About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Pietermaritzburg
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Pietermaritzburg
>>
2019
>>
[2019] ZAKZPHC 59
|
|
Cedarwood Properties (Pty) Limited v Dickinson and Theunissen Inc and Another (9902/2017P) [2019] ZAKZPHC 59 (29 August 2019)
IN THE HIGH COURT OF
SOUTH AFRICA
KWA-ZULU NATAL
DIVISION, PIETERMARITZBURG
CASE NO: 9902/2017P
In
the matter between:
CEDARWOOD
PROPERTIES (PTY) LIMITED
Applicant
and
DICKINSON AND
THEUNISSEN INC
First Respondent
JASON IAN DOLD
Second Respondent
and
JASON IAN DOLD
Third Party
Coram:
Koen
J
Heard:
10 and 11 June 2019 and
31 July 2019
Delivered:
29 August
2019
ORDER
1. The
first respondent is directed to pay the sum of R3 662 423.41 to
the applicant
with interest thereon at the rate of 10,25 per cent per
annum from 21 July 2017 to date of payment;
2. The
first respondent is directed to pay the applicant’s costs, such
costs
to include that of senior counsel where employed, but excluding
all costs relating to the answering affidavit, the replying
affidavit,
and the costs of the hearing before Mbatha J on 27 August
2018.
3. The
third party is directed to pay the sum of R3 662 423.41 together
with
interest thereon at the rate of 10,25 per cent per annum from 21
July 2017 to date of payment of that amount by the first respondent
to the applicant, to the first respondent;
4. The
third party is directed to pay the first respondent’s costs in
respect of
the third-party proceedings against him.
J U D G M E N T
KOEN
J
:
[1]
The applicant, on motion, claims payment of the sum of R3 662 423.41
together with
interest thereon at the rate of 10,25 per cent per
annum
a
tempore morae
from 21 July 2017 to date of payment, and the costs of the
application.
[1]
The amount
claimed represents a portion of the nett proceeds of the purchase
price of an immovable property sold by the applicant
to Rospa Trading
231 CC (‘the purchaser’). The first respondent was the
conveyancer appointed to attend to the registration
of transfer of
ownership of the property. The amount claimed was paid by the first
respondent to the second respondent, Mr Dold
(‘Dold’)
whose trust, the Dold Family Trust, holds 50 per cent of the shares
and a loan account in the applicant. The
other two shareholders each
holding 25 per cent are the Regsty Trust, represented by Mr Styger
(‘Styger’), and the
Herman Klopper Family Trust,
represented by Mr Herman Klopper (‘Klopper’). Dold,
Styger and Klopper are the directors
of the applicant. Styger and
Klopper also, indirectly, through Austin Crossing (Pty) Limited hold
a loan account in the applicant.
Nothing material to this judgment
turns on the separate identity of the entities referred to above,
unless specifically raised,
and the various role players shall
hereinafter be referred to by the main protagonists of each, simply
as Dold, Styger or Klopper.
In their discussions and dealings Dold,
Styger and Klopper did not always maintain a clear distinction
between these entities and
their personal interests.
[2]
The applicant contends that the amount claimed should have been paid
to it on registration
of transfer. The first respondent and Dold
contend that contractually the amount was to be paid to Dold, as
indeed it was, whether
directly to him or his trust or indirectly to
creditors at his direction. In the event of the court however finding
that this was
not so, and directing the first respondent pay the
amount claimed, or any amount to the applicant, then the first
respondent claims,
as against Dold as third party, that he be
directed to pay the amount and costs so ordered to the first
respondent.
[3]
The aforesaid conflicting contentions of the applicant and the first
respondent gave
rise to material disputes of fact between the parties
as to what the agreement regarding the payment of this nett balance
of the
proceeds on registration of transfer entailed. On 27 August
2018 Mbatha J referred the following issues to oral evidence:
(a)
whether an agreement was concluded on 21 July 2016 between the
shareholders and the directors
of the applicant as to the first
respondent’s disbursement of the free residue of the proceeds
of the sale, which sale occurred
in terms of the Sale Agreement and
Addenda thereto (annexures ‘C2’, ‘C3’ and
‘C4’ to the applicant’s
founding affidavit), and if
so, what the terms of such agreement were.
