Building Product Design Limited v Cordustex Manufacturing (Proprietary) Limited

• Jurisdiction: South Africa
• Judge: Eksteen J
• Judgment Date: 03 July 2012
• Docket Number: 929/2012
• Hearing Date: 10 May 2012
• Court: Eastern Cape Division

Eksteen J:

[1]

This is an application in which the applicant, a company with limited liability registered in England in accordance with the laws of England and carrying on its business in that country, seeks a declaratory order confirming the cancellation by it of an agreement concluded with the first respondent, a South African company.

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[2]

The applicant, as its name suggests, carries on business as a manufacturer and distributor of building products with a special emphasis on roof ventilation, natural ventilation systems, louvers and solar shading and natural daylight products and including construction membranes for roofs and walls.

[3]

The first respondent carries on business as a marketer, manufacturer and distributor of polypropylene spunbond and laminated textiles to the hygiene, medical, construction and industrial markets.

[4]

The second respondent is Ukuvula Investment Holdings (Proprietary) Limited (Registration Number 1999/018692/07), a company with limited liability registered in accordance with the Laws of the Republic of South Africa carrying on business as a direct and indirect investor in a variety of companies. The second respondent has guaranteed the obligations of the first respondent under the equipment loan agreement referred to below.

[5]

On 17 April 2008 the applicant and the first respondent entered into an equipment loan agreement in terms of which the applicant agreed to purchase a 3.2 metre single beam non-woven spunbond machine for the manufacture of spunbond non-woven material and to loan the machine to the first respondent, an expert in the manufacture and supply of high quality spunbond non-woven material, on certain terms. The purpose of the agreement, from the perspective of the applicant, was to secure a

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guaranteed source of high quality spunbond non-woven material for itself. I shall revert to the terms of the equipment loan agreement later.

[6]

Simultaneously with the conclusion of the equipment loan agreement, the applicant and the first respondent accordingly entered into a material supply agreement in terms of which the applicant would place purchase orders for the supply of spunbond material with the first respondent from time to time. The terms of this agreement are not directly material to the present application.

[7]

During the subsistence of these agreements a number of issues of dispute arose between the parties which culminated in a notice of termination of the equipment loan agreement (the initial cancellation) by the applicant to the first respondent on 25 November 2011. Further discussions occurred between the parties and further disagreements arose which ultimately led to a further notice of termination (the final cancellation) by the applicant to the first respondent on 2 March 2012.

[8]

As a result of these events the applicant launched the present application as one of urgency on 19 March 2012 in which the following relief is sought:

'1.

…

2.

That the Applicant's termination of the Equipment Loan Agreement concluded between the Applicant and the Respondents on 17 April 2008 (the "Agreement") be and is hereby confirmed.

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3.

That the First Respondent be and is hereby directed to:

3.1

permit the Applicant, its employees or duly authorized agents:

(a)

Access to its premises situated at Caravelle Street, Walmer Industrial, Port Elizabeth, (the "Premises") as envisaged in clause 11.1 of the Agreement;

(b)

To de-install the Applicant's 3.2 meter single beam non-woven spunbond machine, otherwise known as line 3, (the "Equipment") from the Premises as envisaged in clause 11. of the Agreement;

3.2

Following the aforementioned de-installation:

(a)

transport the Equipment to the First Respondent's loading dock, goods inwards or similar facility for collection by the Applicant, its employees or authorized agents; and

(b)

opening up or dismantling the Premises as may be required to facilitate the removal of Equipment from the Premises;

as envisaged in clause 11.4 of the Agreement, alternatively to re-imburse the Applicant such costs as may be incurred in undertaking the activities listed in paragraph 3.2(a) and 3.2(b) above within 7 days of invoice.

4.

As to costs:

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4.1

That the First Respondent pay the Applicant's costs on a party and party scale;

4.2

In the event of the Second Respondent opposing the Application, an order directing the Respondents to pay the Applicant's costs on the party and party scale, jointly and severally, the one paying the other to be absolved.'

