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[2012] ZAECPEHC 70
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Cowley and Another v Lai Thom and Another (1117/2010) [2012] ZAECPEHC 70 (25 September 2012)
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE – PORT
ELIZABETH)
Case No.:
1117/2010
Date
heard: 16 March 2012
Date
delivered: 25 September 2012
In the matter between:
NIGEL COWLEY
First Plaintiff
MARGARET COWLEY
Second
Plaintiff
And
EDWARD LAI THOM
First
Defendant
PAM
GOLDING PROPERTIES
Second Defendant
JUDGMENT
DAMBUZA, J
:
In this action the plaintiffs, who
are married to each other, seek an order declaring that there is no
binding agreement of sale
between them and the first defendant. They
also seek refund of an amount of R115,000.00 which they paid into
the second defendant’s
trust account, on an understanding that
there was a valid agreement of sale between them and the first
defendant.
The plaintiffs’ case is that
they discovered, after they had paid the deposit, that their offer
to purchase certain property
from the first defendant had expired by
the time he accepted it.
The plaintiffs live in Perthshire,
United Kingdom. During 2007 they were looking for immovable property
to buy in and around Port
Elizabeth. They eventually made an offer,
through Pam Golding Properties (the second defendant) to buy Erf No
6 (No 28 Lazy Waves)
Kini Bay, Port Elizabeth.
Because the plaintiffs were overseas
when making the offer, most of the communication between them and
the Estate Agent (and later,
the attorneys who were to effect the
transfer of the property to them) was by emails exchanged between
them. The content of
these emails was not in dispute at the trial.
Evidence led was largely explanation of that correspondence. I
shall therefore,
in this judgment, refer extensively to that
correspondence.
The evidence was that whilst the
plaintiffs were looking for immovable property as stated, they were
contacted by Linda de Lange,
an Estate Agent employed by the second
defendant, who showed them the property described above. The
plaintiffs made an offer
to purchase the property for R1,000,050.00;
this offer was declined by the first defendant (the owner of the
property). They
then revised the offer to R1,150,000.00, which was
accepted by the first defendant. The plaintiffs then paid the sum of
R115,000.00
as deposit towards the purchase price into the bank
account of Pam Golding Properties.
At the trial it was common cause that
the plaintiffs’ offer to purchase was to expire at
“10
pm”
on Saturday 7 April 2007. It was also common cause
that the offer was accepted by the first defendant on 15 April 2007
and that
the plaintiff paid the deposit of R115,000.00 on 25 April
2007. When the plaintiff’s paid the deposit they were not
aware
of the late
“acceptance”
of their offer.
For a while after payment of the
deposit it seemed that all was well, until 4 May 2007, when the
conveyancers who were to attend
to the transfer of the property,
called for a bank guarantee from the plaintiffs in respect of the
balance of the purchase price
(R1,035,000.00). To this demand the
first plaintiff responded that they had made arrangements for their
funds to be available
on 22 August 2007 as they had been advised, by
the Estate Agent, that the balance of the purchase price would be
payable on registration
of transfer. He objected to the demand for
transfer fees and the guarantee, stating that the deadline set (25
May 2007), by
which they had to furnish the guarantee, was
arbitrary.
Indeed clause 5 of the offer to
purchase provided that registration of transfer would be effected on
22 August 2007 or as soon
as possible thereafter. But clause 2.2 of
the offer to purchase provided that:
“
The
balance of R
1,035,000 (One million and thirty five thousand rand)
shall be paid to the Seller’s conveyancers (conveyancers)
against transfer. When requested by the conveyancers, the
Purchaser shall furnish a guarantee/s by a financial institution
approved by and acceptable to the Seller, securing payment of such
balance. Such guarantee/s shall be delivered by the Purchaser
within 14 (fourteen) days of the conveyancers’ request
which
request can be made at anytime but not before the fulfilment of any
suspensive or resolutive conditions which are a necessary
pre-requisite for the provision of such guarantees contained in
clause 6 of this contract or otherwise provided for.”
