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[2018] ZAECPEHC 56
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Tryzone Fourteen (Pty) Ltd v Batchelor N.O and Others (3535/2013) [2018] ZAECPEHC 56 (2 October 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
CASE
NUMBER: 3535/2013
DATE
HEARD: 13/08/2018-16/08/2018
DATE DELIVERED: 02/10
/2018
In
the matter between:
TRYZONE
FOURTEEN (PTY) LTD
PLAINTIFF
and
PETER
GEORGE BATCHELOR N.O FIRST
DEFENDANT
ANDREW
JOHN BATCHELOR N.O SECOND
DEFENDANT
ROBIN
OWEN JEFFERSON
N.O THIRD
DEFENDANT
ROSEMARY
ANN BATCHELOR N.O
FOURTH DEFENDANT
MICHAEL
JAMES ORGANISATION FIFTH
DEFENDANT
ARTHUR
J
MARRINER
SIXTH DEFENDANT
ALSAK
(PTY) LTD
SEVENTH DEFENDANT
JUDGMENT
NAIDU
AJ:-
INTRODUCTION:
[1] This is an action in
which the Plaintiff seeks restitutive relief from the Defendants
arising out of a failed purchase transaction
in respect of an
immovable property. The Plaintiff claims restitution in the amount of
R835 740.00. It is further common
cause that the Plaintiff
seeks no relief from the Third Defendant herein.
[2] It is trite that the
matter initially proceeded by way of application, whereafter an order
was made by Alkema J that the matter
proceed by way of trial, with
the filing of pleadings.
BACKGROUND:
[
3]
The following facts are common cause. The property that makes up the
factual matrix of the dispute between the parties is identified
as,
‘’Unit 1, Manor Hastings, 13 2
nd
Avenue Walmer, Port Elizabeth,’’ (‘’the
Property’’).
[4] The Plaintiff company
was represented at all material times by its sole director, one
Dr
Dimitri Coutsouridis
(hereinafter ‘’
Dr
Coutsouridis’’
), a local businessman. The First to
the Fourth Defendants are trustees of the Unit 1 Manor Hastings Trust
(‘’the Trust’’),
the Fifth Defendant was the
auctioneer that attended to the sale of the property on auction. The
Sixth Defendant was the Trust’s
duly appointed agent that had
been tasked by the Trust to sell the property. The Seventh Defendant
was a juristic entity of which
the Sixth Defendant was the sole
member, and in fact had been deregistered during March 2013.
[5]
It is common cause that on or during February 2013, Dr
Coutsouridis
was drawn to an advertisement in the local print media wherein which
an immovable property, described as ‘’Unit 1,
Manor
Hastings, 13 2
nd
Avenue Walmer, Port Elizabeth,’’ (‘’the
Property’’), was advertised for sale. The sale of the
property on auction was advertised to be held on the 12
th
March 2013 at 11h00.
[6] A copy of the
advertisement is set out hereunder:
[7]
Dr Coutsouridis
being interested to purchase the property made inquiries with the
Fifth Defendant and sought further information pertaining to
the
property on the 25
th
February 2013 with the Fifth
Defendant responding to such request on the 28
th
February
2013.
[8] On the 05
th
March 2013,
Dr
Coutsouridis
attended upon an inspection
of the property and was accompanied by a representative of the Fifth
Defendant, one Mr
Ashton Galpin.
At the inspection,
Dr
Coutsouridis
was provided with a tour of the premises, with an
inspection being conducted on the ground floor as well as the first
floor of
the property.
Dr Coutsouridis
was specifically
advised by Mr
Galpin,
that the verandah on the first floor,
formed part of the property to be sold on auction. He was further
advised by Mr
Galpin
that the Trust held deposits in respect
of the leases of the property and which would be paid over to the
purchaser of the property.
[9] On the 12
th
March 2013,
Dr
Coutsouridis
attended upon the auction,
which was being held on the property to be sold. As a prospective
buyer, it was incumbent upon
Dr Coutsouridis
to sign
documentation relating to the sale. In this regard he attended to
signing a document entitled
‘’
Rules of
Auction and Conditions of Sale for Immovable Property’’,
and a document entitled
‘’
Rules of
Auction.’’
[10] It is then common
cause that Dr
Coutsouridis
bid R3 900 000-00 million for the
property, which bid was the highest, and was duly accepted as being
successful by the Fifth Defendant.
The bid amount excluded the
auctioneer’s commission and the Vat thereon.
[11] On the 14
th
March 2013, the Seventh Defendant addressed correspondence to the
Fifth Defendant advising that the Trust had accepted the auction
price and further requested that the deposit paid be transferred into
the Unit 1 Manor Hastings Trust Bank account. A trustee of
the Trust
one
R Batchelor
had signed the Conditions of Sale on behalf of
the Trust in acceptance of the offer to purchase the property.
[12] On the 15
th
March 2013,
Dr
Coutsouridis
received an email from one
‘’
Rolene’’
, an employee of the Fifth
Defendant, congratulating him on the purchase of the property, and
attached various documentation that
he had requested, which included:
1.
Signed Conditions of Sale;
2.
Acceptance Letter from the Seller;
3.
Copy of the Rates Account;
4.
Copy of the Water Account;
5.
Copy of Deposit Invoice;
6. Confirmation that the
managing agent of the property was the ‘’
Jack Allers
Group’’;
7. That the body
corporate would demarcate 14 parking bays undercover as was requested
by
Dr
Coutsouridis.
[13]
It is apposite that the Plaintiff then paid to the Fifth Defendant
the sum of R835 740-00, made up as follows:
(i) A deposit equal to
10% of the purchase price being the sum of R390 000-00;
(ii) The costs of the
relevant administrative documentation in the sum of R1140-00;
(iii) The Fifth
Defendant’s commission in the sum 10% of the purchase price,
inclusive of VAT thereon, being the sum of R444
600-00.
[14] Pursuant to the
payment of the R835 740-00,
Dr
Coutsouridis
, via his
attorneys addressed correspondence to the Sixth Defendant expressing
his increasing concern regarding the validity of
the lease agreement
between the Trust and Vaidro 120 CC, being ‘’Admirals’’,
as he had been advised by
Mr Shamley
of ‘’Admirals’’
that the lease agreement with the Trust was unenforceable due to the
non-compliance with
the suspensive conditions contained in the lease
agreement. The Plaintiff further requested proof of all payments
received by the
Trust from the lessees, and expressed the concern
that the ‘’Admirals’’ lease was a principal
lease and
that the Plaintiff had relied on such lease being in place
when the property had been purchased. The Plaintiff’s attorneys
requested the information on various occasions from the Sixth
Defendant.
[15] On the 13
th
May 2013, the Plaintiff’s attorneys finally received a reply
from attorney C.R Knoesen, submitting that the purchaser was
not
entitled to plead misrepresentation as he had failed to carry out a
due diligence of the property. In response to the correspondence
the
Plaintiff’s attorney advised the Sixth Defendant it still
requested the information it had previously requested and threatened
to file an application in terms of the provisions of the
Promotion of
Access to Information Act 2 of 2000
.
[16] The application in
terms of the
Promotion of Access to Information Act 2 of 2000
was
subsequently filed by the Plaintiff. The following documentation
inter alia
were requested:
‘’
1.
Inasfar as the agreement of lease between the Trustees of the Unit 1
Manor Hastings Trust and Vaidro 120 CC dated August 2012
(‘’the
Admirals lease’’) is concerned:
1.1
The
approval of the loan by Business Partners referred to in clause 9.1
of annexure ‘’A’’ to the Admirals
Lease.
1.2
The
proof of payment of the deposit in the sum of R52 000-00 by the
Lessee to the Lessor referred to in clause 9.2 of annexure ‘’A’’
to the Admirals Lease.
1.3
The
confirmation or waiver of the Lessee of the condition referred to in
clause 9.3 of annexure ‘’A’’ of
the Admirals
Lease.
1.4
All
invoices and proof of payments relating to the fixing of the roof
referred to in clause 9.4 of annexure ‘’A’’
of the Admirals Lease.
1.5
The
proof of payment of the amount of R27 500-00 by the Lessee to the
Lessor for the use of the premises from 16 August 2012 to
31 August
2012 referred to in clause 9.4 of the Admirals Lease.
1.6
All
invoices of the Lessor to the Lessee pertaining to amounts due by the
Lessee in terms of the Admirals Lease from 1 September
2012 to date.
1.7
All
statements of the Lessor to the Lessee pertaining to Admirals lease
from 1 September 2012 to date.
1.8
All
proof of payments of amounts paid by the Lessee to the Lessor
pertaining to Admirals Lease from 1 September 2012 to date
1.9
All
correspondence between the Lessor and the Lessee pertaining to the
Admirals Lease from 1 September 2012 to date.
1.10
All
bank statements pertaining to the deposit that the Lessor holds in
terms of the Admirals Lease.’’
[17] The Plaintiff
further requested similar information pertaining to the company known
as ‘’ZTE’’, the
second lessee occupying the
property, as well as the relevant bank statements pertaining to the
deposit paid by the Plaintiff in
respect of the agreement of sale
with the Trust for the property.
