About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2013
>>
[2013] ZASCA 48
|
|
Irwing 514 CC v Mngani Property 4 (Pty) Ltd (297/2011) [2013] ZASCA 48 (28 March 2013)
Links to summary
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
CASE NO: 297/2011
Not Reportable
In the matter between:
IRWING 514 CC
..............................................................................................
APPELLANT
and
MNGANI PROPERTY 4 (PTY) LTD
............................................................
RESPONDENT
Neutral citation:
Irwing 514 CC v Mngani
Property 4 (Pty) Ltd
(297/11)
[2013] ZASCA 48
(28 March 2013).
Coram:
Cachalia, Leach,
Tshiqi, Majiedt et Pillay JJA
Heard:
26 February 2013
Delivered:
28 March 2013
Summary:
Appeal
– purchase and sale of shopping centre – default on
payment schedule –cancellation of sale – claim
for return
of moneys already paid – counterclaim for damages –
counterclaim referred to trial and postponed in terms
of Uniform rule
22(4) – order in terms of that rule for payment into trust
account pending determination of counterclaim
impermissible –
appeal upheld.
Cross appeal - notice of default containing sufficient
detail – letter of cancellation therefore proper –
cross-appeal
dismissed.
ORDER
On appeal from:
South Gauteng High Court,
Johannesburg (Spilg J sitting as court of first instance):
1. The appeal is allowed with costs and the order of the
court a quo is set aside and
substituted with the following:
‘
(a) The cancellation of the agreement by the
respondent on 7 November 2008 is declared valid;
(b) The cancellation of the agreement by the applicant
on 10 November 2008 is declared invalid;
(c) Judgment in respect of the applicant’s claim
of R5.375 million and interest thereon is postponed until the
determination
of whether the respondent is entitled to judgment in
respect of its counterclaim provided that the respondent proceeds in
terms
of the order set out in paragraph (d) below;
(d) The respondent’s counterclaim is referred to
trial and the respondent is to deliver a declaration within 20 days
of this
order;
(e) Should the respondent fail to comply with
sub-paragraph (d) of this order, the applicant shall be entitled to
apply for judgment
in respect of its claim of R5.375 million
plus interest together with costs;
(f) Costs, including costs of the application are to be
costs in the cause of the hearing of the counterclaim, subject to
sub-paragraph
(e) hereof.’
2. The cross-appeal is dismissed with costs.
JUDGMENT
PILLAY JA (CACHALIA, LEACH, TSHIQI ET MAJIET JJA
CONCURRING)
[1] On 5 March 2008, the appellant (Irwing) and
respondent, Mngani (Mngani) concluded a written agreement of sale
(‘the agreement’)
in terms of which Irwing sold to
Mngani, as a going concern, a shopping centre (‘the property’)
situated in Westonaria,
Gauteng for an amount of R41 million. Irwing
subsequently cancelled the agreement. Mngani disputed that the
cancellation was valid.
[2] Mngani then applied to the South Gauteng High Court
for an order declaring (a) Irwing’s cancellation invalid; (b)
its
own cancellation of the agreement to be valid; (c) payment of
R5.375 million. If Irwing’s cancellation was invalid the
further
question that arose was whether Irwing’s purported
cancellation amounted to a repudiation of the agreement entitling
Mngani
itself to cancel the agreement, which it purported to do three
days later, and recover the moneys it had paid towards the purchase
price, ie R5.375 million. Irwing, in turn, counterclaimed that its
cancellation was valid and that it was entitled to judgment
in its
favour for payment for damages in amount of R6.587 million arising
from Mngani’s breach of contract.
[3] The high court (Spilg J) held that Irwing’s
cancellation was good and dismissed Mngani’s claim.
1
It also held that whilst Mngani was entitled to recover
the moneys it had paid towards the purchase price of the property,
Irwing
had demonstrated prima facie that it had suffered damages in
an amount of R6.587 million, after it had resold the property to a
third party for some R8.5 million less than the price agreed upon in
its contract with Mngani.
[4] The high court thus referred Irwing’s
counterclaim for trial and postponed judgment in respect of Mngani’s
claim
for repayment of the moneys (R5.375 million) it had paid
towards the purchase price of the property pending adjudication of
Irwing’s
counterclaim; it also ordered Irwing to pay this
amount into a trust account of an attorney in the interim.
