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[2017] ZASCA 84
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Van Huyssteen NO and Another v Mila Investment and Holding Company (Pty) Ltd (593/16) [2017] ZASCA 84 (2 June 2017)
THE SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 593/16
In
the matter between:
ABRAHAM
JOHANNES VAN HUYSSTEEN N O
FIRST APPELLANT
MARIUS
ROELOF VAN HUYSSTEEN N O
SECOND APPELLANT
and
MILLA
INVESTMENT AND HOLDING
COMPANY
(PTY) LTD
RESPONDENT
Neutral
citation:
Van
Huyssteen N.O. and another v Milla Investment and Holding Company
(593/16)
[2017]
ZASCA 84
(2 June 2017)
Coram
:
Navsa, Cachalia,
Majiedt, Swain and Mathopo JJA
Heard:
22 May 2017
Delivered:
2 June 2017
Summary:
Contract: Lease:
divergent factual versions on terms: doctrine of quasi-mutual assent
wrongly applied by the high court: appeal
upheld.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Bozalek J, sitting as
court of first instance):
1
The appeal is upheld
with costs.
2
The order of the high
court is set aside and substituted with the following:
‘
The
action is dismissed with costs’.
JUDGMENT
Majiedt
JA (Navsa, Cachalia, Swain and Mathopo JJA concurring):
[1]
This appeal, with leave of the Western Cape Division of the High
Court, Cape Town (Bozalek J sitting as court of first instance),
(the
high court), concerns a claim by the respondent, Milla Investments
and Holdings Company (Pty) Ltd (Milla) for rental allegedly
underpaid
by the Sport City Trust (the Trust) in respect of premises in the
Cape Gate Lifestyle Centre, a shopping centre in Brackenfell,
Cape
Town (the shopping centre). The first and second appellants are
trustees for the time being of the trust. The high court granted
judgment in favour of Milla and ordered payment in the sum of
R1 283 328.49, together with interest
a
tempore morae. The
first appellant, Mr Abraham Johannes van Huyssteen (Mr van
Huyssteen), at all relevant times, represented the
Trust.
[2]
Milla sued as a cessionary, the claim having been ceded to it by
Attfund Limited (Attfund), the present owner of the shopping
centre.
Attfund purchased the shopping centre from its original developer,
Cape Gate Lifestyle (Pty) Ltd (Cape Gate) on 2 February
2006. In
terms of the purchase agreement Cape Gate had guaranteed to Attfund
the rental in respect of the shopping centre for a
period of a year,
which was later extended to two years, leading to a total exposure on
its part of R2.2 million.
[3]
The claim referred to in para 1, which is the subject of this appeal,
was in respect of shop LL01 (the premises), where the
Trust had
conducted business as Tekkie Town, part of a national chain which
sells mostly sports shoes. There are presently some
300 Tekkie Town
outlets in the country. The Tekkie Town business which was
established during September 2005, was purchased by
the Trust from Mr
van Huyssteen in late 2005 or early 2006.
[4]
On 18 August 2005, prior to the Trust being established, Mr van
Huyssteen had entered into a written lease agreement with Cape
Gate
(the 2005 lease). In terms thereof, Mr van Huyssteen, then the owner
of and trading as Tekkie Town, rented shop 17 located
in phase 1 of
the shopping centre, from Cape Gate from 1 November 2004 for a period
of three years, with an option to extend the
lease for a further two
years.
[5]
Shop 17 was 300 square metres in extent and the basic rental was
R65.00 per square metre (escalating at 9 percent per annum).
To that
was added additional operating costs, rates and taxes payable at
R15.50 per square metre (with an annual escalation of
12 percent).
During discussions between Mr Jaco Odendaal (Mr Odendaal), the
majority shareholder of Cape Gate, and Mr van Huyssteen,
it was
agreed that Tekkie Town would move from shop 17 to the premises
located in a further development of the shopping centre,
known as
phase 2. The premises in the new location in phase 2 was considerably
larger than shop 17, namely 1398 square metres.
