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[2013] ZASCA 174
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Northern Estate and Trust Administrators (Pty) Ltd v Agricultural And Rural Development Corporation (117/13) [2013] ZASCA 174; [2014] 1 All SA 655 (SCA) (28 November 2013)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 117/13
I
n the matter
between:
NORTHERN
ESTATE AND TRUST
ADMINISTRATORS (PTY)
LTD
……………………………………………
..APPELLANT
AGRICULTURAL
AND RURAL
DEVELOPMENT
CORPORATION
………………………………………..
RESPONDENT
Neutral citation:
Northern Estate and Trust Administrators V Agricultural and Rural
Development Corporation (117/13)
[2013] ZASCA 174
(28 November 2013)
Coram
:
Lewis, Maya and Leach JJA and Swain and Meyer AJJA
Heard
:
6 November 2013
Delivered
:
28 November 2013
Summary: Contract -
whether sale of shares agreement consensually cancelled, expressly or
by conduct. Cession - cedent’s right
to claim transfer of
shares ceded - consequence of cession where debtor, in ignorance of
prior cession, and cedent agreed to a
cancellation of the sale of
shares agreement.
ORDER
On appeal from: Full
Court of the North Gauteng High Court, Pretoria (Mavundla J with
Ranchod and Tuchten JJ concurring):
The appeal is dismissed
with costs including those of two counsel.
JUDGMENT
MEYER AJA (LEWIS, MAYA
AND LEACH JJA AND SWAIN AJA CONCURRING):
[1] This appeal arises
out of an agreement of sale concluded in May 2005 in terms of which
the respondent, the Agricultural and
Rural Development Corporation
(the ARDC), sold shares it held in a company known as Outspan (Pty)
Ltd to Mr Charles Andrew Boyes,
trading at the time as Henley Farm
(Boyes). Boyes paid the purchase price but the shares were not
transferred to him. Subsequently
the appellant (Northern Estate and
Trust Administrators (Pty) Ltd) instituted action against the
respondent alleging that Boyes
had ceded his ‘rights, title and
interest’ in a claim against the respondent for transfer of the
shares, and claiming
an order directing the respondent to transfer
such shares to it.
[2] At first instance,
the matter came to trial in the North Gauteng High Court before
Phatudi J who found that the cession relied
on by the appellant had
indeed taken place, but dismissed the appellant’s claim,
finding that Boyes and ARDC had agreed to
cancel the sale of the
shares. The appellant appealed unsuccessfully to a full bench, its
appeal having been dismissed on 19 October
2012. The present appeal
is with the leave of this court
[3] By the time the
matter went to trial it was common cause that a valid and binding
sale agreement had been concluded between
the ARDC and Boyes, who had
paid the full purchase consideration for the shares to the ARDC. At
their pre-trial conference the
parties agreed that the only disputes
between them were those set out in paragraph 9 of the particulars of
claim (which related
to the cession) and in paragraph 2.2 of the
plea, which read as follows:
‘
In the
alternative, and in the event that the Honourable Court finds that an
agreement, as alleged, or at all, was concluded between
the said
Boyes and the Defendant, the said agreement of sale was cancelled by
agreement between [the] said Boyes and the Defendant
expressly and
the Defendant paid back the amount received from the said Mr Boyes in
the sum of R145, 520.00, alternatively, tacitly
in that the Defendant
paid back the amount received from the said Mr Boyes in the sum of
R145,520.00.’
[4]
Consensual
cancellation is simply '. . . a contract whereby another contract is
terminated’.
[1]
The express consensual cancellation of the sale agreement is alleged
to have been concluded expressly at a meeting held on 5 November
2007
and, alternatively, by conduct during September 2008 when the ARDC
repaid the purchase consideration to Boyes and he accepted
the
repayment. The question for decision in this appeal is whether the
court a quo correctly endorsed the decision of the court
of first
instance that the ARDC discharged its onus of proving a consensual
cancellation of the sale agreement. Appellant’s
counsel also
raised a further argument before us, raised neither at the trial nor
in the court below, that Boyes had been divested
of his right to
claim transfer of the shares by virtue of the cession of that right
to the appellant on 1 April 2008 and that,
consequently, only the
appellant could thereafter have agreed to cancel the sale agreement.
