South Africa: Eastern Cape High Court, Grahamstown Support SAFLII

You are here:  SAFLII >> Databases >> South Africa: Eastern Cape High Court, Grahamstown >> 2011 >> [2011] ZAECGHC 32

| Noteup | LawCite

Howell v Half Point Properties and Others (1094/08) [2011] ZAECGHC 32 (29 June 2011)

Download original files

PDF format

RTF format


IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION - GRAHAMSTOWN)



CASE NO 1094/08

DATE HEARD: 14/12/10

DATE DELIVERED: 29/06/11


In the matter between

GRAHAM LOUIS GEORGE HOWELL …......................................................PLAINTIFF

and

HALF POINT PROPERTIES ….......................................................FIRST DEFENDANT

HEATHER EMILY TYSON ….....................................................SECOND DEFENDANT

ANTHONY FRANK FULLER …......................................................THIRD DEFENDANT



JUDGMENT

________________________________________________________________

ROBERSON J:-


INTRODUCTION


[1] The plaintiff and the second and third defendants are the members of the first defendant (“Half Point”). The plaintiff and the second and third defendants were frequently referred to during the trial by their first names, and in this judgment I shall refer to the plaintiff as Graham, the second defendant as Heather, and the third defendant as Tony. Tony is Graham’s father-in-law.


[2] Graham instituted action against Heather and Tony, and Heather and Tony counterclaimed against Graham, in terms of s 50 of the Close Corporations Act 69 of 1984 (“the Act”), which provides as follows (portions not relevant to the claims are omitted):

Proceedings against fellow-members on behalf of corporation

(1) Where a member or a former member of a corporation is liable to the corporation –

(a) …………………………….

(b) on account of –

(i) the breach of a duty arising from his or her fiduciary relationship to the corporation in terms of section 42;

or

(ii) negligence in terms of section 43,

any other member of the corporation may institute proceedings in respect of any such liability on behalf of the corporation against such member or former member after notifying all other members of the corporation of his or her intention to do so.”


S 42 of the Act provides as follows (portions not relevant to the claims are omitted):


Fiduciary position of members

  1. Each member of a corporation shall stand in a fiduciary relationship to the corporation.

  2. Without prejudice to the generality of the expression “fiduciary relationship”, the provisions of sub-section (1) imply that a member-

(a) shall in relation to the corporation act honestly and in good faith, and in particular-

(i) shall exercise such powers as he may have to manage or represent the corporation in the interest and for the benefit of the corporation; and

(ii) shall not act without or exceed the powers aforesaid; and

(b) shall avoid any material conflict between his own interests and those of the corporation, and in particular-

(i) shall not derive any personal economic benefit to which he is not entitled by reason of his membership of or service to the corporation, from the corporation or from any other person in circumstances where the benefit is obtained in conflict with the interests of the corporation;

  1. ………………………

(iii) shall not compete in any way with the corporation in its business activities.


  1. (a) A member of a corporation whose act or omission has breached any duty arising from his fiduciary relationship shall be liable to the corporation for-

(i) any loss suffered as a result thereof by the corporation; or

(ii) any economic benefit derived by the member by reason thereof.


(b)……………………………….


(4) ……………………………………”


S 43 of the Act provides as follows:

Liability of members for negligence

  1. A member of a corporation shall be liable to the corporation for loss caused by his failure in the carrying on of the business of the corporation to act with the degree of care and skill that may reasonably be expected from a person of his knowledge and experience.

  2. Liability referred to in sub-section (1) shall not be incurred if the relevant conduct was preceded or followed by the written approval of all the members where such members were or are cognizant of all the material facts.”



HISTORY


[3] During 2004 Graham approached Tony with the idea of applying for a franchise from Geffen International Realty Franchises (Pty) Ltd (“GIF”). GIF had been constituted for the purpose of establishing a franchised national network of estate agents. Tony in turn approached Heather, who was regarded as a top estate agent, to come on board. After a meeting with Mr. Brent Townes, CEO of GIF, the franchise was awarded to Half Point, which had been formed for the purpose of operating the franchise. A written franchise agreement was concluded on 21 June 2005 and Half Point commenced business as an estate agency during August 2005. Its area of operation lay between Hamburg and Alexandria. The membership interests in Half Point were Heather 50%, Graham 40% and Tony 10%.


[4] The grant of the franchise included the right to conduct franchised activities under the GIF name, and the licence to use the name and logo of Sothebys International Realty (“SIR”). The duration of the agreement was 10 years in respect of the GIF licence and 5 years in respect of the SIR licence.

[5] Terms of the franchise agreement relevant to this case were as follows:

Should the franchisee violate any of the provisions with regard to the use of the SIR mark, GIF shall be entitled to terminate this Agreement by giving the Franchisee notice of election to terminate as provided in clause 25.”


The Franchisee shall conduct itself and the Business in such a manner as not to harm the reputation of GIF, SIR, the Name (the GIF and SIR names) or its fellow Franchises.”


During the term of this agreement, the Franchisee shall use its best efforts to maintain a reputation and image as a high quality real estate Franchisee and shall at all times conduct itself and cause its officers, employees, sales associates and affiliates to conduct themselves, in accordance with the highest standards of professional and business conduct.”


If any of [the Franchisee’s] members, directors or senior employees, does anything or omits to do anything which in the reasonable opinion of GIF caused prejudice to the Name, then GIF shall have the right to terminate this agreement, recover from the Franchisee all amounts owed in terms of the agreement at the date of termination and any damages or loss which GIF may have suffered, without prejudice to any other claim which GIF may have against the Franchisee.” (This term was included in the breach/termination clause, which contained various other grounds for breach and termination.)


The Franchisee shall have the right to establish sub-offices in the Area (the area for which the franchise was granted) with the prior written consent of GIF, which shall not be unreasonably withheld.”


Under the heading “RIGHTS ON TERMINATION” there was a number of clauses dealing with the franchisee’s obligations on termination. These obligations included ceasing to use any element of the Geffen International Business System or the GIF and SIR names, deleting the franchisee’s entries in the telephone directory, and terminating any listings which might indicate the franchisee ever was a franchisee. If the franchisee leased premises, it was obliged to take steps to cede its rights and obligations in the lease agreement to GIF. It was not in dispute that the purpose of these obligations is to protect the name and reputation of GIF and SIR, so that the public should not know that there has been a dispute or termination, and a seamless transition takes place from the previous franchisee to the next franchisee.


[6] On 11 September 2006 GIF, represented by Townes and Lew Geffen, Chairman of the Board of GIF, verbally terminated the agreement and on 15 September 2006 confirmed the termination in writing.


PLEADINGS AND ISSUES


[7] The present litigation arose from this termination. Graham alleged that Heather and Tony had breached their fiduciary duty in terms of s 42 of the Act towards Half Point, and had breached their obligation in terms of s 43 of the Act to carry out the business of Half-Pont with the requisite care and skill. As a result of these breaches, Heather and Tony caused the loss to Half Point of various amounts, the largest of which was the projected loss of profits suffered by Half Point as a result of the termination of the agreement, which termination had allegedly been caused by Heather and Tony. The other amounts claimed were payments which Heather and Tony had allowed to be made by Half Point, when Half Point was allegedly not liable for such amounts.


[8] Heather and Tony disputed the alleged breaches and alleged in their counterclaim that Graham had breached his obligations in terms of ss 42 and 43 of the Act and had thereby caused the termination of the agreement and other losses. They too claimed on behalf of Half Point loss of profits, as well as payment made by Half Point for Graham’s personal telephone account and for his attendance at a convention, for which he was personally liable. In his plea Graham denied the various allegations, but at the outset of the trial, in an amendment to his plea, admitted he was indebted to Half Point for the amount of his personal telephone account and the convention costs. He however pleaded that this indebtedness was not as a result of a breach of ss 42 or 43 of the Act.


[9] In accordance with an agreement reached at a rule 37 conference, an order was made in terms of rule 33 (4) that the issue of the loss of profits claimed in the claim and the counterclaim, together with the extent of the parties’ respective liabilities, would be postponed for later determination, and the remaining issues decided at the initial trial. It was admitted in the respective pleas that Half Point had suffered a loss of profits as a result of the termination of the franchise agreement.


FURTHER HISTORY


[10] Before setting out the details of the various alleged breaches, I should set out some further common cause events, which will add substance to the bare outline mentioned above and give context to the particulars of the alleged breaches.


[11] It was initially decided between the members that the franchise would operate from Port Alfred, and when it was financially viable it could expand to a second office in Kenton-on–Sea (Kenton). It was also decided that the members would not be paid salaries until the business could afford them. Selling agents were appointed, including Graham and Heather, as well as a rental clerk Sandra Cronje and an office administrator, Margaret Kenhardt Davies (“Penny”). The agents were independent contractors and not employees. (During the trial the agents and employees were at times collectively referred to as the “staff”.) One of the agents appointed was Lindsay Timm (“Lindsay”) who was successful agent in the area at the time. During October 2005 an agreement was entered into between Half Point and Lindsay whereby Lindsay purchased a 10% share in the business, including the assets, for the sum of R43 000.00, entitling her to a 10% share in the nett profits, but also rendering her liable for 10% of the nett losses. When this agreement was first reduced to writing it wrongly reflected that Lindsay was liable for 10% of the Port Alfred office’s monthly operating costs and also did not reflect that she purchased 10% of the assets. These mistakes were rectified in a further written document signed on 31 October 2006.


[12] In January 2006 a satellite office was opened in Bathurst and in April 2006 a satellite office was opened in Kenton, which was run by Graham. At a certain stage (the date was in dispute), Heather and Tony agreed that Heather’s commission on sales would be increased from 50% to 60%. After discovering the payment to Heather of 60% commission, on 19 April 2006 Graham wrote to Heather and Tony offering his member’s interest to them for the sum of R360 000.00 in exchange for an independent branch of the franchise at Kenton, for which he offered R40 000.00.


[13] At a member’s meeting held on 11 May 2006, which was not attended by Graham, Cyril Tyson (“Cyril”), Heather’s son, was appointed as trainee office manager at Half Point.


[14] On 22 May 2006, with reference to Heather’s 60% commission and Cyril’s appointment, Graham wrote to Heather and Tony threatening legal action if any further decisions were taken without him.


[15] On 24 May 2006 Graham changed Half Point’s internet banking password after using Half Point’s internet banking facility to pay his personal telephone account of R760.61.


[16] On 19 June 2006 Tony wrote to Heather and Graham suggesting a split of the franchise, with him and Heather taking the eastern area and Graham and his wife Jean (Tony’s daughter) taking the western area. The western area included Kenton, Alexandria, Canon Rocks, Boknes and Bushman’s River.


[17] On 27 June 2006 Graham wrote to Heather and Tony informing them that he was returning to the Port Alfred office on 3 July 2006 on a full time basis and that Cyril was to vacate his desk.


[18] On 3 July 2006 Townes offered his services as a facilitator between the members and asked them for their written grievances.


[19] On 7 July 2006 Graham threatened Half Point’s bank with legal action, resulting in the suspension of Half Point’s internet banking facility.


[20] On 18 July 2006 a meeting was held at Kariega Game Reserve between Townes and the members, at which a split in the franchise was discussed, namely a split into east and west areas, with Graham to take the west and Heather and Tony to take the east.


[21] On 25 July 2006 Graham informed Townes that he did not accept the proposals made at the meeting, and that he was returning to the Port Alfred office. On 26 July 2006 Townes instructed the members to abide by what was agreed at the meeting of 18 July 2006.


[22] On 27 July 2006 Graham returned to the Port Alfred office and requested Cyril to vacate his desk, and when Cyril did not do so Graham then occupied Heather’s desk. He repeated this conduct on 28 July, 1 August, 2 August and 3 August 2006.


[23] On 3 August 2006, in anticipation of the new eastern franchise, the name Happy Sunshine Homes (“HSH”) was approved and reserved by CIPRO.


[24] On 4 August 2006 Heather brought an urgent application in the Grahamstown High Court for an order interdicting Graham from entering the Port Alfred office and interfering with Half Point’s administration, pending an application in terms of s 36 of the Act to declare that Graham ceased to be a member of Half Point, or an action for the implementation of the agreement allegedly reached at the Kariega meeting of 18 July 2006. Pending the judgment in the application, Graham agreed to stay away from the Port Alfred office. On 7 August 2006 Townes sent an e-mail to the members, referring to the interdict and attorneys’ letters, and warning them that their performance would be reviewed, which could lead to a termination of the agreement. On 24 August 2006 Townes sent another e-mail referring to the fact that the interdict proceedings were a matter of public record. On 4 September 2006 the application for an interdict was dismissed with costs.


[25] On 5 September 2006 Tony conducted a confidential survey amongst the staff and with one exception they said that they would not accept Graham as office administrator at Port Alfred. On 7 September the staff threatened to walk out of the Port Alfred office. On 7 September 2006 Townes e-mailed Heather and Graham, noting that they could not work together and that Half Point should be liquidated, and telling Graham not to attend the provincial franchisee meeting to be held on 11 September 2006. On 8 September the staff walked out of the Port Alfred office and returned when Graham had left.


[26] On 11 September 2006 Townes and Geffen met with the staff and thereafter informed Graham, Heather and Tony that the agreement was terminated. The agents submitted affidavits to GIF in confirmation of what they had discussed with Townes and Geffen. Heather and Tony decided not to oppose the termination while Graham wanted to oppose the termination.


[27] Lindsay and Cyril were awarded the GIF/SIR franchise and GIF thereafter entered into a franchise agreement with HSH, the members of which were Lindsay and Cyril, with a member’s interest of 50% each. Half Point ceased trading and its estate agency licence expired at the end of 2006. During October 2006 Graham took up employment in Johannesburg.


[28] Heather and Tony put risk capital into HSH and thereafter shared in its profits and losses, with effect from 12 September 2006. They received blank signed member’s interest forms and eventually became members of HSH on 1 April 2008, together with Lindsay and Cyril. On 22 July 2008 Lindsay sold her member’s interest in HSH to Heather, Tony and Cyril.


[29] Tony performed the various duties involved in finalising Half Point’s business, which included selling some of the furniture to HSH, and paying pro rata salaries. Graham, Heather and Tony were paid out their loan accounts and share of the profits.


SPECIFIC ALLEGATIONS

[30] In his particulars of claim regarding the various alleged breaches by Heather and Tony, Graham alleged that by their refusal to co-operate with him in the best interests of Half Point, Heather and Tony caused GIF to terminate the franchise. In his further particulars for trial in relation to this conduct, he alleged that they did not co-operate in resolving differences between the members; they involved staff members and agents in disputes between the members; they brought the High Court application for an interdict; they held a meeting with GIF in his absence; they took no steps to prevent the termination of the franchise agreement and failed to challenge it; they solicited affidavits from agents and a staff member concerning him and submitted them to GIF; and failed to take steps to address the issues (if any) between him and the agents and staff member.


[31] Graham further alleged that Heather and Tony had operated a new real estate franchise which would have been in competition with Half Point, had Half Point not ceased trading. He alleged that they held 39% of the members’ interest in HSH through their nominee, Lindsay, and participated in all aspects of HSH’s business from 26 September 2006 onwards.


[32] With regard to payments made by Half Point for which it was not liable, Graham alleged that Heather and Tony had facilitated or permitted such payments. These were payment of the legal expenses relating to the High Court application, and payment of computer expenses, water and electricity accounts, telephone accounts and salaries, all of which were not due by Half Point because it had stopped trading. The persons who were paid salaries were Penny, Cyril, and Sandra Cronje.


[33] In their particulars of claim regarding alleged breaches by Graham, Heather and Tony alleged that Graham failed to sell property in order to generate income for Half Point; he was unwilling to “do show houses” and complained if requested to work on Saturdays and Sundays; he performed his duties in a perfunctory manner; he opened the satellite office at Kenton against Heather and Tony’s wishes, thereby prejudicing Half Point’s business at Port Alfred; he opened the Kenton office for reasons of personal convenience and contrary to the provisions of the franchise agreement; he appropriated Heather’s desk at Port Alfred and caused a disruption of Half Point’s business; he issued inappropriate instructions to staff members; he abandoned his duties with Half Point during October 2006; he failed to manage or represent Half Point in its best interests; he failed to avoid conflict between his own interests and those of Half Point; he failed to carry out the business of Half Point with the requisite degree of care and skill; and he failed to pay monies due to Half Point and paid his personal debts from the monies of Half Point.


EVIDENCE


[34] Graham testified. Prior to the franchise venture, he had been employed as a sales manager, and from 1999 to 2003 he was employed at what he called the family business, Kariega Game Reserve, performing various duties. Tony is a director of the company which owns the reserve. He thereafter started a retail business which closed towards the end of 2004. Before the franchise commenced operating, he acquired his certificate from the Estate Agency Affairs Board. During the early days of the business he saw his function as getting the franchise up and running. Because of his particular skills, his role was the computer set up, communication with GIF, and the placing of advertisements. He would like to have sold properties but did not sell any, and at that stage was not trying to sell. He denied that he had any obligation to sell, or even to try to sell, although later he agreed that because he had signed an agreement with GIF as an agent, he was obliged to sell in that capacity. His function was to undertake the management of Half Point. With regard to the allegation that he was unwilling to work at weekends, he said that over Easter 2006 he was in Kenton attending to show houses there. He also attended to show houses at Kenton and Canon rocks. If he was absent from the office, he would inform the other members. He assisted the agents by taking photographs of properties, downloading the photographs onto computers, listing the properties on websites, and generally helping agents with their computers. At a meeting in November 2005 he proposed that he be appointed as office manager but Heather said it was not necessary and that she, Graham and Lindsay could share the duties.


[35] During September 2005 he met with Heather and Tony (he said it was not a meeting, it was a discussion) and he proposed that one Mark Purdon be appointed as an agent. Heather and Tony did not think that Purdon was the right choice for the SIR image and voted against the proposal. Graham left the meeting because he did not agree with them. He specifically agreed that he walked out of the meeting because he was overruled by the majority. He thought their judgment was clouded because of prior personal issues with Purdon. He agreed that his behaviour was not professional but it had not been a formal members’ meeting, just a discussion. He nevertheless thereafter entered into a “casual arrangement” with Purdon, appointing him to sell properties, because he felt sorry for him and he was a personal friend.


[36] During February or March 2006 he suggested to Heather and Tony that an office be opened at Kenton. The motivation for the suggestion was to give the franchise exposure in the Kenton / Bushman’s area. Although Half Point had had no sales in February there had been a number in March. Tony agreed with the suggestion but Heather first wanted to see if the offices were suitable. After visiting the offices, she was impressed. She never indicated to him at the time that it was not the right time to open an office in Kenton. At a subsequent meeting, at which Lindsay was also present, he was asked to present a budget for Kenton. His budget was R18 000.00 set up costs and R5 000.00 monthly running costs and he agreed that Tony had suggested set up costs of R10 000.00. He understood that the members were in agreement that the Kenton office should be opened. Tony did not say that Half Point could not afford the Kenton office at that stage. He disagreed that it had been agreed that the Kenton office would be privately funded by him and Tony, with Tony paying 10% of the costs, although he agreed that Tony had paid 10% of the Kenton expenses for the months of April, May, June and July 2006. He denied saying that he would go it alone if the other members were not in agreement. One of his considerations in opening the Kenton office was the fact that his mother-in-law was moving back to Kwa Zulu/Natal and would no longer be available to transport his children to school from Canon Rocks to Kenton. This was not the main consideration however, and was merely a convenience factor. Another motivation was the competition from the experienced agents at the Port Alfred office which was too great, and if he opened an office at Kenton every client would have been his. It was envisaged that he would be in the Kenton office on a part-time basis and would still continue with most of his duties in the Port Alfred office. Any profits from the Kenton office would have accrued to Half Point.


[37] The Kenton office opened at the beginning of April 2006 and he was in charge of its operations. He spent a lot of time there but would go through to the Port Alfred office about twice a week for meetings and to assist with other functions such as communicating with the franchisor. At a meeting subsequent to the opening of the Kenton office Heather indicated that she did not support the opening of the Kenton office, but otherwise there was no expressed opposition to the Kenton office. There was no indication from GIF that the Kenton office should not have been opened and one Gary Wenzel from GIF was shown the Kenton office and was impressed. The Kenton office was included on GIF’s website. Graham had telephonically discussed the Kenton office with Townes after it had been opened, and Townes had given his consent.


[38] Tony actively assisted with the opening of the Kenton office, including providing and varnishing some of the furniture. After the Kenton office opened, Graham paid some of its expenses personally, and others were paid by Half Point. He paid some of the expenses personally because Heather had reneged on the agreement and Half Point was not paying the expenses. He sent Half Point a schedule of what he had paid and requested reimbursement but Half Point paid only some of the expenses on the schedule. He believed that payment by Half Point indicated that the other members had in fact agreed with the opening of the Kenton office.


[39] It had been initially agreed that Heather would be paid 50% of the commission earned on property sales. However in March 2006 he discovered that she was being paid 60% of the commissions. He contacted Tony who said he was not aware of the 60% payment. When he confronted Heather with this discovery, she said that she deserved 60%. He agreed that Heather as a strong agent would in the normal course qualify for 60% commission.


[40] Following his discovery of the 60% commission, and because of it, on 19 April 2006 Graham wrote to Heather and Tony saying that he felt that the trust between them no longer existed. He offered to sell them his member’s interest in Half Point in return for an increased stake in the Kenton office, which he would run as an independent branch of the franchise. He suggested a split in the franchise between the east and west sectors, with accompanying financial arrangements. There was no express mention in his letter of the 60% commission issue. His offer was open until 21 April 2006. He denied that Heather and Tony had approached him for an extension of time within which to consider his offer.

[41] Graham acknowledged that his absence from the Port Alfred office might have left a gap in one or two respects, but that the members could have found a solution. Listings would have had to be loaded onto the website but that would not have required continuous effort. He also acknowledged that when he was at the Port Alfred office he was actively involved with the agents, and with the listings and the advertisements. He agreed that when he was in Kenton someone would have had to perform those duties, but said that in other franchises most agents do that work themselves and up to that stage he had been helping the agents, or “spoonfeeding” them. In the minutes of a staff meeting held on 4 April 2006, it was recorded that the Kenton office would shortly be opening and that Heather wanted to get one IT person who would handle photographs, listings and window cards. Graham said these duties would have taken an hour or two a day. He agreed that it was a reasonable request, but instead, a junior office manager had been appointed, which appointment had never been discussed with him.