[6]
In consequence, on 5 May 2006, Mr Odendaal had sent to Mr van
Huyssteen, by fax, an offer to lease in which most of the essentials
in respect of a contemplated lease were completed in typescript.
Because the Trust had purchased the Tekkie Town business, all
new
lease agreements reflected the Trust as the tenant.
[7]
Upon receipt of the faxed offer to lease, Mr van Huyssteen effected
certain changes in manuscript. For present purposes the
most
important of these was a change in the escalation rate from 9 percent
to 8 percent as far as the basic rental and operating
costs were
concerned, ‘other costs’ were qualified by the addition
of the words ‘this included in ops [operation]
costs’.
The provision for payment of a deposit equal to one month’s
gross rental was deleted and, lastly, a further
special condition was
added that there would be ‘no escalation after year one’.
In manuscript, Mr van Huyssteen wrote
that the offer was to remain
open until noon on 22 May 2006. Mr van Huyssteen signed the offer to
lease, incorporating the manuscript
changes (the amended offer) on
behalf of the Trust on 15 May 2006 and returned it to Cape Gate’s
letting agents, Lynx Properties
Limited (Lynx), on that date.
[8]
The amended offer did not, however, reach Mr Odendaal who, as Cape
Gate director, was the sole person responsible for negotiating
and
concluding lease agreements on its behalf. The amended offer was thus
never countersigned on behalf of Cape Gate to signal
its acceptance.
[9]
Nonetheless, the Trust was given beneficial occupation of the leased
premises on 3 July 2006 and Tekkie Town’s business
operations
commenced there on 1 August 2006. From that date until 3 October
2007, Attfund as successor in title to Cape Gate, and
lessor, sent
monthly invoices to the Trust, based on the 2005 lease’s basic
rental, operating costs and rates and taxes,
describing the leased
unit as ‘shop 17’.
[10]
Attfund advised the Trust on 3 October 2007 that it should have paid
higher rental in respect of the considerably larger leased
premises.
This was disputed by the Trust. On 27 May 2008 Attfund and the Trust
reached a new agreement in respect of the premises,
agreeing that it
would be reduced to roughly half its prior size, and would now be
numbered shop LL01A and the Trust would, from
April 2008, become the
lessee.
[11]
In essence the claim ceded to Milla by Attfund is the difference
between what the Trust had in fact paid as rental in respect
of the
leased premises and what Cape Gate alleges it should have paid. Milla
relied for its claim on the lease as contemplated
in the amended
offer. The appellants, on the other hand, contended that the terms of
the 2005 lease agreement in respect of shop
17 had, by virtue of an
oral agreement between Mr Odendaal on behalf of Cape Gate and Mr van
Huyssteen on behalf of the Trust,
transplanted to the new premises
and that the lease in respect of the leased premises would be on
identical terms, notwithstanding
that the property was now four times
its original size. This, according to Mr van Huyssteen, was because
Mr Odendaal had prevaricated
in relation to a new lease, had not
followed up on the offer he had despatched to the Trust, and was
holding out for better terms
from prospective other tenants which had
not materialised, so he was desperate for a tenant. This, of course,
was vehemently denied
by Mr Odendaal.
[12]
In summary, the parties’ respective positions were as follows:
in its claim Milla placed reliance on a tacit acceptance
of the
amended offer and, in the alternative, that the parties’
conduct had resulted in a tacit lease agreement coming into
existence, on the terms contained in the amended offer. The Trust, on
the other hand, relied on an oral agreement of lease, in
material
parts based on the terms of the 2005 lease. In addition to the main
differences regarding the identity of the tenant and
the rental
payable, an additional difference between the two involved the
question as to who had the responsibility for the upgrading
of the
lighting and the installation of the carpets. This difference gained
importance during the trial because in terms of the
amended offer to
lease the lessor would assume responsibility for the upgrading of the
lighting and make a contribution towards
the cost of the carpets.
