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[2011] ZASCA 201
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Van Aardt v Galway (923/10) [2011] ZASCA 201; 2012 (2) SA 312 (SCA); [2012] 2 All SA 78 (SCA) (24 November 2011)
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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no: 923/10
In the matter between:
CHRISTIAAN VAN AARDT
…........................................................
Appellant
and
JOHN RICHARD GALWAY
….....................................................
Respondent
Neutral citation:
Van Aardt v Galway
(923/10)
[2011] ZASCA 201
(24 November 2011)
Coram:
PONNAN, SHONGWE and WALLIS JJA.
Heard
: 3 November 2011
Delivered
: 24 November 2011
Summary: Sale of land – compliance with
Alienation of Land Act 68 of 1981
ORDER
On appeal from:
Eastern
Cape High Court, Grahamstown (Jones J sitting as court of first
instance) it is ordered that:
The appeal is upheld with costs
,
save that the costs of the preparation, perusal and copying of the
record shall be limited to two-thirds of the costs incurred
in those
tasks.
The order of the trial court is set aside
and replaced by the following:
‘
1 Paragraph 1 of the Agreement
of Lease between the parties concluded on 31 August 2000 and
paragraph 1 of the Deed of Sale, annexure
‘C’ to the
particulars of claim, are rectified by the deletion of the words ‘the
District of Grahamstown more
fully described as Portion 9 (a
portion of portion 5) of the farm Sevenfountain no 447’ in the
former and the deletion
of the words ‘Portion 9 (a portion
of portion 5) of the farm Seven Fountains No 447’ in the
latter.
2 Against the tenders set out in paragraph 13 of the
particulars of claim it is ordered that:
the defendant is forthwith to take all steps necessary
to transfer to the plaintiff the immovable property described as the
farm
Midhurst in the area of the Makana Municipality, District of
Albany as more fully described in Deed of Transfer T21417/96
registered
in the Deeds Registry Cape Town;
in the event of the defendant failing to take such
steps within a period of one month from 30 November 2011, the
Sheriff is directed
to take all such steps and sign all such
documents in the name and on behalf of the defendant to give effect
to paragraph 2(a)
of this order.
3 The defendant is ordered to pay the plaintiff’s
costs.’
JUDGMENT
WALLIS JA (PONNAN and SHONGWE JJA concurring)
[1] This is a dispute between two dairy farmers over the sale of a
farm. The respondent, Mr Galway, owns the farm Midhurst situated
in
the Makana Municipality near Grahamstown. The appellant, Mr van
Aardt, owns one of the neighbouring farms. On 31 August 2001
Mr
Galway leased Midhurst to Mr van Aardt for a period of five years for
the purpose of dairy farming. He also leased his herd
of Jersey cows
to Mr van Aardt. The lease agreement contained an option to
purchase ‘the farm property’. On 3
March 2005 Mr van
Aardt purported to exercise this option. Mr Galway disputed his right
to do so. That led Mr van Aardt to commence
these proceedings to
compel Mr Galway to transfer the farm Midhurst to him. Mr van
Aardt’s claim was dismissed by Jones
J and with his leave he
appeals to this court.
[2] The relevant clauses of the lease are clauses 1 and
14, which read as follows:
‘
1 LETTING AND HIRING
The Lessor lets and the Lessee hires the farm property
Midhurst in the district of Grahamstown being more fully described as
Portion
9 (a portion of portion 5) of the farm Sevenfountain no 447
together with the dairy and its equipment but exclusive of the house
presently occupied by the Lessor and his family.
2 – 13 …
14 OPTION TO PURCHASE
The Lessor extends to the Lessee an option to purchase
the farm property for the sum of R700 000,00 in which regard the
Lessee shall
exercise the option not later than three months before
the termination of the Lease and not before a date six months before
the
termination of the Lease by delivering to the Lessor a signed
agreement of sale in the terms aforesaid.’
[3]
O
n 3 March 2005 Mr
van Aardt’s attorneys addressed a letter to Mr Galway in the
following terms:
‘
We enclose herewith a draft
Deed of Sale which has been signed by our client, the Lessee of the
property described in the enclosure
hereto.
Our client exercises the option to purchase the
immovable property in question at a purchase price of R700 000,00 as
stipulated
in the Agreement of Lease.
To the extent that it is necessary for our client to
exercise the option in writing, he does so by appending his signature
to the
foot hereof which is to be read in conjunction with the Deed
of Sale enclosed herewith.
Obviously should you require any reasonable amendments
to the Deed of Sale, our client will give due consideration thereto.’
At the foot of this letter appeared the following
inscription:
‘
I, Christiaan van Aardt do
hereby exercise the option granted to me in terms of the Deed of
Lease concluded between myself (as Lessee)
and John Richard Galway
(as Lessor). The exercise of this option to be read in conjunction
with the annexed Deed of Sale.’
Mr van Aardt appended his signature below this.
[4]
Attached to the
letter was a deed of sale. For present purposes I need only quote the
first three paragraphs thereof. They read
as follows:
‘
1.
