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[2016] ZAECPEHC 11
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Gerber v Naidoo and Another (3048/2015) [2016] ZAECPEHC 11 (25 February 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
CASE
NO: 3048/2015
DATE
HEARD: 03/12/2015
DATE
DELIVERED: 25/02/2016
In
the matter between:
JAN
LEONARD GERBER
APPLICANT
AND
PUNITHAN QUENTIN
NAIDOO N.O
FIRST RESPONDENT
JOELENE
BROWN N.O
SECOND RESPONDENT
In
their capacities as liquidators of the
Closed
Corporation in Emhlantini Haven CC
(Registration
No. CK 2003/084950/23)
JUDGMENT
COSSIE
AJ
INTRODUCTION
1.
The Applicant launched these proceedings, on 5 August 2015, against
the First and Second Respondents (the Respondents) in their
capacity
as joint liquidators of Emhlatini Haven CC, a Close Corporation
registered in terms of the law of the Republic.
2.
The Applicant is seeking an order directing the Respondents to
transfer the property known as Erf [….], [M....],
Draaifontein,
Port Elizabeth, (“the property”) into the
name of the Applicant.
3.
The remainder of the relief sought is ancillary to the property
transfer process.
4.
The Respondents opposed the application.
BACKGROUND
5.
The Respondents made an offer to sell the property which was bonded
to Standard Bank. The offer was made subject to the consent
of the
bond holder. The Applicant accepted the offer and signed the contract
on 17 March 2014. The material terms of this
contract are as
follows:
5.1
The purchase price is the sum of R1.8 million;
5.2
A 10% deposit towards the purchase price in the sum of R180 000.00
was
payable;
5.3
The balance of the purchase price, in the sum of R1 620 000.00
was payable against
registration of the property into the name of the
Applicant;
5.4
Applicant was to pay occupational interest of R12 000 per month;
5.5
Applicant and Respondents acknowledge that the agreement constitutes
the entire contract
between them and that no other conditions,
warranties or representations were made to either party or their
agents other than those
included in the contract;
5.6
It was a “special condition” that the property would be
maintained by the Applicant
until registration.
6.
The Applicant paid the deposit in full on 14 May 2014, thereafter he
took occupation and paid occupational interest in the sum
of
R11 800.00 on 20 May 2014.
7.
The contract is silent about the payment of VAT in relation to the
purchase price.
8.
On 15 December 2014 the Applicant received a pro-forma invoice from
the transferring attorneys in which he was advised, for the
first
time, that he was liable to pay VAT on the purchase price and was
also advised that he was in arrears with his occupational
interest.
9.
According to pro-forma invoices as well as email correspondence from
the transferring attorneys received prior to 15 December
2014, the
Applicant did not owe any monies. The Applicant contends that VAT is
not payable as the offer to purchase did not make
provision for VAT.
The Applicant also denies that he is liable for payment of further
occupational interest and predicates this
contention on the fact that
on 24 November 2014 he was in credit in the amount of R37 021.40.
10.
On 4 March 2015, the Respondent sent the Applicant a letter calling
on him to make payment of an amount of R139 989.44
comprising of
arrear occupational interest and electricity charges for the months
of April, November and December 2014 and January-
March 2015.
11.
The Applicant denies that he is liable for the amount reflected in
the letter dated 04 March 2015. He contends that on his calculations,
his electricity usage amounts to R29 304.30 which differs vastly
from the account received from the transferring attorneys
in respect
of electricity charges. The Applicant alleges that he is only liable
for electrical usage from the date of occupation.
12.
The Respondents have twice purported to cancel the agreement on the
basis that the Applicant owed occupational interest and
electricity
charges. In the cancellation letters no mention of VAT was made by
the Respondents.
13.
The Applicant denies that he was in
mora
at the time the agreement was purportedly cancelled. The
Applicant also alleges that the letter of cancellation by the
Respondents
was defective and without the legal effect. He
contends that he complied fully with his obligations in terms of the
agreement
of sale and is therefore entitled to transfer of the
property into his name.
14.
The Respondents deny that the Applicant is entitled to the relief
sought as the agreement of sale was validly cancelled on account
of
the Applicant’s breach.
15.
The Respondents contend that the agreement must be rectified in order
to reflect the parties’ alleged true intention that
is that the
purchase price was exclusive of VAT. However, they did not make a
formal application in that regard.
ISSUES
16.
The issues that are in dispute are the following:
16.1
Whether the purchase price included VAT;
16.2
Whether the agreement provided for the payment of electricity by the
applicant; and
16.3
Whether the Respondents were entitled to cancel the agreement.
THE
LAW
17.
A contract of sale is concluded when a seller and a purchaser agree
on the item sold and the purchase price, and the prescribed
statutory
formalities have been complied with.
18.
