Strauss N.O. and Another v Terblanche N.O. and Others (5315/2017) [2018] ZAFSHC 105 (7 June 2018)

80 Reportability

Contract Law

Brief Summary

Contract — Impossibility of performance — Plaintiffs sought cancellation of sale agreement and restoration of property ownership — Defendants, as trustees, entered into sale agreements despite lack of ownership of property — Plaintiffs failed to serve written demand as required by agreement prior to cancellation — Court held that plaintiffs' action was premature due to non-compliance with contractual terms, upholding defendants' exception with costs.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took the form of an exception to the plaintiffs’ particulars of claim in an action instituted in the High Court of South Africa, Free State Division, Bloemfontein. The plaintiffs (Sandra Strauss N.O. and Johann Wolmarans N.O.) acted in their representative capacities as trustees of the Sandra Trust. The defendants included Charl Jean Terblanche N.O. and Mark John Azar N.O. (as trustees of the Pro-Spes Business Trust), the Registrar of Deeds, Bloemfontein, and further defendants cited in the summons, including Charl Jean Terblanche (in his personal capacity) and Wynand Daniël Botha.

The plaintiffs instituted action seeking, in substance, the cancellation of a deed of transfer relating to the farm Damplaats No. 49 (district Ventersburg, Free State) and the restoration of ownership to the plaintiffs (alternatively an order compelling transfer of the property back to the Sandra Trust trustees). The defendants raised several grounds of exception, contending that the particulars of claim failed to disclose a cause of action and that the action was premature.

The general subject-matter of the dispute concerned the contractual consequences of a sequence of written agreements for the sale of an enterprise and/or immovable property, in which payment was linked to a contemplated transfer of another property (Oubos 28), and the plaintiffs’ reliance on impossibility of performance and a claimed entitlement to cancellation and restitutio in integrum.

2. Material Facts

The material facts, as relied upon by the court, were largely common cause and were drawn from the pleaded agreements attached to the particulars of claim.

On 23 October 2014, the trustees of the Sandra Trust (as seller) and the trustees of the Pro-Spes Business Trust (as purchaser) entered into a written agreement styled a “koopkontrak van vaste eiendom”, in terms of which the seller sold to the purchaser the business or letting enterprise operated on the farm Damplaats 49 as a going concern. This agreement was attached to the particulars of claim as annexure “B”.

Thereafter, the parties concluded a written cancellation agreement, attached as annexure “C”, in terms of which the parties jointly cancelled the 23 October 2014 agreement.

On 19 December 2014, the parties concluded a further written agreement, annexure “D”, for the sale of the farm Damplaats at a reduced purchase price. Clause 3.1 of annexure “D” recorded that set-off (skuldvergelyking) would be applied in respect of the purchase price of Oubos 28 Landgoed, Bloemfontein, which property, according to the clause, would be sold by the purchaser to the seller on a date when the purchaser was able to do so. Annexure “D” also contained a term (referred to by the court as paragraph/clause 14) which required the plaintiffs to serve a written demand calling upon the defendants to take steps to effect transfer of Oubos 28 to the plaintiffs within seven days, failing which the plaintiffs would be entitled to cancel.

The plaintiffs alleged (and pleaded as part of their case) that the first and second defendants were not the owners of Oubos 28 when annexures “B” and “D” were entered into, that the first defendant knew Oubos 28 was registered in the name of another person, and that he knew he could not sell and transfer Oubos 28 to the plaintiffs. The particulars of claim also alleged that the first defendant, as author of annexures “B”, “C”, and “D”, acted mala fide with an intention to deceive the trustees of the Sandra Trust.

The judgment recorded the objective position regarding Oubos 28: it had been transferred to Jacubus Francois Opperman on 22 October 2010 (Deed of Transfer ST 1963/2010), and Opperman later sold it to Dirk Johannes Malan on 24 June 2015 (Deed of Transfer ST 10064/2015). The court treated the pleaded consequence relied upon by the plaintiffs as being that performance under annexure “D” (in relation to the transfer of Oubos 28) was impossible.

