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IN THE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOODHOPE PROVINCIAL DIVISION)

‘REPORTABLE’

CASE NO.: 1687/2003

In the matter between:

PATRICIA ANNE GROBBELAAR N.O. Plaintiff

And

PAARL AIRCONDITIONING SERVICES CC Defendant

JUDGMENT DELIVERED ON 11 APRIL 2005

DLODLO, J

INTRODUCTION

1. The Plaintiff, the Liquidator of Paarl Verkoeling en Ventilasie, claims damages it allegedly suffered because of the conduct of the Defendant. The amount claimed is the alleged value of Paarl Verkoeling en Ventilasie’s goodwill which was allegedly appropriated by the Defendant. The Plaintiff’s case is that the income generating aspect from the business of Paarl Verkoeling en Ventilasie was taken over by the Defendant, without value, when the latter started operations in early 2002. The Plaintiff’s contention is that the manner and circumstances in which the alleged appropriation of Paarl Verkoeling en Ventilasie’s business occurred rendered the conduct of the Defendant unlawful. The Plaintiff’s claim may be described as a delictual action for damages flowing from unlawful competition although there is a dispute of facts in this regard. Prior to liquidation Mr. Foot was the sole member of Paarl Verkoeling en Ventilasie/Coolvent.

2. The Plaintiff also instituted alternative claims based on sections 26 and 31 of the Insolvency Act and Section 341 of the Companies Act respectively read with certain sections of the Companies Act and Close Corporations Act. These alternative claims are based on the provisions dealing with collusive dealings and void and/or voidable dispositions. Advocate Melunsky appeared on behalf of the Plaintiff and Advocate Le Roux appeared on behalf of the Defendant respectively.

BACKGROUND

3. Mr. C.A.W. Foot, the father of Benjamin Foot was in the air-conditioning industry until his death in October 1996. Mr. Benjamin Foot worked in his father’s business. But, in 1995, Paarl Verkoeling en Ventilasie was incorporated. Mr. Benjamin Foot was its sole member. Paarl Verkoeling en Ventilasie carried on business of supplying and installing air conditioning in Paarl and surrounding areas. According to Mr. Benjamin Foot himself and according to the financial records of the CC, Paarl Verkoeling en Ventilasie/Coolvent commenced trading during 1996. By this time Mr. Benjamin Foot had ceased to work in his father’s business.

4. The Pleadings show it to be common cause that during its existence Paarl Verkoeling en Ventilasie/Coolvent built up a substantial goodwill in respect of its business, product and services. Paarl Verkoeling en Ventilasie CC ran into financial difficulty and it formally ceased trading on 31 January 2002. The Defendant, the following morning according to the pleadings and the evidence of Mr. Benjamin Foot himself, actively commenced its own business operations.

5. Mr. Foot Senior restructured his business by forming a close corporation, Paarl Air-conditioning Service CC. According to the evidence at the time of Mr. Foot senior’s death the latter close corporation had been incorporated but it was dormant and had never traded. Mrs. Anneke Foot (Mr. Benjamin Foot’s wife) was then employed at an old age home with a meager income. The Foot family was under pressure. They had to find the means to support themselves and their two (2) children. Mr. Benjamin Foot only had experience in the supply and installation of air-conditioning equipment.

6. Mrs. Anneke Foot acquired the member’s interest in Paarl Air-conditioning Services CC from the Estate of the late C.A.W. FOOT.

Paarl Air-conditioning Services employed both Mr. and Mrs. Foot. They started trading early during the year 2002 in the supply and installation of air-conditioning equipment. Paarl Air-conditioning Services thus became a “vehicle” used by Mr. Benjamin Foot to carry out his business expertise in supplying and installing air-conditioning equipment.

(7) The issues for decision by the Court are as follows:

1. Did the air-conditioning operations conducted by Paarl Verkoeling en Ventilasie at the end of 2001 and the beginning of 2002 have any goodwill?

2. If the answer to the above is in the affirmative, the next issue for

determination is to whom did the goodwill attach, Paarl Verkoeling en Ventilasie or Mr. Benjamin Foot?

3. If the goodwill was attached to Paarl Verkoeling en Ventilasie, was such goodwill transferred to the Defendant i.e. Paarl Air-conditioning Services?

4. If it was, was such transfer lawful or unlawful?

5. If it was unlawful, how much was the goodwill worth in monetary terms?

THE PLAINTIFF’S CASE

(8) Ms Patricia Anne Grobbelaar testified that she is the Plaintiff in the matter. She was duly appointed by the Master of the High Court as liquidator to Paarl Verkoeling en Ventilasie (in liquidation). The provisional order of liquidation was granted on 27 March 2002. Ms Grobbelaar was appointed on 10 April 2002. The provisional liquidation order was subsequently made final. She made an appointment with Mr. B. Foot, the member of the Close Corporation. On 28 March 2002 Ms Grobbelaar went to the premises of Paarl Verkoeling en Ventilasie in Paarl. She found premises locked. She met Mr. Benjamin Foot who gave her entry into the premises. She found four (4) vehicles in the workshop. In the main entrance there was office furniture which looked like two (2) workstations with desks, chairs. It was very tidy. There was no stock. Ms Grobbelaar further explained that normally when a company is filing for liquidation, the liquidator has got to get his/her security in place, make sure the premises are secured, alarm company has been notified, the landlord knows. When Ms Grobbelaar went there she found that all the accounts had been paid up until the end of April. All accounts, the landlord, the security company, telephone account were paid to date.

There were no employees and there were very few books and records. Ms Grobbelaar took three (3) files back to her office. These were creditors’ statements which she needed for the preparation of a creditors mailing list to advise creditors about liquidation. There were no debtors. These had been collected from date of closure (31 January 2002) by Mr. B. Foot’s wife. Ms Grobbelaar was given instructions by Mr. Foot that phone account had been transferred to the new CC. She made a note about this (Exhibit B89). Mr. B Foot further told Ms Grobbelaar that he was then trading under a new CC (Paarl Air Conditioning Services). The latter CC was registered in 1996. Its new member was a Mrs. A. Foot. The Foots approached Ms Grobbelaar and they wanted to make offers with regards to two (2) motor vehicles.

Mr. B. Foot specifically told Ms Grobbelaar not to cut off the telephone because it had been paid for in full and that it had been transferred to the new owner (Paarl Airconditioning Services, 18 Van der Merwe Street). Ms Grobbelaar was told the telephone line was transferred to the home address in Wellington. Consequently Ms Grobbelaar was never telephonically contacted by any of the customers of Paarl Verkoeling en Ventilasie. In her view customers went through Paarl Air-conditioning Services.