[18] It is trite that a
plethora of correspondence were exchanged between the legal
representatives for the Plaintiff and the Trust,
in addition to
various meetings held between the parties legal representatives in an
effort to resolve the issues in dispute, in
particular the
documentation requested by the Plaintiff. Regrettably it appeared
that the parties were unable to reconcile their
differences.
[19] On the 26
th
August 2013, the Trust’s attorneys addressed correspondence to
the Plaintiff’s attorney advising that should the Plaintiff
not
furnish the transferring attorney CR Knoesen with the relevant
guarantees before the close of business on the 30
th
August
2013, that their client would reserve its right to cancel the
agreement.
[20] In response to such
correspondence the Plaintiff’s attorney filed a reply on the
27
th
August 2013 to the Trust’s attorneys and
reiterated the Plaintiff’s concern regarding the validity of
the lease agreement
with ‘’Admirals’’, the
properties anchor tenant. Furthermore it was concern was expressed of
the fact that
the Plaintiff had failed to receive occupation of the
property in terms of the agreement of sale, and had not received any
of the
deposits that had been paid by the existing tenants of the
property. It was further reiterated that the information and
documentation
requested in terms of the application of Act 2 of 2000
had yet to be provided. It was further submitted that the Trust had
failed
to disclose substantial expenses that would have to be
incurred regarding the property.
[21] On the 17
th
September 2013, the Trust’s attorneys advised the Plaintiff’s
attorneys that the client had decided to cancel the agreement
as the
Plaintiff had failed to provide the necessary guarantee timeously. In
response thereto, the Plaintiff’s attorney disputed
the
validity of the Trust’s cancellation of the agreement and
claimed that the Trust had in fact repudiated the agreement
and
consequently the Plaintiff cancelled the agreement. The Plaintiff
further demanded repayment of the sum of R864 630-00, being
the
inclusive amount of R835 740-00 that was paid by the Plaintiff on the
14
th
March 2013 and the amount of R28 890-00 that was paid
to the transferring attorneys C.R Knoesen on the 17
th
March 2013.
[22] The above sequence
of events finally materialized into an application filed by the
Plaintiff which subsequently morphed into
the present action before
me.
THE PLAINTIFF’S
CASE:
[23] The Plaintiff
submits that pursuant to the payment of the deposit and auctioneers
commission and through the effluxion of time,
it is submitted and
pleaded on behalf of the Plaintiff that
Dr Coutsouridis
became
aware of the following:
(i) That the Trust was
not in receipt of monthly rentals from ‘’Admirals’’,
and that ‘’Admirals’’
had in fact not made
rental payments for the month of October 2012, had only paid an
amount of R1 700-00 for the month of November
2012 and was in default
of its further rental obligations thereafter;
(ii) Dr
Coutsouridis
further discovered that the verandah that he had been advised by
Mr
Galpin
, formed part of the property, did not in fact form part of
the property;
(iii) That the Trust did
not hold rental deposits from the tenants of the property.
[24] It is further
pleaded on behalf of the Plaintiff that upon perusal of the lease
agreement entered into between the Trust and
Vaidro 120 CC, the
company operating ‘’Admirals’’, the following
was apparent namely:
(i)
The Lessee had to obtain approval of a loan from Business Partners;
(ii)
That the Lessee had to make payment of a deposit in the sum of R52
000-00;
(iii) That the Trust was
obligated to repair the roof of the premises which had been leaking.
The above conditions had
all not been fulfilled.
[25] The Plaintiff
further discovered that the Trust had been subject to an adverse
arbitration order made against it by the body
corporate of the
scheme, which had found that the Trust, as owner of the property, was
liable:
(i) To
remove an unauthorized façade;
(ii)
To replace the roof on a refuse hut;
(iii)
To replace the enclosure on the second floor with more durable
materials;
(iv)
To pay the costs of the laying of further electrical cabling.
[26] It is pleaded on
behalf of the Plaintiff that had the Plaintiff been aware of the
above information, it would not have bid
to purchase the property for
the sum of R3 900 000-00, or at all, and that it had been induced to
purchase the property by the
misrepresentations conveyed to it and
the fraudulent non-disclosures.
[27] As result of the
fraudulent misrepresentations the Plaintiff submits that it is
entitled to restitution of the amount of R835
630-00 from the
Defendants.
THE FIRST TO THE
FOURTH DEFENDANTS DEFENCE:
[28] It is pleaded on
behalf of the trustees of the Trust that it is denied that the
representations made by the Fifth Defendant
to
Dr
Coutsouridis
regarding the rental deposits that were supposed to have been
held by the Trust and which in fact were not held, were false. It is
specifically pleaded that the only representation made on behalf of
the Trust in relation to the ‘’Admirals’’
lease, prior to the auction, was the advertisement that appeared in
the newspaper.
[29] The trustees submit
in their pleadings that the ‘’Admirals’’
lease was at the time of the auction in
arrears in respect of its
rental obligations, however
Mr Shamley,
the owner of
‘’Admirals’’, had taken financial steps to
settle the arrears.
[30] It was specifically
pleaded that the Trust denied that any fraudulent misrepresentations
had been made by anyone in relation
to the admirals lease either
prior to the auction or anytime thereafter, and that the Plaintiff
had been well aware of the difficulties
with the ‘’Admirals’’
lease shortly after the auction but before the lawful cancellation of
the agreement
by the Trust.
[31] The Trustees in
their pleadings further deny having misled the Plaintiff regarding
the inclusion of the veranda.
[32] Regarding the issue
of the Trusts obligations in respect of the lease agreement entered
into between it and Vaidro 120 CC being
‘’Admirals’’,
it is pleaded specifically that the Trust denied that it or its agent
had any legal duty
to make any factual disclosures to the Plaintiff
in respect of the reciprocal duties ensconced in its lease agreement
with Vaidro
120 CC.
[33] The Trust admits in
its pleadings that it was well aware that the roof in the kitchen
area was leaking, but it did however
provide Vaidro 120 CC with a
written undertaking to repair the leak. It is further pleaded
regarding the issue of the leaking roof
that
Dr Coutsouridis
had inspected the property prior to the auction and had never
enquired about the state of the roof, and that consequently no
fraudulent
misrepresentations had been made to him in this regard. It
is further pleaded that the ‘’
Voetstoots Clause’’
in the agreement has application in the context and in any event the
leaking roof was immaterial to the agreement concluded between
the
parties and did not entitle the Plaintiff to resile from the
agreement.
[34] In respect of the
arbitration award against it, the Trust avers in essence that such
obligations were attached to it, as a
juristic entity and accordingly
was not transferrable to the Plaintiff, and that it would have
honoured such obligation.
THE FIFTH DEFENDANT’S
DEFENCE:
[35] The Fifth Defendant
in essence pleads that it acted on the instructions of the Sixth
Defendant in the preparation of the advertisement
in the newspaper,
and that it was indeed the Sixth Defendant that had provided the
necessary information for such information leaflet.
[36] The Fifth Defendant
specifically pleaded
inter alia
that the Plaintiff had signed
the ‘’Conditions of Sale’’, which stipulated
that the purchaser was liable
for the auctioneer’s commission
amounting to 10% of the purchase price in addition to VAT thereon.
[37] It is further
pleaded that in terms of the provisions of the signed ‘’Conditions
of Sale’’, it was
stipulated that the auctioneer would
not be held personally liable in consequence of any representation
made by him with regards
to the sale of the property.
[38] It was further
pleaded on behalf of the Fifth Defendant that in terms of the ‘’Rules
of Auction’’ that
had been signed on behalf of the
Plaintiff by
Dr
Coutsouridis,
and specifically having
regard to clause 2.1 thereof which reads:
‘’
The
purchaser shall be liable for and pay, in addition to the amount
payable in terms of the conditions of sale, auctioneer’s
commission of ten percent of his bid, plus VAT thereon, which
commission shall be payable into the trust account of the auctioneer
immediately upon the seller signing the conditions of sale as
acceptance of the purchaser’s bid.’’
[39]The Fifth Defendant
accordingly submits that the Plaintiff is disentitled to reclaim the
commission amount paid to it.
THE SIXTH DEFENDANT’S
DEFENCE:
[40] The Sixth Defendant
admits to having instructed the Fifth Defendant to advertise to the
general public the sale of the property.
It was specifically pleaded
that the Sixth and Seventh Defendants had been acting on behalf of
the Trust in this regard.
[41] The Sixth Defendant
specifically pleaded that upon request from the Plaintiff for
information regarding the property, directed
at the Fifth Defendant,
that he himself provided such information to the Fifth Defendant to
convey to the Plaintiff. It is common
cause that the information
confirmed in this regard related to a request made by one
Tahlita
Zwiegelaar
, an employee of the Plaintiff, who requested
information pertaining to the property, prior to the auction date. An
email was addressed
to
Rolene,
an employee of the Fifth
Defendant on the 25
th
February 2013, requesting: ‘’
the
current leases of the property, Rates and taxes, Plans (if exist) and
Insurance.’’
