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[2022] ZAFSHC 345
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Gouveia v Decotable (Pty) Ltd (5638/2018) [2022] ZAFSHC 345 (2 December 2022)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No: 5638/2018
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
CARLOS
GOUVEIA
Plaintiff
ID
NUMBER: [....]
and
DECOTABLE
(PTY)
LTD Defendant
(REGISTRATION
NUMBER: 2018/090984/07)
HEARD
ON:
15
AUGUST 2022
JUDGMENT
BY:
MHLAMBI,
J
DELIVERED
ON:
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email and released to
SAFLI.
The date and time for the hand-down are deemed to be 12h30 on 2
December 2022.
[1]
The plaintiff instituted an action consisting of two claims against
the defendant
arising from a written sale of a business agreement
which was concluded on 17 March 2018. The relief sought in the first
claim
is the rectification of the agreement and an order for specific
performance of the agreement in the second claim as well as the
payment of the balance of the contract price in the amount of R
763 845.00.
[2]
The defendant pleaded that the parties did not reach a true
consensus
on the nature of the
merx
on the basis of a mutual mistake
that rendered the contract void and of no force and effect.
Simultaneously, the defendant filed
a counterclaim based on a
material misrepresentation by the plaintiff for the cancellation of
the agreement and tendered restitution
of the performance already
received.
[3]
The material terms of the sale of the business agreement were as
follows:
“
2.
SALE
2.1
Subject to the fulfillment or waiver of the suspensive conditions,
the Seller sells to the Purchaser which
purchases the business assets
with effect from the effective date.
3.
PURCHASE
CONSIDERATION AND PAYMENT
3.1
The consideration payable for the business assets is an amount of
R
1 700 000.00
(one million seven hundred thousand rands)
Payable
3.1.1
R 50 000.00 (fifty thousand Rand) on 19 March 2018
3.1.2
R 950 000.00 (Nine Hundred and Fifty Thousand Rand) on or before
30 April 2018
3.1.3
The amount of R 200 000.00 as soon as the purchaser receives the
Vat Credit on the purchase of the business assets.
3.1.4
The balance of R 500 000.00 on or before 31 August 2018 after
the following items have been brought into consideration
3.1.3.1
The amounts received by the Seller before 15 March 2018 for service
to be delivered
after 15 March 2018
3.1.3.2
The amount paid by the Seller for good or services before 15 March
2018 but delivered
after 15 March 2018
3.1.3.3
The amount paid by the Purchaser after 15 March 2018 for goods or
service delivered
before 15 March 2018
3.1.3.4
The amount received by the seller after 15 March 2018 for goods or
service supplied
by the Purchaser.
3.1.3.5
The amount received by the purchaser after 15 March 2018 for goods or
service
supplied before 15 March 2018
3.1.3.6
The difference between 80% of R 749 899 and the sales achieved
by the purchaser
from 1 April 2018 to 31 August 2018 should the sales
be less than 80% of R 749 899.
3.1.3.7
The difference between the list of equipment as supplied by Mr.
Gouveia and the
actual stock at replacement value at the premises on
the date of the takeover.
6.
WHOLE
AGREEMENT
6.1
This agreement constitutes the whole of the agreement between the
parties relating to the subject matter thereof, and
no amendment,
alteration, addition, variation or consensual cancellation will be of
any force or effect unless reduced to writing
and signed by the
parties.
6.2
The parties agree that no other terms or conditions, whether oral or
written, and whether express or implied, apply.”
[4]
The meaning assigned to the business assets in the agreement meant
all the assets
of the seller used in or in connection with the
business, comprising the business name, movable assets and stocks.
[1]
Movable assets meant all the fixed assets of whatsoever nature or
kind owned and used by the seller in or in connection with the
business on the effective date, which fixed assets were listed in
annexure “A”.
[2]
The
stocks meant the stock in trade of the seller on the effective date
comprising all the items on the inventory and included
the stock in
transit to and from the seller, stocks held on consignment by third
parties and stocks held for reworking by third
parties. The agreement
included all annexures to it.