(9) Paarl Verkoeling en Ventilasie (in liquidation) had Geyser and KWV as its major debtors owing the company in liquidation R 200 000 and R 2201.65 respectively. No amount was collected from Geyser because it was itself in liquidation. An amount owed by KWV could not be collected either because Ms Grobbelaar did not have sufficient invoices or trace documents. She did not get full documentation, save for a few files of creditors. In her view the rest of the documentation were taken back (when the company closed) to 18 Van der Merwe Street because the Foots had been collecting from debtors from the date the cc closed until the date Ms Grobbelaar arrived there. The missing documents referred to the various customers of Paarl Verkoeling en Ventilasie. The documents were eventually dropped off at Ms Grobbelaar’s offices in September 2003 after an inquiry. These were contained in three (3) boxes. Ms Grobbelaar testified that these documents would have assisted with regards to collecting the debtors, but when she got them, they were in no order. It appeared to her as if they had just been taken out of lever arch files and dumped in these boxes. There were job cards, customer cards, the normal creditors’ statements, bank statements, cheque stubs. Ms Grobbelaar only got these documents upon an order by the Magistrate who presided over the inquiry. She had asked Mr. Foot many times for these documents but they were not forthcoming. She had to sell office furniture to Mr. Foot because the offer he made was above the valuation. The shortfall was R 776 000 owing to creditors when the liquidation was finished. Ms Grobbelaar identified the financial statements of Paarl Verkoeling en Ventilasie up until 31 August 1996 as appearing in Bundle B181. She further identified the financial statements of the same cc for August 1997 as well as for August 1998 (Bundle B 172 / B160).

(10) From Bundle A Ms Grobbelaar identified that Paarl Air-conditioning Services’ Founding Statement shows that it was received by Registrar of Companies & Close Corporations on 6 February 2002, six (6) days after Paarl Verkoeling en Ventilasie was closed. She further identified that Mr. Ben Krige was the accounting officer of Paarl Verkoeling en Ventilasie and he is also the accounting officer of Paarl Air-conditioning Services CC. The two CC’s have the same P O Box number. They had the same registered address (18 Van der Merwe Street, Wellington). They conducted the same type of business. Ms Grobbelaar testified that L G Electronics had a claim amounting to R 384 103-04 against Paarl Verkoeling en Ventilasie at the latter’s liquidation. That amount remained owed to LG Electronics on 31 January 2002. No payments appear to have been made to LG Electronics in those six (6) months. Ms Grobbelaar, however, found that Springbok was not treated like LG Electronics. She noted for example that in October, November 2001, Paarl Verkoeling purchased R 145 000 from Springbok which was paid off in four (4) instalments. During the same month or period, Paarl Verkoeling purchase for R 44 000 from LG Electronics but no payment was made to the latter. She went on and on to show that LG Electronics was not treated like Springbok.

In cross-examination Ms Grobbelaar stated that the trading name may well have been Coolvent but the majority of their accounts were in the name of Paarl Verkoeling en Ventilasie. She denied that she went with the auctioneer because she intended to sell assets piecemeal. She stated the auctioneer comes out with her to give her advice because that is their speciality. Her speciality is liquidation and insolvency practice. The auctioneer helps her, amongst other things, to assess whether or not business is viable to be sold as a going concern. The auctioneers give a valuation.

(11) Mr A.S. Pocock, an expert called by the Plaintiff testified that goodwill would comprise the client base which have been developed and maintained firstly in this case by Mr. Foot’s father and then by Mr. Foot himself. Stating it differently, he explained that goodwill would comprise of each development to be derived by the corporation from the client base sold to it by Mr. Foot. Amplifying his statement M. Pocock testified that in 1996 Mr. Benjamin Foot sold his goodwill to Paarl Verkoeling for R 130 000-00 thereby giving rise in the books of Paarl Verkoeling en Ventilasie to an asset reflected as intangible and maintained on that balance sheet to date of liquidation. Further clarifying his assertion, Mr. Pocock testified that until that date Mr. Foot had traded for his own account as a sole proprietor. In 1996 he then sold his trading as operation to Paarl Verkoeling as at that point it is apparent from the financial statement that the goodwill was sold for R 130 000-00. Mr. Pocock, however, points out that he has had no sight of the actual agreement or sale, nor of the calculations and workings for the raising of that goodwill. He concluded that he is not certain as to how the goodwill was in fact calculated in 1996. In the books of account year after year the goodwill remain reflected as the same R 130 000-00. Mr. Pocock further testified that according to IAS36 (international accounting statement) each year one should review the goodwill, the impairment, or diminution and adjust accordingly. But he hastened to add that in 2000, however, IAS36 was not yet applicable. Mr. Pocock added that the financial statements he was supplied with are pro forma financial statements and only a negligible value can be attached to them. Referring to the defendant (Paarl Air-conditioning Services) Mr. Pocock told the Court that in the first eight (8) months of trading it reflects a turnover of some R 1.9 million able to pay salaries of R 40 000. In 2003 the defendant reflected a pre-tax profit of R 49 608 (the first year of trading). In other words the period 10 October 2002 to 30 September 2003 the defendant reflects turnover of some R 3.463 million. Mr. Pocock then dealt in some great detail about the value of goodwill transferred to Paarl Air-conditioning Services. He proceeded using the figure of R 130 000-00. He applied the CPI rate to it and came to figures ranging between R 250 000 to R 300 000. Mr. Pocock was extensively cross-examined by Mr. Le Roux.

