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Lethale and Associates CC v Molope Bakeries (Pty) Ltd (282/98) [1999] ZANWHC 2 (16 September 1999)

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CASE NO : 282/98


IN THE HIGH COURT OF SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)


In the matter between:


LETHALE AND ASSOCIATES CC PLAINTIFF/RESPONDENT


and


MOLOPE BAKERIES (PTY) LTD DEFENDANT/EXCIPIENT



NKABINDE AJ


FOR EXCIPIENT : MR. H. DISON

FOR PLAINTIFF/RESPONDENT : MR. T. LANGA


DATE OF HEARING : 07 SEPTEMBER 1999

DATE OF JUDGMENT : 16 SEPTEMBER 1999



NKABINDE AJ: This is an exception to set aside the particulars of claim filed in this action on the basis that it discloses no cause of action. The plaintiff is suing the defendant on a written contract, “Annexure A”(“ the contract”), which the defendant allegedly signed. In the combined summons the plaintiff is cited, in paragraph 1 of the particulars of claim, as -


LETHALE AND ASSOCIATES CC a close corporation, duly incorporated and registered in terms of the Close Corporations Act No 69 of 1984, with registration number CK 96/22932/23, having its registered office at FIRST FLOOR LISBON BUILDING, CORNER JOUBERT & MERRIMAN STREETS, VEREENIGING.”



Paragraphs 3 and 4 of the particulars of claim read as follows:-


“ 3. On or about 13 May 1996 and at GA-RANKUWA ....., the Plaintiff made a written offer to the Defendant to perform a Value Added Tax Review on a contingency basis.


4. On or about June 1996 at GA-RANKUWA ... the Defendant accepted the written offer by signing same. A copy of the said written offer and acceptance is attached hereto and marked “A”.”

(My underlining for emphasis)



The contract is a two paged document on the letterhead of LETHALE AND PHUNGULA CONSULTING SERVICES. At the bottom of the first page appears the following:


Partners : Lethale SSG; Phungula MG”.


The contents of the contract, which are of relevance for the purpose of this judgment, read as follows:


Engagement Proposal

We refer to our conversation... in which you expressed an interest in a VAT review on a contingency basis. We accordingly set out below our terms of engagement as discussed with you....

...

Our sole objective is to identify whether there are any opportunities to reduce VAT liabilities in Molope Bakeries (Pty) Ltd....

...

Our fee would be structured on a contingency basis .... For example, if we discover input tax not deducted in one tax period..., Molope Bakeries (Pty) Ltd would be able to recover the unclaimed input tax in respect of all tax periods. Our fee would be based on the total savings identified ....

On the other hand, if we do not identify any reduction in VAT liability, there will be no fee payable.

Our time input will be determined solely by ourselves based on our initial assessment of the effectiveness with which VAT transactions appear to be dealt with by your staff.

As we would not be performing an audit, no report would be issued. We would like to stress that this exercise is not designed to highlight VAT problems in your organisation...

If you are satisfied with the terms of the engagement kindly sign the letter in the place provided below.

We look forward to the opportunity of being of service to Molope Bakeries (Pty) Ltd.”.

(My underlining for emphasis)


The aforesaid partners signed the contract at the bottom of the second page and L S Molope, as Chief Executive Director, presumably of the defendant, also signed it.


In the notice in terms of Rule 23 dated 17 August 1998 and filed of record on 18 August 1998, the defendant excepted to the particulars of claim as disclosing no cause of action, alternatively as being vague and embarrassing. For convenience and ease of reference, the first exception reads as follows:



“ 1. 1.1 In paragraphs 3 and 4 of the particulars of claim, the Plaintiff relies upon a written agreement purportedly concluded between it and the Defendant during or about May 1996. A copy of this purported written agreement is annexed to the particulars of claim as Annexure “A” thereto.


1.2 Annexure “A” to the particulars of claim is a letter on the letterhead of “LETHALE AND PHUNGULA CONSULTING SERVICES”. The partners of this entity are listed, at the foot of the letterhead, as S.S.G LETHALE and M.G PHUNGULA. It is signed by these two individuals.

1.3 In the circumstances , Annexure “A” to the particulars of claim does not constitute a written agreement between the Plaintiff and the Defendant.

