MTN Service Provider (Pty) Ltd v LA Consortium & Vending CC t/a La Enterprises, and Others

• Jurisdiction: South Africa
• Judge: CJ Claassen J
• Judgment Date: 10 September 2007
• Docket Number: 2004/20602
• Hearing Date: 07 September 2007
• Counsel: HJ Fischer for the plaintiff. AP den Hartog for the defendants.
• Court: Witwatersrand Local Division

CJ Claassen J: B

The plaintiff is a service provider conducting business as an exclusive MTN cellular telephony service provider in South Africa. The first defendant conducts business as a distributor of cellular telephony products. The first defendant is a close corporation owned by the second C defendant (Froneman). The third defendant is also a close corporation and, together with Froneman, bound themselves as sureties and co-principal debtors with the first defendant, in favour of the plaintiff, for the due fulfilment and payment of all amounts due by the first defendant to the plaintiff.

Plaintiff and the first defendant concluded three written sale contracts: D

1.

On 2 April 2001 and at Sandton, a 'Prepaid Distribution Agreement'. [1]

2.

On 28 January 2002 and at Sandton, an 'Electronic Distribution Agreement'. [2]

3.

On 2 July 2002 and at Sandton, a 'Cellular Telephony Distribution E Agreement'. [3]

It should be noted immediately that the third agreement of 2 July 2002 superseded [4] the first agreement of 2 April 2001. The parties further concluded written amendment agreements in order to rectify the names of the plaintiff and the first defendant. This was necessary F because, subsequent to the conclusion of the agreements, plaintiff changed its name, and the first defendant's name had been incorrectly recorded in the agreements. However, nothing turns on these amendments.

In effect the parties' contractual relationship was at all times governed by G two contracts, ie the Prepaid Distribution Agreement, as later substituted by the Cellular Telephony Distribution Agreement on one hand, and the Electronic Distribution Agreement. The difference between these two agreements, in simple terms, is to be found in the fact that, in the Prepaid Distribution Agreement, plaintiff sold to the first defendant H physical telephony products, whereas, in the Electronic Distribution

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A Agreement, plaintiff sold to the first defendant non-physical electronic signal facilities (network services) [5] which were necessary to make the physical telephony products function as they were designed to do. In the first case, physical delivery of the products sold was possible, but not so in regard to the delivery of the network services in the second case. In the B second case, delivery of the signal necessary to make the telephony products function was occasioned by electronic activation, the notification whereof occurred via email messages. It follows that proof of delivery of the sales in terms of the Electronic Distribution Agreement would be peculiarly problematic in legal terms. I will return to this aspect C later.

The parties conducted their commercial relationship for approximately two years and six months, whereafter plaintiff terminated both contracts in terms of their respective termination provisions [6] providing for 90 days' (or three months') notice in writing. The plaintiff terminated the D agreements by reason of first defendant's alleged failure to meet the minimum targets set in the contracts. [7] Despite a written warning [8] to comply with the set targets, first defendant failed to deliver the required minimum performance, as a result whereof plaintiff terminated, seemingly ex abundante cautela, all three contracts in a letter dated 17 October 2003. [9] After receipt of the letter of termination, no further orders were E placed by the first defendant for products, nor did plaintiff deliver any further products to the first defendant.

On 4 November 2003 plaintiff demanded payment from the first defendant of an outstanding amount of R3 514 492,26, as set out in an F annexure attached to the aforesaid letter, from which it would appear that the amount is derived from five invoices issued in respect of account No 5182. It is common cause that such account was opened for the first defendant in the books of the plaintiff. [10] The only response from the first defendant was a letter written by one Mr Ben Vorster, dated 29 November 2003, wherein copies of the three contracts and the five invoices were G requested. [11]

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Prior to the written cancellation contained in the letter dated 17 October 2003, A the first and second defendants were verbally informed of plaintiff's intention to cancel the contracts. In response to such verbal information, a letter was written by Mr Ben Vorster on behalf of the first defendant, dated 16 October 2003, wherein plaintiff's right to cancel the contracts was not disputed, but only the return of the suretyships B requested. [12] In this regard it must be noted that counsel for the plaintiff, at the close of plaintiff's case, indicated that he was not persisting with the claims against the second and third defendants based upon the suretyship document. As a result, second and third defendants are entitled to be absolved from the instance with costs.