DEFENDANT’S CASE

(12) Mr Johannes Frederick Basson, an accountant as well as an auditor at PriceWaterhouse Coopers, testified that he was asked to value the goodwill of Paarl Verkoeling en Ventilasie CC and that he prepared a report in that regard. He was furnished with certain financial results of the cc. He first gave the court the definition of fair market value saying it is the price a willing buyer and a willing seller pay for a particular asset valued at the date of valuation. The source of information he used were cash flow statements for the period for the years ending 31 August 1999 through to 31 August 2001. He stated that due to different reasons, he did not have an opportunity to go and do an in-depth analysis of the business and of the records of the CC. He merely did a review of what was available by screening through the financial statements. He obtained the background information from Mr. Pocock’s report. He had no information about an entry of R 130 000-00 appearing as goodwill in the accounting records. He also had no information about where the entry came from and how it was determined. Presented with Mr. Foot’s version of how the R 130 000 came about, Mr. Basson commented that loan swapping was common at the time and it was used to get some tax advantages. Emphasizing, Mr. Basson stated that the value of goodwill is the excess of the value of the business over the value of the nett tangible assets. He told Court that goodwill is hard to count on, because its value can come from abstract and often unreliable things like ideas and people neither of which are guaranteed to work for a company forever. Further explaining goodwill he stated given its hazy nature, goodwill is designated as an intangible asset. In his explanation goodwill is a blanket term that presents in lump sum the value of brand names, patrons, customer base loyalty, competitive position and development of other hard to price assets a company might own. It is all the attributes of the business that draws customers to that business. On the basis of business making loss, Mr. Basson testified that if he had to make a valuation the first thing that that business can’t have any value because people don’t want to buy a business making a loss. People want to buy a business that will give them a profit. Basing his view on information supplied, Mr. Basson expressed an opinion that Paarl Verkoeling en Ventilasie did not have any value because of loss. Mr. Basson strongly differed to Mr. Pocock regarding the use of price index. He state categorically that the value of goodwill doesn’t move in line with the consumer price index. Mr. Basson also differed on the use of hindsight which Mr. Pocock advocated for. Disputing the transfer of goodwill from Paarl Verkoeling en Ventilasie to Paarl Air-conditioning Services, Mr. Basson testified that the latter remains a new business. In his view there could be other circumstances and other reasons why that business is doing well.

Turning to the client lists, Mr. Basson testified that they may have value for some business. He gave example of Reader’s Digest. Mr. Basson was extensively cross-examined by Mr. Melunsky.

(13) Ms Anneke Foot testified that she is a member of the Defendant CC. Her husband Mr. Benjamin Foot first worked for his father and thereafter he established his own business. Ms Anneke Foot was not involved in Mr. Benjamin Foot’s business. The Foot family was making a living out of Mr. Benjamin Foot’s business (Paarl Verkoeling en Ventilasie). At the end of the year 2001 she realized things were not working well for her husband’s business. Mr. B. Foot took a decision to rather seize trading. In her evidence the Foot family could not survive without the income they normally had from Paarl Verkoeling en Ventilasie. Mr. Banjamin Foot could not get employment anywhere. Mr. B. Foot wanted to go on with business but L.G. Electronics decided to liquidate him. The Foot’s then decided to rather do business on the name of Ms Anneke Foot, hence the existence of the Defendant. The Defendant CC was incorporated by Anneke Foot’s father-in-law in 1996 but had remained dormant. They contacted customers. Mr. B. Foot visited some customers. They traded in 19 Van der Merwe Street, Wellington. She further testified that they met Ms Grobbelaar. The Foot’s made an offer to purchase office furniture. In her evidence, Ms Grobbelaar never mentioned to them that she would sell the business as a going concern. According to her the telephone number of Paarl Verkoeling was closed. The Defendant later on advertised. The customers came to her husband for air-conditioning. The Defendant never took the customer list belonging to Paarl Verkoeling en Ventilasie. She was never aware of the word goodwill (klandisiewaarde). Under cross-examination she testified that it was Mr. B. Foot who advised that the business was experiencing problems and that they had to look at other options. Establishing a new company was one such an option. The Defendant was established in order to enable Mr. B. Foot to continue with his business venture. She conceded that her husband was worried about sequestration. She admitted that this was the reason she became the member of the Defendant CC. She told the Court that Mr. Krige was the accounting officer. Asked if it was true that Mr. Krige said in the inquiry that Defendant was the same business as Paarl Verkoeling en Ventilasie, Ms Anneke Foot stated that she has no experience. She merely handles the administrative side of the Defendant CC. She denied that the telephone number of Paarl Verkoeling en Ventilasie was transferred to Defendant adding that it would be impossible because it is two different districts. She, however, told the court there was voicemail. She conceded that Mr. Foot’s cellphone number was the same. They do get work from the people who contacted her husband. People do phone Mr. B. Foot.

(14) Mr. Benjamin Foot testified that his father was Kabie Foot. His father was in the air-conditioning business. Mr. Benjamin Foot started in 1995 to become active in his father’s business. But in 1996 Mr. B. Foot started his own business, namely Paarl Verkoeling en Ventilasie trading as Coolvent. Mr. B. Foot’s father’s business seized to exist shortly before his death. Before his death, Mr. Foot senior incorporated a close corporation called Paarl Air-conditioning Services but it was dormant. Mr. B. Foot explained that an entry appearing as goodwill in the books of account of Paarl Verkoeling en Ventilasie came about as follows:

In 1996 Mr. B. Foot and his wife wanted to purchase a house. Mrs. Foot then had a housing subsidy of R100 000.00 approved in her favour by her then employer. The house they intended to buy was priced at R160 000.00. They needed to obtain R60 000.00 to enable them to purchase the house. At the time Mr. B. Foot owned a holiday house in Betty’s Bay bonded in an amount of R70 000.00. The market value of this house was sufficient to secure a second bond of R60 000.00. Mr. foot planned to borrow a further R60 000.00 on security of this property. He would then donate this sum of money to his wife to make up the R60 000.00 they needed to purchase their intended house. Mr. Foot’s accounting officer (Mr. Strydom) advised Mr. Foot thus:

1. Mr. Foot was to sell his personal goodwill to Paarl Verkoeling en Ventilasie for R130 000.00 (R70 000.00 + R60 000.00).

2. Paarl Verkoeling en Ventilasie would borrow this amount from the bank.

3. Mr. Foot would bind himself as surety for Paarl Verkoeling en Ventilasie’s indebtedness to the bank and, as security for his obligations, the Betty’s Bay property would be offered as security.

4. The result of the transaction would be that the interest payable on the loan of R130 000, 00 would be an expense which could be reflected on the income statement of Paarl Verkoeling en Ventilasie and, thus reduce the latter’s taxable income.

(15) Mr. Foot told the Court that he is well known in the area for air-conditioning. Before he was liquidated, Mr. Foot was threatened with liquidation by L.G. Electronics. The latter indeed liquidated him.

