IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE DIVISION  - GRAHAMSTOWN)

							Case No:  451/2011
							Date Heard:  01.09.2011
							Date Delivered: 14/11/2011

 In the matter between

CHICORY SA LIMITED						PLAINTIFF

and

BRIAN NEARY							DEFENDANT

JUDGMENT

ROBERSON J:-
[1]  The plaintiff has excepted to the defendant’s plea on the ground that a part thereof does not disclose a defence.
 
[2]  The relevant portion of the plaintiff’s particulars of claim are as follows:
	“3  On 2 October 2009 and at Port Elizabeth, Plaintiff and Defendant entered into a written memorandum of Understanding a copy of which is annexed marked “A”.
4	 The written document, Annexure “A”, is void, inter alia, in that Defendant purported to contract as a Trustee of a Trust to be formed and the document does not create effective rights and obligations.
5	In the bona fide, reasonable and mistaken belief that the document, Annexure “A”, constituted a valid agreement Plaintiff made payment to Defendant:
5.1	Of the sum of R50 000.00 on 8 October 2009; and
5.2	Of the sum of R50 000.00 on 15 December 2009; and
5.3	Of the sum of R247 000.00 on 11 January 2010; and
5.4	Of the sum of R75 000.00 on 23 March 2010; and
5.5	Of the sum of R61 000.00 on 24 June 2010;
and in all in the sum of R483 000.00.
6.  Defendant has appropriated the sums of money paid by Plaintiff and has been enriched at the expense of Plaintiff without cause or justification in the sum of R483 000.00.”

[3]  Before setting out the defendant’s plea, it is necessary to refer to some of the contents of the memorandum of understanding.  It recorded that the defendant, as future trustee of the trust, had developed technology to produce Agave syrup and Agave nectar powder from the Agave plant, and was marketing these products to pharmaceutical and other companies.  Chicory and Agave have largely the same characteristics.  Under the heading “POSSIBLE PROPOSED JOINT VENTURE” it was recorded that the parties would research the feasibility of a joint venture to produce chicory syrup from chicory root.  The joint venture was to be a separate legal entity with the name Newco and a dormant private company of the plaintiff was available for use.  It was intended that the parties would acquire shareholdings in Newco.  The plaintiff would fund the project and provide funds for laboratory scale trials, and if necessary, the building of a pilot plant for commercial scale trials.  The trust would sell its technology to Newco, alternatively it would afford Newco the exclusive right to the technology.  Under the heading “EFFECTS OF ENTERING INTO THE MOU”, the parties were to agree on the cost of laboratory scale trials, which would not exceed R50 000.00, and would be funded by the plaintiff.  The trust was to conduct an assessment and feasibility study in regard to existing plant and equipment, and to provide a cost estimate in regard to further plant and equipment required.  The plaintiff was to conduct market research and conduct a preliminary feasibility study.  If after following these steps the results were commercially viable and acceptable to both parties, the parties were to agree on whether or not to build a pilot plant for commercial scale trials, and if so agreed, the cost of such building would not exceed R450 000.00, and would be funded by the plaintiff.   Thereafter the parties were to determine certain specifications, including capital expenditure estimates for the commissioning of a plant to carry out Newco’s business.

[4]  The defendant pleaded as follows to the particulars of claim:
“2.  AD PARAGRAPH 3
The Defendant admits that the parties entered into the Memorandum of Understanding Annexure “A” however avers that the said agreement was partly in writing and partly oral.  The oral part was that the parties agreed that should the Trust not be formed the Defendant in his personal capacity would conduct experiments, trials and analysis as to produce syrup from the chicory plant and to provide the Plaintiff with the results thereof as is set out in Annexure “A” and further should the Plaintiff be satisfied with those results, the Defendant would erect a pilot plant as is contemplated in clause 3.5 of Annexure “A” which pilot plant had to be funded by Chicory SA Limited, the Plaintiff.  Alternatively, it was an implied or tacit term to Annexure “A” that should the Trust not be formed the Defendant in his personal capacity would conduct experiments, trials and analysis as to produce syrup from the chicory plant and to provide the Plaintiff with the result thereof as set out in Annexure “A” and further should the Plaintiff be satisfied with those results, the Defendant would erect a pilot plant as is contemplated in clause 3.5 of Annexure “A” which pilot plant had to be funded by Chicory SA Limited, the Plaintiff.

3.  AD PARAGRAPH 4

The Defendant denies the contents of this paragraph.

4. AD PARAGRAPH 5

The Defendant denies the contents of this paragraph.  The Defendant avers that as was agreed to between the parties, the Defendant conducted experiments, trials and analysis as to produce syrup from the chicory plant in terms of the agreement between the parties.  The Defendant further avers that on the specific instructions of Mr. Swift representing the Plaintiff, the Defendant erected the pilot plant as was set out in paragraph 3.5 to Annexure “A” of the Plaintiff’s particulars of claim.  The Defendant thereafter delivered invoices to the Plaintiff.  The invoices are annexed hereto marked Annexure “BN1” to “BN5”.  The Plaintiff paid the amounts to the Defendant in terms of an agreement between the parties for work and services rendered by the Defendant to the Plaintiff.  The Defendant admits receiving the sums set out in paragraph 5.1 to 5.5.

