About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2021
>>
[2021] ZASCA 139
|
|
McGrane v Cape Royale The Residence (Pty) Ltd (831/2020) [2021] ZASCA 139 (6 October 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 831/2020
In the matter between:
NOEL
PATRICK
McGRANE APPELLANT
and
CAPE
ROYALE THE RESIDENCE (PTY)
LTD RESPONDENT
Neutral
citation:
McGrane v Cape Royale The Residence (Pty)
Ltd
(831/2020)
[2021] ZASCA 139
(6 October 2021)
Coram:
SALDULKER,
MATHOPO AND PLASKET JJA AND KGOELE AND POTTERILL AJJA
Heard:
7
September 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication
on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 09h45 on 6 October
2021.
Summary:
Contract
– agreement of sale of immovable property – whether
unenforceable on account of non-fulfilment of a condition
precedent
clause embodied in the agreement – interpretation of the clause
– whether condition precedent applicable
– the impugned
clause sufficiently clear – agreement not subject to condition
precedent – waiver proven –
agreement valid and binding.
ORDER
On
appeal from:
Western Cape Provincial
Division of the High Court, Cape Town (
Sievers AJ
sitting
as court of first instance):
1 The
appeal is upheld with costs.
2 The
order of the court below is set aside and replaced with the following
order:
‘
1 It
is declared that the agreement of sale concluded by the parties is
not null and void on
account of the non-fulfilment of the suspensive
condition, as alleged by the defendant in paragraphs 5.3 and 5.4 of
the plea;
2 The
defendant is directed to pay the plaintiff’s costs in respect
of the trial on the
separated issue.’
JUDGMENT
Kgoele
AJA (Saldulker, Mathopo and Plasket JJA and Potterill AJA
concurring):
[1] The
issue in this appeal concerns the interpretation of an agreement of
sale in respect of an immovable property.
In particular, it concerns
whether the agreement relied upon by the appellant, Mr Noel Patrick
McGrane, had been rendered unenforceable
by the non-fulfilment of a
condition precedent embodied in the said agreement which he concluded
with the respondent, Cape Royale
The Residence (Pty) Ltd. The
litigation that culminated in this appeal commenced by way of a trial
in the Western Cape Division
of the High Court (the high court),
before Sievers AJ, who upheld a plea raised by the respondent that
the agreement was subject
to a condition precedent which had not been
fulfilled. In the result, the claim instituted by the appellant
against the respondent
for specific performance was dismissed with
costs on 14 April 2020. The appeal is before us with special leave
granted by this
Court.
[2] The
factual matrix within which the issue arose is largely common cause.
In November 2006, the parties entered
into a written agreement of
sale (the agreement) in terms of which the appellant purchased and
the respondent sold a unit yet to
be built in a sectional title
development, commonly known as section 215 of the sectional title
scheme ‘Cape Royale’
situated at Green Point, Cape Town
(the property). The agreement comprised of a contract, a covering
schedule (the schedule) and
the standard terms and conditions. Only
the clauses of the agreement relevant to the determination of the
issues in this appeal
will be referred to.
[3] The
appellant signed the agreement on 1 July 2006 in Dublin, Ireland,
while the respondent signed it on 20
November 2006 at Cape Town. In
terms of clause 4 of the schedule, the purchase price agreed upon was
R1 298 960, inclusive
of Value Added Tax (VAT). In terms of
clause 5 of the schedule, a deposit of R324 740 was payable on
signature of the agreement
and the balance of R974 200 on
registration of the transfer. Transfer to the purchaser was to be
effected ‘as soon as
possible after the opening of the
sectional title register . . .’. When the agreement was
concluded, the unit had not yet
been constructed. As a result, the
floor area of the property decreased when a structure was built
thereon. In October 2007, the
parties concluded a written addendum to
the agreement in respect of the floor area. The purchase price was
accordingly adjusted
to R1 278 342 inclusive of VAT. The
addendum did not change anything in the original agreement except for
the purchase
price.
