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[2011] ZASCA 20
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Pangbourne Properties Ltd v Basinview Properties (Pty) Ltd (381/10) [2011] ZASCA 20 (17 March 2011)
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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
: 381/10
In
the matter between:
Pangbourne
Properties Limited
..........................................................................
Appellant
and
Basinview Properties (Pty) Limited
................................................................
Respondent
Neutral citation:
Pangbourne v Basinview
(381/10)
[2011] ZASCA 20
(17 March 2011)
Coram:
Lewis, Maya and Seriti JJA
Heard:
28 February 2011
Delivered: 17 March 2011
Summary: Sale of land subject to suspensive condition:
condition not fulfilled: sale not revived by subsequent addendum that
assumed
sale to be valid: purchaser not estopped from relying on
non-fulfilment since none of requirements of estoppel established.
_________________________________________________________________________
ORDER
_________________________________________________________________________
On appeal from:
North Gauteng
High Court (Pretoria) (Legodi J sitting as court of first instance):
The appeal is upheld with costs. The order of the high
court is replaced with:
‘
The application is dismissed
with costs.’
_________________________________________________________________________
JUDGMENT
_________________________________________________________________________
LEWIS JA (MAYA and SERITI JJA concurring)
[1] On 6 November 2007 the respondent, Basinview
Properties Ltd (Basinview), sold to the appellant, Pangbourne
Properties Ltd (Pangbourne),
its business of letting immovable
property. The business was defined to comprise certain immovable
property, fixed assets and leases
in respect of the property. Office
buildings on the property were at the time let to two businesses. The
purchase price was R50 854 857.14,
inclusive of VAT. The
agreement provided that on transfer the sum of R9 424 000
would be retained by the conveyancer
nominated under the agreement:
if approval to develop a further office block on the property were
not obtained the amount retained
would be repaid to Pangbourne. The
amount of the purchase price, coupled with the amount so retained,
was an issue in the litigation
that ensued between the parties. The
agreement was made subject to three suspensive conditions, the
fulfilment of one of which
is the central issue in dispute.
[2] Pangbourne took the view that because one of the
three conditions had not been fulfilled timeously, the agreement was
not binding
on it. Accordingly, Basinview applied to the North
Gauteng High Court for an order that it was of full force and effect
and asked
also for rectification of the purchase price so as to
reflect the payment of R9 424 000 as well. Legodi J granted the
orders sought.
The appeal against his decision is with the leave of
this court. Long after leave to appeal had been granted, Basinview
sought
to cross appeal against the order in the event that the appeal
was dismissed. The high court granted leave to do so just two weeks
before the appeal was to be heard. Basinview sought condonation of
the late filing of the notice of cross appeal and heads of argument
were filed a week before the hearing. The cross appeal is conditional
on the appeal failing.
[3] It should be noted that in the application to the
high court, Pangbourne did not answer the founding affidavit of
Basinview,
deposed to by Mr J Seeliger. Instead it filed a notice in
terms of Uniform Rule 6(5)(d)(iii) raising only questions of law.
Seeliger
responded with a ‘supplementary founding affidavit’.
[4] I shall deal first with the dispute whether one of
the conditions was fulfilled. Should it be found that the condition
was not
fulfilled and that the agreement was thus of no effect, the
dispute about the price, and an application to rectify the agreement,
need not be decided.
[5] In so far as relevant, Clause 4 of the agreement
stated:
‘
Suspensive Conditions
4.1 This entire agreement . . . is subject to the fulfilment of the
suspensive conditions that:
. . .
4.1.2 the Board of Directors of both the Purchaser and the Seller
approve the purchase and sale recorded herein. Proof of the passing
of such resolution shall be furnished by each party to the other in
the form of a written resolution duly certified by the
chairman/secretary
as being a true copy of a resolution which was
passed at the meeting for that purpose;
. . .
4.3 The suspensive conditions . . . have been inserted for the
benefit of all parties and may not be waived.’
Clause 4.4.2 provided that the condition relating to
board approval ‘shall be fulfilled within 14 (fourteen) days of
the signature
date’. Clause 4.5 provided that the parties
could, in writing, extend the dates of fulfilment, prior to those
dates, by mutual
agreement. Clause 4.6 stated that, in the absence of
such extension, if the conditions were not fulfilled, then the
agreement ‘shall
never become of any force or effect and no
party shall have any claim against any other party’ save in the
event of a breach
of clause 4, and that ‘the parties shall be
restored to the status quo ante’.
[6] Pangbourne’s board of
directors did not pass the resolution anticipated in clause 4.2
within the 14-day period stipulated.
This much is common cause.
Although the other conditions were fulfilled the effect of the
failure of this condition was, so Pangbourne
argued, to render the
entire contract of no effect. This is indeed the general consequence
of the failure of a condition: the contract
has no legal force.
