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[2014] ZASCA 19
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Royal Anthem Investments 129 (Pty) Ltd v Lau (941/2012) [2014] ZASCA 19; 2014 (3) SA 626 (SCA) (26 March 2014)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 941/2012
DATE:
26 MARCH 2014
REPORTABLE
In the matter
between:
ROYAL ANTHEM
INVESTMENTS 129 (PTY) LTD
.................................
APPELLANT
And
YUEN FAN
LAU
...........................................................................
FIRST
RESPONDENT
SHUN CHENG
LIANG
..........................................................
SECOND
RESPONDENT
Neutral citation:
Royal Anthem Investments v Yuen Fan Lau (941/2012)
[2014] ZASCA 19
(26 March 2014)
Coram: Ponnan,
Mhlantla and Leach JJA and Mathopo and Mocumie AJJA
Heard: 21
February 2014
Delivered: 26
March 2014
Summary: Sale of
immovable property ─ deposit and transfer duty paid by
purchaser to conveyancing attorney ─ sale subsequently
cancelled ─ attorney obliged to repay deposit and transfer duty
to purchaser and not to hold them on behalf of seller.
ORDER
On appeal from:
North Gauteng High Court, Pretoria (Kruger AJ sitting as court of
first instance):
(a) Paragraphs 1 and
2 of the order of the high court of 6 June 2012 are amended to read
as follows:
‘1 The first
defendant is ordered to pay the plaintiffs─
(a) the sum of R720
000;
(b) the sum of
whatever interest accrued on the said sum of R720 000 pursuant to its
investment in an interest-bearing account calculated
up to and
including 9 December 2009;
(c) interest on the
sum of R720 000 calculated at the legal rate of 15,5% per annum from
10 December 2009 to date of payment.
2 The first
defendant is further ordered to pay the plaintiffs the sum of R264
723 together with interest thereon calculated at
the legal rate of
15,5% per annum from 29 June 2011 to date of payment.’
(b) The appeal is
otherwise dismissed with costs, such costs to include the costs of
two counsel and to be taxed on the scale as
between attorney and
client.
JUDGMENT
Leach JA (Ponnan and
Mhlantla JJA, Mathopo and Mocumie AJJA concurring)
[1] The present
dispute arises out of a written agreement of sale concluded by the
parties on 1 June 2009 under which Yuen Fan Lau
and Shun Cheng Liang,
the first and second respondents respectively, a married couple,
agreed to pay the appellant, Royal Anthem
Investments 129 (Pty) Ltd,
a purchase price of R3,6 million for certain immovable property on a
golf estate in Tshwane. After the
sale failed the respondents sought
to recover both a deposit of R720 000 and a further sum of R264 723
in respect of transfer duty
that they had paid to the attorneys
appointed by the appellant to attend to transfer of the property.
When those amounts were
not repaid, the respondents instituted action
against both the appellant and the attorneys in the North Gauteng
High Court. (The
attorneys, who are not parties to this appeal were
cited as first defendant and for convenience I shall refer to them as
such.)
[2] The first
defendant played no part in the proceedings when the matter came to
trial and the hearing continued as if the appellant
was the sole
defendant. It concluded on 6 June 2012 when the high court upheld the
respondents’ claim and granted the following
order:
‘1. Second
defendant is ordered to pay the plaintiffs the amount of R720 000.00
plus interest thereon at the rate of 15,5%
as from 1 August 2009
until date of payment;
2. Second defendant
is ordered to pay to the plaintiffs the amount of R264 723.00 plus
interest thereon at the rate of 15,5% from
date of payment made by
plaintiffs to first defendant until date of payment;
3. Second defendant
must (excluding what is stated in paragraph 4 infra) pay plaintiff’s
costs at a scale as between attorney
and client, inclusive of the
costs occasioned by the employment of two counsel;
4. Plaintiffs must
pay the costs occasioned by the postponement on 7 November 2011 on a
scale as between attorney and client.’
The appeal to this
court against that order is with the leave of the court a quo.
