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[2015] ZASCA 62
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Shakawa Hunting & Game Lodge (Pty) Ltd v Askari Adventures CC (44/2014) [2015] ZASCA 62 (17 April 2015)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 44/2014
In
the matter between
SHAKAWA
HUNTING & GAME LODGE (PTY)
LTD
...............................................
APPELLANT
and
ASKARI
ADVENTURES
CC
........................................................................................
RESPONDENT
Neutral
citation:
Shakawa Hunting & Game
Lodge (Pty) Ltd v Askari Adventures CC
(44/2014)
[2015] ZASCA 62
(17 April 2015)
Coram:
Mpati P, Leach, Majiedt, Saldulker JJA
and Dambuza AJA
Heard:
18 February 2015
Delivered:
17 April 2015
Summary
:
Contract – interpretation - written agreement providing
that respondent company to pay appellant 10% of its value
if sold -
meaning of term ‘value’- assets of respondent company
sold – whether appellant entitled to 10% of selling
price.
ORDER
On
appeal from:
North Gauteng High Court,
Pretoria (Kollapen J sitting as court of first instance).
1
The appeal is upheld, to the extent that paragraph 1 of the order of
the court below is set aside and replaced with the following:
‘
1
The defendant is ordered to pay to the plaintiff the amount of
R403 600, with interest thereon at the rate of 15.5% per annum
a
tempore morae
to date of final payment, both dates inclusive;’
2
The respondent is ordered to pay the costs of the appeal.
JUDGMENT
Mpati
P (Leach, Majiedt, Saldulker JJA and Dambuza AJA concurring):
[1]
This appeal concerns the interpretation of a written agreement
concluded between the appellant (defendant in the court below)
and
the respondent (plaintiff in the court below) on 1 March 2004. At the
time of the conclusion of the agreement the appellant
(Shakawa) was
represented by Mr Peter Wilkinson (Wilkinson), its sole shareholder
and director, while the respondent (Askari) was
represented by Mr
Paul Ferreira (Ferreira), its sole member. On 15 September 2011
Askari caused summons to be issued against Shakawa
claiming payment
of the sum of R3 230 600, together with interest and costs
of suit, the capital sum claimed being due,
so it was alleged in the
particulars of claim, in terms of the agreement. The relevant part of
the agreement reads:
‘
Both
parties hereby agreed as follows:
1.
Paul Ferreira on behalf of Askari
Adventures will receive an amount not less than 10% of the value of
Shakawa hunting and Game Lodge,
if the company is sold or Mr Peter
Wilkinson should pass away.
2.
This 10% sharing will be calculated after
costs. E.g.: Legal fee, agent’s commission etc.’
Shakawa
operated a game and hunting lodge from five (5) adjoining farms
situated in the Limpopo Province. It is common cause that
in January
2011 Wilkinson sold the farms and the entire business operation in
Shakawa (the going concern) for a consideration of
R32 500 000.
[2]
Askari alleged in its particulars of claim that, as a result of the
sale, it ‘became entitled to payment in an amount
of R3 230 600
same being ten percent of the aggregate of the gross value of the
business and/or its assets (R32 500
000) less accounting and
legal fees (R100 000) less a severance payment made to Ferreira
(R94 000).’ A sales invoice
reflecting these calculations
– though not indicating in whose favour the severance payment
was made – and issued to
Shakawa, dated 28 February 2011, was
annexed to the particulars of claim. On 8 February 2012 Askari
obtained an order in the following
terms in an application it had
launched on 5 April 2011 against Shakawa, Charles Pieterse Attorneys
and Louw Attorneys, as first,
second and third respondents,
respectively:
‘
1.
THAT the second respondent, alternatively the third respondent . . .
retain in trust the sum of R3 230 600.00 from
the proceeds
of one or more agreements of sale entered into between the first
respondent and an unknown third party (in terms of
which the first
respondent sold to such unknown third party [the five farms].)
. . .
Pending final
determination of an action or application to be instituted by the
applicant for payment in the sum of R3 230 600.00,
together
with interest thereon, in terms of a written agreement concluded
between the applicant and the first respondent on or
about 1 March
2004.’