Mr. Foot admits meeting Ms Grobbelaar on the premises of Paarl Verkoeling en Ventilasie. She had arrived on the premises with someone from Ocean Alliance. He conceded that all the assets Ms Grobbelaar mentioned she found on the premises were indeed there. Asked about the personnel, Mr. Foot stated that he made a suggestion that they should become sub-contractors. They were positive towards this. He further testified that at the beginning of the Defendant, it traded on the same premises that previously housed Paarl Verkoeling en Ventilasie. Mr. Foot ensured that the rent and telephone accounts were paid up to date of liquidation. He explained that he had to pay telephone for purposes of an alarms system. He testified Ms Grobbelaar asked them to assist with collection of outstanding debts. He explained that Paarl and Wellington are country towns with small communities. The people know one another. Mr. Foot knows customers.

His father Kabie Foot was well known. Paarl Air-conditioning Services get customers as a result of references, friend, etc.

Under cross-examination Mr. Foot admitted that apart from customers he learnt to know the suppliers and the business established for itself goodwill. Mr. Strydom was involved in the family business since 1995. Mr. Foot is well known in the area. Loan swapping was recommended to him by Mr. Strydom. Mr. Foot, however, does no longer remember the discussion specifically focusing on goodwill. Mr. Foot said he no longer remembered how R130 000.00 came about until he was reminded by Mr. Strydom. Mr. Strydom did not also remember this readily; he had to think about it. When it was put to him that his wife testified that the reason why Paarl Air-conditioning Services was on her name was because he (Mr. Foot) wanted to continue with business, Mr. Foot denied this and said his wife is wrong in that regard.

He conceded, however, that Defendant CC was the same business as Paarl Verkoeling en Ventilasie. Asked if the Defendant CC was patronized by the same customers, Mr. Foot responded merely by saying customers know them.

Asked about the customer list, Mr. Foot said he had no customer list; he did not need it, customers phoned him. He denied that Defendant CC was his business, stating that it was on the name of his wife.

ASSESSMENT OF SUBMISSIONS

(16) Mr. Le Roux argued that the Plaintiff did not succeed to prove that:

(i) Paarl Air-conditioning Services ever conducted business from the same premises as Paarl Verkoeling en Ventilasie/Coolvent;

(ii) Paarl Air-conditioning ever made use of Paarl Verkoeling en Ventilasie’s telephone number save that Mr. Foot kept his cellphone number;

(iii) Paarl Air-conditioning Services ever made use of its predecessor’s client list to acquire customers or that it solicited the clientele of its predecessor;

(iv) Traded under a name similar to the English translation of “Paarl Verkoeling en Ventilasie”.

Concluding his submissions in this regard, Mr. Le Roux disputed the appropriation of Paarl Verkoeling en Ventilasie’s goodwill by Paarl Air-conditioning Services. In his view Mr. Foot did not act in contravention of any restraint of trade.

(17) In order to fully understand the above submission one needs to consider the correlations between these two (2) businesses ie Paarl Verkoeling en Ventilasie in Liquidation and Paarl Air-conditioning Services. These close corporations had:

1. Virtually similar names but different meanings;

2. The same accounting officer;

3. The same postal address;

4. The same registered address;

5. The same type of business activities;

6. The same product;

7. The same geographical area of operation;

8. The same clientele (not necessarily all but indeed many of them);

9. The same driving force, namely Mr. Benjamin Foot.

Mr. Benjamin Foot testified that when the Defendant commenced operations it initially did so from the premises of Paarl Verkoeling en Ventilasie. It initially used the latter’s motor vehicles and telephone. It is noted that this was for a very short period of time. Evidence does show that the Defendant at a later stage operated from other premises. But the point is that the Defendant commenced in January/February 2002. It carried on the same business which had previously been carried on by Paarl Verkoeling en Ventilasie. That the two (2) businesses once shared the same telephone number, at least for a while, cannot be ignored. Mr. Foot himself conceded this. Ms Grobbelaar testified that the business telephone of Paarl Verkoeling en Ventilasie had been taken over or transferred to the Defendant by the time she was appointed. Ms Grobbelaar told the Court that when she assumed her duties she was instructed by Mr. Foot not to disconnect the telephone line of Paarl Verkoeling en Ventilasie because it had been transferred. Although this evidence is disputed by Mr. Foot it is noteworthy that Mr. Foot ensured that the telephone line was paid for and kept active. Mrs. Anneke Foot also admitted that the Defendant paid the telephone expenses of Paarl Verkoeling en Ventilasie’s line. She denied that the telephone line had been diverted to the Defendant. Regard being had to the admission by Mr. Foot that the Defendant initially used both premises and telephone of Paarl Verkoeling en Ventilasie, the probabilities weigh heavily in favour of the Plaintiff’s assertion on this aspect. The possible diversion of the telephone line from Paarl Verkoeling en Ventilasie to the Defendant and/or the taking over of Paarl Verkoeling en Ventilasie’s line by the Defendant meant that prospective customers of Paarl Verkoeling en Ventilasie ended up as customers of the Defendant.

More so because we are told that in the air-conditioning business run by Paarl Verkoeling en Ventilasie (later on by the Defendant) was not the type of business where customers visited the premises.

On the contrary, inquiries were made and orders placed by telephone. It is Mr. Benjamin Foot’s evidence that the situation of the premises, whether in Paarl or Wellington, was of no consequence.

(18) Mr. Benjamin Foot’s cellphone number is the same cellphone number he used when he was still employed by Paarl Verkoeling en Ventilasie. I am told that this was Mr. Foot’s personal cellphone. It is, however, also important to bear in mind that Paarl Verkoeling en Ventilasie paid the expenses generated by the use of Mr. Foot’s cellphone. Except after 1 February 2002, it may be argued that this particular cellphone instead of generating business for Paarl Verkoeling en Ventilasie, it (because it retained its original number) generated business for the Defendant.

Mr. Foot’s evidence at the inquiry was to the effect that persons still telephoned him in connection with installations which he had done prior to the demise of Paarl Verkoeling en Ventilasie.

This was confirmed by Mrs. Anneke Foot also at the inquiry.

(19) It remains important to note that the Defendant initially operated from the same premises as Paarl Verkoeling en Ventilasie. The Defendant therefore would have had access to the invoices of Paarl Verkoeling en Ventilasie. The Defendant had access to the computers used by Paarl Verkoeling en Ventilasie. It would most probably have access to the electronic information contained in these computers. Mr. Foot told this Court that a client list bears no significance in the country towns like Paarl and/or Wellington because people know one another there.

