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[2017] ZAGPJHC 345
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Grand Aviation (Pty) Ltd v Bray (A5043/2015) [2017] ZAGPJHC 345 (24 March 2017)
HIGH
COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
No: A5043/2015
Reportable
Not
of interest to other judges
Revised.
In
the matter between:
GRAND
AVIATION (PTY)
LTD
Appellant
and
MICHAEL
GEOFFREY
BRAY
Respondent
Case
Summary:
Contract
– composite agreement providing for sale of land and the
construction of a dwelling house in a residential development
–
whether underlying agreement for the sale of land and transfer of
ownership valid – whether building part of the
agreement valid
and enforceable – whether composite agreement validly
cancelled. Appeal dismissed with costs.
JUDGMENT
MEYER
J (MATOJANE and FRANCIS JJ concurring)
INTRODUCTION
[1]
This is an appeal against the judgment and order of the Gauteng Local
Division of the High Court (Barnes AJ) on 18 May 2015,
granting the
claim of the respondent, Mr Michael Geoffrey Bray, for specific
performance by the appellant, Grand Aviation (Pty)
Ltd, of an
obligation arising from a written agreement to construct what had
been described as a type E dwelling house measuring
approximately 183
square metres (the unit) for Mr Bray on an erf in a residential
estate called Emerald Estate, being developed
by Grand Aviation in
Greenstone Hill Extension 7, near Modderfontein (the erf, property or
land), and dismissing Grand Aviation’s
counterclaims for an
order declaring the written agreement null and void for lack of
compliance with the provisions of s 2(1) read
with
s 28(2)
of the
Alienation of Land Act 68 of 1981
, the re-transfer of ownership of
the property into its name and for declaratory relief that the
agreement was validly cancelled
and that it is in law not required to
erect the unit for Mr Bray. The litigation commenced by way of
motion proceedings during
November 2007, but, on 4 April 2008, the
matter was referred to trial due to disputed issues of fact that had
arisen on the papers.
The appeal to this full court is with the
leave of the trial court.
FACTUAL
MATRIX
[2]
I commence by setting out the facts relevant to the determination of
the issues between the parties. In doing so, I essentially
follow the same chronology as set out in the trial court’s
thorough and comprehensive judgment. Mr Bray decided to
purchase the erf and to have a dwelling house constructed thereon,
for investment purposes. He selected a residential unit
that
was described as a ‘Unit Type E measuring approximately 183
square metres’ from among unit options A, B, C, D
and E offered
by Grand Aviation. On 28 September 2003, he completed and
signed Grand Aviation’s standard written agreement.
It
comprises a ‘Deed of Sale’ part and in respect of the
erf, an ‘Annexure “A”’, which essentially
contains the construction of the unit part of the agreement together
with an ‘Annexure “B”’ (a schedule
of
building specifications) and an ‘Annexure “C”’
(specifications of the electric fittings to be installed
in the
unit). I refer to the ‘Deed of Sale’ part as ‘sale
of land part of the agreement’, to clauses
2.1, 2.2, 3.4 and
3.5 of the ‘Deed of Sale’ part together with Annexures
‘A’, ‘B’ and ‘C’
as ‘the
building part of the agreement’ and to both parts as ‘the
agreement’.
[3]
The written agreement or offer signed by Mr Bray was never signed by
Grand Aviation. Its chief executive officer who testified
on
its behalf, Mr Prochassek, could not explain the omission. He
conceded that Grand Aviation was at all material times under
the
impression that it had signed the agreement and that a valid and
binding agreement had been concluded with Mr Bray. The
trial
court correctly in my view found this was borne out by Grand
Aviation’s conduct, and that-
‘
[i]t appears that it was only
after the plaintiff [Mr Bray] had instituted these proceedings
against the defendant [Grand Aviation]
for specific performance, that
the defendant realised that it had not signed the agreement and then
contended, rather conveniently,
that it was invalid for lack of
compliance with the
Alienation of Land Act.’
[4
]
By way of interpolation I refer to certain provisions of the
agreement, which are relevant to the determination of the issues
in
the appeal. The property is described as follows in clause 1 of
the sale of land part of the agreement:
‘
1
DESCRIPTION OF PROPERTY
ESTATE
EMERALD ESTATE
ERF NUMBER
3.84
UNIT TYPE
E
MEASURING
183 Square metres
Approximately
TOWNSHIP
GREENSTONE HILL EXT 7’
[5]
Clause 2 of this part of the agreement stipulates the purchase price,
thus:
‘
2
PURCHASE
PRICE
2.1 The Purchase Price of the property
and the cost of the construction of the dwelling inclusive of VAT are
made up as follows:
Cost of land
R229 000 (Two hundred
and twenty nine thousand Rand)
Cost of building
R380 000 (three hundred eighty)
[inserted in manuscript]
Total
R639 450.00 [inserted in manuscript]
2.2 The parties record that the
construction and erection of the dwelling house and outbuildings on
the Property are to be governed
by the terms and conditions contained
in
Annexure “A
” to this Deed of Sale.’
[6]
The payment of the purchase price is provided for in clause 3, which
reads as follows:
‘
3
PAYMENT
OF PURCHASE PRICE
3.1 The Purchaser shall pay the
purchase price of the Property as follows:
3.1.1
On signature hereof an initial non-refundable fee of R5 000.00 (FIVE
THOUSAND RAND) shall be paid to the Conveyancer of the
Seller on date
of this offer, which amount will be invested in an interest bearing
account in terms of
Section 78(2)(A)
of Act 53/79 on behalf of the
Purchaser, which interest will accrue to the Purchaser.
3.1.2
In the event of this offer failing this offer shall lapse
ipso
facto
in which event the
Seller will be entitled to retain the fee in clause 3.1.1 as
rouwkoop
.
