IN THE SOUTH GAUTENG HIGH COURT OF SOUTH AFRICA
(JOHANNESBURG)
Case No: A5025/2011
Appeal Court Case No: 580/2011
Court a quo Case No: 29063/2005
Date of Appeal: 21 May 2012
In the matter between:
CARGILL COTTON GINNERS LIMITED Appellant
And
FLEETAFRICA (PTY) LTD Respondent
JUDGMENT
C. J. CLAASSEN J:
INTRODUCTION
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This is an appeal against the judgment of Willis J in which the learned judge found that the South Gauteng High Court in Johannesburg was vested with jurisdiction to entertain the action instituted by the respondent (“FleetAfrica”) against the appellant (“Cargill”). The learned judge dismissed Cargill’s special plea alleging lack of jurisdiction of this court.
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Cargill applied for leave to appeal the aforesaid decision. Willis J refused the application for leave to appeal. Cargill then petitioned the Supreme Court of Appeal for leave to appeal. Leave to appeal to the full bench of this Court against the judgment of the court a quo was granted on 30 June 2011.
THE PLEADINGS
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FleetAfrica instituted action against Cargill for the payment of an amount allegedly due in terms of a partly oral and partly written agreement concluded between the parties on 16 March 2007 in Pinetown, Kwazulu-Natal. A copy of the written portion of the agreement is attached to the particulars of claim as annexure “A”. It was therefore common cause that the contract was concluded outside the jurisdiction of this court.
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FleetAfrica alleged that Cargill had its principal place of business or branch office at Building No 5 Fourways Office Park, Corner Roos and Fourways Boulevard, Fourways, Johannesburg, Gauteng (“the Fourways address”). This allegation was specifically denied in paragraph 2 of Cargill’s plea on the merits. Cargill further placed the jurisdiction of this Court to entertain the action in dispute in its special plea filed simultaneously with the plea on the merits, i.e. prior to litis contestatio.1 The special plea contained the following allegations:
“1.
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The defendant’s principal place of business is, and at the time of the commencement of this action was, situated at 2762 Nasser Street, Chipata, Zambia and not at the address alleged by the plaintiff, viz. Building No 5 Fourways Office Park, Corner Roos and Fourways Boulevard, Fourways, Gauteng.
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The defendant’s registered office address is, and at the time of the commencement of this action was, situated at Plot 2386 Longolongo Road, The Globe Building, Lusaka, Zambia.
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The plaintiff’s principal place of business is, and at the time of the commencement of this action was, situated at 47 Oppenheimer St, Pinetown, Kwazulu-Natal and not at the address alleged by the plaintiff, viz. Super Group Park, 27 Impala Rd, Chislehurston, Sandton, Gauteng.
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The plaintiff’s registered office address is, and at the time of the commencement of this action was, situated in Centurion, Pretoria.
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In the circumstances, at the time of the commencement of this action:
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the defendant did not reside in, and was not in, the area of jurisdiction of this Court within the meaning of section 19(1) of the Supreme Court Act, 1959;
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the defendant was (and the defendant still is) a peregrinus, both in respect of the area of jurisdiction of this Court and in respect of the Republic as a whole.
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the plaintiff was an incola of the Republic, but a peregrinus in respect of the area of jurisdiction of this Court.
2.
2.1 The cause of action pleaded by the plaintiff is based on a partly oral and partly written agreement which:
2.1.1 is alleged to have been concluded at 47 Oppenheimer Street, Pinetown, Kwazulu-Natal;
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was to be performed and was performed in Zambia where the plaintiff provided the service of transporting cotton seed from locations in Zambia to the defendant’s gin in Chipata in Zambia;
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was allegedly breached in Zambia;
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In the circumstances, the causa underlying the plaintiff’s claim arose outside of the area of jurisdiction of this Court.
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On the grounds set out in 1 and 2 above, the defendant denies that this Court has jurisdiction to entertain this action.”