5.	AD PARAGRAPH 6
The Defendant denies the contents of this paragraph."

The invoices annexed to the plea amounted to a total of R483 000.00 and were for laboratory scale trials (R50 000.00) and the pilot plant phases 1, 2, and 3 (R433 000.00).

[5]  The plaintiff’s exception was framed as follows:
1.  Plaintiff hereby excepts to Defendant’s plea on the ground that it does         not disclose the defence in respect of that which is pleaded at paragraph 2 of Defendant’s Plea more particularly in that:

1.1 Defendant has admitted the written agreement referred to in            
Plaintiff’s Particulars of Claim; and

1.2  Defendant has alleged further oral terms not appearing in the    
written agreement, alternatively the existence of tacit or implied
terms to the same effect as the alleged oral agreement; and

1.3	Defendant’s allegations relative to the further oral agreement 
and /or implied or tacit terms are in direct conflict of the 
expressed terms of the admitted written agreement.
		
[6]  The invoices annexed to the plea reflected payments due to the “Agave Trust” and it was submitted on behalf of the plaintiff that this fact was a further ground for finding that the plea could not be sustained.  However, this detail in the invoices was not mentioned in the notice of exception and I have had no regard to it in deciding the exception. 
 
[7]  The plaintiff can only succeed if paragraph 2 of the plea is excipiable on every reasonable interpretation that can be ascribed to it.  

[8]  While paragraph 2 of the plea in isolation appears to offend the parole evidence rule and thus would not disclose a defence to a claim on a binding written contract, it must be interpreted in relation to the particulars of claim, to which it purports to be a defence.  The particulars of claim do not allege a binding contract.  They allege a written memorandum of understanding which was void.  Although paragraph 2 of the plea suggests that the memorandum of understanding was part of a binding contract which was partly written and partly oral, implicit in my view in paragraph 2 of the plea is an acceptance that the memorandum of understanding was void, because one of the parties was a trust to be formed, represented by a future trustee.  No plea by the defendant could turn such a document into a binding contract, and it is not the plaintiff’s case that the memorandum of understanding was a binding contract.  Although paragraph 2 of the plea is unfortunately worded, in my view, reasonably interpreted, it means that no trust was formed, no reliance was placed on the memorandum of understanding, and the plaintiff concluded a contract with the defendant in his personal capacity.  This interpretation is borne out by the remainder of the plea, which deals with performance in terms of the alleged contract between the plaintiff and the defendant in his personal capacity.  Such an interpretation does disclose a defence to the claim, in that the defendant, while admitting receiving payment, alleges that the plaintiff paid in terms of a contractual obligation.  The defendant’s denial in paragraph 3 of the plea that the memorandum of understanding was void must be seen in the context of his allegation that the agreement was partly written and partly oral.

[9]  It is worth remembering the purpose of an exception to a pleading on the basis that a cause of action or a defence is not disclosed.  In Barclays National Bank Ltd v Thompson 1989 (1) SA 547 at 553G-I, van Heerden JA said:
“It has also been said that the main purpose of an exception that a declaration does not disclose a cause of action is to avoide the leading of unnecessary evidence at the trial:  Dharumpal Transport (Pty) Ltd v Dharumpal 1956 (1) SA 700 (A) at 706.  Save for exceptional cases, such as those where a defendant admits the plaintiff’s allegations but pleads that as a matter of law the plaintiff is not entitled to the relief claimed by him (cf Welgemoed en Andere v Sauer 1974 (4) SA 1 (A)), an exception to a plea should consequently also not be allowed unless, if upheld, it would obviate the leading of ‘unnecessary’ evidence.”

If paragraph 2 of the plea remains, no unnecessary evidence will have to be led.  The issue apparent from the pleadings is whether or not there was a contract in terms of which the defendant would perform work and services for the plaintiff, and receive payment for such work:  in other words whether or not payment was made with cause.  The evidence at the trial will concern this issue.  No evidence will be required to determine whether or not the memorandum of understanding was a binding contract, and no adjudication will be needed on the admissibility of evidence to vary its terms.

[10]  There is a further aspect.  The exception in this case is only to a part of the defendant’s plea.  In Barclays National Bank Ltd v Thompson (supra) van Heerden JA said at 553 F-G:

“It seems clear that the function of a well-founded exception that a plea, or part thereof, does not disclose a defence to the plaintiff’s cause of action is to dispose of the case in whole or in part.  It is for this reason that exception cannot be taken to part of a plea unless it is self-contained, amounts to a separate defence, and can therefore struck out without affecting the remainder of the plea.”  

In my view, paragraph 2 of the plea is not self-contained.  Paragraph 4 of the plea is a continuation of paragraph 2, dealing as it does with performance in terms of the alleged contract, and the two paragraphs are therefore linked.

[11]  For all the above reasons, the exception cannot succeed.

[12]  The following order is made:

The exception is dismissed with costs.

_______________
J M ROBERSON
JUDGE OF THE HIGH COURT

Appearances:
For the Plaintiff:  Adv R Brooks, instructed by Netteltons Attorneys, Grahamstown
For the Defendant: Adv B Pretorius, instructed by Borman & Botha,  Grahamstown