IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
DELETE WHICHEVER IS NOT APPLICABLE REPORTABLE: NO OF INTEREST TO OTHERS JUDGES: NO REVISED 30 January 2023 __________________ DATE SIGNATURE
In the matter between:
SMALL ENTERPRISE FINANCE
AGENCY SOC LIMITED Plaintiff
and
FEM GROUP (PTY) LIMITED First Defendant
MIRANDA NOMATHEMBA MAYEKISO Second Defendant
MAPELO PERLAZAR MASHISHI Third Defendant
___________________________________________________________________
JUDGMENT
JANSE VAN NIEUWENHUIZEN J:
1. This is summary judgment application in which the plaintiff claims payment of the amount of R 9 177 052, 97 with interests and costs from the first and third defendants, jointly and severally, the one to pay the other to be absolved.
2. Shortly after the summary judgment application was served, the first and third defendants’ attorneys withdrew from record. On the evening prior to the hearing of the application, the third defendant filed an opposing affidavit and appeared at the hearing of the application in person.
3. The plaintiff’s claim is based on a written Development Term Loan Agreement (“the Agreement”) entered into between the plaintiff and the first defendant on 28 November 2016, in terms of which the plaintiff lend an amount of R 4 960 170, 00 to the first defendant.
4. The first defendant had to repay the loan amount together with fees and interest in 60 consecutive payments in the amounts stipulated in Annexure A attached to the Agreement.
5. The plaintiff avers that the first defendant has breached the Agreement by failing to make payment of the capital amount together with interest thereon and that the full amount owing under the Agreement has become due, owing and payable. A certificate of balance confirms the claimed amount.
6. The claim against the third defendant is based on a Deed of Suretyship entered into between the plaintiff and the third defendant on 1 December 2016 in terms of which the third defendant bound herself as surety and co-principal debtor for the due and proper performance by the plaintiff of the terms of the Agreement.
7. In the plea filed on behalf of the first and third defendants, the conclusion of the Agreement and the Deed of Suretyship is admitted. The first and third defendants, however, pleaded that the Agreement was amended by a later agreement entered into the parties on or about 18 January 2017 titled “Franchise Business Agreement”, but referred to by the parties as the “Step in Agreement”. The parties to the Step in Agreement are the plaintiff (“the funder”), the first defendant (“the franchisee”) and an entity known as MFK Holdings (Pty) Ltd (“the franchisor”).
8. Clauses 1, 2, 4 and 11 are relevant to the defence raised by the first and third defendants, to wit:
“1. Notwithstanding the provisions of clause 24 of the Franchise Agreement, upon the Franchisee committing a breach of the franchise agreement and the Franchisor issuing a notice of cancellation of the franchise agreement between the Franchisor and The Franchisee, and notifying the franchisee in writing, the Franchisor shall, at the sole and absolute discretion of the Franchisor and only if so elected by the Funder, with effect of date of cancellation of the Franchise Agreement, take over the business as conducted in the Premises and such occupancy will be on the same terms and conditions as set out in the lease agreement.
2. The Franchisor shall step into the business and the franchisee shall be deemed to have accepted the step in. The assets of the business will be sold to the franchisor or right of use will be granted to the franchisor for the value as determined by a registered valuer as appointed by the franchisor to ensure business continuation.
…....
4. With effect from the date on which the Franchisor approves the new franchisee for the Premises, the Franchisor’s right, title and interest (with regard to this agreement) and to the initial agreement will cede and the Franchisor’s obligations in and to the initial loan agreement will be delegated and assigned to such new franchisee, and the Franchisor and the Franchisee hereby accept such a cession and assignment from such date.
……
11. The step in agreement will be based on the outstanding balance of the initial loan excluding interest and penalties given by the funder.”
9. The first and third defendants allege that the Step-in agreement was activated. As proof of the aforesaid allegation, the first and third defendants attached a letter dated 12 February 2018 written by Paul Maboa, the Interim General Counsel of the plaintiff, to the franchisor defendant. Mr Maboa refers to a letter received from the attorneys of the franchisor in terms of which the first defendant was notified of the termination of the franchise agreement between the franchisor and the first defendant and proceeds as follows:
“ In the light of the above, sefa (the plaintiff) hereby bring to Mikes Kitchen Franchising (the franchisor”) attention the following assailant clauses stipulated in the Step-in Agreement, which provides the following:
(clauses 1 and 2 referred to supra is cited)
In terms of your letter dated 9 February 2018 from your Attorneys, Smit & Van Wyk Attorneys, addressed to Mike’s Kitchen Eastgate (the first defendant), terminating the franchise agreement with FEM Group, the step in agreement comes into effect as it is evident that Mikes Kitchen Eastgate will not be able to honour sefa’s loan facility agreement.”
10. In the result, the first and third defendants deny being indebted to the plaintiff.
11. In its affidavit in support of the summary judgment application, the plaintiff pointed out that the defendants failed in several instances to allege compliance with the Step-in agreement. The defendants inter failed to allege that the Franchisor elected to, with effect of date of cancellation of the Franchise Agreement, take over the business of the first defendant.
12. The third defendant could not take the matter any further in her opposing affidavit or in her address in court.
13. I agree with the plaintiff’s contention that without alleging that the franchisor elected to take over the business of the first defendant, the Step-in agreement is of no force and effect and the first defendant remains indebted to the plaintiff in terms of the Agreement.
14. In making the finding supra, I am mindful of the letter dated 12 February 2018 addressed by the plaintiff to the franchisor. The letter does, however, not assist the defendants in establishing whether the franchisor elected to take over the business of the first defendant.
15. It follows that the plaintiff is entitled to summary judgment in the terms claimed against the first defendant. The third defendant relied on the defence raised by the first defendant in her opposition of the summary judgment application and her opposition follows the same fate as that of the first defendant.
Costs
16. Clause 30.3 of the Agreement provides that the first defendant will be liable for costs on an attorney and own client scale. Clause 28 of the Deed of Suretyship also provides for costs on an attorney and own client scale and such cost orders will follow.
ORDER
Summary judgment is granted against the first and third defendants together with any judgment granted against the second defendant, jointly and severally, the one paying the other to be absolved for:
1. Payment of the amount of R 9 177 052, 97.
2. Interest thereon at the rate of 15,4% per annum calculated daily and compounded monthly from 1 January 2022 to date of payment.
3. Cost of suit on the scale as between attorney and client.
______________________________________________
N. JANSE VAN NIEUWENHUIZEN
JUDGE OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
DATE HEARD:
13 JANUARY 2023
DATE DELIVERED:
APPEARANCES
COUNSEL FOR THE PLAINTIFF: Adv M Patel
ATTORNEYS FOR THE PLAINTIFF: Mothle Jooma Sabdia Inc
THIRD DEFENDANT: Appeared in person
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