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[2016] ZAGPPHC 378
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SPF and Another v LBCCT/A LB and Another (26492/13) [2016] ZAGPPHC 378 (20 April 2016)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been redacted
from this document in compliance with the law and
SAFLII
Policy
IN THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)
Case no.26492/13
DATE: 20 MARCH 2016
IN THE MATTER BETWEEN
SPF
First Plaintiff
G
Properties
Second Plaintiff
and
L
B CCT/A LB
First Defendant
SR
Second Defendant
JUDGMENT
L
EGODI
J;
HEARD ON: 16 March 2016
JUDGMENT HANDED DOWN ON: 20 April 2016
[1] "The general effect of misrepresentation and fraud on a
contract can be shortly stated: A party who has been induced to
enter
into a contract by misrepresentation of an existing fact is entitled
to rescind the contract provided the misrepresentation
was material,
was intended to induce him to enter into the contract and did so
induce him."
[1]
[2]
This case is about fraudulent misrepresentation arising from
negotiations which resulted into a lease agreement concluded between
S P F (the first plaintiff), G P Properties Limited (the second
plaintiff) and L B cc (first defendant) of which S R (the second
defendant) was the sole member.
[3]
The lease agreement aforesaid was for a period of three years effect
from 1 September 2002 in respect of a premises described
as Shop
no.., situated at K Shopping Mall, Montana Park, Pretoria North. The
estimated area of the shop aforesaid was 236m
[2]
situated directly opposite to another shop which was called I R with
estimated area space of 3196m
2
[4]
Using the words of the only witness for the plaintiffs, Mrs K: "I-R
was an important tenant. It was important because of
its size, big
space occupied in the centre. It was an anchor tenant element in the
centre". Furthermore, K stated that I R
occupied the space
within the mall since 1995 upon the establishment of the mall. It was
an entertainment kind of a business occupying
two levels of the
centre, the upper level being good for viewing the lower level where
activities of ice scatting and other activities
were taking place.
Opposite to where I-R was situated, it was the first defendant and
other three restaurants, importantly located
in such a way that
patrons, children and adults coming to the I-R can conveniently move
into the restaurant (first defendant) for
a bite, drink or meal.
However, I R closed down business at the end of December 2012.
[5]
The lease agreement between the plaintiffs and the defendants became
the subject of fierce dispute as a result of the closure
of I R, the
issue being characterised by counsel on behalf of the defendants as
being:
"Did the plaintiffs as
represented by Mrs K make fraudulent misrepresentation to the second
defendant? In particular:
(a)
Whether
the
closure
of
the
I-R
was
a
material
fact,
in
other
words,
was the closing of
the I-R
germane
to the contract?
(b)
Whether Mrs K
deliberately
withheld
the fact
of the closure
of the
IR?
(c)
Whether there was duty to disclose that I R was not
extending its lease with
the
Plaintiffs
resting on
the
legal convictions
or
bona
mores of
the
community and
policy consideration based on
full
and
frank disclosure?"
[6] The questions above were
based on the following pleaded defence and repeated in the
counterclaim by the defendants:
"4.2
During
the negotiations
which gave rise to the conclusion of the
Agreement
and
prior
to the
signing
of the
Agreement
by
the
first
Defendant's
representative,
the plaintiff's representatives,
alternatively employee,
in the further
alternative
duly
authorised agent made the
following
intentional,
alternative
negligent
misrepresentations (hereafter referred to
as "the Misrepresentations'
)
to
the
Defendant:
4.2.1
That
the leased premises would be located across from the ice rink at the
K Shopping Centre and that the premises was a
prime spot;
4.2.2
That
the presence
of
the
ice
rink
would
substantially
contribute
to
the
number
of patrons to the
First Defendant's business;
That as
a
result
of
the
location
of
the
premises
across
from
the
ice
rink
that
the
location is the best location in the whole shopping centre;
4.2.4
That
the First Defendant's patrons would have
a
view of the ice rink thereby allowing
parents and/or persons accompanying individuals who are
frequenting the ice rink to
have a view of the ice rink and those
individuals;
4.2.5
That
the ice rink is frequented by a large number
of people
and
that as a result the First Defendant's
shop
would
be frequented
by
a
large
number
of
customers
which
would
increase
the
turnover;
4.2.6
That
the
shopping centre receives over
a
million customers per month;
4.2.
