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[2021] ZAGPJHC 362
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Z Hakimjee Investments (Pty) Ltd v Georgia Avenue Investments 135 (Pty) Ltd (2020/26801) [2021] ZAGPJHC 362 (2 June 2021)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Reportable:
No
Of
interest to other judges: No
2
June 2021
Case
number: 2020/26801
In
the application of:
Z
Hakimjee Investments (Pty)
Ltd
Applicant
and
Georgia
Avenue Investments 135 (Pty) Ltd
Respondent
JUDGMENT
Vally
J
Background
and facts
[1]
On or about 17 March 2020 the applicant as
purchaser and the respondent as seller concluded a written agreement
titled ‘Memorandum
of Agreement of Sale’ (Agreement). The
Agreement relates to the purchase and sale of the business as a going
concern. The
business includes an immovable property. The Agreement
was concluded under the guidance of both parties’ legal
representatives.
The business is defined in the Agreement as: ‘Sasol
Carletonville Service Station, the goodwill thereof, all fixed assets
thereof, the cession of the Franchise [and] the immovable property.’
The purchase price for the business is recorded as being
R17 100 000.00 (the purchase price). The purchase price was
to be paid in cash, or by furnishing an acceptable bank guarantee
to
the respondent. The clause – clause 1.2 - in the Agreement
attending to this issue reads:
‘
1.2
The Purchase Price in the sum of R17 100 000.00 (Seventeen
Million One Hundred Thousand Rands) shall be
paid to the
Conveyancers, or secured by a Bank Guarantee acceptable to the
SELLER
and payable upon transfer of the
Property
and Business
to the
PURCHASER
,
within (21) business days after the date of fulfilment of the
suspensive condition in paragraph 1.5.’ (Bold in original)
[2]
The suspensive condition was that the
applicant was required to obtain finance for ‘the balance of
the purchase price’
by 17 April 2020, failing which the
Agreement would automatically be null and void.
[3]
Clause 1.2 – quoted in [1] above –
has to be read with clause 1.4, which reads:
‘
The
purchase price shall be paid to the
SELLER
upon registration of transfer of the
Property
and simultaneous transfer of the necessary licences and leases (“
the
Effective Date
”) to give effect
to the transfer of the
Business
,
into the name of the
PURCHASER
.’
(Bold in original)
[4]
The respondent’s attorney was
appointed as the conveyancing attorney and thereby empowered to
attend to the transfer of the
immovable property into the name of the
applicant.
[5]
The applicant faced difficulties in meeting
the 17 April 2020 deadline to obtain its finance. After some verbal
communication between
the applicant’s representative, Mr Z
Hakimjee (Mr Hakimjee), and the respondent’s representative, Mr
R Sewlall (Mr
Sewlall), the parties’ respective attorneys
exchanged written communication. The written communication culminated
in the
parties concluding an agreement styled, ‘Addendum to
Agreement of Sale’ (the Addendum). This occurred in the
following
manner. The respondent’s attorney wrote, per email,
to the applicant’s attorney on 17 April 2020 informing him that
the respondent had agreed to extend the time by which the applicant
should obtain finance to pay for the purchase to 31 May 2020.
An
unsigned copy of the Addendum was attached to the email. The
applicant was asked to have its representative sign it and return
it
to the respondent’s attorney for the respondent to co-sign it.
On 29 April 2020 Mr Hakimjee signed it on behalf of the
applicant and
duly sent it to the respondent’s attorney. On 30 April 2020 Mr
Sewlall co-signed it on behalf of the respondent.
[6]
The applicant continued to pursue its
endeavours to secure the finance by 31 May 2020. On or about 22 May
2020 it secured finance
in the amount of R13 100 000.00
from ABSA Bank (ABSA). It had secured finance for R4 000 000.00
prior to that.
On 29 May 2020, its attorney wrote a letter to the
attorney of the respondent informing him that:
‘
We
have instructions from our client [the applicant] to confirm our
client having obtained finance for the purchase price of
R17 100 000.00
(Seventeen Million One Hundred Thousand
Rands) as provided for in the amended paragraph 1.5 of the Agreement
of Sale.
Our client will secure
the purchase price by bank guarantees to your client and payable upon
transfer of the property and business
to our client within 21
(Twenty-One) business days from Friday, 29 May 2020.
Kindly furnish us with
your guarantee requirements for the balance of the purchase price not
covered by the guarantees to be issued
by Victor and Partners on
behalf of ABSA Bank.’