3.2 The purchase price is R R639
450.00 (…………………………)
[the
amount of R639 450.00 was inserted in manuscript] payable as
follows:
3.2.1
A fee of R5 000 as stated in 3.1.1
3.2.2
[this sub-clause provides for the payment of a deposit, but was
deleted]
3.3 The balance of the purchase price
shall be payable against the registration of transfer into the name
of the Purchaser but payment
thereof is to be secured by means of a
bank guarantee approved by the Seller or Seller’s Conveyancers
and to be delivered
to the Seller’s conveyancers within 30 days
of signature hereof.
3.4 The approved banker’s
Guarantee or other acceptable security for the full amount of the
building costs referred to in
3.3 above entitles the Seller to
receive progress payments as the Works proceed in accordance with the
provisions set out in the
annexure hereto. In the circumstances
where the building is self-financed by the Purchaser the Seller shall
be entitled to
obtain from the Purchaser a guarantee that payment
will be effected timeously.
3.5 Any outstanding amounts or
instalments due by the Purchaser to the Seller in terms of this deed
of sale and/or the annexure
hereto, shall bear interest at the prime
plus 2% from the due date to date of payment.’
[7]
I now refer to certain provisions contained in Annexure A of the
building part of the agreement.
‘
1 INTERPRETATION
1.1
In this Annexure, unless
inconsistent with the context, the Works and phrases defined
hereunder shall bear the meanings assigned
to them in this clause:-
1.1.1
“
The Works” shall
mean the erection of a dwelling house that is to be executed on the
property in accordance with the provisions
of this Annexure.
1.1.2
“
The Contract Sum”
shall mean the sum inclusive of VAT or such other amounts as shall
become payable as set out hereunder at
the times and in the manner
specified herein and shall be payable to the Contractor or at his
chosen address being his
domicilium
citandi et executandi
.
The final amount shall be determined from the area given on the final
approved drawings. The contract sum shall be
based on the
building cost set out in the Deed of Sale.
1.1.3
The Final Drawings shall mean
the building plans as annexed hereto or the building plans agreed to
by the parties and signed by
both for identification purposes
together with schedule of finishes (if any) therein referred to.
Should no reference to
a schedule of finishes be made in the drawing
plans, the attached schedule of finishes will apply.
1.1.4
“
The Contract Documents”
shall mean
1.1.4.1
this Annexure
1.1.4.2
the Final drawings.
1.1.5
The specifications shall
mean the specifications mentioned in the final drawings and the
schedule of finishes as set out in annexures
“B” and “C”
hereto. Unless the specifications and plans are agreed by the
parties in writing and
annexed to this Annexure the specifications
shall be deemed to be the minimum specifications recommended by the
National Home Builders
registration council. In the event of
any discrepancy arising between the drawings and specifications, the
provisions of
the specifications shall prevail. In the event of
any discrepancy arising between the specification and the finishing
schedules
the provisions of the finishing schedules shall apply,
provided, however, that where there are engineers’ drawings
they shall
take precedence.’
[8]
Clause 1 of Annexure ‘B’ (schedule of specifications)
provides as follows:
‘
The units will be erected
substantially in compliance with the National Home Building
Regulations, SABS 0400, the requirements of
the local authority and
any major financial institution, but this specification will override
those requirements should any conflict
arise.’
[9]
Clause 3 of the Annexure A provides as follows:
‘
3 PLANS/DRAWINGS
3.1 The Purchaser hereby specifically
and separately authorises the Seller to prepare working drawings for
the Works and to submit
such plans for and on behalf of the purchaser
for approval by the local Authority concerned.
3.2 In the event of the Local
Authority, mortgagee, township owner or other statutory body of the
purchaser, at any time or for
any reason whether before, during or
after the construction of the Works, requiring any alteration,
variation or amendment to the
drawings and/or specifications
involving the Seller in additional expense, then the reasonable cost
of complying with such alteration,
variation or amendment shall be
borne and paid for by the Purchaser.’
[10]
And finally, clause 9 of the Annexure A provides in relevant parts as
follows:
‘
9 PAYMENT
The Seller shall, upon reaching the
stages of completion of the Works for which payment is to be effected
in terms of this Annexure,
make written application to the Purchaser
for such payment. Payment of the Annexure Sum shall be made to
the Seller as set
out below and the method of payment shall be
determined in the manner in which finance has been secured:
9.1
Finance
by mortgage bond or self -financed
Payment to the Seller, if financed by
a Bank, shall be made according to the methods and rules for interim
payment prescribed by
them and if it is financed by the purchaser the
following methods of payment shall apply
. . .
9.2
Cession
In the event of the Annexure price
being payable from the proceeds of a building loan secured by a First
Mortgage Bond obtained
from a Bank or approved Financial Institution,
then the Purchaser irrevocably cedes to the Seller a sum equal to the
amount of
such mortgage bond. The Seller is hereby authorised
to receive interim draws from the Mortgagee/s and the Purchaser
agrees
to sign the authority for such payments as and when required
by the Seller. In the event of the Purchaser failing an/or
refusing
to authorise payment of such interim draws, the Seller shall
be entitled without prejudice to any other rights which it may have
in terms of this Annexure, or in Law, to discontinue the said Works,
and all damages arising, costs included and additional interest
accruing shall be for the account of the Purchaser provided that the
Seller himself is not in default in any way. The Purchaser
hereby irrevocably authorises the Seller to sign any release for and
on behalf of the Purchaser and to accept all draws on the
Purchaser’s
behalf. In the event of the Mortgagee/s, through error or
otherwise, paying the Purchaser or his agent,
or assigns, any of the
proceeds to the Bond/s hereby ceded, prior to the Seller having been
paid the full Annexure price, plus
any additional sums herein
contained, the Seller may require the Purchaser forthwith to pay such
amounts to the Seller plus interest
from time to time thereon at a
rate of interest equivalent to the prime rate + 2% charged by the
Seller’s bank in respect
of unsecured overdraft facilities as
charged from time to time from the due date of such payment until the
date of payment thereof
to the Seller. No access bond by
Purchaser will be accepted.’
