African Camp Management Services (Pty) Ltd v Mothae Diamonds (Pty) Ltd (CIV/APN 139 of 2011) [2011] LSHC 106 (12 July 2011)

IN THE HIGH COUR T OF LE S OTH O CIV/ APN/ 1 3 9 / 2 0 1 1 In th e m a tter b etween :- AF R ICAN CAMP MANAGE ME NT S E R VICE S (P TY) LTD AP P LICANT An d MOTHAE DIAMONDS (P TY) LTD R E S P ONDE NT J UDGME NT De live r e d by t h e Ho n o u r a ble Ac t in g J u d ge L. A. Mo le t e o n t h e 1 2 t h J u ly 2 0 1 1 . Th is m a tter is b r ou gh t b efore th is Cou r t in ter m s of a n a greem en t of s ettlem en t b etween th e p a r ties wh ich wa s m a d e a n or d er of Cou r t on th e 3 0 t h Ma rch 2 0 1 1 in wh a t I s h a ll refer to a s th e m a in a p p lica tion . Th e m a in a p p lica tion wa s b r ou gh t on a n u rgen t b a s is b y Ap p lica n t s eek in g to en for ce th e Awa r d of Con tr a ct No P1 2 3 1 - PPM-MOT-0 0 1 for th e p r ovis ion a n d op er a tion of th e Res p on d en t’s m in in g Con tr a ctor s a ccom m od a tion fa cilities a n d ya rd a n d ca ter in g m a n a gem en t s ervices a t th e Moth a e Dia m on d Min e Les oth o (“th e con tr a ct”). It wa s a wa r d ed b y th e Res p on d en t to th e Ap p lica n t on th e 1 2 t h Feb r u a r y 2 0 1 0 a s a va lid a n d b in d in g a greem en t, b u t Res p on d en t la ter s ou gh t to rep u d ia te a n d p u t it b a ck to ten d er for va r iou s rea s on s . Con s equ en tly, th e Ap p lica n t s ou gh t in ter im r elief in ter d ictin g a n d res tr a in in g res p on d en t fr om a n y a cts in b rea ch of s u ch con tr a ct, in clu d in g th e Awa r d of th e Con tr a ct to a n y oth er p a r ty. Th e Ap p lica tion wa s op p os ed on n u m b er of grou n d a lleged b y Res p on d en t . A t im e ta b le wa s a greed u p on b y th e p a r ties for th e filin g of Affid a vits a n d th e m a tter wa s p os tp on ed for h ea r in g b y th is Cou r t to th e 3 0 t h Ma r ch 2 0 1 1 . On th e 3 0 t h Ma r ch 2 0 1 1 th e Pa r ties filed a Deed of Settlem en t wh ich wa s m a d e a n ord er of Cou r t b y Con s en t. Th e Settlem en t wa s to th e effect th a t con tr a ct P1 2 3 1 -PPM-MOT-0 0 1 wou ld b e ca n celled ; a n d th e Ap p lica n t a greed to va ca te Res p on d en t’s p rem is es on 3 0 Ap r il 2 0 1 1 . Th e Pa r ties fu r th er a greed th a t a s com p en s a tion for th e ca n cella tion certa in p a ym en ts wou ld b e m a d e b y th e Res p on d en t. Th ey a greed to s ettle th e m a tter a s follows ; “1 . th e Res p on d en t will p a y ou t th e Ap p lica n t th e b a la n ce of th e Con tr a ct p r ice of th e Con tr a ct b etween th e Pa r ties u n d er referen ce P1 2 3 1 -PPM-MOT-0 0 1 . 2 . th e a m ou n t p a ya b le is to b e ca lcu la ted on th e p r ojected b a la n ce of th e Con tr a ct Va lu e over th e tota l Con tr a ct p er iod of 2 8 m on th s fr om 1 Feb ru a ry 2 0 1 0 , ca lcu la ted on th e a m ou n ts p a ya b le to d a te in ter m s of th e con tr a ct.” Th e Am ou n t Pa ya b le in ter m s of th e a b ove p rovis ion s wa s to b e a greed b etween a ccou n ta n ts n om in a ted b y ea ch of th e Pa r ties ; fa ilin g th a t to b e a greed b y th e Pa r ties ’ Cou n s el b y n ot la ter th a n 1 2 Ap r il 2 0 1 1 a n d in th e even t th a t th ey d o n ot a gree th e Pa r ties a s k ed for th e in ter ven tion of th e Cou r t to fix th e a m ou n t on th e b a s is of th e