[5] The issues that arose
on appeal will be better understood against the following background.
The ARDC was established in terms
of the Northern Transvaal
Corporation Act No 5 of 1994. During 2005, it embarked on a
restructuring process which, inter alia,
entailed the selling off of
its movable and immovable assets, including shares which it or its
subsidiaries held in various companies.
Its acting managing director
at the time, Dr Shaker (Shaker), had the requisite authority to
approve the conclusion of the intended
sale agreements on behalf of
the ARDC. On 31 May 2005, as part of that process, the sale agreement
was concluded, in terms of which
Boyes purchased various shares from
the ARDC for a total purchase consideration of R145 520.00. The sale
agreement was approved
by Shaker, and Boyes duly effected payment of
the purchase price by means of an electronic transfer on the day of
its conclusion.
[6] The ARDC’s
board of directors, however, resolved not to ‘ratify’ the
sale of shares to Boyes at its meeting
on 8 December 2005. Instead
Shaker’s successor as acting managing director, Mr M B J Maloa
(Maloa), recommended that the
sale of shares to Boyes should not be
approved and that the shares be used to promote Black economic
empowerment in the province.
This was accepted by the board. Mr G D
Esterhuysen (Esterhuysen), who at all material times was employed by
the ARDC in the capacity
of manager, corporate services and finance,
and the only witness who testified about the alleged consensual
cancellation of the
sale agreement, explained in his evidence that
the new course adopted by the ARDC board of directors entailed
benefiting communities
who were involved in the ARDC’s former
projects. The shares were to be ‘remarketed’ and, upon
board approval,
transferred to legal entities established by those
communities at no cost.
[7] By letter dated 11
January 2006, the ARDC notified Boyes as follows:
‘
It is with regret
that we have to inform you that the Board of Directors of the ARDC
did not approve the sale of shares. They resolved
that the shares
must be remarketed.
Please supply your Bank
Details for the refund of the amount paid, R145 520.’
[8] Subsequently a
dispute arose between the ARDC and Boyes about the validity of the
sale agreement. Though the sale was approved
by Shaker, the stance
adopted by the ARDC was that no valid and binding agreement had come
into existence as a result of the non-approval
by its board of
directors. Boyes, on the other hand, maintained that ARDC board
approval had not been a requirement for the validity
of the sale
agreement, and insisted on receiving transfer of the shares. The
dispute dragged on for a considerable period of time.
The validity of
the sale agreement was for the first time conceded on behalf of the
ARDC at the pre-trial conference held on 28
April 2010.
[9] On 5 November 2007, a
meeting was held at the instance of Boyes. It was attended by Maloa,
Esterhuysen, and a Mr Ngoasheng from
the ARDC and Boyes. This was the
meeting at which the express agreement of cancellation was alleged to
have been concluded. Maloa
led the meeting and only he and Boyes
participated in the discussion. Esterhuysen’s evidence about
the discussion between
Maloa and Boyes is unconvincing and
ambivalent. He essentially testified about his ‘impression’
of the meeting. The
high-water mark of his evidence is that Boyes
accepted that the shares would not be transferred to him ‘on
condition’
that they be transferred to the beneficiary
communities and not resold to any other party.
[10] Esterhuysen conceded
that a cancellation of the sale agreement had not been discussed. Had
an agreement in fact been concluded
one would have expected that
consensus would also have been reached regarding the repayment of the
purchase price, which Esterhuysen
conceded had not been discussed.
Esterhuysen was also unable to explain why the purchase price had not
been promptly repaid to
Boyes after the alleged agreement had been
concluded. Under cross-examination he conceded that if Boyes were to
testify that the
cancellation of the agreement had by no stretch of
the imagination been agreed at the meeting, he would be unable to
dispute it.