[11]
Grand Aviation provided Mr Bray with its standard building plan for
the type E dwelling unit and the plan, according to Mr
Bray, formed
part of his application for a home loan. He obtained a loan
from Nedbank Limited in the amount of R639 450 against
the security
of a first mortgage bond, which was to be registered over the
property. Nedbank agreed to make an amount of
R229 000
available for guarantees and payment against transfer of ownership of
the property into Mr Bray’s name and to retain
and advance the
amount of R410 540 as the works progressed from time to time.
The details of this were confirmed in a letter
dated 2 March 2004,
from Nedbank to the conveyancing attorneys, De Wet Reitz Attorneys.
On 11 October 2004, Nedbank furnished
a guarantee to the conveyancing
attorneys for payment of the amount of R229 000 against registration
of transfer of ownership of
the property into Mr Bray’s name
and the registration of a first mortgage bond in its favour over the
property to secure
payment of the loan amount of for R639 450.
Transfer of ownership of the property into the name of Mr Bray and
the registration
of the first mortgage bond in favour of Nedbank were
effected simultaneously in the Deeds Office on 29 March 2005.
[12]
It appears from the evidence that Grand Aviation furnished purchasers
in the Emerald Estate with standard drawings and specifications
for
the different unit options to which the residential units would be
built. Agreement was to be reached on alterations
to the
standard drawings and specifications and on the placement of houses
on the properties. Mr Bray sought certain alterations
to his
type E unit and, on 8 June 2005, Grand Aviation’s Mr Lopion
furnished him with a written ‘revised quote and
floor plan’
which incorporated his proposed alterations for the total amount of
R79 500, but there were two outstanding items
– ‘kitchen
customisation’ and ‘additional paving’ – that
still had to be quoted for.
Mr Bray was required to sign the
quotation and return it to Mr Lopes. The following contractual
term was also included:
‘
It is hereby agreed that the
purchaser will provide the funds required for this quote within 7
days prior to commencement of the
building of the unit. Should
this not occur, the original standard unit will be built on the
property, with the purchaser
liable for payment thereof.’
On
13 June 2005, Mr Lopion notified the purchasers, including Mr Bray,
that-
‘
[s]igned quotes have to be in
[his] possession by 30 June 2005. If not, the developer
reserves the right to disregard [Mr
Bray’s] request for
alterations and build a standard unit in terms of [his] signed
purchase agreement.’
Mr
Bray thereupon signed the quotation, initialled the altered floor
plan and returned both to Mr Lopion on 30 June 2005.
[13]
On 30 May 2006, Grand Aviation’s Ms Linda Weiland furnished Mr
Bray with detailed plans of his unit, which incorporated
the
alterations he sought, for his approval. At his request, she
also, on 24 August 2006, furnished him with a revised quotation
for
the alterations, which quotation was then incorporated into an
‘Addendum to the Deed of Sale’ that he was requested
to
sign (the addendum). The revised quotation was identical to the
initial quotation in respect of the items that had been
quoted for,
but it included a so-called ‘modification fee’ in the
amount of R110 000, which increased the total amount
for the
alterations from R79 590 to R189 590. The trial court, in my
view correctly, accepted the evidence of Mr Bray that
he had been
told by Mr Prochassek that the modification fee was to cover the
increased building costs that had arisen because of
the delay in the
development. As a result, the construction of phase 3 of the
development, which included Mr Bray’s
unit, was scheduled to
commence only in January 2007. Mr Bray never signed the
addendum.
[14]
The trial court rejected Mr Prochassek’s version that Mr Bray
had raised no objection to the modification fee and that
he agreed to
pay it (despite the fact that he never signed the addendum) and it
accepted Mr Bray’s evidence that he had not
been prepared to
pay the modification fee and that he had communicated this to Grand
Aviation. In this regard, the trial
court found as follows:
’
44. The plaintiff
testified that he regarded the modification fee as unacceptable, was
not prepared to pay it and told the
defendant so. The plaintiff
testified that he could not recall precisely who he had communicated
his attitude to, although
it would likely have been Mr Lopion or Ms
Weiland. The plaintiff testified that this communication must
have been oral.
Certainly, there is nothing in writing before
me which records an objection by the plaintiff to the modification
fee.
45. The defendant disputed
this. In his evidence in chief Mr Prochassek referred to what
he claimed was a file note
in Ms Weiland’s handwriting.
The note appears to be dated 27 March 2006 and states “
Mr
Bray phones, happy to pay mod fee.”
Mr Prochassek
contended that this established both that the plaintiff had been sent
the addendum much earlier than he claimed and
that the plaintiff was
happy to pay the modification fee. Notably, however, Ms
Weiland, who would have had personal knowledge
of this, was not
called to testify. No explanation was given for this.
Furthermore, it was not put to the plaintiff
that he had been
prepared to pay the modification fee and that he had communicated
this to Ms Weiland. Mr Novitz, who appeared
for the defendant,
argued that it was not necessary to put this to the plaintiff because
Ms Weiland’s note, which had been
attached to the defendant’s
answering affidavit had not been disputed by the plaintiff in reply.
Mr Novitz submitted
that in a matter such as this, which had
commenced as an application proceeding and had thereafter been
referred to trial, reliance
could be placed on the fact that a matter
had not been disputed on the papers and in those circumstances, it
was not necessary
to take the matter up with the relevant witness.
This is not correct. The correct position is that where a
motion proceeding
has been referred to trial, the affidavits filed
therein are of no probative value save for admissions contained
therein.
[
Lekup Prop Co No 4 (Pty) Ltd v Wright
2012 (5)
SA 246
(SCA).] The plaintiff did not admit on affidavit that he
had been prepared to pay the modification fee.