(b)
whether the first respondent, as elected conveyancer, had acted in
terms of the agreement
(if established), alternatively whether the
first respondent had breached the applicant’s mandate to it,
when it paid the
amount of R3 662 423.41 to the second
respondent.
(c)
whether the first respondent as appointed conveyancer was obliged to
pay the amount
of R3 662 423.41 directly into the bank account
of the applicant, pursuant to the sale of the going concern upon
transfer
of such concern to the purchaser.
(d)
whether the first respondent, as appointed conveyancer, is obliged to
pay the amount of
R3 662 423.41 to the applicant.
(e)
whether the third party should indemnify the first respondent in the
event of the court
finding that the first respondent is liable to pay
the applicant the amount of R3 662 423.41.
[4]
Styger testified for the applicant and Mr Clinton Smith (‘Smith’),
an
admitted attorney (but not an admitted conveyancer
[2]
)
testified on behalf of the first respondent. The applicant also
adduced the evidence of Mr de Beer as an expert in accounting
matters
relating to the applicant. The second respondent/third party (i.e.
Dold) was in default of appearance.
[5]
The evidence to resolve these disputes of fact must be viewed against
the background
which resulted in the property being sold and
transferred.
[6]
For some time, prior to the events giving rise to this application,
there had been
discord amongst the shareholders of the applicant. The
detail thereof is irrelevant to this judgment. It however resulted in
a
meeting being held on 21 July 2016 at Cathkin Valley attended by
Styger, Klopper, Dold, Smith and Dold’s accountant, Mr Raymond
Govender, to discuss various options to terminate the shareholders’
shareholding in the applicant. These included amongst
others the
property being sold and the applicant thereafter being would up
voluntarily with all creditors being paid (which would
inter alia
include the South African Revenue Service for amongst other capital
gains tax on the sale of the property, any outstanding
income tax,
and dividends tax in respect of the final distribution, and the loan
accounts being discharged) and final dividend
distributions
thereafter being paid to the shareholders. If no offer for the
purchase of the property from a third party materialized
then Dold
would buy out the other shareholders, or failing him securing the
required finance, Klopper or his nominee would purchase
Dold’s
shareholding.
[7]
At the conclusion of the meeting, Smith authored a memorandum, signed
by Dold, Styger
and Klopper, which recorded inter alia that:
(a)
The applicant would sell the property to one Goolam or an entity
nominated by him;
(b)
The directors agreed not to disburse an amount of R1 million until
the company’s auditors
and the parties agreed the final loan
account figures;
(c)
In the event of the offer not materialising within 30 days of the
signed sale agreement,
the management company must expedite the main
and/or lease agreement. Within 30 days of the Dold Family Trust being
advised of
same, guarantees for 50 per cent of the company shares
must be delivered in the sum of R4,75 million.
(d)
In the event of the Dold Family Trust not securing the guarantee for
the shares within 30
days of being advised of the renewed lease,
Herman Klopper or his nominee would purchase Jason Dold’s 50
per cent shares
in the entity from him in the sum of R3,75 million
within 30 days after the Dold Family Trust is unable to provide the
guarantee.
Subsequent
to the meeting, and on his return to his office, he prepared a typed
version of the memorandum and also dictated a file
note, the contents
of which was consistent with the above memorandum. The file note in
addition recorded that once he was in possession
of all the details
and documents, he would be able to prepare the sale agreement in
which the first respondent would be appointed
as the conveyancers to
attend to the transfer of the property.
[8]
Smith testified that it was at this meeting that it was agreed that
there would be
a split of the net proceeds and payment made to the
shareholders in the percentages that they held shares, so Dold would
get 50
per cent thereof and the other shareholders would get the
balance of 50 per cent between them. They thereafter would ‘sort
out’ the loan accounts once they either reached agreement on
the loan account balances due to each, or not, and he thought
that
they gave themselves a month to try and sort out such loan account
disputes.
[9]
According to Styger it was also agreed at this meeting that the
outstanding rates
and taxes on the property would, contrary to normal
practice, be paid from the proceeds of the sale. He maintained that
Smith confirmed
that this could be done. Smith did not dispute this
evidence.