[3]
Particulars
of Claim and the Pleas
[5]
It was stated in the particulars of claim that the agreement did not
correctly record
the agreement and the common intention between the
parties in that annexure “A” as envisaged in clause 1.2.6
of the
agreement was not annexed to that agreement. It was the common
intention of both parties to reduce the list of the immovable assets
as envisaged in that clause to writing and annex such list as
annexure “A” to the agreement.
[4]
[6]
The mistake was the result of a
bona
fide
mutual
error of the parties who did not annex annexure “A” at
the date of signature of the agreement.
[5]
The parties did complete an agreed list as envisaged in clause 1.2.6,
a copy of which was annexed as annexure “B” to
the
particulars of claim. The parties had, throughout, the intention that
the agreement had an annexure “A”. The defendant
wanted
to verify the stated list.
[6]
On
12 April 2018, the defendant confirmed the stated list and only had
an issue with the tables mentioned in the list which amounted
to R
10 591.20.
[7]
The plaintiff
accordingly sought an order rectifying the agreement by the inclusion
of annexure “B” as annexure “A”
to the
agreement.
[8]
[7]
The defendant denied in its plea that annexure “A”
represented the final
and consensual record of the parties’
agreement and that no consensus was reached in respect of clause
3.1.3.7 of the agreement.
It admitted that it was the common
intention of the parties to annex a list of assets to the agreement
but that was not done at
the time of the signature of annexure “A”
and, a list purporting to be that envisioned in clause 3.1.3.7, was
only
provided by the plaintiff after the agreement was signed. It
further denied that the intention was to annex a final list at the
date of signature of the agreement and such omission arose as the
result of any mistake, whether
bona
fide
or
otherwise.
[9]
[8]
The plaintiff provided the same list annexed as annexure “B”
to the particulars
of claim a month after the conclusion of the
agreement. The items on this list amounted to only R 678 850.00
and were inflated.
The items on the premises at the time of the
take-over were markedly fewer than those contained in annexure “B”
and
their value amounted to only R 484 273.00. The other items
promised as part of the sale were never provided or included on
any
list.
[10]
The parties had
therefore reached no true consensus in regard to the nature of the
merx
and/ or the operation of clause 3.1.3.7.
[11]
Counterclaim
[9]
The defendant filed a counterclaim that the numbers and values of the
movable assets, constituting the
merx,
were inflated and rendered the business,
[12]
in the form received from the plaintiff, unable to reach its
targets.
[13]
The defendant
understood clause 3.1.3.7 to mean that the plaintiff would provide a
list that contained stock and equipment that
amounted to the greater
part of the purchase price.
[14]
This list would have been compared with the actual stock and
equipment at the premises on the date of the handover and the
contract
price adjusted accordingly.
[15]
The plaintiff, on the contrary, regarded the list annexed as “B”
as either the final list of movable assets or as being
the list
envisioned in clause 3.1.3.7.
[16]
The parties had different meanings to this clause and each was
mistaken about the other party’s intention, rendering the
agreement void and of no force and effect.
[17]
The defendant tendered the return of the assets received under the
contract against the repayment of the amounts paid as
consideration.
[18]
[10]
In his plea to the counterclaim, the plaintiff stated that annexure
“B” was drafted
in the presence of the plaintiff and the
duly authorised representative of the defendant, namely Werner
Remholdt, and it was confirmed
and accepted by the defendant. The
only issue was the tables but it was resolved.
[19]
The plaintiff stated that the defendant made payments to the
plaintiff before and after confirming the list of assets. All agreed
and confirmed that the items were delivered and provided to the
defendant and the defendant’s conduct confirmed that the
parties had consensus in regard to the terms of the agreement.
