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[2015] ZAGPJHC 261
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Robin N.O and Others v Serame (A5005/2015) [2015] ZAGPJHC 261 (16 November 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
number: A5005/2015
DATE:
16 NOVEMBER 2015
In the
matter between:
BARNETT:
ELMER ROBIN
N.O
..................................................................................
First
Appellant
BARNETT:
YOLANDI
N.O
........................................................................................
Second
Appellant
BARNETT:
ELMER
ROBIN
........................................................................................
Third
Appellant
BARNETT:
ANDRE GEORGE
N.O
..........................................................................
Fourth
Appellant
BARNETT:
MARIA CORNELIA ESTELLE
N.O
.......................................................
Fifth
Appellant
BARNETT:
ANDRE
GEORGE
.....................................................................................
Sixth
Appellant
DE JAGER:
BARBARA
WILHELMINA
................................................................
Seventh
Appellant
And
RANKOU:
EDWARD
SERAME
.........................................................................................
Respondent
JUDGMENT
SATCHWELL J:
INTRODUCTION
This
appeal, against the judgment of our late sister Mayat J handed down
on 17
th
May
2013, concerns an application by the applicant
(‘Rankou’) to resile from a written contract
entered into between himself and two trusts (‘ Barnet
Family Trust’ and the ‘Elmer and Yolandi
Trust’)
for the sale of shares in a company known as
Lumin Light Nett (Pty) Ltd (‘Lumin’)
.
The
facts may be very briefly stated. The first six
respondents are all members of the Barnett family.
Sixth respondent (‘George’)
performed building alterations for Rankou who was satisfied
therewith and the two entered into business discussions
regarding Lumin. Pursuant thereto, Rankou
concluded a written agreement on 20
th
February 2008 with the Barnett Family Trust and the
Elmer & Yolandi Barnett Family Trust for the sale and purchase
of 33.33% of the issued shares in Lumin for the purchase
price of R 2 million. Subsequent thereto, during
2008
and 2009, Rankou received five dividend payments .
Share certificates in Lumin were
issued in his
name.
By
2010, Rankou learnt that Lumin was suffering from the
recession and in a cash-flow crisis and further
funds
were required. Rankou signed an application for an
overdraft facility with Nedbank which was declined
[1]
.
This led to further discussions and Rankou ultimately took the view
that the Memorandum of Agreement
for the Sale of Shares
(‘the agreement’) in Lumin “should be
declared
void
ab
initio
and of no force or effect”
alternatively “be cancelled” and that first
and second respondents as
trustees of the Barnett Share
Family Trust (‘ Elmer’ and ‘Yolandi’)
alternatively
third respondent (‘Elmer’) in his
personal capacity and fourth and fifth respondents
as trustees
of the Barnett Family Trust (‘George’
and ‘Maria’) alternatively fourth respondent
(‘George’) George in his personal capacity be ordered to
refund the sum of two million Rand (R 2 000
000) to
Rankou.
The
application brought by Rankou before Mayat J relied on a
number of procedural and
locus standi
issues pertaining to the trusts,
alleged failure of the written agreement to properly
reflect
the discussions and real agreement which had taken place
prior to written conclusion and signing of same
and alleged
misrepresentations inducing conclusion of the written sale of
shares agreement.
The
learned judge in the court
a quo
found that the one trust was not in existence and that,
absent authorization for co-trustees to act independently,
the written agreement was void ab initio. The
learned judge also found that Rankou’s averments
pertaining to the oral agreement were plausible whilst the
Barnett’s averments pertaining to the written agreement
were untenable.
THE PARTIES
The
Memorandum of Agreement for the Sale of Shares, dated
20
th
February 2008 identifies three
entities on the first page: the ‘Company’
which
is Lumin, the ‘Sellers’
which are both the Barnett Family Trust
IT
5424/01 and the Elmer & Yolandi Barnett Family
Trust IT 12901/06 and the ‘Purchaser’
who is Rankou. The agreement spells out that the
purchaser and the sellers have reached an agreement for the
sale and
purchase of 33.33 % shares in the company from the sellers.
At
the time this agreement was concluded, 20
th
February 2008, only the Barnett Family Trust
IT 5424/01
[2]
and the Barnett Share Family Trust IT 12901/061
[3]
had been registered. The Elmer &
Yolandi Barnett Family Trust did not yet
exist and had not been
registered.
Rankou
avers that he had no knowledge of (and therefore no particular
interest in the identity of) the existence of
the trusts or
their role in the agreement.