[10]
Neither the agreement that the rates and taxes would be paid from the
proceeds of the sale, as
contended for by Styger, nor the split in
the payment of the proceeds of the sale, as contended for by Smith,
was recorded in either
the minute or the subsequent file note.
[11]
On 21 July 2016 the board of directors of the applicant resolved to
sell the property for an
amount of R9,5 million, excluding VAT, and
authorised Styger to sign all the required documentation on its
behalf to give effect
to the sale. A written resolution to that
effect was signed by all three directors dated 21 July 2016.
[12]
In compliance with the instructions he had received at the meeting,
Smith prepared a written
agreement between the applicant and the
purchaser in respect of the sale of the property. The last dated
signature appearing thereon
is 30 August 2016. The terms of this
agreement material to this application included the following:
(a)
the property was sold for a purchase price of R9,5 million;
(b)
the effective date of the agreement would be the date of transfer of
the property;
(c)
the attorneys attending to the transfer of ownership would be the
first respondent;
(d)
the purchase price would be paid by the purchaser to the attorneys on
the seller’s
behalf upon the effective date, without deduction
or demand at Pinetown and such payment would be effected within 14
days of signature
of the purchaser and/or seller, calculated from
whichever is the last dated signature of the agreement. The payment
would be affected
in cash or in the form of an approved guarantee
acceptable to the seller for payment of the purchase price;
(e)
any cash moneys held by the attorneys would be retained in an
interest-bearing account with
such interest earned prior to the
effective date to accrue to the purchaser;
(f)
payment of the purchase price would only be regarded as having taken
place once the
proceeds thereof had been cleared in the applicant’s
bank account;
(g)
the agreement constituted the whole contract between the parties and
no variation, addition
thereto or deletion from or cancellation
thereof would be effective unless reduced to writing and signed by or
on behalf of the
parties.
[13]
On 30 August 2016 an addendum to the agreement was also concluded.
The contents thereof is irrelevant to
this judgement. On or about 9
September 2016 a further addendum was concluded which in its final
form provided that an amount of
R4,5 million of the purchase
price would be paid to Meyer Van Sittert & Kropman Attorneys (the
‘applicants attorneys’)
within two working days of
signature which would be invested by them in an interest-bearing
account with a recognised financial
institution pending registration
of transfer, when the amount would be released to the applicant, with
interest accruing thereon
to accrue to the purchaser. It was further
provided that the balance of the purchase price in the sum of R5
million would be payable
on registration of the transfer from the
proceeds of a loan granted to the purchaser and secured by a
guarantee to be furnished
to the conveyancers within 14 working days
of written request by the conveyancers.
[14]
Pro forma distributions headed ‘Cedarwood Properties Pro forma
Distribution’ were
provided to give the shareholders an idea of
what the ultimate dividend would be. However there were calculations
still to be done
of what had to be paid before the balance
representing the final dividend could be distributed amongst the
shareholders.
[15]
Styger correctly pointed out that the applicant always retained the
obligation to pay the capital
gains tax liability on the sale of the
property. He also communicated this to Smith on 19 September 2016. On
20 September 2016
he addressed a further letter to Smith clarifying
any ‘misunderstanding on the way forward’. This letter
confirmed
that after the loan accounts were agreed to and the rates
were paid from the proceeds of the sale, the balance of the moneys
accruing
to the applicant would be paid to the management company on
behalf of the applicant, for it to pay all the tax liabilities of the
applicant, to wind down its affairs and finally pay the closing
dividend. In his reply on 22 September 2016 Smith confirmed this
as
‘the correct way to go forward …’ Styger found
comfort in this assurance. He added that he was never advised
that
the first respondent intended to distribute any of the proceeds to
Dold. That evidence was not disputed.
[16]
On 10 October 2016 Styger signed an ‘Instruction to register
transfer’ prepared by
Nalini Santigen of the first respondent’s
conveyancing department instructing the first respondent to attend to
the registration
of the transfer and to pay inter alia, rates, taxes,
levies owing to any local authority and for the balance to be paid
into the
account of the account holder in the name of the applicant
held with First National Bank.