[7]
Victor and Partners are the Conveyancers
appointed by ABSA to attend to the registration of a Mortgage Bond in
favour of ABSA against
the property.
[8]
ABSA issued three guarantees to the benefit
of the respondent’s attorney: one on 4 June 2020 in the amount
of R4 100 000.00,
one on 18 June 2020 in the amount of
R9 000 000.00 and one on 29 June 2020 in the amount of
R4 000 000.00.
Upon receipt of the third guarantee, the
respondent’s attorney, who it will be recalled was also the
conveyancing attorney,
wrote to the applicant’s attorney
demanding that the guarantees be amended by 17h00 on 30 June 2020,
failing which the respondent
‘reserves all its rights.’
The amendment sought was that the guarantees be payable upon the
surrender of the site licence
and the trading licence and not upon
the registration of transfer of the immovable property. The
applicant’s attorney responded
by stating that the guarantees
were drafted in accordance with Clause 1.4 of the Agreement and
therefore it could not be altered
in the manner sought by respondent.
[9]
In the meantime Mr Hakimjee attempted to
secure the co-operation of Mr Sewlall to ensure that the franchise
rights of the business
were transferred to the applicant. Mr Sewlall
was slack with his co-operation. This prompted a letter on 8 July
2020 from applicant’s
attorney to the respondent’s
attorney, the penultimate paragraph of which reads:
‘
Your
client is delaying the finalization of this transaction and we have
instructions to request that your client will [sic] urgently
liase
with SAOL [sic] on the requirements to transfer the operator’s
agreement, the lease agreement and the license to our
client.’
[10]
The respondent did not reply to the letter.
Instead, two weeks later Mr Hakimjee, and not the applicant’s
attorney, received
a letter from a new attorney for the respondent,
who is its present attorney of record, informing him that the
Agreement was null
and void, alternatively had lapsed. On the same
day the respondent’s present attorney sent a follow up letter
to Mr Hakimjee
stating that even though the Agreement was null and
void, alternatively had lapsed, the respondent would still be
interested in
selling the business to the applicant but on new terms.
The applicant’s attorney responded on 28 July 2020 stating that
the
applicant was of the view that a valid agreement of sale was in
place. He called on the respondent to comply with the terms of the
Agreement.
[11]
No further communication took place between
the two attorneys or between Mr Hakimjee and Mr Sewlall. The
applicant decided to enforce
its rights by bringing this application,
wherein it seeks a declarator that the Agreement is valid and binding
on the parties and
some ancillary relief.
Rule
regarding the establishment of a contract and the attitude of the
respondent
[12]
It is a general rule of contract law that
for a contract to exist
there
must be an objective intention – as opposed to subjective
intention - on the part of the parties to enter into legal
relations.
If so, then a binding contract would normally come to be. For a court
to reach a conclusion that a binding contract
has come to be there
has to firstly be
evidence of an
intention, objectively assessed, by the parties to enter into legal
relations. But, secondly, formalities relating
to the conclusion of
the contract have to be adhered to otherwise no binding contract
would result from their endeavours.
[13]
In this case the evidence, objectively
assessed, that the parties intended to enter into legal relations is
overwhelming. The respondent
does not deny that the applicant and it
had an objective intention to respectively purchase and sell the
business. This is manifest
not only by their representatives
appending signatures to the Agreement and the Addendum – which
records their objective
intentions to enter into a binding contract -
but also by their conduct post the signing of the two documents.
However, says the
respondent, this is not enough. For the contract to
come into existence the legal formalities have to be complied with.
And this,
the respondent contends, did not occur. Hence it denies
that the Agreement constitutes a binding contract. In its words, the
Agreement
is null and void
ab initio
.
This is its first contention. Its second contention is that if the
Agreement is a binding contract then it had lapsed by dint
of the
non-fulfilment of the suspensive condition. These contentions will
now be addressed.
The
Agreement is null and void
ab initio
[14]
Drawing attention to the fact that the
subject matter of the Agreement is the sale of a business, where the
business is defined
as a service station, the goodwill thereof, all
fixed assets, a cession and most importantly an ‘immovable
property’,
and that the purchase price is a composite
R17 100 000.00, the respondent says that it fails to comply
with a peremptory
requirement set out in s 2(1) of the Alienation of
Land Act, 68 of 1981 (Act) in that the price of the immovable
property is not
specified, thus making it null and void from its
inception. The previous sentence may be long but it captures the case
of the respondent
in its entirety on this aspect.