figu res p la ced b efore it b y th e a ccou n ta n ts a n d cou n s el. Both th e Accou n ta n ts a n d Cou n s el fa iled to a gr ee; a n d th e m a tter wa s th erefore refer red b a ck to th e Cou r t to fix th e a m ou n t. Th is wa s on th e 1 0 t h Ma y 2 0 1 1 . Th e Cou r t wa s u n a b le to m a k e a d eter m in a t ion on th a t d a y; a n d gr a n ted a n Ap p lica tion for p os tp on em en t b y Res p on d en t . Th e Cou r t a ls o d irected th a t fu r th er Affid a vits b e filed to cla r ify ea ch Pa r ty’s s ta n d a n d in ter p reta tion of th eir a greem en t. Th is wa s b eca u s e th e a m ou n ts s u b m itted a n d ca lcu la ted b y th e a ccou n ta n ts of th e p a r ties were s u b s ta n tia lly a t va r ia n ce. Th e a p p lica n t ca lcu la ted th a t th e b a la n ce owin g is in th e a m ou n t of M3 7 9 2 2 8 0 -0 8 ; wh ile Res p on d en t in s is ted th a t th e s ettlem en t a m ou n t s h ou ld b e th e s u m of M6 6 3 ,0 0 0 -0 0 . Th ey d is a greed on th e cor rect for m u la to b e u s ed to a r r ive a t th e a m ou n t p a ya b le. It wa s clea r a t th a t s ta ge th a t th e cou r t requ ired fu r th er cla r ifica tion on h ow th e p a r ties u n d er s tood a n d in terp reted th eir Agreem en t, s p ecifica lly Cla u s es 1 a n d 2 th ereof. Th e m a tter wa s con s equ en tly p os tp on ed to 1 4 t h J u n e 2 0 1 1 for h ea r in g; wh ile th e p a r ties were ord ered to file th eir Affid a vits a n d s u b m is s ion s b y th e 1 0 t h J u n e 2 0 1 1 rega r d in g th eir s p ecific ca lcu la tion s . On th e h ea r in g d a te a n d with th e fu r th er Affid a vits filed ; th e m a tter wa s a rgu ed b efore m e. Th e Affid a vit of th e Res p on d en ts Ma n a gin g Director Nya k a llo Mp a tu oa refer red to s om e d is p u tes rela tin g to th e con tr a ct, p r ior to th e s ettlem en t a greem en t wh ich wa s m a d e a n or d er of Cou r t. Mr Pen zh or n for th e Ap p lica n t s u b m itted th a t th e ter m s of t h e or igin a l Con tr a ct a n d a lleged b rea ch es a s well a s m otiva tion b y Res p on d en t in en ter in g in to th e s ettlem en t a greem en t were ir releva n t . Th a t t h e Cou r t ou gh t to d is rega rd a n y a verm en ts in th a t rega rd b eca u s e th e s ettlem en t a greem en t h a d to b e in ter p reted in d ep en d en tly. On th e a u th or ity of Ha m ilton v v an Zy 1 1 9 8 3 (4 ) 3 7 9 (S CD) an d W ils on B ably Holm e s (Pty ) ltd v Ma e y an e an d oth e rs 1 9 9 5 (4 ) S A 3 4 0 (TPD) th e Cou r t a greed with th a t p r op os ition . As a res u lt th e a llega tion s b y Res p on d en t wh ich p oin ted to th e fa ct th a t th e Ap p lica n t wa s u n a b le to com p ly with t h e con tr a ct b eca u s e n o op er a tin g licen ce h a d b een gr a n ted b y th e Dep a r tm en t of Tr a d e, were n ot given m u ch con s id er a tion , with th e res u lt th a t th e Cou r t ign ored th e a p p a ren t viola tion of th e Tr a d in g E n terp r is es Or d er 1 9 9 3 . Th e m a tter b efore m e wa s th erefore to m a k e a d eterm in a tion b a s ed on ly on th e s ettlem en t a greem en t of th e Pa r ties . Th e Ap p lica n t s u b m itted th a t th e in ten tion of th e Pa r ties wa s clea r ly s et ou t in th e s ettlem en t. Th a t th e com p r om is e m ea n t th a t Ap p lica n t wou ld b e p a id a n a m ou n t “to b e ca lcu