The
learned judge in the court
a quo
found that the written agreement was unenforceable
in relation to the Barnett Share Family Trust because Elmer
had signed on behalf of the Elmer & Yolandi
Barnett Family Trust which was not yet extant although
he
was a trustee of the Barnett Share Family Trust; because
there was no suggestion that Elmer
was in error at
the time he did so; because of the absence of any
averments pertaining to the common continuing
intention of all
parties to the agreement; and the failure to seek
rectification of the agreement on the basis of the agreement.
There
is no dispute that the trust referred to as the Elmer & Yolandi
Barnett Family Trust did not exist at the time of the
agreement.
There is no dispute that the Masters Reference Number IT
12901/06 attached to
the ‘seller’ on
first page of the agreement and in the definitions
clause is that of
the Barnett Share Family Trust.
All the respondents - Elmer, Yolandi, George and Maria
have confirmed on oath
[4]
in their answering affidavit that “the trustees for the
time being of the Barnett Share Family Trust and the Barnett
Family
Trust respectively intended to enter into the contract concerned to
sell shares”. and that
“ the
first respondent [Elmer] and the fourth respondent [
George] were duly authorized by their co-trustees
to act on
behalf of each of their respective co-trustees in entering into the
contract concerned.” Elmer was
a trustee of the
Barnett Family Share Trust.
I can
see no reason why, In the circumstances, the
approach to be taken to these facts
should not
follow that set out by Miller JA in
Gralio
(Pty) Ltd v D E Claassen (Pty) Ltd
1980
(1) SA 816 AD that “a defendant who
raises the defence that the contract sued upon does
not correctly
the common intention of the parties, need not even claim formal
rectification of the contract; it is
sufficient if he
pleads the facts necessary to entitle him to rectification and
asks the Court to adjudicate upon the basis
of the written contract
relied upon by plaintiff as it stands to be corrected”.
Gralio supra
was
followed and applied in in
Citibank NA, South
Africa Branch v Paul N.O. and Another
2003
(4) SA 180
(TPD) at 188D-E and in
Boundary
Financing Ltd v Protea Property Holdings Pty Ltd
2009 (3) SA 447
(SCA) at 453A-B.
The
Barnetts say that they always intended the Barnett Share
Family Trust to enter into the agreement and
the master’s reference number to that trust is obviously
reflected in the agreement. The Barnetts do
not formally
need to claim rectification. This court is
entitled to determine the matter upon the basis
of the written
agreement as it stands to be corrected should this court
decide that the agreement should be so rectified.
After
all, the issue is the details of the true terms of the
contract. There
is no variation of the contract
only correction of the name of a party in the document which
reflects that contract.
It is not necessary that
there be a mutual mistake on the part of all contracting
parties – in the present
case the details of the trusts were,
according to Rankou, irrelevant and of no concern to
him.
I
regret that I am unable to agree with the approach taken by the
learned judge in the court
a quo
on this point and cannot agree that the absence of a claim for
rectification renders the agreement “effectively unenforceable
at least in relation to the Barnett Share Family Trust”.
I do not take the view that “one of the averred sellers
of the
shares in the company, as described in the written agreement,
does not exist”. Both
trusts existed
at the relevant time – both were correctly identified by
their registration numbers, one
was misnamed.
RESOLUTIONS AND
AUTHORISATIONS
In the
agreement, each Trust, as seller, is
recorded as “duly authorized by the Trustees”
and the memorandum is signed by George on ‘behalf
of Barnett Family Trust’, Elmer “
on behalf
of Elmer & Yolandi Barnett Family Trust.”
Rankou
complains
[5]
that the agreement should be declared “
void
ab initio
” apparently on the
ground that there are “no resolutions underlying”
which authorize
only Elmer and George to sign as opposed
to each of Elmer and Yolandi and of George and
Maria, as co-trustees,
being required to sign.
The
learned judge in the court
a quo
found that there was
nothing to suggest that the relevant trustees of each of the trusts
jointly with their co-trustees
bound the trusts in relation to
the written agreement. This finding was made because there
are no resolutions
to show that the co-trustees of each of the
two trusts acted jointly to authorize either Elmer or George to sign
the agreement.
The general rule is that trustees are
obliged to act jointly in dealings with the outside world unless
otherwise authorized.
Accordingly, the
court found that the trust deeds did not empower Elmer or George to
act independently
and there was no evidence to suggest that
co-trustees had delegated their powers or authorized these
trustees. Therefore
the written agreement could not be
enforced against a third party in the position of Rankou.
