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IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION)

CASE NO: 3355/2006

DATE HEARD:6-7/12/07

DATE DELIVERED:14/2/08

NOT REPORTABLE

In the matter between:

DP COHEN CONSULTING (PTY) LTD PLAINTIFF

and

AMENDU PRODUCTS (PTY) LIMITED DEFENDANT

______________________________________________________________

The plaintiff alleged that it had concluded a contract with the defendant for the payment of a success fee for certain work, to be paid in three tranches. The defendant paid the first tranche but refused to pay the second and third. The plaintiff, having accepted the repudiation of the contract, and having cancelled it, sued for damages in the amount of the outstanding fee. The defendant denied that the contract alleged by the plaintiff had come into existence. The court held that the plaintiff had discharged the onus resting on it to prove that the contract had been concluded and ordered the defendant to pay the damages as claimed, interest thereon and costs.

JUDGMENT

PLASKET J

[1] One central issue arises for decision in this trial. It is whether or not an oral agreement was entered into by the plaintiff and the defendant on 11 June 2006 in terms of which the defendant undertook to pay a success fee to the plaintiff of R2 250 000.00 plus Value Added Tax (VAT) in three tranches.

[2] It is common cause that the plaintiff was engaged by the defendant to facilitate its restructuring and to raise finance for that purpose. It is also common cause that the plaintiff was paid an amount of R1 125 000.00 plus VAT for its services on 20 July 2006. The defendant takes the view that this is all the plaintiff is entitled to, while the plaintiff asserts that this is only half of what is due, and it claims the amount of R1 125 000.00 plus VAT, a total amount of R1 282 500.00, as damages after it accepted the defendant’s repudiation and cancelled the contract.

[3] Four witness testified. Mr Derek Cohen, who represented the plaintiff when the contract it relies upon was allegedly concluded, testified in support of the plaintiff’s case. Mr Chris Vafiades, with whom Cohen alleges he reached the agreement, his partner, Mr John Pitsiladis, and their financial manager, Mr Clinton Marais, gave evidence for the defendant.

[4] Cohen testified that he had done work for the defendant before the events which gave rise to this litigation. In this instance, his function had been to structure and project-manage a black economic empowerment program with the defendant in terms of which he was to raise funds from the National Empowerment Fund (NEF) to enable the dilution of the shareholdings of the original shareholders and the introduction of new shareholders. The total value of the project, he said, was R45 000 000.00.

[5] He had arranged to meet with Pitsiladis and Marais in Mthatha on 11 June 2006 in order to deal with a number of outstanding issues concerning the project, including the re-signing of certain documents, amending an agreement and discussing matters of corporate governance.

[6] When he broached the subject of his fee, he was told by Pitsiladis that Vafiades, who was in Greece, was the person to speak to. Pitsiladis contacted Vafiades by cellphone and gave the instrument to Cohen.

[7] Cohen reminded Vafiades that in terms of a previous discussion they had had, his fee was to be five percent of the total value of the transaction payable on the date that the funder – the NEF -- paid the defendant. (This date is referred to as the effective date.) Vafiades explained that the defendant was experiencing a cash flow problem and suggested that the payments be staggered. It was then agreed that 50 percent of the fee would be paid on the effective date, that a further 25 percent would be paid on 29 December 2006 and that the final 25 percent would be paid on 29 June 2007.

[8] Cohen explained to Pitsiladis and Marais what had been agreed. He declined a dinner invitation offered to him by Pitsiladis and went, instead, to his accommodation in Mthatha where he drafted an e-mail which he sent to Marais on 13 June 2006. This e-mail, to the extent relevant for present purposes, states:

‘Further to our discussion of 11 June 2006 in Mthatha between Chris (per telephone), John, you and myself, it was agreed that the success fee to be paid by Mister Bread in respect of the transaction which DP Cohen Consulting (Pty) Limited (“DPCC”) (and Hatley, Myles (Pty) Limited) facilitated, structured and arranged funding with the National Empowerment Fund (“NEF”) will be paid by Mister Bread as follows:

1. R1.125 million plus VAT payable on the date NEF pays out under the transaction documents.

2. R562 500 plus VAT payable on 29 December 2006.

3. R562 500 plus VAT payable on 29 June 2007

4. In the event of Mister Bread being listed on the JSE or amounts which the vendors are funding Tropical Paradise being refinanced e.g. ABSA, before any of the payment dates in 2 and 3 then the amount(s) owing under the success fee will be due and payable on listing date or receipt of such refinancing funds by the vendor, as the case may be.