46. In the witness box,
the plaintiff was adamant that the first time he saw the modification
fee was when Ms Weiland
e-mailed the addendum on 24 August 2006, that
he regarded it as unacceptable, was not prepared to pay it and told
the defendant
so. If the defendant sought to challenge this, it
needed to put its version to the plaintiff in cross-examination.
It did not.
47. Matters did not improve for
the defendant when Mr Prochassek testified, for the first time in
cross-examination, that
he had a meeting with the plaintiff sometime
during 2005 during which he had showed him the addendum and the
plaintiff had raised
no objection to the modification fee. Here
again Mr Prochassek was vague about the details of this meeting.
But in
any event, this too was never put to the plaintiff.
47. What is not in dispute
between the parties is that the plaintiff never signed the addendum
to the agreement. If
the plaintiff had had no difficulty with
the modification fee it is difficult to understand why he would not
have signed the addendum.
There is no suggestion on the
evidence that the plaintiff had any other complaint in relation to
the deal. I am therefore
of the view that the probabilities
also support the plaintiff’s version on this score.’
[15]
The trial court’s reasoning and conclusion on this disputed
issue of fact can, in my view, not be faulted. Furthermore,
Grand Aviation argues that Ms Weiland’s note referred to in the
above-quoted passage was pertinently raised in the answering
affidavit and not challenged by Mr Bray in his replying affidavit.
Thus, it is argued, its contents are deemed to be admitted.
There is no merit in this argument. It is trite that
‘quiescence is not necessarily acquiescence’.
(
Collen v Rietfontein Engineering Works
1948 (1) SA 413
(A) at
422.) Mr Bray’s failure to repudiate the allegation
relating to Ms Weiland’s note in his replying affidavit
should
have been canvassed with him when he was cross-examined, because he
might well have proffered a satisfactorily explanation
for his
silence. As was said by Miller JA in
McWilliams v First
Consolidated Holdings (Pty) Ltd
1982 (2) SA 1
(A) at 10-
‘
[b]ut in general, when
according to ordinary commercial practice and human expectation firm
repudiation of such an assertion would
be the norm if it was not
accepted as correct, such party’s silence and inaction, unless
satisfactorily explained, may be
taken to constitute an admission by
him of the truth of the assertion, or at least will be an important
factor telling against
him in the assessment of the probabilities and
in the final determination of the dispute.’
Furthermore,
the Constitutional Court, in
President of the Republic of South
Africa v South African Rugby Football Union and Others
2000 (1)
SA 1
(CC) held that:
‘
[61] The institution of
cross-examination not only constitutes a right, it also imposes
certain obligations. As a general
rule it is essential, when it
is intended to suggest that a witness is not speaking the truth on a
particular point, to direct
the witness’s attention to the fact
by questions put in cross-examination showing that the imputation is
intended to be made
and to afford the witness an opportunity, while
still in the witness-box, of giving any explanation open to the
witness and of
defending his or her character. If a point in
dispute is left unchallenged in cross-examination, the party calling
the witness
is entitled to assume that the unchallenged witness’s
testimony is accepted as correct. This rule was enunciated by
the House of Lords in
Browne
v Dunn
[(1893) 6 R 67 (HL)]
and has been adopted and consistently followed by our courts.’
(Footnotes
omitted.)
[16]
By letter dated 23 April 2007, Grand Aviation demanded that Mr Bray
furnished it within seven days with a demand guarantee
from a bank or
suitable financial institution for the full amount of the building
costs in order for it to waive its ‘builder’s
lien over
the work in favour of the registered bond holder’, because
financial institutions usually insist on it waiving
its builder’s
lien before any progress payments are made. Mr Bray (and other
purchasers) was also given the option
of utilising his own builder to
construct his unit or to sell his property in which event a
consensual cancellation of the ‘building
component of the deed
of sale’ was required. Mr Bray did not respond.
Seven days later, on 7 May 2007, Grand
Aviation in writing repeated
the same demand, afforded him seven days after receipt of the letter
to comply with the demand and
notified him that if he failed to
comply-
‘
. . . then and as is provided
for in terms of clause 8 of the Deed of Sale, [he] shall be in breach
in that [he is] unable to provide
a Banker’s Guarantee to give
effect to Annexure A of the Deed of Sale and that the Deed of Sale
shall thereafter immediately
be cancelled. [Grand Aviation]
shall be entitled to proceed against [him] and may claim damages
which [it] may suffer as
a result of [his] breach.’
[17]
Mr Bray did not accede to Grand Aviation’s demand for a demand
guarantee for the full amount of the building costs.
By letter
dated 17 May 2007, addressed to Mr Bray, Grand Aviation purported to
cancel the agreement in terms of clause 8 thereof
due to his failure
to provide the banker’s guarantee. Mr Bray placed it on
record that he ‘did not accept the
defendant’s attempted
cancellation of the agreement’. The matter could not be
resolved and hence the litigation
that culminated in this appeal.
TRIAL
COURT’S PRINCIPAL FINDINGS
[18]
The following principal questions arose for determination by the
trial: (a) whether ownership of the property had
been
validly transferred to Mr Bray; (b) whether the parties concluded a
binding agreement for the construction of a dwelling on
the land,
and, if so, on what terms; (c) if such contract was concluded,
whether it was validly cancelled by Grand Aviation; and
(d) if it was
not validly cancelled, whether Mr Bray was entitled to specific
performance, and, if so, in what form.