[42] It is further common
cause that on the 28
th
February 2013
Tahlita
Zwiegelaar
, advised
Dr Coutsouridis
via email that she had
been provided with certain information that had been requested from
Mr Ashton Galpin
an employee of the Fifth Defendant. The
information was provided by
Mr Galpin
telephonically and
confirmed the rates and taxes and the confirmed
inter alia
the
rental income of the property.
[43] The Sixth Defendant
pleaded that he bore no knowledge as to the representations made by
the Fifth Defendant to the Plaintiff
on the 12
th
March
2013, in the context of the representation made by
Mr Galpin
on behalf of the Fifth Defendant that the Trust held the necessary
rental deposits for the property, and that same would be paid
over to
the prospective purchaser. The Sixth Defendant specifically admits
that he was aware that as at the date of the 12
th
March
2013, (being the date of the auction), ‘’Admirals’’
had been in arrears with its rental obligations,
and that the Trust
did not in fact not hold the relevant rental deposits from the
tenants of the property.
[44] The Sixth and
Seventh Defendants further deny that they were under any legal duty
to disclose to the Plaintiff the issues relating
to the lease
agreement between the Trust and Vaidro 120 CC, being ‘’Admirals’’.
The Sixth Defendant specifically
denies that such information
relating to the lease agreement was fraudulently withheld from the
Plaintiff.
[45] The Sixth and
Seventh Defendants further admit that the roof of the property had
been leaking, and were aware of same at the
time that the property
was sold on auction, but pleads that the Trust had provided Vaidro
120 CC with a written undertaking to
repair same. It is also pleaded
that
Dr Coutsouridis
never enquired about the roof during his
inspection of the property and further that the leaking roof is
covered by and rendered
non-actionable by the ‘’
Voetstoots
clause’’
in terms of the sale agreement entered into
between the Plaintiff and the Trust.
[46] Regarding the issue
of the arbitration award made against the Trust, the Sixth and
Seventh Defendants plead that such obligations
attached only to the
Trust and not to any successors in title to the property.
THE
EVIDENCE ON BEHALF OF THE PLAINTIFF:
[
47]
Dr
Dimitri Coutsouridis
testified on behalf of the Plaintiff.
Dr
Coutsouridis
confirmed that he was the sole director of the Plaintiff Company.
[48] He further confirmed
that during February 2013, he was drawn to an advert in the local
newspaper advertising the sale of a
property on auction. He requested
his assistant
Tahlita Swiegelaar
to obtain further information
regarding the property from the Fifth Defendant. It is common cause
that the request was made to
Rolene
an employee of the Fifth
Defendant on the 25
th
February 2013. The information
requested was provided on the 28
th
February 2013. The
information included confirmation of the monthly rental income of the
tenants in the property. Dr
Coutsouridis t
hen utilized the
information he had at hand to work out a ‘’desk top’’
calculation as to the feasible purchase
price he could bid for the
property.
[49] On the 05
th
March 2013, Dr
Coutsouridis
attended upon the property and
made an on-site inspection. He was accompanied by
Mr Ashton
Galpin,
a representative of the Fifth Defendant who, during such
inspection, confirmed to him that the veranda formed part of the
property
to be purchased and further confirmed to him that the Trust
was in possession of the rental deposits from the tenants.
[50]
Dr Coutsouridis
confirmed that he attended the auction on the 12
th
March
2013. He confirmed having signed the ‘Rules of Auction’’
but had not been given a proper opportunity to
study the contents
thereof adequately. He had asked
Rolene,
an employee of the
Fifth Defendant, who was present at the auction and was assisting in
the facilitation of the auction if ‘’everything
was in
order’’ and if there was ‘’anything funny’’
contained in the ‘’Rules of
Auction’’, he was
assured everything was fine. It is then common cause that his bid of
R 3 900 000-00 was the highest
bid and was accepted by the Fifth
Defendant.
[51]
Dr
Coutsouridis
confirms that two days later, he was advised that
his bid was successful, and that the Trust had accepted his offer. On
or about
the 13
th
March 2013, he received a Tax Invoice
from the Fifth Defendant setting out the sum the Plaintiff had to
pay, being R835 740-00.
Dr Coutsouridis
confirmed that he
effected an electronic transfer of the aforesaid amount into the bank
account of the Fifth Defendant.
[52] Pursuant to the
payment of the R835 740-00,
Dr
Coutsouridis
became
aware of various issues relating to the property which caused him
some consternation. He discovered that a possibility existed
that the
owner of ‘’Admirals’’, namely one
Mr
Shamley
considered ‘’Admirals’’ not bound
to the lease agreement with the Trust, due to the non-fulfilment of
certain
suspensive conditions contained in such agreement, one of
which being the suspensive condition related to the Trust having to
repair
the leaking roof on the property.
Dr Coutsouridis
was
unaware of such leak prior to his proposal to purchase the property.
[53] He further
discovered that ‘’Admirals’’ were in
financial difficulties and were in arrears with its
rental payments.
He further discovered, contrary to
Mr Galpin’s
confirmation, that the Trust did in fact not hold any rental deposits
for the tenants.
[54]
Dr Coutsouridis
further also discovered that there had been an arbitration award made
against the Trust in a matter between it and the Body Corporate
of
the Sectional Title Scheme of the property. In terms of the award,
the Trust as owner of the property was directed to effect
various
repairs and renovations to the property.
[55]
Dr
Coutsouridis
confirmed that had he been appraised of the fact
that the anchor tenant ‘’Admirals’’ had been
in arrears
and that
Mr Shamley
had in fact advised the Sixth
Respondent in January 2013, he intended to close the doors of the
business due to financial difficulties,
he would not have bought the
property.
[56] Having regard to all
of the information that he discovered pursuant to purchase of the
property,
Dr
Coutsouridis
confirmed that he would not
have purchased the property.
[57] During examination
in chief,
Dr
Coutsouridis,
was presented with a
correspondence in the form of an email from the Sixth Defendant to
the First, Second and Fourth Defendants,
dated the 12
th
March 2013, being the date of the auction. The email reads as
follows:
‘’
Hi
all
There were about twenty people at
the auction this morning and in the end there were three serious
buyers. Thank goodness for them.
Had Admirals closed down last week I
don’t think we would have had the same interest. No sign of De
Costa or Gutsche.
The winning bid will cost the
purchaser not only R4.3 mill but transfer costs, electrical wiring
certificate costing around R100
000, and all the repairs and
maintenance demanded by the Body Corporate on top of that. (refer
previous correspondence). Painting
will cost R75 000 minimum: tarmac
repair and waterproofing the roof etc will be big numbers. At the end
of the day the purchaser
is facing an outlay of about R5 million. A
lot of money when you have a ‘’dicey’’ tenant
with a long lease
and a blue chip tenant with a short lease. Not a
situation conducive to peaceful sleep.
The M H Trust will receive R3.9 net
plus about R50 000 in occupational interest, so close to R4 mill. The
Seller will be entitled
to outstanding and current rentals up until
the end of March, but will be liable for levies and Municipal costs,
up to that date.
A levy clearance certificate from
the Body Corporate will have to be obtained before we can effect
transfer this will cost around
R100 000 due to arrear B C levies and
arrear Municipal water and sewage charges. Over and above that we
will need a Rates Clearance
Certificate from the Municipality. I will
contact the Municipality to determine what that will cost.
The Municipal valuation of Unit 1
is R2.8 mill so we have done a lot better than that.
Whether or not Unit 1 Manor
Hastings Trust accepts this offer, it will have to make urgent
payment of R50 000 to the Municipality
before Friday otherwise it
will switch off the electricity supply. I was able to persuade them
to hold off doing so until after
the auction. (my email to you dated
8 March to which I have not had a reply). The other R50 000 for
levies is not as urgent but
the B C is losing patience about the
arrear situation.
A deposit of R390,000 was paid by
the purchaser today. It will be paid into Unit 1 Manor Hastings bank
account on acceptance of
this offer and would be available
immediately to pay the above creditors.
Your decision is urgently required
Cheers for now
Arthur’’
[58]
Dr Coutsouridis
confirms that in terms of the content of the email, he was unaware
that ‘’Admirals’’ had intended closing
down,
nor that the electrical wiring certificate would cost R100 000-00,
and of the Body Corporate’s arbitration award. He
further did
not budget for an amount of R5 million.
[59] During
cross-examination by
Mr Mullins
for the First to the Fourth
Defendants, it was put to
Dr
Coutsouridis
that the
Trustees were unaware of any representations made by the Fifth
Defendant to him.
Mr Mullins
put to
Dr Coutsouridis
that there had in fact been no direct contact between him and the
trustees of the Trust regarding the sale of the property.
[60] It was further put
to
Dr Coutsouridis
that whilst the First to the Fourth
Defendants may have been negligent in their conduct in the matter, no
semblance of fraud could
be attributed to them.
[61] It was further put
to
Dr Coutsouridis
that notwithstanding the information he
received pursuant to the purchase of the property which was withheld
from the Plaintiff,
and which he submits had been fraudulently
withheld, he still appeared to want to proceed with the sale,
and that he merely
requested a reduction in the purchase price.