As per our Mandate of 3 June 2004 (“the Mandate”), all amounts will be paid against presentation of invoice by DPCC.

In the event of any of the amounts due under the Success Fee not being met, then DPCC will be entitled to claim the outstanding balance.’

[9] The e-mail makes mention of Mr Bread. The defendant sold its business to Mister Bread (Pty) Ltd but owns 70 percent of Mister Bread. Nothing appears to turn on the mistaken reference in the e-mail to Mister Bread as the payee. It is not in dispute that if an agreement was reached on 11 June 2006, the defendant will be liable to pay the fee still outstanding.

[10] Cohen had a telephonic conversation with Marais on 13 June 2006 in which he asked Marais to confirm the contents of the e-mail. Marais did so and Cohen subsequently sent a second e-mail to confirm the telephone conversation. Cohen received no response to this e-mail.

[11] On 19 July 2006, Cohen’s secretary sent Marais an e-mail which said: ‘Derek will send you an invoice on Monday. Please let me know who to make the invoice out to. Also the VAT no.’ Marais replied promptly by e-mail. He wrote: ‘Should be invoiced to Amendu Products (Pty) Ltd.’ He also supplied the VAT number as requested.

[12] Cohen duly sent his invoice in which he claimed a total amount of R1 282 500.00, made up of R1 125 000.00 described as ‘part payment of success fee in terms of e-mail dated 13 June 2006’, plus VAT of R157 500.00. The invoice was marked for the attention of Marais. The amount claimed in the invoice was paid without demur on 20 July 2006.

[13] In August 2006, Cohen met, in Mthatha, with Mr Darwin Nkonki and Marais. Nkonki, the chairperson of Mr Bread (Pty) Ltd, informed Cohen that Vafiades and Pitsiladis were not willing to pay him the balance of his fee which he had claimed. Their view, as conveyed to Cohen by Nkonki, was that they were only willing to pay Cohen’s fee as and when further funding was received by the defendant.

[14] The first payment had been made after the defendant received R22 180 000.00 from the NEF. Cohen stated that in his experience of over 30 years in the business the normal way in which a fee is determined is as a fixed percentage – five percent in this instance – of the total value of the transaction. That value in this case was R45 000 000.00.

[15] In the result, only half of Cohen’s fee, as formulated in his e-mail of 13 June 2006, was paid. The plaintiff claims the outstanding amount as damages.

[16] The defendant’s witnesses conceded that the telephone conversation between Cohen and Vafiades took place, as alleged by Cohen, on 11 June 2006. Vafiades denied, however, that the agreement relied upon by Cohen was reached. It was not in dispute that the plaintiff had a mandate to restructure the defendant as alleged by Cohen.

[17] The evidence of Vafiades was that he was, indeed, in Greece when he received a telephone call from Pitsiladis who told him that Cohen was claiming a fee of five percent of R45 000 000.00. Vafiades told Pitsiladis that they would pay Cohen five percent of what he raised as had happened with an earlier transaction.

[18] Vafiades then spoke to Cohen, who asked for payment of his fee based on the value of the transaction. Vafiades did not accede to this but said that Cohen would be paid a percentage of the amount of money that he raised for the defendant. He said too that Cohen mentioned various dates for payment but he did not agree to these.

[19] Pitsiladis confirmed that he and Marais had met Cohen in Mthatha on 11 June 2006. He said that he and Cohen had discussed Cohen’s fee and had disagreed. While Cohen had said that he wanted five percent of R45 000 000.00, he said that the defendant was only willing to pay five percent of R22 180 000.00, the amount that the defendant received. As a result of this disagreement, Pitsiladis telephoned Vafiades. He reported on his argument with Cohen and then handed the telephone to Cohen. He was able to hear what Cohen said but not what Vafiades said. The evidence of Pitsiladis, especially when he was cross examined, was so vague that it took the matter no further. I do not intend dealing with it any further for this reason.

[20] The defendant’s final witness was Marais, its financial manager at the time and now its financial director. He too confirmed that the meeting in Mthatha on 11 June 2006 had occurred, that Cohen and Pitsiladis had discussed the latter’s fee and that Cohen and Vafiades had then spoken telephonically. He stated that he had only heard Cohen’s side of the conversation but it appeared to him that Cohen believed that he had reached an agreement along the lines set out in his e-mail of 13 June 2006.

[21] Marias confirmed that he received this e-mail but that he never responded to it. He said that the e-mail was not in order as there was no agreement. He forwarded the e-mail to Vafiades and Pitsiladis as it was not part of his mandate to deal with it. He also received the e-mail of 14 June 2006 but he was, he said, not in a position to say that Cohen would be paid.