7
That there are no other factors
(such
as renovations
or
the opening
of
new malls in the
area
of
any other
factor) which would
affect the
number of
patrons to the shopping centre or the
First Defendant's shop;
4.2.8
That
the shopping centres number of visitors has remained constant
notwithstanding the fact that other shopping centres had opened
in
the area;
4.2.9
That
the First Defendant
could
expect
a
turnover
of at
the very least R2500,00 per square meter (in other words the total
area of the shop being 236 sqm multiplied by R2500 would
equal a
minimum
monthly
turnover of R590 000,00), but that a
higher turnover was
to
be expected;
4.2.10
That
there would only be minor renovation work done at the shopping centre
but that it
would
be
done
in
such
a
way
that
the
First
Defendant's
business
would
not
be
negatively
influenced
thereby;
4.2.11
That
the
renovation would that was to be done would be done after hours and
would therefore not affect the First Defendant's business
or the
number of patrons frequenting the shopping centre or the First
Defendant's business.
4.3
When
the Misrepresentations
were
made the Plaintiffs' representatives, alternatively employee,
in
the further
alternative
duly authorised agent was aware of the
fact that the Misrepresentations were untrue in so far as:
4.3.1…
4.3.2
The
closing of the ice rink would substantially affect the number of
patrons to the
First
Defendant's business
and
also
the
value
of
the
location of
the
premises;
4.3.3…
4.4
In
the alternative to
subparagrap
4.3
above
, the
Plaintiffs'representatives, alternatively employee,
in
the further
alternative
duly authorised agent was aware of the
fact that the ice rink would be closing, alternative
l
y
should have been aware of the fact,
as
well
as
the fact
that
the
Misrepresentations
were
untrue
and/or
inaccurate and had a legal duty to
disclose those facts to the Defendants.
4.5
4.6
6
When the Plaintiffs'
representatives,
alternatively employee,
in the further alternative
duly authorised agent made the
Misrepresentations, alternatively breached
their
legal duty to disclose the true facts, the Plaintiffs'
intended
the
Defendants
to
act thereon and to
enter
into the Lease Agreement and the subsequent suretyship.
4.7
7
The First Defendant
was induced by the Misrepresentations,
alternatively
the Plaintiffs' failure to disclose
the full and/or relevant and/or correct and/or
information,as
is
alleged
supra, and
had
the
First
Defendant
been
aware
of
the
full
and/or relevant
and/or
correct
and/or
true
information,
it
would not
have
entered
into
the Agreement at
all".
[7]
Brief background to the dispute is necessary: The negotiations
between the plaintiffs and defendants started about April-May
2012.
On one occasion, the negotiations took place in the presence of a
certain W N who was an acquaintance of the second defendant
and who
accompanied her as a possible investor in the business of the first
defendant. N happened to be an attorney by profession.
[8] On 6 June 2012 the
second defendant on behalf of the first defendant signed an offer to
conclude the lease agreement with the
plaintiffs. At that time, the
second defendant was operating her business at M Park which was
marketed as the L B P aimed to become
a unique and modern bakery
situated in the upmarket suburbs of Gauteng. Its trademark was said
to be for freshly baked pastries,
cupcakes and birthday cakes. It was
intended to be ultimately described as a cake boutique and bakery
where customers can expect
a twist and trendy cupcakes with
exceptional Italian coffee or beverages in a retail environment. L B
was said to be a unique wholesale
and retail confectionary brand.
[9]
On 25 July 2012, I R formally informed the plaintiffs that it would
not be renewing its lease agreement which was expiring during
October
2012. This was after its proposal for the renewal of the lease
agreement was rejected by the plaintiffs. On the same date,
the first
defendant represented by the second defendant, singed the lease
agreement with the plaintiffs. On 28 August 2012, the
lease agreement
was concluded when it was signed on behalf of the plaintiffs.
[1
0]
On 7 September 2012 the second defendant heard over the news and
confirmed by N that I R was closing down. The second defendant
immediately contacted K who then confirmed the closure of I R.When
the second defendant enquired as to what was going to happen
to the
lease agreement, she was assured that the closure of I R would not
have significant impact on the business of the first
defendant and
that in any case I R was moving out at the end of December 2012. That
made the defendants to elect not to cancel
the agreement. They
proceeded to operate, considered themselves bound by the terms and
conditions of the lease and continued to
pay the rental amount.