[5] Irwing now appeals against the order requiring it to
pay R5.375 million into an attorney’s trust account on the
ground
that there was no factual or legal basis for it. Mngani
cross-appeals the order dismissing its claim that Irwing’s
cancellation
was invalid. Both the appeal and the cross-appeal come
before us with leave of the high court.
[6] It seems to me that it would be convenient to first
consider Mngani’s cross-appeal because if Irwing’s
cancellation
of the agreement was invalid it would dispose of its
appeal. This follows inevitably from the fact that Irwing would in
that event
have to repay Mngani the sum it had paid towards the
purchase price of the property and there would therefore have been no
basis
for the court below to have ordered that this amount be paid
into the trust account of an attorney. I revert to the facts.
[7] In terms of Clause 1.2 of the agreement, Mngani had
to pay the purchase price in specified instalments on specified
dates. The
relevant portions of clause 1.2 read as follows:
‘
1.2.1 R500 000.00 on
27 February 2008;
1.2.2 R500 000.00 on 28
February 2008;
1.2.3 R1 million on 5 March
2008;
1.2.4 R2 million on 12 March
2008;
1.2.5 On date of registration of
transfer, a sum of R32 million, for which sum, the Purchaser shall
issue or cause to be issued
and delivered to the Seller, accepted
bank guarantees for the amount of R32 million, payable against
registration of transfer of
the property into the name of the
Purchaser. Such guarantee shall be issued within 30 days after
undersigning of this agreement.
1.2.6 . . .
1.2.7 . . .
1.2.8 . . .
1.2.9 . . .’
[8] In clause 3.12, Irwing, as seller, warranted that
‘the letting enterprise produces an annual income yield of a
minimum
of 9.50% defined as the annual net income before interest,
finance charges and company taxation, expressed as a percentage of
the
purchase price of R41 million (Forty One Million Rand)’. By
14 March 2008, Mngani had complied with the aforementioned payment
schedule – and had paid Irwing R4 million as agreed.
[9] Pursuant to clause 1.2.5 of the agreement, Mngani
negotiated with Nedbank Limited (‘the bank’) a bank
guarantee
for R32 million. On 23 April 2008, the bank provided Mngani
with a ‘letter of grant’ for R32 million. On 10 July
2008,
it issued two guarantees totaling R32 million.
[10] It is common cause that prior to the registration
of transfer, the bank cancelled the guarantees. Mngani was
consequently in
default of its obligation under clause 1.2.5.
[11] The parties thereafter entered into protracted
negotiations to structure a suitable alternative payment regime in an
endeavour
to salvage the agreement. During the course of these
negotiations, Mngani made further payments amounting to R1.375
million. So
together with the R4 million that Mngani had paid earlier
the total paid amounted to R5.375 million.
[12] Mngani remained in default of the agreement and on
31 October 2008, Irwing addressed a letter to it and put it on terms
to
remedy the default within 2 days in terms of clause 5.1 of the
agreement. The letter reads as follows:
‘
NOTICE OF DEFAULT IN TERMS OF OFFER TO PURCHASE BETWEEN
MNGANI
PROPERTY 4 (PTY) LTD & IRWING 514CC FOR THE LETTING ENTERPRISE
KNOWN AS
PICK ‘n PAY SHOPPING COMPLEX, WESTONARIA
We remind you that you are in default with regard to your obligations
in terms of clause 1.2 of the agreement. Your attention is
also drawn
to clause 5.1 of the agreement with regard to remedy of default.
Please advise as to how you will remedy this default.’
[13] Clause 5.1 of the agreement to which the letter
refers, reads:
‘
5.1 Should either party
default with the due performance of its obligations in terms of this
offer and persist in such default for
a period of 2 (two) days after
it will have received a notice calling upon it to remedy such
default, then notwithstanding any
prior waiver, and without prejudice
to any other claim which the aggrieved party may have, either in
terms of this offer or at
law, it shall be entitled to either: -
5.1.1 claim specific
performance; or
5.1.2 be restored to its
position status quo ante; or
5.1.3 declare this offer
cancelled and to recover all damages it may have suffered or
sustained by reason of such default.’