[4] As
evidenced by the present proceedings, the relationship between the
parties became strained at a later stage.
According to the appellant,
the strained relationship arose as a result of the respondent having
stopped its attorneys from proceeding
with the process of
transferring the property, despite the fact that he had already at
that time paid the full purchase price.
The payment of the full
deposit and the purchase price were disputed by the respondent.
Clause 5 of the standard terms and conditions
of the agreement, which
provides for the acquisition of loan finance by the appellant to pay
part of the purchase price, is the
subject of the contested issue
between the parties. For the sake of coherence in the narrative, the
full text thereof will be set
out later in this judgment.
[5] In
January 2013, the appellant instituted an action in which he sought
an order directing the respondent to
comply with the terms of the
agreement by taking all the necessary steps to transfer ownership of
the property to him. In his particulars
of claim, the appellant
alleged that he had complied with all of his obligations under the
agreement, by paying the deposit and
the remainder of the purchase
price to the respondent’s transferring attorneys. The sectional
title register had been opened,
triggering transfer. Despite this, so
he claimed, the respondent refused and/or failed to transfer
ownership of the property to
him. This failure, according to
appellant, constituted a breach of the agreement. He elected to
enforce the agreement, hence the
claim for specific performance.
[6] In
response to the appellant’s particulars of claim, the
respondent set up the following defence. In
its plea, the respondent
claimed that in terms of clause 5.1 of the standard terms and
conditions read with clause 6.1 of the schedule,
the agreement was
subject to a condition precedent that the appellant obtain a loan of
R649 480 within 21 days from the date
of acceptance. This clause
had not been fulfilled as there was no such loan secured by the
appellant within the stipulated time
period, thereby rendering the
agreement null and void. Furthermore, the appellant paid a deposit of
only R151 300 instead
of R324 740, and refused to pay the
balance of R173 440 in terms of clause 5.1 of the schedule.
Alternatively, pleaded the
respondent, if the court did not rule in
its favour (regarding the issue of the agreement being null and
void), then the failure
by the appellant to pay the deposit as set
out above amounted to a repudiation of the agreement, which
repudiation the respondent
accepted and therefore consequently
elected to cancel the agreement. The appellant did not replicate.
[7 At
the commencement of the trial, the respondent successfully applied to
have the issue of the enforceability
of the agreement, on the basis
of the appellant’s failure to comply with the condition
precedent as raised in paras 5.3.
and 5.4 of its plea, adjudicated
separately in terms of rule 33(4) of the Uniform Rules of Court.
[8] At
the heart of the dispute between the parties, are clauses 5.1 and 5.2
of the standard terms and conditions
of the agreement. The parties
differ in the interpretation of these clauses. It is of crucial
importance that the text of these
contentious clauses be quoted in
full as they form the matrix of this appeal. They provide:
‘
5.1 In
the event of the Purchaser requiring a mortgage loan to finance the
acquisition of the Unit and Exclusive
Use Area, this sale shall be
subject to the condition precedent that the Purchaser obtains
approval in principle from a recognised
financial institution for
such a loan in the amount as specified in Clause 6.1 of the Schedule
within 21 (twenty-one) days of signature
hereof by the Purchaser, on
the institution’s usual terms and conditions relating to such
loans. The Purchaser undertakes
to use his best endeavours to ensure
that the loan referred to is granted timeously and undertakes to sign
all such documentation
and co-operate with the Seller fully in order
to ensure that the said loan is approved. This condition shall be
deemed to have
been fulfilled upon the Purchaser obtaining approval
in principle from a financial institution for a loan as herein
contemplated.
5.2 In
the event that the condition precedent is not fulfilled within the
time period provided for in clause
5.1 above, the Seller may in its
sole discretion extend this period for 7 (seven) days at a time until
the Seller, in its absolute
discretion, notifies the Purchaser of the
termination of such time period.’