Clause 5 provided that:
“
Transfer
shall be effected by the conveyancers on
Registration
+
22-08-07
or as soon
as possible thereafter, provided the Purchaser has complied with the
provisions of 2.1
and
2.2
, signed all
necessary bond and transfer documents and paid all necessary costs of
transfer. The Purchaser shall upon demand by
the conveyancers make
such payments and the Seller and the Purchaser shall sign all
transfer documents when so required by the
conveyancers. The Seller
shall upon demand, if the conveyancers so require, pay to the
conveyancers such amounts as may be necessary
to obtain a rates
and/or levy/ies clearance certificate to facilitate transfer.”
(my emphasis)
A flurry of emails was exchanged
between the plaintiffs and Ms Samantha Craddock, the conveyancer,
during the period 24 May to
28 May 2007. In that correspondence the
conveyancer essentially demanded that the plaintiffs furnish a
guarantee as provided
for in the offer to purchase, and the
plaintiffs refused to furnish same, on the basis that their
understanding was that clause
2.2 of the offer to purchase was not
applicable. In one of the emails dated 28 May 2007 Ms Craddock
explained the demand for
a guarantee to the first plaintiff as
follows:
“
We
are aware that registration of transfer is only to be effected by the
22nd of August 2007 but our responsibility is to have the
purchase
price secured by means of a guarantee which does not entail the funds
being paid out prior to 22-08-07.”
Again Ms Craddock, in an email dated
25 May 2007, warned the plaintiff that failure to comply with the
demand to furnish a guarantee
(together with signed transfer
documents) by 25 May 2007, would necessitate that they (the
plaintiffs) be put to terms. To this,
the plaintiffs responded in an
email dated 26 May 2007, as follows:
“Regarding
the offer to purchase contract, we have completed a number of offers
to purchase in relation to this transaction
due to numerous errors by
Pam Goldings agents in relation to various dates and details
regarding, for example, address details,
expiry of the offer and
dates of registration.
Pam
Goldings agent categorically told us that we only had to pay our 10%
deposit and the balance to be paid on transfer. Accordingly
we took
it that clause 2.2 that you refer to was not applicable. We also
have 2 different copies of the offer to purchase –
one where
clause 2.2 was not completed and one where it was.
However
our understanding is that the seller did not comply with the offer
expiry date in the latter case
.
I
trust then that you may understand that the handling of this contract
to date has appeared somewhat disorganised and as such very
different
from our previous land purchase transaction in Kini Bay.
We
would however ask that you convey to the vendor that our offer and
actions are in good faith and that we are serious purchasers
as
reflected by our lodgement of 10% ie. R115,000 (by no means a small
deposit). The reason for our suggested completion / registration
date is that our funds are tied up until the beginning of August and
as such we will not be able to provide a guarantee
.
We
will try to make contact with you this coming Monday (28th May) to
discuss the situation more fully and will try to get the required
documentation to you as soon as we are able.
Sincere
apologies for any delays but as previously stated e-mail is not our
best form of contact and we are in an
extremely
busy business period
at this point.”
(my emphasis)
By 29 May 2007 the problems relating
to the furnishing of a guarantee seemed to be resolved as the
conveyancers wrote to the plaintiffs
that the first defendant had
agreed that the guarantee requirements be put on hold until the
middle of or late in August 2007,
when the plaintiffs’ funds
would be available.
Thereafter, correspondence between
the conveyancers and the plaintiffs, during the period June to mid
August 2007 related to the
preparation and signing of transfer
documents. In particular, during July 2007, the conveyancers wrote
to the plaintiffs enquiring
about transfer documents which had been
forwarded to them and telephone (voice) messages which had been left
for them to which
there had been no response. In an email dated 18
July 2007 the conveyancers reminded the plaintiffs, amongst others,
that registration
of transfer was scheduled to take place on 22
August 2007. On
7 August 2007 the conveyancers wrote to the
plaintiffs again confirming that registration of transfer was set
for 22 August 2007
and inquiring once again as to when the balance
of the purchase price would be transferred to them to enable them to
proceed
with registration of transfer.
By 24 August 2007 registration of
transfer had not occurred, although the transfer documents had been
lodged with the office of
the Registrar of Deeds. Registration of
transfer was held back because the plaintiffs had not paid the
balance of the purchase
price. The conveyancers then placed them on
terms in a letter of demand, giving them 7 days from the date of the
letter (24
August 2007), to transfer the balance of the purchase
price and transfer costs into their trust account. Another letter
(strangely,
also dated 24 August 2007) was addressed to the
plaintiffs, advising that the 7 day notice period had expired and
that the first
defendant had instructed the conveyancers to cancel
the sale agreement as a result of the plaintiffs’ default (by
failing
to pay the balance of the purchase price and transfer costs
as demanded).