la ted on th e p r ojected b a la n ce of th e con tr a ct va lu e” a n d th a t th e fu r th er p r ovis ion th a t s u ch a m ou n t wou ld b e “ca lcu la ted on th e a m ou n ts p a ya b le to d a te in ter m s of th e con tr a ct” m ea n t th e p a ym en ts m a d e to d a te wou ld s im p ly b e p rojected over th e b a la n ce of th e 2 8 m on th s of th e con tr a ct. Th a t is h ow Ap p lica n t a r r ived a t th e a m ou n t of M3 7 9 2 2 8 0 -0 0 . In its ca lcu la tion s ; Ap p lica n t took n o a ccou n t of th e es tim a ted cos ts of th e b u s in es s a n d con s equ en tly d id n ot d ed u ct a n y a m ou n ts th a t wou ld h a ve b een exp en s es a n d cos ts of th e op er a tion b y Ap p lica n t com p a n y. Th e Res p on d en t on th e oth er h a n d a p p r oa ch ed th e m a tter d ifferen tly, a n d ca lcu la ted th e s ettlem en t s u m a n d a r r ived a t M6 6 3 ,0 0 0 -0 0 . It rep res en ted a n et p r ofit of 2 5 % for th e Ap p lica n t wh ich wa s s et ou t in a n n exu re “A1 ”. Th e for m u la u s ed b y Res p on d en t wa s b a s ed on th e m on th ly cos ts a n d exp en s es in its b u s in es s with th e Ap p lica n t in th e p reviou s m on th s of Feb r u a r y 2 0 1 0 to Ma rch 2 0 1 1 . It ca m e to a figu re rep res en tin g a n et p r ofit m a r gin of 2 5 % for Ap p lica n t a fter d ed u ctin g a ll cos ts a n d exp en s es . Th e s u b m is s ion of Mr Ma leb a n ye on b eh a lf of Res p on d en t wa s th a t th e ca lcu la tion b a s ed on th es e con s id er a tion s b y th e Res p on d en t, a r r ives a t a fa ir a n d equ ita b le a m ou n t a n d is a d equ a te com p en s a tion for ea r ly ter m in a tion of th e Agreem en t. Th e Res p on d en t m a in ta in ed th a t s u ch wa s th e a greem en t con tem p la ted b y th e p a r ties a n d a n y oth er in terp reta tion wou ld b e u n ten a b le a n d n ot in ten d ed b y th e Pa r ties b eca u s e it m ea n t Ap p lica n t cou ld b e p a id a m ou n ts over a n d a b ove wh a t it wou ld b e en titled to, in clu d in g a m ou n ts it wou ld h a ve in cu r red b u t for th e term in a tion of th e a greem en t. Th es e in clu d ed d irect food cos ts a n d s ta ff cos ts a s well a s fu n ction s wh ich were r efer red to a s ad -h oc, wh ich wou ld n or m a lly r equ ire s ep a r a te or d ers . Th e Ap p lica n t in s is ted th a t it wa s th e in ten tion of th e Pa r ties a n d th e cor rect in ter p reta tion of th e s ettlem en t a greem en t. It wa s s u b m itted th a t th e ou tcom e a n d a m ou n t a r r ived a t wa s cor rect n otwith s ta n d in g th e a p p a ren t over p a ym en t. It wa s clea r th a t th ey were a t logger h ea d s a s rega r d s th e form u la to b e u s ed to a r r ive a t th e cor rect a m ou n t d u e to Ap p lica n t a n d th e m ea n in g of th e p h r a s e “b ein g th e b a la n ce of th e con tr a ct p r ice wh ich is to b e ca lcu la ted on th e p rojected con tr a ct va lu e.” Th e Cou r t is th erefore ca lled u p on to “fix a n a m ou n t on th e b a s is of th e figu r es p la ced b efore it b y th e p a r ties .” In d oin g s o, it wa s n eces s a ry to a ls o m a k e a fin d in g a s to wh ich of th e Pa r ties ’ in terp reta tion of th e s ettlem en t a greem en t wa s th e cor rect on e. Th e Cou r t h a d n o a lter n a tive b u t to con s id er th e tr a n s a ction a s a wh