[9] Clause
6 of the schedule referred to above in clause 5.1 of the standard
terms and conditions provides:
‘
6. MORTGAGE
BOND
6.1
Amount required: R649,480
Date by when to be
granted: Within 21 days after the date of acceptance of this
Agreement by the Seller, or such extended period
as the Seller in its
sole discretion may allow.’
[10] The
only evidence led during the trial on the separated issue was that of
the appellant. He testified that
he had paid the full purchase price.
The first payment was a deposit of R151 300 on 29 September
2006. On 11 December 2007,
less than two months after the addendum
was signed, the balance of the purchase price was paid. It was paid
into the Phelan Cape
Royale account held in Dublin which was given to
him by Mr Phelan, who represented the appellant at all times.
[11] The
appellant did not deny that the condition precedent was embodied in
the agreement, however, his testimony
was that it was not applicable
to him as he did not require the mortgage loan. He had enough money
to pay the full purchase price
and Mr Phelan was aware of this. He
therefore did not even apply for the loan. According to his
testimony, he stated emphatically
to Mr Phelan when they concluded
the agreement that he will pay the purchase price in cash, which he
did.
[12] Furthermore,
he testified that he was never given notice that he was in breach of
any condition of the agreement
and to remedy same as required by
clause 15.1 of the standard terms and conditions. He was also never
given notice, in terms of
clauses 15.1.1 and 15.1.2 regarding the
cancellation or termination of the agreement by the respondent as a
result of the non-fulfilment
of the condition precedent or payment of
the full deposit.
[13] In
support of his evidence that the respondent at all the times accepted
that an obligation to acquire a mortgage
loan was not a condition
precedent, the appellant relied on two account reconciliations which
reflected the payment of the full
purchase price, and a surplus of
some R28 000 owing to him, which documents were written by Mr
Phelan himself in his presence.
He also included an email from Mr
Janse van Rensburg, the financial manager of Phelan Holding (Pty)
Ltd, to Mr Phelan, which stated
that the funds (paid into the
respondent’s Dublin account) which were initially disputed by
the respondent, had been traced
and were to be transferred to the
respondent’s conveyancers. The appellant relied too on an email
from Mr Phelan, in which
Mr Phelan acknowledged that the appellant
paid more than the amount specified in the addendum, and had earned
interest. Mr Phelan
further stated therein that the transfer of the
unit would take place in September, at which stage the appellant
would get the
Rental Pool income. The appellant was surprised by this
as the agreement did not include a Rental Pool agreement, which was
something
the respondent had unilaterally introduced. The
disagreement between the parties was sparked by the appellant’s
refusal to
sign the Rental Pool agreement, when the respondent
insisted that it was required before transfer could be effected.
[14] As
already indicated above, the high court found favour with the
respondent’s interpretation that the
agreement was subject to a
condition precedent in terms of clause 5.1 of the standard terms and
conditions. In dismissing the appellant’s
claim, the high court
reasoned that even though the appellant pleaded that he had complied
with all of his obligations under the
agreement, his evidence
established unequivocally that the mortgage loan was not obtained as
required by clause 5.1 of the standard
terms and conditions of the
agreement. As a result, the condition precedent had not been
fulfilled, and the agreement was held
to have no legal force.
[15] In
this Court, the appellant persisted with his contention that the
agreement was not subject to a condition
precedent. He maintained
that the contentious clause was not applicable to him and if this
Court does not find favour with his
interpretation, then the
respondent was entitled to extend the period, which it did. The
respondent’s stance was that the
high court’s finding is
correct. The basis for this contention was twofold. First, the
respondent argued that the agreement
expressly provided that a
mortgage bond was required to pay part of the purchase price and this
is the only manner in which clause
5.1 of the standard terms and
conditions could be interpreted. Second, the same argument grew more
nuanced in this Court as it
was also argued in the alternative that,
in the absence of the appellant pleading and proving waiver, estoppel
or any other ground
upon which the effect of the non-compliance could
be neutralised, the appellant’s action could not be sustained.