On 27 August 2007 the first plaintiff
responded to the cancellation of the agreement as follows:
“
As
you acknowledged at that time, per clause 13 our offer to purchase
‘expire[d] at 10.00 pm on Saturday 7
th
April...’ and ‘[was]...shall be deemed to be accepted on
signature ... by the seller ...’
You
confirmed that in fact Mr Thom did not sign acceptance of that offer
until the 15
th
April 2007, long after our offer had
expired and through your subsequent actions seemed to acknowledge
that in light of this fact
the documentation relating to our offer to
purchase does not in fact constitute a binding ‘contract’.
This failure
by Mr Thom to respond in a timely manner had far
reaching consequences in regard to our commitments at that time and
moving forward.
I
should note for the record however that to date you have not
responded to the requests from both my wife and myself for hard copy
of this documentation and it would seem inappropriate for us to be
threatened with ‘breach’ or placed ‘on terms’
of a document which we have never been afforded access.
By copy
of this letter I would hereby repeat my request for a clean and clear
(legible) hard copy of this pivotally important document
to be
forwarded to us by post.
Further
I should note, in trust that you may relate to your client, that when
this absence of a contractual agreement was identified
my wife and I
suggested to you in good faith that this be addressed by furnishing a
‘clean and clear’ offer to purchase
for timely completion
or a mutually agreed binding summary contract. Once again to date
this suggestion has not been taken up
in spite of adequate time
having elapsed.
Whilst
we could endeavour to make funds available within the three week
timeframe previously suggested by your client if you indicated
to us
that this would be acceptable we should note that in the absence of a
binding contractual commitment from the seller, which
to date you
have not furnished despite our requests, we will not be bound by your
‘demands’.
I
should also note that should Mr Thom withdraw his offer to sell
represented by your firm for whatever reason we will demand return
of
the funds lodged with your firm / PGP (R115,000) in good faith as you
have failed to furnish a binding commitment from the seller.
Finally,
notwithstanding the above points, we should make it clear that it is
still our desire and intention to complete the purchase
once the
appropriate agreement has been properly documented. You will
understand that we would be reluctant to forward over R1,000,000
without clear documented assurance that a binding contractual
agreement exists.
Without
prejudice.”
It was common cause at the trial that
the last page of the
“accepted”
or signed offer
to purchase that had been sent to the plaintiff by email was
illegible, to the extent that the date of signature
thereof by the
first defendant was unascertainable therefrom. Hence, the request
by the first plaintiff for a clear copy thereof.
It is for the same
reason that the plaintiffs did not immediately become aware that
their offer had been accepted after the
expiry thereof.
On 28 August 2007 the plaintiffs
wrote to Ms Craddock as follows:
“
There
is no contract with “terms” or conditions for you to
place us “on terms” of or make demands on.
Whilst
we have indicated our desire to complete the purchase of ERF 6, Kini
Bay – lodged a substantial deposit toward the
purchase and
attempted to complete required admin to that end in the interim –
the fact remains that no actual contract with
‘terms’
exists.
Whilst
you may wish to infer a ‘verbal’ or similar contract,
certainly we have at no point indicated any willingness
to accept any
of the terms or conditions relating to our previously documented
offer or otherwise. This was made perfectly clear
to you at the end
of May and by your actions in not following up on your previous
threat to hold us ‘in breach’ and
‘place us on
terms’ at that time I believe you have indicated that you
understood this perfectly well.
I
do not believe that you are in a position to hold us ‘on terms’
as no ‘terms’ have been agreed despite
our previous
request to furnish us with a binding commitment from your seller.
Without
prejudice.”
The response by the conveyancers was
that the plaintiffs had requested them (the conveyancers) to advise
the first defendant of
their intention to continue with the purchase
despite the late
“acceptance”
of the offer, and
that response forms the basis of the defendants’ defence in
these proceedings. In their plea, the defendants
contend that the
conduct of the plaintiffs, after being aware of the irregularity
regarding the acceptance of the offer, constituted
a
“waiver”
of their right to elect not to be bound by the agreement and that
the plaintiffs, in fact, accepted the existence of a valid
contract.