[3] As so often
happens in matters concerning the sale of immovable property, the
dispute between the parties arose out of the terms
relating to the
financial arrangements to be made for payment of the purchase price.
Clause 2.2 of the agreement provided that
the price of R3,6 million
was to be paid as follows:
‘2.2.1 Cash:
R540 000 . . . Payable by 15 June 09 after acceptance hereof which
amount is to be deposited at the Conveyancing
Attorneys. The amount
will be invested in accordance with Section 78(2)(A) of the
Attorney’s Act No 53 of 1979, as amended,
pending the
registration of transfer of the property in the name of the
[respondents]. The deposit and any other amounts will be
paid over to
the [appellant] on date of registration of the property in the name
of the [respondents]. Interest earned will be
for the benefit of the
[respondents].
2.2.2 For the
balance of R3 060 000 . . . an acceptable guarantee in favour of the
[appellant] or his agent must be issued within
45 days after
acceptance of this offer, free of bank commission payable at PRETORIA
on registration of transfer of the property
in the name of the
[respondents].’
It should be
recorded that under the agreement the appellant was entitled to
appoint the ‘Conveyancing Attorneys’ referred
to in
clause 2.2.1 quoted above. This led to the first defendant being
appointed for this purpose.
[4] Importantly, the
sale was made conditional upon the respondents being able to raise
the necessary finance to pay the purchase
price. In this regard
clause 3 of the agreement provided as follows (I quote the clause
verbatim; drafted by the estate agent through
whom the sale was
negotiated, it is a model of neither language nor precision):
‘3.1 This
offer is subject to the raising of a loan not later than 31 July 2009
. . . for the amount of R3 060 000 . . . By
a registered financial
institution (at such rates and other conditions as instituted by the
institution). The [respondents] undertakes
to immediately apply for a
loan. The [respondents] authorise the BANK or [the estate agent] to
make an application on [their] behalf
and undertakes further to sign,
to complete and to make available any documentation as required by
the BANK or [the estate agent].
3.2 These conditions
will be regarded as complied with when a financial institution grants
the loan, regardless of the fact that
the granting is subject to a
suspensive condition. If the [respondents] should delay to co-operate
by not giving the necessary
information or by not applying for a
loan, or if [they] should refuse to accept a loan that has been
granted then the suspensive
conditions in 3.1 will seemed to be
fulfilled.
3.3 If this or any
other suspensive condition is not fulfilled, this contract of
purchase and sale will . . . and be of no effect
and the deposit with
interest will be refunded to the [respondents].’
[5] It can be
accepted for present purposes that the word ‘seemed’ in
clause 3.2 quoted above should be read as ‘deemed’
and
that the ellipsis after the word ‘will’ in clause 3.3
should be read as ‘lapse’. It is not necessary
for
present purposes to deal with further anomalies such as the failure
to identify the bank to which reference was made or the
apparently
meaningless provision that the condition would be regarded as
fulfilled should a financial institution grant a loan
subject to a
suspensive condition.
[6] In any event,
although the respondents purchased the property jointly, it was the
second respondent who assumed responsibility
for applying for the
necessary loan. Notwithstanding the provisions of clause 3.1 she
asked neither the unidentified bank nor the
estate agent to apply for
a loan on her behalf. Instead, or so she alleged, when testifying,
she initially approached Absa Bank
(Absa) to provide the required
funds. This she did as Absa had previously provided her with a home
loan and, presumably, she thought
that her good payment record in
that instance would count in her favour. Whether she applied to Absa
on 1 July 2009 (the very day
the agreement was signed) as she alleged
at one stage, or at a later date, was a matter of great dispute, but
one which for the
reasons that follow is unnecessary to decide. The
second respondent also alleged that she had approached Standard Bank
for a loan,
but when she first did so is unclear. I must mention that
the second respondent, who is Chinese, was not proficient in English
which unfortunately compromised the clarity of her evidence. Be that
as it may, in the light of my views set out below, it matters
not
precisely when and to which financial institution the second
respondent made her initial approach. What can be accepted is
the
following:
(a) The second
respondent flew to Hong Kong the day after the sale agreement had
been signed and returned to this country on 11
July 2009.