[15]
Sub-section 2(1) of the Act provides that
‘
No
alienation of land after the commencement of this section shall,
subject to the provisions of section 28, be of any force or
effect
unless it is contained in a deed of alienation signed by the parties
thereto or their agents action on their written authority.’
[16]
One
of the objects of the sub-section is to minimise disputes or
disagreements between the parties in transactions where land is
being
alienated, since such contracts ‘were, as a rule, transactions
of considerable value and importance , and that the
conditions
attached were often intricate.’
[1]
Another object is to place ‘a curb on the dishonesty of land
speculators’.
[2]
[17]
The respondent’s complaint is that
the Agreement fails to specify how much of the R17 100 000.00
constitutes payment
for the immovable property. In other words, the
price of the immovable property has not been specified. And this the
respondent
says nullifies both documents for failure to comply with a
peremptory requirement of the Act.
[18]
Section 1 of the Act defines ‘a deed
of alienation’ as a ‘document or documents under which
land is alienated.’
The definition is wide in scope. It simply
says that a ‘’’deed of alienation’’
means a document under
which land is alienated.’
[19]
There is nothing in the sub-section 2(1)
read with s 1 of the Act to suggest that the subject matter of the
document has to be restricted
to the alienation of land. The
alienation of land may thus be but one of the subjects of the deed.
There is also nothing in the
sub-section read with s 1 which requires
the price to be paid for the land to be specified. In this case the
Agreement specifies
that land is to be alienated. It also identifies
the specific land.
[20]
It follows, in my judgment, that the
Agreement would and does constitute ‘a deed of alienation’.
It follows that the
contention of the respondent that the Agreement
is null and void because it does not comply with the formalities set
out in s 2(1)
of the Act is, in law, incorrect.
[21]
There
is another problem for the respondent. It is not disputed that the
sale of the immovable property is part of a broader transaction.
The
transaction involves the purchase and sale of a business as a going
concern, the business concerned being
inter
alia
the service station and assets ancillary to that, which includes the
immovable property. Put differently, the applicant is only
purchasing
the immovable property because it contains the business of the
service station. The entire business has to be transferred
from the
respondent to the applicant. The immovable property – land in
terms of the Act – is part of the assets of
the business. In a
matter of analogous significance a full bench of the Natal Division
found that where a purchaser purchases a
seller’s interest in a
partnership, which partnership owned an immovable the property, the
provisions of the Contracts of
Sale of Land Act 71 of 1969 –
the predecessor to the Act in our case – which requires the
transaction alienating land
to be recorded, was inapplicable. The
matter is that of
Desai
.
[3]
Meskin AJ writing for a unanimous court said:
‘
With
respect, I consider that there must be considerable doubt as to
whether this case was correctly decided. Insofar as it decides
that a
partner’s interest in a partnership, that is the bundle of
rights of action which the existence of such interest predicates,
represents immovable property or an interest in immovable property,
within the meaning of legislation such as s 1 of Natal Law
12 of
1884, merely because one of the partnership’s assets is an
immovable property, then I regret I am unable to agree with
it. In my
judgment, therefore, s 1(1) of Act 71 of 1969 was of no application
in the instant case and the question whether there
was sufficient
description of the immovable properties in the agreement does not
arise.’
[4]
[22]
The ratio of the decision being that:
‘
The
expressed intention, as I have said, inter alia was that the
purchasers were to purchase the interest of the seller in such
partnerships and through or via the acquisition of such interest to
acquire the immovable properties which were assets of the
partnerships. This, in my judgment, was not an intention to purchase
land or any interest in land within the meaning of s 1(1) of
Act 71
of 1969
.
’
[5]
[23]
In
Desai
the issue before court was whether there was sufficient description
of the immovable properties being sold as part of the assets
in a
partnership. It was part of a bundle of rights being sold. In
casu
,
too, the title and rights to the immovable property were only part of
the bundle of rights that were being sold by the respondent.
[24]
While
Desai
dealt with the predecessor to the Act, the provisions in question in
both Acts are identical. And hence the issue presented itself
in a
matter before the Cape Provincial Division in
Cape
Town Municipality
.