The courts have long regarded the nature of the transaction or the
manifest purpose of the contract as vitally important in
its
interpretation, as it would be confirmatory of the common intention
of the parties.
19.
Sections 2
(1) and
6
of the
Alienation of Land Act 68 of 1981
provide
for the formalities that have to be complied with in respect of
alienation of land, inter alia, that a sale must be in
writing,
contained in a deed of alienation, must have a description of the
parties to the deed, the description of the property
sold and the
purchase price. The deed must be signed by the parties or their
agents acting on their written authority.
20.
The Value Added Tax Act 89 of 1991 contemplates that transactions
that attract VAT may be concluded on both a VAT inclusive
and a VAT
exclusive basis, subject upon which the purchase price is quoted.
The obligation to pay VAT on a transaction where
VAT is payable rests
on the seller and not the purchaser. In this regard see
Strydom
v Duvenhage N.O. and Another
1998 (4) SA 1037
SCA at 1043 H-I.
21.
I will deal with the issues seriatim:
The
first issue is whether the purchase price includes VAT. The
Applicant’s contention in this regard is that he never agreed
to pay any amount for VAT and nowhere in the agreement was it agreed
between the parties that VAT would be payable.
22.
The Applicant also contends that section 64 (1) of the VAT Act
contains the presumption that any price charged by a vendor is
deemed
to include VAT.
23.
The purchase price was the sum of R1 800 000.00 and the
deposit of 10% of the purchase price was paid in full on 14
May
2014. Thereafter the Applicant took occupation of the property
and paid occupational interest of R12 000.00 per
month.
24.
The Respondents contend that the Applicant is liable to pay VAT on
the basis that the Applicant was aware that VAT was payable
as it was
a requirement of the bondholder. The offer to purchase was subject to
the consent of the bondholder. The letter
of acceptance from
the Bank clearly stated that the offer met the Bank’s approval,
subject to the purchase price payable
for the property excluding
VAT.
25.
The rules of interpretation in this regard can be expressed as
follows: “Interpretation is the process of attributing
meaning
to the words used in a document, be it legislation, some other
statutory instrument, or contract, having regard to the
context
provided by reading the particular provision or provisions in the
light of the document as a whole and the circumstances
attendant upon
its coming into existence.” see
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
at 603 para [18].
26.
The Respondents made an offer to the Applicant who subsequently made
an unequivocal acceptance, subject to the consent of the
bond
holder. The acceptance was absolute, unconditional and
identical with the offer. See in this regard
JRM
Furniture Holdings v Cowlin
1983
(4) SA (W) where Nedstadt J, as he then was, stated at 544 A-C “The
trite rule relevant in this regard is that
the acceptance must
be absolute, unconditional and identical with the offer.
Failing this, there is no consensus and therefore
no contract.”
See Wessels: Law of Contract in South Africa 2
nd
Edition Vol I para 165
et
seq
.
27.
Having regard to the two cases mentioned above which make a clear
exposition of how contracts have to be interpreted, in my
view, the
literal meaning of the words embodied in the contract, the
interpretation of which is the subject matter of this application,
it
is clear that VAT was inclusive and there is no need to use other
tools of interpretation. The provisions of the VAT legislation,
in
particular section 64 (1) of the Act contains the presumption that
any price charged by a vendor is deemed to include VAT.
In this
regard see
Huntleigh
Hejsani Duncal Manufacturing (Pty) Ltd v Hejsani Wagner Investments
CC
[2005] JOL 13883
T.
28.
The fact that the bond holders had to consent to the offer to
purchase did not give them an authority to vary the essential
terms
of the written contract which were already agreed upon by the
parties. The person to whom an offer is made can only
convert
it into a contract by accepting, as they stand, the terms offered; he
cannot vary them by omitting or altering any of the
terms or by
adding proposals of his own. It follows that if the acceptance
is not unconditional but is coupled with some
variation or
modification of the terms no contract is constituted. See Wille:
Principles of South African Law 7
th
Edition at 310
et
seq
.
29.
The Respondent’s assertion that the contract must be rectified
in order to reflect the true intentions of the parties
does not hold
as according to
Gralio
(Pty) Ltd v D E Claasen Pty Ltd
1980 (1) 816 (A), a formal application for rectification is
unnecessary, except where the contract has to be in writing in order
to be valid, if facts have been pleaded that warrant rectification
and the court is asked to decide on the written contract as
it ought
to read if it was corrected. See Hofman and Zeffert:
“The South African Law of Evidence”
4
th
Edition at 315.
30.
In the circumstances the Respondents were supposed to have brought a
formal application for rectification and they failed to
do so. As
submitted by the Applicant, the Respondent failed to bring such
application for rectification in all likelihood with
a view to
avoiding the onus they would carry in that event.
31.
In my view, the purpose of rectification is to make the document
conform to the ‘true’ agreement of the parties.