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In reply to Cargill’s request for further particulars for trial, FleetAfrica relied on the following facts for its allegation that Cargill had its principal place of business or branch office at the Fourways address, namely:
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All meetings with Cargill’s “executive director” took place at the Fourways address;
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All report-back meetings regarding performance of the agreement occurred in Fourways;
All invoices were delivered to Fourways and all payments were effected by Cargill in Gauteng;
The breach occurred in Gauteng.
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It was agreed at the pre-trial conference to separate the issues arising from the question of this Court’s jurisdiction from the merits of FleetAfrica’s claim. The trial thereafter proceeded on the basis of dealing exclusively with the issue of jurisdiction.
THE EVIDENCE
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FleetAfrica, as plaintiff in the court a quo, commenced leading evidence on the issue of jurisdiction. It called three witnesses on its behalf namely Mr Gerhardus Kotze, Mr Sukdeo and Mr Cloete. On behalf of Cargill, Mr Coburn and Mr Thomas testified.
Kotze
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Kotze testified that he was the country manager for Zambia in the employ of Cargill RSA (Pty) Ltd. Cargill RSA (Pty) Ltd (“Cargill RSA”) is a different company to the appellant, Cargill Cotton Ginners Ltd (“Cargill”). It was common cause that the appellant, Cargill, was a Zambian company registered in Zambia having its registered office in Lusaka and a principal place of business in Chipata.
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Kotze was housed in Cargill House at the Fourways address from which he managed Cargill’s Zambian operations. The management team in Zambia reported to him in South Africa and he in turn reported to Mr Iles, Cargill’s managing director and Mr Coburn who headed the financial part of the Cargill operations. Kotze categorically stated that the only presence of Cargill in Fourways was himself. He further stated that there was a procurement department at the Fourways address in Johannesburg which procured the requirements of Cargill’s operations in Zambia, Zimbabwe and Malawi. He stated that all logistics were arranged from Fourways by Cargill RSA.
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Initially he was required to spend ten days per month in Chipata and the rest at Fourways. He was then required to spend more time in Zambia and ultimately Cargill decided that he could no longer manage its Zambian business by remote control from the Fourways address and required him to relocate to Zambia in order to manage the business from there. Kotze refused to do so and resigned effectively from 26 July 2007. Had he not resigned and taken up full time employment in Zambia, he would no longer have been employed by Cargill RSA but indeed by Cargill itself.
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He stated that the Fourways premises were occupied by Cargill RSA. This building called “Cargill House”, housed all the employees of Cargill RSA. Nowhere was any signboard to be found indicating that Cargill had any offices there. The receptionist answered the telephone in the name of Cargill RSA and under the latter’s telephone number in South Africa.
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The procurement of insecticides, wool packs, fertilizer and the like for Cargill was undertaken by Cargill RSA and its employees. Payment of FleetAfrica’s invoices was effected in Johannesburg.
Sukdeo
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The evidence of Sukdeo was not relevant to the issue of jurisdiction nor did the court a quo refer to any of his evidence. His evidence concerned the identity of the entity with which the agreement was concluded between Cargill and FleetAfrica.
Cloete
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Cloete’s evidence, insofar as it was relevant to the issue of jurisdiction, was the following:
1. He was involved in the cotton trade from May 1997 until March 2010;
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He first worked for Clark Cotton in Zambia. It was taken over by Afgri and thereafter by Cargill in 2005. He stayed on until 2010.
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He started off as Director: Grower Debtors with Clark Cotton and Afgri. At Cargill, in the beginning, he was made Manager: Grower Debtors in Chipata.
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“Policies” which had to be implemented by Cargill in Chipata, all came from Johannesburg. It was set out by top management in Johannesburg.
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When he said that he was employed by ‘Cargill’ he was referring to Cargill, the Appellant.
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Richard Dettmer (‘Dettmer’) replaced Kotze as the Zambian country manager of Cargill. He was based in Lilongwe, Malawi. He came to Chipata for two or three days per week.
7. Prior to 2007 he received payment of his salary partly in Rands in Johannesburg and partly in Zambian Kwacha in Zambia. From some time in 2007 his entire salary was paid to him in Zambian Kwacha by Cargill.
Coburn
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The first witness called by Cargill was Mr Coburn.