Mr. Foot also denied the existence of a client list. I, however, note with concern that Mr. Krige, the corporation’s accounting officer, testified as follows at the inquiry into the liquidation of Paarl Verkoeling en Ventilasie:

“Paarl Air Conditioning het tot stand gekom sover ek weet deur die feit dat Mnr. Foot deur LG gesê is dat hulle hom gaan likwideer, okay.

Ja …………..toe het hy gesê hy wil graag aangaan, want dit is, hy het die kliëntebasis en hy het alles en hy gaan liewerste sy vrou oplei en van die huis af opereer.” (See: Exhibit ‘A’ page 97.)

Mr. Foot himself at inquiry testified that when a person installed an air-conditioning unit he would keep the client’s name and address. He would build up a list of clients. In his evidence he stated (before inquiry) that this customer connection was very valuable, almost everyone would return to make further purchases. In his words:

“En ag 99 persent van almal wat by jou masjiene koop, koop weer by jou ‘n masjien. Hy gaan koop nie by ‘n ander ou ‘n masjien nie.” (Exhibit ‘A’ 24-26.)

APPROPRIATION

(20) Mr. Le Roux attacks the following reasoning which he ascribes to the Plaintiff, namely that:

1. During 1996, Mr. Foot sold his personal goodwill to Paarl Verkoeling en Ventilasie/Coolvent for any amount of R130 000.00

2. On February 2002 Defendant commenced operations immediately after Paarl Verkoeling en Ventilasie/Coolvent cease trading due to financial difficulties.

3. Defendant employed Mr. foot, who necessarily brought with him his personal knowledge, contacts and experience in the field of the supply, installation and servicing of air-conditioning equipment;

4. In employing Mr. Foot, the Defendant appropriated the goodwill of Paarl Verkoeling en Ventilasie/Coolvent.

This goodwill formed an intangible asset in the insolvent estate of Paarl Verkoeling en Ventilasie/Coolvent, which could have been sold and the proceeds of which sale could have been distributed amongst the creditors of the same Paarl Verkoeling en Ventilasie/Coolvent. Concluding his submission in this regard, Mr. Le Roux stated that it is trite that a person who loses his business due to insolvency has to go and work for a salary. In his view there was thus no appropriation of goodwill by the Defendant at all.

(21) The difficulty I have with this submission is that Mr. Krige (accounting officer of both Paarl Verkoeling en Ventilasie and Paarl Air-conditioning Services) gave evidence at the inquiry into the liquidation of Paarl Verkoeling en Ventilasie to the effect that “now what is the business as far as you know of Paarl Air-conditioning services?

………Dit is dieselfde besigheid.” (See: Exhibit ‘A’ p.148.)

The Defendant’s expert Mr. Basson stated the following in his report:

“We also understand that Mr. foot is employed by PAS, who provides the same service to the same clients as PVV has done in the past.” (See Pleadings page 62)

Although Mr. Foot disputes it, it is so that Ms Grobbelaar testified about the note she made when she went to the premises of Paarl Verkoeling en Ventilasie on 28 March 2003.

It was noted that Mr. Foot admitted to the liquidators that he was “now trading under a new CC, in the name of Paarl Air-conditioning Services CC.”

(22) The owner of Springbok Verkoeling testified at the insolvency inquiry that he did business with the Defendant on the same basis as he had previously done with Paarl Verkoeling en Ventilasie.

Probably, Springbok Verkoeling regarded the new business as essentially the same as the old one. Mr. Foot, probably inadvertedly, referred to the Defendant when he testified before me as “my” business. There was, however, a difference between Paarl Verkoeling en Ventilasie and Paarl Air-conditioning Services. The difference was that the member of Paarl Verkoeling en Ventilasie had been Mr. Benjamin Foot while Mrs. Anneke Foot is the member of the Defendant.

WHAT IS GOODWILL

(23) The Investment FAQ last revised on 18 July 1993 in an article “Analysis of Goodwill” contributed by John Keefe defines goodwill as “an asset that is created when one company acquires another. It represents the difference between the price the acquiror pays and the “fair market value” of the acquired company’s assets……………..In theory the goodwill is the value of the acquired company over and above the hard assets, and it is usually thought to represent the value of the acquired company’s “franchise”, that is, the loyalty of its customers, the expertise of its employees, namely, the intangible factors that make people do business with the company.”

Investorwords.com (the biggest, best investing glossary on the web) defines goodwill as “an intangible asset which provides a competitive advantage, such as a strong brand, reputation, or high employee morale. In an acquisition, goodwill appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company.”

(24) The concept of goodwill has been the subject of adjudication by our Courts. Hence the description thereof in Commissioners of Inland Revenue v Muller and Co.’s Margarine Ltd. 1901 AC 217 (HL) at 223-4 where the following appears:

“It is the benefit and advantage of the goodname, reputation and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has the power of attraction sufficient to bring customers home to the source from which it emanates.”

(25) Goodwill was described as the property, an incorporeal movable in Slims (Pty) Ltd. and Another v Morris NO 1988(1) SA 715 (A) at 727 I-J.

In Torf’s Estate v Minister of Finance 1948 (2) SA 284 (N) at 292, the following dictum of Lord Mcnazhten in Muller and Co’s Margarine Ltd. was quoted:

“It is very difficult, as it seems to me, to say that goodwill is not property. Goodwill is bought and sold every day. It may be acquired, I think, in any of the different ways in which property is usually acquired. When a man has got it he may keep it as his own. He may vindicate his exclusive right to it if necessary by process of law. He may dispose of it if he will – of course, under the conditions attaching to property of that nature.”

(26) It is clear from the above definitions and/or pronouncements that goodwill is an asset with its own identity notionally and commercially. You cannot separate goodwill from the business to which it attaches. It is an attribute.

(See: Speeches in Muller and Co.’s Margarine Ltd. supra.)

It is common cause that the substantial goodwill built up by Paarl Verkoeling and Ventilasie over the years of its operations constituted an asset in its estate. In fact, the books of account of Paarl Verkoeling en Ventilasie show the value of its goodwill to have been R130 000.00. I will deal infra with the version of Mr. Foot as to how the figure of R130 000.00 came about.

VALUATION OF GOODWILL

(27) According to an expert who testified on behalf of the Defendant, Mr. Basson, goodwill is “calculated as the residue between the value of the underlying assets of a business and the value of the business as a whole.” Mr. Pocock, an expert for the Plaintiff agrees with Mr. Basson as to the calculation and assessment of goodwill. The two (2) experts, however, radically differ on the use of hindsight in the assessment of the goodwill.