The Seller hereby sells to the Purchaser who hereby
purchases:
the farm Midhurst in the area of Makana Municipality,
District of Albany more fully described as Portion 9 (a portion of
portion
5) of the farm Seven Fountains No 447;
2.
PURCHASE PRICE
2.1 The purchase price of the immovable property hereby
sold shall be the sum of R700 000,00 (Seven Hundred Thousand Rand);
2.2 The purchase price shall be payable in cash against
registration of transfer of the said immovable property into the name
of
the Purchaser.
2.3 The Purchaser shall when called upon so to do by the
Seller’s Conveyancer furnish to such Conveyancer an acceptable
guarantee
for the due payment of the said purchase price against
registration of transfer.
3.
VALUE ADDED TAX
The parties record that the said purchase price is
inclusive of Value Added Tax.’
[5]
The remaining six
clauses of the deed of sale were relatively straightforward. Clause 4
was a voetstoots clause. Clause 5 provided
that Mr van Aardt would be
liable to pay all the costs of registration of transfer plus a pro
rata share of rates, taxes and other
levies in respect of the
rateable year in which transfer was registered into his name. It also
provided for him to bear the costs
of preparing the deed of sale.
Clause 6, dealing with occupation and possession, provided that this
would be given against registration
of transfer. Clause 7 provided
for Mr Galway to appoint a conveyancer and required Mr van Aardt to
pay to the conveyancer all amounts
due in respect of rates, taxes and
assessments, transfer duty, the costs of registration of transfer and
other costs and charges
on demand. Clause 8 was a breach clause and
clause 10 (there is no clause 9) a clause in which the parties select
domicilia citandi et executandi
.
[6] In his plea Mr Galway contended on two grounds that clause 14 did
not grant an enforceable option to purchase to Mr van
Aardt. He
said first that the property that was the subject of the potential
sale was insufficiently described in clause 14 so
that the clause was
void for vagueness. Second he said that the requirement that the
option should be exercised by the delivery
of a signed agreement of
sale showed that the parties contemplated that the exercise of the
option would be accompanied by further
negotiations between them on
the terms of that agreement and accordingly that the act of
acceptance would not on its own give rise
to a binding contract. For
those same reasons he said that the option did not comply with
s 2(1)
of the Alienation of Land Act 68 of 1981 (the Act), which requires
the provisions of a deed of alienation of immovable property
to be in
writing and signed by or on behalf of the parties thereto.
[7] If those contentions were not accepted Mr Galway turned his fire
on the exercise of the option. Here he advanced three contentions.
First he said that the option referred only to the farm property
whereas the exercise of the option purported to include the dairy
and
its equipment, which he said were movable and not included in the
option. Second he said that the terms embodied in the deed
of sale
were not those embodied in the option and in particular that the
price was incorrect because of the reference to it being
inclusive of
VAT. By way of a late amendment to his plea
1
he alleged that it was implicit in the lease alternatively it was
tacitly agreed that the purchase price would be exclusive of
VAT.
Third he said that the letter invited amendments to the deed of sale
and hence it was not a final acceptance of the option
contained in
clause 14 of the lease. Although not pleaded as such reliance was
again placed on non-compliance with the requirements
of the Act.
[8] One other point needs to be mentioned before turning to address
these contentions. It is that where the lease recorded that
the farm
property Midhurst was ‘more fully described as Portion 9 (a
Portion of Portion 5) of the farm Sevenfountain no.
447’ this
was an error. In turn that error was carried over into the deed of
sale. The correct description of the farm property
according to the
title deed shows that it consists of four pieces of land described as
follows:
‘
Portion 9 (Bayville) (Portion
of Portion 5) of the farm Sevenfontein No. 447 8.502 hectares in
extent ;
Remainder of Portion 5 (Midhurst) of the farm
Sevenfontein No. 447 248.4576 hectares in extent;
Remainder of Portion 8 (Greylands) (Portion of Portion
5) of the farm Sevenfontein No. 447 169.2050 hectares in extent; and
Portion 20 (Portion of Portion 14) of the farm
Sevenfontein No. 447 3.8354 hectares in extent;
all in the Division of Albany, Eastern Cape Province.’
This error in description prompted Mr van Aardt to seek the
rectification of clause 1 of both the lease and the deed of sale and
thereafter an order compelling Mr Galway to transfer the farm to him,
against a tender to pay the purchase price and comply with
his other
obligations under the deed of sale. His entitlement to rectification,
if he showed that a binding agreement had been
concluded, was
conceded before us. It is therefore unnecessary to deal with an
argument based on the inability to rectify an acceptance
of an offer
prior to the conclusion of an agreement.
2
If there was a binding contract Mr van Aardt is entitled to an order
for rectification of the documents embodying that contract.