[17]
On 20 July 2017 an email was forwarded by the first respondent to
Styger, Klopper and Dold to
which was attached a conveyancer’s
final statement of account dated 17 July 2017. The statement
reflected the nett balance
of funds under the control of the first
respondent, in the sum of R3 662 423.41, as due to Dold. This
immediately resulted in a
written demand by the applicants attorneys
addressed to the first respondent that this amount was to be paid to
the applicant and
not Dold. The first respondent’s response was
that ‘Jason Dold and our offices have always held the view that
…
we were to disburse the money held by us as per Mr Dold’s
instructions save for the R1 million.’
[18]
Mr Styger denied that there was any agreement that the free residue
of the sale would be paid
out to the three shareholders. He said it
might have been discussed but he was adamant that there was no
agreement on such a distribution.
He maintained that whatever was
agreed was recorded in the signed minute. If it was not recorded in
the minute (or the sale agreement)
then it was not agreed. He also
disputed that Dold or the first respondent could have come under such
an impression based on the
‘Pro forma distributions’ as
according to those statements Mr Dold had the prospect at best to
receive R2.9 million,
and not the
R3
662 423.41 which he was paid by the first respondent. He was adamant
that before one starts winding up a company one needs to
know what
the liabilities are, not only outstanding tax liabilities but also
other liabilities. He admitted that on 21 July 2017
R2 million was
paid from the applicant’s account to Austin Crossing, in
respect of its loan account and that this was an
overpayment. He
agreed that this was a ‘knee-jerk’ reaction to the
payment of portion of the net proceeds by the first
respondent to Mr
Dold, as the loan account balances had not been agreed. On 10 August
2017 he and Klopper paid R440 825 in respect
of the overpayment of
the loan account. He described the fact that the rates and taxes on
the property would be paid from the proceeds
of the sale (on which
the sale agreement was silent) as being ‘a mere arrangement on
the transfer attorneys instructions’.
[19]
Although
the property was sold and capital gains tax has been paid in respect
of the capital gain to the applicant on the sale of
the property, the
applicant has not been wound up, but is basically dormant. The final
dividend has not been calculated, nor dividends
tax or a final
dividend paid. Mr De Beer, a chartered accountant, confirmed that
there was still a dispute as to the balances owing
in respect of the
loan accounts and the dividends tax cannot be calculated as long as
this dispute remains. According to him there
is also no money for
payment thereof.
[20]
Smith reiterated that it was agreed at the meeting of 21 July 2016
that there ‘would be
a split of the proceeds between the
shareholders in the percentages that they hold shares. So, Dold would
get 50 per cent and the
other shareholders would get the balance of
50 per cent between them. They thereafter would sort out the loan
accounts….’
He explained that this term was omitted from
the minute prepared by him, that it should have been included, but
that the omission
was an oversight on his part. He pointed out that
there were discussions which the applicant accepted but which were
also not contained
in the minute, namely the rates being payable from
the proceeds of the sale prior to transfer, rather than by the
applicant. Regarding
the subsequent addendum providing for payment of
the R4,5 million to the applicant’s attorneys trust account he
said that
he ‘understood’ that to mean that it was the
portion of the proceeds that would go to those two shareholders. He
accepted
that on the scenario he envisaged, the shareholders would
have to refund the applicant to pay liabilities and that if any of
the
shareholder trusts would have been sequestrated before that could
be achieved, it would have resulted in a problem and created a
number
of risks.
[21]
Smith confirmed that the amount of R3 662 423.41 was paid to
creditors of Dold and to Dold himself.
He conceded that ‘in the
ordinary course of (a) conveyancing transaction the seller will be
paid’ but maintained that
the instruction from Dold, Styger and
Klopper was that they would receive their moneys and fight about the
loan accounts later,
although that would deviate from the norm. He
accepted that this could create an ‘unworkable situation’
and that it
is ‘hugely messy.’ He further agreed that the
first respondent would take its instructions from the terms of the
sale
agreement but explained that there was a deviation from the
terms of the written agreement as to the split of the proceeds. He
accepted that this should have been incorporated in the sale
agreement concluded after that initial meeting, which agreement did
not contain such a provision and in fact also contained a
non-variation clause.
[22]
It is significant that although it was maintained that Dold had given
him the express instruction
regarding the splitting of the proceeds,
Dold did not raise the omission of that instruction from the
memorandum which he signed.
