MTN loses appeal over paying dealer R11 million in damages

MTN has lost an appeal against an order to pay one of its former dealers in excess of R11 million for damages suffered due to the breach of an agreement.

The dealer – Belet Cellular – had in 2003 entered into an agreement with MTN  to market, promote, and facilitate distribution of the operator’s stock in South Africa.

Following a visit by an auditor to one of Belet’s stores in Mapobane Mall, MTN terminated the agreement in November 2011, claiming that the dealer was selling grey goods not supplied by itself and that Belet had attempted to hide these goods.

Belet then took MTN to the Johannesburg High Court in December 2011, claiming for R13,120,933 or no less than R3,629,615.50 based on the fact that the operator’s termination constituted a breach or repudiation of the agreement which lead to Belet suffering damages.

After hearing the evidence, Judge Fayeeza Kathree-Setiloane found in favour of Belet and ordered MTN to pay an amount of R5,849,789 in addition to interest of 10.25% per annum from 1 March 2016 to the date of payment.

Another payment of R5,581,937 with interest of 10.25% per annum from the date of judgement was also ordered.

MTN then appealed against the decision, following which its case was heard in the Johannesburg High Court on 9 November 2020.

No evidence of grey goods

In a judgement handed down by Judge Dumisani Hamilton Zondi on 15 January 2021, MTN’s appeal was dismissed with costs.

The court found that there was no evidence that 15 devices that the store manager had instructed an employee to place in plastic bags in a trolley outside the store were in fact grey goods.

The Belet store manager Mrs Letsebele testified that the devices were in fact obsolete or defective and had been paid for, which meant there was no reason to hide them.

“The court a quo accepted Mrs Letsebele’s evidence that the goods in the trolley were all paid for, and that she could therefore keep them wherever she wished,” the judgement stated.

This was confirmed by the auditor Mr Sulaiman, who testified that once stock had gone beyond the 60 days for returns and had been paid for, the dealer could do with it what it liked.

Changing basis for cancellation

MTN later argued that Belet was obliged to use MTN’s Online Management System (OMS) and MTN’s Point of Sales operating system for the purposes of recording all stocks supplied and received from MTN.

It alleged that Belet had been instructed to migrate to an upgraded version of OMS – which it had not done. According to the operator, the purpose of the audit was to determine whether this had been done.

It maintained that Belet had not recorded the 15 items on the system and used an unknown POS. It also said it failed to explain why it did so.

However, the court found that MTN was not consistent in the manner in which it pleaded its defence, with the basis for its cancellation of the agreement changing from Belet holding grey goods to not using the right system.

MTN’s arguments that the damages were material and could not be remedied through payment, and that a new store which was opened by Belet in Jubilee Mall and formed part of the damages claim was not part of the agreement were also rejected.

The operator was also ordered to pay 30% of the costs incurred in the preparation, perusal and copying of the record on an attorney and client scale, due to this percentage of the record being unnecessary for the court to read.

MTN told MyBroadband it has noted the judgment and will comply accordingly.

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MTN loses appeal over paying dealer R11 million in damages