(b) Four days later,
on 15 June 2009, the second respondent paid the first appellant R720
000 in respect of the deposit due under
clause 2.2.1 of the
agreement. Although this was far more than had been agreed, she paid
it at the insistence of the estate agent.
The amount was invested by
the first defendant in an interest bearing account with Nedbank.
(c) On 20 July 2009,
nine days after she had returned from China and five days after she
had paid the deposit, the second respondent
formally applied in
writing to Absa for a loan.
(d) On 29 July 2009,
Absa refused this application: a subsequent request for it to
reconsider its decision was similarly unsuccessful
and was rejected
by Absa on 31 July 2009.
[7] Thus by the
end of July 2009, the respondents had applied to a registered
financial institution for a loan albeit without
success. At first
blush, the suspensive condition in clause 3.1 of the sale agreement
had not been fulfilled and the sale accordingly
lapsed.
[8] But things are
not always so simple. On 19 August 2009, after the first defendant
had written to the respondents calling on
them to provide proof of a
loan, their attorney asked for a further 14 days to do so. He
explained that a default judgment had
been granted by mistake against
a close corporation of which the second respondent was a member and
that it was necessary to have
this set aside before the respondents
could obtain a loan. In light of this, the matter was allowed to drag
on. Eventually the
default judgment was set aside and thereafter, on
18 September 2009, Standard Bank agreed to grant the respondents the
necessary
finance. Despite this, it appears that the respondents were
unhappy with Standard Bank’s interest charges and sought to
arrange
an alternative source of funding at a better rate. The
appellant eventually lost patience and threatened to ‘cancel’
the agreement. Not only did the respondents then provide the required
financial guarantee from Standard Bank but, when the first
defendant
called on them to pay transfer duty of R264 723 required for
registration of transfer (for which they were liable under
clause
10.1 of the agreement
1
) they promptly did so. The first defendant, in turn, proceeded to
pay the necessary duty to the South African Revenue Services
(SARS)
to facilitate registration of transfer.
[9] Consequently, at
that stage, the sale appeared to be going ahead with the respondents
having obtained the necessary loan and
having paid both the deposit
and the transfer duty. However, on 26 November 2009, the first
defendant addressed a lengthy letter
to the respondents making
various demands. Not only were the respondents called on to pay a
substantial sum of interest for having
delayed transfer, but they
were told in no uncertain terms that the property would not be
transferred to them until such time as
this interest was paid.
[10] This led to the
respondents seeking legal advice and, on 9 December 2009, their
attorney wrote to the appellant on their behalf,
refusing to pay the
interest and demanding repayment of the deposit, alleging that the
sale had lapsed on 31 July 2009 through
non-fulfilment of the
suspensive condition in clause 3. In response, the appellant denied
that the agreement had lapsed and contended
that the condition in
clause 3 was deemed to have been fulfilled due to the respondents
having failed to apply immediately for
a loan.
[11] Neither side
gave way and, eventually, the stalemate was broken when the appellant
purported to cancel the sale, alleging the
respondents had breached
their agreement. One way or the other, the sale fell through and, as
mentioned at the outset, the property
was sold to a third party. The
deposit, however, remained invested by the first defendant in an
interest-bearing account and both
it and the interest that has
accrued thereon have never been repaid. We were informed by counsel
for the appellant that the appellant
is responsible for this as the
first defendant, in refusing to repay, has acted on its instructions.
[12] For
convenience, I intend at the outset to deal with the claim for
repayment of the deposit. The debate both in the court a
quo and in
this court (certainly as set out in the heads of argument) focused
mainly on whether the sale had lapsed on 31 July
2009 due to
non-fulfilment of the condition or whether that condition should be
deemed to have been fulfilled as the respondents
had breached their
undertaking in clause 3.1 of the agreement.