[9]
Evidence was led at the trial from Mr
van Aardt, Mr de la Harpe (the draftsman of the agreement and at the
time a practising attorney),
Mr Galway and Mr Parker. Almost all of
this evidence was plainly inadmissible. It concerned the intention of
the parties in regard
to various issues and in particular whether the
purchase price was inclusive or exclusive of VAT and whether the
property subject
to the sale was inclusive or exclusive of the dairy
and the equipment in the dairy. That evidence was inadmissible
because it was
evidence of the intention of the parties and their
prior negotiations and it is clear on the authorities that such
evidence is
inadmissible.
3
If there had been a prayer for
rectification directed at these issues then it might have been
relevant and admissible to explore
the parties’ intentions and
discussions at the time of concluding the lease. However, there was
no such prayer and it was
not, contrary to counsel’s
submissions, relevant and therefore admissible as ‘context’
in relation to either
the interpretation of the documents or the
importation of implied or tacit terms into the lease.
[10] Furthermore the
evidence was utterly unhelpful in resolving the issues in the case.
It showed that the VAT issue was not raised
by anybody when the lease
was drafted. As regards the dairy Mr van Aardt said that he thought
that the dairy and its equipment
were included as fixtures. Mr Galway
said that the attorney told him that it was unnecessary to mention
them, because they were
movables and therefore not included in the
sale. There was no discussion of these matters at the time the lease
was concluded.
That serves only to turn the focus of attention back
to the contractual documents. I stress again the point made by Harms
DP in
Securefin
4
that it is undesirable to permit a
trial to be conducted on the footing of letting in whatever evidence
the parties tender and then
trying at the stage of argument and
judgment to sort the wheat from the chaff. That is not conducive to
clarity in decision-making,
the speedy adjudication of cases or the
vitally important task of limiting legal costs. Had the inadmissible
evidence been excluded
the trial and the record on appeal would have
been considerably shorter and less costly. I will revert to this when
I deal with
the costs.
[11] The enquiry must commence with the option. It was an option to
purchase ‘the farm property’ for the sum of R700 000.
There was no definition of ‘the farm property’ but in
clause 1 it was said that Mr van Aardt was hiring ‘the
farm
property Midhurst in the district of Grahamstown’. It was
common cause that this referred to an identifiable farm. Had
it been
necessary, evidence of identification of the farm could have been led
for the reason explained by Watermeyer CJ in
Van Wyk v Rottcher’s
Saw Mills (Pty) Limited
,
5
namely that it serves to identify the thing that corresponds to the
idea expressed in the words of the written contract. Such evidence
was unnecessary because the parties were agreed that the farm
Midhurst was the farm owned by Mr Galway, the detailed description
of
which was set out in the deed of transfer under which he held his
title to the farm.
[12] Clause 1 of the lease served to describe ‘the farm
property’ and gave meaning to that expression where used
elsewhere
in the lease, in particular in the clause embodying the
option. The trial court thought that there was some confusion because
the
property subject to the lease included ‘the dairy and its
equipment’ and excluded a fenced off area surrounding the
‘house presently occupied by the Lessor and his family’.
However that did not affect the reference to the ‘farm
property’ in clause 1 of the lease or render it ambiguous.
It was clearly stated to be the farm Midhurst and nothing
else. The
exclusion of the house in which Mr Galway and his family were
residing made it clear that the ‘farm property’
encompassed the entire farm including the house and its surrounds,
from which, for the purposes of the lease, the portion surrounding
and including the house was excised.
[13] As far as the reference to the dairy is concerned, clause 11
imposed an obligation on Mr Galway to remove from ‘the
farm
property’ his excess livestock and equipment within one month
of the commencement of the lease. However Mr van Aardt
was leasing
the farm as a dairy farm and simultaneously leasing a herd of Jersey
cows for that purpose. In those circumstances
it would have been
highly inconvenient and destructive of the very basis upon which the
lease was concluded had Mr Galway been
both entitled and obliged to
remove the equipment in the dairy. Hence the agreement made it clear
that the dairy and its equipment
were leased together with the farm
property.
[14] The property was therefore adequately described without any
confusion. Accordingly the option was not void for vagueness.
Provided it was exercised in its terms, the ensuing contract would
comply with s 2(1) of the Act with regard to the description
of
the property sold.
6
The first attack on the validity of the option must therefore fail.
[15] It is convenient to deal with the arguments about the acceptance
of the offer together. They were first that the option contemplated
that a process of agreement on the terms of a sale agreement would
have to take place before any final contract came into existence
and
therefore that it was nothing more than an unenforceable agreement to
agree in the future. Second that the agreement of sale
proffered by
Mr van Aardt contained material provisions dealing with matters not
covered by the option and accordingly the purported
exercise of the
option did not bring about a binding contract because it was not ‘in
terms of the offer, and the parties
were accordingly not
ad
idem’
.
7
Third, and this is perhaps merely a different way of expressing the
second point, in view of those differences it amounted to a
counter-offer that Mr Galway was not obliged to accept.
8
If any of those grounds were correct then there was no agreement
complying with the Act. The trial court upheld these contentions.