[42] Graham was not at the meeting of 11 May 2006 when Cyril was appointed as office manager. He was away playing golf in Knysna and he was almost sure he had told Tony that he would be away. He had his cellphone with him but he was not informed of the meeting. The minutes of the meeting of 11 May 2006 reflected that Heather, Tony and Lindsay were present at the meeting and the decision to appoint Cyril was unanimous. Graham said he would have opposed Cyril’s appointment. He was not in favour of the appointment because he did not have confidence in Cyril’s ability to run the Port Alfred office. It was not in dispute that the appointment of Cyril was considered to be urgent because Heather was leaving for the United States and would be absent from the office for a while. Graham said that if he had been contacted he would have returned and assisted with whatever was necessary in the Port Alfred office during that time. He agreed that the duties assigned to Cyril were necessary and that is why he had proposed in November 2005 that he be appointed office manager and be remunerated accordingly. If Cyril’s position had been offered to him he would have accepted it. He admitted that he accepted the rationale for Cyril’s appointment but was indignant that the appointment had been made in his absence.


[43] Graham once again wrote to Heather and Tony expressing his dissatisfaction that decisions were taken in his absence, and warned of legal action if any further decisions were taken without his consent. He said that with the exception of the franchise agreement, the CK document and the agreement with Lindsay, no further agreements would be respected until a member’s association agreement had been concluded. He drew up such an agreement, but Heather did not respond to it and Tony said it was too detailed.


[44] Graham lived at Canon Rocks, and in the early days of the business a spare room in his house was used as a satellite office. Half Point was to pay the telephone expenses at Canon Rocks. The agent appointed at Canon Rocks resigned in March 2006 and the office closed. It had generated no sales but a board outside had given the franchise some exposure. During January 2006 Heather and Tony felt that the telephone account was too high and that the business calls should be limited to R500.00 a month. Any amount over R500.00 was for Graham’s personal account. An account of R1 610.00 for February 2006 was received, R350.00 of which was for personal calls. He paid R350.00 to Telkom and thought that the balance had been paid by Half Point. When he received a final demand from Telkom during March or April for the balance, he found out that Heather had instructed Penny not to pay that portion of the balance which exceeded R500.00. At that time he also found out that Heather was being paid 60% commission on sales. He asked Penny to pay the account but she refused. He therefore paid the balance of the telephone account from Half Point’s bank account via internet. It was clear to him that the agent at Canon Rocks had exceeded the R500.00 and the rest of the account was therefore not for private use. He thereafter changed Half Point’s internet banking password because he found out that further 60% commission payments had been paid to Heather and he wanted to ensure that no further payments would be made which had not been approved by Penny. Payments would then have been made by cheque and he could have seen whose signatures were on the cheques.


[45] When Penny discovered the password had been changed she wrote to Tony tendering her resignation with effect from 30 June 2006. Graham was aware of this letter and two days later he explained to Penny why he had changed the password. At the time he changed the password, only he and Penny knew the password. He was aware that rental clients who were paid by internet banking would be unhappy at not being paid their rentals immediately


[46] On 2 June 2006 Graham wrote to Heather and Tony, and paid tribute to Heather’s commitment and dedication which he said were largely responsible for the success of the franchise. He went on to suggest that a “shareholders agreement”1 be concluded, and attached a draft for their input.


[47] On 15 June 2006 a meeting was held, which he understood was to be a members’ meeting. In addition to the three members, Lindsay and Cyril were present. Graham felt that there were items on the agenda which were members’ issues and should not be discussed with staff members present and asked if it was a members’ meeting or a management meeting. He acknowledged that there were also items on the agenda which involved Cyril and Lindsay, and that those items could have first have been discussed and then Cyril and Lindsay could then have left. Lindsay and Cyril offered to leave and his response was to wait for them to leave, but they did not leave. He then left the meeting because it was either going to be a members’ meeting or not. Heather warned him that if he left, decisions would be made without him, and he told them to go ahead.


[48] On 16 June 2006 Graham e-mailed Penny advising her that he would transfer funds into Half Point’s account for the costs of a convention which he and Heather had attended, and for the costs of which they were to be personally liable. He received an e-mail from Penny requesting him to pay his share of the convention costs in the sum of R4 174.14. He however never paid this amount because he was owed outstanding expenses for the Kenton office, and once those were paid to him he would have paid the convention costs.


[49] On 17 June 2006 Tony wrote to Graham, suggesting, inter alia, that a new CC be formed for the western region of the franchise area, with Graham and Jean as the members, and that Tony would donate his 10% member’s interest to Jean, thus avoiding family conflict. Graham did not find this suggestion fair or viable, given the value he had placed on the business. In response, and in an attempt to find some middle ground, he wrote to Heather and Tony on 22 June 2006, suggesting the following: Heather to remain on 60% commission; Graham to be office manager at Port Alfred and Kenton at a monthly salary of R10 000.00; and Cyril to be included in Half Point when Tony’s 10% membership was transferred to Graham.


[50] On 27 June 2006 Graham wrote to Heather and Tony, informing them that he would be returning to the Port Alfred office on 3 July 2006 in order to assert his rights to the day to day management of Half Point, and that Cyril should vacate his desk in order to avoid any “unpleasant situations”. He required that payments to Heather in excess of 50% commission be refunded to Half Point and that he be immediately reimbursed for expenses he had incurred at the Kenton office, in the sum of R22 986.64. He suggested yet another allocation of duties, namely: Heather’s responsibilities to include sales and sales personnel related issues, and Heather to be paid commission on sales and a monthly salary of R5 000.00; and Graham’s responsibilities to includes all administrative, operational and franchise related issues at a monthly salary of R15 000.00. He indicated that although he had performed managerial duties since March 2005 (working on the franchise) he was claiming immediate payment only with effect from October 2005, the total amounting to R135 000.00. He also said he would agree to Heather transferring any portion of her member’s interest in Half Point to Cyril or anyone else, once Tony had transferred his 10% member’s interest to him or Jean.


[51] His reasons for returning to Port Alfred on a full time basis were that he had not been part of the decision to appoint Cyril and he had no confidence in Cyril’s abilities; he (Graham) had previously wanted to be appointed as office manager but it was said that this was not required; and it was clear that he was being sidelined in the business. He was therefore making a statement that he had been involved in the business from inception and that he was going to continue to be involved, despite their suggestions of buying him out or somehow sidelining him.


[52] His proposal was not accepted and he then contacted Townes and asked him to be a facilitator in the impasse. On 3 July 2006 Townes e-mailed the members offering his services as a facilitator to resolve the disputes between them, and requesting them to suspend all matters of conflict pending resolution of the dispute. He also requested them to furnish him with details of the disputes in writing. Graham forwarded his written report to Townes, and also informed Townes that in spite of Townes’ request that disputed matters be put on hold, numerous payments had been made without his approval, including payments to Heather and Cyril, which were matters in dispute. He also informed Townes that he was taking immediate action in this regard. Although these were issues that were going to be discussed, he was just pointing out to Townes that Townes’ request that disputed matters be put on hold was not being adhered to. Graham went to the Standard Bank and requested the manager to suspend Half Point’s internet banking facility because there were certain matters in dispute between the members. He gave this instruction so that in future payments would be made by cheque and it could be seen from the signatures on the cheques who had authorised payment. He was aware that salaries and rentals were paid via internet banking and that some rental clients depended on the rental payments as income. He accepted that some rental clients had been upset when they were paid by cheque, and he acknowledged that the effect of the suspension of the internet banking would have impacted to a certain extent on the SIR name, but he would not have gone to such lengths if he had had prior knowledge of the payments to Cyril and Heather. He could not recall threatening to sue the bank but it might have happened because he was angry at that stage. He disagreed that his action at the bank was public knowledge. He informed Townes by e-mail dated 12 July 2006 that he had instructed the bank to suspend all electronic banking until further notice. In his e-mail to Townes he said the suspension of the internet facility in no way affected the franchise’s operations. He said this was a mistake, but he was not aware of the consequences of the suspension of the internet facility.


[53] Townes then e-mailed the members on 11 July 2006 and proposed a meeting on 18 July 2006. On 11 July Graham received a letter from Heather’s attorney Neville Borman, which was in response to Graham’s letter of 27 June 2006 to Heather and Tony (referred to in paragraph [50] above). The letter informed Graham that Heather had had enough of his arrogance and breach of his obligations towards her and Half Point, and went on to list details of his conduct which gave cause for complaint. These included the opening of the Kenton office, walking out of meetings, paying his telephone account, changing the internet password, not working every alternate weekend, and his demand for a salary. The letter put Graham on terms to change his behaviour, otherwise Heather would bring an application in terms of s36 of the Act for an order that he cease to be a member of Half Point. Graham forwarded Borman’s letter to Townes.


[54] Graham, Heather and Tony met with Townes on 18 July 2006 at Kariega Game Reserve and they each expressed their grievances. Thereafter Townes informed them that there was clearly no common ground and that the franchise should be split into the east and west sectors. Heather, Tony and Townes were adamant that a split was the only solution to the problem. Graham did not agree that there were irreconcilable differences and said that that was Townes’ conclusion. He remained at the meeting although he thought that they could have reconciled their differences. Solutions to the various issues were discussed, and after a break for lunch Graham informed the others that he was happy to go along with the idea of a split, but that he was not going to be held to any agreement until he had assessed its viability. The others accepted his stance. The discussion continued and issues were resolved. The meeting ended amicably, with them shaking hands, although he gained the impression that the others thought that they had “sealed the deal”. He knew that Townes was to leave for an overseas holiday after the meeting.


[55] Townes did not express any misgivings about his ability to run the western sector. He later sent Townes studies relating to the viability of the western sector but never received a response. He also sent the studies to Wenzel, who told him that a full blown office in Kenton was not a viable option at that stage. The envisaged Kenton office was not just a satellite office but a fully functional office, which could compete with Pam Golding Properties.


[56] Townes sent the members an e-mail on 21 July 2006, which read as follows:

Dear Franchisees


As agreed, I am appointed mediator between the parties for the purposes of breaking up the PA franchise.

At our meeting at Kariega, we agreed that:

  1. The areas would be split into PA and Kenton-on-Sea (KoS).

  2. That Lindsay Timm has an encumbrance on the PA office (not franchise) in the amount of 10%.

  3. The franchise right and accordant costs including the minimum royalty would be allocated according to the respective area turnovers.

  4. The assets of PA would be valued according to net asset value i.e. after depreciation and allocated as follows NAV x Graham Howell 40% payment to be made by cheque.

  5. The R25 000 licence fee, Brent undertook to clear with global.

  6. Any unforeseen liabilities would be covered by the indemnity in the PA franchise agreement.

  7. Payments made to Heather Tyson would be confirmed and recalculated on the 50% basis.

  8. Payments still to be made for KoS office expenses would be paid by PA franchise as part of an offset and is also tax efficient.

  9. The outstanding pipeline would be the method of distribution of profits and should be confirmed by GIF (Neethesh), using Graham expenses as a second offset, the first being LT 10%, thereafter Heather would draw a 60% commission, and only then would profits be split.

  10. Cecil Tysons salary would stand as a valid expense.

  11. Graham and Heather’s salary claims mutually offset one another.

  12. Tony would cede his 10% interest in KoS to his daughter.

  13. Tony would maintain his 10% share in PA (or more depending on negotiations between these two parties).

  14. No cheques to be paid, unless Graham signs them off by way of a schedule prepared and agreed to before signature.

  15. Graham would pay his own set up costs (using the funds from PA payment) for KoS.

  16. Effective date 31 July.

  17. New agreements to be prepared by Brent and emailed.”


[57] On 24 July 2006 Heather sent Townes details of the payments made by the Port Alfred office for the Kenton office, as well as details of the various 60% commissions she had been paid. Graham was of the view that not all the 60% commission payments had been furnished by Heather, although he was not able to identify which ones were not included.


[58] Graham responded to Townes by e-mail on 25 July 2006 as follows:

Dear Brent


I would like to thank you for your efforts to facilitate a resolution to the various disputes between the members of our franchise.


I have considered the solution and the terms you have proposed in your email below (of the 21st of July) and would like to advise you that I have decided not to accept these as they are not in my or the franchise’s best interest. I did advise you during our meeting that unless I found the terms of your proposal acceptable I would not be held to any of the subsequent agreements we arrived at during our meeting. Be advised I will therefore be returning to our Port Alfred offices on a full time bases until the members of our franchise have arrived at a mutually acceptable alternative arrangement.


We will advise you of these arrangements in due course as well as any alterations to our existing franchise agreement that we may then wish to make.”

On 26 July 2006 Graham e-mailed Heather and Tony as follows:

Dear Heather and Tony


I have advised Brent that the solutions that he proposed are not viable.

From my own point of view, I established and bought into the business with the purpose of being involved in the running of a Lew Geffen franchise according to the model which they have specified and working for the business on a day to day basis as my principal livelihood for supporting myself and my family.


As a substantial member of the close corporation, I am expected and entitled (in terms of Section 46 of the Close Corporation Act) to participate in the business and to use my skills in the running of the operation. I will therefore be returning on a permanent basis to participate in all aspects of the day-to-day activities and management of the business with immediate effect. I will again be assuming responsibility for the office management and franchise related activities. Heather, please will you make the necessary arrangements so as to avoid any possible unpleasantness with Cyril.


I do not wish to sell my interests in the close corporation or to walk away from it in any way. My intention on the contrary is to retain my interests and to exercise my rights to acquire further interests as and when these may become available.


Until we come to mutually acceptable agreement regarding the affairs and the running of the business it is all our duties to ensure that the business must be run in accordance with our franchise agreement with GIF and the Close Corporation Act. I will arrange for independent professional to chair our members meeting in order to ensure compliance with our responsibilities in terms of the Act and or contractual obligations with GIF and other parties.”


[59] He made the decision to return to the Port Alfred office after taking legal advice from his attorney, Peter Sapire. It had become clear to him after the meeting on 18 July 2006 that Heather and Tony’s suggestions all along had been a way of sidelining him from the business and he was making it clear to them that he was not prepared to be sidelined. He envisaged that the Kenton office would still operate on a fulltime basis and that another agent could be appointed there. His role at Kenton would have been supervisory and he would have provided the agents with the requisite backup. The unpleasantness that he wanted to avoid related to the use by Cyril of his desk, Cyril having been appointed without his knowledge or approval. The arrangement for an independent person to chair meetings was a suggestion for “a way forward” because there was a conflict between the members at that stage. Such a person would run meetings properly and ensure that the correct persons were invited to attend meetings. Half Point could have paid such a person at a nominal fee.


[60] On 26 July 2006 Neethesh Haripersad, GIF’s accountant, sent an e-mail to the members informing them that Townes had said that they were all to comply with what had been agreed at the meeting of 18 July, until his return on 6 August 2006. With regard to Tony’s fax of 26 July 2006 to Haripersad to the effect that Graham had broken the agreement reached on 18 July, Graham said that no agreement had been reached.


[61] Graham returned to the Port Alfred office on the morning of 27 July 2006. Cyril was there, sitting at his desk. He agreed that this desk had a computer on it, which was used for much of the IT and which contained templates and similar information. He had invited Cyril to use this desk on previous occasions. Cyril needed to use a desk and this desk was the most obvious one for him to use because the computer contained the materials with which he was to do his job. Graham had a laptop computer which he had used in the Kenton office and there was a large table in the Port Alfred office with an electrical power point next to it. He approached Cyril, who did not appear to be working, and asked him to vacate the desk, but Cyril refused. After repeatedly asking Cyril to move, he threatened to remove him physically, but did not do so. He believed that Cyril had been instructed not to move. He then told Cyril that until he moved, he would use Heather’s desk, which he did. He also removed documents from the desk Cyril was occupying and placed then on the centre table, although he could not say why he did this. He wanted the desk because it had previously been his, he had a right to reoccupy it, and he wanted to make it clear that he was returning and was going to be involved in the business on a fulltime basis. He was a principal in the business and Cyril was a trainee manager, and he saw the desk as his. There was nothing that Cyril was doing that he was not going to take over from Cyril, and, as he had informed Heather and Tony in his letter, he was going to return and take over Cyril’s duties. He thought it was his prerogative to do so because he was a principal, despite Cyril’s appointment having been a majority decision.


[62] Heather arrived later that morning and asked him to vacate her desk, and he told her he would do so provided she requested Cyril to vacate his desk. She refused to do so. He sat at Heather’s desk for the rest of the day, and Heather used a table in the office. He described her conduct as “ranting and raving” and if staff were unsettled, it was because of Heather’s conduct. While he was at her desk, she needed to use her computer and access documents, but if she had been inconvenienced, the remedy lay with her. On 28 July these events were repeated. He did not recall that he repeated his conduct on 1 and 2 August. On 28 July he received a letter from Borman which referred to the desk incident and warned him that if he did not cease interfering with the affairs of Half Point and the other members, an application would be brought in terms of s 36 of the Act.


[63] After he received the letter he left the office, on the advice of his attorney. He responded to Borman by letter dated 31 July, in which he set out his requirements as a member of Half Point. These were that he participate in the management of the business on a day to day basis; that Half Point be run in accordance with an association agreement; that the business comply with the franchise agreement; and that as an agent he receive leads to which he was entitled. He indicated in the letter that he was prepared to consider all reasonable suggestions with regard to the running of the business, with the least amount of friction between the members.


[64] On 2 August 2006 Tony wrote to Graham informing him that an agreement had been concluded on 18 July and that he (Tony) and Heather were honouring the agreement. Tony asked Graham to vacate Heather’s desk and computer as she could not perform her work. He suggested that Graham sit at a table in the office and use his laptop computer there. Tony pleaded with Graham not to cause a confrontation which would upset the staff and suggested he go back to the Kenton office in order to avoid unpleasantness. He asked Graham to be tolerant and co-operative until Townes returned on 7 August.


[65] On 2 August Graham replied to Tony, informing him that no agreement had been concluded on 18 July. He said that unlike Heather, he did not believe that the legal route was the best way to resolve a clash of personalities. He had no alternative but to return to the Port Alfred office and asked for Tony’s support rather than resistance. He could not understand why Tony supported Heather in excluding him from the business. He ended the letter by saying that he looked forward to Tony’s continued support and advice. Graham said in regard to this letter that it was clear that Heather and Tony were carrying on with their franchise and he would continue to be sidelined, and he had had legal advice to return to the Port Alfred office. He was not prepared to wait until Townes returned. He was not aware at this stage that the staff were threatening a walkout because of his return to the Port Alfred office, nor that Heather had averted a walkout by telling them that she was taking legal action.


[66] On 2 August 2006 Graham issued certain written instructions to Cyril. One was to summarise the GIF policies and procedures into twenty pages by 4 August. Another was to take down the board at the Bathurst office, take it to a concern called “The Frameworks”, collect another board at Graham’s house at Canon Rocks and deliver it to The Frameworks. These tasks had to be completed on the same day. It was clear to him that Cyril, a trainee manager, was not going to take instructions from him so that is why he issued the instructions in writing. He acknowledged that he was annoyed with Cyril at this stage, and he agreed that he gave the instructions because he wanted to assert his authority.


[67] The application for the interdict was launched on 3 August 2006 and while it was pending, Graham remained at the Kenton office. Following a fax from Tony to Townes on 7 August, Townes e-mailed the members as follows:

Dear Sirs and Madam


I refer to your franchise agreement, more specifically clause 8.1(b) being;


The franchisee shall conduct itself and the Business in a manner as not to harm the reputation of GIF, SIR the name or its fellow franchisees”.”


We cannot have the situation where fellow Members are delivering legal letters and about to issue interdicts where, in a small community of the Eastern Cape, you place our good name and the name under which your fellow franchisees trade in a manner so as to cause harm to the name and reputation.


It seems that Graham is unwilling to accept the mediation process, which has now broken down, and therefore I give you notice without prejudice, that should the bickering and fighting escalate, I will be reviewing your performance in terms of the franchise agreement. This may lead to the termination of the franchise agreement with Half Point Properties.


All our rights remain and are reserved.”


[68] On 11 August 2006 Graham wrote to Heather and Tony attaching a schedule and copies of invoices for Kenton office expenses, in the sum of R19 434.00, which he said were to be paid by 16 August 2006.


[69] With regard to a document dated 12 August 2006, prepared by Lindsay in response to his answering affidavit in the High Court application, the contents of which were critical of him, Graham said that Heather could be very influential and that Lindsay had been influenced.


[70] On 14 August 2006 Tony wrote to Graham suggesting a settlement to avoid further legal costs. The proposal was that Graham sell his member’s interest in Half Point for R180 000.00, that he be paid out his loan account, and that he transfer his member’s interest on receipt of payment, to Heather, Tony, Lindsay and Cyril. The application would be withdrawn with each party to pay their own costs. Graham responded by saying that he had received legal advice that the offer was not legitimate and its terms were not acceptable. He mentioned that legal costs had already been incurred and that he intended opposing the application. He believed that the members could still work meaningfully together if they applied themselves, without bringing hidden agendas into the business, for example the involvement of Cyril. Tony’s offer was in his view yet another example of not including him in the business.


[71] On 24 August 2006 the following e-mail was sent to the members by Townes:

Dear Sirs and Madam


Without prejudice.


We note that there is a court application for an interdict to be heard.


We also note that the application contains several breaches of the franchise agreement entered into with Geffen International Franchise Services (Pty) Ltd.


Note that since you have made this a matter of public record, we will instruct our attorneys to review the case and ascertain whether our rights have been breached and reserve all our rights accordingly, especially our rights of termination.”



[72] On 28 August 2006 Graham sent advertisements for Kenton properties to Cyril for publication. The response from Heather was that because there had been an agreement to split the franchise, he should place the advertisements for his own account. He did not agree with this reasoning because there had been no agreement.


[73] On 28 August 2006 Sapire wrote to Borman saying that Heather had been deliberately drawing employees of Half Point into the conflict and had even brought them to court with her for the application. Graham said that the application was a matter between members, and staff should not have been involved, and it appeared to him that they had not been at court of their own free will.


[74] On 4 September 2006 a staff meeting was held and attended by Graham, Heather, Cyril, and some of the agents. One of the matters discussed was a presentation to the Royal Port Alfred Marina Association in the hope of being awarded a mandate to sell properties on the Marina.


[75] The application for an interdict was dismissed on 4 September 2006. By letter dated 5 September, Sapire wrote to Borman stating that their respective clients should put aside their differences and work together in the interests of Half Point, its members, and staff. He suggested an interim association agreement until such time as Heather and Graham could negotiate reasonably with each other. He requested that the Kenton expenses be paid forthwith, and advised that Graham would be returning to the Port Alfred office and that Heather should ensure that his desk and computer were available.


[76] On 5 September 2006 Tony forwarded to Townes the results of a survey he had conducted amongst the staff of Half Point. With the exception of Sandra Cronje, they all said they were not prepared to accept Graham as office administrator at Port Alfred. Graham’s view was that the survey looked like canvassing and was not a way to solve problems.


