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[2011] ZASCA 136
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Burger & Wallace Construction (Pty) Ltd v Ballprop Ten (Pty) Ltd (406/10) [2011] ZASCA 136 (23 September 2011)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 406/10
In the matter between:
BURGER
& WALLACE CONSTRUCTION (PTY) LTD
…............................
Appellant
and
BALLPROP
TEN (PTY) LTD
…................................................................
Respondent
Neutral
citation:
Burger & Wallace Construction (Pty) Ltd v
Ballprop Ten (Pty) Ltd
(406/10)
[2011] ZASCA 136
(23 September
2011).
Coram:
CLOETE and MALAN JJA, and MEER, PLASKET
and PETSE AJJA
Heard:
25 AUGUST 2011
Delivered:
23 SEPTEMBER 2011
Summary:
Contract: whether joint venture
agreement, breach and entitlement to claim damages established on
the facts.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
Western Cape High Court (Cape
Town) (Saldanha J sitting
as court of first instance):
The appeal is dismissed with costs, including the costs
of two counsel.
______________________________________________________________
JUDGMENT
______________________________________________________________
CLOETE JA (MALAN JA and MEER, PLASKET and PETSE AJJA
concurring):
[1] The appellant as the plaintiff sued the respondent
as the defendant in the Western Cape High Court for payment of
R461 335,25
in respect of services rendered. It is convenient to
refer to the parties as they were in the court a quo. The defendant
admitted
the claim but counterclaimed for payment of damages for
breach/repudiation of a joint venture agreement. The merits of the
counterclaim
were separated from the amount claimed in terms of rule
33(4) and were determined in favour of the defendant by Saldanha J,
who
granted leave to appeal to this court.
[2] The plaintiff is a company that provides civil
engineering services in construction projects. The defendant is a
property development
company that buys and develops land and
constructs and sells houses.
[3] It was the defendant's case that in or about April
2001 and in Cape Town the parties entered into a joint venture
agreement
to develop what came to be known during the trial as 'the
Ogden erven'. For reasons which will become apparent it is necessary
to quote paragraph 3 of the defendant's counterclaim:
'3. The relevant terms of the
joint venture agreement between the Defendant and the Plaintiff were
inter alia
as follows:
3.1 the Defendant would attend
to the rezoning, subdivision and other issues concerning the
development of the relevant erven with
the intention to subdivide and
develop approximately 600 erven in total and to sell these by plot
and plan;
3.2 the Plaintiff would obtain
and/or arrange the necessary finance for the project and furthermore
see to the site services for
each plot for which service the
Plaintiff was to be paid a market-related fee for its services
rendered;
3.3 the Defendant would act as
building contractor and build the dwellings for the plot and plan
purchasers;
3.4 the Defendant and the
Plaintiff would each be entitled to half of the profit generated by
the sale of these plots to purchasers;
3.5 the Defendant would be
entitled to all profit for the building work done in accordance with
the agreement of the parties;
3.6 the joint venture agreement
would be undertaken in the name of a company to be nominated as the
purchaser of the Ogden erven.'
[4] Three principal issues were raised on appeal,
namely:
(a) Whether the defendant had proved a binding contract
on the terms it alleged;
(b) whether the defendant had established that the
contract had been breached in the manner alleged; and
(c) whether the defendant had suffered loss.
The plaintiff accepted the defendant's version for the
purposes of argument on these three issues. In the alternative, the
plaintiff
submitted that the evidence of the principal witness called
on behalf of the defendant, Mr Frederick Peter Carse, should not have
been accepted. It is logical to determine the last question first and
I shall accordingly do so.
[5] The judgment of the court a quo was comprehensive.
After setting out the history of the relationship between the
parties, the
court devoted some 26 pages of the judgment to setting
out the relevant facts in careful detail. It was not submitted that
the
court committed any factual misdirection. It is accordingly
unnecessary to repeat the exercise. It suffices to say that this
judgment
should be read together with that part of the judgment of
the court a quo.
