Court name
High Court
Case name
Kiihn v Levey and Another
Media neutral citation
[1996] NAHC 59

























HERMAN
KUHN


PLAINTIFF





versus


BENJAMIN
LEVEY &




1
OTHER


DEFENDANTS










CORAM:


GIBSON,
J.











Heard
on:


1996
. 05.28









Delivered
on:



1996.09.10










JUDGMENT




GIBSON.
J.
:


The
plaintiff issued a summons against the





defendant
seeking payment of the sum of N$24 000 with interests and costs. The
action arises from an agreement of sale of a business known as
Transport Carriers and Consultants (Pty) Ltd of Windhoek. The
plaintiff's case is that he has performed his obligations under the
agreement, but that out of the purchase price of N$36 000 the
defendants only paid the first instalment of N$12 000, that after
this payment the defendants, in breach of the agreement, stopped
payment of the remaining postdated cheques, being two cheques in the
amount of N$12 000 each.






The
defendants filed a notice of intention to defend and the plaintiff
launched his application for summary judgment saying that the
defendants have no
bona
fide

defence, that the intention to defend is filed purely for the
purposes of delay.



In
a long and detailed affidavit the defendants deny that they have no
bona
fide

defence to the plaintiff's action or that the opposition is filed
merely to buy time. Defendants deny that they are indebted to the
plaintiff as claimed. The defendants admit that there was an
agreement between themselves and the plaintiff. The defendants
assert that the agreement was partly in writing and partly oral,
that it was contained in Annexures "A", "B" and
further orally amplified to include the terms that the plaintiff
would be subject to a restraint of trade as evidenced by the
plaintiff's signed undertaking dated 12th October, 1995 in Annexure
"C" to the opposing affidavit.






The
defendants made the allegations, at paragraph 8 of their opposing
affidavit, this way:











"It
was further agreed that we would take over the business by paying
Plaintiff the sum of N$36, 000.00 on 10 October 1995 (N$12,000.00) ,
1 November 1995 (N$12,000.00) and 1 December 1995 (N$12, 000 . 00) .
We gave Plaintiff two post-dated cheques for the amount. We orally
agreed to write off the company's abovestated indebtedness to us in
exchange for the company's name and its goodwill (including the
retention of company's active clients) Plaintiff undertook to resign
as director of company and to appoint the new shareholders, us, as
directors (which was duly done by company resolution). See
Annexure "B"."









The
defendants also say that in terms of the agreement the plaintiff was
restrained from doing or entering into a related business in
competition with the company for a period of 36 months commencing on
10th October, 1995, in the Republic of South Africa and Namibia with
special reference to clients or customers of the plaintiff's
company during the previous 12 months. The defendants conclude by
saying this restraint of trade agreement was a material term of the
agreement, but plaintiff in breach of the reciprocal obligations,
continued and/or commenced to trade as Kiihn and Partners in
competition with his former company in a related business and with
the active clients of that company, for example Atlas Copco and
Gideon de Wet of Veronica Farm. As a result of the plaintiff's
breach the defendants suffered loss, of clients, turnover and
business. The defendants give specific figures for October,
November, December and January which show a downward monthly
turnover from N$150 000 to N$37 830.07 and a slight upturn to N$68
929.41 in January 1996.









The
plaintiff attacks the opposing affidavit filed by the defendants. It
was submitted on behalf of the plaintiff that the affidavit does not
comply with Rule 32(3)(b) of the Rules of the High Court, in that it
does not fully disclose the nature and grounds of this purported
defence in the form of their counterclaim and the material facts
relied upon as required by Rule 32.









Rule
32(3) requires that the defendants should,











"Satisfy
the Court by affidavit that he or she has a
bona
fide

defence to the action, such affidavit or evidence shall disclose
fully the nature and grounds of this defence and the material facts
relied upon therefor."









The
meaning of the word "fully" as used in the above Rule and
its predecessors was defined in
Maharai
v Barclays









National
Bank Limited
,
1976(1) SA 418 (A) at p. 426, where the learned Judge of Appeal
Corbett, said:











"The
word 'fully' as used in the context of the rule (and its
predecessors), has been the cause of some judicial controversy in
the past. It connotes, in my view, that, while the defendant need
not deal exhaustively with the facts and the evidence relied upon to
substantiate them, he must at least disclose his defence and the
material facts upon which it is based with sufficient particularity
and completeness to enable the Court to decide whether the affidavit
discloses his defence and completeness to enable the Court to decide
whether the affidavit discloses a
bona
fide



defence
At the same time the defendant is



not
expected to formulate his opposition to the claim with the precision
that would be required of a plea; nor does the Court examine it by
the standard of pleadings."