[6]
There the court dealing with the same issue but in terms of the Act
in question here - s 2(1) of the Act – came, correctly
in my
judgment, to the view that the ratio in Desai applies to the Act. In
other words, where a bundle of rights, including rights
and title in
immovable property, are sold as a parcel then the provisions of s
2(1) of the Act do not apply.
[25]
It follows that even if it were to be found
that there was non-compliance with the peremptory requirement set out
in s 2(1) of the
Act, such non-compliance does not nullify the
Agreement.
[26]
The next issue is whether the Agreement had
lapsed by dint of a failure on the part of the applicant to satisfy
the suspensive condition,
making it impossible for the Addendum to
revive it.
The
Addendum is null and void
[27]
It is appropriate to begin with a brief
exploration of the legal effect of the failure of a suspensive
condition in the light of
the parties’ subsequent agreement or
conduct.
[28]
There
has been a number of cases where a suspensive condition had failed
resulting in the contract lapsing, and where parties thereafter
attempted to revive the contract.
[7]
In many of them the court found that the contract had not been
revived. In my reading of those judgments the finding that the
contract was not revived was based on the facts of the particular
case. None of the cases went so far as to say that the contract,
once
lapsed – or to put it differently, was void by operation of law
- could never in principle be revived. In one particular
case,
DS
Enterprises
[8]
the court found that the agreement was revived. After relaying the
facts and the ratio in
Neethling
Nicholas
J (as he then was) concluded:
‘
In
my view, however, these differences are not such as to render the
principle in
Neethling
v Klopper
inapplicable to the present case. In both cases the contract was
dissolved – in
Neethling’s
case it was dead for about three years, in the present case for about
a month. In both cases the parties agreed that the dissolutive
fact
should be nullified, and that this had the result that the contract
was revived. In
Neethling’s
case the parties did not conclude a new contract of sale; and in the
present case their conduct makes it clear that all the parties
intended to do was continue with their written contract of sale.’
[9]
[29]
The correct legal position is aptly
captured in the following
dictum
in
Fairoaks
:
‘
In
each case the true nature of the transaction will have to be
investigated in order to determine whether it constitutes an
agreement
of purchase and sale. If the intention was to buy and sell
i e to enter into a new contract on the same terms as the cancelled
contract, the agreement will have to comply with the prescribed
formalities even though the mechanism employed to give effect to
that
intention was the withdrawal of the cancellation.’
[10]
[30]
The issue really has to be decided on a
case-specific basis. The conclusion to be reached in each case could
be, for example, (i)
the contract has lapsed, (ii) the rights derived
from the suspensive condition were waived, resulting in the contract
remaining
extant, (iii) the contract was revived, or (iv) a fresh
contract was concluded. The determination will depend on the
intention
of the parties as recorded in any memorial –
agreements, addendums, letters, etc – and as manifested
through/by their
conduct.
[31]
The suspensive condition in the Agreement
required the applicant to secure finance to pay for the transaction
by 17 April 2020.
Before that date Mr Hakimjee conveyed to Mr Sewlall
that the applicant was having difficulty meeting the deadline. The
communication
culminated in the signing of the Addendum, which it
must be said took place with the assistance of both parties’
legal representatives.
The Addendum however was only signed by both
parties on 29 April 2020. In terms of the Addendum the entire terms
of the Agreement
remain in place save for the date set out in the
suspensive condition. This had been changed to 31 May 2020. The
Addendum records
the intention of the parties to amend the Agreement.
The actual phrase used reads:
‘
And
whereas the parties hereby record
their
amendments
as provided below’
(Underline added)
[32]
The Addendum introduced only two changes to
the Agreement. The first involves a more detailed description of the
immovable property,
and the second involves a change to the date by
which the suspensive condition takes effect, i.e. from 17 April 2020
to 31 May
2020.
[33]
The respondent contends that as the
Addendum was signed after 17 April 2020 it is null and void. The
Agreement had lapsed on that
date and could no longer be amended. In
contrast the applicant, focusing on the fact that there was consensus
between the parties,
contended that the Addendum ‘revived’
the Agreement. In this regard the applicant says that the phrase ‘the
parties
hereby record their amendment’ read in the context of
the entire Addendum and Agreement allows for only one conclusion:
that
they both regarded the Agreement as amended by the Addendum as a
binding contract, and that they both intended to hold each other
to
its terms.