[16] The parties stipulated in clause 14 that the mode of exercising
the option was by the delivery of a signed agreement of sale
by Mr
van Aardt in the terms prescribed by the option. Did this contemplate
that an exercise of the option would serve to commence
a fresh
process of negotiation around the terms of a sale agreement? If it
did that would render it an agreement to agree in the
future, which
on well-established authority is not binding.
9
In my view it did not. It would have been extremely unbusinesslike
for the parties to agree upon an option and then specify a mode
of
exercising it that was incapable of bringing about a binding
agreement. That was not what they had in mind. It is accordingly
not
surprising to find authority against that proposition. Most recently
the same argument on a clause that similarly provided
for the
exercise of an option to be by way of the delivery of a written
agreement prepared by a firm of attorneys and signed by
the parties
was rejected by this court in
Du Plessis NO and another v Goldco
Motor & Cycle Supplies (Pty) Ltd
.
10
[17] The reason the argument is unsound was correctly expressed by
Page J in
Dold v Bester
11
in relation to an agreement written out on a page torn from a
notebook and providing that:
‘
Formal documents to be drawn
by Mrs J Millington of Bonnin Estates with no commission.’
The learned judge dealt with an argument that the parties could not
be compelled to enter into an agreement in the future in the
following way:
‘
In my view the premise upon
which this argument is based is faulty. The agreement embodied in the
handwritten document is not to
enter into a new contract of sale, but
to execute a formal document intended to replace the handwritten
document as the memorial
of the transaction. Such formal document
would embody no more than the terms, expressed or implied, already
agreed upon by the
parties in the handwritten document.’
That precisely expresses what was intended by the option in the
present case. A deed of sale would be prepared that would reflect
the
terms of the sale, express or implied, as set out in the option
itself.
12
There were obvious reasons of convenience for adopting this course,
not least that it would render the task of the conveyancer
attending
to the transfer of the property simpler, because they would only have
to present one document to the relevant authorities
for the purpose
of paying transfer duty, obtaining a rates clearance certificate and
registering the transfer.
[18] The next argument was that the deed of sale contained provisions
that were inconsistent with the terms of the option. Here
reliance
was placed on two aspects of the deed namely the provision concerning
VAT and a later clause providing that possession
and occupation of
the farm property would pass to the purchaser on registration of
transfer.
13
The latter can be disposed of simply. The option had to be exercised
six months prior to the expiry of the lease when Mr van Aardt
would
already be in possession of the farm property. The parties must have
contemplated that in the ordinary course of events transfer
would
take place before the lease expired. The lease would then fall away
as the lessor and lessee would be the same person in
consequence of
the application of the rule that
huur gaat voor koop
.
14
The only potential issue related to the house occupied by the seller
and his family, but there is nothing to indicate that they
would have
wished to remain in occupation once the farm was sold and transferred
to a new owner. In any event the right to occupy
and possess the
property would vest in the purchaser as a matter of law once the
property was transferred. The fact that circumstances
can be imagined
in which the Galway family might have wanted to stay beyond that
date
15
does not mean that the deed of sale was not in accordance with the
option.
[19] A good deal of the dispute between the parties revolved around
the issue of VAT. The deed of sale said that the price paid
would be
exclusive of VAT. In other words no more than R700 000 would be
paid. That accorded exactly with the terms of the
option and the
emphasis added by the reference to VAT did not affect it. Presumably
this clause was included in the deed of sale
in anticipation that the
transaction would attract VAT and so provide a foundation for a claim
by Mr van Aardt to deduct any tax
so paid as an input tax in his own
accounting for VAT. However, alerted by this to the possibility of
VAT being payable, it not
having previously been discussed, the
attorneys for Mr Galway wrote to Mr van Aardt’s attorneys on 17
March 2005 saying that
their client was to get ‘R700 000
clear ie, not inclusive of VAT’. From there on this became a
bone of contention
between the parties.
[20] Somewhat surprisingly it does not appear to have occurred to
anyone to ascertain whether the sale was in fact a transaction
attracting an obligation to pay VAT in terms of the Value-Added Tax
Act 89 of 1991 (the VAT Act). Whilst Mr Galway appears to have
been a
registered vendor in relation to his dairy farming activities that
does not necessarily mean that the sale of his farm would
have
attracted a liability for VAT. In terms of s 7(1)(a) of the VAT
Act, VAT is only payable on a supply by a vendor of goods
‘in
the course or furtherance of any enterprise carried on by him’.
To determine whether the sale of the farm attracts
VAT requires a
consideration of the facts in the light of the provisions of para (a)
of the definition of ‘enterprise’
in s 1 of the VAT
Act, as read with para (i) of the proviso to that definition. Bearing
in mind that the farm was also the
family residence, and that it was
the property that was sold not the farming business as a ‘going
concern’, it is not
clear that the sale of the farm was a sale
in the course of the farming enterprise.