[19]
The trial court found that: (a) the agreement incorporated two
distinct agreements, a sale of land and a building contract
for the
erection of a dwelling on the property, that the requirements
of the abstract theory of transfer of ownership of
land and of
s 28
(2) of the
Alienation of Land Act have
been met and that ownership of
the property, therefore, been validly transferred to Mr Bray; (b)
even if it cannot be said that
the parties expressly concluded a
contract for the construction of a dwelling on the property, they did
so tacitly, but that they
did not reach agreement on the alterations
to be made to the standard Type E unit; (c) on a proper
construction of clause
3 of the deed of sale part of the agreement,
clause 3.2 was intended to refer to the purchase price for the land
only, clause 3.3
was intended to deal with the method of payment of
the purchase price for the land only and required a bank guarantee
for payment
of the purchase price of the land against transfer of
ownership, clause 3.4 was intended to deal with the method of payment
for
the building costs only and required a bank guarantee
or other
acceptable security
for the full amount of the building costs,
that Mr Bray had provided such acceptable security for the building
costs in terms of
the agreement, that Grand Aviation had no
entitlement to insist on a
demand guarantee
from Mr Bray as it
did and that its purported cancellation of the agreement was
accordingly invalid; and (d) the agreement was
not ‘inchoate’
because final drawings or building plans were not annexed to it as
was contended for by Grand Aviation,
the parties were
ad idem
on
what is to be built – a standard Type E unit measuring 183
square metres, that Grand Aviation had sufficient information
to draw
up plans for a Type E unit on the property and to submit the plans to
the local authority concerned for approval and that
Grand Aviation
was thus ‘. . . ordered to do all things necessary in
preparation for and to effect the construction of a
standard type E
unit on Erf 444, Greenstone Hill, Extension 7 at a cost of R410 540
in terms of the agreement of sale concluded
between the parties in
September 2003.’
[20]
The appeal raises questions relating to the validity of the
underlying agreement and of the transfer of ownership, the validity
and enforceability of the construction part of the agreement and the
validity of the cancellation of the agreement.
VALIDITY
OF THE UNDERLYING AGREEMENT AND TRANSFER OF OWNERHIP
[21]
The trial court, in my view, was correct in applying the abstract
theory for the passing of ownership of immovable property
and in
finding that its requirements have been met in this instance.
The trial court correctly relied on
Legator McKenna and Another v
Shea and Others
2010 (1) SA (SCA), para 22, wherein it was held
that-
‘
[i]n accordance with the
abstract theory the requirements for the passing of ownership are
twofold, namely delivery – which
in the case of immovable
property is effected by registration of transfer in the deeds office
– coupled with a so-called
real agreement or ‘saaklike
ooreenkoms’. The essential elements of the real agreement
are an intention on the
part of the transferor to transfer ownership
and an intention on the part of the transferee to become the owner of
the property.
Broadly stated the principles applicable to
agreements in general also apply to real agreements. Although
the abstract theory
does not require a valid underlying contract, eg
sale, ownership will not pass – despite registration of
transfer –
if there is a defect in the real agreement.’
(Footnotes
omitted.)
[22]
First, delivery – registration of transfer of ownership into
the name of Mr Bray in the deeds office - was effected on
29 March
2005. Second, the intention of Grand Aviation as transferor to
transfer ownership had been established by Grand
Aviation having
given a power of attorney to the conveyancing attorneys to effect
transfer of ownership of the property into the
name of Mr Bray, and
he, as transferee, indisputably had the intention of becoming the
owner of the property. Mr Bray testified
that he intended to
receive ownership of the property and this was, as the trial court
correctly found, borne out by his conduct.
There was also no
suggestion of any defect in the real agreement. The validity or
otherwise of the underlying agreement for
want of compliance with
s
2(1)
of the
Alienation of Land Act, which
provides that-
‘
[n]o alienation of land after
the commencement of this section shall, subject to the provision of
section 28
, be of any force or effect unless it is contained in a
deed of alienation agreed to by the parties thereto or by their
agents acting
on their written authority’
,
is,
therefore, irrelevant. The abstract theory does not require a valid
underlying agreement. The ownership of the property,
therefore,
had been validly transferred to Mr Bray. Grand Aviation’s
claim in its counterclaim for the re-transfer
of ownership of the
property into its name was correctly dismissed by the trial court.
VALIDITY
AND ENFORCEABILITY OF THE BUILDING PART OF THE AGREEMENT
[23]
The trial court, in my view, correctly held that ‘. . . the
sale agreement in this case is not a unitary contract but
is
comprised of two notionally separate contracts: one for the
sale of land and one for the construction of a dwelling on
the land.
The relevant provisions of the agreement must be interpreted in
accordance with the established principles of interpretation
(see
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
2014
(2) SA 494
(SCA) para 12).
[24]
The ‘Deed of Sale’ section of the agreement, except for
clauses 2.1, 2.2, 3.4 and 3.5 thereof, exclusively constitutes
the
sale of land part of the agreement and clauses 2.1, 2.2, 3.4 and 3.5
thereof together with Annexures ‘A’, ‘B’
and
‘C’ the building part of the agreement. Clause 2.1
of the sale of land part of the agreement distinguishes
between the
cost of the land (which is stated to be R229 000) and the cost of
building (which is stated to be R380 000).
This clause makes it
clear that the cost of the land was separate and distinct from the
cost of construction. In clause 2.2
the parties expressly and
unambiguously recorded that the construction and erection of the
dwelling and outbuildings on the land
are governed by the terms and
conditions contained in the Annexure A part of the agreement.
This provision makes it plain
that the parties contemplated that the
sale of the property was to be governed by the terms of the sale of
land part of the agreement
and the construction of the dwelling by
the building part of the agreement, in other words that the parties
intended to conclude
two separate and distinct agreements albeit in
one document.
[25]
Clause 3.1 makes provision for the method of payment of the purchase
price of the property only. Even though the parties
inserted in
clause 3.1 in manuscript the total amount for the price of the land
and the cost of the building (‘R639 450),
their clear and
unambiguous intention with this clause was to provide for the method
of payment of the purchase price for the property
only, which was
R229 000 and not R639 450. Clause 3.2.2 provides for a deposit
of ‘R nil’ and the balance of
the purchase price to be
secured by a guarantee payable ‘against registration of
transfer’. This clearly refers
to the purchase price of
the property (as defined in clause 2.1 – being R229 000) and
not the ‘cost of construction
of the dwelling’ as defined
in clause 2.1, since only the purchase price for the land was to be
paid against registration
of transfer and not the building costs.
