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[2018] ZASCA 136
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Meyer NO and Others v Big Five Developments (Pty) Ltd and Another (1017/17) [2018] ZASCA 136 (28 September 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 1017/17
In
the matter between:
LEOLA SHARON MEYER N
O
FIRST
APPELLANT
GLENN TYRES N
O
SECOND
APPELLANT
HELEEN JEANNE MEYER N
O
THIRD
APPELLANT
J
G MEYER BOERDERY (PTY)
LTD
FOURTH
APPELLANT
and
BIG FIVE DEVELOPMENTS (PTY)
LTD
FIRST
RESPONDENT
FORE STREET HOLDINGS (PTY)
LTD
SECOND
RESPONDENT
Neutral
Citation:
Meyer
& others v Big Five Developments (Pty) Ltd
(1017/17)
[2018] ZASCA 136
(28 September 2018)
Coram:
Shongwe ADP and Dambuza, Mathopo,
Mocumie and Molemela JJA
Heard:
23 August 2018
Delivered:
28 September 2018
Summary:
Contract –
Interpretation of the agreement – whether joint venture
agreement includes sale of land or not – whether
Alienation of
Land Act applicable – authority of trustees –
rectification whether claims properly abandoned or not.
ORDER
On
appeal from
: The
Gauteng Division, Johannesburg (Nicholls J, sitting as court of first
instance):
The appeal is dismissed with costs, such costs to
include costs occasioned by the employment of two counsel.
JUDGMENT
Mathopo
JA (Shongwe ADP and Dambuza, Mocumie and Molemela concurring):
[1]
This appeal concerns the interpretation of an agreement concluded
between Big Five Developments (Pty) Ltd, a development company,
Fore
Street Holdings (Pty) Ltd, (hereinafter collectively referred to as
Big Five) and Klipriviersberg Trust, JGM Trust and JG
Meyer Boerdery
Trust, a private company which conducts farming operations on the
land owned by the Trust (the Trusts or the appellants).
It arises
from an action instituted by the respondent (Big Five) in the Gauteng
Division, Johannesburg. Big Five sought the following
relief; (a)
rectifying various clauses of the joint venture agreement, (JVA) (b)
declaring that the agreement concluded is valid
and of full force and
effect, (c) interdicting the trustees from negotiating the sale of
the property to Home Talk Developments
and any other third party.
[2]
The appellants raised various defences to the relief sought.
Primarily they questioned the validity and enforceability of the
JVA.
First, they contended that the agreement is a sale of land and thus
invalid for lack of compliance with the requirements of
the
Alienation of Land Act 68 of 1981 (the Act). Second, they averred
that Ms Leola Meyer, one of the trustees, did not have the
authority
to bind the trusts. Third, they averred that no proper case for
rectification was made by the respondent. Each of these
contentions
will be considered later. The high court dismissed the appellants’
defences. With leave of the high court the
appellants now appeal
against that decision.
[3]
The brief background facts are as follows. During 2010 Leola Meyer, a
trustee of Klipriviersberg Trust and JGM Trust approached
Glenn David
Crick, a director of Big Five and proposed that he develop a piece of
land belonging to the Trust. I should add that
Leola and Crick had
previously dealt with each other when developing another piece of
land in Bassonia belonging to the Trust.
The negotiations led to the
conclusion of three agreements styled joint venture agreements.
[4]
During the negotiations relating to the first agreement, the
envisaged development was originally a low to medium density
residential
estate with an equestrian theme, incorporating some
commercial offices at a fairly low density residential scheme. The
first agreement
was concluded on 22 October 2010 between Crick on
behalf of Big Five and Leola as a representative of Klipriviersberg
Trust, JGM
Trust, Pather Trust and the Boerdery Trust. The second
agreement, which was similar to the first, was signed on 20 July 2011
by
Crick on behalf of Big Five and Leola on behalf of the
Klipriviersberg Trust, JGM Trust and the Boerdery. The Pather Trust
was
excluded from the agreement. By the time the third agreement was
finalised the vision had changed. It was envisaged that a high
density mixed use residential scheme incorporating residential,
commercial, hospitality, medical facilities, offices and large
retail
component would be developed. In order to achieve this vision a team
of experts was engaged to assist with the development
of the area and
the rezoning of the property from agricultural to a property with
rights to develop a mixed used scheme.