[22] This, in brief, is the evidence that was given in chief by the various witnesses. I shall deal further with their evidence when I consider their credibility and the probabilities. First, however, it is necessary to say something of the onus and the standard of proof.

[23] The plaintiff bears the onus of establishing its claim on a balance of probabilities, a standard that requires that, on a preponderance, it is more likely than not that an agreement was concluded between Cohen and Vafiades on 11 June 2006¹ -- or that, in other words, ‘the onus bearing party has succeeded in weighting the scales of probability with sufficiently cogent evidence in his favour’.² The application of this standard of proof has been set out in the following terms by Eksteen AJP in National Employers General Insurance Co Limited v Jagers:³

‘It seems to me, with respect, that in any civil case, as in any criminal case, the onus can ordinarily only be discharged by adducing credible evidence to support the case of the party on whom the onus rests. In a civil case the onus is obviously not as heavy as it is in a criminal case, but nevertheless where the onus rests on the plaintiff as in the present case, and where there are two mutually destructive stories, he can only succeed if he satisfies the Court on a preponderance of probabilities that his version is true and accurate and therefore acceptable, and that the other version advanced by the defendant is therefore false or mistaken and falls to be rejected. In deciding whether that evidence is true or not the Court will weigh up and test the plaintiff’s allegations against the general probabilities. The estimate of the credibility of a witness will therefore be inextricably bound up with a consideration of the probabilities of the case and, if the balance of probabilities favours the plaintiff, then the Court will accept his version as being probably true. If however the probabilities are evenly balanced in the sense that they do not favour the plaintiff’s case any more then they do the defendant’s, the plaintiff can only succeed if the Court nevertheless believes him and is satisfied that his evidence is true and that the defendant’s version is false.’

[24] I turn now to a consideration of the witnesses and their versions. I found Cohen to be a good witness. He displayed a thorough knowledge of his field in general but also of the specifics of the transactions with which this case is concerned. He gave a clear account of what had happened and his version was supported by the documentation, the figures, the fact that his e-mails confirming the agreement he believed existed were not responded to and the fact that he was paid the first tranche on the basis of an invoice that referred to the e-mail that contained the terms of the agreement that he relied upon. When he was confronted with an earlier instance of having taken payment for work done by him based not on the total value of the transaction but on the amount of money he had raised, he was able to explain this satisfactorily.

[25] By contrast, I was not impressed with Vafiades as a witness. Although his version was a simple one as it stood, he was not able to explain satisfactorily so many matters that a question mark hangs over his entire version.

[26] For instance, Vafiades experienced difficulties in explaining why, when Cohen’s e-mail of 13 June 206 was received, Cohen was not informed that he was incorrect in asserting that an agreement had been reached. When Vafiades was told about the e-mail by Marais, he instructed him to ignore it. He ascribed this response to two things: first, that he was a simple man and secondly, in accordance with Greek culture, when one wants to snub a person, one fails to respond to that person’s queries. Why he decided to snub Cohen was never stated.

[27] The same problem confronted him in relation to Cohen’s e-mail of 14 June 2006 in which he also sought confirmation from Marais that ‘[y]ou agreed to the terms and conditions relating to the success fee as set out in the said e-mail’. Vafiades stated that he did not respond to this e-mail because, as he had not agreed, he saw no need to write back. Then he claimed that he does not do business in writing and that he cannot write. He could not explain why he had not instructed someone else to respond in writing if he could not. One would imagine that the sensible and rational response on receiving an important communication with which one did not agree would be to contact the author of that communication and not simply to ignore it.

[28] It is all very well to ascribe his failure to respond to Cohen’s e-mails to the Greek way of snubbing a person but that really begs the question. When there is, on his version, an obvious misunderstanding with a person with whom he was involved in a business undertaking, on an ongoing basis, involving millions of rands, why would he want to snub him and why would he not simply pick up the telephone if he did not like doing business in writing, and speak to Cohen to clarify the misunderstanding? His evidence fails to provide any enlightenment on this crucial aspect.

[29] He was also not able to explain satisfactorily why the invoice of 26 June 2006 was paid if he was of the view that all that was owing to Cohen was five percent of the R22 180 000.00 that he raised from the NEF – which would have been an amount of R1 109 000.00 -- and why no effort was made to recover the overpayment that he said had occurred or to claim the overpayment in these proceedings. To ascribe this to a series of oversights, as he did, strikes me as glib and improbable.