Dr
Coutsouridis
submitted in response, that he entertained the
possibility of continuing with the agreement but he still had not
been placed in
possession of all the necessary information pertaining
to the property in order for him to make such decision.
[62]
Mr Williams
on behalf of the Fifth Defendant in essence cross-examined
Dr
Coutsouridis
as to him being bound to the agreements he had
signed, namely the ‘’Rules of Auction’’ and
‘’Conditions
of Sale’’.
Dr
Coutsouridis
in reply confirmed that he would be bound by the
terms of such agreements had no fraud been perpetrated against him.
It was also
put to
Dr
Coutsouridis
that the information
pertaining to the property and the request for further information
regarding the property by the Plaintiff
had in fact been obtained by
the Fifth Defendant from the Sixth Defendant namely
Mr Marriner
.
[63] Upon
cross-examination by
Mr Van Rooyen
for the Sixth and Seventh
Defendants,
Dr
Coutsouridis
confirmed that he only
became aware of the lease between ‘’Admirals’’
and the Trust and in particular the
suspensive conditions contained
therein, pursuant to the Plaintiff purchasing the property. This he
had discovered after a meeting
he held with
Mr Shamley
the
owner of ‘’Admirals’’ pursuant to the
purchase of the property.
APPLICATION FOR
ABSOLUTION FROM THE INSTANCE:
[64] At the close of the
Plaintiff’s case all the Defendants applied for absolution from
the instance, and requested that
the Plaintiff’s claim be
dismissed with costs. After hearing argument from counsel for the
Defendants and for the Plaintiff,
I dismissed the applications and
advised that my Judgment would follow in the main Judgment. I provide
my reasons as follows.
THE LEGAL PRINCIPLE OF
ABSOLUTION FROM THE INSTANCE:
[65]
The legal principles that are applicable in applications for
absolution from the instance are well established. In order to
defeat
an application for absolution, a Plaintiff must make out a
prima
facie
case in the sense that there is evidence relating to all the elements
of a claim on the strength of which the Court could or might
find for
the Plaintiff at the end of the case.
[1]
The Plaintiff at this stage of proceedings is further entitled to
rely on any reasonable inference drawn from the evidence placed
before the Court.
[66]
Further a Court has a discretion whether to grant absolution from the
instance or not. In exercising such discretion it has
to determine
whether it would be in the interests of justice to bring the
litigation to an end. Where the legal position is uncertain
the
interests of justice are better served by the refusal of
absolution.
[2]
[67]
Mr Mullins
on
behalf of the First to the Fourth Defendants argued succinctly that
there was insufficient evidence placed before me to suggest
that the
First to the Fourth Defendants had made any misrepresentations to the
Plaintiff. He further argued that the trustees had
no control over
their agent
Mr Marriner
, with the implication that they should
not be held liable for any misrepresentations
Mr Marriner
may
have made to the Plaintiff.
Mr Mullins
further argued
that the Plaintiff having received all the necessary facts had in any
event made an election to abide by the contract.
[68]
Mr Williams
on behalf of the Fifth Defendant argued that if the First to the
Fourth Defendants application for absolution succeeded, then by
necessary implication, so should the Fifth Defendant’s
application. He further argued that as the Plaintiff’s claim
against the Fifth Defendant, as pleaded was based on innocent and/or
negligent misrepresentations, and that innocent and/or negligent
misrepresentations can be excluded by parties to a contract, this was
in fact done when
Dr Coutsouridis
signed the ‘’
Rules
of Auction and Conditions of Sale for Immovable Property’’
.
The Fifth Defendant he argued had in terms of clause 8.5 of such
document contracted out of any innocent and/or negligent
misrepresentations
made, and that the Plaintiff was bound to such
agreement.
[69]
Mr Williams
further argued that having regard to the essential elements required
for the Plaintiff to prove fraudulent misrepresentations,
the
Plaintiff had failed to prove that the Fifth Defendant had been aware
that the misrepresentations made were in fact false.
[70]
Mr Van Rooyen
on behalf of the Sixth and Seventh Defendants inveigled me to either
disregard ‘’Annexure A’’, being the
bundle of
documentary evidence handed in by agreement between the parties, or
that I should hold that they should have little probative
value. He
argued in essence that having regard to the evidence of
Dr
Coutsouridis
and the documentary evidence, there was very little
support for the Plaintiff and the Court to draw the inference of
fraudulent
misrepresentations that were alleged to have been made by
the Sixth Defendant.
[71]
Mr De La Harpe
for the Plaintiff in response to the arguments postulated on behalf
of the respective Defendants in the application for absolution
from
the instance, reiterated the principles applicable in such
applications. He argued further that an inference of fraudulent
misrepresentation may be made by the Court if the inferences sought
to be drawn are reasonable in the circumstances. He further
correctly
argued that at the close of the Plaintiff’s case and in
assessing applications of similar ilk, a Court is quite
entitled to
refuse such application unless, it is satisfied that no reasonable
court could draw the inferences for which the Plaintiff
contends.
[72]
Mr De La Harpe
submitted further that having regard to the submissions made on
behalf of the Trust and the Sixth Defendant, the Fifth Defendant
had
in fact been employed as an agent of both the Trust and the Sixth
Defendant. The information provided by
Mr Galpin
to the
Plaintiff regarding the verandah and the deposits held by the Trust
in respect of the Lessees of the property had been false.
The Fifth
Defendant merely denied the allegations of fraudulent
misrepresentations and placed the Plaintiff to the proof thereof.
Mr
De La Harpe
submitted that counsel for the Fifth Defendant’s
submissions that the Fifth Defendant is still entitled to its
commission
even if I should find there to have been fraudulent
misrepresentations made to the Plaintiff, to be an incorrect position
in law.
He further argued that that at the stage of the application,
there were overwhelming evidence to draw the reasonable inference
that the Plaintiff had been the victim of fraudulent
misrepresentations.
Mr De La Harpe
entreated me to dismiss the
applications.
[73] In assessing the
Defendants application, the evidence placed before the Court as well
as the legal principles applicable as
at the stage of the Defendants
application for absolution must be considered.
[74] It is common cause
that the Sixth Defendant was at all material times acting as the
agent on behalf of the Trust regarding
the sale of the property.
[75]
It is trite that our law has held that if an agent both (1) makes a
representation, and (2) (a) knows (ie is conscious of the
fact) that
it is false, or (b) does not have an honest belief in its truth,
being reckless, careless whether it be true or false,
the legal
position is the same as if the principal himself had made the
representation with the requisite state of mind.
[3]
[76]
Lord
Brandwell
held in
Weir
v Bell
3 ExD 243
,
that:
‘’
Every
person who authorizes another to act for him in the making of any
contract undertakes for the absence of fraud in that person
in the
execution of the authority given as much as he undertakes for its
absence in himself when he makes the contract.’’
This
view has been affirmed in our Appellate Division.
[4]
It was further held by Trollip J in
Randbank
(Bpk) v SantamVersekerings Maatskappy 1965(4) SA 363 (A) at……
that:
‘’
The
general principle is that where an agent contracting in the course of
his employment and within the scope of his authority,
fraudulently
conceals or otherwise fails to disclose a fact known to him which,
having regard to the nature of the contract, he
ought to have
disclosed to the other contracting party, his principal is liable for
and must suffer the consequences of his concealment
or
non-disclosure. That responsibility of the principal attaches at any
rate in regard to the voidability of the contract, even
if he himself
had no knowledge of the fact not disclosed or fraudulently
concealed.’’
[77] It is axiomatic
that, whilst I may not find sufficient evidence of fraudulent
misrepresentations on the part of the First to
the Fourth Defendants,
with
Mr Mullins
on their behalf submitting that their acts or
omissions could at most only be construed as negligence, should I
find the Sixth
Defendant,
Mr Marriner’s
conduct in the
matter to amount to fraudulent misrepresentation, then consequently I
may attribute this fraudulent misrepresentations
to the First to the
Fourth Defendants as well.
[78] The elements of
proving fraud is well established:
(a)
There must have been a representation made to a Plaintiff by the
Defendant or the Defendant’s agent,
[5]
it is trite law that a representation may consist of a
non-disclosure;
[6]
(b)
It must be alleged that the fraud or misrepresentation was false and
or intentional or negligent;
[7]
(c)
The representation must have induced the Plaintiff to act;
[8]
(d) The Plaintiff must
prove that he has suffered damages as a result of such
misrepresentation.
[79]
It has also been held that failure to disclose the complete truth in
circumstances where there can be no doubt that silence
may amount to
a misrepresentation, are where part of the truth has been told but
the omission of the remainder gives a misleading
impression.
[9]
[80] Having regard to the
advertisement brochure, the question then to ask is whether the
Defendants knew that the brochure would
leave potential buyers under
a false impression and intend to leave them in that mistaken state of
mind. Furthermore whether their
silence could be construed so as to
induce potential buyers to purchase the property or to pay more for
it than it was really worth.