[21] There is accordingly uncertainty over the issue of the
obligation to pay VAT on the sale of this farm. It is not appropriate
to make any determination of this issue in this case or even to
express a view on it as it depends on facts not before us, the
interpretation of the applicable legislation and the approach of SARS
to the issue. We can only proceed on the footing that the
sale may or
may not attract a liability to pay VAT and construe the option in the
light of that fact.
[22] The option says simply that on its exercise the purchaser will
pay to the seller R700 000, no more and no less. No resort
to
surrounding circumstances can alter that amount and make it greater
or less than the agreed figure. Ultimately this was recognised
by
counsel for Mr Galway who moved an amendment to the plea in the
course of argument at the trial to aver that it was an implied
term
of the option, alternatively it had been tacitly agreed between the
parties, that Mr Galway would receive payment of R700 000
exclusive of VAT. The effect of that amendment was to say that if
there was a liability for VAT on the part of Mr Galway it would
be
paid by Mr van Aardt. The amount would be R98 000, which Mr van
Aardt would have had to pay together with the purchase
price, but
could presumably have recovered thereafter as an input credit.
[23] An implied term is one implied by law and a tacit term is one
flowing from the actual or imputed intention of the parties
to the
contract.
16
There is no scope here for an implied term. The VAT Act contemplates
that transactions attracting VAT may be concluded on both
a VAT
inclusive and a VAT exclusive basis, subject to an obligation to
advertise the basis upon which the price is quoted.
17
Where the consideration is in money the value of the supply for the
purpose of calculating VAT is the amount of the money.
18
Where a sale is inclusive of VAT the VAT component is calculated
using the tax fraction defined in s 1 of the VAT Act. To
deal
with instances where the vendor fails to take account of the
incidence of VAT in determining the price, s 64(1) contains
a
presumption that any price charged by a vendor in respect of a
taxable supply shall be deemed to include tax payable in respect
of
such supply even if the vendor has not included tax in the price.
Given this and the other detailed provisions of the VAT Act
it is
impossible to imply the suggested term as a matter of law.
[24] As regards a tacit term, the fact that the sale of the farm may
not have given rise to a liability on the part of Mr Galway
to pay
VAT is utterly destructive of his contention that the contract is
subject to a tacit term that the purchase price that he
would receive
would be exclusive of VAT. No such term would arise from the actual
or imputed intention of the parties, because
they would have no need
of such a term if VAT were not payable. The response to the
hypothetical bystander’s question, ‘What
about VAT?’
would be that VAT was not payable. It would not be that the parties
were agreed that VAT was payable by the purchaser
if, contrary to
their understanding of the position, the seller was liable therefor.
[25] The same result follows even if it is assumed (as did the
parties and their legal advisers) that VAT was payable. In response
to the hypothetical bystander’s question I find it impossible
to accept that Mr van Aardt would have agreed without more
to pay an
additional R98 000 by way of VAT. That would have had a material
effect on his cash flow even assuming he could
thereafter recover it
as an input credit. I think it more likely that his response would
have been: ‘I hadn’t thought
of that. I’d better
speak to my accountant or attorney to see what can be done.’ or
‘That’s your problem.
My price is R700 000’.
This court took that view in similar circumstances in
Strydom v
Duvenhage NO en ʼn ander
19
and pointed out that in addition the imputation of such an intention
to the parties was not necessary to lend business efficacy
to the
contract.
20
The same is true here.
[26] No issue was raised with regard to the other provisions of the
deed of sale. They were either in accordance with ordinary
common law
principles applicable to all sales of land or, as in the case of the
voetstoots clause and the clauses requiring Mr
van Aardt to pay the
costs of procuring transfer, beneficial to Mr Galway and hence
unobjectionable. In fairness to Mr Galway he
accepted this in his
evidence.
[27] The last major issue related to the dairy and its equipment. Mr
Galway said that the equipment, but not as I understand it
the shed
within which it was housed, was movable property that did not form
part of the farm property and hence was not included
in the option.
It was argued that when the option was exercised and the deed of sale
provided that:
‘
4.3 The Purchaser acknowledges
that the said immovable property, including the buildings, erections
and improvements thereon, are
purchased as they stand on the date
hereof, subject to all defects, latent and patent, that may exist or
may in future be found
to exist in respect of the said property,
buildings, erections or improvements, any implied warranties being
expressly excluded,
that is to say voetstoots’;
the effect was to say that the movable dairy equipment was included
in the property sold because it improved the value of the farm.
The
basis for this submission was that, whatever meaning the word
‘improvements’ would ordinarily bear in a contract
of
this type, in the context of the present case it bore a special
meaning. That meaning so it was argued would be dictated by
a
layperson’s understanding that equipment in a dairy that was
bolted down would be an improvement even though the bolts
could be
undone and the equipment removed.
[28] This argument is fallacious. First the clause in question does
not deal with what is sold but provides that whatever has been
sold
is sold voetstoots. It does not alter or affect the identity of the
merx
. Second there is nothing to indicate that in a deed of
sale drafted by an attorney the word ‘improvements’ was
intended
to bear a special meaning discernible by a layperson and
inconsistent with its ordinary meaning in the context of a sale of
immovable
property, namely as a reference to additions to the
property that by their nature as well as the manner in which they are
affixed
have adhered to and become an integral part of the property.