1
[6] The court a quo found that a joint venture agreement
between the parties had been established. In summary, the court
accepted
the evidence of Carse that after approaches to the Cape of
Good Hope Bank and Absa for finance for the joint venture had not
succeeded,
he, with the assistance of Mr Izak Martin Burger and with
the co-operation of Mr Terence James Wallace, the directors and
shareholders
of the plaintiff, had approached Mr Andrew David
Ribbans. Ribbans agreed on behalf of a company (to which I shall
refer as 'the
Ribbans company') to finance the purchase of the Ogden
erven by a 'shelf' company. The 'shelf' company used was Defacto
Investments
12 (Pty) Ltd. Ribbans required that the shareholding in
Defacto would be the Ribbans company as to 80 per cent and the
defendant
as to 20 per cent. Ribbans also required that the first R10
million of the anticipated profit to be made by Defacto in selling
subdivided plots was to be split 80 per cent in favour of the Ribbans
company (which would include the plaintiff's 50 per cent share
of
those proceeds in accordance with the joint venture) and 20 per cent
in favour of the defendant; and this ratio was to be reversed
in
respect of the second R10 million of the anticipated profit ─
provided that if the development took more than four years
but less
than five years, the ratio was to be 70/30 and if the development
took more than five years but less than six years, the
ratio was to
be 60/40. Ribbans, Burger and Carse were appointed directors of
Defacto. The plaintiff's version, which the court
a quo rejected, was
that Ribbans was only prepared to commit his company to the purchase
of the Ogden erven on the basis that that
company would own the land,
indirectly by means of a 100 per cent shareholding in a 'shelf'
company; that Ribbans had not stipulated
any payment ratios; and that
the joint venture ─ if it existed at all (a point on which
Wallace and Burger contradicted each
other) ─ did not survive
the refusal of the two banks to provide finance.
[7] The court a quo scrutinized and evaluated the
evidence given by the witnesses in some detail and concluded that:
'Carse, although at times
argumentative in cross-examination, cast a more favourable impression
on the court as a witness than any
of those for the plaintiff.'
On appeal it was contended that the court had erred in
this regard. Notably, it was not suggested that the court's
criticisms of
the evidence of Wallace, Burger and Ribbans was not
justified. The submission, rather, was that the court had not
properly evaluated
Carse's evidence, which it was submitted was
neither credible nor probable, for a number of reasons. I shall deal
with the probabilities
presently. Some of the reasons advanced
against Carse's credibility do not warrant consideration. The others,
which I shall now
deal with, are without merit.
[8] It was submitted that there were contradictions
between Carse's oral testimony and his affidavit resisting summary
judgment,
his version in the Rule 22(4) proceedings, the original
claim in reconvention, and the amended claim in reconvention. It was
also
submitted that in terms of the Companies Act 61 of 1973 the
agreements to which Carse testified had to be reflected in the
defendant's
annual financial statements, but they were not. It is
unnecessary to discuss the alleged contradictions and omission as
none of
this was put to Carse in cross-examination and he was not
given an opportunity of dealing with it.
[9] It was submitted that on his own version, Carse made
no effort to bind Defacto, Ribbans or the defendant to the agreements
to
which he testified. It is true that no written agreements were
concluded, but according to Carse, there was an agreement between
the
shareholders of Defacto and an agreement between the parties to the
joint venture agreement, the workings and terms of which
I shall deal
with later in this judgment.
[10] It was submitted that it is telling that Carse did
not raise the agreements referred to in the previous paragraph with
Ribbans
at any time after July 2001, and that he only raised a claim
in respect of the Ogden properties by way of an attorney's letter in
response to the plaintiff's application for summary judgment in
January 2005. The submission concluded that this did not reflect
the
conduct of a man who genuinely believed that he had the rights of the
kind and value for which the defendant contends. The
submissions are
not entirely accurate, nor do they reflect all of the facts. Carse
sent a memorandum to the plaintiff dated 15
August 2002, the heading
of which was 'Defacto ─ Sunrise Beach' in which he said, inter
alia:
'Although progress to date does
not maybe reflect it, a tremendous amount of work and energy goes
into this project. It would be
appreciated if we could formalise the
arrangement between the parties.'