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Coburn stated that the principal place of business of the various operations in Africa were not at the Fourways address. Each of these operations was contained in a legal entity in the country where they were based. Those operations were managed in that country. He and Mr Iles simply provided oversight of these operations at group level.
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More specifically, he stated that the principal place of business of Cargill was not at Fourways but indeed in Chipata. Cargill had no presence in “Cargill House” at Fourways, Johannesburg, nor were any of Cargill’s employees based in Fourways.
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He confirmed that Kotze was employed by Cargill RSA as country manager for Zambia operations. However, such arrangements were temporary until such time as Kotze could relocate to Chipata and manage the business of Cargill from there. Coburn is in fact a director of Cargill.
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Coburn confirmed that a strategic meeting held during February/March 2007 was attended by Kotze and a representative of Super Rental, Mr Sodayo. The remaining attendees were all employees of the Zambian operation and one individual from the Zimbabwe operations.
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Coburn further stated the following:
“The defendant, M’Lord, Cargill Cotton Ginners Limited based in Chipata was the primary business that was originating cotton from smallholder farmers and processing that cotton or ginning that cotton which would involve separating the fibre from the seed. The fibre would be pressed into bales and that fibre would be known as cotton lint. We had earlier an explanation of how that cotton lint was exported. The other aspect of the business was the cotton seed which was the by product of the ginning process. That was also sold as part of the cotton operation….
The defendant had roughly between 250 and 300 employees. During the actual buying season and the ginning season we would employ another 300 odd employees on a seasonal basis…
A number of them would be based at the cotton gin in Chipata. It was very labour intensive. It involved shifting cotton in bags into the ginnery and offloading those bags to be processed in the gin and then shifting the bales once the cotton has been processed and put them into a warehouse. So it is highly labour intensive. Also there were a large number of full staff based out in the field responsible for the origination of the cotton dispersed over large areas in and around Chipata and they were responsible for buying the cotton from the farmers and loading it onto the trucks to move into the cotton ginnery for processing…
When Cargill bought the Clark Cotton business in South Africa and Mr Kotze became an employee of Cargill RSA, were there discussions with him about the management function that he had in relation to the defendant’s business? --- M’Lord, I was not directly involved in those discussion, but I am well aware that myself and Mr Isles were not comfortable with the situation which we had inherited from Clark Cotton whereby Mr Kotze and Mr Helberg were managing the … Zambian business on behalf of Cargill RSA by remote control and it was certainly made clear … by me to Mr Helberg that he would have to relocate to Chipata and take up employment there and as far as I am aware those very same discussions were taking place with Mr Kotze…
And what was Mr Helberg’s reaction to the news that … he was required to relocate to Chipata? Did he agree? --- He was not comfortable with that arrangement. He told me directly that he would not be prepared to relocate which I accepted and we came to an amicable agreement that he would move on from Cargill and subsequently we hired his replacement, which was referred to earlier, Mr Solomon Chirwa to be employed by Cargill Cotton Ginners Limited and to be stationed in Chipata…
Will it be correct to say that Mr Helberg was retrenched in January 2007? --- M’Lord, that would be correct…
You are now being handed a copy. That is Mr Kotze’s letter of resignation. He gave 30 days written notice for his resignation as employee of Cargill RSA on 26 June 2007. Are you aware of the reason that led to his resignation? Or rather let me put it differently. Are you aware of the reason for his resignation? --- Yes, M’Lord, I am.
What was it? --- M’Lord, Mr Kotze did not want to relocate away from South Africa to live in Lilongwe to perform his duties in Chipata … despite a number of conversations taking place with Mr Kotze where he accepted that he would have to perform his duties based out of Chipata. In the end he decided that he would not see that through and he handed in his resignation as a result.
