order, a·full account, supported by vouchers, of the business of the defendant, including but not limited to the contract value, the income and expenses, and the net profit, and all further documents and information for purposes of calculating the net profit, in respect of each of the projects detailed in the second agreement schedule for the period July 2014 to date, for purposes of determining such net profit.

2.2 The defendant is ordered and directed to debate the aforesaid account with the plaintiff.

2.4 The defendant is ordered and directed to make payment to the plaintiff of whatever

amount appears to be due to the plaintiff upon debate of the aforesaid account.

2.5 In the absence of agreement between the parties in respect of the amount to be paid to the plaintiff, and after such statement and debatement of account, the plaintiff is granted leave to approach the Court and to set this matter down for further hearing, in order to determine the amount due and owing by the defendant to the plaintiff.

3. CLAIM 3:

3.1 The defendant is ordered and directed to make payment to the plaintiff of the sum of R720,000 .00 (seven hundred and twenty thousand rand).

3.2 The defendant is ordered and directed to make payment to the plaintiff of interest on the

aforesaid sum calculated at the mora interest rate of 10.25% per annum from 27 February 2017, being the date of demand (TB), to date of final payment.

4. The defendant's counterclaims are dismissed with costs.

5. The defendant is ordered to pay the plaintiff's costs on an attorney and client scale.

RG

TOLMAY

JUDGE

OF THE HIGH COURT

DATE OF HEARING:

16 MARCH 2020

DATE OF JUDGMENT:

21 MAY 2020

ATTORNEY FOR PLAINTIFF:

VAN DER WAL SLADE

RAMABULANA INC

ADVOCATE FOR PLAINTIF:

ADV C WOODROW

ATTORNEY FOR DEFENDANT: DEMPSTER McKINNON INC

ADVOCATE FOR DEFENDANT:

ADV M LOUW

[1] Sellebosch Farmers Winery Group Ltd v Martell et Cie & Others 2003(1) SA 11 (SCA) South African Bank of Athens v 24 Hour Cash CC (A3027/2016) (2016] ZAGPJHC 217 (11 August 2016)

[2] Dale v Fleet Management PE (Pt y) Ltd 1971(3) SA 760 (A); Graney Property Ltd and Another v Seena Marena Investment (Pty) Ltd & Others (2014] SA 123 (SCA)

[3] 2018] ZAGPJHC 24 (16 February 2018) available at http://www.saflii.org/za/cases/ZAGPJHC/2018/24.pdf

[4] At par [41]

[5] Rectifier and Communications Systems (Pty) Ltd v Harrison 1981 (2) SA 283 (C) at 287 ff

[6] Doyle and Another v Fleet Motors PE (Pty) Ltd, 1971 (3) SA 760 (A) at 762 G to 763 D; Graney Property Ltd and Another v Seena Marena Investment (Pty) Ltd and Others, [2014) ZASCA 50, (2014) 3 All SA 123 (SCA).