This was also confirmed by the evidence of both parties and it was
never suggested
by either party that the full contract price of R639
450 was payable against registration of transfer.
[26]
Clause 3.4 then provides for the furnishing of security in respect of
the building costs. It is therein stated that ‘[t]he
approved Banker’s Guarantee or other acceptable security for
the full amount of the building costs referred to in 3.3 above
entitles the Seller to receive progress payments as the Works proceed
in accordance with the provisions set out in the annexure
hereto.’
The reference to clause 3.3 was clearly contemplated to be a
reference to clause 2.1 since clause 2.1 refers
to the cost of
building and clause 3.3 does not refer to the cost of building at all
but to the payment of the balance of the purchase
price of the land.
Clause 3.4 further entitles the seller to obtain a guarantee that
payments would be effected timeously,
only from a purchaser who
self-finances the building. The method of payment of the
building costs is provided for in clause
9 of the building part of
the agreement (Annexure A). Clause 9.1 provides that payment to
the seller, if financed by a bank,
shall be made according to the
methods and rules for interim payments prescribed by the bank.
Clause 9.2 contains a cession
to the seller of the proceeds of
the building loan secured by a first mortgage bond obtained from a
bank or financial institution.
[27]
Clause 8 of the sale of land part of the agreement is a breach clause
which allows a defaulting party three days to remedy
its breach,
whereas clause 11 of the building part of the agreement (Annexure A),
which is also a breach clause, provides for eleven
days to remedy a
breach of the provisions of the building part of the agreement.
The sale of land part and the building part
of this composite
agreement thus each has its own breach clause, which would have been
unnecessary if the parties had intended
a single indivisible
agreement. Furthermore, Grand Aviation’s own conduct in
affording purchasers the option of utilising
their own builders to
construct their units or to sell their properties and for the
consensual cancellation of ‘the building
component’ of
the deeds of sale militates against its contention that the parties
intended a single indivisible agreement.
[28]
In support of its contention that the agreement is a single
indivisible agreement and not a composite one comprising an agreement
of sale and a construction agreement, Grand Aviation relies heavily
on the unreported judgment of Blieden J in
McCreadie and Another v
Grand Aviation
(WLD (case no. 14817/05) delivered on 25 November
2005), wherein he, in respect of a similar agreement, held that-
‘
. . . it is plain from a
reading of the document as a whole that what was sold is land and
improvements thereto which in this case
are still to be constructed.
“Land” in this country includes all improvements which
accrue to it.’
[29]
I respectfully agree that ‘”[l]and” in this country
includes all improvements which accrue to it’,
but I do not
believe Blieden J intended to find that land includes future
improvements that ‘are still to be constructed’.
I
agree with the trial court’s finding that-
‘
. . . on a proper understanding
of the sale agreement in this case, there is no contract for the
sale
of a dwelling. The defendant agreed to construct a dwelling on
an erf, which by the time construction commenced, would have
been
transferred to the plaintiff. The dwelling would accede to the
erf upon construction.’
The
building part of the agreement in this instance is not a sale, but a
locatio conductio operis
(letting and hiring of work).
(See
BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms)
Bpk
1979 (1) SA 391
(A)).
[30]
The trial court then applied the principles of tacit agreements to
the building agreement to find that-
‘
[e]ven however, if it cannot be
said that such contract was concluded expressly, I am satisfied that
such contract was concluded
tacitly.’
However,
the terms and conditions of the building part of the agreement are
express and in writing and the signing thereof by the
parties is not
a legal requirement for a valid building agreement. The parties
concluded an express agreement for Grand Aviation
to construct a Type
E unit measuring 183 square metres on the property on the terms and
conditions set out in the building part
of the agreement.
[31]
The trial court, therefore, was correct in finding that the agreement
contains two distinct contracts – a sale of land
agreement and
a building agreement. I also agree with the trial court’s
finding that the building part of the agreement
did not require
signature for its validity in terms of
s 2(1)
of the
Alienation of
Land Act and
, therefore, that
s 28(2)
of that Act, which provides
that-
‘
[a]ny alienation which does not
comply with the provisions of
section 2(1)
shall in all respects be
valid
ab initio
if
the alienee had performed in full in terms of the deed of alienation
or contract and the land in question has been transferred
to the
alienee’
was
not applicable to the building agreement. I accordingly do not
need to enter the debate whether the performance contemplated
by
s
28(2)
is confined to the obligations arising from the sale of land
part of the agreement, as was contended for by Mr Bray, or whether
it
includes the obligations arising from the building part of the
agreement, as was contended for by Grand Aviation. The
counterclaim of Grand Aviation for declaratory relief that the
agreement is null and void for lack of compliance with the provisions
of
s 2(1)
read with
s 28(2)
of the
Alienation of Land Act, therefore
,
was correctly dismissed by the trial court.
[32]
I now turn to the question whether the building part of the agreement
is inchoate and unenforceable. Grand Aviation contends
that it
is inchoate for want of compliance with clauses 1.1.3 and 1.1.4
thereof (annexure A) since no final drawings were annexed
to the
agreement and no building plans were agreed to by the parties.
Mr Bray, on the other hand, contends that valid, binding
and
enforceable building contract came into existence.