[5]
The main purpose of the JVA according to the respondents was to
increase the value of the land by obtaining the appropriate
rezoning,
then on sell it to a third party or a realisation company. It was not
contemplated that Big Five would purchase the property
from the
Trust. The appellants as intimated earlier adopted the stance that
the JVA was intertwined with the sale agreements. Absent
compliance
with the provisions of the Act, the agreement was invalid and
unenforceable.
[6]
Premised on the factual allegations that the respondents
mischaracterised the JVA as only an agreement to develop the property
and not of sale, the appellants raised special pleas which
principally attacked the validity of the agreement. The appellants’
principal stance was that the agreement is a sale of land which,
absent compliance with the Act, is invalid or unenforceable. This
argument was based on the suggestion that because it was not
determinable from the agreement which Trusts own the land purportedly
sold, and again since the purchase price and value thereof was
uncertain, the agreement is void for vagueness. It was further
submitted that because the purchase price was not clearly stated in
the agreement or rather left to the determination of Big Five.
The
unilateral determination of the purchase price by Big Five renders
the contract of sale uncertain, void and thus unenforceable.
The
submission made was that this clause took away the parties’
opportunity to decide for themselves before they become bound
in law
whether they wished to enter into a contract or not. It was argued
that giving Big Five an unfettered discretion to decide
on the
contract price is unconscionable.
[7]
A second string to the appellant’s bow related to the validity
of the November 2011 agreement. It was submitted that following
upon
the evidence of Mr Ewan Simmonds (Simmonds), an attorney who acted
for Big Five at the conclusion of the agreement, the trustees’
resolution related to the July agreement only. We were urged to
accept that absent any proper formal quorate resolution of the
trustees of a particular trust regarding a particular parcel of land,
the agreement was invalid and unenforceable. Foundational
to that
contention is the suggestion that there was no proper resolution
authorising the conclusion of the November agreement.
Thirdly, it was
submitted that no proper case had been made for rectification of the
agreement. This argument was developed further
as a result of the
purported abandonment of certain orders during the application for
leave to appeal by counsel for the respondents.
In essence it was
submitted that by abandoning the orders in relation to clauses 8.1
and 8.2 of the JVA, the respondents lost their
locus standi to sue.
Each of these contentions will be considered later.
[8] The respondents adopted an approach that on a proper
reading of the JVA agreement there was no sale of land between Big
Five
and the Trusts. The high-water mark of the respondent’s
case was that all the clauses of the agreement referred to the
transfer
of land only to the realisation company and development
company. These sales, so the argument continued, would only take
place
in the future with other parties. Accordingly the respondents
submitted that the Act was inapplicable. Addressing the appellant’s
contention that the agreement was void for vagueness as a result of
the undetermined purchase price and value of the property,
the
respondents submitted that the appellants misconstrued the agreement
and to a large extent ignored the unchallenged evidence
of Crick and
Simmonds that Leola or the Trusts did not envisage any sale.
Was
the JVA intertwined with elements of property development as well as
the sale of land by the Trust to the realisation company?
[9]
To answer this question it is necessary to interpret the agreement.
The starting point is the words of the agreement. It has
to be borne
in mind as emphasised by this court in
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
2016 (1) SA 518
(SCA) at para 27, ‘that this court has
consistently held ... that the interpretative process is one of
ascertaining
the intention of the parties’. To this end the
court has to examine all the circumstances surrounding the conclusion
of the
agreement i.e. the factual matrix or context including any
relevant subsequent conduct of the parties.