[13] The essence of
the appellant’s argument is that despite the respondents’
unsuccessful application to Absa that
had been rejected by 31 July
2009, they had breached their undertaking to apply ‘immediately’
for a loan as undertaken
in clause 3.1 of the sale. In that regard
the appellant submitted that the respondents had been obliged to
apply by no later than
the day following the conclusion of the
agreement. It was also argued that the respondents’ application
to Absa was not bona
fide as the respondents knew by the time it was
made that it would not be granted due to the default judgment having
been granted
against the second respondent’s close corporation.
[14] At first blush
these contentions do not hold water. The undertaking to apply
immediately for a loan was designed to procure
certainty as to the
respondents’ loan application by the end of the month. That end
was achieved. Moreover, the fact that
a judgment by default had been
entered against the second respondent’s close corporation does
not mean that her application
for a loan can be disregarded. The
appellant’s basis for suggesting that the clause should be
deemed to be fulfilled therefore
appears to be without substance.
[15] The obvious
problem the appellant faces at the outset is the general rule that
the failure of the agreement obliges parties
to restore each other to
the position they were in immediately before the conclusion of the
agreement. Thus, a purchaser who has
paid a portion of a purchase
price as a deposit is generally entitled to be repaid that sum. But
of course the duty to restore
is not immutable and may be excluded by
agreement (eg in the case of a penalty stipulation) and the
appellant, relying upon the
conditions of clause 6 of the agreement
of sale, argued that this was such a case. That clause provided as
follows:
‘If the
[respondents] is in default of this agreement and refuse to rectify
the default within 14 (fourteen) days after acceptance
of this
written notice, the [appellant] will be entitled, without prejudice
to any other rights that he may have such as liquidated
damages,
cancel the agreement and to keep any other amounts payable, as
rouwkoop or by means of any pending decision by a court
of the real
damages suffered or demand specific performance of the conditions of
the contract with or without a claim for damages.’
(My
emphasis)
[16] The immediate
problem facing the appellant in relying on this is that the clause
relates to amounts it was entitled ‘to
keep’, a phrase
that connotes an amount received and being held by the appellant.
However the deposit was paid to the first
defendant in his capacity
as the conveyancing attorney, to be held in trust pending
registration of transfer, and as transfer never
took place it was
never paid to the appellant. The deposit appears therefore not to be
an amount envisaged by clause 6.
[17] The appellant
sought to meet this by arguing that the first defendant had received
the deposit as the appellant’s agent,
so that the payment to
the first defendant was thus, effectively, a payment to it. This
raises the somewhat vexed question as to
whether a conveyancing
attorney in circumstances such as the present, entrusted to hold a
portion or the whole of the purchase
price until registration of
transfer, receives the sum as agent of the seller, or of the buyer,
or of both, or as ‘trustee
for both to await the event’
2
– see in this regard the conflicting judgments in Minister of
Agriculture and Land Affairs v De Klerk
2014 (1) SA 212
(SCA).
3
This is an issue unnecessary to decide as even if the payment to the
first defendant is to be regarded as a payment to the appellant,
as
to which I refrain from expressing an opinion, the deposit had to be
repaid unless it can be construed as falling within the
category of
‘any other amounts payable’ referred to in clause 6.
[18] Essentially,
the question becomes what are the ‘other amounts’ to
which clause 6 referred? Of course that phrase
connotes that certain
amounts would not fall within the category of ‘other amounts’,
but what amounts those would
be was not clearly spelled out.
However, clause 2.2.1 provided for the deposit ‘and any other
amounts’ to be paid on
registration of transfer, and this is a
clear indication that the deposit was not envisaged as being one of
the ‘other amounts’
envisaged by clause 6. This is all
the more so in the light of the further provision in clause 3.3 that
the deposit would be repaid
in the event of the agreement lapsing
should any suspensive condition not be fulfilled.
[19] Appellant’s
counsel sought to meet this by arguing that clause 6, properly
construed, should be interpreted to mean that
the appellant was
entitled to keep ‘all amounts’ payable rather than ‘any
other amounts’. Not only does
this essentially amount to a
request to rectify the agreement without rectification ever having
been previously raised as an issue,
but there is no scope to
interpret the clause in this way. Not only would it be inconsistent
with both clauses 2.2.1 and 3.1 but
on its clear meaning clause 6 was
intended to apply only to certain, and not all amounts, that had been
paid.