[33]
In
CGEE Alsthom Equipments et Enterprises Electrique, South
African Division v GKN Sankey (Pty) Ltd
1987 (1) SA 81
(A), at
92A-E, Corbett JA said the following about inchoate agreements:
‘
There is no doubt that, where
in the course of negotiating a contract the parties reach an
agreement by offer and acceptance, the
fact that there are still a
number of outstanding matters material to the contract upon which the
parties have not yet agreed may
well prevent the agreement from
having contractual force. A good example of this kind if
situation is provided by the case
of
OK
Bazaars v Bloch
(supra)
(see also
Pitout v North
Cape Livestock Co-operative Ltd
(supra)).
Where the law denies such an agreement contractual force it is
because the evidence shows that the parties contemplated
that
consensus on the outstanding matters would have to be reached before
a binding contract could come into existence (see Pitout’s
case
supra at 815B-C). The existence of such outstanding matters
does not, however, necessarily deprive an agreement of contractual
force. The parties may well intend by their agreement to
conclude a binding contract, while agreeing, either expressly or
by
implication, to leave the outstanding matters to future negotiation
with a view to a comprehensive contract. In the event
of
agreement being reached on all outstanding matters the comprehensive
contract would incorporate and supersede the original agreement.
If, however, the parties should fail to reach agreement on the
outstanding matters, then the original contract would stand.
(See generally Christie
The
Law of Contract in South Africa
at
27-8.) Whether in a particular case the initial agreement
acquires contractual force or not depends upon the intention
of the
parties, which is to be gathered from their conduct, the terms of the
agreement and the surrounding circumstances (see Pitout’s
case
supra at 815D-G).’
[34]
The provisions of the building part of the agreement referred to in
paragraphs 7-9
supra
are pertinent to this enquiry. The
parties agreed that Grand Aviation would construct and erect a
standard Type E dwelling
house measuring183 square metres on the
property in accordance with the provisions of the building part of
the agreement (clause
1 of the Deed of Sale and clause 1.1.1 of
annexure A). The parties agreed on standard specifications,
materials and fittings
to which the dwelling house would be built,
which could be varied consensually (clauses 1.1.3, 1.1.5, 2.4, 3.2 of
annexure A and
the schedules of specifications and of electric
fittings (annexures B and C)).
[35]
The only outstanding matter upon which the parties still needed to
agree was the final building plans for a Type E residential
unit
(clause 1.1.3 of Annexure A). Mr Bray, however, specifically
authorised Grand Aviation to prepare the drawings and to
submit them
for and on his behalf for approval to the local authority concerned
(clause 3.1 of Annexure A). This was part
of its obligations
which it was compelled to perform when the trial court ordered it to
‘do all things necessary in preparation
for and to effect the
construction of a standard type E unit’.
[36]
Turning to the conduct of the parties and the surrounding
circumstances, Mr Bray’s evidence was that Grand Aviation
provided Mr Bray with its standard building plan for the Type E unit
and that plan, according to Mr Bray, formed part of his application
for a home loan. Mr Bray sought certain alterations to the
standard drawings and specifications for the Type E unit.
On 8
June 2005, Grand Aviation’s Mr Lopion furnished him with a
written ‘revised quote and floor plan’, which
incorporated his proposed alterations. Mr Bray was required to
sign the quotation and furnish it to Mr Lopion and thereby
agreeing
to
provide
the funds required for the alterations within 7 days prior to
commencement of the building of the unit and, should that
not occur,
the original standard unit would be built on the property. On
13 June 2005, Mr Lopion notified Mr Bray and other
purchasers that
the signed quotations had to be in his possession by 30 June 2005,
failing which Grand Aviation would have the
right to disregard their
requests for alterations and to build standard units in terms of
their agreements. Mr Bray testified
that Grand Aviation,
represented by Mr Lopion, had been aware of the placement of the
dwelling on the property that he had sought
and he had been satisfied
with its placement on the floor plans which Mr Lopion had furnished
to him. He signed the quote,
initialled the altered floor plan
and e-mailed both back to Mr Lopion on 30 June 2005.
[37]
On 30 May 2006, Ms Linda Weiland furnished Mr Bray with detailed
plans for his unit and they accorded with the plans he had
approved
in June 2005. Detailed plans, according to the evidence of Mr
Bray, had therefore been drawn up by 30 May 2006,
which could be
submitted to the local authority concerned. He had signed the
detailed plans for the standard Type E unit
to be built on the
property on two occasions for identification purposes as required by
the agreement (clause 1.1.3 of annexure
A). Grand Aviation did
not call Mr Charles Lopion or Mr Linda Weiland as witnesses and Mr
Bray’s evidence concerning
his discussions with them and the
document which he had received from and had sent to them, was not
refuted with credible evidence.
[38]
Mr Prochassek, in giving evidence on behalf of Grand Aviation,
conceded that it had information from Mr Bray as to where he
wanted
the dwelling to be placed on the property and that its architects
would be able to draft working drawings or plans.
He also
conceded that Grand Aviation could not dispute Mr Bray’s
account that he had sent the signed quotation and plans
to Mr
Lopion. (It was also not put to Mr Bray during his
cross-examination that he did not do so.) Mr Prochassek also
testified that the altered plans were for the alterations that Mr
Bray had requested and that the alterations were merely extensions
to
the standard Type E plan. He conceded that Grand Aviation could
have built a standard Type E on the property but for the
dispute
about the demand guarantee to which I return.
[39]
The trial’s court finding that no variation was agreed to in
respect of Grand Aviation’s obligation to build a
standard Type
E unit on the property is not attacked on appeal before us.
This finding, therefore, meant that Grand Aviation
was not obliged to
build a modified Type E unit. Having regard to the
intention of the parties, as gathered from their
conduct, the terms
of the building part of the agreement and the surrounding
circumstances, the building part of the agreement,
in my view,
acquired contractual force. It was not inchoate and was and is
capable of performance in accordance with the
order of the trial
court. I thus agree with the trial court’s
conclusion that the parties concluded a valid and
enforceable
contract for the construction of a Type E dwelling on the property.