21
Third this requires that the court have regard to matters extraneous
to the written document embodying the agreement, which is
contrary to
the parol evidence rule that provides that where a contract is
reduced to writing, as this contract had to be, evidence
to
contradict, add to or modify its meaning is inadmissible.
22
[29] The deed of sale did not, as contended by Mr Galway, seek to
include, as part of the property sold, items of movable equipment
not
referred to in the option. Whether the dairy equipment has acceded to
the farm property is a question that may have to be dealt
with on
another occasion but it is irrelevant to the issues before us. We
hold that the deed of sale relates only to the immovable
property
constituting the farm. If the assumption that the dairy equipment is
movable, on which assumption the trial was fought,
is erroneous and
the dairy equipment or any part of it has adhered to the farm
property, then it will have been sold as part of
the farm.
[30] It follows that the exercise of the option as embodied in the
deed of sale, was strictly in accordance with the terms of the
option. Accordingly it did not amount to a counter-offer to contract
on different terms. The fact that in the covering letter Mr
Galway
was afforded the opportunity to put forward possible amendments if he
wished was no more than a courteous indication that
if there was some
other provision that he wanted or some difficulty with the language
of the deed he was free to ask that it be
dealt with. It did not
render the exercise of the option conditional or subject to further
negotiation and agreement. There was
a valid option and a valid
exercise of the option. That brought into existence a binding
agreement of purchase and sale of the
farm property. Once that
occurred it was permissible for the court to order the rectification
of that agreement so that it correctly
reflected the description of
the property. The appeal must therefore succeed with costs. The
issues raised by the case are not
such that they required the
services of two counsel.
[31] Before closing it is necessary to make some remarks about the
record and the approach of counsel to compliance with certain
of the
requirements of Rule 10A of the rules of this court that incorporates
much of what has previously been required by practice
direction 3
issued by the President of the Supreme Court of Appeal on 17 August
2007 and its predecessors.
23
[32] I turn first to the record. It consists of nine volumes and runs
to 877 pages. It includes the trial bundle and exhibits covering
171
pages. Of these the lease, deed of sale and covering letter were
annexed to the particulars of claim and should have been excluded
in
terms of rule 8(i)(iv) and the other documents played little part in
the trial
24
and no part at all in the appeal.
25
The belated application for amendment, running to 95 pages, was
included on the insistence of Mr Galway’s attorneys.
26
It was not mentioned in the heads of argument for Mr Galway. Another
72 pages were taken up with expert notices and summaries for
four
expert witnesses, only one of whom testified and then not as an
expert. A further 27 pages consisted of a notice under rule
35 and
photographs of dairy equipment that were attached to further
particulars for trial. In 2009 the issue of the validity of
the
option and its exercise was separated from the alternative cause of
action and a claim in reconvention. Nonetheless the pleadings
relating to these were included as was a request for particulars in
respect of quantum. So too was the opening address of counsel.
27
The evidence of Mr de la Harpe was included but never referred to, as
was that of Mr Parker who was mentioned once.
[33] On any basis very little regard was had to the rules of this
court and the true issues in the case in preparing the record.
The
impression is that the pleadings, notices and bundle for trial were
included as a matter of rote and the evidence typed without
any
consideration of its relevance. Had both parties observed the rules
at least 400 to 450 pages would not have been in the record.
This
would not only have eased our task but would have reduced the costs
substantially.
[34] Turning to the practice note, rule 10A(ix) enjoins counsel to
provide a list reflecting those parts of the record that
in the
opinion of counsel
are
necessary
for the determination of
the appeal. The purpose of this provision was spelled out by Harms JA
in
Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd
and Another
28
:
‘
The object of the note is
essentially twofold. First, it enables the Chief Justice in settling
the roll to estimate how much reading
matter is to be allocated to a
particular Judge. Second, it assists Judges in preparing the appeal
without wasting time and energy
in reading irrelevant matter. Unless
practitioners comply with the spirit of this requirement, the objects
are frustrated and this
in turn leads to a longer waiting time for
other matters.’
He warned that if practitioners failed to give proper attention to
the requirements of the practice note that might result in an
order
disallowing part of their fees. That threat came to fruition in
Firechem
, supra
.
29
[35] Notwithstanding that and later judicial complaints
30
and advice
31
we were told in the practice notes in this case
32
that, save for the expert notices and summaries, ‘counsel
contend that the remainder of the record is relevant for the
determination
of the appeal.’ That was manifestly not correct.
When we raised this with counsel it appeared that there is some
confusion
about what is required of counsel in complying with this
rule. It is therefore appropriate to say something on that topic.
[36] The practice note requires a statement of counsel’s view,
in the form of a list, of those parts of the record that need
to be
considered in order to decide the case. The fact that his or her
opponent may disagree is neither here nor there. That will
emerge
from the opponent’s practice note. In addition the list is to
be confined to those parts of the record that are ‘necessary’
for that purpose. Documents and evidence are not to be included in
the list on the off chance that someone might wish to refer
to them.