In his evidence Carse explained the reasons behind this
request as follows:
'U Edele [the defendant] sowel
as myself, professionele mense het geweldige hoeveelheid tyd en ure
ingesit in die projek en ek wou
graag dat ons ooreenkoms, die
ooreenkoms met Burger & Wallace en die deelname van Master Tyre
Properties [a Ribbans company],
dat dit meer formeel geskied. Ek wil
hulle ook meer betrokke gehad het by die ontwikkeling omdat hulle
vennote was, finansierders,
en daar besluitneming in terme van baie
goed geneem moet word.'
On 8 April 2003 Carse wrote to Ribbans. The heading of
the letter was 'Defacto Investments 12 (Pty) Ltd'. In the letter,
Carse said:
'I want to remind you that I
have [on] various occasions suggested/requested that we have regular
meetings to address matters relating
to this joint venture. As the
financing partners, it is in your interest to have such contact and
communication.'
In February 2004 when Carse was asked by Ribbans to
resign as a director of Defacto, he reacted, according to him, by
saying:
'Maar wat van 'n aandeelhouding,
julle kan mos nie net dit doen nie.'
In August 2004 Carse received a letter to attend a
meeting for his removal as a director of Defacto and consulted an
attorney, who
advised him to prepare for litigation to enforce the
defendant's claim. In January the following year Carse and his
attorney, Mr
Horak, attended a meeting with Wallace. During that
meeting they attempted to raise the question of a claim by the
defendant. Wallace
abruptly terminated the meeting. Shortly
thereafter, the plaintiff instituted its claim by summons dated 10
February 2005. It must
be borne in mind that the defendant was facing
expensive litigation with two potential adversaries which had far
deeper pockets
that it did ─ the Ribbans company, and the
plaintiff. When all of these facts are borne in mind Carse's conduct
does not
suggest that the defendant's claim is mala fide or that he
had no genuine belief in its existence or validity, and his conduct
in putting up R850 000 in cash to be invested by the plaintiff's
attorneys pending the outcome of the litigation as security
for the
plaintiff's costs, tends to indicate the contrary.
[11] Carse's evidence was supported by contemporaneous
documents. The original memorandum compiled by him dated 15 May 2001
was
addressed to the plaintiff. It was compiled to enable the
plaintiff to approach the Cape of Good Hope Bank for finance, and it
was used for that purpose. It makes it quite clear that the finance
was required by a joint venture between the plaintiff and the
defendant. Burger's denial that the parties had agreed to embark on a
joint venture subject to finance being obtained, was untenable.
Even
Wallace was ultimately obliged to concede that there had been such an
agreement.
[12] The other contemporaneous document which is of
cardinal importance is Carse's recordal of what he says Burger had
told him
and Wallace after he (Carse) and Wallace had made a
presentation to Ribbans in June 2001. It was not suggested to Carse
that the
document was a forgery. It reflects the percentage payments
(80/20 or 70/30 or 60/40) referred to above which Carse says Burger
told him were required by Ribbans. Wallace recalled that figures were
'bandied about' at the meeting attended by himself, Carse
and Burger
at which Burger reported back on Ribbans' reaction to the
presentation. But those figures would have been irrelevant
had
Ribbans insisted on purchasing the Ogden erven without any obligation
to develop them as agreed by the parties to the joint
venture. Burger
flatly denied that the figures were discussed at all. Ribbans said
that he never gave such ratios to Burger. The
evidence given by the
witnesses called on behalf of the plaintiff is irreconcilable with
the contents of the document and counsel
for the plaintiff was unable
on appeal to advance any explanation how the document might have come
into existence, other than on
the basis testified to by Carse.
[13] In the circumstances I am not surprised that the
court a quo preferred the evidence of Carse to the evidence of the
plaintiff's
witnesses whose evidence, as I have said, it criticised
for reasons not challenged on appeal. The court a quo also set out a
number
of probabilities which favour the defendant's version. These
were relied on on appeal by the defendant. There was no attack on
appeal by the plaintiff on this part of the judgment either. I shall
accordingly not repeat the findings of the court a quo, but
simply
emphasise some of the probabilities which favour the defendant's
version. I shall then deal with the argument that there
are
probabilities in favour of the plaintiff, to demonstrate that there
are not.
[14] Carse entered into the written contract for the
purchase of the Ogden erven on behalf of the defendant on 4 May 2001.