[77] On 5 September Heather wrote to Graham as follows:


Dear Graham

I refer to the letter received by me at 16h50 dd 5 September 2006 from Peter Sapire.


Chris de Wet Steyn2 has kindly offered his desk in the interim until we can sort out the reshuffling of staff, desks and computers.


You are aware that we are extremely busy, pressed for time and in the middle of our preparation for presentation for the Marina, the Quarterly Regional Meeting on Monday, listings, window cards and adverts. The templates, information, files etc are on the computer at the desk currently occupied by Cyril Tyson and this will take more time to move than we can afford to lose over the next few days.


Could we schedule a members meeting at Avondale on Friday – 8 September at 14h00.


Yours sincerely

Heather Tyson”


The quarterly meeting she referred to was a meeting of GIF franchisees in the Eastern Cape and representatives from GIF. Graham e-mailed Heather in response to this letter, as follows:

Heather


I acknowledge receipt this morning of your letter calling members meeting in terms of Section 36 of the Closed Corporation Act for Friday at 14:00


I Have referred this to my Attorney who will be in contact with your Attorney shortly to discuss the purpose of this meeting as you have nothing on the agenda you sent with your letter and Members meeting are normally called under Section 48 and not Section 36 of the Closed Corporation Act so we are not certain what the purpose of this meeting is.


I would also like to remind that I will be back in the office from tomorrow as per Peter Sapire’s letter that you mentioned and assume that this time you will actually arrange for Cyril’s move to Chris De Wet Steyn’s (or any other desk) as I am perfectly capable of supervising Cyril or any other staff to finalise the Marina presentation, do the Listing, Window cards and adverts as I have done these in the past and intend being involved in the management of these in future. In addition I also need to obtain all the Franchise related information that I have not been privy to over the last few months to prepare myself for the Quarterly meeting with Sothebys’s on Monday. I look forward to seeing you tomorrow.”



Graham acknowledged that there was a need for an urgent meeting.


[78] Heather forwarded Graham’s e-mail to Townes, who e-mailed Heather and Graham on 7 September 2006 as follows:

Dear Heather and Graham


Without prejudice to our rights.


I received your email this am and respond that you need to call the relevant meeting and sort out operational issues today.


Heather, I can see that you and Graham no longer can work together so I believe the best step is to call up loan accounts and liquidate the CC as I cannot in all honesty see this franchise working out.


Graham, I can see that we are also not going to be working together due to the manner in which you conduct business, so I would prefer if you stayed away from the franchise and GIRF as you definitely do not represent the interests of the CC but rather yourself. You also need to be aware that only one independent contractor will work with you, so you are faced with a mass walk out – in the event of this happening I will be seeking termination of the franchise and damages from you.”


Graham assumed that when Townes mentioned that only one contractor would work with him, he was referring to the confidential survey, although he had not seen the survey at that stage. As far as he was concerned, as a franchisee he was entitled to attend the quarterly meeting. He also said that Townes had no right to instruct him not to go into the office, although he acknowledged that Townes did not do so in his e-mail, but only instructed him not to attend the quarterly meeting.

[79] Sapire then wrote to Townes in response, essentially denying that Graham had caused any damage to GIF’s reputation and saying that if there was damage, it had been caused by Heather’s conduct in taking the dispute into the public domain. He also said that if there was a threatened mass walkout, it had been engineered by Heather. Graham said that this was his opinion at that stage, and that if there was a mass walkout it could only have been manipulated. He conceded that he had no evidence that Heather had engineered the walkout.


[80] Townes replied to Sapire as follows:

Dear Sir


All rights being reserved.


I note the comments of your fax and reserve the right to answer more fully.


I do not have any confidence in your client representing our brand in the Area, and can see that by his intransigence the entire office has been put at risk – a walkout was threatened this morning of which your client doubtless “knows nothing and is blameless in his opinion” – this was averted by Heather,

Graham’s own partner.


The situation is so serious that we may lose them all within one week as a direct result of his behavior. Time will tell, which will force my hand as the franchisor and I will seek damages as I have clearly and consistently warned all parties of what the consequences of this dispute will mean.


As it is, I am of the opinion that the franchise is already in breach of my warning about harm to the name and I reserve all rights accordingly.


Accordingly I repeat my call for Graham not to be present at the franchisee meeting.”


[81] When Graham returned to the Port Alfred office on 7 September his desk was available. He was not aware of a threatened walkout that morning. On 7 September Graham wrote what he described as a reconciliation letter to the staff. It read as follows:

LETTER TO STAFF DD 07/09/06


Firstly I would like to apologise to all of you for any inconvenience or embarrassment that the recent differences between Heather and me may have caused you. I would also like to thank-you in advance for your continued commitment to the future success of Half Point Properties. These have certainly been trying times for all of us, but we can only hope that this experience will strengthen us all and consolidate our position in the market.


If my silence towards you at any time may have seemed to be aloof or arrogant I apologise unreservedly for this. My intentions however have been not to involve any of you in our member related disagreements. This I hope, also explains my reason for leaving certain meetings (where staff had been invited by the other members) as I knew disputed issues between the members were to be discussed that I believed had nothing to do with them.


For any staff that may not be aware of the fact, my intention when I started this business was to own and manage the Sotheby’s Franchise in Nldlambe District Area. In November 2004 obtaining the Sotheby’s Franchise was my initiative, after which I approached Tony who suggested getting Heather involved as she was recognized as being one of the prominent agents in the area. Without going into too much history my intentions have always been to own and manage a business working with staff I like within the area that I am very passionate about. I believe that I can say that I have achieved this with all of you.


Although initially I may have done whatever was required to get the business running it has become clear that a franchise of this nature requires day-to-day management. My intentions have never been to be a sales agent in competition to the agents that I employ but rather to be involved in the running and management of the Franchise that I purchased.


Even though there have been court applications brought by Heather to resolve our difference. It has always been and still remains my objective to resolve these differences in a business like and in an amicable manner as possible.


If you would like any clarity with regards to any of the above issues or my future intentions in the business I will happily meet with you to discuss these.


Thanks

GRAHAM”


He said he wrote the letter because they had “crossed a mountain” and he was looking forward to carrying on with the business.


[82] On 8 September 2006 Sapire forwarded to Graham, the following e-mail from Townes:

Half Point Properties CC


Without prejudice and all our rights reserved.


Dear Sir and Madam


I warned Graham of the potential harm to our name being caused by the independent contractors not being willing to work with him, the threat of a walk our and the consequences thereof. (see below)


I have been reliably informed that they have all now left and do not want to return unless Graham leaves. I will meet with them to listen to any issues.


The harm to our name in such a small area, regardless of whether this franchise continues or not can now be seen and damages can be calculated.


I am briefing our attorney to draw up a termination letter early next week dealing with the interdict, the walkout, the opening of offices without our consent as well as any other breaches.”


Graham said he was not informed that the agents had walked out and for all he knew they might have been out listing a property, or going to the Marina in connection with the presentation. He agreed that they were not in the office and that he was alone until Sandra Cronje returned. If there had been a walkout, it had been staged by Heather and Tony.


[83] He arrived for the franchisee meeting on 11 September 2006 and saw that a meeting was taking place between the agents, Tony, Townes, and Lew Geffen. Later Townes and Geffen called the members together and announced that they were terminating the franchise. They informed the members that Cyril and Lindsay would be the caretaker franchisees. Graham was shocked at this announcement and then left for Kenton.


[84] On 12 September 2006 a members’ meeting was held. Heather and Tony accepted the termination but Graham did not. The minutes of this meeting were sent to Townes by either Heather or Tony.


[85] On 15 September 2006 Townes sent the members a written notification of termination of the franchise, in the following terms:


Re: Termination of franchise.


Dear Sirs and Madam


I have reviewed the judgment of the case between two of the members, and the comments, allegations and unseemly manner in which matters were conducted within the franchise


I also have received 6 affidavits from your independent contractors, after a breakfast meeting was held on Monday 11th September 2006, at their request with my Chairman and I.


All of the above items contain allegations of serious harm and damage to the brand and trademark, which have now managed to reach the general public, and the estate agency body in the area in particular.


Notwithstanding my many attempts and warning (by email and phone) for the parties to see reason, and to cease and desist from harming our name and reputation; matters proceeded to deteriorate further thereby compounding the harm.


I have in my receipt minutes of a meeting of member of the franchise (accepting as a majority) the termination. I accordingly acknowledge your acceptance of the termination.


Your sincerely


Brent Townes”


[86] The six affidavits referred to contained various criticisms of Graham and an expression of unwillingness to work with him. Graham had not seen them at that stage. He said the affidavits must have been instigated by Tony, and the agents must have been coerced, because if the agents had had problems with him they would have discussed them with him earlier. If he had known that the agents had problems with him he would have discussed the problems with them amicably. In his view the affidavits were an attempt by Heather and Tony to confirm the termination of the franchise, and the agents had been coached.


[87] Sapire wrote to GIF, disputing the reasons for the termination, denying any brand damage and pointing out that the brand had received a boost by the award of the Marina mandate. He alleged that the termination was “a disingenuous collusion between yourselves and Heather Tyson to evade the judgment of the High Court and to oust my client through the back door”. He concluded by demanding that the termination be withdrawn pending a proper consideration of the circumstances. Graham thought that they could have opposed the termination and could have approached Townes on the basis that the members had reconciled their differences. With regard to the allegation of collusion in Sapire’s letter, and the absence of such an allegation in his particulars of claim, Graham said he would have given his legal representatives the information and his opinions, and they would have drawn the pleadings. When asked directly if collusion was part of his case, his answer was “our case has been pleaded”.


[88] Graham did not return to work at Half Point. It ceased trading on 15 September 2006 and as far as he could recollect its assets were sold to HSH. Everyone who had worked for Half Point was now working for HSH. A Half Point members’ meeting, from which he excused himself because he was going to Johannesburg, was held on 27 September 2006. The minutes reflected, inter alia, that Heather and Tony felt that opposing the termination would be a waste of money, that Lindsay should be repaid her loan, and that the Kenton office and legal expenses would not be discussed without Graham’s presence.


[89] On 28 September 2006 Sapire wrote to Borman saying that the termination must be opposed. He set out a number of reasons for such opposition, among which were the value of the franchise to Half Point, the irregular manner in which GIF had terminated the franchise, and the specious grounds given for termination. He said that to accept the termination without any query was a gross dereliction of the members’ fiduciary duty to protect the interests of Half Point. In the event that Heather and Tony were not prepared to oppose the termination, he requested a resolution in terms of which Graham could oppose the termination on behalf of Half Point. Should Heather or Tony not accede to these requests, then they should resign as members, and if they did not do so, Graham would be left with the option to bring an application in terms of ss36, 42, 43, 49, or 50 of the Act, or an action for damages for his loss over the next ten years that the franchise would have run.


[90] On 3 October 2006 Graham e-mailed Heather with regard to a members’ meeting held on 27 September, the minutes of which had been forwarded to him. He stated that because there was not a quorum at the meeting (he had excused himself from the meeting), decisions taken were of no force and effect, and that he did not accept the decision taken at the meeting to repay Lindsay R43 000.00.


[91] A Half Point members’ meeting was held on 4 October 2006 and was attended by Graham, Heather and Tony. According to the minutes Heather and Tony approved proposals that Graham would pay all the Kenton office expenses incurred from 1 April 2006, that Lindsay should be paid out R43 000.00, and that Half Point should pay the legal costs of the High Court application. Graham opposed these proposals. He said he could not see how Half Point should be liable for the legal costs when the application was brought by Heather. Graham said that the agreement with Lindsay was a sale and not a loan, and that according to the agreement Lindsay was liable for 10% of Half Point’s operating costs. He was aware that the first written agreement wrongly reflected that Lindsay was liable for 10% of the operating costs, but he was just informing Heather and Tony of what had been in the contract. Graham proposed that Lindsay and Cyril be liable for Half Point’s expenses from 11 September 2006 because they were the caretaker franchisees, while Tony said that Half Point was liable for salaries for Cyril, Penny and Sandra Cronje until the end of October 2006. Graham’s proposals that the termination of the franchise be opposed, that he be authorised to oppose the termination on behalf of Half Point, and that an approach be made to GIF to set aside the termination, were all rejected by Heather and Tony. The minutes reflected further that the members made various accusations against each other, including Tony telling Graham that he had caused the termination of the franchise, and that he had broken down everything that had been built up.


[92] On 15 October 2006 Graham started work in Johannesburg and requested that any further members’ meetings be held on Saturdays. If there had been any remaining obligations on his part to Half Point, he would have dealt with them. He did not inform Heather and Tony that he was taking up employment in Johannesburg. He said if they had wanted to know where he was they could have sent him an e-mail.


[93] On 17 October 2006 Townes sent an e-mail to Graham and Heather, releasing them from the restraint of trade clause which had been a term of the franchise agreement. A Half Point members’ meeting was held on 27 October 2006. It was attended by Heather and Tony. According to the minutes Heather required a release from the other members authorising her to make a living as an estate agent. Graham did not sign the release because Heather and Tony had accepted the termination on very weak grounds and he saw no reason to allow Heather to continue. Graham said that Heather and Tony had invited the termination by supplying Townes with information, and the termination did not affect them because their lives carried on as normal, whereas he had lost his franchise.


[94] The minutes also reflected that Tony recalled giving authorisation to Heather on 6 January 2006 to be paid 60% commission. Approval was given for payment out of the members’ loan accounts and that certain amounts be deducted from Graham’s share of the profits, namely the Kenton office expenses incurred from 1 April 2006, the payment of his private telephone account, and his portion of the costs of the conference he had attended and which he had undertaken to repay to Half Point. The verbal agreement with Lindsay concluded on 13 October 2005 was reduced to writing and was to be honoured, because the written agreement signed on 3 March 2006 did not correctly reflect what was agreed. Graham in due course received his profit share and was not aware that any deductions had been made.


[95] On 18 November 2006 a Half Point members’ meeting was held, attended by Graham, Heather, and Tony. According to the minutes Graham arrived with a tape recorder which Tony confiscated. Graham said that Tony threw it against the wall. When Heather took the tape recorder to prevent Graham from retrieving it, Graham threatened to lay a charge of theft against her. Graham left the meeting but after Heather telephoned her attorney, Graham returned and the meeting continued. Tony asked Graham why he had not informed him and Heather that he was now working in Johannesburg and Graham said that it was none of his business. Graham was not prepared to discuss the sale of his shares, because the window period had expired and no extension had been requested. Graham said that there might have been a proposal that Heather and Tony buy his member’s interest but nothing had come to fruition. The minutes also reflected that a proposal to pay Heather R25 000.00 per month from 16 September 2006, for the work she had done for Half Point after Graham left for Kenton, was accepted. Graham was not aware that this proposal had been implemented.


[96] Heather was offered the position of PRO for HSH on 26 September 2006. Graham disagreed that in view of the fact that she was a prominent face of SIR, such an appointment was useful. He conceded that because Half Point had ceased trading she was not competing with Half Point if she sold properties, but because she had accepted the termination, this meant that she was not interested in being an estate agent. She could not then continue with another franchise as it suited her.


[97] A letter dated 26 May 2008 from Townes was sent to the members, although Graham had not requested such a letter. The letter read as follows:


Dear ex-Members


As per your request, I detail what transpired leading up to an including the termination of you as the Franchisee.


The events are best handled in a sequential manner.


1 April 2006: an office was opened in Kenton-on Sea without our approval.


3 July 2006: I offered to mediate between the Members as a result of acrimonious correspondence and behavior between the Members and asked that all refrain from harming one another.


18 July 2006: I travelled to Kariega Game Reserve to mediate between the parties, where an oral agreement was reached between Members as how to proceed with the portioning of the franchise Area and the launching of the new Kenton-on-Sea franchise to be owned by Graham Howell as it was agreed by all present that working together was no longer possible


21 July 2006: My email confirms same.


26 July 2006: Graham Howell withdraws from the separation agreement.


27 July 2006: email from our financial manager Neethesh Haripersad stating all parties to comply with what was agreed.


4 August 2006: Heather Tyson commences proceedings i.e. an interdict preventing Graham Howell from interfering in the Port Alfred office.


In the interim I receive calls from certain property consultants that they cannot work there, that they love the brand, and our methods, but Graham Howell’s behaviour is untenable.


7 August 2006: I email a warning about behavior of Members.


8 September 2006: The agents and staff refuse to work in the office if Graham Howell continues with his behaviour, in fact they remove themselves and start working from their various homes – they do so on the basis that I will meet with them on the 11th September.


11 September 2006: the meeting was held in Port Alfred at 08h30 where the agents briefed Lew Geffen and I that their situation was untenable vis a vis Graham Howell’s behavior towards them and Heather Tyson, that the franchise could no longer operate and that they were giving up.


GIRF decided to terminate the franchise forthwith as to allow it to proceed would continue to cause harm to our good name and trademarks as by now the public and estate agency body in particular had become aware of the disputes, and that it had ceased to operate as per the franchise agreement.


All parties were orally informed that we were terminating the franchise.


15 September 2006: Fax and email reasons for termination.

In my opinion, it is common cause that the working relationship between the Members has become dysfunctional, and that the franchise operation in Port Alfred suffered as a direct result. GIRF has a responsibility in terms of its Master Licence to ensure the upholding of the name and its continuing good operations of all its franchisees and enforced these rights. Without apportioning blame, the franchise agreement was terminated to protect our rights. With time and hindsight, the partnership of Howell and Tyson was fraught as Graham Howell could not compete with Heather Tyson’s ability to generate business.


The facts speak for themselves – Howell caused disruption in the office and commenced an undermining process of Tyson which led to the inevitable termination, notwithstanding my written warning to that effect.”


[98] With regard to the various amounts which Graham alleged had wrongly been paid by Half Point after it had ceased trading, he conceded that the electricity, water, and telephone accounts had been correctly paid. The computer expenses claimed were in fact for repairs to an auto document feeder for a photostat machine. He did not agree that the feeder was required for Half Point’s rental business and deals which still had to be finalised. He accepted that if Penny, Cyril and Sandra Cronje had not received salaries from HSH then Half Point would have had to give them a month’s notice. He accepted that Sandra Cronje had to stay with Half Point to wind down its rental division and that Half Point would have had to continue to pay her, but he did not accept that payments to her by Half Point were legitimate, because at that time she was working for HSH as well. He agreed that Cyril was entitled to payment in lieu of notice in terms of his employment contract with Half Point, but in view of the situation he did not agree with the payment. He did not accept that Penny was legitimately paid, even though she was involved in finalising the pending sales in which Half Point was the agency.

[99] Lindsay Timm testified on behalf of Graham. Prior to joining Half Point she was a successful agent with Remax Estate Agency. She was planning to leave and open her own franchise, and had applied to Chas Everett, and been awarded a franchise. She had read the franchise agreement with Chas Everett. She was approached by Heather’s husband Fred, and then by Tony, to join Half Point. She confirmed the agreement which was correctly recorded in writing on 31 October 2006. After the franchise was terminated she was paid out the R43 000.00 but was told later that this payment was in error and she had to pay back the money.


[100] When the franchise opened she already had general management skills and Graham and she did the administrative and computer work while Heather was involved in sales and the sales staff. They were all supposed to be selling properties and Graham did try to sell. In the early days everyone at Half Point got on well and there was no discontent amongst the staff concerning Graham. In the written statement she provided in August 2006 for the interdict proceedings she said that Graham should have put his golfing activities on hold while the office was being set up and that of all the agents, he was the least in the office.


[101] During February or March 2006 Graham told her that it would be a good idea to open an office at Kenton. An office at Kenton had been anticipated in the future. She was asked to participate in the Kenton office but declined. She did not want to put money into a business over which she did not have control, and Graham had at that stage not sold a property. The Kenton expenses which were paid by Half Point affected her profit share and she eventually asked for her share of those payments back. In her statement for the interdict proceedings she said that consent had not been given to Graham to open the Kenton office and that Graham was told if he went ahead it would have to be with private funds. She also said that Graham had told her that he was opening the Kenton office because his mother in law was leaving and he would have to fetch and carry his children.


[102] At the meeting on 4 April 2006 Heather expressed her wish to appoint an IT person once Graham had left for the Kenton office. Such a person was necessary because she (Lindsay) and Graham had been sharing this work and his departure would leave his work to her. She needed to be freed from such work in order to sell and earn an income.


[103] She was present at the meeting on 11 May 2006 when it was resolved that Cyril be appointed. She supported his appointment as it would enable her to sell. Her workload had increased since Graham’s departure for Kenton. At that time Heather had to go to the United States to see her sister. Heather asked her to train Cyril and personally paid her R5 000.00 to do so. While Heather was away in the United States and Graham was at Kenton, she and Cyril ran the Port Alfred office, with Tony taking care of the financial side. Graham came to the Port Alfred office from time to time and attended to work involving the franchise and GIF. In her affidavit in the interdict proceedings she said Graham only came to the occasional Tuesday meeting and was very seldom in the office. She agreed that this statement was probably correct. There was no discontent amongst the staff on these occasions when Graham was at the Port Alfred office, nor was Graham rude to the staff. Graham assisted the agents with computer related problems.


[104] When Graham changed the internet banking password she was angry because it adversely affected the office, and the service to clients. Penny was very upset as well, and Sandra Cronje was not happy. With regard to the 60% commission payment to Heather, she said that early in 2006 Heather felt that she was contributing to the business more than Graham was, and was making a lot of sales, and that she deserved 60% commission. Heather used to complain openly to her and other staff about Graham, in that he was not selling and not doing show houses. Graham never complained about Heather in her presence.


[105] She was present at the meeting on 15 June when Graham left. Graham had wanted to know whether it was a members’ or a management meeting, and when he was not answered he left. She said he should have remained. It had been necessary for her and Cyril to be present at the meeting because there were a lot of management issues to discuss. In her statement for the interdict proceedings she said that Graham was so cross that no-one could reason with him and he walked out of the meeting. She regarded this behaviour as childlike. It was clear to her at this stage that the situation between Heather and Tony on the one hand, and Graham on the other, was becoming very difficult and it did appear that they were not going to work together productively or professionally. A split between the east and west sectors would have been best for everyone. Tony’s proposal for a split was a way to solve the problems, and Graham’s proposal contained in his letter of 27 June 2006, when he announced that he would be returning to Port Alfred and wanted a backdated salary of R15 000.00 per month, was not reasonable.


[106] With regard to Penny’s resignation, Penny had said she would retract her resignation provided the office issues were resolved and she did not get caught in the middle of these issues. Lindsay said she and Penny were being caught in the middle of issues between the members, because Heather and sometimes Tony would tell them about issues with Graham. She and Penny did not want to take sides.