[10] To fully appreciate the parties’ contention,
one should start with a consideration of the relevant provisions of
the
written agreement. The heading of the agreement is styled ‘Joint
Venture Agreement’. In the interpretation section the
Trusts
are defined as Klipriviersberg Trust duly registered with
registration number 1333/1994 and JGM Trust duly registered with
registration number 4907/1995. The property means the immovable
properties known as:
‘
1.2.2.4.1
The remaining extent of Portion 136 (a portion of Portion 2) of the
Farm Klipriviersberg 106, measuring approximately
730794 hectares and
held under Title Deed T84172/1994;
1.2.2.4.2 Portion 240 of the
Farm Klipriviersberg 106, measuring approximately 205132 hectares and
held under Title Deed T54572/2001;
1.2.2.4.3 Remaining extent of
Portion 2 of the Farm Klipriviersberg 106, measuring approximately
905481 hectares, held under Title
Deed T22463/2002.
Jointly
measuring approximately 380 hectares and set out in the diagram
attached hereto marked “A”.’
[11] Clause 2.2 sets out the purpose of the agreement as
follows:
‘
2.2
The Trust and Big Five hereby enter into a joint venture in terms
whereof Big Five will rezone the property for purposes of
increasing
the value of same for on sale to the development company.’
[12] Clause 3.3 states the value of the property as
follows:
‘
3.3
The parties hereby agree that the value of the property is an amount
of R200 000 000.00 (Two Hundred Million Rand)
subject to
the proposed rights, as envisaged by Big Five, being approved.’
[13] Clause 3.8 provides:
‘
3.8 On
signature hereof, Big Five undertakes to pay to the Trust the amount
of R1 000 000.00 (One Million Rand), as part
payment of the
purchase price, which is paid for and on behalf of the realization
company.’
[14] Clause 3.4 sets out the role of the realisation
company. It reads as follows:
‘
3.4 It
is anticipated that prior to any portion of the property being
proclaimed, that a company/ies, being a special purpose vehicle/s.
will be established for the purpose of taking transfer of the
relevant portions of the property ( (“the realization
company”),
and on selling same to the development company.
[15] Clause 5 sets out the obligations of Big Five:
‘
5.
Big
Five’s obligations
5.1 Big Five shall be
responsible for the day-to-day affairs of the project.
5.2 The Trust hereby authorises
Big Five to apply to the relevant Authorities in regards to obtaining
the relevant permission to
continue with the development and
undertakes to sign any and all documentation necessary to give effect
thereto.
5.3 Big Five shall be entitled
to appoint agents and sub-contractors to assist it in performing its
obligations in terms thereof.
5.4 Big Five
shall be responsible for the costs associated with and related to the
development.’
[16]
In terms of the JVA, the Trusts would contribute the land to the
joint venture and Big Five would undertake the task of developing
and
rezoning it. It would pay all the fees associated with that function.
Big Five maintained the properties and employed labourers
to tend the
properties. During October 2005 Big Five obtained approval for the
construction of an off-ramp for the purposes of
facilitating access
to the property. This, according to Crick, increased the expenditure
to R5 million. It was further anticipated
that after the
rezoning process the land would have to be transferred into a company
to be formed and only at that point would
money flow to the Trusts.
It was further contemplated that the land would be subdivided so that
the Trusts would get paid once
those subdivided portions of the land
were transferred.
[17] It is quite clear that the purpose of the agreement
was to increase the value of the land by means of residential and
commercial
rezoning. In the interpretation clause only the word
‘development’ is defined. No sale is mentioned or
contemplated.
This, in my view, indicates that any possible sale
could only take place in the future to the realisation company and
thereafter
the development company. There was no agreement of sale
between Big Five and the Trusts. In the bigger scheme of things Big
Five
would not be a party to the eventual alienation of land
agreement. Its limited role in terms of clause 3.7 of the agreement
was
to negotiate the purchase price for the property which would
accrue to the realisation company and be shared equally between the
parties in terms of clause 3.5 of the agreement, which provides:
‘
The
shares in the realization company/ies will be held equally by the
Trusts and/or its nominees and by Big Five and/or its nominees.’
