Smith and Another v Parton NO

• Jurisdiction: South Africa
• Judge: Friedman J
• Judgment Date: 29 April 1980
• Citation: 1980 (3) SA 724 (D)
• Court: Durban and Coast Local Division

Friedman, J.:

This application concerns a business known as "The Castle" which is a licensed restaurant having regular entertainments in the form of cabaret shows. The business was previously conducted by the applicants, A who were (and still are) also the owners thereof. By means of a written agreement concluded during December 1978, the applicants sold to one Smit (to whom I shall hereinafter refer as "the insolvent") the business as a going concern and "consisting of the goodwill, fixtures and fittings thereof as at 15 December 1978" for a total purchase price of R50 000. The B agreement made provision for the payment of the purchase price by means of instalments, details of which are not relevant for present purposes. The agreement was expressed to be subject to certain conditions precedent, one of which was to the effect that a lease of the premises would be granted to the insolvent on terms similar to the lease then existing between the applicants and the lessor of the premises. It is common cause that this C condition, together with all the other conditions precedent, were fulfilled although the papers give no details as to the precise nature or terms of the lease concluded between the insolvent and the lessor of the premises. A further term of the agreement was to the effect that "ownership in the assets sold with the exclusion of the stock" would not D pass from the applicants to the insolvent until such time as payment of the full purchase price had been effected. The agreement also contained a provision as to the manner in which the agreement could be cancelled by the applicants in the event of the insolvent failing, for example, to pay any of the instalments of the purchase price. In such event it was necessary for the applicants to give the insolvent "10 days registered E written notice" to remedy his default before any right of cancellation could be exercised.

After the agreement had been in operation for some time, the insolvent defaulted in the payment of certain monthly instalments. On 7 February 1980, a written notice was sent to the insolvent by registered post F requiring him within 10 days from the date of such notice to make good his default, failing which the applicants might cancel the agreement. The insolvent failed to make payment of the outstanding instalments either within the time prescribed by the letter or at all. On 22 February 1980, that is to say after the period of notice prescribed by the agreement as a G prerequisite to the accrual of a right of cancellation had expired, the applicants applied for and were granted an order provisionally sequestrating the estate of the insolvent. Prior to the grant of this provisional sequestration order, however, the applicants had not yet elected to exercise the right conferred upon them to cancel the agreement consequent upon the insolvent's failure to make payment within the time H prescribed by the written notice. Such an election was only made on 6 March 1980 when the applicants wrote to the respondent, who had in the meantime been appointed the provisional trustee in the estate of the insolvent, recording that they, the applicants, had decided to exercise their rights to cancel the agreement. At the same time the applicants called upon the respondent to restore the business to them consequent upon what they claim was an effective cancellation by them of the agreement. The respondent refused to do so and continued to run the business until 10 March 1980 when he decided to close its doors and to cease operating it

Friedman J

any further. This action on the part of the respondent precipitated an urgent application to this Court by the applicants, who obtained an interim order in the following terms:

"1.

A That a rule nisi do issue calling upon the respondent to show cause before this Court at 9.30 am on 25 March 1980 why an order should not be made in the following terms:

(a)

That the respondent be ordered:

(i)

B to give immediate occupation of the premises occupied by the business known as 'Castle Restaurant' situated on the 2nd floor, Coastlands, 47 West Street, Durban, to the applicants;

(ii)

to do all necessary to enable the applicants to manage the said business.

(b)

That the respondent pay the costs of this application.

(c)

C Alternative relief.

2.

That para 1 (a) (i) and (ii) operate as an interim order against the respondent pending the determination of this application.

3.

That any profits made by the applicants in the conduct of the D business of the said 'Castle Restaurant' shall be paid to the applicants' attorneys, Messrs Don Allaway & Co, 16th floor, Ashley House, 320 Smith Street, Durban, to be held in trust by them pending the determination of this application.

4.

That the applicants be responsible for any losses incurred in conducting the said business pending the determination of this application."

E The respondent filed affidavits in an endeavour to oppose the confirmation of this rule nisi on its return date and filed affidavits to support a counter-application which he...