The contract
contained a suspensive condition that made it subject to
the defendant being able to obtain a loan equal to the purchase price
of R4 115 400 from a bank or other financial institution
upon the security of a first mortgage bond to be passed over
the
erven. The contract also entitled the defendant to nominate a
purchaser in its place, in which case the defendant bound itself
to
the seller as surety and co-principal debtor
in solidum
for
the due performance by the nominee of all the obligations of the
nominee as purchaser arising under or by virtue of the contract,
including payment of any damages which might be suffered by the
seller by reason of the nominee failing to fulfil its obligations
arising under or by virtue of the contract.
[15] On the plaintiff's version it is difficult to
understand why the defendant would have exercised its option, as it
did, to nominate
a shelf company in which the Ribbans company would
have held all the shares, thereby incurring liability as a surety to
the seller
of the Ogden properties. Nor would one have expected
Ribbans to request Carse, as he did via Burger, to obtain the shelf
company
through Carse's attorney, Mr Shaer. The defendant was also
required to waive the suspensive condition in the sale agreement and
rely on the Ribbans company to provide finance. According to Ribbans,
his company was not obliged to develop the Ogden erven as
contemplated in the joint venture ─ indeed, his evidence was
that he was unaware of a joint venture. How, one may ask, did
any of
this benefit the defendant? It might not even have received
development fees and it is inconceivable that Carse would have
agreed
to this. The suggestion by Ribbans was that Carse really had no
option but to agree to Ribbans' terms, as the defendant
faced
defaulting under the contract for the purchase of the Ogden erven.
But that is not so. The defendant, as Carse testified,
could simply
have walked away from that contract, letting it lapse by reason of
the non-fulfilment of the suspensive condition.
He said that it would
have done so. In argument, it was submitted that Carse needed to get
the Ogden erven into other hands as
the owners were not prepared to
assent to a rezoning application, the grant of which was in the
defendant's interests as it was
developing other properties in the
area. But the evidence established quite clearly that although the
consent of the owners of
the Ogden erven to the rezoning would have
been helpful to the defendant, it was by no means necessary for the
rezoning to take
place. And neither of these explanations provide an
answer to the question why, on the plaintiff's version, a shelf
company was
to be used to purchase the property, instead of Carse
nominating the Ribbans company. Nor do they explain why Carse refused
to
resign as a director of Defacto when asked to do so in July 2001:
he would have had no reason to want to stay on as a director ─
he was paid no fees and, on the plaintiff's version, Ribbans was
entitled to do what he liked with Defacto and the Ogden erven
owned
by it.
[16] It was submitted on behalf of the plaintiff that
there were probabilities in favour of the plaintiff's case. Three
were relied
on. First, it was submitted that it is improbable that a
civil engineering contractor such as the plaintiff would have been
prepared
to agree to the development of the Ogden erven simply on the
strength of an oral agreement, particularly because of the risks
involved;
and that to conclude such an agreement orally would also
have been inconsistent with the policy of the plaintiff company and
its
practice of concluding written agreements. It was said that this
is borne out by the contract in respect of an earlier development,
in
respect of the Breakers. But that contract was not concluded before
the plaintiff commenced work on it and it was never signed
on behalf
of the defendant. The plaintiff had had a successful professional
relationship with Carse in the past and Burger and
Wallace would
obviously have trusted Ribbans, who was related to Burger by marriage
and with whom Burger sat on the board of a
large family company.
[17] The second probability contended for in favour of
the plaintiff was that the plaintiff had no independent financing.
But that
is the very reason why it was a condition of the joint
venture agreement that the financing for the joint venture had to be
obtained
from a third party. Then third, it was submitted that
developing properties was not the plaintiff's core business. That,
however,
did not prevent the plaintiff from embarking on just such a
venture after Carse had been removed as a director of Defacto, as
will
appear from the section of the judgment below dealing with the
breach/repudiation of the joint venture agreement.