I
would go along with the plaintiff's criticism that the defendants do
not disclose fully the defence and the material facts upon which it
is based only where this refers to the defendants' reference to
their claim that the plaintiff's company owed an old and unpaid debt
to the defendants' partnership. The debt is said to have originated
in a set-off but which is not described, and is said to have been in
an amount of money, which is again not disclosed. This defence
however seems to have been mentioned in passing only. It was not
relied upon in the heads of argument which deal with two defences
being the
exceptio
non adempleti contractus

and an illiquid counterclaim for damages.






It
is agreed by both sides that a counterclaim can form the basis of a
good defence in law, if it is clearly and well-pleaded.
Crede
v Standard Bank of South Africa Ltd
,
1988(4)



SA
786 E.









So
I now turn to consider the defendants' claim that the
exceptio
non adempleti contractus

is available to them as a defence, and, that they have a
counterclaim for damages against the plaintiff.






As
I see it the defendants' case depends on whether the restraint of
trade clause is valid and enforceable and nothing else. The
submission is that the plaintiff's undertaking to be bound by the
restraint clause followed the written agreements, annexed to the
opposing affidavits as "A" and "B".






Annexure
"A" witnesses the sale of business at N$36 000 excluding
debtors and creditors including fixed assets (listed) , equipment
(listed) , fixed assets on lease (listed), deposit for rented
premises, company name registration and customers and concludes with
the defendants as the new company directors and the plaintiff's
resignation which is noted. The annexure is signed by the plaintiff
and dated 10th October, 1995.






Annexure
"B" is the resolution of the directors dated 10th October,
1995 accepting the resignation of plaintiff as director and
approving the appointment of the defendants in his place. It also
notes the transfer of the plaintiff's company shares to the
defendants.









Annexure
"C" is also dated 10th October, 1995. But it was
signed by the plaintiff on 12th October, 1995. The defendants say
that Annexure "A" and "B" were orally amplified
to contain the terms that the plaintiff would be subject to a
restraint of trade as evidenced by Annexure "C". The
defendants state in their affidavit that the purpose of the
undertaking in the restraint of trade agreement was to prevent the
plaintiff from causing damage to the company and its new
shareholders, that this was expressly discussed with the plaintiff
before he signed it. The defendants state further that since the
commencement of the negotiations in August, 1995 the plaintiff gave
them verbal assurances that the defendants need not fear any
competition from the plaintiff because he was leaving the transport
business in order to manage a guest farm.






Because
of the obvious importance of Annexure "C" in this case it
is essential to set out the whole of this document. The document is
headed
"Restraint
of Trade"
:











1.
1.1 HERMAN HORST DIETER KiiHN, Identity Number 591218 0100 27 4, or
no two or more erstwhile Shareholders of the Company shall be
entitled to enter into a related business together, either directly
or indirectly, whether as partners, directors or shareholders in a
company or in any other way, within a period of 3 (THREE) calender
years of the date upon which the last of them shall have ceased to
be an employee or shareholder (whichever may be the later) of the
Company.



1.2
The restraint shall be restricted to:



1.2.1 A
business or business which



competes
with the Company or its subsidiary/ies in any business carried on by
it.





1.2.2


The
then existing clientele









of
the Company as per its active client listing. Active client listing
to be interpreted to read those clients, their holding companies and
subsidiaries who has been dealing with the Company during the 12
month period prior to the erstwhile Shareholder/s leaving the employ
of the Company.




  1. The
    Shareholders acknowledge that they regard this restraint as fair
    and reasonable in every respect for the protection of the business
    of the Company.



  2. The
    restraint of trade clause shall only be applicable to R S A and
    Namibia for a period of 38 (THIRTY SIX) months commencing the 10th
    of October 1995."