1
[7] The high court found, however, that although the
agreement had lapsed it had been ‘revived’. This was the
implication
of a written addendum to the agreement concluded after
the date for fulfilment had occurred. The high court also found for
Basinview
on the ground that Pangbourne was estopped from asserting
that the agreement was a nullity. And it found that the fulfilment of
the condition had been waived despite the express prohibition on
unwritten waivers in the agreement. In refusing the application
by
Basinview for leave to appeal Legodi J said:
‘
[I]t would offend against one’s sense
of justice if, despite clear and unambiguous intention of the
parties, the general rule
is applied. At the risk of repeating myself
and contrary to the rigid rule as proposed by Counsel on behalf of
the respondent,
a lapsed agreement due to non-fulfilment of a
suspensive clause, could be revived provided of course that the
intention to revive
it spell out or can be implied, or can be seen to
have been waived.’
[8] The facts relating to non-fulfilment, and to the
addendum, are not in dispute. Before the expiration of the 14-day
period for
fulfilment of the condition, on 15 November 2007,
Pangbourne’s company secretary wrote to Basinview advising that
the chief
executive officer of Pangbourne, Mr C Hutchison, who had
authority to approve the purchase price, had approved the agreement
for
the purchase of the property. In the same letter she asked for
proof of Basinview’s board approval.
[9] It subsequently transpired that Hutchison had
exceeded the limit of his authority. Nothing turns on this since it
is clear that
Hutchison in any event did not constitute the board and
that there was in fact no board approval. Basinview contended in the
high
court, however, that Pangbourne was bound by the letter of 15
November on the basis of the Turquand rule: that although Pangbourne
had not followed its own internal procedures, third parties could not
be expected to take cognizance of that and were entitled
to rely on
what is communicated to them by the company.
[10] The court below made no finding in this regard but
did not reject the argument. The invocation of the Turquand rule is
in my
view inapposite. Pangbourne communicated quite clearly to
Basinview, through the company secretary, that Hutchison (rather than
the board) had approved the purchase. This is not a case where
internal procedures were not followed, unbeknown to third parties.
Basinview actually knew that there was no board resolution as
required by the agreement. The point was not pursued on appeal.
[11] Basinview argued before this court that the
agreement was binding on the basis of estoppel. Alternatively it
contended that
a new agreement had been entered into when the parties
signed an addendum to the agreement on 19 June 2008. I shall deal
first
with the argument based on estoppel.
Estoppel
[12] The high court appeared to find (saying that the
‘cumulative events or conduct . . . should justify a finding .
. . on
estoppel’) that Pangbourne was estopped from denying the
validity of the agreement. The basis for this was the conduct of
Pangbourne’s officers, and their correspondence after the
agreement and the addendum respectively were signed. On appeal
Basinview argued only that the letter from the company secretary on
15 November 2007 formed the basis for finding that Pangbourne
was
estopped from asserting that the condition was not fulfilled and that
the agreement was not binding.
[13] It should be noted that clause 19.3 of the
agreement provided that:
‘
No extension of time or waiver or
relaxation of any of the provisions or terms of this agreement . . .
shall operate as an estoppel
against any party in respect of its
rights under this agreement . . . .’
Basinview argued that this provision did not exclude the
operation of estoppel since it was not contending for any extension
of
time, waiver or relaxation of a term of the agreement. Instead it
relied on a misrepresentation made by Pangbourne in the letter
written by the company secretary. That letter constituted the
misrepresentation. Part of the heading of the letter referred to
‘approval by Pangbourne’s board of directors referred to
in clause 4.1.2 of the agreement’. The second and third
paragraphs read:
‘
I confirm that the purchase price of the
Property in the sum of R50 854 857,14 falls within the authorization
limit for approval
of a purchase by Craig Hutchison, in his capacity
as Chief Executive Officer, in terms of Pangbourne’s policies
and procedures.
I accordingly confirm, in my capacity as Company Secretary of
Pangbourne, that the purchase of the Property has been approved by
Craig Hutchison.’
[14] This, contended Basinview, amounted to a
representation that there was board approval – a general
authority for Hutchison
to approve the purchase. It did not matter
that in fact the price exceeded his general authority. Basinview had
reasonably relied
on the representation to its detriment.
[15] The requirements for an estoppel
to operate are well known. A representation made by a principal, not
an agent, by words or
conduct in such a way that the principal would
expect someone to rely on it; reasonable reliance on the
representation by the person
relying on the representation; and
consequent prejudice to that party.
2
[16] In my view, the letter made no misrepresentation
that the condition had been fulfilled, and Basinview could not
reasonably
have relied on it in believing that the board had passed
the requisite resolution. The agreement in clause 4.1.2 expressly
required
a resolution of the board approving the particular sale –
not a general resolution giving an officer of the company authority
for acquisitions for less than a specified amount. And proof of the
specific resolution, ‘duly certified by the Chairman/Secretary
of the Company’ had to be furnished to Basinview. The letter
did not say that the board had resolved to approve the agreement.
It
said that Hutchison had approved it. And there was indeed no
resolution (as Basinview now accepts) and thus no proof of it as
required.