[18]
The contention by the appellants that the agreements did not
expressly state the values of the property misconstrues the purpose
of the JVA. In terms of the agreement once the properties are
developed and rezoned, the values would be assessed at the applicable
market values at that time. What the appellants lost sight of is that
all the clauses of the agreement which refer to the sale
of land
relate to the realisation company and development company. The
alienations are to take place in the future and do not concern
Big
Five. The evidence of Crick that there was never a sale intended
between the parties was unchallenged. Equally undisputed was
his
evidence that the parties intended future sale agreements with other
parties.
[19] It cannot be successfully contended that during the
negotiations between Leola and Crick any sale was discussed. The
evidence
points to the contrary. What was foremost in the minds of
both was to develop the property. To achieve this the JVA was
concluded.
On a proper reading of the agreement and further
considering the evidence of Crick and Simmonds, no evidence of the
intended sale
by means of a JVA could be established. This evidence
was corroborated by Simmonds who testified that:
‘
When
Leola came to see us she instructed us that she had provided a third
party with a right of first refusal to purchase the property
because
of that she could not enter into a purchase agreement.’
This
crucial piece of evidence was unchallenged and there is no reason why
it should not be accepted.
[20] There is no doubt in my mind that there could not
have been a development agreement without the subsequent sales by the
realisation
company. The appellants’ contention would lead to
an unbusinesslike conclusion where Big Five would develop the
property
belonging to the Trusts without any quid pro quo. In my view
what elevates this agreement to a legally enforceable one and
distinguishes
it from being intertwined to the sale agreement is the
fact that Leola categorically agreed that the Trusts were entering
into
a JVA to develop the land and granted the right of first refusal
to a third party, Home Talk Development. On the facts of this case
enforcing the JVA as being only a property development agreement
would not be interfering with the good faith which the parties
promised themselves.
Was
Leola Meyer authorised to represent the trustees and if so was there
a proper resolution of the trustees to sign the November
agreement?
[21]
The lack of authority argument was premised on the contention that
Leola, one of the trustees, did not have the authority to
sign the
agreement on behalf of the other Trusts. The argument advanced on
behalf of the appellants was that in order to bind the
Trusts all
trustees were required in law to sign. In support of his argument
counsel relied on the judgment of this court in
Land
and Agricultural Bank of South Africa v Parker
2005 (2) SA 77
(SCA), where it was held that: ‘when fewer
trustees than the number specified in the trust deed were in office,
the trust
suffered from an incapacity that precluded action on its
behalf’. The facts in
Parker
are clearly distinguishable from the present case and accordingly
reliance on it is misplaced.
[22] There are also many insuperable obstacles standing
in the way of the appellants. There were three trustees of the Trusts
namely
Leola, Heleen and Tyers. The deeds provided for decisions of
the trustees to be taken by a majority vote and no unanimity was
required.
As to the resolutions, two were signed by all three, the
third was signed by Leola and Heleen, while the fourth was signed by
Leola
and Tyers. On the uncontradicted evidence of Simmonds and
Crick, there is nothing to suggest that Leola did not have the
authority
of the other trustees. On the contrary the evidence
demonstrates that the other trustees were involved in the process.
Heleen was
present when the meetings with Crick took place. Tyers at
some stage demanded a meeting with Crick to discuss the financial
implications
of the agreement. Evidently all of the trustees were
aware and in fact actively involved in the discussion to sign the
JVA. In
a letter dated 11 September 2013 signed by all of them
addressed to Home Talk Developments the following is stated:
‘
We
confirm that the Trust is of the view that it was entitled to
conclude a joint venture agreement with a third party to develop
its
own immovable property, which it has duly done.’
The
extract of this letter is ample evidence that all trustees formally
resolved to conclude the JVA and authorised Leola to sign
on behalf
of the Trusts. The evidence of Simmonds that the relevant resolutions
were passed authorising the November agreements
cannot be faulted.
The submission that the high court relied on informal processes is
accordingly misplaced.
