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[2021] ZAGPJHC 387
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Mcwade Property Holdings (Pty) Ltd v Babcock Ntuthuko Engineering (Pty) Ltd and Others (9787/2020) [2021] ZAGPJHC 387 (26 May 2021)

IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 9787/2020
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
26/05/2021
In
the matter between:
MCWADE
PROPERTY HOLDINGS
(PTY)
LTD
Applicant
and
BABCOCK
NTUTHUKO ENGINEERING (PTY) LTD
First Respondent
FLUXMANS
INCORPORATED
Second Respondent
INVESTEC
BANK
Third Respondent
Delivered:
This judgment was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation
to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on CaseLines. The
date for
hand-down is deemed to be 26 May 2021
JUDGMENT
YACOOB
J:
1.
The applicant (“McWade”)
seeks a declaration that a sale agreement concluded between it and
the first respondent (“Babcock”)
has lapsed or is of no
further force or effect, and the repayment of the amount of R10 270
852.10 it paid in terms of that agreement,
together with interest.
Babcock, by way of counter-application, seeks an order declaring the
agreement valid and binding and directing
McWade to comply with it.
2.
The facts in this matter are common cause.
The issue is the interpretation of a particular suspensive condition
and of the facts
relevant to that condition.
3.
On 29 March 2019, Babcock and McWade
concluded an agreement of sale of certain immoveable property, and
Babcock made part payment
of the purchase price, of R10 270 852.10,
which is held in trust by the second respondent (“Fluxmans”).
Babcock also
purchased McWade’s business as a going concern at
the same time, in a separate agreement. This application only deals
with
the agreement of sale of property.
4.
Only McWade opposes Babcock’s
application. Fluxmans has filed a notice to abide. The third
respondent (“Investec”)
was cited for any interest it may
have and has not participated at all in these proceedings.
5.
In terms of the sale of property agreement,
Babcock was to purchase the property for R30 million, excluding VAT.
It was to pay a
R3 million deposit to Fluxmans by 30 April 2019, and
the remaining R27 was to be paid by a combination of cash, the
6.
proceeds of a loan, and/ or the proceeds of
the sale of certain property of Babcock. A guarantee for this amount
was to be delivered
to Fluxmans within 30 days of the “condition
date”.
7.
The “condition date” is defined
in the agreement as “the date on which the last of the
conditions precedent are
fulfilled or waived in accordance with the
provisions of this agreement”.
8.
The conditions precedent are contained in
clause 9 of the agreement, which provides that the agreement, save
for clauses 9 and 17
to 21 (read with clause 2) is subject to the
fulfilment of two conditions precedent.
9.
The first, in 9.1.1, was that McWade is
able to sell its identified erven at a price of R14.2 million or a
lesser amount that McWade
may elect, and that the sale become
unconditional in accordance with its own terms by 31 July 2019.
10.
The second, contained in 9.1.2, is that:
the purchaser is able, by
no later than 60 days after the signature date to raise a loan for
the sum of R21 000 000 (twenty one
million rand) (or such lesser
amount as the purchaser in its sole discretion may elect) upon the
security of a first mortgage bond
to be passed over the property, at
prevailing bank terms and conditions. The purchaser undertakes
timeously to take all steps and
to sign all documents and do all such
things that may be necessary to procure the loan and comply with the
requirements of the
lender.
11.
The remainder of clause 9 contains
provisions for waiver, extension and non-fulfilment of the conditions
precedent, as well as an
undertaking by the parties to use their best
endeavours to procure the fulfilment of the conditions precedent.
12.
Clause 9.3 provides that the conditions
precedent are for the benefit of the purchaser and that the purchaser
has the right to waive
them before the date of fulfilment, and clause
9.4 that the parties are entitled to extend the dates in writing,
before the date.
There was no waiver and no agreement to extend. Nor
could there have been, because as can be seen from the facts set out
below,
at the relevant dates all indications were that the conditions
had been timeously fulfilled.
13.
As stated above, the agreement was entered
into on 29 March 2019. On 23 May 2019, within the 60 day period
required by clause 9.1.2,
Investec sent a letter confirming approval
of a loan for R21 million. It also sent a “confidential term
sheet”, which
specified that the loan would be secured by a
mortgage bond over the property which was the subject of the
agreement, as well as
additional mortgage bonds on other properties
held by McWade. An additional condition was that the property be
valued at at least
R40 million, and that any conditions imposed by
the valuer have been fulfilled. These are the relevant terms to this
dispute.
14.
McWade accepted the terms on the
confidential term sheet on 27 May 2019. The 60 day period ended on 29
May 2019. McWade and Investec
concluded a loan agreement on 22 August
2019, and Investec issued a R21 million guarantee in favour of