The
second respondent in that application were Shakawa’s attorneys,
while the third respondent was the conveyancer who was
attending to
the transfer of the farms.
[3]
Shakawa admitted the terms of the agreement in its plea, but denied
that Askari was entitled to payment of the amount claimed.
In the
alternative, Shakawa pleaded as follows:
‘
8.3
[I]n the event of the Court finding that [Askari] had become entitled
to payment in terms of the agreement between the parties,
which is
still denied, [Shakawa] pleads that:
8.3.1 the nett
amount after deduction of all costs amounted to R4 036 000.00;
8.3.2 10% of the
nett amount is calculated at R403 600.00;
8.3.3 [Shakawa]
tendered payment of the aforesaid sum of R403 600.00 to
[Askari];
8.3.4 [Askari]
refused to accept payment of the said amount.’
In
addition to its plea Shakawa filed a counterclaim seeking payment of
‘the decrease in value of the sum of R3 230 600.00
against the British Pound Sterling from 6 April 2011 to date of
judgment’, with interest. The basis for the counterclaim
was
set out as follows (in para 8 thereof):
‘
As
a result of the continued devaluation of the value of the ZA Rand
against the British Pound Sterling [Shakawa] will suffer damages,
which damages can only be ascertained with accuracy on the date of
judgment in this counterclaim, and which will amount to the
decrease
in value of the sum of R3 230 600.00 against the British
Pound Sterling from 6 April 2011 to date of judgment.’
[4]
At the commencement of the trial the court below (Kollapen J) granted
an application brought by Askari for leave to amend its
particulars
of claim to include a claim for rectification of the agreement, so as
to reflect what was alleged to be the common
intention of the
parties. In terms of the amendment Askari sought, in addition, an
order rectifying the written contract by inserting
the following
words into clause 1 thereof, directly after the words ‘is
sold’:
‘
or
if Shakawa Hunting & Game Lodge (Pty) Ltd sells its immovable
properties and the improvements thereon, including the Shakawa
Game
Lodge, as a going concern.’
The
basis for the rectification sought was, therefore, that it was the
common intention of the parties that the amount of not less
than 10%
of the value of Skakawa would also be payable to Askari in the event
that the company, Shakawa, sold its immovable properties
and the
improvemnets thereon, including the Game Lodge, as a going concern.
After hearing evidence, the court below dismissed Shakawa’s
counterclaim, with costs. It ordered Shakawa to pay to Askari the
amount of R3 230 600, with interest thereon at the
rate of
15.5% per annum,
a tempore morae,
to date of final payment and to pay the costs of the action. The
court subsequently dismissed Shakawa’s application for leave
to
appeal. This appeal is with leave of this court.
[5]
I should mention at this stage that in its judgment the court below
treated its granting of the amendment to the particulars
of claim as
an order for rectification of the agreement. The court said (in para
7 of the judgment):
‘
While
the written agreement provided that the plaintiff would receive 10%
of the value of Shakawa Game Lodge if the company was
sold, the
parties were in agreement that what was also contemplated was that in
the event of the assets of the company being sold
as opposed to a
sale of the company, the obligation to pay 10% would also be
activated (subject to certain conditions). In this
regard, the
plaintiff applied for an amendment at the commencement of the trial
to rectify the written agreement to reflect such
common intention.
The defendant did not object to the proposed amendment and the
written agreement was accordingly rectified.’
It
is true that counsel for Shakawa did not object to the amendment
sought, but made it clear that what was sought to be inserted
in the
agreement by way of rectification was ‘not the proper version
and we will get to that in due course’. No evidence
was led to
lay the basis for rectification and the court below accordingly erred
in stating that ‘the written agreement was
accordingly
rectified’. All that had been granted was an amendment to the
pleadings
.
But
that error is of no moment, for present purposes, because whatever
was sold, Shakawa accepted that the 10% share due to Askari
should be
calculated on the basis that the purchase price was R32 500 000.
The only issue in dispute, therefore, is how
the amount due to Askari
was to be calculated.