In fact all the signatories did not
notice this alleged omission. Smith was unable to point to any
provision in the sale agreement,
or any mandate, that the proceeds be
split as he contended for. The manner of distribution he contended
had been agreed would also
not be business like. Neither Govender nor
Dold, who both attended the initial meeting, testified to support
Smith’s version.
There was no suggestion that they were not
available to testify.
[23]
Smith also accepted that the actual distribution was not in
accordance with what he contended
had been agreed. The reality is
that he simply took what was reflected as the remaining balance, and
paid it to Dold. He candidly
conceded that he did not follow the
mandate from the applicant as contained in the ‘Instruction to
register transfer’.
[24]
On the probabilities, the case presented by the applicant was
overwhelming. The written sale
agreement required payment of the
proceeds to the applicant, which is in accordance with normal
conveyancing practice. According
to the express terms of the
agreement payment would only have occurred once the funds were
cleared in the applicant’s account.
The subsequent
correspondence and ‘Instruction to register transfer’ are
consistent only with payment having to be
made to the applicant to
discharge all liabilities, including any disputed liabilities
regarding the loan accounts once resolved,
capital gains tax,
outstanding income tax and dividends tax as part of the liquidation
of the applicant which it was contemplated
was to follow. The
contrary ‘agreement’ contended for by Smith is not
business like, not workable and fraught with
dangers. It is
improbable that such an agreement was concluded. Not a single
document was forthcoming from Smith to reflect the
terms of the
agreement which he contended applied. Indeed the documents that were
produced are all inconsistent with the agreement
he contended for.
The amount claimed should have been paid by the first respondent to
the applicant and not to Dold and his creditors.
[25]
A point raised in argument was whether the applicant’s claim
for payment of the amount
claimed was one for specific performance of
what the first respondent should have performed, or whether more
appropriately the
applicant’s claim is one for contractual
damages arising from the breach of the mandate granted by the
applicant to the first
respondent. The first respondent never
incurred a contractual obligation in its own right to pay the sum of
R3 662 423.41 to the
applicant. The obligation it incurred in terms
of its mandate was to pay the balance of the net proceeds from the
sale, which happen
to be R3 662 423.41, to the applicant, which it
failed to do. The applicant’s remedy would accordingly more
appropriately
be one for contractual damages according to its
positive interesse to place in the position it would have been in had
the breach
of the mandate not occurred.
[26]
Mr Ploos van Amstel for the first respondent urged me to accept, with
reference to the contemplated
liquidation of the applicant and
accepting certain amounts as representing at least the minimum
balances of liabilities and potential
proposed distributions, that
the applicant’s damages would be significantly lower than the
amount claimed. Alternatively,
the argument would be that the
applicant had simply failed to prove its damages.
[27]
In my view, that argument proceeds on an incorrect factual premise.
As much as a liquidation
of the applicant was contemplated, it has as
yet not been affected, and for a variety of reasons may never
proceed. Even if the
claim was to be treated as properly one for
contractual damages, the damages of the applicant must be assessed
with reference to
the position it would have been in immediately
after the balance of the proceeds from the sale should have been paid
to the applicant
rather than to Dold and his creditors.
[28]
In so far as the claim would be one for specific performance, it is
of course trite law that
such remedy is always subject to a court’s
discretion.
[3]
The plaintiff
always has the election whether to proceed for a claim for specific
performance or to claim damages for the breach.
It is however not a
choice which the defendant enjoys.
[4]
It is for the defendant who seeks to avoid its application to allege
and prove facts on which the court can exercise its discretion
in its
favour.
[5]
No such facts were
alleged by the first respondent, or proved.
[29]
It seems to me more appropriately that the claim is properly one for
damages for breach of the
mandate. Such damages are however capable
of prompt and ready ascertainment on the facts of this matter and
happen to coincide
with the amount that should have been paid by the
first respondent to the applicant on registration of transfer. No
facts have
been proved which would justify these damages being
reduced in any way.
[30]
At best, it was argued that the applicant would be benefited unduly
as it would allegedly receive
the full balance of the net proceeds
whilst at the same time also enjoying the benefit that the loan
account in respect of the
Dold Family Trust would have been
discharged. That argument overlooks the legal principle that in order
for a debt to be discharged
it is required that there be agreement
between the parties to that effect.