[13]
The high court rejected the appellants’ reliance on an oral
agreement encompassing the terms of the 2005 lease. In upholding
the
claim, the high court held that the lease agreement in respect of the
leased premises was governed by the terms of the amended
offer by
virtue of the doctrine of quasi-mutual assent. Its reasoning was as
follows: it made favourable credibility findings in
respect of
Milla’s witnesses, particularly of Mr Odendaal, and adverse
credibility findings against the Trust’s witnesses,
particularly of Mr van Huyssteen. The high court found that the
carpeting issue was a neutral factor and that with regard to the
upgraded lighting, Milla’s version was ultimately more
probable. It found that on an overall assessment of the evidence,
the
probabilities and the objective facts, the Trust had failed to prove
the oral agreement it relied upon, and it consequently
rejected that
defence. Lastly, in respect of upholding the claim, the high court
applied the so-called ‘battle of the forms’
and found
that the lease was governed by the amended offer.
[14]
The high court can in my view not be faulted in its finding that the
Trust had failed to prove the oral agreement. While the
high court’s
credibility finding in respect of Mr Odendaal’s testimony is
somewhat generous, there is no warrant for
interference on its
credibility findings on appeal.
[1]
It assessed the following probabilities and objective facts as
militating against an oral lease:
(a)
The oral agreement was never reduced to writing. Mr van Huyssteen was
quite frank about his distrust of landlords generally
and, in the
present instance, he had on his version been treated abominably by Mr
Odendaal. No acknowledgment of receipt of the
amended offer to lease,
nor any response thereto was forthcoming. It was left to Mr van
Huyssteen to make enquiries, as a result
of which he was told by an
unnamed Cape Gate employee that another tenant had secured the
premises (which turned out to be incorrect).
It beggars belief that a
businessman as astute as Mr van Huyssteen would not in these
circumstances have reduced the oral agreement
to writing.
(b)
The oral agreement contained terms unbelievably favourable to Tekkie
Town – it would occupy premises more than four times
the size
of shop 17 at the same aggregate rental for a period of 15 months,
until 31 October 2007.
(c)
It is unfathomable how Mr Odendaal, also an astute businessman, could
have failed to have the oral agreement recorded in writing.
On Mr van
Huyssteen’s version the oral agreement was a product of tough
negotiations and hard bargaining. There was no justification
(nor was
any suggested during argument) for departing from a standard
procedure adopted in the case of the 185 other tenants.
(d)
There was no evidence led at all (save for that of Mr van Huyssteen)
of the proposed occupation of the leased premises by another
tenant.
Mr Visser, who was centrally involved in getting the leased premises
ready for Tekkie Town’s occupation, made no
mention of this at
all.
(e)
Exact Africa, who took over the administration of all Tekkie Town
leases in the early part of 2007, was not made aware of this
remarkably favourable lease agreement.
[15]
Having rejected the Trust’s defence of an oral agreement, the
high court found that, based on the doctrine of quasi-mutual
assent,
more particularly the ‘battle of the forms’, the amended
offer governed the terms of the lease agreement. The
central question
in this appeal is whether the high court correctly applied the
doctrine. Before answering that question, it is
necessary to consider
first, the argument advanced on behalf of the Trust that there was no
intention to contract (
animus
contrahendi
) in
this matter. Given the outcome in this appeal, this contention can be
dealt with very briefly.
[16]
The argument in essence was that, since both Mr Odendaal and Mr van
Huyssteen had laboured under the belief that they had already
concluded an agreement (albeit on different terms), neither party had
the requisite intention to conclude an agreement. Reliance
was placed
on
Rand
Trading
[2]
and on
Landmark
Real Estate
[3]
.
In rejecting this argument, the high court correctly distinguished
those two cases on the facts. There the parties had actually
concluded an agreement and were ad idem on the terms and the
contracting parties. In
Rand
Trading,
however,
the lease agreement was invalid and the court held that ‘the
mere fact. . . that both parties erroneously assumed
that there was a
contract in existence at that date altogether precludes us [the
court] from now inferring a new contract.’
[4]
In
Landmark
Real Estate
,
the court held that, since the parties had assumed that there was a
contract of sale in existence and had the same view of who
the
contracting parties were, it precluded an implied contract with
different parties coming into existence. I turn next to a discussion
of the doctrine of quasi-mutual assent.