[6]
It was never in dispute that at the time of the sale of the going
concern Wilkinson had a loan account of R28 270 000 in
Shakawa.
It was contended on behalf of Shakawa that before calculating the 10%
sharing due to Askari the amount of the loan account
must be deducted
from the purchase price, which would then leave a balance of
R4 230 000. From that residue further
amounts of
R100 000 (legal fees) and R94 000 (severance payments) must
be deducted. The 10% sharing due to Askari should
then be calculated
from the balance of R4 036 000, resulting in an amount of
R403 600, payment of which, according
to Shakawa’s plea,
was tendered to Askari.
[7]
In this court it was argued on behalf of Askari that the case
presented by Shakawa, both in its pleadings and the questions
asked
and version put to Askari’s witness, was that the amount of the
loan account was to be deducted as a cost item in terms
of clause 2
of the agreement. In support of this contention reference was made to
paragraph 8.3.1 of Shakawa’s plea (see
para 3 above) and to the
record, where, during the cross-examinatiom of Ferriera, it was put
to him that he was ‘entitled
to 10% of what is left over after
all the costs have been paid’, and that the 10% sharing ‘will
be calculated after
costs, example legal fees, agent’s
commission etcetera . . . ’. It was also put to Ferreira that
prior to signing the
agreement Wilkinson had asked Mr Pieter Nel
(Nel), an accountant who drew up the agreement upon request, in the
presence of Ferreira,
whether the agreement meant that his
(Wilkinson’s) loan account ‘is included in the costs
component’ to which
Nel answered in the affirmative. Reference
was also made to Wilkinson’s testimony, where he testified that
after reading
the agreement he commented to, or asked, Nel: ‘.
. . I presume that “after cost” includes my loan’,
clearly
referring to the wording of clause 2, so it was contended.
During his cross-examination Nel conceded that for purposes of
Shakawa’s
calculation of the amount payable to Askari,
Wilkinson’s loan account should be deducted from the value of
Shakawa as a cost
item in terms of clause 2 of the agreement. It was
accordingly contended on behalf of Askari that insofar as it is now
contended
that the loan account should be deducted as a liability in
order to determine the value of Shakawa as referred to in clause 1 of
the agreement, Shakawa should not be allowed to advance that
submission. For this contention counsel for Askari relied on
Imprefed
(Pty) Ltd v National Transport Commission
1993 (3) SA 94
(A) at 107C-110A.
[8]
In that case this court said:
‘
At
the outset it need hardly be stressed that:
“
The
whole purpose of pleadings is to bring clearly to the notice of the
Court and the parties to an action the issues upon which
reliance is
to be placed.”
(
Durbach
v Fairway Hotel Ltd
1949 (3) SA 1081
(SR) at 1082.)
This
fundamental principle is similarly stressed in Odgers’
Principles of Pleading and Practice in Civil Actions in the High
Court of Justice
22
nd
ed at 113:
“
The
object of pleading is to ascertain definitely what is the question at
issue between the parties; and this object can only be
attained when
each party states his case with precision.”
The
degree of precision obviously depends on the circumstances of each
case. More is required when claims are based upon the provisions
of a
detailed and complex contract, in which numerous clauses confer the
right to additional payment in differing circumstances
- a contract,
moreover, in which such payments are to be determined, calculated and
claimed in different ways depending on which
clause is relied upon.
In addition, as already pointed out, the contractor may choose to
base the cause of action on some common
law ground (breach of
contract, enrichment or delict) quite unrelated to any additional
payments for which the contract provides.
Particularly in this
context, it goes without saying that a pleading ought not to be
positively misleading by referring explicitly
to certain clauses of
the contract as identifying the cause of action when another is
intended or will at some stage – in
this case at the last
possible moment – be relied upon. As it was put by Milne J in
Kali v Incorporated General Insurances Ltd
1976 (2) SA 179
(D)
at 182A:
“
.
. . a pleader cannot be allowed to direct the attention of the other
party to one issue and then, at the trial, attempt to canvass
another”.’