[18] I therefore find no basis upon which the court a
quo can be criticised for accepting the evidence of Carse, and
rejecting that
of the plaintiff's witnesses. It is now necessary to
consider the arguments advanced on behalf of the plaintiff on the
basis that
this finding was correct. As I have said, they fall under
three broad headings. The first is that the defendant did not prove
that
a binding joint venture agreement had been concluded on the
terms pleaded. Two arguments were advanced in this regard:
(a) That it was common cause that 'from the outset' the
plaintiff's participation in any venture was expressly subject to a
bank
providing 100 per cent of the requisite finance, and a bank had
not done so; and
(b) that a further essential prerequisite for the
anticipated joint venture was that the parties acquire the entire
shareholding
in Defacto, because until this happened the cornerstone
of the joint venture was not in place.
[19] If regard is had to paragraph 3 of the defendant's
counterclaim quoted above, it is plain that the defendant neither
alleged
that a bank had to provide 100 per cent of the finance nor
that the parties had to acquire all of the shares in a company to
serve
as a vehicle for the joint venture. Certainly, that was what
the parties contemplated in the memorandum of 15 May 2001. So far as
finance is concerned, it was clear that neither party could provide
it and that it had to be obtained from a third party. What
the
parties originally contemplated was that the finance would be
provided by a bank. When this failed, finance was obtained from
the
Ribbans company ─ with the co-operation and direct involvement
of Wallace and, particularly, Burger. It would therefore
be more
accurate to say that it was common cause that the parties'
participation in any joint venture required 100 per cent financing
and that at the outset (not from the outset) it was contemplated that
this would be done by a bank. So far as Defacto is concerned,
it was
also initially contemplated by the parties that there would be equal
shareholding in such a company. But ultimately, the
joint venture
agreement was, as pleaded, 'undertaken in the name of a company to be
nominated as the purchaser of the Ogden erven'.
Defacto purchased the
erven. And it was Defacto that would have contracted with the
plaintiff to provide the civil engineering
works for the development,
that would have contracted with the defendant to attend to the
rezoning and subdivision of the Ogden
erven and that would have sold
the plots to the purchasers for whom the defendant would have
constructed houses. Nor, as a matter
of principle, was it necessary
for the parties to be the sole shareholders in Defacto. Before
dealing with the argument in this
regard, I would say that even if
the defendant's pleadings were deficient in regard to either of the
points raised (finance and
shareholding), the defendant's version of
how the joint venture was to operate after Ribbans had agreed to put
up the finance and
how Ribbans' requirements were to be accommodated,
was fully ventilated in evidence. Carse testified on this aspect, and
so did
Burger, Wallace and Ribbans, and all were cross-examined. Any
deficiency in the pleadings was accordingly cured by the evidence.
[20] I return to the question whether the joint venture
parties had to be the sole, and equal, shareholders in Defacto. It
was submitted
in the plaintiff''s heads of argument that:
'The central pillar of the joint
venture pleaded by Defendant, and an inescapable requirement for its
implementation, was that it
would be conducted using a corporate
vehicle (Defacto), in which Plaintiff and Defendant would each own
50% of the shares.'
It was further submitted that Carse 'clearly recognised'
that the plaintiff and the defendant would have to be the sole
shareholders
in Defacto and I shall deal with this submission
presently.
[21] Both propositions in the passage just quoted were
conceded in oral argument to be incorrect. The concessions were well
made.
As appears from paragraph 3 of the counterclaim quoted above,
it was not in fact pleaded that the parties to the joint venture had
to be equal shareholders in Defacto. Nor was this necessary for the
operation of the joint venture. A distinction must be drawn
between
the joint venture agreement and the agreement between the
shareholders of Defacto. The joint venture agreement was between
the
plaintiff and the defendant. One of the terms of that agreement was
that they would share equally in the profit generated by
the sale of
the plots to purchasers. The shareholders' agreement was between the
Ribbans company that provided the finance, and
the defendant. The
evidence of Carse makes it clear that that agreement recognised the
joint venture agreement and therefore the
term of it to which I have
just referred. The shareholders' agreement also provided that the
profit made by the company would be
divided up in a defined ratio
(depending on the number of years the development took) giving more
to the Ribbans company than to
the defendant in respect of the first
R10 million anticipated profit, and reversing the ratio in respect of
the next R10 million.
The plaintiff's share was to come out of the
amount paid to the Ribbans company.