[17]
In this court, Milla’s counsel readily conceded that the first
pleaded basis for the claim, namely tacit acceptance of
the amended
offer to lease, did not bear scrutiny. It is well established that
the failure to accept an offer within the time stipulated
in the
offer, results in that offer lapsing.
[5]
This is the case here. As could be expected, counsel supported the
high court’s findings in Milla’s favour on the second,
alternative basis as pleaded. In its finding that a contract of lease
had arisen tacitly, through conduct, the high court observed
that
‘[t]he problem facing [Milla] is that there was no explicit
meeting of minds on the terms of any lease agreement . .
.’ It
continued: ‘This apparent failure of the minds of the parties
to meet is met, however, by the application of
the doctrine of
quasi-mutual assent’. Bozalek J referred with approval to
Ideal
Fastener Corporation CC v Book Vision (Pty) Ltd t/a Colour Graphic
2001 (3) SA 1028
(D) in support of his finding that the present case
falls within the ‘battle of the forms’ principle. In that
regard,
Bozalek J found that, on the facts, Cape Gate had sent the
original offer to lease to the Trust, based on the in-principle
agreement.
It contained the landlords ‘printed conditions’.
Mr van Huyssteen, on behalf of the Trust, had effected certain
manuscript
changes and had transmitted its own ‘printed
conditions’ in the form of the amended offer to Cape Gate. This
amended
offer had been sent in the appropriate manner for it to be
drawn to the attention of a reasonable person in the position of the
landlord, Cape Gate. In the high court’s assessment of the
facts, the critical factor was Cape Gate’s actions after
receiving the amended offer, namely its giving beneficial occupation
on 3 July 2006 and enabling Tekkie Town to start trading from
the
leased premises from 1 August 2006. This, held the high court, ‘gave
the [T]rust reason to understand that [C]ape [G]ate
was contracting
on the [T]rust’s conditions’. The high court noted
further that Milla had ‘come to court. . .
on the basis of the
terms as amended by the [T]rust which are more favourable to the
[T]rust rather than on the landlord’s
terms as contained in the
[original] unsigned offer to lease. This is, of course, appropriate
inasmuch as the Court must consider
the situation from the [Trust’s]
lessee’s / defendants’ perspective, i.e the party that
“fired the last
shot”’.
[18]
By reference to Christie
[6]
the
high court stated that there are three requirements to be met for the
last shot to win the battle of the forms:
(a)
First the one party (often the seller, but here the lessor) must
present its ‘printed conditions’ (here the terms
as per
the original offer to lease) in such a way as to draw them to the
attention of a reasonable person in the position of the
buyer (here
the lessee);
(b)
Second, the buyer (lessee) must then present its ‘printed
conditions’ (the amended offer) in the same manner;
(c)
Third, the seller’s (lessor’s) action after receiving the
buyer’s (lessee’s) conditions must give the
buyer
(lessee) reasonably to understand that the seller (lessor) is
contracting on the buyer’s (lessee’s) conditions.
[19]
The so-called "battle of the forms" is not a mechanical
rule to be applied regardless of the facts. Its requirements
are
simply an application of the doctrine of quasi-mutual assent to the
situation where the terms upon which parties are prepared
to contract
with each other are exchanged, without being read. The author of the
last document exchanged i.e. "the last shot
fired" is
entitled to contend on the basis of quasi-mutual assent, that
subsequent performance by the other party reasonably
entitled it to
assume that the other party had either read and assented to its
terms, or was prepared to be bound without reading
them. That this is
so is especially apparent from the third requirement above. Since the
high court resorted to an application
of the doctrine of quasi-mutual
assent what is required is a consideration of this doctrine.
[20]
The doctrine of quasi-mutual assent, also sometimes referred to as
the (direct) ‘reliance theory’, is firmly entrenched
in
our law.