It was put to Mr Kotze and he agreed with it, that because employees of Cargill RSA, which clearly would have included yourself and Mr Isles, Mr Helberg and Mr Kotze, provided management services on behalf of Cargill RSA to the defendant, … the defendant’s nerve centre was at the Fourways address. What do you say about that? --- M’Lord, that would not be possible. As I mentioned earlier Cargill Cotton Ginners Limited employed several hundred people. It was a very extensive operation that required on hand management on the ground in Chipata. It would be impossible to manage that business remotely from South Africa…
Mr Kotze gave evidence that he procured inputs while he was at Fourways in the form of chemicals and the like, spares for the cotton gin for Cargill Zambia. Could you explain to his Lordship about the procurement operation? --- Cargill RSA, M’Lord, one of its businesses was to procure supplies for the other cotton operations in the region. So in addition to Cargill Cotton Ginners Limited in Zambia (it) would include Cargill Malawi, Cargill Zimbabwe and from time to time Cargill Tanzania. Now those Cargill RSA employees would act, would provide effectively a service to those other companies in the regions for which they were charged a fee and the reason they did that was because there was value to be gained from consolidating orders with large suppliers in South Africa for the region. It made sense for Cargill RSA to do that for which it received a fee…
M’Lord, Cargill RSA would purchase those supplies for its own account. It would be invoiced by the suppliers in South Africa. It would settle those invoices with the South African suppliers. They would then invoice the different countries in the region and it would be paid by those countries in the region for providing those goods including the service fee for rendering such a service.
Could you tell his Lordship about the sale of cotton lint within the Cargill group and then with more specific reference to the defendant Cargill Cotton Ginners Limited? --- M’Lord, Cargill Cotton Limited in the UK was the marketing arm for all the cotton produced by the ginning operations in Africa…The arrangement was the same for Cargill Cotton Ginners Limited in Zambia as it was for Cargill Malawi, Cargill Zimbabwe and Cargill Tanzania.”
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Cargill was a wholly owned subsidiary of Cargill Incorporation, a United States of America company. Cargill RSA is ultimately owned by Cargill Incorporated through its wholly owned subsidiary, Cargill Africa Investments, a Cayman Islands company and its wholly owned subsidiary Cargill RSA Holdings (Pty) Ltd of which Cargill RSA is in turn a wholly owned subsidiary.
Thomas
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Thomas also confirmed that the administrative and management aspects of Cargill’s business were carried out in Chipata, Zambia. He said that Cargill is an international group of companies based in Minneapolis in the United States of America. All group policies were strategized in Minneapolis. These policies were dispensed and implemented by the regional manager such as Mr Iles for Southern Africa. These policies related to matters such as accounting, environmental health and standards, setting targets, evaluating performance against the targets and personal issues.
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He was, however, adamant that the control of the business of Cargill rested with the team in Chipata.
THE LAW
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It is common cause that Cargill is a foreign or external corporation.
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Section 19(1)(a) of the Supreme Court Act 59 of 1959 (“the Act”) states:
“A provincial or local division shall have jurisdiction over all persons residing or being in and in relation to all causes arising…within its area of jurisdiction and all other matters of which it may according to law take cognisance…”
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A company is regarded as being resident:
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At its principal place of business;2 and
At the place where it has its registered office, even if it does not carry on business at that place;3
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A foreign4 company is regarded as being resident in a court’s area of jurisdiction if:
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It has its principal place of business in the court’s area of jurisdiction;5
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If the foreign corporation has its principal place of business outside the Republic of South Africa and:
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it has a branch office or a place of business within the area of jurisdiction of the court; and
the cause of action arose from the business activities of that branch.6
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It has been held that the terms “reside” and “residence” can only be used in relation to natural persons. The residence of a legal persona like a company which has been artificially created must be a mere notional concept introduced for purposes of jurisdiction and law. The only home which a company can be said to have would be a place where operations for which it was called into existence are carried on. So far as it can be said to reside anywhere, that would be the place where it resides.7
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It was held in Dowson and Dobson Ltd v Evans and Kearns (Pty) Ltd 1973 (4) SA 136 (E) at 141E – F that:
“A place of business is, in my judgment, a place where the management is situated (although this may well be in more than one place), where the public is invited to communicate with the company for the performance of the company’s business and where – unless the company ceases to do business altogether – it may be expected with reasonable confidence that responsible officials, competent to bind the company, were normally to be found, irrespective of the fact that the company’s other employees may elsewhere be engaged on its activities. Not all of these elements will necessarily be present in every case, but in my view they are the aggregate of the factors, all or most of which will exist at a place of business of a company.”