Issues on the pleadings C

It is trite law that plaintiff bears the onus of proving on a balance of probabilities that the first defendant owes it the amount it claims. The pleadings indicate that the terms and provisions of the contracts are not in dispute. [13] The plaintiff divided its claim on the pleadings into two D parts: Claim A is for an amount of R323 701,26, comprising physical stock sold and delivered by the plaintiff to the first defendant, at the latter's special instance and request. [14] This allegation is denied by the defendants as if specifically traversed, and plaintiff is put to the proof thereof. [15] Claim B is for an amount of R3 080 202,04, comprising stock E sold and delivered by the plaintiff to the first defendant in terms of the Electronic Distribution Agreement. [16] This allegation is also denied by the defendants as if specifically traversed, and the plaintiff is put to the proof thereof. [17] As indicated previously, the Cellular Telephony Distribution Agreement concluded in July 2002 superseded the Prepaid Distribution Agreement. As such, the contractual relationship between F the parties, as at the date of termination in October 2003, would be governed by the terms of the Electronic Distribution Agreement and the Cellular Telephony Distribution Agreement. The issues on the pleadings and the tendered evidence must therefore be viewed in the light of their provisions. G

The evidence

The plaintiff called four witnesses, ie Mr LJ Lodge, Mr K Vandayar, Mr Shepherd Mpofu and Mr Maxwell Chongo. Thereafter plaintiff closed H

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A its case and the defendant similarly closed its case without calling any witnesses.

Lodge confirmed the conclusion of the three agreements referred to above. He testified to the addendum agreements amending the names of the entities to the contracts. [18] He was in regular discussions with B representatives of the first defendant, regarding the termination of the contracts. He said that, because first defendant did not reach its set targets, the contracts were terminated in terms of the notice provision, giving them 90 days' notice. The plaintiff's case was not based on any breach of contract on the part of the first defendant. The last order C placed by the first defendant for stocks and services was invoiced on 15 October 2003. [19]

Lodge testified that the plaintiff used an Oracle accounting system to manage its stocks and debtors. This is a software package designed for larger businesses, similar to SAP and ACPAC. He stated that monthly D statements, indicating transactions from the first to the last calendar day of each month, were generated and stored on the plaintiff's computer system. The statements were printed out in duplicate, the first copy going to the distributor and the second copy retained by the plaintiff. Lodge issued a certificate in terms of s 15 of the Electronic Communications and Transactions Act 25 of 2002 (ECT Act). [20] Lodge confirmed E the correctness of paras 1, 2 and 3 thereof, which state as follows:

'1.

The running account statements from January 2003 to February 2004 and the summary of the running account statements annexed hereto and marked LA1 and LA2 respectively and initialized by me are copies and/or printouts of the data stored on the plaintiff's F computer system.

2.

The data recorded on the account statements was made in the ordinary course of the plaintiff's business.

3.

The data recorded on the account statements was:

3.1

generated and stored by the plaintiff under my supervision and control on the plaintiff's computer system;

3.2

G maintained by the plaintiff under my supervision and control on the plaintiff's computer system; and

3.3

printed by the plaintiff under my supervision and control from the plaintiff's computer system.'

The documents attached to Lodge's certificate are copies of the documents H found at pages 201 – 325 in exhibit A. He confirmed that these copies and print-outs are correct copies of the data contained on the Oracle computer system. [21]

Lodge testified that he was responsible for the statements and the day-to- day accounting of debtors. He was in charge of a staff of approximately I 20 people. The first defendant was granted 30 days for payment of stocks

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and services purchased from and delivered to it by the plaintiff. The first A defendant never paid the exact amounts reflected in the invoices, but instead paid lump sums which were then allocated by the plaintiff's staff to the various invoices, starting with the oldest orders. He stated that the staff created the transactions from orders received, and each staff member dealt only with his particular function in regard to each order. B Once the transaction is captured, the value thereof is automatically calculated by the computer system, as it contains all the prices of the various products. The outstanding balance on the distributor's account...