[22] There were three directors of the company which
acquired the Ogden erven for the development, ie Defacto: Ribbans,
who would
protect the interests of his company that provided the
finance; Burger, who would protect the interests of the plaintiff;
and Carse,
who would protect the interests of the defendant. All knew
of the joint venture agreement and intended that it be performed. The
fact that the plaintiff was not a shareholder of Defacto is of no
moment ─ Burger would have looked to Ribbans to protect
the
plaintiff's interests and as I have said, Ribbans was related to him
by marriage and he was a co-director with Ribbans in a
large family
company. Nor does it make any difference that the defendant was a
minority shareholder in Defacto. Part of the agreement
between the
shareholders of Defacto, which the directors intended to implement,
was that ultimately the plaintiff and the defendant
would participate
equally in the profits made by Defacto as provided for in the joint
venture agreement. The defendant would have
been entitled to enforce
that part of the shareholders' agreement.
[23] As I have said, it was submitted that Carse
'clearly recognised' that the plaintiff and the defendant would have
to be the
sole shareholders in Defacto. That is certainly what the
memorandum of 15 May 2001 contemplated. But when Ribbans came on the
scene,
matters changed. Carse said in cross-examination:
'U Edele, die ooreenkoms was
gewees tussen my en Burger & Wallace, dit het gegaan oor 'n 50%
verdeling van winste op die ontwikkeling
van grond. Die
aandeelhouding [in Defacto] is nie 'n aanduiding van die ooreenkoms
tussen my en Burger & Wallace nie; daar
was praktiese reëlings
gewees hoekom die aandeelhouding in Defacto verskil van 'n 50/50
aandeelhouding. My ooreenkoms was
met Burger & Wallace en dit het
gegaan oor, soos ek nou net gesê het, die verdeling van winste
op die ontwikkeling van
grond.
. . .
Die aandeelhouding [in Defacto]
het niks gemaak aan my en Burger & Wallace se ooreenkoms nie.
. . .
And the interests of the parties
in the development would be determined by their shareholding in the
company. --- Edelagbare, dit
is nie noodwendig die geval nie. Daar
kan ooreenkomste buite die aandeelhouding wees. Ek verskil van mnr
Myburgh [the plaintiff's
then senior counsel to whose proposition
Carse was replying] op daardie punt.'
[24] I therefore conclude that the joint venture
agreement as testified to by Carse, was established. The next
question is whether
it was breached. The defendant's pleaded case in
this regard is not well phrased. The allegation in question reads:
'Contrary to the joint venture
agreement and in breach thereof, the Plaintiff reneged [on] the said
agreement with the Defendant
and contracted with third parties to do
the development on the said erven, thereby failing to honour its
commitment in terms of
the joint venture agreement with the
Defendant.'
But the allegations are wide enough to cover a
repudiation: the word 'reneged' means (according to the
Concise
Oxford English Dictionary
10
ed)
'to go back on a promise, undertaking, or contract'. And for the
reasons which follow, the evidence in my view establishes the
very
repudiation alleged. If the events relevant to this question are set
out in chronological order, the conclusion reached by
the trial
court, which I shall quote in due course, is inevitable.
[25] On 19 July 2001 New Invest 212 (Pty) Ltd (the
Ribbans company) was registered as the sole shareholder in Defacto.
That was
not in accordance with Carse's agreement with Ribbans, and
Carse said that he had no knowledge of it. I have to interrupt the
chronology
at this point to deal with the submission that Carse's
evidence in this regard should be rejected. I see no reason to do so.
Ms
Kim Olivier, the employee of Shelf Company Warehouse who sold
Defacto to the defendant's attorney, Mr Shaer, said that it was
impossible
that the CM42 security transfer form would have contained
the identity of the transferee, New Invest, or the number of shares
to
be transferred, when it left their offices. Shaer said that he had
not inserted this information and could not have done so, because
it
was typed in and he did not possess, nor had he ever possessed, a
typewriter. He sent the form to Ribbans' auditors under cover
of a
letter and sent a copy to Ribbans, whose evidence was that when he
received the copy attached to Shaer's letter the number
of shares and
the identity of the transferee had already been filled in. Counsel
for the plaintiff submitted on appeal that we
should accept this
evidence because the letter Shaer wrote to Ribbans said:
'Attached please find copy of
CM42 duly completed and signed by the existing shareholder . . . .'