He must
be kept to the immutable consequences of his choice of not
deleting the said clause. Further that, there was no sufficient
evidence
adduced to establish waiver.
[16] It
is therefore apparent that two issues crystallised in this appeal.
The first and primary issue is whether
the agreement, properly
interpreted, was subject to a condition precedent which was not
fulfilled. The second is whether, despite
the condition precedent
remaining unfulfilled, the agreement survived in the circumstances
where waiver was not pleaded. The second
issue only arises if the
answer to the first issue is not positive.
[17]
The
approach to interpretation of contracts is settled.
[1]
Recently, this Court re-stated the trite principles involved in
Passenger
Rail
Agency
[2]
and held that when interpreting a contract an ‘insensible or
unbusinesslike result’ or a result undermining the apparent
purpose of the document, must be avoided. It is also well established
that the mere use of the word ‘condition’ does
not always
translate into the condition in question being a suspensive
condition.
[3]
[18] In
an enquiry such as the present one, it is best to start with the
clause itself. Accordingly, it becomes
necessary to examine clause
5.1 in order to decide whether its proper characterisation meant to
merely create a condition precedent
with legally enforceable
obligation or not. A proper reading of clause 5.1 reveals that it is
prefixed by the words ‘
[i]n the event of the Purchaser
requiring a mortgage loan to finance the acquisition of the Unit
. . . this sale shall be subject to the condition precedent . . .’
(Emphasis added). From the language of the text, the structural
and
grammatical construction, including the punctuation of the whole
clause, it is self-sufficiently clear that the parties did
not
expressly provide that the appellant, as purchaser, was obliged to
obtain the mortgage loan. This is certainly not what clause
5.1 says.
[19] The
clause is not capable of the contrary interpretation that was
contended for by the respondent namely that
the appellant was obliged
to obtain a loan. The words ‘[i]n the event of the Purchaser
requiring a mortgage loan’,
cannot be wished away and render
the respondent’s interpretation untenable. The clause is clear.
The condition precedent
of obtaining a mortgage loan was for the
benefit of the appellant and only arose if the appellant required
finance. If he did not
require any, no obligation was created by this
condition and the condition precedent did not have any force and
effect.
[20]
The
finding of the high court inclusive of its reasoning is difficult to
discern as it amounts to striking out the words ‘[i]n
the
event’ from clause 5.1. As pronounced by this Court in
Sivubo,
[4]
the mere inclusion of the word ‘condition precedent’ in
the contract does not always translate into the condition in
question
being a suspensive condition. It follows that the high court
misconceived the inquiry. The decision of the high court
cannot
therefore be supported. Despite the fact that the alternative
argument raised by the appellant is dependent on the conclusion
that
I have reached, I am of the view that for the sake of completeness,
an analysis of the arguments regarding waiver is necessary.
[21]
The
high watermark of the respondent’s case is that the appellant’s
arguments in this Court suggest that the condition
precedent should
be regarded as having been waived and by reason of the fact that
waiver was not specifically pleaded, this court
cannot come to the
assistance of the appellant. It was also argued that the appellant’s
evidence did not establish waiver
at all. Even though it is trite
that the defence of an election or waiver must be pertinently raised
and pleaded,
[5]
there are
several reasons why this argument cannot advance the respondent’s
case either.
[22]
It
is not necessarily fatal to the appellant’s case that waiver
was not expressly pleaded. In
Collen
v Rietfontein Engineering Works
[6]
this Court decided the matter on the basis of a contract that was
never pleaded and contained different terms to the one that was
pleaded. It held that because of the fact that all the relevant
material had been produced and placed before it, it would have
been
‘idle for it not to determine the real issue which emerged
during the course of the trial’. Similarly, where a
party
sought to rely on a tacit contract that was not pleaded, Schreiner JA
stated that ‘where there has been full investigation
of a
matter, that is, where there is no reasonable ground for thinking
that further examination of the facts might lead to a different
conclusion, the Court is entitled to and generally should treat the
issue as if it had been expressly and timeously raised’.