SAICA Guide on Equity Valuations of 1993 referred to by Mr. Pocock refers to the case of Holt & Others v IRC 1958 (2) A11 ER 1499 where the following appears with regard to the use of hindsight in valuations:

“It is necessary to assume the prophetic vision of the prospective purchaser at the moment of the death of the deceased, and firmly to reject the wisdom which might be provided by the knowledge of subsequent events.”

It is not necessary to dwell in the use of hindsight because the practice in this country in any event is that hindsight is not permissible when valuations are done.

(28) According to Mr. Foot an amount of R130 000.00 reflected as goodwill in the balance sheet of Paarl Verkoeling en Ventilsasie, came about as follows:

In 1996, Mr. and Mrs. Foot wanted to purchase a house. Mrs. Foot then had a housing subsidy of R100 000.00 approved in her favour by the Provincial Government. The house they intended to buy cost R160 000.00. They then needed to obtain R60 000.00 to enable them to purchase the house. At the time Mr. Foot owned a holiday house in Betty’s Bay bonded in an amount of R70 000.00. The market value of this house was sufficient to secure a second bond of R60 000.00. Mr. Foot planned to borrow a further R60 000.00 on security of this property. He would then donate this sum of money to his wife to make up the R60 000.00 they needed to purchase their intended house. Mr. Foot’s accounting officer, Mr. Strydom advised Mr. Foot as follows:

1. Mr. Foot was to sell his personal goodwill to Paarl Verkoeling en Ventilasie for R130 000.00 (R70 000 + R60 000.00)

2. Paarl Verkoeling en Ventilasie would borrow this amount from the bank.

3. Mr. Foot would bind himself as surety for Paarl Verkoeling en Ventilasie’s indebtedness to the bank and, as security for his obligations as surety, the Betty’s Bay property would be offered as security.

4. The result of the transaction would be that the interest payable on the loan of R130 000.00 would be an expense which could be reflected on the income statement of Paarl Verkoeling en Ventilasie and, thus reduce the latter’s taxable income.

(29) It surprises that during this hearing Mr. Foot had a clear remembrance of this “loan swapping”. At the insolvency inquiry Mr. Foot denied any knowledge as to how the sum of R130 000.00 had been arrived at. This is clear from the following extract of his evidence at the inquiry:

“Soos Mnr. Krige ook gesê het. Hy het niks te doen gehad met die vasstelling van daardie bedrag nie. Daardie bedrag is vasgestel deur Mnr. Strydom, vorige boekhouer van Paarl Verkoeling. Hy het die bedrag vasgestel. Hoe hy daarby uitgekom het weet ek nie, maar tussen hom en die bankier was die bedrag in lyn……….(K)om ek sê ABSA Bank het die bedrag goedgekeur wat Mnr. Strydom vir hulle gegee het en hy moes feite gehad het om dit te kon staaf hoekom hy gesê het dit is R130 000.00.”

At the same inquiry Mr. Foot told the Court that R130 000.00 was the true value of goodwill:

“Ja dit is die bedrag wat, dit is die ware bedrag waaroor die verkoop was.” (See: Exhibit ‘A235”.)

Mr. Foot before me did not want to admit that R130 000.00 was the true value of the goodwill. He did not want to admit that the amount had been an arbitrary amount and that the entry in the financial statements of Paarl Verkoeling en Ventilasie had been a fraud. Mr. Foot preferred ultimately to say he was satisfied that it must have been a correct valuation in that it had been done by a chartered accountant. It is difficult to apprehend how the R130 000.00 came about. Mr. Foot has preferred to present conflicting answers in this regard. In my view it would be futile to attempt to search further. I accept R130 000.00 in the income statement as the true figure representing goodwill as at the date when the entry was made.

HOW IS GOODWILL CALCULATED

(30) According to Mr. Basson the value of goodwill is the excess of the value of the business over the value of the nett tangible assets. It can vary from day to day and is affected by many factors. According to Pocock to place a value on the goodwill at any particular time is a difficult exercise. In his own words “it’s a very inexact science”. Mr. Pocock told the Court that the client list and telephone line have value of their own distinct from the value of the goodwill.

In assessing the goodwill of Paarl Verkoeling en Ventilasie allegedly taken over by the Defendant, Mr. Pocock testified that the turnover of the Defendant “is an indication”.

(31) I bear in mind that the chartered accountant responsible for the alleged “loan swapping” was not called to give evidence. I am further mindful that Mr. Basson looked exclusively at certain of the close corporation’s historical financial statements in his consideration of the value of goodwill of Paarl Verkoeling en Ventilasie. These were sets of financial statements which he himself labelled as “being completed and accurate”. These were unaudited Pro-forma financial statements. I accept that close corporations do not have to subject their financial statements to auditing. I find that it would be dangerous to place reliance on these financial statements. I agree with the observations made by Mr. Pocock in reaction to the statement put to him, namely, that the goodwill entry was bogus.

Mr. Pocock responded thus:

“The man who is prepared to pass a simulated transaction of such nature, is he not prepared to understate turnover, overstate expenditure.”

I have found little assistance from the two (2) experts’ conflicting views regarding the calculation of goodwill. I take it that R130 000.00 was a legitimate entry despite the attempts by Mr. Foot to deny the legitimacy thereof.

(32) Mr. Pocock mentioned that the mere fact that liabilities exceed assets “does not negate the fact that the goodwill has a value as an asset.” In this regard Mr. Basson also conceded.

That goodwill is not entirely dependent on profit stands to reason: that a purchaser might not be prepared to offer anything for the business above its net tangible asset value does not mean that there is no goodwill with any value. It simply means that the value of the goodwill (as an intangible asset) is not enough, together with the tangible assets, to turn the business into a profitable prospect. The distinction between profit and goodwill becomes apparent in liquidations where a purchaser, who generally will not take the liabilities of a business, is likely to offer significantly more for a going concern than for a business which is sold off piecemeal.

THE APPLICABLE LAW

33. Lex Aquilia is applicable here.

This entails a general action for unlawful competition which is recognized in our law. See: (Atlas Organic Fertilizers (Pty) Ltd. v Pikkewyn Ghwano (Pty) Ltd. and Others) 1981 (2) 173 (T) at 179 E-F; 186 D.