The list should include only those parts of the record that counsel
is likely to refer to either in support for the argument,
or for
rebuttal, or to highlight flaws in the judgment appealed against. It
is inappropriate to include material on the basis that
if a
particular question is asked, or explanation is sought, it may be
necessary to refer to it. What is required is a list setting
out the
portions of the pleadings, the documents and the particular passages
in the record of evidence that counsel believes are
necessary to
determine the case. The list must identify by reference to volumes
and pages where those parts of the record are to
be found. Lastly, it
would be a salutary practice for counsel to prepare the list in
positive terms, identifying the parts of the
record necessary for the
determination of the appeal, rather than, as seems frequently to be
the case, identifying portions that
need not be read. The list is
supposed to assist the judges in identifying what needs to be read.
It should not be treated as the
commencement of a process of
elimination of unnecessary material.
[37] Applying that approach in this case and on this record we should
have been told that only those portions of the pleadings
and
annexures that related to the claim to enforce the option were
necessary.
33
The four letters referred to in the heads should have been
identified. As regards the evidence it would have sufficed to say
that
the judge’s summary of facts in paragraphs 2 to 8 of his
judgment was accurate and to refer to those pages in the evidence
where statements were made on which reliance was to be placed. I
estimate that if that had been done somewhere between one and
two
volumes of the record, including the judgment, would have been
identified as truly relevant to and necessary for the determination
of the appeal.
[38] A judge may choose to read more than counsel regards as
necessary, but that is for the judge to decide. The first advantage
of proper compliance with the rule in the preparation of the practice
note is that the judges will be able to assess whether they
have read
sufficient or need to consider the record in greater detail. The
judges may be satisfied that the case can be determined
on the
portions identified by counsel, bearing in mind that the respondent’s
counsel will be able to remedy any perceived
shortcoming in the
appellant’s counsel’s list. The second advantage is that
the careful preparation of the list will
serve to focus the argument
in the heads and at the hearing in due course and facilitate the
expeditious preparation of a judgment.
[39] In view of possible confusion amongst counsel as to what is
required under the rule it would be unfair to penalise those involved
in this case for their non-compliance. As regards the record Mr
Galway is going to have to bear the costs of the appeal as well
as
those of the trial. It would not be right for him to be burdened with
costs that should not have been incurred in the preparation
of the
record. Some of those are the fault of his attorneys in insisting on
the inclusion of the application for amendment. That
issue he will
have to resolve with them. The rest are a result of Mr van Aardt’s
attorneys’ failure to pay heed to
the rules of this court. Had
they done so the record would have been reduced by around one third.
The order for costs will take
account of this.
[40] The appeal is upheld with costs, save that the costs of the
preparation, perusal and copying of the record shall be limited
to
two-thirds of the costs incurred in those tasks. The order of the
trial court is set aside and replaced by the following order:
‘
1 Paragraph 1 of the Agreement
of Lease between the parties concluded on 31 August 2000 and
paragraph 1 of the Deed of Sale, annexure
‘C’ to the
particulars of claim, are rectified by the deletion of the words ‘the
District of Grahamstown more
fully described as Portion 9 (a
portion of Portion 5) of the farm Sevenfountain no 447’ in the
former and the deletion
of the words ‘Portion 9 (a portion
of Portion 5) of the farm Seven Fountains No 447’ in the
latter.
2 Against the tenders set out in paragraph 13 of the
particulars of claim it is ordered that:
the defendant is forthwith to take all steps necessary
to transfer to the plaintiff the immovable property described as the
farm
Midhurst in the area of the Makana Municipality, District of
Albany as more fully described in Deed of Transfer T21417/96
registered
in the Deeds Registry Cape Town;
in the event of the defendant failing to take such
steps within a period of one month from 30 November 2011, the
Sheriff is directed
to take all such steps and sign all such
documents in the name and on behalf of the defendant to give effect
to paragraph 2(a)
of this order.
3 The defendant is ordered to pay the plaintiff’s costs.’
M
J D WALLIS
JUDGE OF APPEAL
Appearances
For appellant: E A S Ford SC (with him M L Beard)
Instructed by:
Neville, Borman & Botha, Grahamstown
Symington & De Kock, Bloemfontein
For respondent: Johann Gautschi SC
Instructed by:
Wheeldon, Rushmere & Cole, Grahamstown
Phatshoane, Henney Inc, Bloemfontein.
1
The
application for amendment was brought during the argument of the
case at the close of the evidence. The result and reasons
for
granting it in part are set out in the judgment.
2
The
argument was based on
Boerne v Harris
1949 (1) SA 793
(A).
3
Van
Wyk v Rottcher’s Saw Mills (Pty) Limited
1948 (1) SA 983
(A) at 991;
Delmas Milling Co Ltd v Du Plessis
1955 (3) SA
447
(A) at 454G - H;
KPMG Chartered Accountants (SA) v Securefin
Limited and Another
2009 (4) 399 (SCA) para 39.