[20] Counsel for
the appellant conceded, quite correctly, that unless the deposit was
brought within the aegis of clause 6, the
appellant had no right to
either retain it or to receive it from the first defendant. For the
reasons set out above, the appellant
has failed to establish that the
deposit was indeed an amount envisaged by that clause and the
respondents were thus entitled to
it being repaid. The appeal
relating to repayment of the deposit cannot succeed.
[21] I turn to the
claim for repayment of the amount of R264 723 paid as transfer duty.
As registration of transfer did not proceed,
it became necessary to
reclaim the duty paid in anticipation of transfer from SARS. This was
done by the first defendant requesting
repayment by lodging the
prescribed TD3 form with SARS. This form contained a declaration,
signed by both the appellant and the
second respondent on 31 July
2009, that the agreement had lapsed due to the non-fulfilment of a
suspensive condition to obtain
a loan (a significantly different
stance from that adopted by the appellant thereafter). In any event,
it appears from the TD3
form that only R233 000 of the amount of R264
723 the respondents had paid to the first defendant had been paid to
SARS as transfer
duty. How this came about I do not know but it
matters not as it is common cause that the respondents had paid the
larger sum
to the first defendant. Be that as it may, SARS was asked
to repay the lesser sum and did so by way of a cheque received by the
first defendant on 21 June 2011. Thereafter, on 27 June 2011, the
first defendant informed the respondents’ attorneys that
it had
received the payment of R233 000 and stated that, as the matter was
the subject of a legal dispute, it was their intention
to lodge the
sum in an interest bearing account until such time as a court order
indicated to whom it should be repaid. The immediate
response from
the respondents’ attorney on 28 June 2011 confirmed the
existence of a dispute in regard to the deposit but
went on:
‘However the
amount paid by our clients to the Receiver of Revenue does not form
part of the dispute, as you are well aware.
You are also well aware
that this amount was paid by our client in regards to an agreement
which never came to being due to a suspensive
condition not being
fulfilled. There are no grounds on which [the appellant] can lay
claim to this money.’
[22] This protest
notwithstanding, the first defendant appears to have invested the
amount of R233 000 with Nedbank on 28 June 2011
and presumably it is
still there. Apart from the appellant’s instruction not to pay
it over, I cannot understand why the
first defendant could ever have
thought it should not be immediately repaid to the respondents. They
had received R264 723 from
the respondents in order to pay SARS and
not to pay the appellant. That sum was never payable to, nor paid
over to, nor held by
or on behalf of, the appellant; it could thus
never have been an amount the appellant was entitled ‘to keep’
under
clause 6. This is all the more so as, at the time of
cancellation, the duty had already been paid over to SARS and was not
available
to the appellant to keep. Consequently SARS repaid the sum
of R233 000 after the sale had fallen through and at a time when
neither
the first defendant nor the appellant had any entitlement to
retain it, as was correctly pointed out by respondents’
attorney
in his letter of 28 June 2011 quoted above. In the
circumstances, the respondents were entitled to be repaid the
transfer duty
of R264 723.
[23] Accordingly,
the appeal must fail in respect of both the deposit and the transfer
duty. As I have mentioned, the first defendant’s
failure to
refund both amounts was pursuant to the appellant’s
instructions, and it was accepted by the appellant that, in
consequence, it should bear the costs both in the court below and in
this court should its appeal fail. That being said, it is
necessary
to mention a number of ancillary issues.
[24] First, the
order of the court a quo directed the appellant to pay the disputed
amounts to the respondents. But the parties
are ad idem that the
funds lie with the first defendant and the latter, rather than the
appellant, is the party who should be ordered
to make payment of the
capital sums and interest.
[25] Then there is
the question of what interest is payable on the deposit of R720 000.