An Aquilian action exists where economic loss has been caused to a trading entity by unlawful actions of a rival. There is no numerus clausus of instances of unlawful competition. Where in a particular case the conduct complained of amounts to unlawful competition, such conduct need not fall within any recognized category of unlawful competition.

(Dun and Brandstreet (Pty) Ltd. v SA Merchants Combined Credit Bureau (Cape) (Pty) Ltd. 1968 (1) SA 209 (C) at 216-18 and 221;

Schultz v Butt 1986 (3) SA 667 (A) at 678).

(34) In Matthew and Others v Young 1922 AD 492 at 507 the following passage of importance appears:

“Competition often brings about interference in one way or another about which rivals cannot legitimately complain. But the competition and indeed all activity must itself remain within lawful bounds. All a person can, therefore, claim is the right to exercise his calling without unlawful interference from others. Such an interference would constitute an injuria for which an action under the Lex Aquilia lies if it has directly resulted in loss.”

(35) In Dun & Brandstreet (Pty) Ltd. v SA Merchants Combined Credit Bereau (Cape) (Pty) Ltd. supra, Corbett J held a rival trader liable in damages where it had knowingly furthered its business with information compiled by its competitor by the exercise of skill and labour and distributed by that competitor to its clients upon a confidential basis. The learned Judge stated the following:

“Reverting to the position in our law, and without attempting to define generally the limits of lawful competition, it seems to me that where, as in this case, a trader has by the exercise of his skill and labour compiled information which he distributes to his clients upon confidential basis, (i.e. upon the basis that the information should not be disclosed to others), a rival trader who is not a client but in some manner obtains this information and, well knowing its nature and the basis upon which it was distributed, uses it in his competing business and thereby injures the first mentioned trader in his business, commits a wrongful act vis-à-vis the latter and will be liable to him in damages……In such circumstances the conduct of a rival trader who obtains and, well knowing the position, uses the information to advance his own business interests and activities amounts to a deliberate misappropriation and filching of the product of another’s skill and labour. Such conduct must, in my view, be regarded as dishonest and as constituting a fraud upon the compiler of the information…………..(A) not the damages suffered would normally consist of the loss of customers or potential customers who have been induced by such conduct to deal with his competitor rather than with the compiler himself.”

APPLICATION OF LAW TO THE FACTS OF THIS MATTER

(36) The test to be used in the determination of the lawfulness or unlawfulness of the conduct of the Defendant “is the objective one of public policy. This general sense of justice of the community, the boni mores, manifested in public opinion.”(Atlas Organic Fertilizers, supra at 188H; Schultz v Butt supra

As defined in Atlas Organic Fertilizers supra:

“In determining and applying this norm in a particular case, the interest of the competing parties have to be weighed, bearing in mind also the interest of society, the public weal. As this norm cannot exist in vacuo, the morals of the market place, the business ethics of that section of the community where the norm is to be applied, are of major importance in its determination.”

(37) The operations of the Defendant in my view certainly amounted to unlawful competition in certain respects. It took the customer connections of Paarl Verkoeling en Ventilasie. It misrepresented the situation to customers of Paarl Verkoeling enVentilasie. It induced customers including potential customers of Paarl Verkoeling en Ventilasie to deal with itself by deception. It thus passed itself off as Paarl Verkoeling en Ventilasie. It is in this way in my view, that the Defendant obtained an undue and improper advantage over Paarl Verkoeling en Ventilasie. This was an obvious interference with Paarl Verkoeling en Ventilasie’s right to attract custom.

(38) Our law is clear, customer lists drawn by a trader, and kept confidential for the purposes of his own business; contain confidential information, which is the property of that trader (Pelunsky & Co. v Theron 1913 WLD 34; Robb v Green (1895) 2 QB 315 (CA); Telefund Raisers CC v Isaacs and Others 1998(1) SA 521 (C)).

(39) I hold that Paarl Verkoeling en Ventilasie’s telephone line was either diverted or somehow transferred to the Defendant. Diverting this telephone line was but a strategy by the Defendant to pass its business off as being, or being associated with the business of Paarl Verkoeling en Ventilasie. The Defendant has a trade name similar to, and which can easily be confused with that of Paarl Verkoeling en Ventilasie. The telephone diversion took the deception a step further. The obvious inference is that all who telephoned Paarl Verkoeling en Ventilasie’s telephone number thought and accepted that the business formerly conducted at that number is being conducted by the Defendant. The diversion of the telephone line (or the taking over of the telephone line) amounted not only to passing off, but it was also a method by which the Defendant had, by deception, solicited clients of Paarl Verkoeling en Ventilasie. The Defendant’s objective in applying for and obtaining the diversion of Paarl Verkoeling en Ventilasie’s line was, in my finding, to appropriate the trade of Paarl Verkoeling en Ventilasie, by intercepting and diverting telephone calls made to the latter. By leading clients and customers of Paarl Verkoeling en Ventilasie to believe that they were dealing with the same business, when they in fact were dealing with the Defendant. Once more the Defendant intended and did in fact appropriate the trade of Paarl Verkoeling en Ventilasie by deceptive means. This undoubtedly constituted an unlawful and unfair interference with Paarl Verkoeling en Ventilasie’s business and reputation, designed to enable the Defendant to filch customers of Paarl Verkoeling en Ventilasie and to cash in on its good name and reputation in the trade.

(40) The conduct of Mr. Benjamin Foot, in taking confidential client lists, in taking whatever repute might have attached to himself and whatever knowledge he might have had of the industry and transferring it to the Defendant, and in competing with Paarl Verkoeling en Ventilasie (before the liquidation proceedings were finalized), amounted to the contravention of his fiduciary duties to Paarl Verkoeling en Ventilasie provided for in Section 42 of the Close Corporations Act. In his work Henochsberg on the Close Corporations Act makes the following telling comment:

“The intention is to prohibit competition by a member with the corporation in its business activities irrespective of the manner in which the competition occurs. It could occur, inter alia, as a consequence of the member’s association with inter alia another corporation, company or partnership, the business of which competes with the corporation’s business.”(See looseleaf, issue 13 para 42(8) of theAuthor’s work).