[1]
[9]
I do not agree with counsel for Askari that Shakawa should not be
allowed to advance the submission that Wilkinson’s loan
account
should be deducted as a liability in order to determine its
(Shakawa’s) value, either because of what was pleaded
in
paragraph 8.3 of its plea or because of certain evidence testified to
by Shakawa’s witnesses, or statements put to Askari’s
witness. Paragraph 5 of the particulars of claim reads:
‘
5
The express,
alternatively
tacit,
further alternatively
implied, terms of the agreement that are relevant hereto were as
follows:
5.1
In the event that Wilkinson sold the defendant and/or the immovable
property of the Defendant, and/or the lodge to a third party,
alternatively
in the event of his passing away, the plaintiff would immediately
become entitled to an amount of not less than ten percent (10%)
of
the value of the defendant and/or the lodge at the time of such sale,
alternatively at the time of Wilkinson’s death.
5.2
The abovementioned ten percent (10%) sharing would be calculated on
the gross value of the defendant and/or the lodge, after
certain
costs such as legal fees and/or agent’s commission had been
deducted therefrom.’
[10]
In response, Shakawa pleaded thus:
‘
Ad
paragraph 5 thereof:
4.1 The defendant
denies the contents of this paragrapgh.
4.2 The defendant
pleads that the material express alternatively implied terms of the
agreement were the following:
4.2.1 The plaintiff
would receive an amount of not less than 10% of the nett value of the
defendant if the defendant was sold or
Peter Wilkinson passed away;
4.2.2 The 10% of the
nett value would be calculated after the deduction of all costs of
the defendant, e.g. legal fees, estate agent’s
commission and
the loan accounts of the share-holders of the defendant.
. . . .’
Although
there is clearly some confusion in subparagraph 4.2.2, where ‘nett
value’ is referred to and yet it is averred
that the loan
accounts of shareholders will be deducted as part of ‘all
costs’, it is specifically pleaded in subparagraph
4.2.1 that
the 10% to which Askari would be entitled will be 10% of the nett
value of the defendant. And subparagraph 8.3.1 of
the plea (quoted in
para 3 above) does not detract from what is contained in subparagraph
4.2.1.
[11]
As to the evidence of the witnesses on what they believed or thought
the agreement meant, it needs be remembered that we are
here dealing
with the interpretation of a contract. Consequently, what the parties
and their witnesses ex post facto think or believe
regarding the
meaning to be attached to the clauses of the agreement, and thus what
their intention was, is of no assistance in
the exercise. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA
593
;
[2012] ZASCA 13
(SCA) this court (per Wallis JA) said this with
regard to the construction of a document:
‘
The
present state of the law can be expressed as follows: Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the language used in the light of the ordinary
rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material
known to those
responsible for its production.’
[2]
And
further:
‘
Unlike
the trial judge I have deliberately avoided using the conventional
description of this process as one of ascertaining the
intention of
the legislature or the draftsman, nor would I use its counterpart in
a contractual setting, “the intention of
the contracting
parties”, because these expressions are misnomers, insofar as
they convey or are understood to convey that
interpretation involves
an enquiry into the mind of the legislature or the contracting
parties. The reason is that the enquiry
is restricted to ascertaining
the meaning of the language of the provision itself.’
[3]
(Footnotes omitted.)
[12]
What was said in
Endumeni Municipality
regarding the
expression ‘the intention of the parties’ is in line with
what was expressed by Greenberg JA more than
six decades ago in
Worman v Hughes & others
1948 (3) SA 495
(A) at 505,
namely:
‘
It
must be borne in mind that in an action on a contract, the rule of
interpretation is to ascertain, not what the parties’
intention
was, but what the language used in the contract means . . . .’
It
follows that the testimony of the parties to a written agreement as
to what either of them may have had in mind at the time of
the
conclusion of the agreement is irrelevant for purposes of
ascertaining the meaning of the words used in a particular clause.
[13]
It is now convenient to set out briefly the circumstances relevant to
the agreement in this case coming into existence. Wilkinson
became
sole shareholder and director of Shakawa when his co-director and
shareholder, a Mr Rigby, passed away in mid-2002.