[107] She was again angry when Graham instructed the bank to suspend Half Point’s internet banking facility because they had to pay clients by cheque and there was a clearance period. Even her mother had been affected when she was unable to pay for groceries because the rental cheque paid to her had not been cleared.


[108] Heather and Tony informed the staff that an agreement had been reached to the effect that Graham would run the Kenton office and that the franchise would be separated, with a new CC at Kenton and the existing CC at Port Alfred. She could not remember if her membership of the Port Alfred CC was discussed but she would have expected to be a member.


[109] Heather informed the staff that Graham had announced he would be returning to the Port Alfred office and wanted his desk to be vacated. Heather told Cyril that he was not to vacate his desk for Graham. At that stage there was no threat of a walkout by the staff. Graham’s return did not bother her as she did not have a problem with him and she was able to get on with her work as usual. When Graham arrived he greeted the staff and asked Cyril to vacate his desk. When Graham occupied Heather’s desk, the rest of the staff just carried on as usual with their work, but the atmosphere was unpleasant. She thought at the time that his behaviour was unprofessional and childish, but in hindsight she thought that Heather should have instructed Cyril to move because Graham was a member. After the second or third day that Graham occupied Heather’s desk, Heather told the staff that she was going to take legal action against Graham. Half the staff did not care if there was an interdict or not, because Graham’s presence at the office did not affect everyone. She supported Heather in her application for an interdict and thought she was justified in bringing the application in order to get Graham out of her desk. She agreed that Graham was arrogant and insensitive to Heather. She also agreed that Graham’s written instruction to Cyril to summarise the manual was a bit silly and that Graham was probably trying to assert his authority.


[110] The affairs at Half Point were at this time common knowledge in Port Alfred and Half Point became the laughing stock of other agencies, but it was Heather who was spreading matters around town and not Graham. It was the dispute between the members, and the court application, which were being spoken about in town, and not the subject matter of the application. At Heather’s request, Lindsay accompanied her to her attorney’s office and to court. Heather kept her and the rest of the staff informed at all times about the court application. Heather did not want Graham in the office and did not want to talk to him. There was animosity on both sides and they were not able to resolve any issues.


[111] In her statement for the interdict application she mentioned that the urgency of the case was clear because of the atmosphere in the office when Graham came in, and that the staff had offered to down tools and walk out until he stopped coming into the office. She said she did not remember the staff offering to down tools and it was difficult to think that far back. She thought her statement was slightly exaggerated but possibly correct. She exaggerated because the working atmosphere in the office was not good and her side of the story came directly from Heather and Tony. When it was put to her that she could not remember writing the statement because she was now testifying for Graham, she said she was asked to testify for Graham and she wanted closure. She consulted with Graham’s legal team and declined to consult with Heather and Tony’s legal team because she was tired of being Heather and Tony’s puppet and being used by them.


[112] She agreed that it was correct, as was recorded in her statement, that Graham’s departure for Kenton caused her and other agents an extra workload; that free time and family time were more important to Graham; that when she and others worked extra show days and weekends, Graham was away with family or friends; and that she did the work which Graham claimed to have done. She concluded her statement by saying that she no longer trusted Graham, that he acted in a sly and sneaky manner, and that if he were to play an active part in the business she would have had no choice but to seek employment elsewhere. She said that was her firm view at the time.


[113] Graham’s letter of 31 July 2006 to Borman was handed to her by Heather for comment. She made notes on the letter. Her comment on Graham’s proposal that he participate in the running and management of Half Point on a day to day basis was “why now all of a sudden – from March he was not interested?” Her comment on his statement in the letter that he would consider all reasonable proposals with regard to the running of the business with the least amount of friction between the parties, was “a bit late”. She said she meant by that possibly a bit late in trying to help run the office. Her comment on his entitlement as an agent to leads was that he had passed up a lead which led to the sale of a property for the price of R1 350 000.00. She said however that he had given that lead to one of the agents and the result was that the agent and the business had benefited from the sale, and not Graham personally.


[114] When Half Point paid the legal costs of the High Court application, Lindsay did not think it fair because she had to forfeit 10% of her profits for a case which did not involve her. Heather personally reimbursed her 10% of the costs which were paid.

[115] She thought that the aim of the confidential survey conducted on 5 September was to keep Graham and Heather separate, and to separate the franchise into Kenton and Port Alfred, with Graham remaining in the Kenton office. For this reason she signed the survey questionnaire to the effect that she would not accept Graham as office administrator at the Port Alfred office. It was clear to her that Graham and Heather could not work in the same office and she thought that the survey was conducted to show that the staff could not work under those conditions. She agreed that if Graham had moved back to Kenton that would have put an end to the problems.


[116] In response to Graham’s letter to staff on 7 September 2006, she wrote to him as follows:

Graham, with reference to an undated letter received from you today 7 September 2006:


I think this is a little bit late, as for the last while all you have thought of is yourself, you have never once stopped to think of the harm caused to other people in the office.


I have found blatant untruths which you have put down on paper and sworn them to be the truth. I would never ever dream to behave like this in business, the opportunities have always been there for you to take up in this property industry but you chose to walk away.


I cannot and will not work together with you, you have broken up our team and we have tried our best to hold it together.


I think you should be thanking Heather for taking the chance and going into business with you as without her I don’t think you would have been able to come this far!! But you have chosen to stand on her, kick her around and hope for a friendship. I don’t think this behavior is acceptable.


Lindsay”



She said she was angry because Graham had impacted on her work. She felt at the time that he had broken up the team but now, looking at events in a broader context, she said it was his and Heather’s actions which had broken up the team, namely their bickering and conflict. If matters had been handled better and the team had not been drawn into the conflict, things would have been better. The staff were only hearing one side of events and did not get a chance to hear the other side and she regretted having been pulled into the fight between members. She wrote what she did because she was influenced by the one- sided opinion of Heather and Tony. She felt “terrible” about what had happened to Graham and that she had played a part she should not have played.


[117] According to her the staff were requested by Tony to stage a walkout. They were told that a walkout was necessary in order to separate the franchise and to show GIF that they wanted Graham to have the west sector. The staff had not agreed amongst themselves to have a walkout. She offered her house and the staff came there, and after they were informed that Graham had left the office, they returned.


[118] She attended the meeting with Townes and Geffen on 11 September 2006, which was also the day of the quarterly franchisee meeting. At that stage there was not a bad atmosphere in the office and she was not aware of the threatened termination by Townes. She had got permission to attend the franchisee meeting because she had been involved in the management of the franchise. They had been told that the purpose of the meeting with Townes and Geffen was to discuss Graham, their inability to work with him, and the atmosphere at the office. They were all given an opportunity to speak. They were all in agreement that the cause of the problem was Graham’s intrusion in the office. No-one suggested that Heather was the problem. After the meeting Heather and Tony told her that the franchise had been terminated and asked her to attend the franchisee meeting in the capacity of office manager. Although the franchise had been terminated, she did not question this request and remained. Cyril also remained. At this stage she did not comprehend that the franchise had been terminated, and still believed that there would be two CC’s, one at Kenton and the other at Port Alfred. That afternoon she was part of a group of staff members of Half Point who went on a boat cruise on the Marina. Geffen and Heather were also on the boat cruise. They drank champagne but she did not remember what they were celebrating. There was also a meeting that afternoon at which awards were handed out, and sales figures and GIF’s future plans were discussed. She, Heather, Cyril, and Penny were at this meeting as well as the other staff members of Half Point. Townes did not offer her and Cyril the franchise on 11 September, and that was not the reason why she was asked to remain at the meeting. She denied that she telephoned Heather and told her that Townes wanted her (Heather) to attend the rest of the day’s events.


[119] After the termination Tony asked the agents for affidavits and gave them pointers on what should be contained in the affidavits. She deposed to an affidavit, expressed in her own words, in which she recorded her lack of trust in Graham and that she would not work for him. She would seek employment elsewhere if he was associated with the SIR brand, and if he returned to the office she would walk out as she did on 8 September. She further recorded her support for Heather and her willingness to work under her. She provided the affidavit because she was trying to help Heather and Tony.


[120] The day after the termination, she went to work as usual. She was not too concerned about the loss of the franchise because she still believed that the separation would take place. Tony told her not to worry and that he would protect her and look after her interest in Half Point. He said that he was sorting matters out with Graham and once this had been done things would go back to normal. She therefore had no concern that she was going to lose money or that her job was in jeopardy. Heather and Tony told her that they were not going to oppose the termination of the franchise but that Graham wanted to oppose it. It made sense to her that Heather and Tony did not oppose the termination because in her view they still owned the business.


[121] Within a week of the termination of the franchise, Tony told her that the franchise would be awarded to her and Cyril, that a new CC would be formed to keep the business running, and that she would have a 50% member’s interest. She did not say no to the franchise because Tony asked her to hold it on his and Heather’s behalf. Tony told her that he and Heather could not have a member’s interest in the new CC because it would be in conflict with the CC which had just lost the franchise. She never applied to GIF for the franchise and never approached an attorney for the purpose of forming a CC. She agreed that it was in the interests of all involved that the new franchise should be up and running as soon as possible and that it should be a seamless process.


[122] The staff were told that a new CC needed to be formed and they should think of a name. Heather wanted Sunshine because of the Sunshine Coast, and the name Happy Sunshine Homes was agreed upon and Tony attended to the formation of the CC. Later in her evidence she said that the discussion about the name of the CC could have taken place after the meeting at Kariega on 18 July. Tony brought her the CK1 form and she signed it. She had a 50% interest on paper but only received 10% of the benefits of the business. The business was split four ways between her, Heather, Tony and Cyril. She and Cyril had signed a document which enabled members’ interests to be transferred to Heather and Tony. Tony told her to write to Half Point asking for her R43 000.00 back, and to backdate the letter to 12 September. She received payment of R43 000.00. She was asked to transfer R40 000.00 of it to HSH, in order to have an opening balance in its bank account. This R40 000.00 determined a share price of R4 000.00 a share and she therefore in fact paid for a 10% members’ interest, although on paper she held a 50% member’s interest. At the time she did not have experience in running a business and did not realise that she should not have signed a document which was false. She was doing what Heather and Tony asked her to do. Tony told her it was a temporary measure while they were sorting out issues with Graham, so she “went with the flow”. A financial statement of HSH for the year ended 28 February 2007 reflected that her loan account was R115 168.00. R60 000.00 of her loan account was Tony’s money. Tony owned 15% of the business and his R60 000.00 was put in her name. The balance of R15 168.00 was a performance bonus which was credited to her loan account. Cyril’s loan account of R353 312.00 was partly his money and partly Heather’s money, as well as a performance bonus. At a meeting at her house at about the end of October or beginning of November 2006, the share holdings and share price were discussed, resulting in Lindsay with 10%, Cyril with 35%, Heather with 40% and Tony with 15%, at R4 000.00 per share.


[123] Gill Dempers (one of the agents) was granted a 5% member’s interest in HSH because she owned property on the Marina. It was a requirement of the Marina committee that whoever was awarded the mandate to sell property on the Marina had to own property there.


[124] The franchise agreement between GIF and HSH was concluded on 29 September 2006. Lindsay and Cyril signed on behalf of HSH. Lindsay was not given time to go through the agreement and Tony asked her to sign it. HSH did not pay GIF for the franchise. From 12 September 2006 until Lindsay left to join Pam Golding Properties, Heather was the principal of HSH and attended to its day to day running. She was the PRO and also sold properties and received commissions, although Lindsay was not able to dispute that for five months Heather made no sales. Tony had asked Lindsay and Cyril to appoint Heather as PRO because she was not supposed to be seen as part of the business, and that appointment would give her a reason to be there. Heather’s name could then be used and ensure a flow of business for the franchise. She accepted that because of the need for a seamless transition, it was important that Heather be utilised for her PRO value.


[125] Lindsay was becoming concerned at the amount of work she was given to do at HSH . At the time of the termination of the franchise Heather and Tony had been offering shares in the business to the agents at R10 000.00 a share. At that time she had declined because she did not want more than 10%. She thought it was not right that before they determined the price at R4 000.00 a share they had not come back to the agents and said the share price was now R4 000.00. She denied that when Graham offered his 36% interest for sale at R360 000.00 during April 2006, she had been offered his shares at R10 000.00 per share. She queried why Cyril had been able to buy at less than what she had paid in the beginning and Tony explained to her that a new business was starting. She became increasingly unhappy and asked for meetings but her concerns were not addressed at meetings.


[126] Heather wrote to her on 27 February 2007 and referred to a meeting at Avondale where they had discussed the distribution of shares. Lindsay had stayed with 10%, Tony increased his 10% to 15%, Heather said she would take 40% and Cyril said he would take whatever was left. Cyril did not pay anyone for his shares. The R4 000.00 per share that he paid was paid into his loan account and in her view that meant that he did not pay for his shares. He also obtained shares in a business which was already operational. In her letter Heather said that Lindsay had requested 20% shares in early February. Lindsay said this was not so and said that Heather had said that she always wanted her to have 20%. She acknowledged that prior to the meeting Heather had wanted her to take up 25% of the shares. In the letter Heather also offered Lindsay 5% of her shares but Lindsay did not accept. Lindsay denied that she was unhappy because the business had had a good Christmas and she only had 10% while Cyril had 35%. She said that Heather had written the letter to keep her happy because the business was in her name, although she conceded that Heather and Tony could at any time have taken up their member’s interest.


[127] Matters grew steadily worse and eventually Lindsay stopped helping with management of HSH and paved the way for getting out of it. On 1 April the CK documents were changed to reflect the members’ interests as originally agreed upon, including her 10%. On 22 July 2008 an agreement was reached whereby she sold her 10% member’s interest in HSH to the other members for R125 000.00. She was also paid R98 000.00 for her share of the profits. On 31 July 2008 an indemnity agreement was concluded whereby Heather and Tony indemnified her against claims by the South African Revenue Services arising out of the disposal of her 39% member’s interest to Heather and Tony, which she had held as Heather and Tony’s nominee. Lindsay did not leave HSH on good terms and felt that Cyril had been favoured over her. She also said that Tony had gone back on his word regarding the payment to her of R43 000.00. He had always told her it was a loan and that Graham was trying to take her money, but then later told her that it was not a loan, and denied that he had ever told her that it was a loan. The amount was deducted from her share of the profits.


[128] A letter dated 21 April 2008 from Townes, addressed to the members of HSH and marked for her and Cyril’s attention, was never received by her, and she had never requested Townes to write the letter. The letter contained Townes’ account of the events leading up to the termination of the franchise and his reasons for termination.


[129] Tony testified. He is a businessman and a director of Kariega Game Reserve. Graham approached him with the suggestion of applying for the GIF/SIR franchise for the Port Alfred area. He thought that Graham did not have enough relevant experience and suggested that Graham work for SIR in Port Elizabeth. Graham however preferred to live in the country. They discussed the suggestion further and Tony said that they would need a very experienced sales person to join them otherwise they would not get the franchise. After making enquiries, he was told that Heather was the top sales person in Port Alfred and he approached her and she said she was prepared to consider joining them. They met with Townes and Townes was prepared to consider offering them the franchise provided Heather joined them. At that stage Heather was working for Pam Golding Properties and had some business to conclude there but said she would consider resigning thereafter, which she in due course did. When the business began, it was envisaged that they would first get the Port Alfred office well established, and when they had the finances, open an office in Kenton. Heather would be in charge of the Port Alfred office and Graham in charge of the Kenton office when it was up and running. Heather was strong on the sales side and guided Graham who was still inexperienced, while Graham had the IT skills. The franchise could not afford salaries so both of them had to sell to earn a living as well as perform other duties. Salaries would be considered after a year, depending on finances. During November 2005 Graham suggested that he be paid a salary but Tony and Heather did not agree to the suggestion. Graham said he would like the position of office manager but at that time Half Point did not have enough funds and there was insufficient work to justify the position. He (Tony) was a sleeping partner, keeping an eye on finances and contracts, and helping to recruit agents, one of whom was Lindsay, who was an outstanding agent at that time.


[130] When they were still operating from temporary premises they were looking for an agent for the Kenton area and Graham suggested Purdon, who was a friend of his. Tony and Heather both knew Purdon and did not think he would project the correct image for SIR, and both voted against appointing him. Tony did not have personal issues with Purdon, and liked him. Graham was not happy at the decision and left the meeting. Tony was shocked at this conduct because it was their first meeting and a member has to accept the majority vote.


[131] One of the agents Tony recruited was Annemarie van Vuuren. She operated from an office in Graham’s house at Canon Rocks. There was only one telephone in the house and it was agreed that business calls would not exceed R500.00.


[132] During March 2006 Graham told him that he could get office accommodation in Kenton for a good price. He thought it was a good idea because they had always envisaged opening an office in Kenton but Half Point was not in a good financial position at that stage, having had no sales in February. As at 28 February 2006 Half Point showed a loss of R71 000.00. However he thought it was a good opportunity which they might later regret having missed. Graham’s mother-in-law, who had been transporting his children to and from school, was returning to Durban and he now had the problem of the children having to be taken home to Canon Rocks from school. Opening an office in Kenton would help Graham because he would be able to take the children home from school, although this was only one of the reasons for opening the Kenton office.


[133] Tony was in favour of opening the Kenton office but because Half Point could not afford it, he proposed that they should fund it from private resources and he was prepared to pay 10% of whatever costs were agreed upon. Although Half Point was paying the expenses for the Bathurst office, they were very low. A meeting was held between the members and Graham presented a budget of R18 000.00 start up costs and R9 000.00 a month running costs. Tony felt that these costs were too high and if they were brought down to R10 000.00 and R5 000.00 respectively, he would be prepared to fund his share personally. Heather was not prepared to put in personal funds and was adamant that Half Point would not finance the Kenton office. She wanted to delay the opening of the Kenton office until September. Lindsay also declined to become involved. Graham was annoyed at Heather’s rejection and said that if they did not want to come in he would do it on his own. Tony tried very hard to get Heather to agree to carry part of the expenses but without success. It was never agreed that Half Point would pay the Kenton office expenses. Tony viewed the personal funding by him and Graham as bridging finance, in the hope that by September Half Point would be in a position to take over and reimburse them. He agreed that the allegation in the particulars of claim of the counterclaim that Graham had opened the Kenton office against the wishes of the other members of Half Point, was incorrect, and that it had been against Heather’s wishes. It was alleged in the particulars of claim that the opening of the Kenton office caused substantial expense to Half Point and prejudiced its business in Port Alfred. Tony did not think that Half Point was caused any harm by the opening of the Kenton office at that time, nor was the opening of the Kenton office contrary to Half Point’s interests.


[134] In his affidavit in the interdict application, Tony dealt with the opening of the Kenton office. He said he had informed Graham that if he opened the Kenton office, expenses incurred which exceeded the discussed minimum expenses would be for Graham’s personal account. He could not say why there was no mention in his affidavit of his 10% share of the Kenton expenses. The minimum expenses referred to were the R10 000.00 and R5 000.00 for set up costs and running costs respectively.


[135] Graham did not pay his 90% share of the expenses and in order to protect the SIR name Tony persuaded Heather to allow Half Point to pay some of them. At this time Half Point was still struggling, having showed the loss at the end of February.


[136] During March 2006 Graham telephoned him while he was at the doctor, and asked him if he knew that Heather was being paid 60% commission. He said that he was not aware, but because she was working hard, she should receive 60%. When he got home he telephoned Heather and told her she could have 60% and she reminded him that in January he had agreed she could be paid 60% commission. He had not recalled this agreement when Graham telephoned him. At that stage there was trust between the members and they made decisions by telephone. He assumed that Heather had told Graham about the 60% commission, although he did not ask her if she told Graham. He forgot to inform Graham that he had agreed to the 60% in January. At the members’ meeting of 4 October 2006 he said he was not sure when he had approved the 60% but at the meeting on 27 October 2006 he said he had approved it on 6 January 2006. He attributed this disparity to a memory lapse. In her affidavit in the interdict proceedings Heather said that she and Tony had agreed on the 60% commission in October 2005, but Tony said this was not correct.


[137] The Kenton office opened on 1 April 2006. Tony had all the desks made and also personally stained them. Tony paid his 10% of the costs for the period that the Kenton office was open. He tried to persuade Heather to contribute her 50% of the costs but Graham and Heather had an argument and that scuttled his efforts to get her to be involved in the Kenton office. Graham was to run the Kenton office and to try to get business in the western area and appoint agents, and Heather was in charge of the Port Alfred office. Lindsay was also involved in management duties at Port Alfred.


[138] The letter of 19 April 2006 from Graham in which he offered his member’s interest for sale at R360 000.00 was not totally unexpected, but the terms were restrictive, because they only had until 21 April to consider the offer. With regard to Graham’s words that trust between members no longer existed, Tony said that from their side Graham was doing things of which they did not approve, one of which was the appointment of the agent whose appointment he and Heather had disapproved. Tony thought that Graham’s offer was a good suggestion although his price was very expensive, and that a split into two sectors was a sensible idea. They offered shares to some of the agents at R10 000.00 per share. They could not come up with the money by 21 April and when they asked Graham for an extension he said the time was up.


[139] The meeting held on 11 May 2006 was an emergency one because Heather had to leave urgently for the United States to be with her ill sister. R12 million worth of deals were at that stage unfinished and they did not want to lose this business. Graham was now in the Kenton office, and they were struggling to manage the workload, particularly in IT, so they discussed the possibility of an office coordinator. With Lindsay’s agreement, they resolved to appoint Cyril at a salary of R4 000.00 per month, to start immediately. Graham was in Knysna at the time, playing golf, and would be away for several days. Tony’s son had told him prior to Graham’s departure that he and Graham and others were going away on a golf trip. Tony did not expect to get hold of Graham and it was an emergency situation. Although he had Graham’s cellphone number he did not expect Graham to interrupt his golf trip to attend a meeting. Cyril’s appointment was for a probation period of six months, and if he performed, he would have been given a permanent appointment. Tony did not think that Graham would be interested in coming back to the Port Alfred office and taking up the position of office manager at R4 000.00 per month. He was running the Kenton office and if he came back to Port Alfred there would have been a void at Kenton. When Graham returned Tony informed him of Cyril’s appointment. Graham was disappointed that he had not had a chance to discuss it and give his input.


[140] Graham then wrote his letter dated 22 May 2006, in which he mentioned that decisions had been taken without consultation with him, threatened legal action if further such decisions were taken, and suggested a shareholders’ agreement. Tony was in favour of a shareholders’ agreement but he felt that the draft agreement attached to Graham’s letter of 2 June 2006 was too complicated and that they needed a simpler one.


[141] He learned of Graham’s payment of his telephone account and the changing of the internet banking password. Tony had told Penny not to pay the telephone account and to wait for Heather to come back. Penny was a very trusted person and she was very hurt at Graham’s actions in paying the telephone account and changing the password.