On cancellation of the sale agreement
R65,550.00 of the funds paid by the plaintiffs as deposit towards
the purchase price were
paid to the second defendant as commission
whilst the balance was paid to the first defendant.
Apart from what is already stated
above, Linda de Lange’s undisputed evidence was that at no
time, whilst she dealt with
the plaintiffs, did the late acceptance
of the offer or the validity of the agreement become an issue.
It is a general principle in the law
of contract that where acceptance of an offer is stipulated to be
made within a specified
time, the offer expires at the end of the
prescribed time and is no longer open for acceptance.
1
It is on this basis that the plaintiffs contended that there never
was a binding agreement between them and the first defendant.
According to Christie, if the
offeree purports to accept an offer after the fixed time has
expired, the offeror is not bound to
a contract and the proper way
to interpret the late “acceptance” is as a counter-offer
which the original offeror
can accept or reject as he wishes.
2
The plaintiffs’ case in this
regard, that they only became aware of the counter-offer on 24 May
2007, is not in dispute.
Further the correspondence to which I
have referred shows that until shortly before 24 May 2007 the
plaintiffs consistently
sought confirmation, from both Estate Agent
and the conveyancers, that they had a valid agreement of sale with
the defendant.
At that stage, their concern was not being in
possession of a hard copy of what they considered to be a
“duly
signed agreement of sale”.
On 30 April 2007 the first
plaintiff wrote to Ms de Lange that
“Whilst I am assuming
that we now have a binding agreement regarding the Kini Bay
transaction I am aware that several aspects
of the transaction and
timescales etc are somewhat unusual because we are not ‘local’”.
The plaintiffs were assured by Ms de Lange that the copy of the
signed agreement that had been emailed to them was the actual
agreement. This, of course, was not correct, as the plaintiffs’
offer had expired by the time of acceptance thereof.
Having become aware of the
irregularity in the acceptance of their offer, the plaintiffs, on 26
May 2007, wrote the email letter
quoted in paragraph 11 above. The
evidence of the first plaintiff was that, immediately on being aware
of the belated acceptance
of the offer, he told the conveyancer, Ms
Craddock that he did not consider himself (and his wife) bound by
the “agreement”
and that he could not be placed on terms
on an invalid agreement. On the other hand, Ms Craddock’s
evidence was that the
validity of the offer was never protested by
the plaintiff; her recollection of the events was that the
plaintiff remained keen
on continuing with the agreement. I have
difficulty in making a finding, on their oral evidence alone, as to
what, exactly was
expressed by the first plaintiff in the telephone
discussions he had with Ms Craddock in this regard. But it is
significant
that in the first plaintiff’s email of 26 May 2007
he specifically referred to the error regarding the “
expiry
of the offer”,
and to
the failure by the first
defendant to
“comply with the offer expiry date”,
but he then requested Ms Craddock to “
convey to the vendor
that our offer and actions are in good faith and that we are serious
purchasers as reflected by our lodgement
of 10% ie. R115 000 (by no
means a small deposit). The reason for our suggested
completion/
registration
date is that our funds are tied up until the
beginning of August and as such
we are not able to provide
a guarantee
”.
The plaintiffs’
bona fides
regarding the transaction was, again, expressed by the first
plaintiff in an email by the first plaintiff to the conveyancers on
27 May 2007.
I am of the view that whilst, in the
email of 26 May 2007, the first plaintiff did complain of errors in
the various documents
drawn by the Estate Agent and the conveyancer,
he did not convey any repudiation of the
“agreement”
.
It seems to me that the plaintiffs intention was to continue with
the transaction on the terms set out in their original offer
to
purchase, save that there would or should be no requirement that
they furnish a guarantee. Indeed the evidence of the first
plaintiff was that they were still interested in buying the property
on terms that would allow them to pay the balance of the
purchase
price in August. The only aspect that would change would be that
there would be no provision that a bank or any other
guarantee for
payment of the balance of the purchase price would have to be
furnished.
At the trial the first plaintiff
testified that although he did make the suggestion to Ms Craddock
that the requirement to furnish
a guarantee should not form part of
the agreement, nothing was agreed on. I do not agree. As I have
stated, Ms Craddock in the
email of 29 May 2007 addressed to the
second plaintiff, conveyed that the first defendant was happy that
the transaction proceed
on the terms suggested by the plaintiffs.