Ferreira, a
professional hunter conducting the business of an outfitter under the
name Askari Adventures CC, joined Shakawa as
a consultant in the year
2000. In addition to the consulting services he also acted as
outfitter in respect of safaris on Shakawa’s
property. In terms
of an agreement between it and Shakawa, Askari was paid commission on
earnings received by Shakawa, which would
be a percentage of the
daily rate paid by clients. Ferreira was afforded free accommodation
on the property and the relationship
between the parties appears to
have been cordial and beneficial to both. It appears that in due
course and to ensure the continued
loyalty and support of Askari in
the business of Shakawa, an oral agreement was concluded in terms of
which, according to the testimony
of Ferreira, Askari would ‘receive
10% of what we all knew as Shakawa’ if the latter were to be
sold. After the demise
of Mr Rigby, Fereirra and Wilkinson agreed
that the oral agreement should be put in writing. The parties’
(Askari and Shakawa)
mutual bookkeeper, Nel, was commissioned to
produce the written agreement, which was then signed on 1 March 2004.
[14]
In its judgment the court below, after setting out the contentions of
the parties, expressed the view that in respect of the
main claim
‘the only issue for determination is the proper interpretation
to be given to Clause 2 of the agreement’
and ‘. . . in
particular the meaning to be attached to the word “costs”’.
Because the abbreviation of the
word ‘etcetera’ (etc) was
used after the words ‘legal fee’ and ‘agent’s
commission’,
which were recorded as examples of ‘costs’,
the court below went on to establish whether or not Wilkinson’s
loan
account was covered by the term ‘costs’. In doing so
the court applied the
ejusdem generis
principle of
interpretation and concluded that ‘the genus established in
Clause 2 of the agreement relates to costs relating
to the sale
transaction . . . .’ To arrive at this conclusion the court had
regard to the judgment of Hugo J in
Ovcon (Pty) Ltd v
Administrator, Natal
1991 (4) SA 71
(D) at 76I-J:
‘
Where
a
genus
is
in fact established and the word “etc” is added the
latter or
ejusdem genus
construction seems to me to be indicated. The more generic words
precede “etc”, the more limited its effect must be.
Thus
“oranges etc” may well mean all fruit, simply because no
genus
is
established; while “oranges, lemons, grapefruit etc” will
almost certainly be limited to citrus fruit. On the other
hand, if
the preceding words are not confined to a
genus
then “etc” will tend to extend the meaning rather than
limit it, so eg “oranges, peaches, etc” will probably
include all fruit.’
The
court below held that to include Wilkinson’s loan account as a
cost ‘would hardly accord with the meaning of the
word “costs”
used as it is in the context described above’. It accordingly
excluded the deduction of the loan
account as an item under ‘costs’
and granted Askari its entire claim.
[15]
The fundamental error the court below committed was to ignore clause
1 entirely in its attempt to interpret the parties’
agreement.
The process of attributing meaning to the words used in a contract
must be undertaken ‘. . . having regard to
the context provided
by reading the particular provision or provisions in the light of the
document as a whole and the circumstances
attendant upon its coming
into existence.’
[4]
The
stipulation that Askari will receive an amount not less than 10% of
the value of Shakawa on the happening of certain events
is contained
in clause 1 of the agreement. I agree with counsel for Shakawa that
clause 1 contained the nucleus of the agreement
between the parties.
Clearly, therefore, before effect is given to the deductions referred
to in clause 2 the value of Shakawa
must first be established.
[16]
It seems to me that the court below misinterpreted Wilkinson’s
evidence because, although it referred to his acceptance
that the
value of the property sold was R32 500 000, it took that to
mean that Wilkinson accepted that that was the value
of Shakawa.
During cross-examination Wilkinson agreed with counsel that the
‘value’ of the property was R32 500 000,
which
was the selling price the property had fetched. But the value of the
property, in the sense of its selling price, and the
value of the
company, Shakawa, which owned the property, are two different
concepts. It was as a result of the misinterpretation
of Wilkinson’s
evidence that the court accepted as correct the calculation contended
for by Askari (see para 2 above) and
ordered Shakawa to pay to Askari
the sum of R3 230 600, with interest.