A fact treated as decisive for the exception was that, on the plaintiffs’ own case and on the terms of annexure “D”, the plaintiffs had not complied with the contractual procedure requiring a written demand prior to either instituting action or cancelling the agreement.

3. Legal Issues

The central legal questions were directed to whether the plaintiffs’ particulars of claim disclosed a cause of action in light of the contractual terms and the pleaded reliance on impossibility. In particular, the court had to determine whether, assuming the pleaded allegations to be true for purposes of exception, the plaintiffs were entitled to claim cancellation and restitution without complying with the contractual demand mechanism contained in annexure “D”.

The dispute involved a combination of legal questions (the effect of impossibility of performance on contractual obligations; the consequences of a party causing impossibility; and the enforceability of contractual procedural requirements) and the application of law to the pleaded facts (whether the plaintiffs’ pleaded case could succeed despite non-compliance with the demand clause).

Although the defendants raised several grounds of exception, the court’s determination focused on the legal consequence of the plaintiffs’ pleaded reliance on impossibility together with their failure to follow the contractually stipulated enforcement and cancellation procedure.

4. Court’s Reasoning

The court approached the exception on the basis of principles applicable to impossibility of performance in contract, including the proposition that a party who causes impossibility cannot take advantage of it and may remain liable on the contract. The court referred to authority for the proposition that where impossibility is caused by a party, that party may be held liable and the other party may be entitled to enforce the contract.

In articulating the relevant doctrinal framework, the court adopted the formulation that impossibility must be absolute (not merely probable), absolute rather than relative, not due to the fault of either party, and subject to any contrary common intention of the parties. The judgment emphasised that where a party promises to do something which can be done in general but cannot be done by that party, that party remains liable; and where that party has caused the impossibility, the party cannot escape liability by invoking impossibility.

Applying these principles, the court concluded that it was “evident” that the first defendant and/or the Pro-Spes Business Trust would be liable on the contract, with the consequence that the plaintiffs were, in principle, free to enforce the agreement. However, the court held that enforcement had to occur in accordance with the contract’s own terms.

The court treated clause/paragraph 14 of annexure “D” as imposing a procedural step: the plaintiffs were obliged to serve a written demand before either issuing summons or cancelling the agreement. The plaintiffs’ failure to comply with that demand mechanism meant that their action, as pleaded, was premature.

On that basis, the court held that the exception was well-founded and that it disposed of the action as a whole. The court further held that costs should follow the result.

5. Outcome and Relief

The court upheld the defendants’ exception and thereby disposed of the action in the form in which it had been instituted. The court ordered that the exception is upheld with costs.

Cases Cited

Wireohms SA (Pty) Ltd v Greenblatt 1959 (3) SA 909 (C) at 912A–B.

Quinella Trading (Pty) Ltd v Minister of Rural Developments 2010 (4) SA 308 (LCC).

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that, even accepting the plaintiffs’ reliance on impossibility of performance as pleaded, the plaintiffs were required to act in terms of the contract. Because annexure “D” required the service of a written demand prior to summons or cancellation, and because the plaintiffs did not comply with that requirement, the action was premature. The exception was accordingly upheld with costs.

LEGAL PRINCIPLES

The judgment applied the principle that impossibility of performance operates within defined limits: the impossibility must be absolute rather than probable, absolute rather than relative, and not attributable to the fault of a party who seeks to rely upon it, subject to the parties’ contrary intention.

The judgment further applied the principle that a party who has caused the impossibility cannot take advantage of it to escape contractual responsibility and may remain liable on the contract, leaving the innocent party free to pursue contractual enforcement.

Finally, the judgment applied the principle that contractual rights (including cancellation or enforcement remedies) must be exercised in accordance with agreed contractual procedures, and that failure to comply with an express procedural precondition (here, a required written demand) can render litigation premature and susceptible to exception.