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The words “causes arising” in section 19 of the Act had been interpreted as signifying not “causes of action” arising, but “legal proceedings duly arising in which the court has jurisdiction under the common law.8 However, a cause arising in a court’s area of jurisdiction is not enough, absent residence to confer jurisdiction on the court if the defendant is a foreign peregrinus. Where the plaintiff is an incola of the court’s area of jurisdiction and the defendant corporation is a foreign peregrinus of the court’s area of jurisdiction having its principal place of business beyond the jurisdiction of the court, the attachment of the defendant’s property is essential to confirm jurisdiction.9 However, FleetAfrica did not plead that the court a quo had jurisdiction on this ground. No evidence was led to the effect that any property belonging to Cargill was attached in South Africa for purposes of confirming jurisdiction. In fact, it would have been difficult to rely on such an allegation in the light of the evidence that the Fourways address did not contain any property belonging to Cargill. Even on the evidence of Kotze, there were no activities conducted on behalf of Cargill at Fourways other than the alleged managerial activities of Kotze himself. These activities were, however, of a temporary nature as Coburn confirmed that Cargill could not be managed from Fourways. After Kotze refused to relocate to Zambia, Mr Richard Dettmar was appointed in his place as country manager for Zambia operating as such from Lilongwe, Malawi, as an employee of Cargill, not Cargill RSA.
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FleetAfrica had to allege and prove the facts necessary to establish that the court had jurisdiction in this matter over Cargill.10 The fact that Cargill raised a special plea did not attract an onus of proof to establish lack of jurisdiction on a balance of probabilities. Since FleetAfrica raised the question of jurisdiction in alleging that Cargill had its principal place of business or a branch office within the jurisdiction of the court, it attracted an onus to prove that fact on a balance of probabilities. There is a presumption against legislative interference with the jurisdiction of the High Court and a clear provision is necessary to rebut that presumption.11 The jurisdiction of the court must be established as at the point in time when proceedings commenced, i.e. when summons was issued.12
THE JUDGMENT OF THE COURT A QUO
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The court a quo held that the jurisdiction of the court was not solely to be determined with reference to FleetAfrica’s allegation that Cargill had its principal place of business at the Fourways address. It held that the jurisdiction of the court could also be determined on the basis of the alternative ground for jurisdiction, i.e. that Cargill resided within the area of the court’s jurisdiction. In my view, the court a quo misdirected itself in this regard. The onus of proof has to be gleaned from the manner in which the question of jurisdiction has been pleaded. As stated above, not only did FleetAfrica as plaintiff allege that the court had jurisdiction because of Cargill having a principal place of business within the court’s jurisdiction, it also pleaded in its further particulars for trial facts which would justify the conclusion that Cargill had a branch office or a principal place of business at the Fourways address.13 Alleging these facts, FleetAfrica attracted an onus of proving the jurisdiction of the court. Only once these allegations were proved, would a duty to rebut (“weerleggingslas”) arise to counter the evidence establishing that the court was vested with jurisdiction.
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The court a quo did not discuss the cogent evidence of Mr Coburn in regard to the activities conducted at the Fourways address. As indicated above, Coburn was quite clear and adamant that Cargill could not be managed from Fourways and that in any event, Kotze’s employment by Cargill RSA at the Fourways address was a temporary measure, which terminated upon his resignation in July 2007. The summons was only issued in November 2007 at a point in time when the so-called “management” of Cargill from the Fourways address had terminated and such management had been transferred to Cargill’s office in Chipata, Zambia. Coburn also testified that the procurement activities conducted by Kotze from the Fourways address were done in the name of Cargill RSA. It procured the relevant items and paid the providers. Thereafter it invoiced Cargill in Chipata and the other African operations for which they then paid Cargill RSA in order to enjoy the benefit of bulk buying by Cargill RSA. The latter was, therefore, a supplier of goods to Cargill in Zambia and the other entities operating in Zimbabwe, Malawi and Kenia. This evidence suggests that no “business” was conducted by Cargill at Fourways. The business conducted at Fourways was that of Cargill RSA.