4
Paras
38 – 41.
5
Supra
at 990-991.
6
Clements
v Simpson
1971 (3) SA 1
(A) at 7F-G;
JR 209 Investments (Pty)
Ltd & another v Pine Villa Country Estate (Pty ) Ltd; Pine Villa
Country Estate (Pty) Ltd v JR 209
Investments (Pty) Ltd
2009 (4)
SA 302
(SCA) para 19.
7
Per
Innes J in
Joubert v Enslin
1910 AD 6
at 29.
8
Rockbreakers
and Parts (Pty) Ltd v Rolag Property Trading (Pty) Ltd
2010 (2)
SA 400
(SCA) paras 11 and 24.
9
Premier,
Free State, and Others v Firechem Free State (Pty) Ltd
2000 (4)
SA 413
(SCA) para 35. It is unnecessary to reach the question
whether the common law in this regard needs to be developed, a
question
left open by the Constitutional Court in
Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
[2011]
ZACC 30.
10
2009
(6) SA 617
(SCA) paras 14 to 17.
11
1984
(1) SA 365
(D) at 370H.
12
It
was tentatively argued that in order to constitute a proper
acceptance the deed of sale had to be signed by both parties, but
that is patently incorrect, as it would place the exercise of the
option entirely within the power of the seller, which can never
have
been intended.
13
Reliance
for this latter point was placed on
King v Potgieter
1950 (3)
SA 7
(T).
14
As
to which see
Genna-Wae Properties (Pty) Ltd v Medio-Tronics
(Natal) (Pty) Ltd
[1995] ZASCA 42
;
1995 (2) SA 926
(A).
15
I
say ‘imagined’ because in his evidence under
cross-examination Mr Galway indicated that he had no difficulty with
this clause.
16
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A) at 531D - 532G
; South African Maritime
Safety Authority v McKenzie
2010 (3) SA 601
(SCA) paras 11 and
12.
17
Section
65 of the VAT Act.
18
Section
10(3)(a)of the VAT Act.
19
Strydom
v Duvenhage NO en ʼn ander
1998 (4) SA 1037
(SCA) at
1045C-D.
20
The
‘officious bystander’ and ‘business efficacy’
tests are derived from the English law where the expression
‘implied
term’ is used to encompass both the implied term and the tacit
term of South African law. In England these
two cases are
distinguished by referring to them as terms implied by law or
custom, or terms implied by fact. See Sir Guenter
Treitel QC,
The
Law of
Contract, (11ed, 2003) at 201.
These two tests evolved in relation to terms implied in fact and are
used in South Africa as tests
for the imputation of a tacit term.
However, they are not necessarily congruent, as pointed out by Lord
Hoffmann in
Attorney
General of Belize & others v Belize Telecom Ltd & another
(Belize)
[2009]
UKPC 10
;
[2009] 2 All ER 1127
(PC) paras 21 to 27. Nor are they
necessarily the only basis upon which to determine whether there is
a tacit term in a contract.
They are rather ‘different ways in
which judges have tried to express the central idea that the
proposed implied term must
spell out what the contract actually
means.’
21
The
approach to determining whether something has been annexed to
immovable property in such a way as to become a part of that
property is dealt with in
Standard-Vacuum Refining Co of SA (Pty)
Ltd v Durban City Council
1961 (2) SA 669
(A) at 677 and
Theatre
Investments (Pty) Ltd & another v Butcher Brothers Ltd
1978
(3) SA 682
(A) at 688D-H.
22
Johnston
v Leal
1980 (3) SA 927
(A) at 943B.
23
2007
(6) SA 1
(SCA). The first such practice directive was published on
26 May 1997. See
1997 (3) SA 345
(SCA)
24
The
inclusion of many of these was contrary to the agreement at the
pre-trial conference that documents not referred to in evidence
would not form part of the record of the trial.
25
The
heads of argument for Mr Galway referred to four letters of which
one was mentioned in oral argument.
26
This
was an entire volume of the record of 877 pages.
27
Contrary
to rule 8(j)(i).
28
Caterham
Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd & another
[1998] ZASCA 44
;
1998 (3) SA 938
(SCA) para 36.
29
Premier,
Free State, and Others v Firechem Free State (Pty) Ltd
2000 (4)
SA 413
(SCA) at 434D–G.
30
Africa
Solar (Pty) Ltd v Divwatt (Pty) Ltd
2002 (4) SA 681
(SCA) paras
40 to 45.
31
L
T C Harms,
Heads of argument in courts of appeal
(2009) 22
Advocate 20 at 22.
32
The
two were identical.
33
By
way of example of how to do it the list would have reflected the
pleadings in Vol 1, pp 3-10, 16 –38; the separation
order, Vol 2, pp 132-3; the relevant passages in the evidence; the
letters in Vol 7, pp 654, 676, 678 and 681 and the judgment
in Vol
9, pp 836-854.