ole a n d d ecid e wh a t th e Pa r ties m u s t h a ve in ten d ed . It goes with ou t s a yin g th a t th e tr a n s a ction m u s t h a ve b u s in es s - lik e effica cy; b e rea s on a b le a n d fa ir to b oth p a r ties , rega r d b ein g h a d to th e fa ct th a t it is a s ettlem en t res u ltin g fr om a n a greed term in a tion . I a gree with Res p on d en t th a t th e tr a n s a ction m u s t b e look ed a t a s a wh ole a n d th e Cou r t m a y im p ly term s wh ich on ly s er ve t o give th e con tr a ct a rea s on a b le a n d b u s in es s lik e m a n n er : 1 . S A m u tu a l Aid S ocie ty v Ca p e tow n Ch a m ber of Com m e rce 1 9 6 2 (1 ) S A 5 9 8 AD. 2 . Ha m ly n & Co v W ood & Co. 1 8 9 1 (2 ) QB 4 8 8 . I th erefore a gree with th e a p p roa ch of th e Res p on d en t th a t th e ca lcu la tion s h ou ld n ot in clu d e Ca p ita l exp en d itu r e a m ou n ts a n d d irect s ta ff a n d food cos ts for th e b a la n ce of th e p er iod . Th is wou ld res u lt in p a yin g over to th e Ap p lica n t m on ies wh ich wou ld b e p a r t of its exp en s es a n d for s er vices wh ich m a y n ot h a ve b een ren d ered even if th e con tr a ct h a d b een fu lly d is ch a r ged a n d it s ter m s com p lied with in a ll res p ects . Th a t in ter p reta tion wou ld n ot b e equ ita b le a n d cou ld n ot b e fa irly con tem p la ted b y th e Pa r ties . Th e Cou r t m u s t a s s u m e th a t n on e of th e p a r ties s ou gh t to u s e th e a greem en t of Set tlem en t to ga in m ore th a t wh a t wou ld h a ve a ccr u ed to th em a fter com p lete a n d s u cces s fu l im p lem en ta tion . Th a t wou ld b e u n ju s tifia b le. I h a ve h owever ob s er ved th a t th e ca lcu la tion of res p on d en t con fin ed its elf to p r ofit a t 2 5 %, b u t fa iled to ta k e in to a ccou n t a d d ition a l cos ts th a t Ap p lica n t wou ld in cu r a s a res u lt of th e ter m in a tion ; th es e wou ld in clu d e b u t n ot n eces s a r ily lim ited to (a ) (b ) (c) Rep a tr ia tion ; tr a n s p or t a n d rela ted cos ts of rem ova l. S ta ff r etren ch m en t cos ts a n d exp en s es . Pos s ib le los s es in cu r red in m a k in g exp en d itu re s p ecifica lly in con tem p la tion of th e con tr a ct u n d er referen ce P1 2 3 1 - PPM-MOT-0 0 1 . In th e cir cu m s ta n ces th e Cou r t Or d er is th a t th e Ap p lica n t b e p a id th e a m ou n t of M6 6 3 ,0 0 0 -0 0 in r es p ect of th e p r ofit a s ca lcu la ted b y Res p on d en t; a n d th a t in a d d ition Ap p lica tion will b e en titled to ca lcu la te a n d a d d a n y a n oth er rea s on a b le exp en s es a s s tip u la ted a b ove . In th e even t th a t th e p a r ties d o n ot a gree on th e a d d ition a l a m ou n ts th ey ca n s im ila r ly a p p r oa ch th e Cou r t for fin a l d eter m in a tion . Th e res p on d en t will a ls o b e lia b le to p a y Va lu e Ad d ed Ta x (VAT) to th e Les oth o Reven u e Au th or ity (LRA) on b eh a lf of Ap p lica n t if th e ta x a u th or ity d em a n d s or d eter m in es th a t s u ch VAT is p a ya b le. Th is wa s con ced ed b y th e Res p on d en t. Th e p a r ties a greed th a t th ere b e n o or d er a s to cos ts a n d it is a ls o s o ord ered . _______________ L. A. MOLE TE ACTING J UDGE For th e a p p lica n t : Ad v G Pen zh orn S C For th e res p on d en t : Ad v S Ma leb a n ye 10