Indeed no further demands were made for a guarantee to be furnished
by the plaintiff.
My understanding of the sequence of
events is therefore that after the plaintiffs had become aware of
the first defendant’s
counter-offer they made their own
counter-offer to him. I am satisfied that, when instructing Ms
Craddock to
“hold
off”
on the
guarantee requirements, as Ms Craddock testified, the first
defendant intended to accept the plaintiffs’ counter-offer.
It
also appears from the evidence that such was the understanding of
the parties involved in the transaction; hence no further
demands on
the plaintiffs to furnish a guarantee were made.
But the question is whether the first
defendant’s acceptance of the plaintiff’s counter-offer
resulted in a valid
agreement of sale. It is trite that section 2
of the Alienation of Land Act (the Act) requires an agreement
relating to alienation
of immovable property to be
contained in a deed of alienation signed by the parties thereto or
their agents acting on their written authority
.
3
Contracts which do not comply with the provisions of this section
shall be of no force and effect and there is no room for argument
that the section can be waived by either party.
4
The evidence was that the first
defendant’s instruction that Ms Craddock should accept the
plaintiffs’ counter-offer
was made telephonically and Ms
Craddock communicated the acceptance of the counter-offer in the
email of 29 May 2007. In
that email Ms Craddock referred to a
telephonic conversation
which she had had with the first defendant earlier on that day.
According to Christie:
5
“
The
requirement in s 2(1) that the contract be ‘signed’ is
not fulfilled by the inclusion in an oral contract of a term
that the
contract will be reduced to writing. Nor is it fulfilled by a
written document signed by only one party, nor by a written
offer
tacitly or orally accepted, since this would be ‘admitting the
very mischief which the law was passed to exclude”.
Nor is it
fulfilled by signature of a blank page which is later completed with
the terms of the contract. This difficulty cannot
be overcome by
appointing the one party to the contract as the agent of the other.
But if the offer and acceptance are in writing
the acceptance may be
communicated by telegram, by telephone or orally. It does not matter
whether the signed written document
describes itself as the contract
itself or as a memorandum or confirmation of a prior oral agreement,
especially if it was drawn
up by laymen.”
And further, that the following
appears:
6
“
The
question of how much of the contract must be in writing has led to
some difficulty. There is no doubt that the material terms
must be
in writing. A document signed by the offeror, and then amended in a
material respect by the offeror’s orally authorised
agent in
the presence of the offeree, who then signs, is valid. But a written
offer, together with a written counter-offer which
is accepted, but
not in writing, is invalid. Statements in some of the judgments that
the essential terms of the contract must
be in writing merely mean
that unless all the essential terms of a contract of sale –
subject-matter, parties and price –
are in writing the written
contract is so incomplete that it can have no legal effect. These
statements do not mean that provided
the three essential terms are in
writing any additional terms, however material, need not be in
writing but may be proved by extrinsic
evidence.”
In my view the acceptance, by the
first defendant, of the plaintiff’s counter-offer, that the
furnishing of a guarantee/s
should not form part of the agreement,
did not comply with the pre-emptory provisions of section 2 of the
Act. For that reason
even the second attempt by the parties at
concluding an agreement of sale, failed and in the end no agreement
of sale was ever
concluded by the parties in this matter.
Consequently, the plaintiffs are
entitled to refund of the R115 000,00 paid by them towards the
purchase price.
The defendants are ordered jointly
and severally, the one paying the other to be absolved, to pay to
the plaintiffs:
An amount of R115,000.00;
Interest on the said amount at the
legal rate of 15,5% per annum
a tempora morae
;
Costs of suit.
_________________________
N.
DAMBUZA
JUDGE
OF THE HIGH COURT
Appearances
:
For the plaintiffs:
Adv A Beyleveld SC
Instructed by
Kaplan Blumberg Attorneys
of Port Elizabeth
For the defendants:
Adv B Pretorius
Instructed by
Greyvensteins Attorneys
of Port Elizabeth
1
Christie’s: The Law of Contract in South Africa; 6
th
edition; at 50.
2
Supra
at 50 – 51.
3
Section 2(1) of
Act 68 of 1981.
4
Christie’s (supra) at 116.
5
At 118
6
At 122