[81] In my view, the
representation that rental income was being obtained from two lessees
in the brochure, elucidated a clear intention
to convey to any
prospective purchaser that the purchase of the property was
lucrative, as active income would be derived from
the property. On
the 28
th
February 2013, it was confirmed to
Dr
Coutsouridis
, who at that stage was still a prospective
purchaser, that ‘’Admirals’’ was paying an
amount of R52 000-00
per month. The brochure gave the public, and in
particular
Dr Coutsouridis
, the distinct impression that not
only were rental agreements in place for two tenants, but that there
was as a matter of fact
rental income being obtained from both
lessees. It is apposite that ‘’Admirals’’ had
not been paying their
rent since January 2013, hence the
advertisement that there was a rental income of approximately R52
000-00 per month being received
from ‘’Admirals’’
was in my view a clear misrepresentation by the Trust and the Sixth
Defendant’s
omission to disclose the fact that ‘’Admirals’’
had in fact not being complying with their monthly rental
obligations. It is common cause that the Trustees and
Mr Marriner
were well aware of this prior to the publication of the brochure.
[82] It is further
apposite from the evidence presented that
Dr Coutsouridis
confirmed that he had been drawn to the prospect of purchasing the
property, by the advertised rental income as set out in the
advertisement produced by the Fifth Defendant. It subsequently came
to his knowledge after his successful bid that the representations
made by
Mr Galpin
for the Fifth Defendant regarding the
inclusion of the verandah as part of the property to be sold and the
rental income deposits
allegedly held by the Trust for the current
Lessees were false.
He also discovered after
the auction that the anchor tenant of the property, ‘’Admirals’’,
where in fact
in financial trouble and had not been abiding to its
monthly rental income of R52 000-00 per month since January 2013. He
also
further discovered that there was a possibility that the lease
agreement between the Trust and Vaidro 120 CC being the juristic
ego
of ‘’Admirals’’, could be held to be
non-binding due to the non-fulfillment of certain suspensive
conditions in the lease agreement. He finally also discovered further
that there was an arbitration order made against the Trust
as owners
of the property, in favour of the Body Corporate of the property that
would necessitate a significant financial outlay
for costs,
inter
alia
for repairs and maintenance to the property.
[83]
Mr
Marriner’s
correspondence to the First, Second and Fourth Defendants, on the
12
th
March 2013, has a significant bearing, especially when one has regard
to the respective cases as pleaded by the First to the Fourth
Defendants and
Mr
Marriner
the Sixth Defendant. It is evident from this correspondence that Mr
Marriner confirmed his view that ‘’
The
winning bid will cost the purchaser not only R4.3 mill but transfer
costs, electrical wiring certificate costing around R100
000, and all
the repairs and maintenance demanded by the Body Corporate on top of
that.)(My emphasis)
(refer previous correspondence). Painting will cost R75 000 minimum:
tarmac repair and waterproofing the roof etc will be big numbers.
At
the end of the day the purchaser is facing an outlay of about R5
million. A lot of money when you have a ‘’dicey’’
tenant with a long lease and a blue chip tenant with a short lease.
Not a situation conducive to peaceful sleep.’’
Mr
Marriner’s
view
was never contradicted or queried by the First to the Fourth
Defendants as being inaccurate. It was further never put to
Dr
Coutsouridis
that the First to the Fourth Defendants disagreed with
Mr
Marriner’s
submissions as postulated in the above email. That being the case,
their respective pleadings to the extent that the arbitration
award
as well as the issue of the leaking roof were obligations attaching
to the Trust and not the Plaintiff is contradictory to
say the least.
It must be further pointed out that the Trustees in the matter only
signed the acceptance of the sale agreement
pursuant to the above
email from
Mr
Marriner.
[84] The further
reference to their being a ‘’
dicey tenant’’
,
gave credence to the Plaintiff’s assertions that he had become
aware only pursuant to the purchase of the property that
the anchor
tenant ‘’Admirals’’ had been in default of
its rental payments well before the sale of the property
on auction,
and was in financial stress and that this was a fact well known to
the First to the Fourth and the Sixth Defendants,
and that such
information had deliberately not been disclosed to him prior to the
purchase of the property. In the premises I was
of the view that a
prima facie
case for fraudulent misrepresentation had been
established by the Plaintiff.
[85] The application of
the Fifth Defendant presents a different position. As quite correctly
pointed out by
Mr Williams
for the Fifth Defendant, at the
close of the case for the Plaintiff, there was insufficient evidence
to persuade me of the Fifth
Defendant’s complicity in any act
of fraudulent misrepresentation. It is apposite that the Fifth
Defendant had been acting
on instruction of the Sixth Defendant and
the information obtained for the publication of the brochure, and the
conveyance of further
information regarding the property as requested
by the Plaintiff, had as a matter of fact been obtained from the
Sixth Defendant.
[86]
Mr Williams
further submitted that the Plaintiff is bound to the contractual
agreement signed with the Fifth Defendant being the ‘’
Rules
of Auction’’
and the ‘’
Conditions of
Sale for Immovable Property’’
which sets out the
Plaintiff’s obligation to pay the Fifth Defendant’s
commission.
Mr Williams
submits further that in terms of
clause 8.5 of the ‘’Conditions of Sale’’,
Fifth Defendant and the Plaintiff
contracted out of liability for any
misrepresentations, but concedes that parties may not contract out of
liability for fraud.
[87] Whilst I am of the
view that at the stage of the application for absolution there was no
evidence to evince any fraudulent
misrepresentation made by the Fifth
Defendant to the Plaintiff, I do not agree with
Mr Williams’s
submission that in absence of a finding of fraudulent
misrepresentation against the Fifth Defendant, that the Plaintiff is
still
bound to its contractual obligation with the Fifth Defendant.
The Fifth Defendant’s agreement with the Plaintiff is
inextricably
bound with the sale agreement between the Plaintiff and
the Trust as seller. A finding of fraud in the primary sale agreement
between
the Plaintiff and the First to the Fourth Defendants will
vitiate such agreement and all associated agreements with the primary
transaction including the agreement between the Plaintiff and the
Fifth Defendant.
[88] Our Courts have held
that fraud is conduct which vitiates every transaction known to law,
Lord Denning in Lazarus Estates Ltd v Beasley [1956] 1 QB (CA) at
712, held:
‘’
No
court in this land will allow a person to keep an advantage which he
has obtained by fraud. No judgment of a court, no order
of a
Minister, can be allowed to stand if it has been obtained by fraud.
Fraud unravels everything. The court is careful not to
find fraud
unless it is distinctly pleaded and proved; but once it is proved it
vitiates judgments, contracts and all transactions
whatsoever;…’’
The
above principle has been confirmed with approval by our Courts.
[10]
[89]
Mr Van Rooyen
on behalf of the Sixth and Seventh Defendants submitted that the
bundle of documents handed in as ‘Exhibit A’’,
as
well as the affidavits contained in the application proceedings has
little or no probative value. I do not concur. At the outset
of the
trial ‘’Exhibit A’’ was handed in by consent
by all the parties. There were no objections to the
content of
‘’Exhibit A’’ being inaccurate or false.
Furthermore when
Dr Coutsouridis
on behalf of the Plaintiff
was questioned regarding the Sixth Defendant’s email to the
First, Second and Fourth Defendants,
on the 12
th
March
2013, at no stage was it ever put to him by
Mr Van Rooyen
that
the Sixth Defendant disputed the content of such correspondence, and
in particular that he was not in fact the author of such
email.
[90]
Mr Van Rooyen
further submitted that having regard to the content of the email of
the 12
th
March 2013, that the content of such email is one
of interpretation. The email contained very little support for the
Plaintiff
or the Court to draw an inference of fraudulent conduct on
the part of the Sixth Defendant, and consequently there was no reason
for the Sixth Defendant to explain himself. I disagree with these
submissions. From the Sixth and Seventh Defendant’s pleadings
in defence of the action and having regard to the content of the
Sixth Defendant’s email to the Trustees, there is a stark
and
clear contradiction, which in my view the Sixth Defendant needed to
explain.
[91] In the circumstances
I dismissed the Defendants application for absolution.
THE EVIDENCE OF THE
SIXTH DEFENDANT:
[92] Upon dismissal of
the Defendants application for absolution from the instance, the
First to the Fourth Defendants as well as
the Fifth Defendant closed
their respective cases.
Mr Van Rooyen
on behalf of the Sixth
and Seventh Defendants called the Sixth Defendant, namely
Mr
Arthur Marriner
to provide evidence.
[93]
Mr Marriner
confirmed that he was a family friend of the
Batchelor Family
,
of whom the First, Second and Fourth Defendants are such family
members. He submits that on or during November 2012, he was contacted
by the Fourth Defendant herein, to assist in particular with sale of
a family asset, being the property in question.
[94]
Mr Marriner
confirmed that he suggested to the family that the property be sold
on auction, to which they agreed. He then approached
Mr Ashton
Galpin
, an employee of the Fifth Defendant to ostensibly arrange
for the auction of the property. It was then agreed that the property
be sold in the new year, with the date being arranged for the auction
being the 12
th
March 2013. Mr Marriner further confirmed
that he had reached an agreement with
Mr Galpin
, that they
split the commission of the sale of the property.