[142] When Graham arrived at the meeting on 15 June 2006, he asked what Lindsay and Cyril were doing there. They offered to leave but before they could do so he left. As he was leaving, Heather told him decisions would be taken which would bind him. Lindsay and Cyril’s presence at the meeting was necessary because their input was required on management issues. Cyril was an employee and Lindsay was voluntarily doing a lot of the work which Graham used to do. Prior to Graham’s departure from the meeting, Tony said that one of the reasons for the meeting was for each member to present a shareholders’ agreement so that a formal agreement could eventually be concluded. At the meeting Tony convinced the others present that Half Point should pay certain Kenton office expenses, because creditors were telephoning for payment and he did not want the franchise to get a bad name.


[143] After that meeting he made his proposal of 17 June 2006 to the effect that a new CC be formed for the west sector and that Graham and Jean should be the members. In his view there was too much friction and matters could not continue in this way. He thought his proposal would eliminate friction between him and Graham, and between Heather and Graham. He thought that Graham’s letter dated 22 June 2006 in response, in which he inter alia wanted a salary of R10 000.00 per month, was not a constructive attempt to move forward. He thought the salary proposal was unfair because no salary for Heather was proposed.


[144] Then came Graham’s letter of 27 June 2006, announcing that he was returning to the Port Alfred office on 3 July. Tony could not see the point of Graham returning to Port Alfred, questioning what would happen to the Kenton office and saying that opening an office and then closing it would do harm to the franchise’s name. Graham’s demand for a salary of R15 000.00 per month and payment of Kenton expenses was in his view preposterous.


[145] He thought Graham’s approach to Townes to act as a facilitator was an excellent idea. He had been trying to mediate between Graham and Heather without much success. He agreed that Graham acted in the interests of Half Point in involving Townes at that stage. He made his requested submission to Townes, in which he said that he was not in conflict with Graham or Heather and had tried to resolve the conflict. In his submission, he set out the events so far in accordance with his testimony at the trial, and mentioned that it was difficult to mediate when one party walks out of a meeting.


[146] When the internet banking facility was frozen, Tony instructed Heather to inform Townes. He was aware that Heather had consulted with Borman and he was in favour of a warning letter being sent to Graham.


[147] At the meeting of 18 July 2006 they all aired their grievances and Townes said to him that he could see that Heather and Graham could not work together. Townes told them his suggestion was to split the franchise into two small boutique franchises, thereby reducing monthly payments. All points were debated and agreed. The only outstanding matter was the monthly amounts to be paid to GIF by each franchise, namely the split of the royalty fee. Neither Graham nor Heather was happy and each had to make hurtful concessions. There were no winners or losers. He thought Townes had been very generous to Graham, because Graham had had no sales up to that point and now he was getting an entire franchise for the west sector. According to the Deeds Office transfers had taken place in that area to the value of R120 or R130 million and he was confident that the west sector was viable. Despite the fact that Graham had not sold any properties while at the Kenton office, he could have recruited agents to sell for him. They departed from the meeting amicably, and Tony shook hands with Graham. Townes’ e-mail of 21 July correctly set out what had been agreed. As from 1 August 2006 there would a new CC for the east sector and he assumed Graham would form a CC for the west sector. Graham accepted the deal struck on 18 July and Tony was bitterly disappointed and disgusted when Graham withdrew from the deal. He thought everyone had made an effort to end the problem. He said Graham’s intention to return to the Port Alfred office was preposterous and questioned what would have to happen about Cyril and what would happen to the Kenton office. He thought Graham’s proposed figure of R483 000.00 for setting up the franchise at Kenton was preposterous and that Graham wanted to run before he could walk.


[148] On 27 July 2006, the day Graham returned to the Port Alfred office, Tony telephoned him in the morning and asked him not to do anything he would regret because an agreement had been reached on 18 July. After Graham returned, Tony wrote to Jean hoping that she would influence Graham to correct his behaviour. He did not think that Heather was unreasonable in bringing the interdict application and believed she was acting in the interests of Half Point. Initially he did not want to get involved in court proceedings against a family member, but eventually he realised he could not sit on the fence and he deposed to an affidavit in the proceedings. At this time he was aware that Graham had created a bad feeling amongst the agents because they perceived his behaviour towards Heather as a man bullying a woman. One of the agents told him that matters could not carry on as they were and that he had better do something. He wrote to Graham on 2 August 2006 telling him that he and Heather were going to honour the agreement of 18 July. He requested him to vacate Heather’s desk, pleaded with him not to cause a confrontation which would upset the staff, and asked him to be tolerant and co-operative until Townes’ return on 7 August. He hoped at that stage that Townes might be able to facilitate a solution. He believed that Graham’s return to Port Alfred was totally unnecessary and he could not support Graham’s actions in returning.


[149] After the meeting of 18 July it was envisaged that a new CC would start business from 1 August 2006, and he and Heather debated a name with some of the agents. The name Happy Sunshine Homes was agreed upon and on 3 August that name was approved and reserved by the Registrar of Companies. At that stage that franchise was going to be his and Heather’s, and they were planning to invite Lindsay and Cyril to become members.


[150] With the intention of keeping Townes informed, on 7 August Tony sent him a fax informing him of the interdict application and asking whether or not it was in the interests of Half Point and SIR to have a 36% member who had not produced any income since October 2005. He asked this question in order to highlight the financial side of the franchise for Townes and thought that it would help Townes with further negotiations.


[151] Tony did not want the application for an interdict to proceed and made one last effort to try to resolve the conflict. He wrote to Graham with the proposal that they purchase Graham’s member’s interest for R180 000.00, that this interest be transferred to Tony, Heather, Lindsay and Cyril, and that the application be withdrawn with each party to pay their own costs.


[152] Tony conducted the confidential survey without Graham’s or Heather’s knowledge. The staff did not want them to know. He felt the atmosphere in the office and knew that the agents were the lifeblood of the franchise. He acted in the interests of Half Point because if the agents left, Half Point would have closed its doors. He did not want the franchise to be terminated. Prior to the survey he had told Townes that the staff were not happy. He thought that Townes, as the franchisor, had a right to know, and he had gone to great lengths to mediate. He believed that Townes should know about the atmosphere in the office and whether or not the staff wanted Graham back. He did not force any of the staff to sign the survey document. He was hoping that the agreement of 18 July could be implemented and that both franchises could operate in harmony. He did not think that a meeting with Graham and Heather and the agents would have solved the problem of the agents’ unhappiness, and meetings with Graham did not work.


[153] Heather told him about the threatened walkout on 7 September and that she had averted it. He denied that he instigated the walkout on 8 September and said that would have been a stupid thing to do because it could have caused the loss of the franchise. He thought the walkout was irresponsible in that the office had been deserted, there was no receptionist, and no-one to answer the telephone. When he arrived at the office on 8 September, only Graham was there. He telephoned Lindsay who told him to come to her house and there he found the staff. They said they were not going back to the office until Graham left. He ordered Sandra Cronje to return to the office because she was a salaried employee. Penny, who was also a salaried employee, was not interested in returning. He intended to discuss the walkout with Graham and Heather at the meeting which had been scheduled for that afternoon. He informed Townes of the walkout because he felt he should know what was going on and he did not want to lose the franchise.


[154] He was shocked when he saw Townes’ e-mail informing them that he was instructing GIF’s attorneys to draw up a termination letter. He telephoned Townes who requested him to arrange for the agents meet with him and Geffen on 11 September. He thought that Townes would be able to pacify the agents and solve the problems. Tony was present at the meeting when the staff expressed their views, but he did not participate. Their main complaint was that they did not want Graham to come back to the Port Alfred office as administrative manager. Townes and Geffen then left for about five minutes and when they returned asked the staff if they were prepared to put their views in affidavit form. The staff agreed to this and Tony was asked to collect the affidavits and forward them to Townes. He did so because he was complying with Townes’ instructions and he wanted to ensure that Half Point would not be liable for damages. He did not prescribe to the staff what to say in their affidavits.


[155] Graham and Heather then arrived, and the three members were informed that the franchise had been terminated. Tony was shocked. He had not expected, in spite of the previous warnings, that the franchise would be terminated that day. He thought that after the agents had aired their grievances, they could revert to the agreement of 18 July. Graham and Heather left immediately. Tony did not know on 11 September that the franchise had been offered to Lindsay and Cyril, and he denied telling Lindsay that the franchise had been awarded to her and Cyril. He could not recall the date when he heard that Lindsay and Cyril had been offered the franchise. On 12 September Lindsay approached him expressing her concern about her money now that the franchise had been terminated and he told her to write him a letter asking for her loan to be repaid.


[156] At the members’ meeting on 12 September Graham indicated he did not want to accept a verbal termination and Tony told him the decision came from the top and that he accepted it. He believed GIF had grounds to terminate but it was still a shock. He did not think that there was a prospect of successfully contesting the termination. Had there been a chance of doing so, he would have backed Graham. Tony felt it would be a waste of money to oppose the termination and that to do so would adversely affect their relationship with GIF, who could also sue Half Point for damages. In order to protect Half Point’s interests he saw no point in opposing the termination. He sent the minutes of the meeting to Townes because Townes asked him to, and also as proof of acceptance of the termination. Because of Graham’s concern that the termination had been verbal, he telephoned Townes and asked for the termination in writing. The written termination was duly received.


[157] Tony and Heather later sought a legal opinion from Senior Counsel on whether or not to oppose the termination, and the opinion was what they would be wasting their time and money. Tony believed he could rely on this legal opinion. On the advice of Counsel he and Heather did not agree to provide Graham with a resolution to act on behalf of Half Point to contest the termination, because of their fiduciary duty to Half Point and because there was no prospect of success. A further reason was that Graham did not give them an indemnity in respect of any claims against them personally or against Half Point, arising from litigation challenging the termination. Tony and Heather were also not prepared to resign as members of Half Point without being paid out the value of their member’s interest.


[158] Tony thought Townes’ choice of Lindsay and Cyril as franchisees was an excellent one. They were both young people with enthusiasm and energy. He and Heather offered them HSH so they would not need to form a new CC. Lindsay and Cyril requested his assistance with the contract with GIF, and he advised them and had certain clauses deleted, including the suretyship clause. Lindsay and Cyril requested him and Heather for financial assistance because they did not have enough money to finance the franchise. At a meeting on 31 October 2006 it was decided that they were under-capitalised. Lindsay and Cyril also wanted the benefit of Tony and Heather’s expertise. Because Half Point was registered as an estate agency until the end of December, it would be in conflict with HSH and he therefore could not be a member of HSH. From 1 January 2007 there would be no conflict and he would be free to take up membership in HSH. He and Heather were prepared to put money into HSH but he needed to protect his money and he did so by requiring that Lindsay and Cyril sign an undated blank transfer form so that if anything went wrong, he could step in at any time. Regarding the various financial holdings in HSH, he said during August when the new boutique franchise was envisaged, Lindsay said she would like 10% and could not afford more because she was involved in a spec building project at the time. Tony said he would take up 15%, Heather 40% and to their surprise, Cyril said he would take the remaining 35%. They were surprised at Cyril’s decision because they had another potential investor, one Peter Lane, and had intended to split the franchise five ways. HSH was in due course registered with Lindsay and Cyril each holding a 50% members’ interest. At the meeting of 31 October when Lindsay and Cyril realised they were under-capitalised, the percentages agreed upon during August remained the same, in calculating the risk capital to be put in by Tony and Heather. Lindsay’s R40 000.00 for 10% set the bench mark for the amount of the risk capital to be contributed, so Tony put in R60 000.00, Heather R160 000.00 and Cyril R140 000.00. Until such time as Tony and Heather could take up a member’s interest, the shareholding would be registered as 50% in Lindsay’s name and 50% in Cyril’s name. Profits as at 28 February 2007 were paid out in accordance with the financial percentages. The price of R10 000.00 a share had been discussed when Graham had offered is 36% interest for sale at R360 000.00 at an earlier stage. Lindsay and some of the other agents were asked if they wanted to buy this interest at that time.


[159] Tony was concerned that while Half Point was still registered with the Estate Agency Board, it would not be proper for Heather to act as an agent. He suggested that if she was to work for another company it should be in a different capacity. Lindsay and Cyril came up with the idea of Heather being appointed as PRO, so that Heather would be in the public eye and they would not lose clients to other agencies. Had it not been for Heather’s involvement with HSH, the seamless transition might not have happened and Half Point might have had to pay damages to GIF. From 1 November 2006 Tony and Heather assisted with the running of HSH but Lindsay was the principal and she and Cyril were in control. They had signing powers at the bank and controlled the finances.


[160] After the termination Graham disappeared and Tony only found out weeks later that he was working in Johannesburg. Half Point meetings would be arranged and Graham would say he was not available. The meeting of 27 September 2006 was one such meeting. At that meeting he and Heather decided not to oppose the termination. They had had a legal opinion that GIF had acted correctly and there was no hope of successfully opposing the termination. They also felt bad that Lindsay had invested R43 000.00 in good faith, and felt morally obliged to look after her, and agreed that it was fair to repay her.


[161] It was decided at the members’ meeting of 4 October 2006 that Half Point should pay the legal expenses of the application for an interdict. Tony was of the view that Graham had caused the problem by hi-jacking Heather’s desk and that Heather had acted in the interests of Half Point because if she had not brought the application they would have lost all their agents.


[162] At the meeting of 18 November 2006 Graham arrived with a tape recorder. Because Graham had not provided the tape recording of a previous meeting which he had recorded, Tony and Heather decided not to allow him to tape the meeting. The agenda had been provided to Graham prior to the meeting and one of the items on the agenda was an offer by Graham to sell his shares in Half Point to them. Graham refused to discuss this item because the window period had expired, even though Heather and Tony had through their attorneys requested an extension of time within which to consider the offer. The reason for the decision taken at that meeting to pay Heather R25 000.00 per month was Graham’s refusal to sign a release form to allow her to sell, and she needed to earn a living. She was paid for two months. She had done a lot of work on deals which still needed to be finalised. Tony thought it unfair that she was not allowed to earn a living while Graham was doing so in Johannesburg. At that meeting Tony and Heather did not disclose their financial interest in HSH. Tony and Heather then wrote to Sapire offering to buy Graham’s member’s interest in Half Point. Their offer was not accepted.


[163] After termination Tony undertook to deal with all matters relating to Half Point’s various obligations to creditors and staff, deals still in the pipeline, and disposal of assets. Townes expressed trust in him to collect money from sales and pay over to GIF the royalties. The creditors were first paid, and then the loan accounts of the members were paid out. Lindsay was paid her R43 000.00 but after it was pointed out by Graham, his attorney, and Half Point’s auditors, that this repayment was incorrect, the R43 000.00 was deducted from Lindsay’s share of the profits. Half Point’s lease was ceded to GIF. Half Point’s rental division was not part of the franchise, and was sold to HSH with effect from 31 October 2006, on which date Sandra Cronje’s employment with Half Point ceased, and she was employed by HSH. Office equipment was sold to HSH. The printer had to be repaired before it could be sold to HSH. Half Point needed to retain Penny’s services for deals still in the pipeline but as the work decreased so did her salary. Half Point was obliged to pay Cyril a month’s salary in lieu of notice, in terms of his employment contract with Half Point. After the profit shares less tax were paid to the members, there was an amount of R1 913.00 left over which Tony and Heather agreed would be paid to him for his efforts in finalising Half Point’s affairs, which took more than a year. From his share of the profits, he paid R3 000.00 into Graham’s share, in accordance with his undertaking to pay a portion of the Kenton office expenses.


[164] Tony initially wanted to see how Lindsay and Cyril fared in running the business but eventually he was disappointed in their performance and he and Heather took up their membership interests on 1 April 2008. He did not think it was necessary to inform Townes because it was simply a change of membership within HSH, which had the contract with GIF. He also thought that Heather had informed Townes. He, Heather, Cyril, and one Birt also subsequently became members of a CC which obtained the GIF franchise for Grahamstown. When Lindsay sold her 10% interest in HSH, he persuaded Heather and Cyril to pay the price he and Lindsay had agreed upon. He thought the price of R125 000.00 was too high but wanted to settle the sale amicably.


[165] After the summons was served on him, Tony asked Townes to write a letter setting out why GIF had terminated the franchise, because he wanted the history of the matter. In response Townes sent his letter of 26 May 2008 to the members. Tony did not request the letter of 21 April 2008 which Townes wrote to Lindsay and Cyril.


[166] With regard to the various alleged breaches by Graham, he said Graham had an obligation to sell and he considered Graham’s failure to sell a breach of his obligations because he should have tried harder and did not use the opportunity to learn from Heather. Graham did not devote enough time to sales although he could not say how much time Graham spent in trying to sell. He said it was partly correct that Graham was unwilling to do show houses and complained if requested to work at weekends, because Graham had said it was important to play sport and liked to spend time with his family on Sundays. He agreed that Graham occasionally did show houses. An example Tony gave of Graham performing his duties in a perfunctory manner was his departure for a week to play tennis shortly after the Kenton office opened. Principals were expected to work harder than agents. On another occasion Graham went to Knysna to play golf. Although he supported Graham in opening the Kenton office, the timing was wrong and if Graham had had the interests of Half Point at heart he would have postponed the opening until September. He agreed that if the Kenton office had made sales, Half Point would have benefited. Tony considered Graham’s instruction to Cyril to summarise the GIF manual to be disruptive because he was given an impossible time frame within which to carry out the instruction. An example of Graham putting his personal interests ahead of Half Point was his departure after termination and failure to assist with Half Point business and pass on the Kenton and Boknes listings. Examples of Graham not carrying on Half Point’s business with the necessary care and skill were his walking out of meetings and going against the majority vote by appointing an agent. If he had the interests of Half Point at heart he would have remained at meetings to discuss matters so that decisions could be made. Tony did not deduct the convention costs and the Canon Rocks telephone account payment from Graham’s loan account repayment because he thought that he needed the money. He forgot to deduct these amounts from Graham’s share of the profits, and to demand them after the profits were paid out.

[167] Heather testified that at the time Tony approached her to join Half Point she was already a very successful estate agent with Pam Golding Properties, and was not interested in the prospective GIF franchise. During December 2004 or January 2005 she met with Graham and Tony and was still not interested, but was eventually persuaded by her husband and son. After another meeting with Townes present, when he said if she became involved they would be awarded the franchise, she decided to go ahead. She named three conditions: her member’s interest would be 50%, the premises would be in the centre of town, and she could first go on a trip to Egypt which she had won through her successful sales with Pam Golding. Graham did not like her request for a 50% member’s interest but she wanted it because she saw Graham and Tony as one family, and herself as the other. In preliminary discussions it was decided that she and Graham would both sell, Graham would do the IT work and liaise with GIF, she would be involved with sales and work with the staff and put her sales experience into the office, and Tony was to look after finances and legal matters. Graham was very good at IT and he handled the internet side, advertising, window cards and listings. It was decided that all their efforts would first be put into the Port Alfred office and once they were on their feet, outlying agencies, including Kenton, would be opened. They however were looking for agents in outlying areas who could work from their homes. It was also decided that the members would not draw salaries for a year. From the beginning Lindsay put a lot more into the business than merely selling, and Heather told Graham and Tony that she should be given some acknowledgment. It was then decided that she should have the 10% profit share.


[168] Initially she and Graham got on well. At the meeting in September 2005 he proposed Purdon as an agent for the Kenton area. She and Tony said that Purdon did not have the right image for SIR. Graham was annoyed and packed his briefcase and left. She was stunned. She later found out that Purdon had been appointed.


[169] During February or March 2006 an office was opened at Bathurst. Heather’s sister-in-law, Kotie Tyson, was an experienced estate agent who owned property in Bathurst and wanted to return to Bathurst and to work as an agent. Heather, Graham and Lindsay went to look at an office and nobody opposed opening an office there. The rent was R1 000.00 per month. The Bathurst office benefited Half Point because Kotie achieved sales and the running costs were small.


[170] During December 2005 or January 2006 Graham told her that his mother in law was returning to Kwa Zulu/Natal and it would be difficult for him to fetch his children from school in Kenton, take them home, and then return to Port Alfred to work. He also said that the competition for sales in the Port Alfred area was very great because most clients requested agents who had already been practising in Port Alfred. He also had only one duty day a week because of the number of agents. If he opened the Kenton office he would get every client every day of the week. Heather sympathised with him, but after consideration decided that opening an office at Kenton would not be in Half Point’s interests. At that stage Half Point could not afford it and she thought they should keep to the decision to wait for a year.


[171] She did not think that Graham had been pulling his weight in selling at that stage. She thought he wanted an “eight to five” job and did not want to work at weekends. It had been agreed that as principals, she and Graham would be on duty on alternate weekends, together with the duty agent, but this did not happen and Graham only worked every sixth or seventh weekend. He said weekends were family time and he also played sport. Graham did ask for extra days as a duty agent.


[172] Heather and Lindsay were impressed with the proposed office premises in Kenton. At a meeting at Kariega she asked Graham for a budget and he proposed R18 000.00 set up costs and R9 000.00 a month running costs. She said they could not manage these amounts and Tony suggested R10 000.00 set up costs and R5 000.00 a month running costs. She was still not happy because Easter was approaching and the Port Alfred office was going to be very busy, and they needed all the manpower that they had. Graham then said he would go it alone and Tony said he would support Graham. Tony tried to talk her into becoming involved in the Kenton office but she was not interested. If the proposed Kenton costs had been extremely low like the Bathurst office costs, she might have been in favour of opening. She did not know the extent of Tony’s involvement in the Kenton office but she thought he had helped with the furniture and she believed that he had paid 10% of the expenses. She had little to do with what was happening in the Kenton office and never went back there. She intended to discuss Kenton sales commission payments at the meeting on 15 June but Graham had walked out of the meeting. When she made her later submissions to Townes prior to the meeting of 18 July, she did not mention that Tony had backed Graham in opening the Kenton office because what they did privately did not affect the business, and the funds were not coming from Half Point. Her complaint to Townes about Graham’s conduct was that he had abandoned the Port Alfred office and made no input in Half Point. Tony was not operating the Kenton office and was doing his share at the Port Alfred office. In her founding affidavit in the interdict application she also made no mention of Tony’s support for the opening of the Kenton office, because it was a private matter between Tony and Graham.


[173] After Graham left for Kenton, Lindsay was the only person with IT skills. Heather then asked Cyril to help Lindsay so that Lindsay could sell as well. Cyril assisted without payment. Graham came to the Port Alfred office for the weekly staff meetings, and in addition came there about twice a week.