The
purpose of the wording set out immediately below the heading can be
implied from the title above. But the first paragraph, namely 1.1.1
seems to be contradictory. It is at variance with the ordinary
understanding of a restraint covenant. Mr Smuts, who appeared for
the plaintiff, has summed up the effect of paragraph 1.1.1. Mr Smuts
submitted in his heads of argument that "the purported
agreement is incomprehensible, that it does not contain an
obligation on the part of the plaintiff in its formulation. I agree
with the submission. The meaning of the words is difficult to
determine because the language is unclear. However it may be argued
that it is possible to construe the document so as to render it
effective and to give effect to the intention of the parties to
incorporate a restraint clause. The context in which clause 1.1.1 is
contained may also be crucial, nestled as it is between the
subtitle at the top and paragraphs 1.2, 1.2.1 up to 1.2.4 that spell
out the parameters of the restraint clause to prevent the designated
competition. ■ A businessman may be surprised that a purchase of a
business and its goodwill promptly gives
carte
blanche
to
the seller to trade in competition.









Annexure
"C" was undoubtedly drawn up by all the partners with a
view that it should hame commercial efficacy in order to protect the
business which the Plaintiff had sold to the defendants. The fact
that Annexure "C" was drawn on the same date as Annexure
"A", the sale agreement, and the resolution Annexure B,
the assumption of directorships by the defendants, shows the
importance that the parties attached to it and that it was part and
parcel of the whole agreement. The assertion by the defendants that
there were discussions with the plaintiff during which the plaintiff
was made aware of the defendants' requirement that the plaintiff
should give an undertaking not to enter into competition with the
company he had just sold seems to be supported by the
contemporaneous nature of the three documents, Annexures "A",
"B" and "C".






If
I accept that this was the background in which the restraint clause
came to be drawn up I do not think that it would be easy to dismiss
Annexure "C" as nothing but a meaningless document serving
no purpose. The heading of Annexure "C", in my view says a
great deal. Further, it is confirmed as to its purpose by the
contents of its paragraphs 1.2, 1.2.1 to 1.2.4.



As
to what to do about Annexure
"C"
and
its indeterminate meaning, the words of Colman, J. in
Burroughs
Machines Ltd v Chenille Corp SA Ltd
.
1964(1) SA 669 seem apposite. The learned Judge said at page 670,











"
I must, I think, have regard to the fact



that
exhibit 'A' is a commercial document executed
by the parties with
a clear intention that it
should have commercial
operation.
I
must



therefore
not lightly hold the document to be
ineffective. I need not
require of it such
precision of language as one might expect in
a
more formal instrument, such as a pleading drafted
by
counsel "









It
is obvious that Annexure "C" is a document of some
commercial importance. The background in which it was drawn up on
the same date as the sale agreement, and its heading cannot be
ignored. In my opinion the defendants' assertions in their opposing
affidavit verified in Annexures "A", "B" and "C"
are enough material to indicate the defence relied upon and its
basis. Rule 32(3) (b) is therefore fully complied with. Therefore
the defendants are entitled to go to trial to establish whether or
not the defence of
exceptio
non adempleti contractus

is properly raised, and, against the plaintiff and to see whether
their claim that the plaintiff should comply with his undertaking in
Annexure "C" before the defendants can be made to pay the
full purchase


price
has substance. The principle is thus stated in B K


Tooling
Eiendoms (Bpk) v Scope Precision Engineering
,
1979(1) SA 391, in the heading:











" when
a creditor in a reciprocal contract is



prevented
from fully performing his own counter-performance by the failure of
the other party's necessary cooperation he, despite
his own incomplete performance, can claim performance by



the
other party, but subject to reduction of



the
performance claimed, namely by the costs which the creditor saves in
that he does not have to perform fully in his own
counter-performance."









I
think that if the defendants prove that, there was an enforceable
restraint clause, that the clause was reasonable in terms of the
interests it sought to protect, reasonable in regard to the time and
place during which and over which it operated, and the parties are
shown to have been in an equal bargaining position at the time of
contracting, the defendants would have every right to cross-examine
the plaintiff in order to get an explanation about the activities of
his company Kvihn and Co (Pty) Ltd and whether or not such
activities compete with the plaintiff's former company. In the
result the defendants have established a triable issue, therefore
the application for summary judgment is bound to fail.






It
is ordered that the application be and is hereby dismissed with
costs.










ON
BEHALF OF THE APPLICANT: Instructed by:



ADV
D F SMUTS Diekmann & Associates










ON
BEHALF OF FIRST AND SECOND DEFENDANT: Instructed by:









ADV
J J SWANEPOEL R Olivier & Co.