[6]
Whatever was paid by the first respondent to Dold did not discharge
whatever might be owing by the applicant to the Dold Family
Trust.
The appropriate remedy is that the applicant should succeed for the
amount of its claim with the first respondent being
entitled to
proceed against Dold for the amount it has to pay to the applicant.
In the event of the former not being able to reimburse
the first
respondent, the normal remedies on execution would be available to
the first respondent including attaching for example
Dold’s
right title and interest to any amounts to which he may become
entitled from the Dold Family Trust.
[31]
To the extent that the applicant’s claim is properly one for
damages and the applicant
has used the application procedure, I am of
the view that it should not be non-suited for that reason as the
damages are capable
of prompt and ready ascertainment.
[7]
[32]
Regarding costs, although the first of respondent’s version has
been rejected following
the hearing of oral argument, its initial
response to the demand received from the applicant’s attorneys
suggested an agreement
with different terms to that contended for by
the applicant. That gave rise to a material dispute as to the manner
in which the
balance of the proceeds should have been disbursed. The
applicant was perhaps fortunate that the application was not
dismissed
for that reason when the matter initially came before
Mbatha J, rather than it being referred to oral evidence.
[33]
The applicant has been successful and is entitled to its costs, such
costs include the costs
of senior counsel. The costs shall however
exclude all costs relating to the answering affidavit, the replying
affidavit, and of
the hearing before Mbatha J on 27 August 2018.
[34]
The first respondent has been successful with the third party
proceedings. It is entitled to
its costs of the third-party
proceedings against the third party. The first respondent was however
not justified in believing that
it was entitled to act as it did. I
am therefore not disposed to granting an order that it be entitled to
recover in respect of
the costs order made against it in favour of
the applicant, from the third party.
[35]
The following order is granted:
1.
The first respondent is directed to pay the sum of R3 662 423.41
to the
applicant with interest thereon at the rate of 10,25 per cent
per annum from 21 July 2017 to date of payment;
2.
The first respondent is directed to pay the applicant’s costs,
such costs
include that of senior counsel where employed, but
excluding all costs relating to the answering affidavit, the replying
affidavit,
and the costs of the hearing before Mbatha J on 27 August
2018.
3.
The third party is directed to pay the sum of R3 662 423.41
together with
interest thereon at the rate of 10,25 per cent per
annum from 21 July 2017 to date of payment of that amount by the
first respondent
to the applicant, to the first respondent;
4.
The third party is directed to pay the first respondent’s costs
in respect
of the third-party proceedings against him.
KOEN J
APPEARANCES
APPELLANT’S
COUNSEL: Mr L.
Combrink SC
INSTRUCTED
BY:
Meyer Van Sittert & Kropman
c/o
Tomlinson Mnguni James
(Ref:
R Stuart Hill)
RESPONDENT’S
COUNSEL: Mr J Ploos van Amstel
INSTRUCTED
BY:
Bowman Gilfillan Inc
(Ref T
Nichols/cn/6174960)
Trudie.nichols@bowmanslaw.com
c/o AK
Essack Morgan Naidoo
(Ref.
Mr Naidoo)
[1]
In the applicant’s
heads the applicant asks that the costs include the costs of senior
counsel.
[2]
The first
respondent however conducts a practice as admitted conveyancers, the
conveyancing being attended to by other professionals
in the firm.
The instructions as to what had to happen to the balance of the net
proceeds on registration of transfer however
emanated from Smith.
[3]
See inter alia
Candid
Electronics Pty Ltd versus Merchandise Buying Syndicate (Pty) Ltd
1992 (2) SA 459
(C) at 463 – 465.
[4]
Hayes v King
Williams Town Municipality
1951
(2) SA 371
(A) at 378.
[5]
Tamarillo (Pty)
Ltd v Aitken (Pty) Ltd
1982
(1) SA 398 (A).
[6]
ABSA Bank Ltd v
Lombard Insurance Co Ltd
2012 (6) SA
569
(SCA) para 18.
[7]
See also
Manuel
v Economic Freedom Fighters & others
[2019] ZAGPJHC 157;
[2019] 3 All SA 584
(GJ)