It
does not mean amending or varying the contract, as the Respondents in
the present matter purported to do. It is a procedural
device to
re-word a written contract so that it accurately reflects the
intention of all the parties.
32.
In the light of the above, it is clear that there was no common
intention between the parties to exclude VAT from the purchase
price. The contention made by the Respondents that the contract
incorrectly reflects the terms of the contract between the
parties
is, therefore, not sustainable.
33.
I now turn to deal with the second issue, namely, whether the
contract provided for the payment of electricity by the applicant.
The Applicant has submitted that the contract contains no provision
for the transfer of ownership of the property that is dependent
on
the Applicant paying for electricity usage during his occupancy. The
obligation to pay electricity is not a term of the contract.
The
contract is silent on who is responsible for the payment of
electricity usage. However, the Applicant has conceded that he
is
liable for electricity charges from the date of occupation.
34.
In my view, where a query has been raised about the payment of
electricity charges, such a query cannot be elevated or be considered
to be a breach of the contract in the present matter. Therefore the
contentions made by the Respondents are not sustainable in
this
regard.
35.
The third issue is whether the Respondents were entitled to cancel
the contract. In this regard, the Applicant has submitted
that the
Respondents were not entitled to cancel the contract as the Applicant
was not
in
mora
at the time of the purported cancellation. The Respondents
contend that the Applicant breached the contract and failed to
remedy
the breach in its entirety and accordingly the Respondents cancelled
the contract on 13 March 2015.
36.
In this regard the case of
Singh v McCarthy Retail Ltd t/a
McIntosh Motors
[2000] 4 All SA 487
(A) provides clear guidelines
on how this court should deal with this issue. As in that case, the
court in this case has to determine
whether the Respondents were
entitled to cancel the contract, either because the breach was
material, or because the parties had
tacitly agreed on a
lex
commissoria
entitling the appellant to cancel if the contract is
breached as aforesaid.
37.
The right of a party to a contract to cancel a contract on
account of malperformance by the other party, in the absence
of a
lex
commissoria
depends on whether or not the breach, objectively evaluated, is so
serious as to justify cancellation by the innocent party.
38.
Now the question to be asked is whether the breach in this present
matter is so serious that it justifies cancellation by the
Respondents.
39.
The test for seriousness has been expressed in a variety of ways, for
example that the breach must go to the root of the contract,
must
affect a vital part or term of the contract, or must relate to a
material or essential term of the contract, or that there
must have
been a substantial failure to perform. It has been said that the
question whether a breach would justify cancellation
is a matter of
judicial discretion. In more general terms the test can be expressed
as whether the breach is so serious that it
would not be reasonable
to expect that the creditor should retain the defective performance
and be satisfied with damages to supplement
the malperformance.’
(See Van der Merwe et al Contract, General Principles 1 ed 1993, at
255.)
40.
The legal question to be asked, in my view, is whether outstanding
payment of occupational interest and the payment of electricity
go to
the root cause of the contract of sale of the property. These may be
essential terms of the incidental contract but the breach
of such
terms does not go to the root cause of the contract.
CONCLUSION
41.
In my view the Respondents have failed to show that the parties
agreed that the purchase price was exclusive of VAT. The
Respondents should have applied for rectification to show the common
intention of the parties and they failed to do so. The
Respondents also failed to prove that occupational interest and
payment of electricity charges go to the root cause of the contract
of sale of property. As already indicated above the Respondents
should have applied for rectification to show the common intention
of
the parties if that was the case, they failed to do so.
42.
Accordingly the Applicant has proved that a valid written contract of
sale of the property was concluded between the parties.
43.
In the result I make the following order:
(a)
The Respondents must pass transfer to and register the property Erf
[…], [M....],
Draaifontein, Port Elizabeth (
the
“property”
)
into the name of the Applicant;
(b)
The Respondents must attend at the offices of the conveyancers of the
parties, Brown Braude
and Vlok Incorporated (
the
“conveyancers”
),
within 5 days of service of this order; provide the conveyancers with
all information necessary to pass transfer to and register
the
property into the name of the Applicant and sign all documents by the
said conveyancers to effect such passing of transfer
and registration
of the property;
(c)
In the event of the Respondents’ failing to comply with prayer
(b) the Sheriff
of the Court is authorised and directed to provide
the said conveyancers with necessary information and sign the
required documentation
within 5 days of failure of the Respondents to
do so;
(d)
The Respondents are ordered to pay the costs of this application
jointly and severally,
the one paying the other to be absolved.
______________
C.
COSSIE
ACTING
JUDGE OF THE HIGH COURT
Appearances:
For
the Applicant: Ms C K Mey, Ms B Westerdale, instructed by Lessing,
Heyns, Keyter & Van Der Bank Inc, Port Elizabeth.
For
the Respondents: Mr A Beyleveld SC, instructed by Brown Braude &
Vlok Inc, Port Elizabeth.