Certain
Deeds of Trust are attached to the Barnetts’
answering affidavit – Annexure LLN2 for
the Elmer Barnett
Share Family Trust
[6]
and Annexure LLN4 for the Barnett Family
Trust
[7]
.
There is nothing in either deed of trust which requires
any resolution of the trustees to be reduced
to or made in
writing. There is nothing in either deed which requires
both trustees to sign any document executed
for or on behalf
of the trust. There is nothing in either deed which
prohibits the delegation of duties by
one trustee to another.
Provision is made for the co-trustees to determine from
time to time the manner in
which documents shall be signed. There is
also no provision in the Trust Property Control Act 57 of 1988 that
resolutions taken
by trustees of a trust should be in writing.
There
is no evidence, in the form of minutes of meetings or resolutions,
recording that the co-trustees of each trust took
a decision that
one trustee only could sign the written agreement on behalf of
both trustees. In argument,
much was attempted to
be made of the requests for such documentation from the Barnetts’
attorney which documentation was
never forthcoming. The
upshot is that it never came and apparently does not exist.
There was much criticism
of the absence of any explanation for the
failure to make or keep such documentation. This takes
the matter no further.
All the
respondents - Elmer, Yolandi, George and Maria
have confirmed on oath
[8]
in their answering affidavit that “the trustees for the
time being of the Barnett Share Family Trust and the Barnett
Family
Trust respectively intended to enter into the contract concerned to
sell shares” and that
“ the
first respondent [Elmer] and the fourth respondent [
George] were duly authorized by their co-trustees
to act on
behalf of each of their respective co-trustees in entering into the
contract concerned.” This
version of
the respondents which (in motion court proceedings must be accepted
unless patently absurd
[9]
)
is that they are not only permitted to but that they
always intended to and did act jointly
without written
record thereof.
Accordingly,
it is difficult to agree with the submission made by Rankou
complaining of the absence of a written
resolution authorising
only one trustee to sign the agreement on behalf of
each trust. I
regret that I am unable to
agree with the finding of the learned judge in the court
a quo
for the reasons I have set out above.
AGREEMENT
The
Oral Agreement claimed to be concluded
Rankou’s
challenge to the terms of the agreement is against as it is
recorded in writing. He
avers that the real
agreement was concluded in the course of various
discussions. He reached
an agreement in December
2007
[10]
with George and with Lumin
[11]
(represented by George), that he would “inject”
the sum of R 2 million into Lumin,
he would receive one
third of the shares in Lumin and dividends in respect thereof,
he would be a “silent partner”
and participate on the
level of a director.
These
terms are described as either ‘express’
or ‘implied’ or ‘tacit’ and
definitely
‘oral’. In other words, it is whatever
is not recoded in the actual written document
as the agreement
between the parties.
Ultimately
Rankou’s only complaint is that his
‘injection’ of R 2 million was never recorded
as a loan
but as the ‘purchase price’ for the
shares. All other terms of the agreement
were met
- he did receive the one-third of the shares, he did
receive dividends, he did participate in the
affairs of the
company.
Rankou
supplies no details this ‘injection’:
He would “inject R 2 000 000 into
the business of
Lumin” and would “be given one third of the shares
of Lumin” and “would receive
dividends in respect
of my one third of the shares”
[12]
.
This R 2 million injection “would be reflected on an interest
free loan account in my favour in the books of Lumin”
[13]
.
Rankou
is silent in his founding affidavit as to the terms of the
“injection”. It is appreciated that he maintains
that he was not purchasing the shares which he acquired. But
he does not set out the length of time that his injection
would
remain in Lumin, whether any interest or benefit (other
than dividends and shares) would attach thereto,
under what circumstances he would be free to withdraw this
injection.
Rankou
alleges that he agreed only to make an investment
in Lumin. He would become a shareholder
but his
investment would
not
be a purchase price for these shares and his investment would
remain on the books as a loan. This would have
the
more fortunate result that he would be identified as a creditor in
the books of the company and his R 2 million
would not be lost
in case of a loss of any value in his
shares.
The Written Agreement
as Recorded.
Rankou
identifies himself as “an adult businessman’.
He is clearly a successful
businessman since
he has expended some R 50 000 on an entrance gate to his
property and lighting along the perimeter as
well as a further
R 500 000 on home alterations including two additional
garages, enlargement of the reception
area, addition of
a bar, addition of a study and a revamp of the existing
dwelling.
The
document which this astute businessman signed is headed
“Memorandum of Agreement for the Sale of Shares”
[14]
.