1.4 Accordingly, no cause of action for the relief sought is made out, alternatively the particulars of claim, read with Annexure “A” thereto are vague and embarrassing and the Defendant is unable to plead thereto”.

(my underlining for emphasis)



In its response dated 19 October 1998, the plaintiff replied as follows to the excipient’s said exception:


1 1.1 The nature of the written agreement, referred to in annexure “A” of the particulars of claim, is found in the content thereof which document was signed by the Chief Executive Director, Mr L S Molope, as he was known at the time.

1.2 For all intents and purposes the Plaintiff and the Defendant, at the time of the signing of the agreement, referred to as Annexure “A” of the particulars of claim, perceived and accepted Annexure “A” as constituting a written agreement.

1.3 Accordingly, there are no grounds upon which the Defendant avers that no cause of action was made.”.



Mr Dison, appearing on behalf of the excipient, submitted that the basis on which the exception is taken appears clearly from the notice of exception itself and that no further elaboration is necessary. He argued that, save for the name “Lethale”, there is no connection between the plaintiff and the said partners in the contract, and that extrinsic evidence to clarify the agreement is inadmissible. To support his submissions with regard to the identity of the parties, Mr Dison referred to the judgment of Eloff J, as he then was, in the case of Field Engineering Services v Thermo-Bore (Pty) Ltd (unreported), under case number A1131/88 and dated 22 February 1989, whose views I share.


Mr Langa appearing for the plaintiff submitted, correctly in my view, that the intention of the parties is correctly embodied in the contract and that effect should be given to the ordinary meaning of the language used therein.(See: Burger v Central South African Railways (1903 TS 571 at 578, quoted with approval by Fagan CJ in George v Fairmead 1958 (2) SA 465 at 470 C-E, and in Field Engineering Services case, above, at p. 7). He argued that the basis for the exception was not clear in the notice of exception and that he was, consequently, taken by surprise when argument relating to the parties to the contract was raised. He further argued that the exception was an ambush designed to abuse the process of the court. Mr Langa asked for an indulgence, which I granted, to afford him an opportunity to prepare argument with regard to the exception itself and the points raised by the excipient’s counsel.


Mr Langa subsequently submitted that the citation of the plaintiff was a mere error and argued that such an error could be cured by an amendment because of the cession that had taken place after the plaintiff was incorporated. He referred to the case of Trust Bank Bpk v Dittrich 1997 (3) SA 740, as authority supporting his argument. I cannot agree with Mr Langa’s submission. In my view, that case is clearly distinguishable from the instant case. In that case the appellant, which was erroneously described, was an existing juristic person. The court decided that whatever potential prejudice could be corrected by an amendment. In the instant case summons had been issued in the name of a juristic person which did not exist at the time the contract was concluded. In any event, this is not an application for an amendment.


I approach this case from the angle that if evidence can be led which can disclose a cause of action alleged on the pleading, such a pleading is not excipiable. In this case, there are other legal aspects which I cannot disregard for the purpose of this judgment: the cause of action is based on a contract apparently concluded between two partners and the defendant; The plaintiff is a Close Corporation duly incorporated and registered in terms of the Close Corporations Act 69 of 1984.


The issues as I define them relate to whether the plaintiff was a party to the contract and if not, whether, in the circumstances of the case and under the rules of evidence, extrinsic evidence can be led in support of or to vary or contradict the contents of the contract.


In this case a simple contractual offer was made by Lethale and Phungula, the two partners of Lethale and Phungula Consulting Services, who signed the contract. Of particular importance in this regard is the mention of a reflexive pronoun “ourselves” and the frequent mention of pronouns such as “we” and “our” in the contract, referring to none other than the said partners. On a proper construction of the contract, on the face of it i.e having regard to its form and contents and disregarding whatever circumstances under which it might have been written, such contract is between the said partners and the defendant. That, I consider, is a fact which ex facie the contract itself, is so plainly obvious that it requires as little elaboration as does the statement that chalk is not cheese.


The plaintiff is a juristic person with the capacity and powers of a natural person of full capacity. On the other hand a partnership is not a legal person but an association of individuals, and its non-corporativeness remains important in other branches of the law as in legal proceedings. It seems to me therefore that the rightful persons to institute the action should be the two aforesaid partners, and not the plaintiff.