Fluxman’s, Babcock’s
attorneys, on 28 August 2019.
15.
It is also relevant that the sale of
property agreement recorded that there was contamination of ground
water on the property, and
that a third party, ABB, had undertaken in
terms of an agreement with Babcock to take certain steps to
rehabilitate the property.
16.
On 15 January 2020, Investec informed
McWade that there were questions regarding the value of the property
arising from a 2007 environmental
report, which dealt with the
contamination referred to in the agreement. Investec raised queries
about what steps had been taken
regarding the rehabilitation. On 17
January 2020, McWade informed Babcock that Investec had decided to
withdraw the bond because
of the environmental issues. On 22 January
2020 Babcock informed McWade that it was happy to wait until
alternative funding was
procured, and that in its view the suspensive
condition had been fulfilled.
17.
On 30 January 2020 Investec’s
attorneys informed Fluxmans that Investec was withdrawing its
guarantee.
18.
McWade contends that 9.1.2 has not been
fulfilled because, although the loan was approved in principle before
the expiry of the
60 days, the loan agreement was not entered into
within 60 days and Investec withdrew the guarantee it later
furnished.
19.
Babcock, on the other hand, contends that
the condition was fulfilled by the approval of the loan in principal,
together the provision
by Investec of a confidential term sheet which
it requested McWade to sign if it wished to proceed, and the fact
that McWade’s
representative indeed signed the term sheet on 27
May 2019. Babcock submits that once the condition was fulfilled, the
agreement
was perfected, and nothing that happened afterwards could
affect it.
20.
The question then is whether 9.1.2 was
fulfilled once the loan was approved in principle, or whether it
required an agreement to
actually have been entered into, or to have
been irrevocable.
21.
It is by now a well-established principle
that a contract must be interpreted
“
in
the light of the document as a whole and the circumstances attendant
upon its coming into existence.
Whatever
the nature of the document, consideration must be given to the
language used in the light of the ordinary rules of grammar
and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material known to
those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the light of
all these
factors. The process is objective, not subjective. A sensible meaning
is to be preferred to one that leads to insensible
or unbusinesslike
results or undermines the apparent purpose of the document. Judges
must be alert to, and guard against, the temptation
to substitute
what they regard as reasonable, sensible or businesslike for the
words actually used. To do so in regard to a statute
or statutory
instrument is to cross the divide between interpretation and
legislation; in a contractual context it is to make a
contract for
the parties other than the one they in fact made. The inevitable
point of departure is the language of the provision
itself, read in
context and having regard to the purpose of the provision and the
background to the preparation and production
of the document.
[1]
22.
McWade
relies on the judgment of
Janse
van
Vuuren v Boshoff and others
,
[2]
in which the seller of property informed the purchaser that the sale
agreement had lapsed because, although the loan was approved
in
principle before the relevant date, the bank only gave a final
approval of the loan two days after the relevant date. In that
case
the suspensive condition was that the purchaser was able to “raise
a loan”. However, the agreement also provided
that the
agreement was of no force or effect should the loan “not be
granted” by the date. Nor was there any evidence
that the terms
of business offered by the bank had been accepted bythe purchaser.
23.
The
court found that the agreement required that “what was required
of the applicant was the actual obtaining of a loan …
and not
only an approval in principle.”
[3]
This conclusion was based both on the agreement in that case and on
that court’s reading of
De
Wet v Zeeman
;
[4]
Remini
v Basson
,
[5]
and
Property
Girl BK v Joubert NO en andere
.
[6]
24.
It can be seen that the agreement in the
Janse van Vuuren
case is different to that in this case, in that it refers not only to
the ability to “raise a loan” but also made provision
for
what would happen should the loan “not be granted”. The
issue there was not simply the raising of the loan, but
also the
grant of a loan.
25.
A cursory examination of the law reports
discloses that raising a loan does not have a specific, objective
meaning. There are cases
in which it is interpreted to mean variously
having a loan approved in principle, a loan being granted, or funds
being advanced.
26.
The cases relied upon by the court in
Janse
van Vuuren
, even if one ignores that
the agreement in that case also dealt with the grant of the loan, do
not support the conclusion of the
court in that case.
27.
In
De Wet v
Zeeman
the condition was that the
purchaser would obtain a bond for a certain minimum amount, and that
if it was not obtained within 90
days the purchaser had the right but
not the obligation to cancel the agreement. If no bond was available