[11] Any agreement to
cancel the sale agreement or to compromise the dispute would have had
to be concluded between Boyes in his
personal capacity and Maloa,
representing the ARDC. Neither of them testified. And significantly,
the minutes of a meeting of the
ARDC board of directors held on 7
December 2007 record that Maloa -
‘
... reminded the
board of directors of a possible legal case by the Boyes group. The
group claim they purchased the ... shares legally’.
Maloa’s reminder to
the ARDC board of directors accords with the stance adopted by Boyes
since the outset, which was that
a valid and binding sale agreement
had been concluded. Moreover, I find it improbable that Maloa would
not have reported to the
board of directors that Boyes had agreed
that the shares might be transferred to the contemplated beneficiary
communities had any
cancellation agreement or compromise been
concluded at the meeting.
[12] Accordingly, I
conclude that the evidence of Esterhuysen failed to establish the
conclusion of an express agreement on 5 November
2007 in terms of
which the sale agreement was terminated or the dispute between Boyes
and the ARDC compromised.
[13]I come now to the
dispute between the parties relating to the cancellation agreement
which is alleged to have been concluded
by conduct during September
2008. In Standard Bank of South Africa Ltd & another v Ocean
Commodities Inc & others
1983 (1) SA 276
(A) Corbett JA said that
- ‘[i]n order to establish a tacit contract it is necessary to
show, by a preponderance of probabilities,
unequivocal conduct which
is capable of no other reasonable interpretation than that the
parties intended to, and did in fact,
contract on the terms
alleged’.
[2]
[14]It is common cause
that on 10 September 2008 the ARDC in fact repaid the purchase
consideration in the sum of R145 520 to Boyes
by means of a cheque
deposited with ABSA Bank Ltd and credited to the account ‘CA
Boyes t/a Henley Farm’, that being
the account Boyes had used
to make payment of the purchase price. Esterhuysen testified that the
following day, while travelling
from Venda to Polokwane he received a
call from Boyes, who was agitated and upset about the money having
been paid into that particular
account. He told Esterhuysen that he
had bought the shares in his personal capacity and that the money
should have been paid into
a different account. As Esterhuysen was
driving, he requested Boyes to fax to his office the details of the
bank account into which
the money should be deposited. Esterhuysen
acknowledged when he was cross-examined that he knew how Boyes ‘felt’
about
the shares at the time of this conversation: he was ‘unhappy’
and Esterhuysen knew that Boyes did not want the money
but the
shares.
[15] Significantly, the
banking details of Boyes were faxed to Esterhuysen the next day by
means of a letter dated 12 September
2008 from the company secretary,
Ms Karen Adam, of South African Farm Management (Pty) Ltd, of which
Boyes was a director. It read:
‘
Soos per
Charles Boyes se telefoniese gesprek gister, is die terugbetaling van
die bedrag van R145 520 vir die koop van Outspan
aandele, in die
verkeerde bankrekening betaal.
Sal julle dit
asseblief wysig, en in die onderstaande rekening betaal. Besonderhede
is soos volg: . . . (details were then provided)’.
Esterhuysen instructed
ARDC’s accountant, Mr J J Naude (Naude), to transfer the money
to the account as requested by Boyes.
Despite his best efforts, Naude
was unable to persuade ABSA to do so. However, the amount paid on 10
September 2008 was never repaid
to the ARDC.
[16]Relying on the trite
principle that a party alleging a tacit contract must catalogue in
its pleading the unequivocal conduct
and circumstances from which the
contract is to be deduced,
[3]
counsel for the appellant submitted that the letter transmitted to
Esterhuysen on 12 September 2008 was not averred in the plea
and
could therefore not be relied upon by the ARDC in establishing the
cancellation. There is in my view no merit in this submission.