[174] The opening of an office at Canon Rocks was not discussed with Heather. She heard that a resident agent’s board was made, to be installed at Graham’s house at Canon Rocks, and she saw that a telephone account for those premises was being paid by Half Point. Annemarie van Vuuren was appointed as an agent and used the office in Graham’s home at Canon Rocks. When Heather learned that there was only one telephone at the house, and that private calls were being paid for by Half Point, she said to Graham and Tony that the maximum Half Point would pay was R500.00. After that agreement, over R10 000.00 worth of Graham’s private telephone accounts were paid but when the last account came she told Penny only to pay R500.00.

[175] When Heather left Pam Golding she had Gold Club status which was equivalent to a Sotheby’s Select Agent, and Townes told them that agents in that category should be paid 60% commission. Heather realised that she qualified but did not ask 60% for herself at that stage because she wanted the franchise first to do well in Port Alfred. However she was working such long hours that she could not manage the same sales she had achieved at Pam Golding, and in October 2005 she told Tony that she felt she qualified for 60% and she thought he agreed to 60% at that stage. She found out that other principals of GIF franchises were taking 60%. In January 2006 she telephoned Tony and said that her first deal was due to be registered and she would take 60% commission, and Tony said that he had no problem. Meetings were not being called at that stage because they were so busy, and when she told Tony, she thought he would have told Graham, because she saw them as one entity, but in hindsight she realised she should have told Graham as well. Graham would have seen the 60% commission payments when he signed off the payment schedules for Half Point. When Tony telephoned her in March she reminded him that he had agreed to the 60% in January. She agreed that Graham would have thought that the decision to pay her 60% commission was made behind his back and that he was justified in being upset.


[176] Graham’s letter of 19 April 2006 to her and Tony came as a surprise. She and Tony did not think that his member’s interest was worth R10 000.00 a share and she could not afford more at that time. She approached the agents, three of whom expressed interest, but when they reverted to Graham he said the time had expired. As far as a split in the franchise was concerned, she thought it was the only way to go in view of the fact that Graham had already left for Kenton.


[177] She telephoned the Kenton office on 11 May 2006 to inform Graham about the meeting on 11 May, and was told by the agent there that Graham was away playing golf in Knysna. Although she knew Graham had a cellphone she did not call him because she thought he would not attend the meeting. She was due to leave for the United States on 15 May. They decided at the meeting that they should offer Cyril a position as trainee manager for a probationary period of six months. Lindsay was bearing a large burden at the time and Cyril had been assisting as much as he could. Heather gave Lindsay her personal cheque for R5 000.00 as a token of her gratitude because she had to leave for the United States and Lindsay was going to bear the full brunt in her absence. Heather enticed Cyril by offering him 10% of her profits each year and for that reason he agreed to work for R4 000.00 per month. Her husband was left to run both his and Cyril’s farms. She did not think that Cyril’s appointment would affect Graham because he was running the Kenton office. Cyril took up his appointment immediately and sat at the desk which Graham had previously occupied. Graham had offered Cyril the use of his desk when he left for Kenton. At that desk was the computer which held the templates for the advertisements.


[178] She did not take issue with the contents of Graham’s letters of 22 May and 2 June 2006 and acknowledged that in the latter letter Graham had praised her. She was also in favour of a shareholders’ agreement.


[179] Heather called the meeting of 15 June 2006. It was a members’ and a management meeting. Lindsay and Cyril were at the meeting because there were a lot of management issues to be discussed. After Graham asked if it was a members’ or a management meeting, Lindsay and Cyril offered to leave, but then Graham left. She called after him telling him there were important matters to discuss and that if he walked out she would inform Townes and Barak Geffen (Lew Geffen’s son), and any decisions made at the meeting would stand. He responded with words to the effect that they should go ahead. At the meeting Heather again expressed that she was not in favour of Half Point spending money on the Kenton office at that stage.


[180] She was not opposed to Tony’s proposal of 17 June 2006, suggesting a split in the franchise with a new CC at Kenton. She thought that it was fair and that he was looking for a solution to the problems. She did not view Graham’s proposal of 22 June 2006, in which he suggested a salary for himself of R10 000.00 per month, as workable. She was working late every night, six or seven days a week, and did not see why she should also not get a salary. She also did not believe that Half Point could afford his salary. She agreed however that Graham was entitled to make a proposal.


[181] Prior to receiving Graham’s letter of 27 June 2006, in which he announced his intention to return to Port Alfred on 3 July, Heather had received no indication that he was intending to return. With regard to his backdated claim for a salary of R15 000.00 per month, she said he had not managed the office. She accepted that most of the Kenton office expenses attached to that letter were reasonable in relation to the business of the Kenton office.


[182] Heather was happy with Graham’s approach to Townes for mediation. After Townes’ e-mail requesting that all matters of conflict be suspended pending mediation, she continued to be paid 60% commission. She sent her submissions to Townes, as requested. In her submissions she mentioned a number of criticisms of Graham, but also gave him credit for his IT contribution to the franchise and his assistance to the agents in IT. On 7 July 2006, at Tony’s request, she e-mailed Townes informing him of Graham’s threat of legal action against the bank. The manager of the bank had told her that Graham had threatened to sue the bank and as a result they would have to freeze the bank account. The bank required a letter with all the members’ signatures, and until they received it they would have to freeze the account. She referred the problem to Tony and a letter was drawn up which Graham refused to sign, but the bank manager accepted the letter with her and Tony’s signatures. She agreed that this incident would not have happened if she had not been paid 60% commission. In her e-mail to Townes she requested permission to present Graham with a letter from Borman, whom she had consulted when she received Graham’s letter of 27 June 2006. Borman had written a letter but she held it back because of Townes’ instruction to put conflict matters on hold. She could not recall having previously discussed the letter with Townes. However on 11 July 2006, after the internet banking had been frozen, she e-mailed the letter to Graham.


[183] Heather’s account of the meeting of 18 July was much the same as Tony’s. She too believed an agreement had been reached. She did not recall that Graham had said he was going to get documents relating to the viability of the west sector, or that he had said he would not be held to any agreement unless he found Townes’ terms acceptable. She was surprised that he was going to do a viability study because when he wanted to open the Kenton office he appeared to have already done the viability study. She thought he might have done the study because he was nervous about being on his own in the west sector. The feasibility study which she saw was for an office bigger than the one at Port Alfred.


[184] She agreed with Townes’ account of what had been agreed at the meeting, as contained in his e-mail to the members of 21 July. She, like Tony, intended to honour the agreement reached. She and Penny drew up a schedule of all the 60% commissions she had received, and submitted the schedule, as well as the Kenton expenses paid by Half Point, to Haripersad, in accordance with what had been requested. The list of Kenton expenses was prepared by Penny, and included the Canon Rocks telephone account which she agreed did not relate to the Kenton Office. She could not explain why other items on the list, such as rent and salary, had been paid by Half Point, because she had nothing to do with the finances.


[185] After the meeting of 18 July they had a meeting with the agents and agreed on the name Happy Sunshine Homes for the new boutique franchise. A meeting was held in late July or early August 2006 at which she, Tony, Lindsay and Cyril were present. Lindsay had a 10% profit share in Half Point and she had promised Cyril a personal 10% profit share, and she and Tony were keen to bring them into the new boutique franchise. Lindsay said she would stick with her 10% because she was involved with her husband in a development in Port Alfred. Heather said she would stick with her 40%. By this she meant she was going to have a shareholding of 40% and did not want any more shares. Tony said he wanted another 5% and would take 15%, and Cyril said he would take whatever was left. Heather was not happy with this result. She was disappointed that Lindsay did not want more, and she would have offered a percentage to Peter Lane who had expressed interest, but Cyril said he would take the balance of 35%.


[186] With regard to Graham’s e-mail of 26 July 2006 announcing his return to the Port Alfred, she said she had no problem with him participating in the business but asked why did he “disappear” to Kenton and not participate in the business. She did not accede to Graham’s request to arrange for him to have his desk back because on a previous occasion when he said he was returning he did not return. In addition the instruction from Townes was to comply with what had been agreed on 18 July until he returned on 6 August. Graham should have stayed in Kenton until Townes returned. She could tell from the tone of Graham’s e-mail that his return would cause a scene in the office and affect the agents.


[187] She thought that Graham’s subsequent return to the Port Alfred office was “the last straw that broke the camel’s back”. The situation with the agents was volatile and Penny was not happy with his presence in the office after what had happened with the internet banking. On 27 July 2006, a Thursday, she arrived at the office and found Graham sitting at her desk. She had worked until eight o’clock the previous evening on a sale with clients who were coming in at nine that morning to sign the contract. She asked Graham to move and he told her she should tell Cyril to move and then he would move. Cyril could not move because he was working to a deadline. She did not recall instructing Cyril not to move. She then used the table in the middle of the office, where the clients signed the contract. In order to use her computer she had to work from behind Graham using one hand. Graham had a laptop and could have worked at the centre table near which was a plug point. The following day Graham was again at her desk. On the following Monday Graham sat at the conference table and used his laptop, and there was no friction in the office. On Wednesday 2 August he again occupied her desk and the agents and Penny told her that they were going to walk out if Graham behaved in this way. She asked them not to because it would cause a public scene and told them she was seeking legal advice and was going to apply for an interdict to have him removed from her desk. That same day she, together with Tony, consulted with Borman. Tony supported her but felt uncomfortable about bringing an application against a family member and asked if he could be left out of the application. The interdict application was launched on 3 August. She felt she had no alternative but to bring the application because otherwise the agents would have walked out and Penny would definitely have left. She felt she was being fair to the agents because they had left top companies in Port Alfred to join her in the GIF venture and now they were involved in an unpleasant situation. She had also heard that Graham’s occupation of her desk was public knowledge. She was confident that Borman had given her the correct legal advice. Lindsay and Penny came to court with her of their own accord.


[188] She agreed that the tone of Graham’s letter of 31 July to Borman was conciliatory and an attempt to find a way forward, although later she said she did not think the letter was conciliatory or an attempt to find a reasonable solution.


[189] After she received Townes’ e-mail of 7 August, warning that if the bickering continued a termination of the franchise might result, she e-mailed him complaining about Graham’s behaviour, including the taking over of her desk, his failure to contribute to Half Point’s income, and the incurring of unnecessary expenses at Canon Rocks and Kenton. She sent this e-mail because she was desperate and Graham was causing chaos in the office. She felt that as the franchisor, Townes should know what was going on, and she was appealing for assistance. She was not trying to paint Graham in a bad light and was trying to explain to Townes how all the conflict had occurred.


[190] On 14 August she received a resignation letter from Penny. Penny was doing all the administrative and financial work in the office and it would have been very difficult to cope without her.


[191] She supported Tony’s proposed settlement letter of 14 August because it was an attempt to avoid the interdict and save Half Point. When the meeting of 4 September was held the outcome of the interdict application was not yet known. There was no conflict with Graham at that meeting.


[192] She agreed that Sapire’s letter written after the application for the interdict was dismissed, was for the most part reasonable and conciliatory. She had lost the application and Graham was coming back and they were going to look for a way forward. She wrote the letter of 5 September to Graham concerning interim desk arrangements and calling a meeting for 8 September. The office was very busy with preparations for the Marina presentation and the quarterly meeting, and there was insufficient time to make the necessary arrangements. Heather had been responsible for the quarterly meeting arrangements which included a breakfast, a lunch, and a trip around the Marina in the afternoon. She did not think that Graham was capable of supervising the staff in finalising the Marina presentation, as he had said in his response to her letter. She forwarded Graham’s response to her letter to Townes because she did not know where to go from there.


[193] On 7 September Graham arrived at the Port Alfred office and his desk was available to him. The agents again threatened to walk out because of his presence, but Heather managed to prevent them by saying that with the Marina presentation pending they could not make such a public statement. The meeting for 8 September did not take place. On the morning of 8 September Graham sent her an e-mail excusing himself from attending the meeting owing to a prior commitment. She had specifically called the meeting on the advice of Borman, Sapire and Townes.


[194] She saw Graham’s letter of 7 September to the staff as well as Penny’s and Lindsay’s response. She did not know that they were going to reply to Graham’s letter, nor did she know of Tony’s confidential survey.


[195] On 8 September Lindsay called her and asked her to come to her house. There she found the staff and was told that they had walked out because of Graham’s presence. She did not stay long because she was busy with the Marina presentation. The Marina presentation was held on 9 September and was successful. She knew that Townes was informed of the walkout although she did not know who informed him. She thought that Townes should know what was happening, even though he had previously threatened to terminate the franchise in the event of a walkout.


[196] On 11 September she arrived for the quarterly meeting and met Townes, who wished her happy birthday and gave her a gift. She and Graham and Tony were then informed of the termination of the franchise. She was shattered and immediately went back to the office and did not attend the quarterly meeting. In spite of the warnings, she had not expected the termination, because Townes had asked her to attend the quarterly meeting. She was upset and angry with GIF because she had worked so hard and built up the business successfully, and felt she had not done anything wrong. Lindsay later telephoned her and told her that Townes had asked her to carry on with the organisation of the afternoon’s events. She returned and participated in the events, but she was not happy. Her biggest concern was the Marina owners whose houses were to be on show, and the embarrassing situation of having to telephone them and tell them that the franchise had been terminated and they were no longer coming to view their houses. She did not want the termination to be public knowledge because it was embarrassing for her and would have damaged the SIR brand. She heard later that day or the next day that Lindsay and Cyril had been awarded the franchise. Neither Lindsay nor Cyril informed her on 11 September that they had been awarded the franchise, nor did she tell Cyril that day that the franchise had been terminated.


[197] On the morning of 12 September 2006 she went to see an attorney who was a friend. She wanted to know where she stood, seeing that she was the breadwinner and needed to earn money. She was very concerned about whether or not she could still act as an agent. The attorney did not feel there was any point in opposing the termination. At the members’ meeting of 12 September she said if she had been on her own she would have considered disputing the termination, but not in the present “partnership” with Tony and Graham. It was impossible to work with Graham as a member and as far as she was concerned he had caused the brand damage to SIR. She did not see any sense in contesting the termination and wanted to move on. At that stage the written reasons for the termination had not been received but she accepted the termination because she did not expect Townes or Geffen to terminate without grounds. On 7 October, in order to be 100% sure, she and Tony consulted with their attorney and Senior Counsel about whether or not to contest the termination. She accepted the opinion and had confidence in the lawyers who gave such opinion.

[198] She also sought legal opinions on whether or not she could sell because she was not sure of what she was allowed to do. She went to the Port Alfred office where she attended to Half Point sales which were still in the pipeline. She felt a moral obligation to the staff and wanted to see them into their new venture and to ensure a seamless transition. With regard to her appointment as PRO for HSH she was prepared to allow HSH to use her name and face because she wanted Lindsay and Cyril to succeed. She smiled when she received the letter from Lindsay and Cyril offering her the position, because she thought they were trying to keep her in the franchise, and only Tony and Fred knew at that stage that she wanted to move on. She was looking into how she could become a property consultant and was not financially worried because there were still Half Point deals in the pipeline. She did not respond to the letter offering her the position of PRO but she performed the duties of a PRO. She sold no property from 11 September until the end of 2006. She was paid 10% commission on listings she had acquired for HSH, which predated the termination of the franchise. She was also involved with show houses and her name and telephone number accompanied property advertisements in the newspaper. On behalf of HSH she dealt with the Marina manager in connection with the Marina mandate. After the termination of the franchise Half Point was not involved in any further sales and without a franchise it was dormant.


[199] When Graham would not sign the resolution allowing her to sell, she told Tony she was going to go ahead and sell because she had to earn a living. Tony kept holding her back telling her he did not think that she should sell. She decided to start selling again after 1 October 2006, but did not try very hard. Her first sale was in 2007, although she had two possibilities during November 2006. She headed some HSH meetings because she wanted to make the agents feel comfortable and ensure that things were running smoothly. She was also keeping stability in the office for the sake of a smooth transition. Lindsay and Cyril now had the power in the franchise and the agents turned to Lindsay with their problems, because she had the experience.


[200] At the Half Point members’ meeting on 4 October 2006 she rejected Graham’s proposal that the termination of the franchise be opposed. Half Point was finished, she could not do business with Graham because of his conduct, and she had had advice from three persons (two attorneys and a businessman) concerning the termination. She was happy that now she could make a change in her life and not have to deal with conflict and disruption.


[201] About a month after the termination Tony told her that the new CC did not have enough funds and asked her if she would be prepared to put money into the CC as risk capital. She was assured that the blank share transfer would secure her money. She was happy to put her money in and receive a share of the profits. She did not want to be a member at that stage, because of the responsibilities and liabilities she had encountered at Half Point. By 31 October 2006 she was leaning towards staying with SIR as a property consultant. At the meeting of 31 October the various members’ interests were discussed, and Lindsay said she would stick with her 10%, which was the percentage she had wanted to have for the boutique franchise. At this stage Heather wanted to move forward with HSH, but not as a member. She was still unsure of what she could and could not do. After 31 December 2006 she felt more comfortable because Half Point’s fidelity fund certificate had expired.


[202] At the Half Point members’ meeting on 18 November 2006 neither she nor Tony disclosed their financial interest in HSH to Graham. She said with hindsight maybe it was important to do so but the focus of the meeting was the purchase of Graham’s member’s interest. She did not consider resigning as a member of Half Point at that stage because it would not have been a sound financial decision.


[203] HSH had achieved good sales during December 2006 and January 2007. Lindsay wrote to Heather on 25 February 2007 saying she regarded Heather as head of the business, thanked her for the offer of shares, and requested 35% in the business. She said she was willing to take the role of administration manager and felt that the only way she and Heather could allocate duties was if they had equal shares in the business. Lindsay had previously requested 20%, which surprised Heather because the percentages had been agreed on 31 October 2006. Heather proposed selling 5% of her interest to Lindsay with the option of buying it back. Heather responded to Lindsay by letter dated 27 February 2007. She confirmed that she was the head of the office, because she took all the responsibility and the public saw her as head of the office. Lindsay had been taking strain and had told her and Tony that she did not want to be the principal. She referred to the allocation of shares at the meeting at Avondale, which was the meeting in August 2006 concerning the boutique franchise. She also referred to her wish at that stage that Lindsay take a 25% share and her disappointment when Lindsay declined. In her reply she referred to previous correspondence from Lindsay in which Lindsay had said “makes me think that this whole take over was planned and executed to benefit the Tyson family”.


[204] She felt that something to do with finances was troubling Lindsay and at a subsequent meeting chaired by the auditor Lindsay’s issues were discussed. One of them was the payment by Half Point of the legal expenses of the interdict application. Heather personally paid Lindsay 10% of those expenses. She did not regret doing so but in hindsight thought that she should not have because Lindsay was one of the agents who wanted to walk out and forced her to seek legal assistance.


[205] During cross-examination she was asked to elaborate on the various alleged breaches by Graham contained in the counterclaim. She regarded his failure to sell and his failure to try to sell as a breach. He was half-hearted in his attempts to sell, took long weekends, worked every sixth weekend and reluctantly did show houses. He performed his duties in a perfunctory manner because he left early, did not work weekends, walked out of meetings, paid his personal accounts after hours, had the internet banking suspended, and by opening the Kenton office did not contribute anything to the Port Alfred office. In May 2006 he went away on a golf trip and in June 2006 was away for a week playing tennis. In July 2006 he did not attend three meetings. The opening of the Kenton office was against her and Tony’s wishes because Tony only supported the Kenton office in his private capacity. The Kenton expenses were also unreasonable. She believed that Graham opened the Kenton office for reasons of personal convenience but she accepted that a further motivation could have been that he wanted to make money for Half Point. His conduct in changing the internet password caused a disruption amongst the staff in that Penny was upset and resigned, and that would have upset the agents. Graham abandoned his duties with Half Point after the termination by not attending meetings and ensuring that the winding up was being done properly. Graham failed to carry out the business of Half Point with the necessary care and skill because he set a poor example for the staff, and because of the various examples she gave of him performing his duties in a perfunctory manner.


[206] Penny testified. She started working for Half Point during September 2005. She set up the administrative system at Half Point, which included accounting, monitoring sales, month end and quarterly returns, and she was also the receptionist and telephonist. She paid accounts on the instructions of Tony and Graham. Prior to her employment with Half Point she had known Heather for fifteen years but had not met Graham or Tony. After her employment commenced she found Graham very pleasant to work with and very competent on the computer. She liked and trusted Tony. She learned about the opening of the Kenton office and according to her knowledge Graham was to be the principal there and Heather was to be the principal at Port Alfred. Her understanding was that the Kenton office expenses were for that office’s account. She paid some of the Kenton expenses on Tony’s direction but was told to refer most of them to Graham because they were not for Half Point’s account. She said it got to the stage when there was a “to and fro” between her and Graham about who was going to pay the accounts. She would get calls from creditors asking for payment and Tony asked her to pay them to avoid bringing Half Point into disrepute. The various payments reflected on the list submitted to Townes after the meeting of 18 July were made with prior approval.


[207] In the early days there was a positive spirit at Half Point, but the atmosphere changed when business dealings between Graham and Heather soured, about five or six months after she started work there. After Graham left for Kenton, he came to the Port Alfred office occasionally but not regularly. The work which he had been doing at Port Alfred was taken over by Lindsay and she understood that Cyril was going to take over from where Graham had left off.


[208] She had been instructed by Heather and Tony to pay only R500.00 of the Kenton office telephone account (she must have been referring to the Canon Rocks telephone account). Graham had wanted her to pay the account of R1 260.61 and she told him she could not pay it. When she was unable to access the internet banking she found out from the bank that the password had been changed and discovered later that Graham had paid the account. She felt that he had committed theft because he had taken money from Half Point without authorisation. She also felt that he had compromised her integrity by his conduct. She and Graham were the only persons who knew the password and she was unable to make payments which had been entrusted to her. Following this payment she wrote to Tony and tendered her resignation with effect from 30 June 2006, but said she would reconsider if the situation improved. She said she was not prepared to be caught up in the conflict between Graham and Heather. This incident was the beginning of the unpleasantness but apart from this incident she had good relations with Graham and liked him. He was never unreasonable or rude to her. She would not comment on how he treated the agents because she did not know.


[209] After her letter of resignation the situation improved, because Graham was not in the office. When he was in the office she thought there was tension because nobody knew what was going to happen, and she herself felt uncomfortable. She thought that the tension between Graham and Heather concerned the opening of the Kenton office. As far as she was aware Heather and Tony felt that the Port Alfred office was not yet established enough to warrant opening the Kenton office. She knew about the dispute concerning the 60% commission payments to Heather but she was not prepared to comment because she did not know why Heather should not have been paid 60%. When Half Point’s internet banking was frozen, she was unable to pay accounts and rental payments had to be made by cheque.