The high court ordered interest to be paid
at the prescribed legal
rate of 15,5% per annum ‘as from 1 August 2009 until date of
payment’. However, as appellant’s
counsel pointed out,
the deposit had been invested in an interest-bearing account for the
benefit of the respondents under clause
2.2.1 of the sale, but at a
substantially lower rate of interest than the prescribed rate. Thus
on cancellation and demand on 9
December 2009, the respondents were
entitled to interest on the deposit at no more than the lower rate of
the investment up to
then and thereafter at the higher prescribed
rate. The order of interest at the higher rate from 1 August 2009
must accordingly
be corrected. I should mention that the interest
that had accrued to 9 December could have been claimed separately and
the respondents
therefore appear to be liable for interest on that
sum as well, calculated at the prescribed rate to date of payment.
But that
interest was never claimed and this court, in the
circumstances, can neither determine the issue nor make any order in
that regard.
Hopefully the first defendant will do what is required
in regard thereto without further litigation.
[26] Finally, in
regard to the interest on the transfer duty of R264 723, the court a
quo ordered it to be paid at the prescribed
legal rate ‘from
date of payment made by plaintiffs to first defendant until date of
payment’. However, the respondents
were not entitled to
interest from when they had paid the transfer duty to the first
defendant as they had agreed that it be paid
to SARS to facilitate
transfer, and R233 000 was used for that purpose. As mentioned, this
sum was repaid by SARS to the first
defendant on 21 June 2011 and, at
best for the respondents, interest would have begun to run only on 28
June 2011 when their attorney
queried why the respondents was not
being refunded (the letter essentially being a demand). The order of
the court a quo therefore
must be varied to limit the interest
payable on the amount of R264 723 to be calculated from 29 June 2011
to date of payment.
[27] These
alterations affect only the first two paragraphs of the order of the
court a quo. Thus although the appeal should otherwise
be dismissed,
those two paragraphs ought to be amended. I should hasten to add it
was not suggested that this would entitle the
appellant to a costs
order in its favour on appeal. In regard to those costs, the parties
were correctly agreed not only that the
costs of two counsel were
justified but that, as agreed in the agreement of sale, costs should
be on the scale as between attorney
and client.
[28] In the result
the following order is made:
(a) Paragraphs 1 and
2 of the order of the high court of 6 June 2012 are amended to read
as follows:
‘1 The first
defendant is ordered to pay the plaintiffs─
(a) the sum of R720
000;
(b) the sum of
whatever interest accrued on the said sum of R720 000 pursuant to its
investment in an interest-bearing account calculated
up to and
including 9 December 2009;
(c) interest on the
sum of R720 000 calculated at the legal rate of 15,5% per annum from
10 December 2009 to date of payment.
2 The first
defendant is further ordered to pay the plaintiffs the sum of R264
723 together with interest thereon calculated at
the legal rate of
15,5% per annum from 29 June 2011 to date of payment.’
(b) The appeal is
otherwise dismissed with costs, such costs to include the costs of
two counsel and to be taxed on the scale as
between attorney and
client.
L E Leach
Judge of Appeal
APPEARANCES:
For
Appellant: J L van der Merwe SC (with him A M Heystek)
Instructed
by:
Alex May
Inc, Pretoria
Lovius
Block, Bloemfontein
For
Respondent: T P Krüger (with him L Badenhorst)
Instructed
by:
Grosskopf
Attorneys, Pretoria
Webbers
Attorneys, Bloemfontein
1
Clause
10.1 provided: ‘
Transfer
of the property will be affected by the Seller’s Conveyancer
and all transfer costs including stamps must be paid
immediately by
the Purchaser if requested by the Conveyancing Attorney.’
2
Per
Botha JA in
Baker
v Probert
1985 (3) SA 429
(A) at 443B-C adopting the phraseology of Denning MR
in
Burt
v Claude Cousins & Co Ltd
[1971]
2 All ER 611
(CA) at 615d-e.
3
What
is apparent not only from
De
Klerk
but judgments such as
Baker
v Probert
is that each case must be considered in the light of its own
particular facts and the particular contractual terms under
which
the conveyancer received the payment.