[14] Despite this, Mngani failed to respond and on 7
November 2008, Irwing wrote to Mngani a letter reading as follows:
‘
NOTICE OF CANCELLATION OF OFFER TO PURCHASE BETWEEN MNGANI
PROPERTY 4 (PTY) LTD & IRWING 514CC FOR THE LETTING ENTERPRISE
KNOWN
AS PICK ‘N PAY SHOPPING COMPLEX, WESTONARIA
I refer to the notification served on you on 31 October 2008 in which
you have been requested to remedy your default in terms of
the above
agreement. As you have not remedied your default to date, the
abovementioned agreement is hereby cancelled with immediate
effect.’
[15] In response thereto, Mngani caused a letter dated
10 November 2008 to be delivered to Irwing. Therein Mngani alleged
first,
that Irwing’s cancellation of the agreement was
premature in that the period of seven days allowed for the default to
be
remedied had by the date of cancellation not lapsed. (It is common
cause that Mngani was mistaken that the
mora
period was seven
days. In terms of clause 5.1 the
mora
period was two days).
Secondly, it stated that it regarded the premature cancellation of
the agreement as a repudiation of the
sale agreement which it
accepted and in turn, was itself cancelling the said agreement.
Mngani, inter alia, further sought a refund
of all moneys paid
towards the purchase price amounting to R5.3 million, failing which
it would sue for the recovery thereof. Irwing
responded on 12
November 2008,
by
pointing out that contractually,
the period to remedy any breach was 48 hours (2 days) and not seven
days as alleged by Mngani
and that it had not prematurely cancelled
the agreement of sale.
[16] Mngani’s case is that the high court erred in
finding that Irwing’s notice of cancellation on 7 November 2008
was
valid. More specifically, it contends that the letter dated 31
October 2008 did not constitute proper notice of default so as to
place it in
mora
as it omitted particulars of the alleged
default, did not set out the steps to be taken to remedy the default
and did not indicate
the consequences should the unspecified default
not be remedied.
[17] It is true that as a general proposition, a notice
of default must be unambiguous and indicate a fixed date for
performance.
But Mngani could not have been under any illusion as to
what the default was, since quite apart from the reference to clauses
1.2
and 5.1 of the agreement, the parties had been in negotiations
over this issue, namely the provision of guarantees for R32 million.
And the reference to these clauses in the agreement made this clear.
What is more is that in its letter of 10 November 2008 Mngani’s
complaint was not that the cancellation letter was unclear, but that
it was premature because of its belief that the
mora
period
was two days and not seven days. This argument must consequently
fail, as must the cross-appeal.
[18] I turn now to the Irwing’s appeal against the
order that it pay R5.375 million into an attorney’s trust
account
pending the institution of an action for damages against
Mngani. In making this order the high court purported to act in terms
of Uniform rule 22(4). It reads as follows:
‘(4) If by reason of any claim in reconvention, the defendant
claims that on the giving of judgment on such claim, the plaintiff’s
claim will be extinguished either in whole or in part, the defendant
may in his plea refer to the fact of such claim in reconvention
and
request that judgment in respect of the claim or any portion thereof
which would be extinguished by such claim in reconvention,
be
postponed until judgment on the claim in reconvention. Judgment on
the claim shall, either in whole or in part, thereupon be
so
postponed unless the court, upon the application of any person
interested, otherwise orders, but the court, if no other defence
has
been raised, may give judgment for such part of the claim as would
not be extinguished, as if the defendant were in default
of filing a
plea in respect thereof, or may, on the application of either party,
make such order as to it seems meet.’
[19] It is clear that rule 22(4) grants the right to a
defendant, who has filed a counterclaim, to apply for a postponement
of such
part of a claim as admitted by him or her pending the
determination of his or her counterclaim. In exercising this right,
the defendant
must demonstrate to the court that the counterclaim, if
successful, will wholly or at least partially extinguish the
plaintiff’s
claim. Generally the claim and counterclaim must
sound in money.
2
In granting such an application for postponement, the
court has a discretion which must be judicially exercised.
3
Normally the court will not give judgment on a claim
before the counterclaim has been determined because ‘if
conflicting claims
are made the subject of judicial order piecemeal,
one party may suffer grave prejudice’.