[20]
The
witnesses
[11]
The plaintiff called two witnesses, Mr Pierre Gildenhuys, an
accountant, and himself while the
defendant, Mr W Remholdt, was the
only witness who testified on behalf of the defendant. In essence,
the plaintiff testified that
the defendant was provided with an
inventory list in January 2018 which the latter confirmed on 12 April
2018. He conceded that
no inventory list was identified as an
annexure “A” to the agreement and that no such list was
signed on behalf of
the defendant. He confirmed that as of September
2018, the list had not been verified, confirmed or signed by the
parties. He also
confirmed the emails that were exchanged between the
parties up until September 2018 and that they were sent in an attempt
to finalise
the list and have a “
rustige uitkoms uit die
saak.”
He was a “
rustige mens”
and
wanted to calm the parties and resolve the matter amicably.
[12]
Mr Gildenhuys confirmed that the inventory list had, to date, not
been verified. He testified
that he did his best since March 2018 to
get the parties together to verify the inventory list but he was not
successful in these
attempts. He was under the impression that there
were still a lot of items that the defendant did not receive.
[13]
Mr Remholdt testified that his father-in-law, Mr Gildenhuys, was the
middle man who negotiated
the sale of the business contract for him.
He was still young, 24 years old, and inexperienced. Mr Gildenhuys
managed his finances
and bookkeeping and had access to everything
pertaining to the business. The total payments made to the plaintiff
were the amount
of R 900 000.00. He expected to receive assets
which were the larger part of R 1 700 000.00. The VAT
received was
not paid over to the plaintiff as the defendant had
already overpaid for the stock. The defendant was not sure of what
stock the
business was to receive. The difference between what was
received and what was to be received was great.
[14]
He wanted a cancellation of the contract; the plaintiff to pay back
what was paid to him and
he, the defendant, to restore what he had
already received.
Claim
1
[15]
The first claim seeks an order rectifying the agreement, annexure
“A”, by the inclusion of annexure “B”
to the
agreement. The written agreement contained a non-variation clause
stipulating that no amendment or alteration would be of
force or
effect unless reduced to writing and signed by both parties. It is
crystal clear from the evidence of both Mr Gildenhuys
and the
plaintiff that the inventory list, which was crucial to the validity
of the agreement between the parties, was not signed
and consented to
as late as September 2018 while the written agreement itself was
signed in March 2018. The pleadings do not accord
with the evidence.
The difference between the spoken word and the written word in the
plaintiff’s case is as clear as a pole
above water. According
to the evidence, neither annexure “A” nor “B”
was signed as, according to the testimony
of Mr Gildenhuys, “
the
parties never sat down and drew the line or set a date to finalise
the list.”
[16]
Rectification of an agreement does not alter the rights and
obligations of the parties in terms of the
agreement to be rectified:
their rights and obligations are no different after rectification.
Rectification, therefore, does
not create a new contract; it merely
serves to correct the written memorial of the agreement. It is
a declaration of what
the parties to the agreement to be
rectified agreed. For this reason, a defendant who contends that an
agreement sued upon does
not correctly reflect the agreement between
the parties may raise that contention as a defence without the need
to counterclaim
for rectification of the agreement.
[21]
[17]
In order to succeed with a claim for
rectification, the plaintiff has to allege and prove the
following:
[22]
(
a
)
that an agreement had been concluded between the parties and reduced
to writing;(
b
)
that the written document does not reflect the true intention of the
parties, this requires that the common continuing intention
of the
parties, as it existed at the time when the agreement was reduced to
writing, be established;(
c
)
an intention by both parties to reduce the agreement to writing in
the present case, the agreement was for the sale of land and,
therefore, had to be in writing in order to be valid and binding;(
d
)
a mistake in drafting the document, which mistake could have been the
result of an intentional act of the other party or a bona
fide common
error; and(
e
)
the actual wording of the true agreement.
[18]
The case for rectification in this case, fails at
the levels of a) and b) as the document sought to be rectified
was
neither signed when the agreement was entered into nor did the
parties get together to agree on the list of the items forming
the
merx
.