[210] When Graham returned to the Port Alfred office and sat at Heather’s desk she found the situation very stressful and thought it was stressful for Heather as well, because she had clients coming to the office. Graham’s conduct affected the whole office. She admired Heather for her calmness in dealing with the situation. She felt that Heather had no option but to do something about the situation and she agreed with the action she took to keep Graham out of the office. There was no alternative but to proceed with the application for an interdict because they could not agree on anything. She and Lindsay went to court on the day of the interdict application in order to support Heather. She went of her own accord and not at Heather’s instigation.


[211] On 14 August 2006 she e-mailed another letter of resignation to Heather saying that the situation in the office was untenable because of the tension Graham’s presence caused. She referred to his arrogance and insensitivity towards the staff and his treatment of Heather and the taking over of her desk. She said he had an arrogant attitude and acted as though he owned the office. This conduct started when he returned and took over Heather’s desk. She could not think of a specific incident which triggered her letter of resignation. It was rather an accumulation of events as well as his attitude, although she could not refer to any particular event. She thought that the staff were unhappy, although they were not complaining to her, but there must have been discussions about Graham’s presence in the office. She thought she stayed on at the office after her letter because either Heather or Tony must have asked her to reconsider.


[212] After the application for the interdict was dismissed, Tony handed the confidential survey document to the staff, but they were under no obligation to participate. Penny was happy to complete the document and said she would not accept Graham as office administrator at Port Alfred because she could not work with him. She thought that Graham’s letter to staff was an attempt to get the staff back on his side. In her letter to Graham in response, she said that her loyalty lay with Heather and Tony and that they had the best interests of Half Point at heart, and that Graham did not. In her view Graham had created dissention and had acted dishonourably. She referred in her letter to his conduct in relation to the internet banking and told him that she did not trust him and did not want to be associated with him. She also told him that he alone was accountable for the mess in which they all found themselves. In her view he had started it all. She told him that the whole situation had caused the entire staff a great deal of emotional suffering and tension.


[213] When Graham returned to the office on 7 September he was not rude to her nor was he rude to anyone in her presence. She did not recall a threatened walkout that day which had been averted by Heather. The next day was the walkout. She did not remember anyone in particular instigating the walkout, but they agreed to walk out. They all left the office and Lindsay suggested they all go to her house and have tea and cake. She could not remember what was discussed amongst them there. When she heard that Graham was no longer in the office, she returned. She participated in the walkout because she was amazed and angry at Graham abandoning the office for so long and then returning and expecting everyone to act as though nothing had happened. She knew that Graham would be back in the office the following week but she did not plan to resign.


[214] She was told by Tony that Townes and Geffen wanted to talk to the staff on 11 September 2006. Townes and Geffen wanted to know what their problems were. The problems they raised with Townes and Geffen concerned Graham’s presence in the office. Penny said she probably told them that she did not want to work with Graham in the office. They were asked, but not forced, to submit affidavits. She referred in her affidavit to what she had said to Graham in her letter to him and confirmed that she could not and would not work with him. She could not remember when she heard that the franchise had been terminated. She was not affected because she did not need the job.


[215] After the termination there was a continuation from Half Point to HSH, and once her work relating to Half Point was concluded, she was employed by HSH, although there was a stage when she was working for both CC’s and was being paid pro rata. Tony authorised payments for Half Point and Lindsay and Cyril authorised payments for HSH. Heather played a passive roll in the office because the franchise had been terminated and she was no longer a principal. Graham sent Penny accounts relating to the Kenton office to pay and she requested him not to do so because she was not authorised by two signatories. She told him he was personally liable for the expenses. His response was that he had a right to incur the expenses in the interests of Half Point and suggested she should pay the accounts immediately, and not concern herself with members’ issues.


[216] Penny left HSH at the end of February 2008 because she decided to stop working.


[217] Townes testified. In his capacity as CEO of GIF he deals with franchise agreements and is familiar with their terms. If a franchise for some reason has to close down, there are two options: one is to find another franchisee very quickly to ensure a seamless transition, the other is to shut it down and let it lie fallow for several years, because it takes years to rebuild the reputation. After termination damages can also be claimed from franchisees, for example two years’ worth of royalties, because it takes about two years to re-establish the name. A seamless integration with a new franchisee would include the retention of agents and existing mandates.


[218] Graham and Tony approached him for the Port Alfred franchise and when he learned that Heather was the agent involved he was satisfied because he knew her reputation. A senior and experienced agent is a prerequisite for granting a franchise. He explained the policy regarding commission splits, saying that normally a manager or franchisee does not qualify for the select club but because of Heather’s experience and reputation there would not have been a problem in paying her 60% commission.


[219] If a franchisee wanted to open a sub-office, GIF retained the right to interpose to ensure that the sub-office maintained its branding standards. When he learned of the opening of the Kenton office, he deliberately refrained from doing anything about it because he wanted to reach agreement with the members first. If Graham wanted to run it as a viable franchise then he would have done the necessary brand and location checks. He did not give written permission to open the Kenton office, but neither did he write to the members and tell them they were in breach of the franchise agreement. He acknowledged that Graham had telephoned him and told him that the office had been opened. He did not tell Graham that he could not do so, because he wanted the business to go ahead in a positive way, but he still needed to do the branding and location checks. He did not do those checks. He did not give written permission to open the Bathurst office, nor did he terminate the franchise for this reason, but he reserved his rights to do so. (The opening of the Kenton office was ultimately not a reason for the termination). He agreed that, by personally funding 90% of the Kenton costs, to the benefit of Half Point, Graham was acting in the interests of Half Point.


[220] Half Point had a reasonably good start and was progressing. Townes agreed that Graham’s letter of 2 June 2006 praising Heather and suggesting an association agreement demonstrated a reasonable and conciliatory attitude and was in the interests of Half Point. He also agreed that Graham’s attendance and input as a speaker at the convention was in the interests of Half Point. He did not think that Graham was acting dishonestly when he changed the internet banking password.


[221] He sent his e-mail of 3 July 2006 offering his services as a facilitator, after Graham and Tony contacted him regarding the disputes. He received their submissions, and his aim was to get them all in one room where they could talk frankly and either find a solution or not. When he received Graham’s e-mail saying that numerous disputed payments had been made and he was taking action, he did not know what he meant. When he received Heather’s e-mail about Graham’s threat of legal action against the bank and the friction in the office becoming public knowledge, he was worried because at that stage he thought the problems had been contained between the members. With the banking problem clients would now be involved because rents would not be paid, and a threat of legal action against the bank was not the sort of conduct he looked for in a franchisee. He did not think that Heather would give Borman’s letter to Graham because he thought they would all keep matters on hold pending the facilitation meeting. When Graham sent him the letter he had received from Borman he was further concerned because the conflict was becoming public. When Graham informed him that he had instructed the bank to suspend internet banking, he did not know if it referred to trust funds or current account payments but if it affected payments of deposits, or attorneys waiting to register transfers, or payment of rents, then the suspension of the internet banking would have had a fundamental effect on the operations of Half Point.


[222] He arrived at the meeting of 18 July at Kariega with an open mind. He would have liked the franchise to continue in its present form, but with some sort of working agreement or association agreement dealing with how the members were going to do business together. Within an hour or two the meeting degenerated into threats and counter- threats, bluster and counter-bluster, between Heather and Graham, with Tony sitting on the sidelines. He realised that the trust between the members had broken down and told them that he needed to look for a separation rather than for them to work together. With the animosity in the room and in the prior correspondence, he did not believe that they could work together. He was now no longer the facilitator but the mediator and franchisor. Agreement was reached on a number of substantive issues, with the aim of keeping Graham and Heather apart, including a separation into two franchises. In his mind agreement had been reached, and he was looking forward to going on holiday and handing over the matter to Haripersad to work on the accounting side and calculate a minimum royalty for the two franchises. He thought they had all had a fair deal and he left the meeting feeling that they could move on. During the meeting Graham was concerned about the viability of the franchise and wanted to compile a business plan. Townes knew that the west sector was a viable area but he thought that Graham had some reservations about its potential success and wanted to do a viability study in order to satisfy himself. He agreed that the separation of franchises was weighted in favour of Heather and Tony because they would get 70% of the market and Graham 30%. However Graham lived in the west area and would be on his own and master of his destiny, and it would be up to him to create his business. When he received Graham’s documents containing set up and operational costs, he thought they were reasonable. He thought that Graham had sent him the information in order to justify himself, and that Graham wanted him to test the validity of the costs, for reassurance. He knew that at the time of the meeting that the Kenton office had had no sales, but said that satellite offices usually do not work and one needs an owner operator who is focused on a market and drives the business. He was still of the view that agreement had been reached.


[223] He was at the airport, about to go on holiday, when Graham’s e-mail of 25 July rejecting the terms proposed at the meeting, was read to him by one of his staff. He was dismayed, because he had thought the problems were over, and now the situation was reversed. It was not his recollection that Graham had said at the meeting that he would not be held to agreements unless he found the terms acceptable. He thought that Graham’s intended return to the Port Alfred office would end badly, because of the lack of trust which had been evident at the meeting. He dictated a response to Graham’s e-mail, sent via Haripersad, to the effect that the members should comply with what had been agreed on 18 July, until his return on 6 August. He wanted to maintain the status quo so that he could intervene one more time.


[224] He returned from holiday on 6 or 7 August and after he received Tony’s fax of 7 August, which mentioned, inter alia, Graham’s occupation of Heather’s desk and the application for an interdict, he sent his e-mail saying that Graham was unwilling to accept the mediation process, and warned the members that should the bickering and fighting escalate, he would review their performance, which might lead to termination of the franchise. He said that Graham was unwilling to accept the outcome of the mediation process. The conflict was now a matter of public record and he was obliged in terms of the master licence agreement to protect SIR brand. The e-mail was a serious threat but he was still hopeful of a resolution. He hoped that the mention of termination would make them see reason and talk to one another. On 24 August he sent the e-mail to the members, noting the application for an interdict and that the application contained breaches of the franchise agreement, and reserving GIF’s right to terminate the franchise. He was deeply concerned because he preferred parties to resolve matters through discussion rather than litigation. He did not agree with what Heather was doing because he did not want GIF to be involved in a court case, although with hindsight he did not think that arbitration would have been possible, given the circumstances. In addition, because of non-payments and similar matters, the client base might be affected, clients might learn of the dispute, and their agents might talk about the dispute to other agents in the area. On the same day he sent an e-mail suggesting an off the record meeting on 31 August, in order to try to stop harm to the name. The meeting never took place.


[225] He compared Sapire’s letter written after the application for an interdict was dismissed, in which he suggested that the parties should put aside their differences and find a way of working together, as shutting the stable door after the horse has bolted. Whatever Graham did at that stage would have made no difference because the relationship of trust was over. He agreed that Graham was trying to repair the relationship but the relationship was fundamentally flawed.


[226] The confidential survey was partly at his instance. He wanted to know what was going on in the office because he was being told stories by Graham and Heather. As a result of the survey he realised that if Graham returned to Port Alfred it would be the end of the business. He thought Graham was misguided in asserting his rights and returning to Port Alfred after a long absence and expecting the business to continue in the normal way. Because of his experience in the estate agency industry he knew that if the agents left they would re-canvas their clients for another agency and tell them what had happened at Half Point. After he received Graham’s response to Heather’s letter calling for a meeting on 8 September, he e-mailed Graham and Heather, suggesting liquidation of Half Point, telling Graham he should stay away from the franchisee meeting, and warning of termination in the event of a walkout. By this time he had seen the pattern of Graham’s behaviour: emotional or petulant reactions after agreements were reached, and agreements becoming “unstitched”. There was a question of integrity emerging from the correspondence and he decided that he did not want to do business with Graham. He did not like the manner in which Graham conducted business, and mentioned the examples of breaking the agreement reached on 18 July, the taking over of Heather’s desk, the threat to sue the bank, the changing of the internet password, and the suspension of the internet banking, the latter two examples resulting in non-payment to rental clients. He was of the view that two or more of such incidents gave GIF the right to terminate the franchise. He said that Graham was responsible for the non-payment to clients and the public knowledge of the interdict, although he agreed that there had been no further complaints about Graham’s conduct after the desk incidents. He did not want Graham at the franchisee meeting because he did not want a fight between Graham and Heather in front of the other franchisees. He thought it more appropriate that Heather attend the meeting because she was the major shareholder. He denied that at that stage he wanted Graham out of the franchise.


[227] He did not ask for Graham’s or Heather’s input on the confidential survey because he had repeatedly warned them to stop their conduct, and had heard their versions. He said that in his warnings he was not targeting Graham or Heather, but Half Point, because his agreement was with Half Point.


[228] He received Sapire’s letter of 7 September, defending Graham and accusing Heather of engineering a walkout. With regard to Sapire’s statement that if a system for working together could not be formulated, this would lead to the liquidation of Half Point, he said it would have been in his interests for Half Point to be liquidated because despite attempts to resolve the conflict, Graham and Heather could not work together. He would rather have called it a day and found a better franchisee.


[229] In response on 7 September he sent an e-mail to Sapire referring to the threatened walkout which was averted by Heather, and repeated his call for Graham not to attend the franchisee meeting. He mentioned the possibility of losing all the agents and warned that he would seek damages because he had consistently warned the parties of the consequences of the dispute. With regard to his statement to Sapire that he had no confidence in Graham representing the SIR brand in the area, he said he did not want the disaster that was about to occur in Port Alfred, that Graham had overstepped the mark, and it was time for him to leave. If Graham committed one more breach he would terminate the franchise.


[230] He thought it was Tony who had informed him of the walkout. On 8 September he sent the e-mail informing the members that he had instructed GIF’s attorney to draw up a letter of termination dealing with the interdict, the walkout, the opening of offices without consent and any other breaches. At this stage he had not made up his mind to terminate the franchise because he was still going to have a meeting with the agents. From the time he received the confidential survey he was not aware of any breach by Graham but the survey was the straw that broke the camel’s back and indicated to him an impending problem. The agents walked out not because of any specific conduct on the part of Graham, but rather a pattern of conduct. He believed they blamed Graham for the animosity in the office. He arranged to meet the agents, together with Geffen, on 11 September, in order to listen to their issues. Some of them had already telephoned him asking for help. He did not want Graham or Heather to be present at the meeting. At that stage he did not think there was much chance of reconsideration of termination. At the meeting, each agent had an opportunity to speak. There was a little unhappiness expressed about the application for an interdict but the bulk of their unhappiness was directed at Graham. They were not willing to work under Graham, and if that was the case, they were not going back to work and were walking out. They were waiting to be told what was going to happen. He spoke to GIF’s attorney who advised that he could verbally terminate the franchise. He then informed the members that the franchise was terminated. Heather “teared up” and walked away. He asked Graham to leave because the franchisee meeting was about to start and Graham left. Tony also left. He later asked Lindsay to invite Heather to attend the rest of the day’s events because she had made all the arrangements and he wanted to extend an olive branch.


[231] He asked Tony to obtain affidavits from the agents because he was concerned they might retract their verbal complaints and he wanted to be on firm ground with regard to the termination. When the lack of specifics in the affidavits was put to him, he said the clear pattern which emerged from the affidavits was that no-one wanted to work with Graham. The agents were not employees but independent contractors who have to be supported and nurtured and their respect has to be earned.


[232] He went on to attend the franchisee meeting and informed the franchisees of what had happened. They had been asking him what was going on because the dispute had become public knowledge. He was considering asking Lindsay and Cyril to take over the franchise and invited them to the franchisee meeting. Lindsay would be in the leadership and sales role and Cyril would run the back office as he had been doing. Lindsay was experienced and had a good track record and the agents had looked to her for support. This was an indication that she would keep the franchise going in the right direction. On 11 September he told them that he wanted them to take over the running of the franchise so that there could be a seamless transition. They were both willing to do so. GIF was willing to forego the R100 000.00 licence fee in order to protect SIR name. If the franchise had collapsed the potential damages would have been far more than R100 000.00. The fee was negligible in comparison to royalty payments over ten years. He also thought that they would not have been able to afford the fee. He did not do the usual suitability checks on Lindsay and Cyril because he knew them already, and a business plan was not necessary because the new franchise would be part of an ongoing operation.


[233] He did not award the franchise to Heather and Tony because they were part and parcel of the problem, namely the franchise. When asked what he meant by part and parcel of the problem, he referred to the argument between Graham and Heather. When directly asked if Graham and Heather were partly responsible for the termination of the franchise, he said yes. He said the bulk of the blame lay with Graham. The application for an interdict was ill-thought and should not have happened, although he understood Heather’s anger, but in his opinion Graham was the reason for the application. The trust between then was broken and maybe Heather had no other option. He did not think that Tony caused any harm to the franchise or had done anything to cause the termination. He saw him as conflicted and had sympathy for him. He did not offer the franchise to Tony because he did not want any interdicts to stop the new business and wanted a clean start. He did not want past history entering the new franchise.


[234] He was specifically asked what brought about the termination of the franchise. He said that they were hoping that the parties would be mature and accommodate one another. He believed that Heather resented the fact that Graham had not made sales and wanted a salary, and that there was a difference in strategy in relation to the opening of the Kenton and Bathurst offices. Up to the time of the meeting of 18 July he felt comfortable and his experience with Graham was quite good, and at the time of the meeting there was still an opportunity for the parties to work side by side. However Graham’s subsequent behaviour and disregard for others, and the agents’ cries for help, made it clear that something was fundamentally wrong. As a result he did not want Graham to be part of SIR.


[235] He asked for and received the minutes of the members’ meeting when the majority had agreed to accept the termination and he sent the written confirmation of the termination to make certain that he had closed the door completely. He had received most of the agents’ affidavits and thought he was on solid ground.


[236] After termination he and Haripersad agreed that they could rely on Tony to attend to Half Point’s various financial obligations. The franchise was awarded to HSH and the effective date of the new franchise was 12 September 2006. He wanted to retain the goodwill of Heather’s name and reputation so that her client base would remain loyal to SIR, and he thought it was a good move to appoint her as PRO of HSH. He had no concern about releasing Graham and Heather from their restraints of trade because the new franchise was up and running, Half Point was winding down amicably and he wanted Heather in the new franchise as an agent.


[237] Up until the time that he saw the various documents which were to be used at the trial, Townes did not know that Heather and Tony had a financial interest in HSH or that they had become members on 1 April 2008. When he found out, he was, as he put it, “not amused”. Although Heather appeared as broker principal of HSH on SIR’s website, as far as he was concerned she was not, and he had no agreement with her for Port Alfred. At the time of the trial, although he knew that Lindsay was no longer a member of HSH, he had not signed a new franchise agreement because he was waiting for the trial to finish and was reserving his rights.


[238] He could not remember who asked him to write the letter of 21 April 2008, addressed to HSH, or why he had written it. He wrote the letter of 26 May 2008 because Tony had asked him to set out his recollection of the sequence of events.


[239] Tony had contacted him about Birt becoming a member of HSH. Tony was acting as a facilitator and was bringing him a lead. Townes thought that Lindsay and Cyril were going to make some of their shares available to Birt. Tony did not disclose to him that he was a member of HSH.


EVALUATION


[240] Graham was not an impressive witness. He was often evasive, irrational and stubborn, and seemed incapable of answering a straightforward question directly or conceding an obvious fact. Sometimes he would not answer at all, and simply say “no comment” when the question was capable of being answered.


[241] Lindsay testified in a satisfactory manner but had great difficulty reconciling her evidence at the trial in support of Graham, with her previous criticism of him. She gave the impression of attempting to downplay this past criticism but the attempt came across as hollow and unpersuasive.


[242] Heather for the most part was a satisfactory and consistent witness. There were times when I think she was a little glib, and a number of times she made gratuitous critical comments about Graham. She often referred to Graham as having “deserted” the Port Alfred office when this was not strictly correct, and downplayed Tony’s role in the opening of the Kenton office. However she gave Graham credit where it was due, for example for his IT skills and his assistance to the agents.


[243} Tony too was a satisfactory witness who unhesitatingly answered questions and maintained his evidence under cross-examination. He was also fair, in the sense that he acknowledged that Heather and Graham clashed, and he had tried to mediate between them, and did not seek to paint only Graham in a bad light. He acknowledged that at the meeting on 18 July 2006 Graham and Heather had each made hurtful concessions and that there were no winners or losers. The division which the conflict caused within the family was clearly painful for him and I think he was for the most part sincere and honest.


[244] Penny was in my view an unbiased witness. She had been friends with Heather for some years, yet she was objective about Graham, saying she liked him and that he had never been rude or unreasonable to her. She did not claim to speak for the agents but merely referred to the atmosphere in the Port Alfred office. She impressed me as a forthright person who has strong views and is not afraid to express them, and who will act in accordance with what she believes is right.


[245] Townes impressed me as an unbiased and objective witness. He was at times critical of Heather and was genuinely displeased when he learned about the current membership of HSH. He was fair to Graham, saying that up to the time of the Kariega meeting his relationship with Graham was good, but that the problems started after that. When asked about the cause of the termination, his evidence did not appear rehearsed, and he seemed to be giving his honest and considered view.


[246] Most of the events in this long saga were common cause and the credibility of the witnesses is bound up with the common cause facts, the interpretation to be placed on these facts, and the probabilities.


FACTUAL DISPUTES


[247] Opening of the Kenton office

The dispute here was whether or not the members had all agreed that the Kenton office would open when it did and whether or not it was agreed that Half Point would pay its expenses. Graham was a lone voice in these disputes. Even his witness Lindsay said that Graham intended to go ahead on his own if the others did not agree, and that Heather was not in favour of opening the office. It was reflected in the minutes of the meeting of 15 June 2006 that Heather was not in favour of Half Point funding the Kenton office. Tony made payments in accordance with his undertaking personally to pay 10% of the expenses. Penny said that she understood that Kenton office expenses were for that office’s account. Graham himself acknowledged that it was convenient to open the Kenton office at that time because his mother in law was moving away, and that he faced competition from the agents at the Port Alfred office. Heather acknowledged that the premises were suitable and Tony acknowledged that the opportunity to obtain the premises should not be missed, but both said that Half Point’s finances could not support the opening of the Kenton office at that stage. Tony tried to persuade Heather to finance the Kenton office and mentioned this to Jean in his letter to her of 29 July 2006. In the same letter he said:

Why was I supporting [Graham] on the Kenton office deal? For what? I wasted my time and my money.”


Payment of the Kenton office expenses was one of the disputes which was resolved at the meeting of 18 July 2006. Having regard to all these factors, it is far more probable that Heather was not in agreement with the opening of the Kenton office and that it had not been agreed that Half Point would carry its expenses, but rather that it would be funded personally by Graham and Tony.