[11] On 5
April 2013 the defendants caused a letter
to be
sent to the plaintiffs and recorded as
follows:
"Dear
Sir/Madam
1.) It
is
our
instructions
that
a
meeting took
place in
July 2012, whereby
information
was disclosed
by yourself
to our client
which led
our client to enter
into a lease
agreement
with yourselves.The
following
relevant
points
were
discussed:
i.)A
layout
of
our
client's
shop
as
well
as
her
products was
presented.You
were
made
aware
that
there
would
be
a
slight
increase
in
the
prices as
displayed
on the
menu,
however
that
the prices will
be
in
line
with
all
the
other
coffee
shops. You
consequently
consented
to the
aforementioned;
It was
disclosed in
negotiations by our client that
one of
the key factors
and rational
for our client to
consider
entering
into
the agreement
was the fact that
her proposed
rental
space
would
be
across
from
the
ice
rink,
which makes
her
rental space
prime.
ii) It is our
instructions
that
our client requested
you
to disclose
the number
of potential
customers
that
enters
the
mall. You
have
conveyed that
on
average
over
a
million people
enters
the shopping
mall per
month.
iii.) You were
directly
requested
to disclose
the
impact
that
the
new
and
surrounding malls
in
the
region
the
K
will have
on
the number
of potential
customers, B
K conveyed
to our client that
no significant
impact
is expected,
iv.) It is
further
our instructions
that B
K
was bold
to convey
that our client
could expect a
turnover
of at least R2 500
per
square
meters.
v.) The information
disclosed by yourself was used by our client to calculate the
turnover expected which was relayed to yourself
and relevant
financial institutions.
vi.) Due
to
the
aforesaid
negotiations
and
presentations made
by
yourself
our
client entered
into
the
agreement. It is
our
instructions
that you
have
failed
to disclose crucial
information to
our
client, which
would
have
had
the
effect
that
our
client would not
have
entered
into
this agreement
alternatively
on
the current
terms
and conditions
inter alia:
a)
Indiscreet
renovations
that
is
disrupting
the
customers and
has
a direct influence
in the amount
of people
visiting the mall;
b)
The termination
of the agreement
with the ice rink
which followed
shortly
after the
commencement
of
the agreement;
c)
According to
your
statistics,
you
had
negative
growth
in
customers
entering the mall
which
was never
disclosed
to our client.
The aforesaid
presentations and
representations
were made
in
the presence
of
an
attorney
who
also acted as an
investor on behalf of our client
who will be more
than willing to testify
to this account.
The aforesaid
is
disclosed
without
limiting
our
client's
rights
to
expand
on
further
reason
if
the
need arise.
It is further
our
instructions
that your
center
management
enters
our client's
premises
without
consent with
the
main aim to
disrupt business
and to
create
a
negative
vibe
between our
client and her
employees.
Further,
that
our client
was summoned
on
several
occasions
to the offices
of
the center
management and
illegitimately
confronted
with
regard
to
the
business
operations
inter
alia
why
there
is
no
'white face'
as part
of the business
operations".
[9]
The first (ii) of the letter became the centre of argument during the
proceedings as it would appear later hereunder. There
was no response
to the letter. Instead, on 6 April 2013 the plaintiffs instituted the
present proceedings claiming payment of the
sum of R259 318.68 in
respect of damages for the period 1 May 2013 to 1 February 2014 and
R207 341.15 in respect of arrear rental
and other costs payable under
the lease as at 1 April 2013. That prompted the defendants to file a
plea and raised a defence of
fraud or misrepresentation and in the
counterclaim, asked for payment of R2 982 188.86 coupled with
cancellation of the agreement
based on fraud or misrepresentation. It
is said, had the defendants been told that I-R would be closing down
they would not have
concluded the lease agreement.
[1O]
The issue therefore is whether the defendants have proved fraud or
material misrepresentation attributable to the plaintiffs
and if so,
whether the defendants not to cancel the agreement immediately after
they became aware of the misrepresentation on 7
September 2012 and
claim damages, are bound by their election.
Fraud/Misrepresentation
[14] A party wishing to
rely on fraud must not only plead it, but must also prove it clearly
and distinctly. The onus is the ordinary
civil onus, bearing in mind
that fraud is not easily inferred. The essential elements for a claim
or defence based on fraud are
the following:
(a) There must be a representation by the other party or by that
party's agent. In the present case K who represented the plaintiffs
during the negotiations
[3]
.
Representation may consist of non-disclosure.
[4]
(My emphasis).
(b) It must be alleged that fraud or misrepresentation was false and
or intentional or negligent
[5]
.
It must be alleged and proved that the representation induced the
representative or innocent party to act
[6]
.
(d) If damages are claimed, it must be alleged that the representee
suffered damages as a result of the fraud
[7]
.
[15] The failure to disclose during the negations
preceding the signing and conclusion of the lease agreement that I-R
will be closing
down, became the defendants' pleaded defence and
cause of action for damages against the plaintiffs.
[16]
K on behalf of the plaintiffs initially suggested that the closure of
the I R did not come up during the negotiations, because
at that
time, she had no reason to suspect that I R would not extend the
lease. This of course is not correct because before 25
July 2012, the
plaintiffs rejected the I R's proposal for the renewal of the lease.