[30] His evidence concerning how the payment was made by the defendant is not consistent with, and cannot explain, the amount that was paid: he admitted, that he authorised the payment without seeing the invoice but said that when Marais told him that the NEF had paid R22 180 000.00, he told him to pay the plaintiff its five percent on this amount.

[31] The final issue to be dealt with concerns whether the payment that was made in terms of the invoice of 26 June 2006 was a part payment or a payment in full. He accepted that the payment made was in terms of the invoice, that it was described as a part payment in the invoice and reference was expressly made in it to the e-mail of 13 June 2006. He was asked why no one had written to Cohen to say that this was a final payment. His response was that Cohen still had more money to bring in and that he would be paid more when he did so. This is, however, at odds with what was set out in the e-mail of 13 June 2006, namely, that three payments were due, the first when the NEF paid, the second on 29 December 2006 and the third on 29 June 2007.

[32] When Marais was cross-examined, he was asked why he had not replied to the e-mail of 13 June 2006. His answer was that he chose not to because there was uncertainty as to the agreement, he had no mandate and he had no instructions. He also did not respond to the next e-mail, dated 14 June 2006, which sought to confirm that he agreed to the terms and condition relating to the success fee as set out in the e-mail of 13 June 2006. His explanation for this omission was that he did not ‘look deeply into it’.

[33] When, on 19 July 2006, however, he received an e-mail from Cohen’s office informing him that ‘Derek will send you an invoice on Monday’ and requesting details as to who the invoice should be made out to and the VAT number, he responded promptly. He responded, he said, because the query involved him.

[34] He received the invoice in due course. It referred expressly to the e-mail of 13 June 2006 and claimed payment of the amount mentioned in the paragraph numbered 1 thereof. He paid it and when asked why he did so, he said he did not take notice of the exact wording and that he did not look at it as deeply as he should have. These explanations are both at odds with the evidence of Vafiades and are unconvincing in themselves, given the background and the amount involved.

[35] In my view, for the reasons set out above, the probabilities are overwhelmingly in favour of the plaintiff that, in the conversation of 11 June 2006 between Cohen and Vafiades, an agreement was indeed reached on the success fee that was to be paid to Cohen, how much was to be paid and when it was to be paid. That agreement is embodied in the paragraphs numbered 1, 2 and 3 of Cohen’s e-mail to Marais of 13 June 2006. I find, in other words, that Cohen has succeeded in satisfying me on a preponderance of probabilities that his version is true, accurate and therefore acceptable, and that the version advanced by the defendant is false and is to be rejected.

[36] The plaintiff has thus established the agreement on which he relies and its repudiation by Nkonki on 15 August 2006, before the second tranche was due. It is not in dispute on the pleadings that the plaintiff’s attorneys wrote to the defendant’s attorneys affording the defendant an opportunity to confirm that it would pay the plaintiff the last two tranches on due date and stating that, if no response was received by 10 November 2006, the plaintiff would assume that the defendant would not meet its obligations. It is also not in dispute that the defendant did not respond to this letter and that the defendant received the plaintiff’s letter in which it accepted the defendant’s repudiation of the agreement and cancelled that agreement. The plaintiff has thus established its cause of action. The quantum of its damages – described in the Particulars of Claim as representing ‘the unpaid portion of the agreed fee’ – was not disputed. The plaintiff has, in my view, established that amount too. As it has formulated its claim as a damages claim, rather than a claim for specific performance, it appears to me that the plaintiff is not entitled to interest from the date of demand but from the date of judgment: it was only on that date that its damages were liquidated.

[37] Before turning to the order that I intend making, it is necessary to deal briefly with costs. Mr Notshe, who appeared for the plaintiff, argued that I should make an order of costs against the defendant on the scale of attorney and client because of what he termed its ‘catch-me-if-you-can’ style of pleading, its conduct prior to trial and the way in which it conducted the trial. I am of the view, however, that it cannot be said that the way the defendant pleaded and its conduct of the trial lacked bona fides or was vexatious. I am therefore of the view that this is not the type of case that warrants a punitive costs order as a mark of the court’s displeasure.

[38] In the result, it is ordered that the defendant shall pay the plaintiff:

(a) the sum of R1 282 500.00;

(b) interest on the above amount calculated at the legal rate from the date of judgment to the date of payment; and

(c) costs of suit.

____________________

C. PLASKET

JUDGE OF THE HIGH COURT

APPEARANCES:

For the plaintiff: Mr S.V. Notshe SC, instructed by Brooks and Brand Inc, Johannesburg and Netteltons, Grahamstown.

For the defendant: Mr V Voormolen, instructed by Edward Nathan Sonnenbergs Inc, Durban and Neville Borman and Botha, Grahamstown

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