This meant, said counsel, that the form had been
completed in all its particulars. But the letter is equally capable
of the interpretation
that the form had been 'duly' completed by the
existing shareholder to the extent that it was necessary for him to
do so, and not
that the form had been completed in full. And the
probabilities favour this interpretation. It was no part of the
function of Shelf
Company Warehouse to fill in the identity of the
transferee(s) and the number of shares to be transferred. An employee
from that
organisation was called to say that this was never done
and, indeed, such information was none of its business. And the
particulars
of the issuer of the security as typed in on the form, ie
Defacto, as well as the name of the transferor (the then holder) are
in a different type face to the typed particulars of the transferee.
There is no reason to reject the evidence of Mr Shaer that
he could
not have filled in the particulars of the transferee. The plaintiff's
counsel emphasized that Carse had given no instruction
to Shaer that
the shares in Defacto were to be transferred to more than one person.
The suggestion obviously was that had Carse
agreed with Ribbans that
the shareholding would be split 80 per cent/20 per cent, he would
have informed Shaer accordingly. This
argument loses sight of the
fact that it was not Shaer, but Ribbans' auditors who were to attend
to the transfer. I therefore accept
that when New Invest was
registered as the sole shareholder in Defacto on 19 July 2001, Carse
had no knowledge of this.
[26] I continue with the chronology of events relevant
to determining whether the plaintiff repudiated the joint venture
agreement.
On 14 December 2002 the plaintiff acquired 50 per cent of
New Invest's shares and thereby became an equal shareholder in
Defacto
with Ribbans' company, New Invest. In the middle of the
following year, on 10 July 2003, the plaintiff's 50 per cent
shareholding
in Defacto was transferred to LA Burger Investment CC,
which was a vehicle Wallace and Burger at that stage used to hold
their
assets. Carse was not told about either of these latter two
changes in shareholding.
[27] On 11 February 2004 Carse was asked to resign as a
director of Defacto. He refused and was subsequently removed at a
general
meeting of Defacto convened for that purpose on 25 August
2004.
[28] On 6 October 2004 a presentation was made by an
entity called MSP about the potential for the development of the
Ogden erven.
The invitation to attend the presentation forming part
of the record was addressed to Wallace. Burger, Wallace and Ribbans
were
amongst those who attended. In cross-examination Ribbans agreed
with the proposition:
'Now in its proper context, when
this presentation was made on 6 October, it was a presentation to
Defacto and in effect therefore
clearly also to its shareholders,
being New Invest and LA Burger Investment CC.'
[29] On 5 May 2005 Defacto entered into what was termed
a 'Land Availability Agreement' with Steenberg Station Development
Company
(Pty) Ltd. The effect of that agreement was summarised by
Ribbans in his evidence-in-chief as follows:
'Well, effectively we [Defacto]
were the owners of the land and we undertook in this document to make
the land available to Steenberg
Station Development Company which was
a separate development company which would develop . . . the land and
effectively buy the
land from us in stages . . . .'
He then went on to agree with the proposition put by the
plaintiff's counsel that:
'They [Steenberg] had the right
to develop the land and in effect it’s a sort of a deferred
Sale Agreement. At some point
they acquire the land then sell it . .
. .'
[30] Ribbans testified that over R7 million was made by
Defacto from the sale of the land. He said that that amount was
available
for distribution between the shareholders of Defacto, ie
Ribbans' company, New Invest, and Burger and Wallace's close
corporation,
LA Burger Investment CC. In addition, Ribbans' company
and LA Investments were 50 per cent shareholders in an entity called
Market
Demand Trading that held one third of the shares in Steenberg.
The shareholders in Steenberg executed a shareholders' agreement
that
gave equal rights and obligations to the three shareholders.
Steenberg embarked on what the defendant's counsel described
as 'a
full blown residential development', a description with which Ribbans
agreed. Ribbans said that this resulted in 'a good
return on our
[Steenberg's] investment'. The plaintiff did the civil engineering
works for the development.