(41) Whether Mr. Benjamin Foot sold his goodwill for a market related price or not bears no significance. The fact remains that he consciously and deliberately sold his goodwill to Paarl Verkoeling en Ventilasie. He accordingly permanently disposed of his goodwill. Mr. Foot was not entitled to utilize the goodwill he sold. It became the sole and absolute property of Paarl Verkoeling en Ventilasie. The relevant analogous position is that of a person selling a business together with its goodwill. Such a seller is prohibited from thereafter soliciting clients of his previous business. To act otherwise would be to deprive the purchaser of the goodwill for which it has bought and paid (Trego v Hunt supra; A Becker and Co. (Pty) Ltd. v Becker and Others 1981(3) SA 406(AD) at 414 H). Defendant tendered for work from clients who had previously been clients of Paarl Verkoeling en Ventilasie. The Defendant was thus certainly soliciting customers from Paarl Verkoeling en Ventilasie’s former clients. Regard being had to the two (2) businesses – that they were vehicles for Mr. Benjamin Foot’s air-conditioning business – this solicitation should on this basis also be regarded as unlawful.

FINDINGS

(42) There is compelling evidence that Paarl Verkoeling en Ventilasie indeed built up for itself substantial goodwill during the years of its existence.

I find that even at the end of 2001 and beginning of 2002 Paarl Verkoeling en Ventilasie still had goodwill attached to it despite the fact that it had ceased trading. Client lists and electronic information contained in computers existed.

(43) The conduct of Mr.Benjamin Foot in ceasing operations in Paarl Verkoeling en Ventilasie and commencing the operations together with his wife (Anneke Foot) out of the Defendant was, in my finding, a deliberate and transparent scheme to enable them to take from Paarl Verkoeling en Ventilasie whatever was good leaving the bad. I find that the customer connections, the know-how and the new orders which all together constituted the goodwill of Paarl Verkoeling en Ventilasie was transferred directly to the Defendant. I further find that although Mr. Benjamin Foot is said to be the driving force, these things did not belong to him nor to the Defendant. The latter merely took advantage of them and it used them to make a profit for itself.

(44) The inference is inescapable that the business of the Defendant was the same business (Paarl Verkoeling en Ventilasie) being carried on under a slightly different name. Just as Paarl Verkoeling en Ventilasie had previously been the vehicle for Mr. Bejamin Foot, so too is the Defendant. It is the same business, conducted only through a different close corporation. The only difference between the two (2) close corporations was that the member of Paarl Verkoeling en Ventilasie had been Mr. Benjamin Foot while Mrs. Anneke Foot is the member of the Defendant. At the time when the Defendant started operation, Paarl Verkoeling en Ventilasie had ceased trading. That, however, does not mean that its goodwill immediately disappeared. It would have possessed residual renown (Polalow Brothers (Pty) Ltd. v Gershlowitz) 1976 (1) SA 863 (E) at 865 H). Consequently the Defendant was immediately successful. Mr. Melunsky is, in my view, correct in saying that the Defendant has reaped where it has not sown. Indeed it has prospered to the detriment of Paarl Verkoeling en Ventilasie. The objective of the Foots in setting up the Defendant even before liquidation of Paarl Verkoeling en Ventilasie has been finalized, had been to appropriate the trade of the latter. They indeed succeeded in doing so. Clearly the boni mores and general sense of justice of society would categorize their conduct and that of the Defendant as the unlawful conduct.

(45) While Mr. Benjamin Foot was generating goodwill during the times of Paarl Verkoeling en Ventilasie, he was going about the business of the latter and not his own business. Mr. Benjamin Foot was an employee. He used his charisma, his knowledge and skill of the industry to further the business of his employer, Paarl Verkoeling en Ventilasie. The goodwill thus belonged to the latter. It was not Mr. Benjamin Foot’s goodwill which he could take with him whenever he chose (compare Telefund Raisers CC v Isaacs and Others 1998 (1) SA 521 (C) at 534 B-D).

(46) When the Defendant commenced trading in February 2002 it would ordinarily have had limited or no goodwill at all. Goodwill is built upon over a period of time. This is evident from the following extract in Trego v Hunt (1895-9) All E.R. 804 (HL) at 810 D-E:

“It is the connection thus formed, together with the circumstances, whether of habit or otherwise, which tend to make it permanent, that constitutes the goodwill of a business. It is this which constitutes the difference between a business just started, which has no goodwill attached to it, and one which has acquired goodwill. The former trader has to seek out his customers from among the community as best he can. The latter has a custom already made. He knows what members of the community are purchasers of the articles in which he deals, and are not attached by custom to any other establishment.”

DAMAGES

(47) I have found that the conduct of the Defendant vis-à-vis Paarl Verkoeling en Ventilasie amounted to unlawful competition. The usual principles of assessing patrimonial loss and damages do not apply, except as modified. This is to accommodate the imponderables attendant upon such an assessment. It is accepted that assessing damages caused by unlawful competition is inherently imprecise. In this sort of case damages need not be proved with mathematical precision. (International Tobacco Co. (SA) Ltd. v United Tobacco Co. (South) Ltd. (1) 1955(2) SA 1 (W) at 17-19; Law of damages, Visser & Potgieter, 2^nd edition, 385).The Court should, on the probabilities revealed by the evidence, make an assessment of the loss and then estimate an amount of damages ex bono et aequo. To require otherwise would “make a travesty of justice”. (See Unlawful Competition p.72). In the instant case the Court must do the best it can on the evidence available (compare Caxton Ltd. v Reeva Forma (Pty) Ltd. 1990(3) SA 547(A) at 573.

(48) Mr. Basson told the Court that a legitimate method of quantifying goodwill was by taking the sustainable income of a business and applying a price earnings ratio to it. In the case of the Defendant’s net profit for one (1) year was thus approximately R50 000.00. On this basis the goodwill of the Defendant according to its financial statements, was in the vicinity of R150 000.00. On the other hand, Mr. Pocock’s figures ranged from R130 000.00 to R900 000.00. It is indeed extremely difficult in the instant case to assess damages. Particularly so because the two (2) experts have differed radically. I would therefore take the figure of R130 000.00 appearing as an entry of goodwill in the financial statements.

COSTS

(49) The general rule is that the successful party is entitled to its costs. In the instant matter there is no reason to depart from the general rule.

ORDER

(50) In the circumstances I make the following order:

1. Judgment is granted in favour of the Plaintiff for the payment of One Hundred and Thirty Thousand Rands (R130 000.00).

2. It is ordered that the Defendant shall pay interest on aforesaid amount at the rate of 15.5% per annum calculated from the date of service of summons (14 March 2003) to date of payment.

3. The Defendant shall pay the Plaintiff’s costs of suit.

__________________

DLODLO, J

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