Spur Corporation, the JSE-listed multi-brand restaurant franchisor, is facing a multi-million dollar damage claim from GPS Foods Group RSA, a subsidiary of the global GPS Food Group.
GPS Foods Group RSA has served a summons to Spur for alleged damages of R183.3 million related to the establishment of a so-called joint venture for a rib supply and processing plant in Cape Town.
GPS Food Group established the prime rib supply and processing facility around 2017 following the acquisition of premises in Cape Town.
It is believed that the intention was that the property was an exclusive supplier of Spur Corporation and its franchised stores.
The facility ceased production in 2020, with premises and assets subsequently sold and remaining staff reduced.
The facility is believed to have employed up to 100 people in peak season.
Attempts to obtain feedback from GPS Food Group were unsuccessful.
GPS Food Group’s claim may be complicated by the death of former Spur CEO Pierre van Tonder on May 9, 2021.
Spur reported in May 2021 that Van Tonder, who was the CEO and CEO of the Spur Group for 24 years and retired in December 2020, had shot himself at his Cape Town home.
Claim ‘to be defended’
Spur Corporation’s corporate communications manager Moshe Apleni confirmed last week that a high court petition was filed against Spur Corporation and defended by the company’s legal team.
Apleni said a subpoena was issued in the Western Cape High Court by GPS Foods Group RSA December 24, 2019 but Spur has not yet been informed of a date on which the complaint will be heard.
Spur Corporation confirmed in a note to its latest financial results that it has been engaging with GPS for several years regarding product supply and the prospect of a joint venture for rib processing.
It said GPS claims that an oral agreement was concluded between GPS and the Spur group around February 2, 2017 under which the parties would form a joint venture to acquire, develop and operate a rib processing plant.
But Spur said no written agreements have ever been made with the GPS.
Spur said GPS also claims that around January 28, 2019 the group repudiated the alleged oral agreement and [GPS] Damages claimed of R183.3 million.
These damages include alleged capital expenditures, goodwill losses and expected operating losses for a five-year period ending November 2022, he said.
“GPS argues in the alternative that, in the event that it is ascertained that the group has not been bound by the oral joint venture agreement, the behavior of the group has represented that it considers itself bound by the agreement and that this gives rise to a requested crime in the amount of R60.0 million, including alleged GPS losses to date, “he said.
Spur denies these allegations, adding that to date the parties have not tried to address the merits of the case and legal correspondence has focused on correcting the deficiencies in the grounds.
“Consequently, it is not considered feasible at this early stage of the legal process to determine with reasonable certainty the likelihood that the group will successfully defend the matter or the value of a successful claim against the group,” he said.
“A further evaluation of the merits was carried out as the parties, on June 28, 2021, exchanged affidavits of discovery.
“All parties exchanged copies of all documents in their respective discovery programs, and the group’s attorneys, along with the legal counsel, assessed the probative value and presented a review of the merits and prospects for success.
“Supported by the advice of its legal advisors, the board believes there is a reasonable prospect of successfully defending the claims,” Spur added.
“It is likely it will take several years for a court to finally settle the matter. As a result of the aforementioned uncertainty, no liabilities have been raised on the matter at the balance sheet date “.
Were any of the rib products supplied to Spur?
Moneyweb asked Spur Corporation whether GPS Foods Group RSA has provided Spur Corporation and / or any of its franchised outlets with any rib products produced by its Cape Town facility and, if so, on what basis. .
Apleni said Spur Corporation, unfortunately, cannot answer this question at this stage because “it may be a question in the pending trial.”
Spur Corporation also declined to comment on why GPS Food Group would have invested in a rib processing plant in Cape Town in the absence of any agreement with Spur Corporation.
“The Group is unable to comment on behalf of GPS,” said Apleni.
Spur Corporation reported in February of this year that one share’s diluted earnings increased 119.1% to 69.84 cents in the six months to the end of December 2021 from 31.88 cents in the previous corresponding period.
Spur Corporation share price
- This article originally appeared on Moneyweb and has been republished with permission.