If the plaintiff were to allege that the list of items was finalised
verbally, he would be
precluded
from relying on the alleged oral agreement by virtue of the so-called
'parol' evidence or 'integration' rule. It is a
well-established
principle that where the parties decide to embody their final
agreement in written form, the execution
of the document
deprives
all
previous statements of their legal effect.
[23]
In
Kingswood
Golf Estate (Pty) Ltd v Witts-Hewinson and another,
[24]
it was stated that
when
a contract has once been reduced to writing, no evidence may be given
of its terms except the document itself, nor may the
contents of such
document be contradicted, altered, added or varied by oral evidence.
[19]
The plaintiff has failed to adduce evidence that proves that he is
entitled to an order for the
rectification of the contract.
Claim
2
[20]
After the initial payment of R950 000.00, the
defendant ceased further payments and also withheld the
amount of
R123 000.00 in 2019 which he received as a credit on VAT on the
sum of R900 000.00 he paid towards the purchase
price; the VAT
amount being withheld because the defendant was of the view that he
had overpaid the plaintiff. The payment of the
purchase price was a
major problem. Despite the assistance of Mr Gildenhuys, the stock
inventory list was neither verified nor
agreed upon by the parties to
determine the actual stock delivered by the plaintiff to the
defendant and its replacement value
by the plaintiff. Mr Gildenhuys
testified that he realized in 2019 that the figures he provided
regarding the sales were incorrect,
which had an impact on the
computation of the payment in terms of the contract.
[21]
The second obstacle was the calculation of the outstanding balance in
accordance with paragraphs
3.1.3.1-3.1.37. This entailed the
cooperation of both parties in the calculation of the amounts
received and delivered by each
for services. No set mechanism was put
in place to manage the process. As of the date of the takeover, a
list of the equipment
supplied by the plaintiff and the actual stock
at replacement value on the premises had not been drawn to determine
the difference
which would influence the purchase price. The sales
achieved by the purchaser for the period 1 April 2018 to 31 August
2018 were
unknown. The calculation sought in clause 3.1.3.6 was
therefore not possible. These calculations are imperative before the
amount
claimed or balance payable is arrived at. The prayer for
specific performance also fails on this basis.
The
Counterclaim
[22]
The defendant pleaded that the agreement was based on either
misrepresentation or mutual mistake
and vagueness in that the values
of the stock and equipment were overstated as the actual value at the
handover amounted only to
R484 273.00. The inventory list
provided by the plaintiff in terms of the agreement (annexure “B”
to the particulars
of claim) only contained assets to the value of
R678 850.00 far less than the contract price of R1 700 000.00.
In
the alternative, the defendant understood the plaintiff to provide
stock and equipment amounting to the greater part of the purchase
price, failing which the actual stock on the premises would be
compared with the list and the contract price adjusted accordingly.
On the contrary, the plaintiff regarded annexure “B” as
the final list of movable assets or as the envisaged list in
terms of
the agreement. Consequently, the defendant tendered the return of the
assets received in terms of the agreement against
the repayment of
the consideration already paid under the contract.
[23]
In his testimony, the plaintiff, without binding
himself to a figure, conceded that the contract price did
not reflect
the value of the assets. The defendant’s counsel referred to
the evidence of Mr Gildenhuys (which was traversed
during his
testimony) on pages 122 and 123 of exhibit “B” before the
court in the form of an email of 11 October 2018
addressed to the
plaintiff. Mr Gildenhuys complained in that email to the plaintiff
that a lot of the assets had not reached the
defendant and “
elke
keer as gevra het vir die finale voorraadlys is daar vir my gese daar
is nog goed by jou huis of by jou stoor of wie weet waar.
Die verkope
wat jy ons gegee het is ook heeltemal geoverstate. Ek het vroeg in
Augustus gese ons moet die kontrak renegotiate maar
julle wou nie.
Die prokureurs gaan julle kaal uittrek.”