[95] On a question from
Mr Van Rooyen
as to when he became aware of the arbitration
award made against the Trust, he initially replied that he could not
recall, and
when pressed as to whether it was before or after the
sale of the property, he exclaimed that it was after the sale of the
property.
His assertions in this regard when questioned by
Mr Van
Rooyen,
were in stark contrast to a letter addressed to him by
BLC Attorneys on the 11
th
February 2013 wherein which it
was quite evident that he was aware
inter alia
of the issue of
the leaking roof, that in order for an electrical wiring certificate
to be obtained electrical renovations would
need to be attended to or
the property could have been condemned, that such costs would be in
the region of R110 000-00. He was
further well aware of the
arbitration award made against the Trust. The content of this
correspondence was merely confirmation
of a meeting held between
Mr
Marriner
and BLC Attorneys on the 04
th
February 2013.
[96] Mr Marriner
testified further that regarding the issue of the arbitration award
he was of the view that the Trust and not the
purchaser of the
property would be responsible for complying with such order. As
pointed out above
Mr Marriner’s
assertions in this
regard stand in total contrast to the content of the email he
dispatched to the First, Second and Fourth Defendants
on the 12
th
March 2013. When he was questioned by
Mr Van Rooyen
about this
particular correspondence,
Mr Marriner
remarked that he was
surprised that this particular correspondence had been obtained and
was being utilized in the legal proceedings
as same was confidential
and that it should never have ‘’gotten into the hands of
attorney’s. When asked by
Mr Van Rooyen
as to what he
meant that any potential purchaser must pay the cost related to the
arbitration award, his response was ‘’
I made a mistake
here.’’
On referring to ‘’
dicey
tenant’’
Mr Marriner
exclaimed that he was
referring to the restaurant business in this regard. He further
confirmed that he was attending to the transfer
of the property
whilst he was in the employ of C.R Knoesen Attorneys, and that he
would also benefit from the fees for attending
to such transfer, as
well as the split commission.
[97]
Mr Marriner
further testified that he never fraudulently withheld information
from the Plaintiff. He submitted that he was of the view that
Mr
Shamley
the owner of ‘’Admirals’’ would
obtain a bond and would pay the arrears due. He further submitted
that
as far as he was concerned he was of the view that the Trust
would be liable for repairing of the leaking roof and the costs
related
to the arbitration award.
Mr Marriner’s
assertions in this regard stand in stark contrast to his email to the
First, Second and Fourth Defendants on the 12
th
March
2013.
[98] In cross examination
by
Mr De La Harpe
for the Plaintiff,
Mr Marriner
conceded that he and the Trust knew prior to the sale of the
property, that ‘’Admirals’’ were in arrears.
He further confirmed that the information contained in the brochure,
emanated from him. When questioned about the income set out
in the
brochure,
Mr Marriner
submits that this was merely ‘’
projected
income’’
. He was unable to explain as to why the
words ‘’
projected income’’
do not
appear on the brochure in confirmation of his view. He also advised
that he did not deem it necessary to inform
Mr Galpin,
the
auctioneer that ‘’Admirals’’ had been in
arrears, nor did he deem it necessary to set out in the brochure
that
‘’Admirals’’ where in arrears. He further
conceded that prior to the sale he had been well aware that
‘’Admirals’’ were in arrears, and that
Mr
Shamley
the owner had to attempt to obtain a bond in order to pay
the arrears.
[99] Regarding his
non-disclosure of the leaking roof and the arbitration award,
Mr
Marriner
submitted that he maintained his view that the Trust
would be responsible for such costs. On a question from
Mr De La
Harpe
as to why he failed to disclose the arbitration award when
the Plaintiff had made a request for further information regarding
the
property during February 2013,
Mr Marriner
conceded that
he had an obligation to convey such information, but that his failure
to do so was not deliberate.
[100] Upon further
cross-examination,
Mr Marriner
confirmed that pursuant to the
sale of the property, he made a proposal to the Plaintiff in essence
that as the Plaintiff had to
be responsible for the payment on
interest on the balance of the purchase price, that the Trust retain
the monthly rental income
of the tenant ZTE, he conceded that this
proposal had been made whilst he was well aware that ‘’Admirals’’
had not being paying their rent. The proposal was set out in an email
to
Dr Coutsouridis
on the 02
nd
April 2013. In said
email
Mr Marriner
remarks to
Dr Coutsouridis
that he
had no personal interest in the matter. This was clearly untrue as
Mr
Marriner
would benefit from the split commission and the legal
fees for attending to the transfer of the property. He advised that
he informed
the Trust of his benefits from the sale only after the
sale of the property.
[101]
Mr Marriner
upon being cross-examined regarding a meeting he held with
Mr
Shamley
, the owner of ‘’Admirals’’ on or
during January 2013 where he was informed by
Mr Shamley
that
‘’Admirals’’ where in financial trouble and
that he wanted to close ‘’Admirals’’
doors,
and that at such meeting
Mr Marriner
had in fact advised
Mr
Shamley
not to close the restaurants doors, as the Trust intended
to sell the property on auction,
Mr Marriner
confirmed same
but submitted that he had said this as
Mr Shamley
intended to
obtain a loan. I find this submission to be totally implausible.
[102] Upon
cross-examination, specifically regarding his submissions of a
‘’
dicey tenant’’
in the correspondence
of the 12
th
March 2013,
Mr Marriner
was called upon
to explain the apparent discrepancy in his reply in his evidence in
chief, that he meant ‘’
dicey tenant’’
to mean the restaurant business, whilst in an affidavit he deposed to
in the application proceedings, he clearly stated that when
he
referred to ‘’
dicey tenant’’
, he
actually meant ‘’Admirals’’ being in arrears.
Mr Marriner
was unable to explain this discrepancy. He was
further unable to explain the submissions made in the 12
th
March 2013 email confirming that the purchaser would be liable for
the leaking roof, the costs relating to the arbitration award
and the
costs for obtaining an electrical certificate, as compared to his
evidence in Court that he was of the view that the Trust
would be
liable for such costs.
[103]There was no
cross-examination of
Mr Marriner
on behalf of the First to the
Fifth Defendants.
EVALUATION OF THE
EVIDENCE:
[
104]In
evaluating the Plaintiff’s claim, and the pleaded basis of such
claim being based upon fraudulent misrepresentation,
I in essence
have to consider whether the Defendants failure to disclose certain
material information pertaining to the property,
prior to its sale
amount to fraudulent misrepresentation. Having regard to the evidence
it is trite that consideration must be
given to the following namely:
(a)
Whether
the Defendants failure to disclose that the property’s main
tenant ‘’Admirals’’, were in financial
strife
and had as a matter of fact not been complying with their rental
obligations for a while prior to the sale of the property
on auction,
despite the advertisement that ‘’Admirals’’
was generating an income, amounted to a fraudulent
misrepresentation,
and;
(b)
Whether
the Defendants failure to disclose that the roof of the building was
leaking and was in need of repair amounted to a fraudulent
misrepresentation ;
(c)
Whether
the Defendants failure to disclose the existence of an arbitration
award against the Trust as owners of the property, requiring
the
owners to effect certain repairs and maintenance to the property,
amounted to a fraudulent misrepresentation;
(d)
Whether
the Defendants failure to disclose that the property would require
extensive and costly repairs to the electricity infrastructure
in
order for the Plaintiff to obtain an electrical wiring certificate,
amounted to a fraudulent misrepresentation.
[105]
Dr Coutsouridis
testified on behalf of the Plaintiff and confirmed that had he been
aware of the above information that had not been disclosed
to him, he
would not have purchased the property. I found there to be no
contradictions or inconsistencies in his evidence.
[106]
Mr Marriner,
the
Sixth Defendant, failed to impress me as a witness. His fastidious
attempts at providing a seemingly innocent explanation for
his
conduct in the matter was ephemeral when elucidated against the
glaring contradictions of his evidence in chief and the documentary
evidence he was the author of. A case in point being the fact that he
testified in evidence in chief that he only became aware
of the
arbitration award after the sale of the property, when it was quite
clear from a correspondence addressed to him from BLC
attorneys
(which he does not dispute), on the 11
th
January 2013,
that he was well aware of the arbitration award.
[107] A further example
of
Mr Marriner’s
disingenuous conduct was the fact that
in an email addressed to
Dr Coutsouridis
on the 02
nd
April 2013 he advised that he had no personal interest in the matter.
This was never disputed by
Mr Marriner
. This was clearly an
untruth as
Mr Marriner
had already made arrangements to split
the commission of the sale of the property with the Fifth Defendant
and he further stood
to benefit financially by attending to the
transfer of the property as well. He submitted that he advised the
Trustees of this
fact pursuant to the sale of the property.
[108]
Mr Marriner
tried to convince the Court that the reason he failed to disclose to
the Plaintiff that the anchor tenant ‘’Admirals’’
was in financial strife and were in arrears in their rental payments,
was that he believed that they would obtain a loan to clear
up the
debt. It was clear from the evidence that
Mr Marriner
held a
meeting with
Mr Shamley
of ‘’Admirals’’
during January 2013 already, when
Mr Shamley
advised him that
he intended to close the doors of the restaurant.