within 120 days of the
agreement the seller was entitled to withdraw.
The property was damaged a few days before the 90 days had expired,
and before the
bond was registered. After the 90 days had expired,
the bank informed the purchaser it was withdrawing from the loan.
28.
The terms of the agreement in
De
Wet
are, again, different to those in
this case. In particular, it was the actual obtaining of a bond that
was required, in the words
of the agreement itself.
29.
Remini v Basson
in
fact is authority for the opposite proposition, as two out of three
judges suggested that it may be sufficient that an offer
of a loan
was made before the relevant date.
30.
In
Property
Girl BK v Joubert NO
the court found
that a loan agreement had to have been entered into because the
contract at issue provided that “a loan is
raised” rather
than that the purchaser “is able to raise” the loan. The
court relied on this difference in wording
to distinguish the matter
from
Remini v Basson
and find that an approval in principal was not enough.
31.
It can be seen, then, that not only was
Janse van Vuuren
decided
on a contract with different terms than that in this case, the
principles on which it purported to rely were, at best, mistaken.
32.
The relevant facts against which clause
9.1.2 in this case must be interpreted are as follows.
33.
The clause does not provide that the
condition is that a loan “is raised”. The condition is
that the purchaser “is
able to” raise a loan.
34.
None of the other clauses of the agreement
refer to the loan in any other way which casts light on what the
parties meant by the
purchaser being able to raise a loan.
35.
Clause 9.1.1, on the other hand provides
(a) that the purchaser “is able to sell” its erven for a
specific amount
and
(b) that “the sale becomes unconditional in accordance with its
terms” by a specified date.
36.
It is significant that clause 9.1.2, while
similarly requiring an ability on the purchaser’s behalf, does
not go that further
step to require that the loan becomes final.
37.
I consider it also significant that, until
the guarantee was withdrawn by Investec in January 2020, both parties
continued as if
the suspensive condition in clause 9.1.2 had been
fulfilled.
38.
If the intention had been that the loan
must have been granted in a way that it was final, this could not
have been the case since
both were aware that the loan was not yet
final.
39.
In particular, McWade went ahead and
entered into a loan agreement with Investec only on 22 August 2020,
almost three months after
it now contends the suspensive condition
had not been fulfilled and the sale of property agreement had already
ceased to be of
any force and effect.
40.
All these leads to the conclusion that what
was intended was simply an indication that the loan facility was
available to McWade,
that is, that the loan secured by a mortgage
bond was approved by Investec.
41.
Any other interpretation in the context of
this case would be inconsistent with the actions of the parties,
would mean that there
would be no certainty, and that the stipulation
of dates by which suspensive conditions must be fulfilled would
become meaningless,
since, on McWade’s version, the parties
simply ignored the dates, and ignored the purported non-fulfilment of
the suspensive
condition.
42.
If the suspensive condition was fulfilled
within the required 60 days, the later withdrawal by Investec cannot
retrospectively invalidate
the agreement.
43.
In the circumstances McWade’s
application must fail.
44.
The relief sought in the counter
application is a declaration that the agreement of sale is valid and
binding, and a direction that
the applicant comply with the
agreement.
45.
An examination of the supporting affidavit
does not require me to examine the whole agreement of sale. Nor was
the validity of the
entire agreement dealt with before me. I do not
find myself in a position to pronounce on the validity of the
agreement as a whole.
In fact the replying affidavit in the
counter-application confirms that what is before me is only the
interpretation of clause
9.1.2.
46.
There is no reason, on the papers before
me, having found that the suspensive condition in clause 9.1.2 has
been complied with,
not to direct the applicant to take necessary
steps to give effect to the transfer of the property.
47.
I therefore make the following order:
(a)
the main application is dismissed;
(b)
the applicant is directed to comply with
its obligations under the agreement of sale between the parties by
taking all steps necessary
in order to give effect to the transfer of
the property contemplated by the sale agreement;
(c)
the applicant is to pay the costs of both
the main application and the counter application.
S.
YACOOB
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Appearances
Counsel
for the applicant:

P
van der Berg SC
Instructed
by:

Van Veijeren

Inc
Counsel
for the first respondent:
CC
Bester
Instructed
by:

Fluxmans
Inc
Date
of hearing:

24
June 2020
Date
of judgment:

26
May 2021
[1]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) at [18]
[2]
(3439/2004)
[2004] ZAECFC 44 (26 November 2004); 2005 JDR 0382 (SE)
[3]
At
paragraph [30]
[4]
1989
(2) SA 433 (NKA)
[5]
1993
(3) SA 204 (N)
[6]
[1999]
1 All SA 18
(T)