[31] In its original counterclaim delivered in March
2006, the defendant pleaded:
'Contrary to the joint venture
agreement and in breach thereof, the Plaintiff contracted with third
parties to do the necessary
building on [sic] construction works and
failed to honour its commitment with regards to the 50% or the half
share of profits on
the sale of the erven as specified herein above.'
It will be recalled that the counterclaim ultimately
contained the allegation that 'the Plaintiff reneged [on] the said
agreement
with the Defendant [ie the joint venture agreement] and
contracted with third parties to do the development on [the Ogden]
erven'.
[32] The court a quo said:
'There was much debate during
the trial about when exactly the breach of the joint venture
agreement occurred. It is therefore necessary
to look at the conduct
of the parties with regard to this question. The defendant claimed
that the plaintiff had in collusion with
Ribbans "hijacked"
the development of the Ogden erven and which conduct on the part of
the plaintiffs constituted a reneging
of its obligations under the
joint venture agreement. In this regard the conduct of Burger was
significant by his deliberate failure
to disclose to the defendant
the plaintiff's purchase of the 50% shareholding in Defacto and its
subsequent transfer to LA Burger
Investment CC. Burger was simply
unable to give any reason or explanation for his conduct which in
turn supported the defendant's
claim that the plaintiff had in fact
colluded with Ribbans and its entities to "cut the defendant
out" of any role in
the development of the Ogden erven. The
collusive behaviour is further evidenced by the conduct of both
Wallace and Burger at the
meeting in February 2004 when Carse was
asked to resign as a director of Defacto.'
2
The court subsequently concluded:
'I am of the view that the
breach as claimed by defendant was evidenced by the collusive conduct
between the plaintiff and Ribbans
in which the plaintiff reneged on
its obligation in the joint venture agreement and in collusion with
other entities (such as Ribbans
and others) indirectly became
involved in the development of the Ogden erven to the exclusion of
the defendant.'
3
Save
for pointing out that the
defendant's case, properly interpreted, was that the plaintiff
repudiated the agreement, I find no reason
to differ from this
conclusion.
[33] It is convenient at this stage to deal with the
argument by the plaintiff's counsel that the plaintiff could not have
repudiated
(or breached) the joint venture agreement until the shares
in Defacto had been transferred to it. The argument loses sight of
the
fact that on Carse's version, the plaintiff was not to become a
shareholder in Defacto.
[34] I therefore conclude that the defendant did
establish that the joint venture agreement had been repudiated by the
plaintiff
in the manner alleged in its pleadings. The last submission
made on behalf of the plaintiff was that Defacto suffered no loss
inasmuch
as Carse said to Ribbans that he wanted a family trust (of
which he was one of the trustees) to be the shareholder in Defacto.
The argument was that profits made by Defacto would then have gone to
the family trust and not to the defendant. The argument is
misconceived. Had the family trust been registered as a 20 per cent
shareholder in Defacto, it would have made no difference to
a claim
by the defendant against the plaintiff flowing from the latter's
repudiation of the joint venture agreement. By becoming
a member of
the company, the family trust would not have succeeded to the rights
or undertaken the obligations of the defendant
under that latter
agreement. Nor did the rights of the parties to that agreement depend
upon the identity of the shareholder(s)
in Defacto. The joint venture
agreement was between the plaintiff and the defendant, and it is the
defendant that suffered any
loss of profit it would have made from
constructing houses, and any loss in respect of its share of the
profits made by Defacto
from the sale of the plots.
[35] The appeal is dismissed with costs, including the
costs of two counsel.
_______________
T D CLOETE
JUDGE OF APPEAL
APPEARANCES:
APPELLANTS: J G Dickerson SC (with him R J Howie)
Instructed by Edward Nathan Sonnenbergs, Cape Town
Lovius Block, Bloemfontein
RESPONDENTS: J A le Roux SC (with him E S Grobbelaar)
Instructed by Fourie Basson Veldtman, Parow
Walkers Attorneys, Cape Town
Naudes Attorneys, Bloemfontein
1
Burger
& Wallace v Ballprop Ten (Pty) Ltd
[2007]
ZAWCHC 91.
2
Para
95.
3
Para
97.