Mr Marriner
advised him not to do so as the owner where planning to sell the
property on auction. The only reasonable inference that can be
drawn
here is that
Mr Marriner
needed ‘’Admirals’’
to remain open in order for him to advertise them as a current tenant
with a monthly
income stream. When asked as to why ‘’Admirals’’
financial issues were not set out in the brochure and was
stated as
fact in the brochure that ‘’Admirals’’ was
bringing in a rental income of approximately R52 000-00
per month, he
submitted that the income portrayed was merely a ‘’
projected
income’’
. His explanation in this regard is
improbable.
[109]
Section 29
of
the
Consumer Protection Act 68 of 2008
requires the marketing of
goods or services to be done in a manner that is not reasonably
likely to imply a false or misleading
representation concerning those
goods or services and not misleading, fraudulent or deceptive in any
way. The brochure in this
matter was a marketing tool employed to
entice prospective purchasers. The brochure advertises that leases
were in place for ‘’Admirals’’
for the period
01
st
September 2012 to 31
st
August 2017, with a
specified rental income of R52 000-00 per month derived from them,
and with ‘’ZTE’’
for the period 01
st
November 2012 to the 31
st
October 2013, with an income of
R34 000-00 per month.
[110] It is quite evident
that the rental income obtainable from the tenants of the property
being ‘’Admirals’’
and ‘’ZTE’’
at the time was specifically and deliberately set out in the brochure
so as to attract any
potential purchaser as to the ‘’lucrative’’
prospect of purchasing the property, as one would derive a rental
income from same. Any potential purchaser would reasonably rely on
the information set forth in the brochure to assess whether
it would
be worthwhile to purchase the property.
Dr Coutsouridis
confirmed that he relied on the information to make ‘’
desk
top calculations’’
to assess whether to purchase the
property or not.
[111] A failure to
disclose that ‘’Admirals’’ was a defaulting
tenant, a fact which
Mr Marriner
knew as far back as January
2013 that they had been unable to pay their debts and that the owner
Mr Shamley
had advised he intended to close his doors, was in
my view a clear misrepresentation as to the factual situation. The
failure to
disclose this information was neither negligent nor
innocent in the light of
Mr Marriner’s
foreknowledge of
‘’Admirals’’ financial woes. The failure to
disclose to a prospective purchaser that a
tenant has defaulted in
its payment obligations and had remained so at the time of the
advertisement of the auction, and at the
auction itself as in the
present circumstances is in my view a material misrepresentation. If
a seller specifically advertises
that specific rental income is
attached to an immovable property, and is well aware that the Lessee
is in default of its obligations,
and has remained in such default
until the date of sale, then in my view the seller has a duty to
disclose such default. A failure
to disclose same where in the
circumstances a reasonable purchaser would rely on such information
as has been duly advertised to
the general public, then this
deliberate act of non-disclosure must in the circumstances amount to
a fraudulent misrepresentation.
[112]
The advertisement of the tenants, ‘’Admirals’’
and ‘’ZTE’’, and their respective
incomes was
deliberate act in attracting potential purchasers. There was a duty
on the Trust by way of its agent
Mr
Marriner
to have disclosed this fact, which they chose not to.
Mr
Marriner had an opportunity on the 25
th
February 2013 to disclose this fact to the Plaintiff when the lease
agreements were called for by the Plaintiff. He had a further
opportunity to disclose this fact when
Dr
Coutsouridis
inspected the premises on the 05
th
March 2013. He had yet a further opportunity to disclose such
information on the day of the auction, and even pursuant the sale,
he
chose not to.
Mr
Marriner
in fact, whilst in the full knowledge that ‘’Admirals’’
had not obtained a bond and remained in arrears,
proposed that the
Trust retain the rental income of ‘’ZTE’’
which tenant had been complying with their
rental obligations, and
that the Plaintiff retain the rental income of ‘’Admirals’’
knowing full well that
such rental payments would not be made. In the
premises, it is clear that a material non-disclosure was made to
Dr
Coutsouridis
,
the non-disclosure was intentional, as to disclose same would have in
all probability not have garnered the same interest or the
amount for
the purchase of the property, this much has been confirmed by
Mr
Marriner,
in his email to the First, Second and Fourth Trustees, on the 12
th
March 2013,
‘’…
Thank
goodness for them. Had Admirals closed down last week I don’t
think we would have had the same interest.’’
(My
emphasis).
[113]
Dr Coutsouridis
testified that the advertised rental income had induced him to
purchase the property as it had been integral in making his ‘’desk
top calculations’’, and that the failure to disclose the
information had resulted in him suffering the damages he now
claims.
The advertised rental income was a material factor in him deciding to
purchase the property.
[114] In
Trotman and
Another v Edwick 1951(1) SA 443 (A), Van Den Heever JA held at
446H-447A:
‘’
(H)aving
made a certain impression upon the mind of the plaintiff by
fraudulent misrepresentations, they [the sellers] did not thereafter
and before the sale disabuse his mind; consequently the effect of the
misrepresentation continued to operate until the deed of
sale was
signed. It furnishes a link in the causal chain between the alleged
false representation and the conclusion of the sale.’’
[115] Having regard to
the above and applying the legal principles applicable in
establishing the elements of fraudulent misrepresentation,
as set out
above, I find the Sixth Defendant’s conduct in not disclosing
the primary tenant ‘’Admirals’’,
financial
strife prior to the sale of the property, to amount to a fraudulent
misrepresentation. Having regard to the fact that
the Sixth Defendant
was acting as an agent for the Trustees of the Trust at all material
times and in accordance with the principal/agent
relationship, I find
the First, Second and Fourth Defendants are bound to the fraudulent
misrepresentations made by the Sixth Defendant.
[116] I turn now to the
issue of the leaking roof, the arbitration award and the costs for
repairs to the electrical infrastructure
of the property.
[117] It is trite that
the First, Second, Fourth and Sixth Defendants have pleaded in
essence that
Dr Coutsouridis
failed to carry out his due
diligence regarding the issue of the leaking roof during his
inspection of the property prior to the
sale, and in any event due to
the ‘’Voetstoots Clause’’, contained in the
sale agreement, they did not
have to disclose this particular fact to
the Plaintiff.
[118] The
locus
classicus
case regarding the issue of ‘’Voetstoot
Clauses’’, is the matter of
Van Der Merwe v Meades
1991(2) SA 1 (A).
The Court in essence held that a seller will be
deprived of the protection afforded by a ‘’Voetstoots
Clause’’
where the purchaser can prove that the seller
(1) was aware of a defect in the
merx
at the time of the
making of the contract and (2)
dolo malo
concealed its
existence from the purchaser with the purpose of defrauding him.
[119] It is common cause
that Sixth Defendant was well aware of the leaking roof, the
arbitration award and the cost of repairing
the electrical
infrastructure prior to the sale of the property.
[120] In
Mcann v
Goodall Group Operations (Pty) Ltd 1995(2) SA 718 (C), Van Zyl J
developed a few examples of a legal duty to disclose, pursuant to
a discussion of authorities on the law relating to liability for
actionable non-disclosure, whether fraudulent or negligent. The
examples are by no means a
numerus clausus
of the occurrence
of a duty to disclose, but include:
(a)
A
duty to disclose a material fact arises when the fact in question
falls within the exclusive knowledge of the defendant and the
plaintiff relies on the frank disclosure thereof in accordance with
the legal convictions of the community;
(b)
Such
duty likewise arises if the defendant has knowledge of certain
unusual characteristics relating to or circumstances surrounding
the
transaction in question and policy considerations require the
plaintiff be apprised thereof;
(c)
Similarly,
there is a duty to make a full disclosure if a previous statement or
representation of the defendant constitutes an incomplete
or vague
disclosure which requires to be supplemented or elucidated.
[11]
[121] In
ABSA Bank Ltd
v Fouche 2003(1) SA 176 (SCA) at 180H-181C, Conradie JA
, in a
majority judgment stated that:
‘’
A
party is expected to speak when the information he has to impart
falls within his exclusive knowledge (so that in a practical
business
sense the other party has him as his only source) and the
information, moreover is such that the right to have it communicated
to him ‘’would be mutually recognized by honest men in
the circumstances.’’
[122] It is an
established principle in our law that a Plaintiff relying on the
non-disclosure of a defect in order to resile from
a contact must
prove that:
(i)
The
Defendants were aware of the defect(s) as pleaded, if indeed the
defects were latent, at the time of sale;
(ii)
The
Defendants had a duty to disclose the existence of the defects (as
pleaded) to the Plaintiff at the time of the sale;
(iii)
The
Defendants fraudulently concealed the existence of the defects,
thereby inducing the contract, alternatively that the Defendants
fraudulently misrepresented that there were no defects.
[123]
Our Courts have held that the definition of ‘’Latent’’
means ‘’
not
apparent or reasonably capable of perception’’.
[12]
In the present matter it is quite apparent that the issue of the
leaking roof was a latent defect. The defect would not have been
apparent or reasonably capable of being perceived by
Dr
Coutsouridis
.