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The court a quo failed to take cognisance of the evidence that there was in fact no “presence” of Cargill at the Fourways address. The question may be asked: “What would have been attached at Fourways address belonging to Cargill if a deputy sheriff was authorised to attach goods belonging to it?” There was no property of any kind belonging to Cargill in Cargill House which would have been susceptible to attachment. Mr Kotze himself could not be attached as he was a resident in South Africa.14 In my view, the contention on behalf of Cargill that no activities were conducted at the Fourways address in the name of Cargill was established on a balance of probabilities.
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The court a quo also found as follows:
“All the key witnesses for the parties, relating to the alleged transaction, live here in South Africa and were in easy commuting distance of this court.”
As at the time of the issue of summons the aforementioned statement by the court a quo was factually incorrect. Mr Kotze who concluded the contract acting on behalf of Cargill, Zambia (and not Cargill RSA) was no longer employed by Cargill RSA. The “alleged transaction” was being managed from Chipata, Zambia. It was in Chipata where the strategic meeting was held concerning the business of Cargill. Cargill employed between three hundred and five hundred people in Zambia. The performance of the transport contract was exclusively executed in Zambia. In pleading the terms of the transaction in paragraph 5 of the particulars of claim, eleven out of twelve terms were to be executed in Zambia. It is only the twelfth term relating to payment of the invoices in Gauteng which indicated part performance of the contract in South Africa. In these circumstances the concept of “commercial convenience”15 does not arise. To the extent that the court a quo concluded in its judgment that there was a sufficient presence of Cargill within the court’s jurisdiction, I am respectfully of the opinion that the facts did not justify such a conclusion. In any event, even if this conclusion is incorrect, I am still of the view that the fact that key witnesses of the parties living within commuting distance of a court, does not constitutes a ground to establish jurisdiction. No authority for this ground relied upon by the court a quo was cited nor was such ground for jurisdiction pleaded.
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In addition, the court a quo did not take cognisance of the fact that Kotze was replaced by Dettmer as the country manager of Cargill Zambia. At all relevant times he resided in Lilongwe, Malawi, but was required by Cargill to be present in Chipata from Monday to Friday every week in order to discharge his duties as Cargill’s country manager.
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The court a quo relied on Appleby (Pty) Ltd v Dundas Ltd 1948 (2) SA 905 (EDLD). In that case it was indeed established that a foreign company established a branch office in Johannesburg. That case is distinguishable from the evidence in this matter which established on a balance of probabilities that no such branch office existed at the Fourways address. If indeed the activities conducted at the Fourways address constituted a branch office of Cargill, then equally, it would have had a branch office in the Cayman Islands and/or in Minneapolis, USA. This logical conclusion of the effect of the finding of the court a quo, cannot be justified.
CONCLUSION
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I am of the view that the appeal against the judgment of the court a quo should be upheld and I therefore make the following order:
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The order of the court a quo dismissing the defendant’s special plea with costs is set aside and substituted with the following:
“The plaintiff has failed to establish the jurisdiction of this court for which reason the court declines to proceed with the hearing of the trial and the plaintiff is to pay the defendant’s costs.”
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The respondent is to pay the appellant’s costs on appeal which costs are to include the costs occasioned by the employment of two counsel.
DATED THE 12th DAY OF June 2012 AT JOHANNESBURG
_____________________
C. J. CLAASSEN
JUDGE OF THE HIGH COURT
I agree
_______________________
M. P. TSOKA
JUDGE OF THE HIGH COURT
I agree
___________________________
Z. CARELSE
JUDGE OF THE HIGH COURT
It is so ordered.
Counsel for the Appellant: Adv A. P. Rubens SC and Adv G. Kairinos
Counsel for the Respondent: Adv A. B. G. Choudree
Attorney for the Appellant: Werksmans Attorneys
Attorney for the Respondent: Vash Choudree & Associates
Date of hearing the Appeal: 21 May 2012
Date of Judgment: 12 June 2012
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