[7]
[23]
More
recently this Court held that litigation is not a game.
[8]
In my view, the issues in the present case were defined, ventilated
and examined by way of viva voce evidence before the high court.
The
appellant, from the onset, and during the trial proceedings,
established waiver. He emphatically indicated that he had paid
the
deposit and the full price in cash and that the respondent’s
representative knew that he did not require a loan even
before the
conclusion of the agreement.
[24]
Even
if this Court was to find that the agreement was subject to a
suspensive condition, the fallacy of the argument of the respondent
lies in the fact that it has long been established that a
subject-to-bond clause such as clause 5.1 of the standard terms and
conditions of the agreement including the consequent clause 6 of the
schedule, operates solely for the benefit of the purchaser.
[9]
In
Mia v
DJL Properties,
[10]
De Villiers J stated that the purpose of a subject-to-bond clause was
to ‘create a facility of which the purchaser could
avail
himself if he wished’ and that ‘[i]t was not intended at
all to protect the seller’. The following remarks
made by De
Villiers J are apposite in this matter and bears repetition:
‘
Furthermore, since
the suspensive condition was inserted to protect the purchaser in the
event of his not being able to raise the
purchase price without
obtaining a bond over the purchased property, the parties obviously
intended that, if the purchaser chose
to make provision for the
delivery of the guarantees without obtaining such a bond, he would be
free to do so. The parties could
accordingly not have intended that
the purchaser would be
obliged
to apply for the bond and that, if he failed to apply therefor, he
would thereby breach the contract.’
[11]
[25]
It
is clear against the backdrop of the authorities quoted above that
the appellant had the right to waive his reliance on the condition
precedent clause. A waiver is a unilateral act
[12]
and so the appellant did not require an acceptance on the part of the
respondent for it to be effective. Of significant importance
in the
appellant’s evidence is that his waiver or election occurred at
the outset. Although there is no evidence of the precise
date on
which his waiver occurred, the manner in which the impugned clause is
phrased lends credence to the probability that he
expressly indicated
upfront that he would pay cash and waived his right. It is
furthermore clear that Mr Phelan, the representative
of the
respondent with whom the appellant dealt, knew that the appellant did
not require a bond, because he undertook to invest
the cash on behalf
of the appellant.
[26] I
turn now to the conduct of the respondent. Throughout the period
concerned, the respondent treated the agreement
as valid. The most
telling instance is when the addendum was signed to make provision
for the amendment of the purchase price.
This occurred long after the
expiry of the period within which, on the respondent’s
argument, the appellant had been required
to obtain a loan. On this
argument, the condition precedent would have come into operation and
it would have had the effect of
nullifying the agreement; yet the
respondent’s conduct manifests an intention to comply with the
terms of the agreement.
[27] The
respondent failed in various respects to utilise the powers conferred
upon it by the agreement. These
failures are consistent with a party
who had accepted waiver or, at least, was aware of such a waiver.
They are: (
a
) the agreement provided that the application for
the mortgage loan by the purchaser would be submitted to the relevant
financial
institution through the respondent or its appointed agents.
Clause 5.4 of the standard terms and conditions further provided that
the agreement operated as a power of attorney in favour of the
respondent, ‘which shall have the power to apply for a loan
. .
. on behalf of the [the appellant]’. No such application was
submitted by either party. The respondent in particular,
did not
utilise the power conferred upon it to apply for the mortgage bond on
behalf of the appellant; (
b
) the respondent did not give
notice to the appellant, informing the appellant that he was in
breach of the terms of the agreement,
and that as a result, the
respondent has decided to terminate the agreement. The only ‘notice’
given to the appellant
of the breach and subsequent termination was
when the respondent filed its plea on 24 May 2013. This is a period
of almost 7 years
after the agreement was concluded; (
c
)
throughout the duration of the agreement, the respondent used the
purchase price and paid the appellant interest as recompense
for the
use of his funds; and (
d
) the respondent had already
instructed its attorneys to pass transfer of the property to the
appellant, only to renege when the
appellant refused to sign the
Rental Pool agreement.