4
[20] Having found that Irwing had indeed properly
cancelled the agreement, it follows that it conceivably has a claim
for damages
against Mngani. Its proposed claim is for R6.587 million
– considerably more than the amount Mngani is claiming. So the
court
below was correct in referring Irwing’s counterclaim to
trial and in postponing judgment of Mngani’s claim pending the
outcome of the counterclaim.
[21] However rule 22(4) does not make provision for the
court to order that any amount in favour of either of the parties be
held
in trust together with instructions to the trustee(s) as to how
to deal with such money. The only basis upon which the court below
could have considered granting such an order, was, if there appeared
from the papers some factual basis to do so. There was no
evidence to
justify granting the order in question nor did Mngani seek it. In the
circumstances the order falls to be set aside
and substituted with
the order set out below. As far as costs of the appeal are concerned,
these should follow the outcome.
[22] There is one other aspect which bears mentioning.
On 20 February 2013, before the hearing of the appeal scheduled for
26 February
2013, a notice of withdrawal of attorneys of record for
Mngani was served on the office of the registrar, the attorneys for
Irwing
and the business address of Mngani. The cross-appeal was
however not withdrawn. This is the second time that Mngani’s
representatives
have withdrawn from the appeal. The appeal was first
set down for 30 April 2012. A notice of withdrawal by Mngani’s
attorneys
was filed on or about 27 April 2012. As a result, the
appeal was postponed sine die.
[23] At this hearing we were informed that the attorney
for Irwing had in fact contacted Ms Nkosi, the chief executive
officer of
Mngani. She had indicated in writing that her legal
representative had become unavailable and that she had not requested
the date
for the appeal on 26 February 2013. This was confirmed in an
affidavit by Ms Erica Noelle Meerholz, a partner in the firm of
attorneys
representing Irwing. The appeal thus proceeded without
Mngani being represented, In preparing this judgment cognizance was
however
taken of the submissions made by counsel in his heads of
argument that were lodged before the hearing.
[24] In the result it is ordered as follows:
1. The appeal is allowed with costs and the order of the
court a quo is set aside and is
substituted with the following:
‘
(a) The cancellation of the agreement by the
respondent on 7 November 2008 is declared valid;
(b) The cancellation of the agreement by the applicant
on 10 November 2008 is declared invalid;
(c) Judgment in respect of the applicant’s claim
of R5.375 million and interest thereon is postponed until the
determination
of whether the respondent is entitled to judgment in
respect of its counterclaim provided that the respondent proceeds in
terms
of the order set out in (d)below;
(d) The respondent’s counterclaim is referred to
trial and the respondent is to deliver a declaration within 20 days
of this
order;
(e) Should the respondent fail to comply with
sub-paragraph (d) of this order, the applicant shall be entitled to
apply for judgment
in respect of its claim of R5.375 million
plus interest together with costs;
(f) Costs, including costs of the application are to be
costs in the cause of the hearing of
the counterclaim, subject to sub-paragraph (e) hereof.’
2. The cross-appeal is dismissed with costs.
R PILLAY
JUDGE OF APPEAL
APPEARANCES:
FOR APPELLANTS: ADV NORMAN DAVIS S C
Instructed by:
Tintingers Inc., Johannesburg;
Symington & De Kok, Bloemfontein
FOR RESPONDENT: NO APPEARANCE
1
In
the court’s order, the dismissal of the declarators was
erroneously omitted. However the learned judge clearly dealt
with
them in the body of the judgment and dismissed both. It would be
prudent to correct this omission later in this judgment.
2
Amavuba
(Pty) Ltd v Pro Nobis Landgoed (Edms) Bpk
1984
(3) SA 760
(N) at 766H – I.
3
NTC
Steel Services (Pty) Ltd v Jamor (Pty) Ltd (t/a Steel King)
1984 (2) SA 629
(T) at 631H.
4
Van
den Bergh & Partners Ltd v Robinson
1952 (3) SA 747(SR)
at
748. See also:
Consol Ltd t/a Consol Glass v Twee Jongegezellen
(Pty) Ltd
2002 (2) SA 580
(C) at 584E–587C.