[17] There was therefore no representation that the
condition had been fulfilled. And accordingly there was no reliance
to its detriment
by Basinview on the fact that the agreement had
become unconditional. The requirements for estoppel to operate such
that the agreement
was enforceable against Pangbourne were not met.
[18] It is thus not necessary to deal
with Pangbourne’s contention that estoppel is in any event a
shield of defence and not
a weapon of attack – a principle
questioned recently by Harms DP in
Oriental
Products v Pegma 178.
3
The finding by the high court that
Pangbourne was estopped from asserting the nullity of the agreement
was clearly wrong.
The addendum constituted a new agreement
[19] Basinview contended in the alternative that an
addendum that the parties had signed on 19 June 2008 constituted a
new agreement
between the parties. Legodi J found that the addendum
‘revived’ the agreement and he added some tacit terms. A
glance
at the agreement suggests that the addendum had a completely
different purpose and effect.
[20] The parties recorded that in terms of clause 27 of
their agreement Pangbourne had appointed another entity, Bridgeport
Property
Administration (Pty) Ltd (Bridgeport), to manage the
buildings on the property sold. They stated, however, that they had
agreed
that Bridgeport would not be required to manage the property,
and thus deleted clause 27. The addendum continued: ‘Save for
the amendment set out above, the Agreement remains of full force and
effect’.
[21] This, argued Basinview, as I have indicated,
amounted to a new agreement for the purchase of the property, on the
same terms
(with the necessary changes being made to dates) as the
initial agreement. The logic defies me. The addendum was recorded to
have
been made for the purpose of deleting clause 27. It stated that
the remainder of the agreement continued in effect. That must include
the conditions. There is not a shred of evidence that the addendum
(usually something to be added to an agreement) was intended
to
replace the agreement. And the contention runs counter to the terms
of the addendum itself.
[22] Nonetheless Basinview argued that the addendum had
to be read against the factual matrix in which the parties operated.
They
knew that the condition had not been fulfilled, yet they stated
that the sale agreement remained of full force and effect. That
must
have meant that they intended to enter into a new contract on the
same terms save that the clauses of the contract of November
2007
dealing with signature, effective dates and fulfilment of conditions
had to be changed in the light of the later date of agreement.
[23] The argument is far-fetched. It requires one to
ignore altogether the language of the addendum and to assume a false
fact.
Pangbourne, certainly, was not under the impression that the
condition had not been fulfilled. In a round robin resolution dated
27 June 2008 the board of directors recorded that it had received
legal advice that Pangbourne was bound by the agreement, despite
the
absence of a mandate on the part of the ‘previous managing
director’, because of the provisions of s 36 of the
Companies
Act 61 of 1973, called by them the ‘ultra vires rule’.
The resolution continued to state that the board now
ratified the
agreement as a result of a request by the attorneys who were to
effect transfer. The resolution thus shows that there
was no
assumption that the agreement was not binding. Accordingly the
factual matrix indicates that the addendum was just that:
an
alteration in one minor respect of what was assumed to be a valid
contract. And that is confirmed by the words at the end that
state
that the agreement remained of full force and effect.
[24] The high court was thus wrong in finding that the
addendum ‘revived’ the agreement for the sale of the
property
by Basinview to Pangbourne, with tacit terms read in as to
the dates of signature, and dates for the fulfilment of the
conditions.
And Basinview’s argument that it actually
constituted a new agreement on the same terms (more or less) likewise
is untenable.
The high court also erred in finding that the parties
had waived the fulfilment of the condition since the alleged waiver
was not
only precluded by the express terms of the agreement but also
occurred after the date by which the condition should have been
fulfilled.
Basinview did not persist in its argument in this regard
on appeal. It also did not persist with the argument that certain
tacit
terms had to be read into the addendum.
[25] In my view there was no basis on which to find that
the agreement was enforceable. Thus it is not necessary to consider
the
claim for rectification nor the conditional cross appeal. (Nor is
it necessary to consider the application for condonation of the
late
filing of the notice of cross appeal.) The appeal must succeed.
[26] The appeal is upheld with costs. The order of the
high court is replaced with:
‘
The application is dismissed
with costs.’
____________
C H Lewis
Judge of Appeal
APPEARANCES:
APPELLANTS: P N Levenberg SC
Instructed by Bowman Gilfillan Inc
Johannesburg
McIntyre & Van der Post
Bloemfontein
RESPONDENTS: N G P Maritz SC
Instructed by Van der Merwe Du Toit
Pretoria
Symington & De Kok
Bloemfontein
1
The
proposition is trite and repeated in many decisions. The most recent
statement of this court to this effect is in
Fairoaks Investment
Holdings (Pty) Ltd v Oliver
[2008] ZASCA 41
;
2008 (4) SA 302
(SCA) paras 20 and
21.
2
See
NBS Bank Ltd v Cape Produce Co (Pty) Ltd
2002 (1) SA 396
(SCA) para 26, cited in
Glofinco v Absa Bank Ltd t/a United Bank
2002 (6) SA 470
(SCA) para 12.
3
(126/10)
[2010] ZASCA 166
(1 December 2010) para 31.