It is a six page document which Rankou has signed on the
lower right corner of each
page. He is identified
as the “purchaser” on the first page and each
page, sometimes
adjacent to his signature,
is reference to the sale and purchase of shares in the company.
I note that
beneath Rankou’s signature on the second
last page there is however no indication that he is the
purchaser,
but nothing turns on that fact.
A
non-variation clause is contained within the agreement.
Both
the maxim c
aveat
subscriptor
and the prescription
against parol evidence may be perceived as
having diminishing roles in our modern
law but good reason
need be shown why neither rule should apply. The
written document cannot be
completely rewritten to suit
a version which is completely contrary to that contained in
that written document.
We are not here concerned with a
small amendment or completion of a lacuna
or clarification of
an ambiguity. Rankou
seeks to completely ignore the written document
which he,
a businessman, signed.
Rankou
claims that he intended to and only “injected” or
“invested” the sum of R 2 million
into Lumin
and that this money was “a loan” to be
reflected in the ‘loan account’
in the books of
the company. Yet the document proclaims itself to be an
agreement “for the sale of shares”,
refers to the parties as “sellers” and “purchaser”,
records the “sale price”
and makes no
mention of any loan account. Obviously this court cannot be
asked to rewrite the written document to reflect
an entirely
contrary agreement. Instead, Rankou asks that the
document be declared void
ab initio.
The
Judgment of the Court
a quo
The
court
a quo
found that Rankou’s averments
pertaining to the oral agreement was “plausible”.
The court found that fifth respondent’s
(‘Maria’) averments pertaining to the purchase price
“accruing” to the “sellers”
were “so untenable in the circumstances…
that they
could be rejected merely on the papers”.
The learned judge found her view
was fortified by
the absence in the agreement of any substantive obligation
imposed on the sellers of the shares
and the absence of the
vesting of any rights in Rankou in relation to the
sellers. Furthermore,
the agreement was silent on
any loan accounts by shareholders.
I
have some difficulty in following the learned judge’s
reasoning. It is difficult to see why the purchase
price should accrue to anyone other than the identified sellers of
those shares i.e. the trusts.
It would be unusual that any further obligation would
attach to sellers of shares other than that they transfer same
to
the purchaser. Similarly it is difficult to
envisage any further rights vesting in a purchaser
other than
acquisition of the shares purchased. The absence of any
mention of a loan account is of no assistance
to Rankou – it
rather contradicts his version.
These
are motion court proceedings in which credibility issues should
play no part and I cannot find that the averments
of Rankou are more
or less ‘plausible’ than those of the Barnetts in the
circumstances of this written document.
(this
was not an issue in argument)
I am
unpersuaded by the reasoning of the learned judge in the court
a
quo
. It is for Rankou to make out a case for
setting aside this written agreement. I do not find that
the version of the respondents is, in any way, improbable or
even unusual for the reasons I have already given.
MISREPRESENTATIONS
Rankou
avers that either Elmer alone or Elmer and George
or George alone made certain misrepresentations
which
they knew to be false and which induced him to enter into the
agreement.
I
have had some difficulty in comprehending the nature of the
misrepresentations which Rankou avers caused him
to
conclude this written agreement. Are the
misrepresentations that the Lumin business was a good operation
assured
of healthy rewards? Are the
misrepresentations that there would be a profitable return?
Are the misrepresentations that the Barnett family were
bona
fide
and honest in their dealings? Are the
misrepresentations that Rankou was not purchasing a shareholding?
Are the misrepresentations that he would be making a loan
recorded as such in the financial records of
Lumin?
The
chronology is that there was initially mention of a
franchise opportunity and thereafter an
opportunity to make a capital injection into the company in exchange
for both shares and dividends. Finally,
there was
the written agreement.
Rankou
sets out the nature of his discussions with the Barnetts.
He does not set out by whom
or when or how he was
induced to conclude this written agreement. In short,
he is silent on the
perpetrator of, the nature of
and the inducement offered with regard to the alleged
misrepresentations.
I
have already commented on the document which he initialed and
signed and the apparent absence of anything unusual or concealed
therein.
It
would appear that it is Rankou’s case (and perhaps the finding
of the learned judge in the court
a quo
) that an
attorney, by the name of de Jager, who
(either alone or in collusion with
some or all of the Barnetts)
made misrepresentations and thereby perpetrated the inducement.
It
is common cause that Rankou was referred to an attorney who is
seventh respondent (‘De Jager’).