[7]
The doctrine is best
summed up in the well-known dictum of Blackburn J in
Smith
v Hughes
as follows:
"I
apprehend that if one of the parties intends to make a contract on
one set of terms, and the other intends to make a contract
on another
set of terms, or, as it is sometimes expressed, if the parties are
not ad idem, there is no contract, unless the circumstances
are such
as to preclude one of the parties from denying that he has agreed to
the terms of the other. The rule of law is that stated
in Freeman v
Cooke. If, whatever a man’s real intention may be, he so
conducts himself that a reasonable man would believe
that he was
assenting to the terms proposed by the other party, and that other
party upon that belief enters into the contract
with him, the man
thus conducting himself would be equally bound as if he had intended
to agree to the other party’s terms’.
[8]
[21]
Hutchison et al point out that the principle was received into South
African law as an objective, corrective mechanism where
contractual
parties were not in agreement and describe it in the following terms:
‘
In
contrast to estoppel, the doctrine of quasi-mutual assent or (direct)
reliance theory is a basis for an actual rather than a
fictitious
contract. From a South African perspective, the doctrine argues that
for contractual liability to arise in the absence
of consensus
requires a reasonable belief on the part of one party (the contract
asserter) induced by the other party (the contract
denier) that the
latter had agreed to the contract in question
.’
[9]
[22]
In
Sonap
[10]
this court, in dealing with the law relating to unilateral mistake,
confirmed that as a general rule, the law concerns itself with
the
external manifestations and not the workings of the minds of the
parties to a contract. In the case of alleged dissensus, the
law has
regard to other considerations. In such cases, resort must be had to
the reliance theory in order to determine whether
a contract has come
into being. This court stated as follows:
‘
.
. .
(T)he
decisive question in a case like the present is this: did the party
whose actual intention did not conform to the common intention
expressed, lead the other party, as a reasonable man, to believe that
his declared intention represented his actual intention?.
. ., To
answer this question, a three-fold enquiry is usually necessary,
namely, firstly, was there a misrepresentation as to one
party’s
intention; secondly who made that representation; and thirdly, was
the other party misled thereby?. . . The last
question postulates two
possibilities: Was he actually misled and would a reasonably man have
been misled?. . . .
’
[11]
[23]
From the foregoing the following conclusions may be drawn:
(a)
The doctrine of quasi-mutual assent constitutes an application of the
reliance theory in cases of dissent.
(b)
The doctrine enables the ‘contract asserter’ to contend
that the ‘contract denier’ misled him or her
into the
reasonable belief that the contractor denier had actually assented to
the contractual terms in question.
[24]
With regard to the question whether quasi-mutual assent may be
invoked against a party to whom no fault can be attributed,
Christie
observes as follows, with reference to
George
v Fairmead
[12]
:
‘
It
remains as important as ever for a plaintiff to prove that the
conduct that induces the plaintiff’s belief is attributable
to
the defendant’
.
[13]
As
Christie
[14]
demonstrates, the
application of the doctrine is not without its pitfalls, and this
case is no exception. When these principles
are applied to the facts
of this case, it is clear that there can be no basis for the finding
by the court a quo that simply on
the basis that the Trust "fired
the last shot" in terms of the amended offer, both parties were
objectively bound by
those terms. In the present case, the
Trust was the contract denier asserting an oral contract at odds with
the contract
sought to be enforced by Milla. The objective
facts are that the amended counter-offer was subject to a very short
period
for acceptance. The work on the new premises had not commenced
on receipt of that counter-offer. As pointed out above, it was not
seen by Cape Gate. The emails and documentary evidence presented in
the high court clearly showed that Cape Gate commenced work,
not on
the basis of the amended counter-offer, but in terms of its original
offer. Cape Gate took no steps to ascertain whether
what had been
accepted was the original offer or an amended counter-offer.
Furthermore, the rental that was accepted by the landlord
for a
period of many months was not in accordance with either the offer or
the counter-offer. In addition, neither the landlord
(Attfund), nor
its predecessor (Cape Gate), made any contribution towards the costs
of the carpets as contemplated in the amended
offer. In these
circumstances I fail to see how the conduct of the contract denier,
being the Trust, could have led Cape Gate to
believe that the Trust
was contracting on the amended counter-offer. That after all is the
contract Milla sought to enforce. What
Mila sought to do was to rely
on Cape Gate’s unreasonable conduct to support its assertion
that the parties were bound by
the terms of the counter-offer.