[28] In
conclusion, it is clear that, from the onset, the appellant did not
require a bond or loan in order to
effect the purchase price in due
course and the parties accepted this. The condition precedent
embodied in clause 5.1 of the agreement
created an obligation on the
appellant only in the event that he required a bond or a loan.
Therefore, as a result of the fact
that the evidence of the appellant
remained uncontroverted that he paid the full purchase price in cash,
clause 5.1 had no application
and its benefits were waived by the
appellant. What is more, the respondent never regarded the agreement
as having failed due to
the non-fulfilment of the condition
precedent. The finding of the high court that the condition precedent
did apply to the agreement
of the parties; that the appellant failed
to fulfil such a condition; and that such a failure rendered the
agreement unenforceable
was flawed. The appeal must therefore
succeed.
[29] In
the result the following order is made:
1 The
appeal is upheld with costs.
2 The
order of the court below is set aside and replaced with the following
order:
‘
1 It
is declared that the agreement of sale concluded by the parties is
not null and void on
account of the non-fulfilment of the suspensive
condition, as alleged by the defendant in paragraphs 5.3 and 5.4 of
the plea;
2 The
defendant is directed to pay the plaintiff’s costs in respect
of the trial on the
separated issue.’
A
M KGOELE
ACTING
JUDGE OF APPEAL
APPEARANCES
For
the appellant: P
Tredoux
Instructed
by: Francis
Thompson Aspden,
Cape Town
Symington
& De Kok, Bloemfontein
For
the respondent: A D Brown
Instructed
by: Abraham
&
Gross Inc, Cape Town
Lovius
Block Inc, Bloemfontein.
[1]
See
Natal
Joint Municipal Pension v Endumeni Municipality
[2012] ZASCA 13
;
[2012] 2 All SA 262
(SCA); 2012 (4) 593 (SCA) para
18.
[2]
Passenger
Rail Agency of South Africa v Sbahle Fire Service CC
[2020] ZASCA 90
at 28.
[3]
Sivubo
Trading v Development Bank
[2019] ZASCA 28
para 11.
[4]
Fn 3 above.
[5]
Collen
v Rietfontein Engineering Works
1948 (1) SA 413
(A);
Montesse
Township and Investment Corporation (Pty) Ltd and Another v Gouws NO
and Another
1965 (4) SA 373
(A) at 381B-D.
[6]
Fn
5 above at 433.
[7]
Middleton
v Carr
1949 (2) SA 374
(A) at 385; See also
Minister
of Safety and Security v Slabbert
[2009] ZASCA 163
; [2010] 2 All SA (SCA) paras 11-12;
South
British Insurance Co LTD v Unicorn Shipping Lines (Pty) Ltd
1976 (1) SA 708
(A) at 714G.
[8]
Cadac
(Pty) Ltd v Weber-Stephen Products Company and Others
[2010] ZASCA 105
;
[2011] 1 All SA 343
(SCA);
2011 (3) SA 570
(SCA)
para 10;
Madibeng
Local Municipality v Public Investment Corporation Ltd
[2018]
ZASCA 93
;
2018 (6) SA 55
(SCA) para 30.
[9]
Van
Jaarsveld v Coetzee
1973 (3) SA 241
(A) at 244 C-G.
[10]
Mia v D
J L Properties (Waltloo) (Pty) Ltd and Another
2000 (4) SA 220
(T) at 222.
[11]
Footnote 10 above at 229.
[12]
Absa
Bank Ltd v Master and Others NNO
1998
(4) SA 15
(N) at 28B.