[248] Agreement at the 18 July 2006 meeting at Kariega

Again Graham was a lone voice in this dispute. I have already referred to Townes’ objectivity, and his evidence that he felt he could now go on holiday having resolved the problems was particularly persuasive. As an experienced person in the real estate industry, and with a responsibility towards GIF and SIR, it is improbable that he would have sent an e-mail to the members setting out in fine detail what had been agreed, if no agreement had been reached. The reservation of the name of HSH and the submission to GIF of all the 60% commission payments made to Heather, strongly supported the agreement. The terms set out in Townes’ e-mail reflected major changes and concessions. It is improbable that these changes and concessions were made provisionally, depending on Graham’s acceptance or otherwise. It is correct that he submitted information to Townes on the viability of the western sector, but I agree with Townes’ comment that the information was submitted for Graham’s reassurance. Graham’s subsequent rejection of the “proposals” was in my view an about turn on what he had agreed to and utterly against the spirit of mediation and conciliation.


[249] Instigation of the walkout on 8 September 2006

Lindsay said that Tony had asked the staff and agents to stage a walkout and told them it was necessary to do so in order to show GIF that Graham was not wanted at the Port Alfred office. I find this evidence very far-fetched. At that stage there was a threat of termination in the event of a walkout. Instigating a walkout was almost asking for termination. From the point of view of a member, the walkout would not only have risked termination but had the potential to harm the image of the franchise and disrupt its operation. The evidence that Tony had ordered Sandra Cronje back to the office was not in dispute, and his evidence that he thought the walkout unprofessional was inherently probable. Penny, whose evidence I accepted, confirmed that Tony had not arranged the walkout. In addition, Lindsay’s credibility was extremely suspect. Even Mr. McCallum, who appeared for Graham, submitted that her evidence should be approached with caution. Her explanation for supporting Graham when she had severely criticised him in the past and blamed him for all the problems, was very unconvincing. In spite of trying to support Graham and describe him as a very different person from the one she had accused of being “sly and sneaky”, she had no option but to make concessions that his conduct at various times was immature and unprofessional. She did appear to have a grudge against Heather and Tony, as was submitted. Her complaints against them were not easy to understand and her accusastion that Tony had gone back on his word about the alleged loan of R43 000.00 was irrational. Her evidence that she was influenced by them and was their puppet was improbable. She was an experienced estate agent at the time, and prior to joining Half Point had been awarded a franchise. She was involved in business enterprises with her husband. She was not as naïve as she made out. I find therefore that the walkout occurred as testified to by Penny and was not arranged by Tony.


[250] Reasons for termination of the franchise

Although there was a dispute in the pleadings about whose conduct caused the termination of the franchise, Townes was really the only witness who could testify about why GIF terminated the franchise. To the extent that there was a dispute about why GIF terminated the franchise, in the light of Townes’ lack of bias and his objectivity, I accepted his evidence of why the franchise was ultimately terminated. It is correct that he did not want Graham at the quarterly meeting and said he could not do business with Graham, but I do not think that these factors mean he was biased against Graham and the reasons he gave for termination were false. The termination was the culmination of warnings which related to Graham and Heather, and it was ultimately the agents’ views and intentions which decided him. The real issue involved in this aspect is whether or not a breach of the fiduciary duty by Graham, Heather or Tony caused the termination.


[251] When was Lindsay informed that she had been awarded the franchise

Lindsay said that she was told by Tony about a week after termination to hold the franchise on his and Heather’s behalf, whereas Townes said that he told Lindsay and Cyril on the day of the termination. In addition to their respective credibility, Townes’ evidence was the more probable. Given the need for a seamless transition it would have been necessary to find a new franchisee as soon as possible. Townes specifically said that he did not want to award the franchise to Heather or Tony, and collusion was not part of Graham’s case, in other words it was not alleged that Townes, Heather and Tony plotted to install Lindsay and Cyril in name only, while Heather and Tony in reality had the franchise. Lindsay also would not have been asked to stay on at the quarterly franchisee meeting if she had not been awarded the franchise. Her evidence that she did not know why she had been invited to remain for the meeting was improbable. I therefore find that Lindsay was told by Townes on 11 September 2006 that he had awarded the franchise to her and Cyril.


FINDINGS ON ALLEGED BREACHES


[252] I now return to the parties’ cause of action and what they were required to prove in order to succeed in their respective claims, within the boundaries of their particulars of claim. They had to prove not only the commission of the alleged breaches of fiduciary duty to Half Point and the alleged negligence in carrying out its affairs, but also that the breaches and the negligence caused the particular member to be liable to Half Point for a loss.


CLAIM


[253] Refusal to cooperate with Graham causing termination of franchise

In my view there was no evidence of such a refusal to cooperate. In elaboration of this allegation Graham alleged a refusal to resolve differences between members. The evidence was to the contrary. In particular, Tony made a number of reasonable proposals for splitting the franchise, which had been Graham’s idea in the first place. Tony even included Jean in one of his proposals, in order to avoid family conflict. Heather and Tony attended the meeting on 18 July with a view to resolving the members’ differences, and accepted the outcome, even though, as Tony said, there were no winners or losers. Even though it was accepted that Heather deserved 60% commission, she agreed at that meeting to repay what she had been paid in excess of 50%. It was also agreed at that meeting that the Port Alfred office would pay the outstanding Kenton office expenses. A members’ association agreement and the Kenton office were on the agenda for the meeting of 15 June 2006. Tony supported Graham to some extent in the opening of the Kenton office and had tried to persuade Heather to support the opening. After the application for an interdict was dismissed, Heather made the arrangements for Graham to re-occupy his desk and called a meeting for 8 September 2006, in accordance with advice. In my view all these factors point to cooperation and accommodation.


[254] The payment to Heather of 60% commission and the appointment of Cyril were not mentioned in Graham’s particulars of claim as specific breaches of Heather and Tony’s fiduciary duty. These items however featured quite prominently in the evidence, but I do not think that they, as part of the general body of evidence, were examples of the general allegation that Heather and Tony refused to co-operate with Graham. One could understand his annoyance at not being informed of the 60% commission and learning about it by chance, but there was no attempt to conceal such payments and he himself acknowledged that Heather qualified for 60%. It was not in dispute that at the time of the meeting at which Cyril was appointed, Graham had left for a golfing trip. He was aware that his move to Kenton necessitated another person being appointed to take the load off Lindsay’s shoulders. The appointment of Cyril was therefore in the interests of Half Point and no ulterior motive could be attributed to Heather and Tony. Heather’s personal payment to Lindsay was evidence in my view of her genuine concern for the business while she was away. The appointment was minuted and Tony informed Graham thereafter. It was submitted that the payment of 60% commission to Heather and the appointment of Cyril were the start of the hostilities. Graham certainly took offence at these events because he was not involved in the decisions, but one must also remember that Graham caused unpleasantness in September 2005 by walking out of a meeting when he did not get his way, and by appointing Purdon as an agent against the wishes of the majority.


[255] There was no substance to Graham’s allegation that Heather and Tony had involved the staff in members’ issues, or that if they did such involvement was related to the termination. Graham’s return to the Port Alfred office on 27 July 2006 and his occupation of Heather’s desk happened in their presence. They of their own accord threatened a walk out and the next day did walk out. Tony’s survey was partly at Townes’ instance and was carried out in the interests of Half Point. The agents were able to speak for themselves and some of them had directly contacted Townes. The meeting on 11 September 2006 was at Townes’ request, and none of the members participated. The affidavits the agents submitted after the termination were also at Townes’ request.


[256] It is correct that Townes was not happy with the application for an interdict, but he nevertheless understood why Heather had acted as she did. I do not think that in applying for the interdict Heather was acting in breach of her fiduciary duty to Half Point. She was not alone in her view of Graham’s conduct in coming back to the office and taking over her desk. She managed to placate the agents by taking and following legal advice. Had the agents left, Half Point would have suffered financially and the GIF and SIR names would have been harmed. In this context the application for the interdict was in the interests of Half Point.


[257] Heather and Tony’s conduct in keeping Townes informed of developments after he had threatened termination, was also not in my view a breach of their fiduciary duty to Half Point or negligence. They could hardly be held accountable for not keeping serious problems a secret. The agents’ unwillingness to work with Graham was a serious crisis. Townes had been closely involved in the members’ disputes since July 2006 and had assisted them in trying to resolve their disputes. Graham himself had reported to Townes in the past. There was no reason now to keep Townes in the dark.


[258] Heather and Tony were criticised for not calling a members’ meeting after the walkout of 8 September 2006, in order to try to resolve the problem. At this stage Tony already knew what the attitude of the agents was and a meeting would not have served any purpose. Graham had written to them on 7 September and they still walked out on 8 September.


[259] Heather and Tony, as the majority, resolved not to contest the termination of the franchise. Again, I cannot see how this resolution was a breach of their fiduciary duty or negligent conduct. There had been a number of warnings from Townes, and the agents had made it clear they would not work with Graham in the Port Alfred office. The relationship between the members was extremely poor. From their point of view, the prospect of successfully contesting the termination was poor, but they nonetheless for reassurance sought legal advice, and acted on that advice. Contesting the termination may well have resulted in financial loss to Half Point and was not a decision to be taken lightly. The following was recorded in the minutes of the members’ meeting of 27 September 2006:

The members present (Heather and Tony) feel that by opposing the termination it is a total waste of money as the only people who stand to benefit are the attorneys.”


This sentiment indicated in my view a genuine and considered decision not to oppose the termination of the franchise.


[260] Operation of a new real estate franchise which would have been in competition with Half Point

This allegation related to Heather and Tony’s financial interest in HSH and their sharing in the profits with effect from 12 September 2006. As from 11 September 2006 Half Point did not have a franchise and ceased trading. In my view there was no basis to this allegation. The evidence did not show that Heather and Tony planned in advance to become involved in a new franchise. In order to do that they would have had to orchestrate the termination of Half Point’s franchise, which would have had to involve Townes and the agents, connive with Townes to award the new franchise to Lindsay and Cyril, and get Lindsay and Cyril’s co-operation in carrying out their plan. Such a scenario is highly improbable. Heather and Tony, especially Tony, were clearly at their wits’ end with Graham’s conduct. This was evident from Tony’s evidence at the trial (at one stage he called Graham a lunatic) and from his accusation at a subsequent meeting that Graham had been the cause of the breakdown. Tony had made reasonable proposals in the past for a split in the franchise, which looked after everyone’s interests, included Jean’s. His position was not an easy one because Graham was his son in law. Townes recognised this difficult position and it is important that at the meeting of 18 July 2006 he saw Tony as being on the sidelines. While Heather and Tony should have disclosed their financial interests in HSH to Graham after 31 October 2006, such a failure to disclose was not in my view connected to their reasons for not opposing the termination. I am also of the view that Heather was far more active in HSH’s affairs soon after termination than merely making the agents feel “comfortable”, but again such activity was not linked to the reasons for not opposing the termination.


[270] The main argument submitted on Graham’s behalf was that the failure to challenge the termination while having a financial interest in HSH, amounted to a conflict of interests resulting in potential loss to Half Point, in the sense that the termination might have been successfully challenged and Half Point might have regained the franchise. The argument went further to the effect that it did not matter whether Half Point would have regained the franchise or not, and that this case is not about actual loss. It was sufficient if Half Point potentially could have regained the franchise. However, as was submitted on behalf of Heather and Tony, Graham’s claim relating to the loss of the franchise was not for a disgorgement of profits, but for actual loss suffered as a result of the termination, allegedly caused by Heather and Tony. In any event I believe the argument does not fit the facts of this case, in that Half Point had lost the franchise and was not prevented by Heather and Tony from being awarded the franchise in the first place. I have already stated that in my view there was no breach of a fiduciary duty by Heather and Tony in not contesting the termination of the franchise.


[271] Payment of expenses by Half Point which were not due

The legal costs of the application for an interdict were paid by Half Point following a resolution of a majority of members taken at a properly constituted meeting. It was considered that the application had been in the interests of Half Point, even though it was unsuccessful. I think that this resolution was taken in good faith and was not negligent. Heather did not bring the application for selfish reasons and she was eventually supported by Tony. The situation created by Graham’s return and occupation of her desk threatened the operation and reputation of Half Point. Heather’s personal payment to Lindsay of 10% of the costs demonstrated in my view her overall good faith in this resolution.


The other payments were made up of various accounts, and salaries to Penny, Sandra Cronje and Cyril. I do not think it is necessary to go into each one. Tony took the responsibility of winding down Half Point and his explanation for all of these payments showed that he acted reasonably, sensibly and fairly. Graham’s objection to these expenses had no rational basis.



[272] It follows that Graham failed to prove any of the alleged breaches of ss 42 and 43 of the Act and consequently failed to prove that Heather and Tony were liable to Half Point for any loss.


COUNTERCLAIM


[273] Before I deal with the specific allegations I must state my view of the pattern of Graham’s conduct, starting with his departure from the meeting in September 2005 because Heather and Tony did not want to appoint his friend as an agent. Graham was not prepared to accept the majority view where it differed from his and this incident demonstrated that he was unable to understand the need to respect decisions made in the interests of Half Point. He went even further and appointed his friend. This was unco-operative, willful, and selfish conduct. In November 2005 he wanted to be appointed as office manager, when it had already been agreed that the members would not draw salaries for the first year. Again, he was considering his own interests as opposed to those of Half Point. The opening of the Kenton office was his initiative, partly for family reasons, and he indicated that if the other members did not agree, he would go ahead anyway. Even though Tony did support him to a certain extent, his attitude was a further example of putting his interests ahead of those of Half Point. After discovering the payment to Heather of 60% commission, instead of calling a meeting, he sent a confrontational letter claiming a lack of trust between the members and suggesting a split in the franchise. This was a huge over-reaction to a relatively minor incident, especially when he agreed that she would have qualified for 60% commission in the normal course. Following Cyril’s appointment, instead of calling a meeting, he threatened legal action. This was another over-reaction, and a hostile one, and should also be seen in the light of the fact that he was threatening legal action against his father in law, who had supported him in the application for the franchise and the opening of the Kenton office.


[274] Matters went downhill from there. Piqued because the Canon Rocks telephone account had not been paid, he paid the full amount, even though it exceeded the agreed R500.00 limit, and then changed the internet banking password. This was outrageous behaviour. He was effectively making Half Point suffer because of his ill feeling towards Heather and Tony. In spite of a relatively conciliatory letter of 2 June 2006 praising Heather and suggesting an association agreement, he thereafter walked out of the meeting of 15 June 2006. This was extremely immature and uncooperative behaviour. Matters pertaining to the interests of Half Point were to be discussed and he simply refused to be involved in any such discussion. It was open to him to accept Lindsay and Cyril’s reasonable and accommodating offer to leave the meeting but he stubbornly and irrationally did not do so. His letter of 27 June announcing that he would be returning to the Port Alfred office and that Cyril should vacate his desk was irrational and confrontational. Graham was the prime mover in opening the Kenton office and merely because of the 60% commission payments to Heather, and Cyril’s appointment, he was prepared to reverse this arrangement, which had suited him personally and potentially financially, and disrupt arrangements at Port Alfred which had been made to accommodate his move to Kenton. His demand in that letter for immediate payment of Kenton office expenses and for a backdated salary of R15 000.00 was ridiculous. In the light of my finding on the opening of the Kenton office, he knew that Half Point was not liable for the Kenton expenses. He also knew that it had been initially agreed that no salaries would be paid to members. His demand for these amounts was provocative and insulting.


[275] Graham’s apparent co-operative attitude in relation to Townes’ facilitation was short lived. Even before the meeting of 18 July he threatened legal action against the bank and was instrumental in having the internet banking facility suspended, which could only have been to the detriment of Half Point. It is correct that he told Townes what he had done but in my view that did not diminish the seriousness of his conduct. He did not consult Heather and Tony before threatening the bank, and Heather only learned what had happened from the bank manager. Although he knew he was personally liable for the convention costs of R4 174.00, he deliberately did not pay these costs, after undertaking to do so, because he claimed that Half Point owed him money. Such an attitude was a breach of his financial obligation to Half Point.


[276] After intense discussion, agreement was reached at Kariega on 18 July 2006 to split the franchise, with give and take on all sides. This was a truly negotiated and mediated settlement of disputes, involving a lot of effort on the part of Townes. Knowing that Townes was going on holiday, Graham announced that he did not accept the proposals and that he would be returning to the Port Alfred office. He must have known that such return would not be in the interests of Half Point. The members’ relationships had seriously deteriorated, ill-feeling had been acknowledged at the Kariega meeting and a split agreed upon. It must be remembered too that it had always been intended that Graham would run the Kenton office in due course, that he was the one who initiated the opening of the Kenton office, and that he was the first member to have suggested a split in the franchise, with his proposal of 18 April 2006. To go back on the agreement reached at Kariega could only cause trouble and adversely affect the affairs of Half Point.


[277] In spite of Tony’s request to him to stay away from Port Alfred, he not only returned but in full view of the staff and potentially clients, took over Heather’s desk. He admitted that he had threatened to remove Cyril physically from his desk. Again this was outrageous behaviour and potentially harmful to Half Point. He must have realised how his actions were viewed by the staff but continued with his behaviour. He acknowledged that his purpose in returning was to assert his authority. That was not conduct which promoted the interests of Half Point.


[278] Even when he returned after the application for the interdict was dismissed, he was uncooperative and provocative. In spite of Heather’s request for him to use another desk temporarily because of the impending Marina presentation, he still insisted on his own desk. He in abrupt terms challenged the proposed meeting of 8 September which was to be held for the purpose of putting a working relationship in place, and then excused himself from attending, claiming another commitment. Again this was conduct which did not serve the interests of Half Point. I should mention here that the fact that the application for an interdict was dismissed, did not in my view affect the tenor of his conduct, and his return on 7 September was merely a continuation of his disruptive conduct.


[279] The thread which ran through Graham’s behaviour from the time of his departure from the meeting in September 2005, up to his failure to attend the meeting on 8 September 2006, was one of putting his selfish interests first, when it suited him, and pique at not getting his own way. Such conduct did not take into account the interests of Half Point. Even after the termination he was uncooperative. He left for Johannesburg without telling Heather and Tony where he was. Although technically correct about the repayment of R43 000.00 to Lindsay, he still tried to suggest that she was liable for 10% of Half Point’s operating costs when he knew that such liability had never been agreed. Heather and Tony, for their part, were at least trying to be fair to Lindsay in paying her the R43 000.00.


[280] Graham’s conduct, however reprehensible, still had to constitute breaches of ss 42 and 43 of the Act, which caused loss to Half Point, in order for him to be liable to Half Point. Various breaches were alleged. I am of the view that the allegations that he failed to sell property, was unwilling to do show houses, and performed his duties in a perfunctory manner were not related to the loss claimed. The opening of the Kenton office was not against the wishes of Tony and was not a ground for termination of the franchise and did not cause the loss claimed. Graham’s departure for Johannesburg was post termination and did not cause the loss claimed. I have no hesitation in finding that in changing the internet password and paying his personal telephone account, he breached his fiduciary duty to Half Point. The bad faith inherent in such conduct speaks for itself. Half Point’s loss was the amount of the personal telephone account. The same applies to the convention costs. He was obliged to pay this amount to Half Point but deliberately failed to do so because he maintained he was personally owed money. Half Point had to lose this amount because of Graham’s dispute with Heather and Tony.


[281] It is a little more difficult to find that Graham’s conduct in causing the loss of the franchise amounted to a breach of his fiduciary duty. He was not for example acquiring secret profits or benefiting financially to the detriment of Half Point. However, as was said in Phillips v Fieldstone Africa (Pty) Ltd and another 2004 (3) SA 465 (SCA) at 477H:

There is no magic in the term ‘fiduciary duty’. The existence of such a duty and its nature and extent are questions of fact to be adduced from a thorough consideration of the substance of the relationship and any relevant circumstances which affect the operation of that relationship.”


[282] Graham’s conduct had to be seen in the context of the fact that Half Point’s principal business was the real estate franchise, and one of its obligations was not to harm the reputation of the GIF or SIR names. This was a crucial obligation, given the competition amongst estate agencies, and the relatively small size of Port Alfred. Graham’s conduct also had to be seen in the context of his initiation of the opening of the Kenton office and his departure to Kenton, his early suggestion of a split in the franchise, and the agreement reached at Kariega. Graham selfishly and, in my view, in bad faith, rejected the Kariega agreement (significantly, this was the turning point for Townes), and returned to Port Alfred when he knew his return would cause conflict and he knew of the obligation of Half Point not to harm the GIF or SIR names. He also knew that GIF could terminate the agreement for a breach of this obligation. His return to the Port Alfred office on 27 July 2006 was irrational and confrontational and upset the staff, and its purpose was to assert his authority. He threatened physical violence against Cyril. He caused an unpleasant atmosphere, and paved the way for the eventual walkout on 8 September. The fact that the application for the interdict was dismissed made no difference. Nor did Graham’s letter of apology. The damage was done. Penny described the atmosphere in the Port Alfred office and it was Graham who created that atmosphere for his own selfish purposes. I have already referred to Tony’s accusation that Graham had broken down everything that had been built up. Lindsay and Penny echoed this sentiment. In their respective letters to Graham following his letter of apology, Lindsay said “you have broken up our team” and Penny said “you and you alone are accountable for this mess we all find ourselves in”. As Tony said, agents are the lifeblood of an estate agency and if they had left, Half Point might as well have closed its doors. It was Graham’s conduct which led to the walkout and the agents’ refusal to work with him, and this refusal was, as Townes put it, the straw which broke the camel’s back. In this context, I am of the view that in rejecting the Kariega agreement and returning to Port Alfred purely for his selfish interests, Graham failed to avoid material conflict between his own interests and those of Half Point (as was alleged), and did not act bona fide in the interests of Half Point, and that as a result the franchise was terminated.


ORDER

[283] The following order will issue:

283.1 Claim

It is declared that the second and third defendants are not liable to the first defendant for any loss as alleged in the plaintiff’s particulars of claim.

283.2 Counterclaim

It is declared that the plaintiff is liable to the first defendant in the sums of R760.61 and R4 174.14, and for such loss of profits as may be proved or agreed, suffered by the first defendant as a consequence of the termination of the franchise agreement entered into between the first defendant and Geffen International Franchises (Pty) Ltd.

    1. The plaintiff is to pay the costs of the claim and the counterclaim.




________________

J.M. ROBERSON

JUDGE OF THE HIGH COURT




Appearances

Plaintiff: 17 – 21 August 2009: Adv. M.J. Lowe SC with Adv. M. Beard, instructed by McCallum Attorneys, Grahamstown. From 7 December 2009 Mr. M.G. McCallum, McCallum Attorneys, Grahamstown.


First and Second Defendants: Adv. E.A.S. Ford SC, instructed by Borman & Botha, Grahamstown.

1Members’ interests were frequently referred to by the witnesses as “shares” and related terminology.

2One of the agents