[17]
Nel, a practising accountant, testified that the valuation of a
company ‘is in terms of assets less liabilities ’
and
that the value of Shakawa was ‘the value of the shares meaning
assets at market value plus related costs less liabilities.’
It
is true that Nel also testified that in terms of the valuation of
shares a loan account is a cost, which may well be so in accounting
parlance. But what is clear from a proper reading of his evidence is
that the value of a company is not just the value of its assets
or
the value of its shares; it is the value of such assets or shares
less its liabilities. In this instance, however, Shakawa was
not
sold. Its property and business operation were sold as a going
concern. It is highly unlikely that a different scenario would
have
been contemplated when the shares of the company were sold rather
than the company itself; indeed, it is inconceivable that
Wilkinson
(Shakawa) would have agreed that were Shakawa to be sold Askari would
receive 10% of its value, while if the shares in
Shakawa were to be
sold Askari would receive 10% of the selling price without
liabilities having been deducted.
[18]
I am satisfied that on a proper construction of the agreement,
particularly clause 1 thereof, Wilkinson’s loan account
had to
be deducted from the selling price of the farms and business
operation of Shakawa before Askari’s 10% sharing could
be
calculated. Moreover, in terms of clause 2 of the agreement, Askari’s
10% sharing should be calculated from the residue
after further
deductions of R100 000 legal fees and R94 000 severance
payments, which Askari seem to have accepted as
an item under costs
rather than a liability of Shakawa. The amount to which Askari is
entitled therefore in terms of the agreement
is R403 600 (see
calculations in para 6 above).
Counterclaim
[19]
In my view, there is no merit in Shakawa’s counterclaim. The
order for the retention in the country of the sum of R3 230 600
granted on 8 February 2012 was obtained pursuant to an application by
Askari, which was unsuccessfully opposed by Shakawa. There
was no
allegation in the papers that the application constituted a malicious
legal proceeding. The money was thus retained on the
strength of a
court order legitimately obtained. No recognised cause of action was
pleaded and no basis therefore exists for the
counter-claim. It was
correctly dismissed by the court below.
Costs
[20]
Counsel for Shakawa submitted that because it had tendered payment to
Askari of the amount of R403 600, which the latter
refused to
accept, Askari should not be awarded the costs of the action in the
court below. I disagree. The allegation relating
to the tender and
refusal to accept was pleaded in paragraph 8.3.3 and 8.3.4 of the
plea (see para 3 above). But the tender was
not repeated in the plea,
nor was there an offer of settlement made in terms of rule 34 of the
Uniform Rules, or a payment into
court. That being so I can find no
reason why Askari should not be entitled to its costs in the court
below, having succeeded in
its claim, albeit in a much lesser amount.
The order of the court below, in terms of which Askari was awarded
costs of the action,
shall therefore remain unaltered. On
the other hand, although Shakawa has not succeeded in respect of its
counterclaim,
the costs attendant thereon were minimal. It had
substantial success in the appeal relating to the amount awarded to
Askari in
its claim and should be awarded costs of the appeal.
[21]
In the result the following order shall issue:
1 The appeal is
upheld, to the extent that paragraph 1 of the order of the court
below is set aside and replaced with the following:
‘
1
The defendant is ordered to pay to the plaintiff the amount of
R403 600 with interest thereon at the rate of 15.5% per annum
a
tempore morae
to date of final payment, both dates inclusive;’
2
The respondent is ordered to pay the costs of the appeal.
_____________________
L
Mpati
President
APPEARANCES
For
appellant: T P Krüger with A Politis
Instructed
by: Charles Pieterse Attorneys, Pretoria
Symington
& De Kok, Bloemfontein
For
first respondent: J S Griessel
Instructed
by: Stuart van der Merwe Inc., Pretoria
Goodrick
& Franklin Inc, Bloemfontein
[1]
At
107C-H.
[2]
Para
18.
[3]
Para
20.
[4]
Endumeni
Municipality
para
18.