VALIDITY
OF THE CANCELLATION OF THE COMPOSITE AGREEMENT
[40]
The determination of the question whether Grand Aviation legally
validly cancelled the agreement depends on whether it had
been
entitled to demand a guarantee in the form of a demand guarantee from
Mr Bray for the building costs. The determination
of this issue
raises the proper interpretation of the provisions of the agreement
in respect of payment and the provision of security,
and, if the
provision of acceptable security had been contemplated, the
determination of the issue whether Mr Bray had in fact
provided
acceptable security. The trial court found that in terms of the
agreement Mr Bray was obliged to provide a bank
guarantee or other
acceptable security for the building costs and that he had indeed
provided acceptable security as contemplated
in the agreement.
[41]
I have referred to the contractual clauses relevant to this part of
the enquiry in paragraphs 6 and 10
supra
and a determination
of their meaning appears in paragraphs 24-26
supra
. The
parties, in clause 3.3 (Deed of Sale), contemplated only payment of
the balance of the purchase price for the land against
registration
of transfer into the name of the Mr Bray, which balance purchase
price was to be secured by means of a bank guarantee
approved by
Grand Aviation or its conveyancing attorneys, and it was to be
delivered to the conveyancing attorneys within 30 days
of signature
of the agreement. Mr Bray provided a guarantee for payment of
the purchase price for the land in the sum of
R229 000 as sought and
approved by Grand Aviation’s conveyancing attorneys and in
terms of the guarantee payment of the purchase
price was effected
against transfer of the property into the name of Mr Bray.
[42]
Clause 3.4 (Deed of Sale) and clause 9 (Annexure A) regulate the
provision of security for the full amount of the building
costs.
The security contemplated in terms of clause 3.4 is a banker’s
guarantee or other acceptable security for the
full amount of the
building costs which would entitle Grand Aviation to receive progress
payments as the building works proceeded
in accordance with the
provisions of the building part of the agreement, and, only if the
building is self-financed by a purchaser,
a guarantee that payment of
the progress payments would be effected timeously. Clause 9.1,
read with clause 9, provides that
progress payments to Grand
Aviation, if financed by a bank, shall be made according to the
methods and rules for interim payments
prescribed by the bank.
Clause 9.2 contains a cession to Grand Aviation of the proceeds of
the building loan secured by a
first mortgage bond obtained from a
bank or approved financial institution. The provisions of this
clause further authorise
Grand Aviation to receive interim draws from
the mortgagee, to sign any release for and on behalf of Mr Bray and
to accept all
draws on his behalf.
[43]
An objective test – ‘what would satisfy the reasonable
man?’ – is to be applied in determining whether
the
security provided by Mr Bray was ‘acceptable security’ as
contemplated in clause 3.4 (Deed of Sale). In
Koumantarakis
Group CC v mystic River Investments 45 (Pty) Ltd and Another
[2008] ZASCA 53
;
2008
(5) SA 159
(SCA), the Supreme Court of Appeal held as follows in
respect of the acceptability requirement of a guarantee:
‘
[39] The final issue to
be determined is whether the seller acted reasonably when it rejected
the guarantee. Put simply,
what is at the heart of this part of
the case, is the so-called “whimsical revocability” of
the guarantee. In
order to determine this issue, the court must
consider the grounds expressed by the seller and apply a double
requirement.
First, a seller must exercise an honest judgment
in deciding whether to accept or reject a guarantee. (Honesty
was not in
issue here.) Second, the seller’s decision to
reject must objectively viewed, be based on reasonable grounds.
[40] In
Herbert
Porter & Co Ltd and Another v Johannesburg Stock Exchange
[1974
(4) SA 781
(W)] the court held:
“
When
parties have stipulated in their contract that something must be done
to the “satisfaction” of one of them, the
Court have
applied an objective test – what would satisfy a reasonable
man?’
[44]
I agree with the trial court’s finding that Grand Aviation had
been provided with acceptable security for payment of
the building
costs and that it was not entitled in addition to demand a guarantee
in the form of a demand guarantee from Mr Bray.
The parties
agreed on the provision of security for the full amount of the
building costs which would entitle Grand Aviation to
receive progress
payments as the building works proceeded in accordance with the
provisions of the building part of the agreement.
The building
costs are to be paid from the proceeds of the building loan that
Nedbank had granted to Mr Bray, which loan is secured
by the first
mortgage bond that had been registered over the property. The
proceeds of the loan had been ceded to Grand Aviation
and it had been
authorised to receive interim draws from Nedbank, to sign any release
of the funds for and on behalf of Mr Bray
and to accept all draws on
his behalf, which interim payments, so the parties agreed, are to be
made according to the methods and
rules for interim payments
prescribed by Nedbank. The demand guarantee demanded by Grand
Aviation would have enabled it to
demand the total building costs at
any time and before it had laid one brick. This was clearly not
what the agreement contemplated.
[45]
Grand Aviation was not acting reasonably in demanding a guarantee in
the form of a demand guarantee. Indeed, it
appeared to
have been satisfied with the security that had been provided until Mr
Bray refused to agree to the payment of the relatively
substantial
modification fee when it suddenly demanded a demand guarantee.
Grand Aviation’s purported cancellation
of the agreement,
therefore, was invalid.
ORDER
[46]
In the result the following order is made:
The
appeal is dismissed with costs.
P.A.
MEYER
JUDGE
OF THE HIGH COURT
I
agree.
K.E. MATOJANE
JUDGE
OF THE HIGH COURT
I
agree.
E.J.
FRANCIS
JUDGE
OF THE HIGH COURT
Date
of hearing: 17 March 2017
Date
of judgment: 24 March 2017
Appellant’s
counsel: M Nowitz
Instructed
by: Nowitz Attorneys, Hyde Park, Johannesburg
Respondent’s
counsel: G Kairinos SC
Instructed
by: Jurgens Bekker Attorneys, Bedfordview, Johannesburg