The
conduct upon which the ARDC relied in its plea is that it paid the
purchase consideration back to Boyes and that he accepted
the
repayment. The letter dated 12 September 2008 is one of the facts
that would prove that allegation. In any event as Brand JA
stated in
E C Chenia and Sons CC v
Lamé
&
Van Blerk
[2006] ZASCA 10
;
2006 (4) SA 574
(SCA):
‘
If counsel
really believed that this evidence was irrelevant and thus
inadmissible because it was not covered by the pleadings,
he should
have objected there and then. The plaintiff could then have tried to
persuade the court that the evidence was indeed
covered by the
pleadings or, otherwise, sought an amendment. A party cannot be
allowed to lull its opponent into a false sense
of security by
allowing evidence in the trial court without objection and then argue
at the end of the trial, or on appeal, that
such evidence should be
ignored because it was inadmissible. It seems to me that when the
defendant’s counsel decided not
to challenge both the
admissibility and substance of [the witness’] evidence, he took
a calculated risk and any possible
prejudice resulting from such
failure must be ascribed to the realisation of that risk and not to
the plaintiff’s departure
from its pleadings.’
[4]
[17] There was in this
instance also no objection to the introduction in evidence of the
letter at the trial or any challenge to
its admissibility or
substance. On the contrary, the version of Boyes and that of his
secretary regarding the letter was foreshadowed
in the
cross-examination of Esterhuysen, albeit that they were not called as
witnesses. The cross- examination of Esterhuysen on
this aspect reads
as follows:
‘
. . . Mr Boyes
was under a lot of pressure with ABSA Bank he had a discussion with
Ms Adam who was the group secretary of SAFM he
merely told her they
paid into the wrong account she took the initiative and wrote this
letter without having been informed by
Mr Boyes (1) that the funds
should be re-deposited into this account (2) he did not provide her
with this information she obtained
this information from an
administrative lady Mr Boyes did not give this information to her and
she took her own initiative to wrote
this letter because she could
not get hold of Mr Boyes at that point in time. I just need to put
that to you if you want to respond
to that. — All I can respond
to is that you know I requested the banking details and it was sent
the following day as I testified.’
[18] The conduct of the
ARDC in repaying the purchase price that Boyes had paid pursuant to
the conclusion of the sale agreement,
and that of Boyes in accepting
and retaining the repayment, seen against the background of the
dispute between them and the ARDC’s
refusal to transfer the
shares to Boyes, establishes unequivocally an intention on their part
to cancel the sale agreement. This,
in the absence of an answer by
Boyes, is the only reasonable inference to be drawn from their
conduct. Despite the fact that he
was unhappy about the ARDC’s
conduct, and until the eleventh hour, insisted on transfer of the
shares rather than repayment
of the purchase consideration, Boyes
nevertheless ultimately agreed to the cancellation of the sale
agreement. Consensus ad idem
on their part has been proved on a
preponderance of probabilities.
[19]
The
appellant, however, argued at the hearing of the appeal that the
agreement of Boyes and the ARDC to cancel the sale can have
no legal
effect since the finding of the court of first instance of a valid
cession of Boyes’s rights under the sale to the
appellant on 1
April 2008 had not been impugned and the cession was fully operative
at the time when the sale agreement was cancelled
during September
2008. The consequence, so it was argued, is that Boyes by then could
not legally have cancelled the sale agreement
with the debtor (the
ARDC). The ARDC objected to the argument being raised for the first
time at the hearing of the appeal. However,
this court ‘is
entitled to base its judgment and to make findings in relation to any
matter flowing fairly from the record,
the judgment, the heads of
argument or the oral argument itself.
[5]
[20]
This
argument as to the effect of the cession ignores the common cause
fact that the ARDC received no notice of the cession prior
to the
institution of the action. Protection is afforded to a debtor who
deals with a cedent without notice of a cession. It is
trite that a
debt is discharged if a debtor pays the cedent in ignorance of the
cession.
[6]
This overall
qualification holds true not only for payment but for any transaction
entered into between the debtor and the cedent
and reflecting on the
debt, such as set-off, settlement, termination by agreement and
release, the granting of an extension of
time to pay or the
acknowledgement of liability for the purpose of interrupting
prescription.’