[24]
On a consideration of all the circumstances of
this case, it is evident that, contrary to the allegations
in
paragraph 5.5 of the particulars of claim, the parties did not agree
on a list as envisaged in clause 1.2.6 of the agreement
relating to
either annexure “A” or “B”. In
Lambons
(Edms) Beperk v BMW (SUID AFRIKA) (Edms) Beperk,
[25]
it was held that, where parties have reached an agreement, the fact
that there were still material matters outstanding on which
they had
still not agreed, might prevent the agreement from having contractual
force. The court concluded that the parties had
not entered into a
binding and enforceable contract as they had not reached an agreement
on all material aspects.
[25]
In this case, it is abundantly clear that the parties were not
ad
idem
on a material aspect of the agreement which is annexure “B”.
Annexure “B” is important as it should list
all the fixed
assets of the business, the
merx,
on the effective date of 19
March 2018. Annexure “B” is therefore an integral
part of the agreement without which
the agreement cannot stand. For
the reasons stated above and the fact that the parties are unable to
be at one on the
merx
and the price, I conclude that the
contract is neither binding nor enforceable. The counterclaim should
therefore succeed and the
agreement declared void, in which case
restitution should take place.
[26]
The successful party is entitled to the costs.
[27]
The following orders ensue:
Order:
1.
The plaintiff’s claims are dismissed with costs;
2,
The agreement between the parties is declared void and
2.1
the defendant is ordered to return all assets, stock and equipment
received from the plaintiff in terms of the agreement;
2.2
the plaintiff is ordered to pay to the defendant all consideration
received in terms of the agreement;
3.
The defendant is to pay the costs of suit.
MHLAMBI,
J
On
behalf of the plaintiff: Adv.
I Sander
Instructed
by: Callis
Attorneys
12
Milner Road
Waverley
Bloemfontein
On
behalf of the respondent: Adv.
Steenkamp
Instructed
by:
Bezuidenhouts
Inc.
104
Kellner Street
Westdene
BLOEMFONTEIN
[1]
Clause 1.2.1 of the Sale of Business Agreement.
[2]
Clause 1.2.6 of the Sale of Business Agreement.
[3]
Clause 1.2.13 of the Sale of Business Agreement.
[4]
Paragraphs 5.2 and 5.3 of the Particulars of Claim.
[5]
Paragraph 5.4 of the Particulars of Claim.
[6]
Paragraph 5.5 of the Particulars of Claim.
[7]
Paragraph 5.6 of the Particulars of Claim.
[8]
Paragraph 5.7 of the Particulars of Claim.
[9]
Paragraph 6 of the Defendant’s Plea.
[10]
Paragraph 7 of the Defendant’s Plea.
[11]
Paragraph 8 of the Defendant’s Plea.
[12]
Paragraph 6.4 of the Counterclaim.
[13]
Paragraph 7.1.1 of the Counterclaim.
[14]
Paragraph 8.1 of the Counterclaim.
[15]
Paragraph 8.2 of the Counterclaim.
[16]
Paragraphs 9.1 and 9.2 of the Counterclaim.
[17]
Paragraph 10.1 of the Counterclaim.
[18]
Paragraph 10.2 of the Counterclaim.
[19]
Paragraphs 4.5 and 4.6 the Plea to the Counterlaim
[20]
Paragraph 4 of the Plea to the Counterclaim.
[21]
BOUNDARY
FINANCING LTD v PROTEA PROPERTY HOLDINGS (PTY) LTD 2009 (3) SA 447
(SCA).
[22]
Propfokus 49 (Pty) Ltd and others v Wenhandel 4 (Pty) Ltd
[2007]
3 All SA 18 (SCA).
[23]
AFFIRMATIVE
PORTFOLIOS CC v TRANSNET LTD t/a METRORAIL 2009 (1) SA 196 (SCA).
[24]
2014] 2 All SA 35
(SCA
)
para
22.
[25]
[1997] ZASCA 51
;
1997 3 ALL SA 327
(A).