[25]
In a cleverly constructed argument, counsel on behalf of Milla sought
to persuade us that the matter should be viewed from
the Trust’s
perspective, with the result that Cape Gate and subsequently Attfund
should be bound by the counter-offer. For
the reasons set out above
this cannot be so. The high court misapplied the doctrine of
quasi-mutual assent by reasoning in this
manner and unjustifiably
inverting the position. Its reliance on
Ideal
Fastener Corporation CC v Book Vision (Pty) Ltd t/a Colour Graphic
was misplaced, since those facts are distinguishable. In that case
the defendant purchaser had in fact ‘fired the last shot’.
The Trust did not seek to be bound by the terms contained in the
amended offer – Milla sought to do so. Milla cannot in law
rely
upon its predecessor in title, Cape Gate’s, unreasonable
conduct to bind the Trust to the terms of the amended offer
in
circumstances where the Trust does not seek to do so. It was in my
view unreasonable for Cape Gate not to enquire whether its
offer to
the Trust had been accepted. Had it done so, the amended offer would
have been discovered and, also, that the offer was
only open until 22
May 2006. It was legally untenable to hold the Trust bound to its
amended offer (when it did not itself wish
to be so bound), on the
basis that on the objective facts the unreasonable conduct of Cape
Gate must have misled the Trust into
believing that Cape Gate was
agreeable to the terms in the amended offer. To have done so, as the
high court did, turned the doctrine
of quasi-mutual assent on its
head.
[26]
For these reasons, both in fact and in law, the high court had erred
in the manner it had applied the doctrine of quasi-mutual
assent. A
party who alleges a contract must prove its conclusion and the terms
of that contract.
[15]
That is
so even where the asserting party has to prove a negative.
[16]
In the present instance, Milla as plaintiff had failed to prove the
contract it had asserted. In the premises the appeal must be
upheld.
[27]
I issue the following order:
1
The appeal is upheld
with costs.
2
The order of the high
court is set aside and substituted with the following:
‘
The
action is dismissed with costs’.
________________________
S A
MAJIEDT
JUDGE
OF APPEAL
APPEARANCES
For
Appellants:
A F Kantor
Instructed
by:
Rubensteins Attorneys, Cape Town
Phatshoane
Henney Attorneys, Bloemfontein
For
Respondent:
E W Fagan
SC
Instructed
by:
Edward Nathan Sonnenbergs, Cape Town
Webbers,
Bloemfontein
[1]
See:
Santam Bpk v Biddulph
2004 (5) SA 586
(SCA) para
5.
[2]
Rand Trading Co Ltd v
Lewkewitsch
1908 TS 108.
[3]
Landmark Real Estate (Pty)
Ltd v Brand
1992 (3) SA
983 (W).
[4]
Rand Trading Co v
Lewkewitsch
, supra, at
115.
[5]
Laws v Rutherford
1924 AD 261
at 262.
[6]
G B Bradfield:
Christie’s
Law of Contract in South Africa
7ed (2016) at 63.
[7]
For a detailed list of cases where the doctrine was applied, see:
Christie
at
12, fn 95.
[8]
Smith v Hughes
(1871) LR 6 QB 597
at 607.
[9]
D
Hutchison
et al,
The Law of Contract
in South Africa,
2ed
(2012) at 95.
[10]
Sonap Petroleum (SA) (Pty)
Ltd (formerly known as Sonarep (SA) (Pty) (Ltd) v Pappadogianis
1992 (3) SA 234 (A).
[11]
Ibid at 239I -240A (references omitted).
[12]
George v Fairmead (Pty) Ltd
1958 (2) SA 465 (A).
[13]
Christie,
op cit at 34.
[14]
Christie, op cit at 32 – 35.
[15]
Kriegler v Minitzer &
another
1949 (4) SA 821(A)
at 826-827.
[16]
Topaz Kitchens (Pty) Ltd v
Naboom Spa (Edms) Bpk
1976
(3) SA 470
(A) at 474A.