[9]

A number of preliminary issues arise from the papers. The respondent issued a notice calling for security for costs to be provided on the basis that the applicant was a foreign company. I was advised at the commencement of proceedings that this matter had been resolved and that the security called for had been forthcoming.

[10]

A dispute appears too on the papers relating to the validity of the attestation of affidavits on behalf of the applicant which had purportedly been signed and attested to before a notary public in England. At the commencement of the proceedings before me I was handed a fresh copy of the same affidavits now attested to before a commissioner of oaths in South Africa. The parties were agreed that the original difficulty had accordingly been cured and I was not called upon to make any finding in this regard.

Urgency

[11]

Mr Buchanan, on behalf of the respondents, argues that the application ought not to have been launched as a matter of urgency and that on this basis the application ought to be dismissed with costs.

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[12]

It is not in dispute that clause 11 of the agreement provides that the applicant will be entitled to remove the equipment from the premises upon termination of the agreement. I have recorded above that the applicant has on two occasions given notice of the cancellation of the agreement. The first respondent disputes the validity of the termination and denies that it has breached the agreement in any material respect. In response hereto the applicant contends, on the papers, that there exists no legitimate basis to dispute the termination of the agreement and hence seeks the relief which I have set out above.

[13]

On 2 March 2012, after the final cancellation, the attorneys of record of the applicant directed a demand to the attorneys of record of the first respondent that the first respondent give an undertaking in writing that it will permit the applicant to collect the equipment on the expiry of fourteen days from the date of the letter. By virtue of the attitude taken by the respondent in respect of the validity of the cancellation such undertaking was naturally not forthcoming. Against this background the deponent to the founding affidavit for the applicant alleges:

"142.

I am informed that vindicatory applications are always inherently urgent.

143.

The Applicant owns the Equipment and the lawful basis upon which the First Respondent was entitled to possess the Equipment has been legitimately terminated.

144.

The Equipment is valuable, worth well in access of R7.5 (seven point five) million, and for so long as it remains in the possession of the First

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Respondent whilst these acrimonious proceedings endure, the greater the exposure of the Applicant to intentional or malicious damage being caused to the Equipment. "

[14]

These, essentially, constitute the grounds of urgency.

[15]

Mr Buchanan argues that the dispute between the parties as to the alleged termination of the underlying agreement arose, at best for the applicant, in November 2011 and that the applicant has unduly delayed the institution of these proceedings.

[16]

I consider that this argument overlooks the very extensive negotiations which continued between the parties after the initial cancellation. On 10 February 2012 the attorneys of record of the applicant addressed an email to the attorneys of record of the respondent in which it recorded in unequivocal terms that "[o]ur client accepts that the first Equipment Loan Agreement between the parties is still of full force and effect". It appears accordingly that the urgency of this application cannot arise from the initial cancellation. Given the context in which this continuing correspondence occurred in which the entitlement to cancel the agreement was in issue, I think that this communication, coming from the applicant's attorneys as it did, constitutes a waiver of any further reliance on the initial cancellation. On any version of events, it seems to me, that the parties were in agreement after 10 February 2012 that the contract continued to exist. No right to reclaim the equipment can exist prior to cancellation. The final cancellation occurred on 2 March 2012 and it is only then that the right which is sought to be enforced in this application arose. In the circumstances, I am of the view that the

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argument advanced in respect of the dispute arising in November 2011 cannot be sustained.

[17]

Mr Buchanan argues, however, that in any event the grounds of urgency set out in the founding affidavit are "scanty to say the least". I have set out above the essential grounds of urgency alleged in the founding papers. I think the submission made by Mr Buchanan in respect of the cogency of these averments has some force. I do not think, however, that this should be viewed in isolation.

[18]

The application was delivered on 20 March 2012. Although the form of the application deviates from form 2A of the Uniform Rules of Court the applicant did not seek to approach the court as a matter of extreme urgency. It afforded the respondents until 16h30 on 22...