This information was within the knowledge of the Trustees and
Mr
Marriner
in
particular. They accordingly had a duty to disclose such defect but
failed to do so. In
Speight
v Glass and Another 1961(1) SA 778 (D) at 782A, Fannin J
held that ‘
’
a
seller who knows of the existence of defects in the thing sold, but
deliberately refrains from disclosing them to the buyer, is
guilty of
fraud…’’
[124] I am of the view
that in the Seller/Purchaser relationship, the information pertaining
to the leaking roof, the arbitration
award made against the seller
and the cost of the electrical repairs fell exclusively within the
knowledge of the Sixth Defendant
at the time of the sale of the
property. There was a duty to disclose this to the Plaintiff prior to
the sale, which
Mr Marriner
failed to do. This information was
in my view purposefully withheld as to have advised any prospective
purchasers of same would
not have resulted in a sale or the property
or the property would have been sold at a drastically reduced price.
[125] It would be
reasonable to infer from all the circumstances that this
non-disclosure was accordingly accompanied by fraudulent
intent on
the part of the Sixth Defendant who sought to gain an advantage over
the Plaintiff in the contract of sale. Silence in
this instance
arising from the Defendants knowledge of the facts and the deliberate
decision not to reveal them is in my view clearly
fraudulent.
[126] As set out above
the First, Second and Fourth Defendants are bound by the fraudulent
actions of the Sixth Defendant and are
consequently also liable.
Regarding the Fifth Defendant, as rightly conceded by
Mr Williams
,
a finding of fraud in the circumstances would set aside the agreement
between the Plaintiff and the Fifth Defendant, as parties
cannot
contract out of fraud.
THE ISSUE OF ELECTION:
[127]
Mr Mullins
for the First, Second and Fourth Defendants argued that the Plaintiff
could not resile from the contract, as it had elected to
abide by the
contract despite becoming aware of the non-disclosed information.
[128] Election of
remedies is the liberty of choosing a particular remedy out of
several means afforded by law for the redress of
an impugned right,
or choosing one out of several causes or forms of action. An election
of remedies arises when one having two
co-existent but inconsistent
remedies chooses to exercise one, in which event he or she loses the
right to thereafter exercise
the other. The doctrine provides that if
two or more remedies exist that are repugnant and inconsistent with
one another, a party
will be bound if he or she chooses one of them.
[129] In
Hlatwayo v
Mare and Deas
1912 AD 242
at 259, De Villiers JP
dealing with the
doctrine of election of remedies stated:
‘’
At
the bottom the doctrine is based upon the application of the
principle that no one can be allowed to take up two positions
inconsistent
with one another, or as commonly expressed to blow hot
and cold, to approbate and reprobate.’’
[130] In the present
matter, it is common cause that pursuant to the sale of the property
and when
Dr Coutsouridis
had become aware of the information
that had not been disclosed to him prior to the sale of the property,
various correspondence
were exchanged between the legal
representatives for the Plaintiff and those of the Trust, wherein
which the Plaintiff requested
various further information pertaining
to the property. The information was not forthcoming, which resulted
in Plaintiff formally
requesting the information in terms of the
Promotion of Access to Information Act 2 of 2000
. From the content of
the various correspondence it was clear that the Plaintiff still
entertained the possibility of continuing
with the agreement under
perceivably the aedilitian remedy, in particular the
actio quanti
minoris
, being a reduction of the purchase price.
[131] The Trust refused
to a reduction of the purchase price and claimed to cancel the
agreement, on the basis that the Plaintiff
had failed to timeously
provide certain financial guarantees, whereafter the Plaintiff
disputed such cancellation. It is common
cause that in correspondence
by the Plaintiff’s attorney to the Trusts attorney’s, on
the 30
th
August 2013, it is stated as follows:
‘’
There
can be no doubt that our client is entitled to a reduction of the
purchase price or even to cancel the agreement.’’
[132] It is clear from
the above that the Plaintiff had not yet made an election to proceed
with a particular legal course of action
against the Trust.
Subsequent to this correspondence the Trust’s attorneys advised
that their client had terminated the agreement
due to the Plaintiff’s
failure to provide certain guarantees.
[133]
Dr Coutsouridis
confirmed in evidence that he had not made an election to abide by
the contract as he still awaited further information from the
Trust
which had not been forthcoming. I am accordingly of the view that the
Plaintiff had at this stage no yet made an election
as to proceed by
way of the Aedilitian Remedy or to cancel the agreement and claim
damages.
[134]
However even if it may be construed that the Plaintiff had made an
election to abide by the contract, our Courts have held
that while
ordinarily a party had to choose which remedy to pursue on breach by
the other party to a contract, and was bound by
the choice, there is
authority for the view that the innocent party could change an
election made after giving the party in breach
the opportunity to
perform. If he or she persisted in the repudiation, thus failing to
repent, the innocent party could change
his or her election and
choose to cancel the contract.
[13]
This principle has been confirmed in the matter of
Primat
Construction CC v Nelson Mandela Bay Metropolitan Municipality
[2017]
ZASCA 73.
[135] Even if one holds
the view that the Plaintiff had made an election to abide by the
contract, the Trust’s continued
failure to provide the
further information requested by the Plaintiff’s legal
representatives on numerous occasions
,
amounted to, in my
opinion, as a continuing repudiation of the agreement. Accordingly
the Plaintiff would have been entitled to
change its election and to
proceed to cancel the agreement and claim damages, which it has done.
[136] In the premises, I
am of the view that the contract of sale stands to be cancelled. The
Plaintiff should accordingly be entitled
to be placed in the position
that it would have been in had the contract not been concluded.
[137] An order is made in
the following terms:
(a)
That
the Unit 1 Manor Hastings Trust (‘’the Trust), pay the
Plaintiff the sum of R835 740.00 together with interest
thereon at
the legal rate of interest from the 14
th
March 2013 to date of payment, jointly and severally with the Fifth
Defendant to the sum of R223 440.00 together with interest
thereon at
the legal rate of interest from 14
th
March 2013 and jointly and severally with the Sixth Defendant to the
sum of R222 300.00 together with interest thereon at the legal
rate
of interest from 14
th
March 2013 to date of payment;
(b)
That
the sum of R390 000.00 together with interest accrued thereon, that
the First, Second and Fourth Defendants attorneys hold
in an interest
bearing trust account in terms of paragraph 4 of the Order of Gqamana
AJ dated the 20
th
March 2014, be paid to the Plaintiff in part payment of the amount
due in terms of paragraph (a) above;
(c)
Payment
by the Trust and the Fifth, Sixth and Seventh Defendants, jointly and
severally, of the costs of suit including the costs
of the
application and all reserved costs together with interest thereon,
calculated at the legal rate of interest from a date
14 (fourteen)
days after allocator to date of payment.
V NAIDU
ACTING JUDGE OF THE HIGH
COURT
Appearances:
For Plaintiff:
Adv D de la Harpe instructed by Schoeman Oosthuizen
Inc,
Port
Elizabeth
For 1
st
, 2
nd
& 4
th
Defendant:
Adv Mullins SC instructed by Kaplan Blumberg,
Port Elizabeth
For 5
th
Defendant: Adv Williams instructed by P G Prinsloo
Attorneys, Port Elizabeth
For 6
th
&
7
th
Defendant: Adv van
Rooyen instructed by Lexicon Attorneys, Port
Elizabeth
[1]
Gordon Lloyd Page and Associates v Rivera and
Another
2001 (1) SA 88
(SCA) at 92E-93A; Ruslyn Mining and Plant
Hire (Pty) Ltd v Alexkor Ltd
[2012] 1 All SA 317
(SCA) at paragraph
22.
[2]
Carmichele v Minister of Safety and Security &
Another 2001(4) SA 938 (CC) at paras [26] and [29]
[3]
Kerr, Law of Principal and agent
[4]
Ravene Plantations Ltd v Estate Abrey and
Others
1928 AD 143
at 153; Randbank (BPK) v SantamVersekerings
Maatskappy 1965(4) SA 363 (A)
[5]
Feinstein v Niggli 1981(2) SA 684 (A)
[6]
Stainer v Palmer-Pilgrim 1982(4) SA 205 (O)
[7]
Rota Flour Mills(Pty) Ltd v Moriates 1957(3)
ALL SA 28(T)
[8]
Bill Harvey’s Invetsment Trust(Pty) Ltd v
Oranjezicht Citrus Estate (Pty) Ltd 1958(1) SA 479 (A)
[9]
Marais v Edlman 1934 CPD 212.
[10]
First Rand Bank Ltd t/a Rand Merchant Bank &
Another v Master of the High Court, Cape Town & Others [2103]
ZAWCHC 173
(11 November 2013) paras 20-27; Esofranki Pipelines v
Mopani District Municipality (40/13)
[2014] ZASCA 21
(28 March 2014)
[11]
Mcann v Goodall Group Operations(Pty) Ltd (at
726A-D)
[12]
Forsdick v Youngelson 1949(2) PH A57 (D)
[13]
Sandown Travel(Pty) Ltd v Cricket South Africa
2013(2) SA 502 (GSJ)