[7]
[21] SWJ van der Merwe,
LF van Huyssteen, MFB Reinecke and GF Lubbe Contract General
Principles 4
th
Ed at 416, correctly in my view, put the
matter thus:
The protection
provided to a debtor, who deals with the cedent in good faith, has
been extended to other situations, such as where
the debtor, in good
faith, concludes a compromise with the cedent, obtains release from
him, or is granted an extension of the
time for performance. The same
holds true where the debtor, in good faith, attempts to set off
against the cedent a claim, that
only became liquidated after the
cession. In all these cases the debtor is treated as against the
cessionary as if the cedent is
still the creditor, with whom the
debtor could have transacted the extinction of the debt.’
[8]
[22]I conclude therefore
that the prior cession of Boyes’ right to claim transfer of the
shares constitutes no impediment
to the validity of the cancellation
of the sale agreement subsequently concluded between the ARDC and
Boyes.
[23]In all these
circumstances the appellant had no right to claim transfer of the
disputed shares. The appeal is dismissed with
costs, including those
of two counsel.
P A MEYER
ACTING JUDGE OF APPEAL
APPEARANCES:
For Appellant: N G D
Maritz SC (with him A P J Els)
Instructed by:
Thomas
& Swanepoel, Pretoria
Symington
& De Kok, Bloemfontein
For Respondent: A J H
Bosman SC (with him J G Blignaut)
Instructed by:
Naudé
& Britz, Pretoria
Naudés
Attorneys, Bloemfontein
[1]
Per
Corbett JA in
Van
Streepen & Germs (Pty) Ltd v Transvaal Provincial Administration
1987
(4) SA 569
(A) at 588H-I.
[2]
At 292A-C.
[3]
See
eg
Triomf
Kunsmis (Edms) Bpk v AE & Cl Bpk en Andere
1984
(2) SA 261
(W) at 267G-H.
[4]
Para 15.
[5]
Per Harms JA in Thompson v South African Broadcasting Corporation
[2000] ZASCA 76
;
2001 (3) SA 746
(SCA) para 7, followed in Cuninghame v First Ready
Development 249
2010 (5) SA 325
(SCA) para 29 and in Nedbank Limited
v Mendelow NO (686/12)
[2013] ZASCA 98
(5 September 2013) paras
17-18.
[6]
Illings
(Acceptance) Co (Pty) Ltd v Ensor NO
1982
(1) SA 570
(A) at 578E-F.
[7]
LAWSA
Vol 2
Part 2 Second Edition para 48. PM Nienaber referred to the following
cases
in
the footnotes to this passage:
Trust Bank van Afrika Bpk v
Oosthuizen
1962 (2) SA 307
(T);
Rixom v Mashonoland Building Loan & Agency Co Ltd
1938 SR
207;
Turbo Prop
Service
Centre CC v Croock
1997 (4) SA 758
(W);
Van der Byl & Co
v Findlay & Kihn
(1892)
9
SC 178
at 181;
African Banking Corporation v Blauwklip Garden Co
Ltd
(1908) 25 SC 946
;
Lovell
v Paxinos & Plotkin: in re Union Shopfitters v Hansen
1937
WLD 84
; and
Aussenkehr
Farms
(Pty) Ltd v Trio Transport CC
2002 (4) SA 483
(SCA) at 496B-E.
[8]
The learned authors referred to the following cases in the footnotes
to this passage:
Brook
v
Jones
1964 (1) SA 765
(N);
Oosthuizen
(supra);
African
Building Corporation
(supra);
Turbo
Prop
(supra);
Van der Byl (supra)
;
Lovell
(supra);
Agricultural & Industrial
Mechanisation
(Vereeniging) (Edms) Bpk v Lombard
1974 (3) SA 485
(O);
Stannic
v Samib
Underwriting
Managers (Pty) Ltd
[2003] 3 All SA 257
(SCA);
Van Zyl v Look
Good Clothing
CC
1996 (3) SA 523
(SE); and
Momentum Group Ltd v Van Staden
[2009] 4 All SA 218
(SCA).