[23]
Confronted with the aforegoing evidence the appellants declined to
join issue with the respondents. In
President
of the Republic of South Africa & others v South
African
Rugby Football Union & others
2000 (1) SA
1
(CC) at para 61 it was stated that ‘if a point in dispute is
left unchallenged in cross-examination, the party calling the
witness
is entitled to assume that the unchallenged witness's testimony is
accepted as correct. This rule was enunciated by the
House
of Lords in Browne v Dunn
and has been
adopted and consistently followed by our courts.’ In my view
t
he fundamental flaw in the
appellants’ case is that the witnesses which the appellants
failed to call were the defendants
themselves in the high court and
on whose behalf the plea was filed. In the absence of their evidence
it is difficult to imagine
how the appellants expected to discharge
the evidentiary burden on the defence of lack of authority. I am
satisfied that the high
court correctly accepted the evidence of
Crick and Simmonds on the purpose of the agreement and Leola’s
authority to bind
the Trusts.
Rectification and abandonment
[24] I now turn to another related matter of
considerable importance which was debated at length by the parties
during the application
for leave to appeal and argument in this
court. For a proper appreciation of this issue a brief history is
necessary. In the particulars
of claim the respondents (plaintiffs)
sought rectification in 14 instances. At the trial 11 claims for
rectification were abandoned
and only three were persisted with. The
rectification was grounded on the allegation that there was a common
error between the
parties which led to the parties signing the
agreement in the mistaken belief that the agreement recorded their
true intention
in the JVA. Before us the appellants did not challenge
the orders granted by the high court which related to the
rectification
of the description of the property. The rectification
sought by the respondents before the high court related to clauses
8.1 and
8.2 of the agreement which read as follows:
‘
8.1 In
view of the fact that Big Five is a holding company and acts as an
agent of its subsidiary companies, Big Five is concluding
this
agreement on behalf of one of its subsidiary companies.
8.2 Big Five
shall be entitled to cede, assign and make over its rights in terms
of this agreement to the relevant nominee subsidiary
company.’
[25]
The rectification in respect of clause 8.1 of the agreement as
explained by Crick in evidence was intended to delete this clause
in
its entirety and align it with the evidence that Big Five acted as
the principal and not agent. In other words it had locus
standi to
sue. In support of this argument reliance was placed on the evidence
that Leola always dealt with Crick as principal
on behalf of Big
Five. Rectification was all aimed at rectifying the erroneous
description of the properties and drafting mistakes.
It did not
affect the rights and duties resting on the parties in terms of the
agreement. It also did not affect the substance
of the agreement.
[26]
During the hearing of the application for leave to appeal before the
high court counsel for the respondents inadvertently abandoned
the
orders relating to clauses 8.1 and 8.2 of the agreement. These orders
were at the core of the respondents’ case. It bears
mentioning
that there were other orders in the judgment of the high court which
were not sought or asked for. What is evident from
the high court’s
judgment is that it conflated the evidence relating to the
misdescription of the property with the rectification
in clauses 8.1
and 8.2 which had nothing to do with the property description but
locus standi. In the process of trying to clarify
the issues and more
importantly to appraise the high court that such orders which were
not sought would be abandoned, counsel for
the respondents
inadvertently abandoned the order which related to the locus standi
of Big Five. The locus standi of Big Five was
at the heart of the
respondents’ case and it was admitted on the pleadings by the
appellants. It seems clear from the provisions
of the JVA read as a
whole that Big Five acted as principal and not agent for its
subsidiaries. There is no doubt in my mind that
the abandonment arose
as a result of a bona fide error on the part of counsel for the
respondents. To hold the respondents bound
by that erroneous
submission which in any event was corrected during argument before
the high court is opportunistic and devoid
of merit. For the
abovementioned reasons the appeal must fail.
[27] The following order is made:
The appeal is dismissed with costs, such costs to
include costs occasioned by the employment of two counsel.
________________________
R S Mathopo
Judge
of Appeal
APPEARANCES:
For
appellant: W J Vermeulen SC and J P Snijders
Instructed
by:
Mills
Groenewald Attorneys c/o Couzyns Inc, Rosebank
Phatshoane
Henney Attorneys, Bloemfontein
For
respondent: M v R Potgieter SC and HA van der Merwe
Instructed
by:
Senekal
Simmonds Inc c/o Monté Coetzer Inc, Johannesburg
Symington
de Kok, Bloemfontein