Concerning the argument that the said partner’s rights were ceded to the plaintiff, section 53 of the Close Corporations Act 69 of 1984, with regard to pre-incorporated contract and which is modelled on s. 53 of the companies Act 61 of 1973, needs to be considered. It provides:-

1. Any contract in writing entered into by persons professing to act as an agent or a trustee for a corporation not yet formed, may after its incorporation be ratified or adopted by such corporation as if the corporation had been duly incorporated at the time the contract was entered into.


  1. The ratification or adoption by a corporation referred to in subsection (1) shall be in the form of a consent in writing of all the members of the corporation ... within a reasonable time after incorporation.”.



It is trite law that a legal entity, be it a company or a close corporation, has no existence as such until the process of its incorporation is completed and a contract purportedly entered into by it before it comes into existence is therefore a nullity. As stated by Trollip JA in Sentrale Kunsmis Korporasie (Edms) Bpk v N.K.P Kunsmisverspreiders (Edms) Bpk 1970 (3) SA 367 (AD) for the company-


.... to become entitled to the rights or bound by the duties thereunder, a fresh contract in those same terms had to be entered into between the parties after its incorporation.”.

(At 396E)

In my view, the above remarks apply mutatis mutandis to a close corporation.


Even assuming, in favour of the plaintiff, that the contract was, subsequent to incorporation, ceded or adopted by the corporation, such extrinsic evidence relating thereto and introducing a completely new party to the contract will offend the parol evidence rule. It would also be unfair and unjust for the defendant to be bound by the internal arrangements of the partnership of which arrangements it might not have knowledge of and/or consented to.


I was referred by the excipient’s counsel to authorities such as R H Christie “The Law of Contract in South Africa 3rd edition, at page 212; Johnston v Leal 1980 (3) SA 927 (A) 943 B and Hoffmann and Zefferett “The South African Law of Evidence”, 4th edition, at page 312", in which the principles relating to the parol evidence rule are clearly delineated. I do not propose to deal with such authorities in any great detail in this judgment because the general principles are quite clear and they were not really disputed on behalf of the plaintiff. Suffice it to state that the plaintiff cannot lead evidence to alter the contract upon which it relies as constituting the cause of action and to which it was never a party. This was elaborated by Corbett J A in the unanimous decision in the case of Levin v Drieprok Properties (Pty) Ltd 1975 (2) 597 AD in which the learned judge quoted with approval (at 407 E-F) the passage from the American Jurisprudence, 2nd edition, vol 17, section 42 that-

.....everyone has a right to select and determine with whom he will contract and another cannot be thrust upon him without his consent, regardless of whether the offeror had special reasons for contracting with the offeree than with someone else.”.



In all the circumstances, I have come to the conclusion that the citation of and reference to the plaintiff in the particulars of claim as a party to the contract is not and cannot be correct.


In regard to the question of costs Mr Dison submitted that if the exception is upheld, costs should follow the cause and that with regard to those costs which were reserved on 17 May 1999 by Mogoeng J, the plaintiff should pay the costs occasioned by such a postponement because the plaintiff’s heads of argument were filed late.


The case having been set down for hearing on 17 May 1999, the excipient had filed and delivered to the plaintiff its heads of argument on 3 May 1999, i.e two weeks before the hearing. The plaintiff’s heads of argument were filed and delivered to the excipient’s attorneys of record on 12 May 1999, i.e less than a week before the hearing.


The Rules pertaining to the filing and delivery of heads of argument are clear. The excipient, plaintiff or applicant (as the case may be) must file and deliver to respondent or defendant not less than two weeks before the date upon which the matter is to be heard and by like filing and delivery to plaintiff, or applicant or excipient of heads of argument of defendant or respondent (as the case may be) in like manner not less than one week before the said date.


Clearly, the plaintiff’s heads of argument were filed and delivered late and no application for condonation of the late filing of such heads of argument was filed.


In the light of the aforegoing, I make the following order:


  1. The exception is upheld with costs.

  2. The combined summons be and is hereby set aside.

  3. The Plaintiff is ordered to pay the excipient’s costs incurred and occasioned by the postponement on 17 May 1999.




B E NKABINDE

ACTING JUDGE


EXCIPIENT’S ATTORNEYS : MESSRS MINCHIN AND KELLY INC

PLAINTIFF/RESPONDENT’S ATTORNEYS : VAN ONSELEN AND VAN ROOYEN INC.