[34]
It is correct that the word ‘revive’
is not used anywhere in the Addendum. This, from the perspective of
the respondent
is of no moment, for even if it was used it would not
legalise the Addendum. Its contention that the Agreement had lapsed
and therefore
could not be amended applies with equal force here:
just as a lapsed Agreement could not be amended, it could not be
revived.
[35]
There is much force in the contention of
the applicant. The approach adopted by the respondent gives no
credence to the intention
of the parties. The intention of the
parties manifests in the language used in the Addendum, which was
signed by the parties’
representatives. It was to enter into
legal relations with each other by binding themselves to the
Agreement as amended by the
Addendum. The intention is further
manifest in the conduct of the parties after the signing of the
Addendum, which included the
interactions of their legal
representatives both of whom we know were parties to the drafting of
the Addendum. Thus, even though
they did not specifically state that
the Addendum revived the lapsed Agreement, and changed it materially
only by amending the
date of expiry of the suspensive condition, it
no doubt, in my judgment, evidences a common intention of the parties
to revive
the agreement.
Compliance
with the suspensive condition
[36]
Finally, there is the question of whether
the suspensive condition was complied with. On the facts set out in
[6] – [8] above
I conclude that it was so.
Conclusion
[37]
Accordingly, the applicant is entitled to
the relief it seeks.
Costs
[38]
There is no reason as to why costs should
not follow the result.
Order
[39]
The following order is made:
1.
It is declared that the agreement of sale which was concluded on 17
March 2020,
at Randfontein between the Applicant, as Purchaser, and
the Respondent, as Seller in respect of the sale by the Respondent to
the
Applicant of a property known as Erf [....], Carletonville
Extension 1, Registration Division IQ, Province of Gauteng, otherwise
known as [....] D[....] Drive, Carletonville, (“the property”),
together with the business consisting of a SASOL Petroleum
Fuel
Station (“the Fuel Station”) (collectively referred to as
“the Business”) and the addendum to the
agreement, true
copies whereof is attached to the notice of motion as annexure “
X(i)”
and “
X(ii)
”, respectively, is valid and
binding on the parties.
2.
That against the tender by the Applicant to pay the purchase price in
respect
of the Business in the sum of R17 100 000.00 (Seventeen
Million One Hundred Thousand Rand), together with such further
amounts
as may still be due in respect of transfer duty,
alternatively, VAT, the Respondent be ordered, within 15 days of the
date of this
order:
2.1
to give effect to the agreement of sale; and
2.2
to perform all such acts as may be necessary to give transfer of the
Business, including
the Property into the name of the Applicant;
3.
That failing compliance by the Respondent with orders 2, 2.1 and/or
2.2 hereof,
the Sheriff be authorized to perform on its behalf all
such acts as may be necessary in order to give effect to the
agreement of
sale and to give transfer of the business into the name
of the Applicant.
4.
The Respondent is to pay the costs of the
application.
Vally
J
Gauteng
High Court (Johannesburg)
Date
of hearing:
24 May 2021
Date
of judgment:
2 June 2021
For
the applicant:
Melt Louw
Instructed
by:
Truter Crous & Wiggill Inc
For
the respondents:
AJ Troskie SC
Instructed
by:
Hay Scott Attorneys
[1]
Wilken
v Kohler
1913 AD 135
at 142; See also
Wendywood
Development (Pty) Ltd Rieger
1971 (3) SA 28
(A) at 38H-39
in
fin
[2]
Wendywood
,
Id at 38G
[3]
Desai
and Others v Desai and Another
1993 (3) SA 874 (NPD)
[4]
Id
at 881B-C
[5]
Id
at 880A-B
[6]
Cape
Town Municipality v Table Mountain Aerial Cableway Company Ltd
1996 (1) SA 909 (CPD)
[7]
See
inter alia:
Neethling
v Klopper en Andere
1967 (4) SA 459
(A);
DS
Enterprises (Pty) Ltd v Northcliff Townships (Pty) Ltd
1972 (4) SA 22
(W);
Cronje
v Tuckers Land and Development Corporation (Pty) Ltd
1981 (1) SA 256
(W);
Fairoaks
Investment Holdings (Pty) Ltd v Oliver
[2008] ZASCA 41
;
2008 (4) SA 302
(SCA);
Pangbourne
v Basinview
[2011]
ZASCA 20
(17 March 2011)
[8]
DS
Enterprises (Pty) Ltd
n
7
[9]
Id
at 28D-E
[10]
Fairoaks
,
n 7 at [19]