It is
Rankou’s version that de Jager “expressly told me that
she did not know Lumin” or Elmer or
George
(and only knew Maria as a former receptionist).
Rankou claims that de Jager did some
investigations and then
informed him that she believed the Barnetts to be “nice
people” who were “Christians”.
Attorney
de Jager informed Rankou that she believed that this was a “good
deal”. Rankou states,
in reply, that
de Jager advised him that he could seek the independent advice of an
auditor on the financial statements
of Lumin.
Rankou
avers that de Jager told him that the agreement which had been
drafted “conformed to my requirements’
and
“safeguarded my position”. De Jager then
“read the body thereof to myself”
but Rankou
himself “never even read the agreement”.
On his
own version, Rankou did not seek independent advice on the
finances of the company and did not conduct any type of
due
diligence investigation. Rankou did not even attempt to
read the written agreement which he initialed on
six pages and
signed in full on one of them.
At
most, Rankou says that de Jager read the body of the agreement
over to him. He does not say or spell out
that de Jager
read out to him an agreement which was and is entirely different to
that which is recorded to writing. He
does not say that de
Jager concocted a verbal version for him which is entirely contrary
to that which he signed. He
says nothing in the papers
as to that which de Jager did read to him.
Did she refer to sellers and purchaser?
Did she make
mention of injections and loans? Did she specify that he was
an investor with a loan account? Nowhere
is the court informed
what Rankou was told by de Jager which is, in any way,
contrary to the written document.
It must
be noted, without making any finding of dishonesty or
impropriety on the part of attorney de
Jager,
that she was not a party to the written agreement.
In
Karabus Motors (1959) Ltd v Van Eck
1962
(1) SA 451
( C ), the court held that a fraud emanating
from an independent third party “will have no effect upon the
contract” unless that third party is acting
“in collusion with or as the agent of one of the parties”
(453C).
There is
no evidence of collusion between the Barnetts and de Jager.
There
is no evidence of any
inducement of Rankou by anyone that he enter
into the agreement.
Rankou states that he
knew what he wanted but that the document which he did not read
did not reflect his intentions.
Accordingly,
I cannot find, as did the court a quo, that
Rankou’s averments
pertaining to the oral
agreement was “plausible” or that the respondent’s
averments were “untenable”.
The
learned judge did not go so far as to find that there had been
misrepresentations but I can envisage no other basis for deciding
to
void this written agreement.
The
learned judge in the court a quo made certain comments on the
‘negligence’ of de Jager apparently by reason
of
her failure to set out in detail and account for the transfer
of the R 2 million funds from her trust account
and to whom.
The court also made a punitive costs order against de Jager.
I cannot
see any negligence on the part of de Jager.
There has been no trial and no cross-examination
of either party.
On the papers, it is difficult to conceive on what basis de Jager
would be required to provide any
accounting to Rankou for dispersal
of these funds and that there could be any negligence on her part in
failing so to do.
CONCLUSION
For all
these reasons I regret that I am unable to agree with the finding of
the learned judge in the court a quo.
In the
result it is ordered as follows:
The appeal
is allowed with costs.
The order
of the court a quo is set aside and substituted with the following
order: The application is dismissed with
costs.
DATED
AT JOHANNESBURG 16
th
NOVEMBER 2015
SATCHWELL J
I agree.
MAKUME J
I agree.
WEPENER J
Counsel
for Appellant: Adv R Goslett.
Attorneys
for Appellant: De Jager Attorneys.
Counsel
for Respondent: Adv J Van Rooyen.
Attorneys
for Respondent: Van Jaarsveld Attorneys.
Dates
of hearing: 11 November 2015.
Date
of judgment: 16 November 2015.
[1]
The court was not furnished with a copy of the
application for overdraft facilities and thus does not know in what
capacity Rankou
signed this document.
[2]
Page 308 of the papers which discloses that only George and Maria
were trustees at the time.
[3]
Page 272 of the papers which discloses that only Elmer and
Yolandi were trustees at the time.
[4]
Paragraph 55 of the Answering Affidavit.
[5]
Paragraph 103.1 of Founding Affidavit
[6]
Page 273 of the papers
[7]
Page 309 of the papers
[8]
Paragraph 55 of the Answering Affidavit.
[9]
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3)
SA 623 (A).
[10]
Paragraphs 24 and 25 of the founding affidavit.
[11]
Paragraph 25.2 of the founding affidavit.
[12]
Paragraphs 24 and 25 of founding affidavit.
[13]
Paragraph 25 of founding affidavit.
[14]
Page 70 to 75 of the papers.