Furthermore, K suggested that at the time of
the signature of the
lease agreement by the second defendant on 25 July 2012, she did not
know that I R will not be renewing the
lease. This was clearly not
correct because, she knew on 25 July 2012 being the very day the
second defendant signed the lease
agreement. On 28 August 2012, the
plaintiffs signed the agreement, yet it was not disclosed to the
defendants that I R was closing
down.
[17]
Before K was confronted with the obvious, she had said, if she had
been aware during the negotiations that I R was to close
down she
would not have told the second defendant because she did not think
that it was a material fact to the conclusion of the
agreement. The
assertion did not last for long as she later conceded that she knew
on 25 July 2012 that I R was not renewing. Her
evidence proceeded
more or less as follows during cross- examination:
"Q:
You
did not tell her because you
knew
that you
will
scare her away,
will
it be fair to say that? -
A: My Lord Ja, I think that could
have been the reason.
Q.
Because
had
you
told
her,
she
could
have
said:
'I
don't
want
to proceed
with
the lease'?
---
That
is
a
possibility".
[18] Furthermore, in cross examination, K made a
statement to this effect:
"I
did not want to give her (the second
defendant) that she had the right to cancel''.
All
of this in my view, brought to an end any suggestion that the
non-disclosure or misrepresentation was not material especially
taking into account the contents of the letter of 5 April 2013 from
the defendants to which K conceded that it was the essence
of the
discussion. Of relevance, and at the risk of repetition, it was
stated in the letter as follows:
"ii.It was disclosed in negotiations
by our client that one of the key factors
and rational for our client to consider
entering into the agreement was the fact that her proposed rental
space would be across
from the ice rink, which makes her rental space
prime."
[19]
However, K and counsel for the plaintiffs suggested that I R situated
across the first defendant's shop "was important
but not a
deciding factor" and that "had it having been a deciding
factor that would have been included in the lease
agreement". I
cannot agree seen in the light of K's evidence quoted in paragraph 17
above. For this she had a duty to disclose
the fact that I R was due
to close down. But her answers and the concession she made as
indicated above, in my view, displays a
deliberate withholding of
material information.
[20]
"Deciding factor" and "material fact" or
"material misrepresentation" was used inter-changeably
during the evidence of K and during oral argument by counsel on
behalf of the plaintiffs. Material misrepresentation is the act
of
intentional hiding or fabrication of a material fact which if known
to the other party, could have terminated, or significantly
altered
the basis of a contract, deal or transaction. It is a
misrepresentation that would be likely to induce a reasonable person
to manifest his assent, or that the maker knows would be likely to
induce the recipient to do so.
[21]
On the other hand, material fact is a fact that is important,
significant or essential to a reasonable person in deciding whether
to engage or not to engage in a particular transaction, issue or
matter at hand. "Material" means that the subject matter
of
the statement or concealment relates to a fact or circumstance which
would be significant to the decision to be made as distinguished
from
an insignificant, trivial or unimportant detail.
[22]
In the present case it is the concealment of the fact that I R was
closing down which is complained of. This issue cannot be
said to be
insignificant taking into account what was stated in the letter of 5
April 2013 to which K conceded. The submission
"important
factor" but not a 'deciding factor" is, in my view, without
merit. K's evidence referred to in paragraphs
17 and 18 above make it
overwhelmingly clear that the fact that Ice R was closing down, was
not only 'important,' but that it was
also a 'deciding factor' for
the defendants in concluding the lease agreement.
[23]
The second defendant says it was important because if she had known
or been told that I R was to close down she would not have
concluded
the agreement on behalf of the first defendant. So, it was not only
material, but the concealment related to a fact or
circumstance which
was significant in the making of a decision whether to conclude the
lease agreement or not. In this regard,
the evidence by the second
defendant remained steadfast and consistent. I therefore find that
fraud or material misrepresentation
has been established. I turn now
to the other issue.
Election
[24]
Election of remedies is the liberty of choosing a particular remedy
out of several means afforded by law for the redress of
an impugned
right, or choosing one out of several causes or forms of action. An
election of remedies arises when one having two
co-existent but
inconsistent remedies chooses to exercise one, in which event she or
he loses the right to thereafter exercise
the other. The doctrine
provides that if two or more remedies exist that are repugnant and
inconsistent with one another, a party
will be bound if he or she has
chosen one of them. The doctrine is most commonly employed in
contractual cases involving fraud
which is a misrepresentation of a
material fact that is intended to deceive a person who relies on it.
A plaintiff can sue for
either damages,
thereby acknowledging the contract and recovering the difference
between the contract price and the actual value of the subject
of the
contract or cancellation of the contract and the return of what has
been paid under its provisions, restoring the plaintiff
to the
position he or she would occupy had the contract never been made. If
the plaintiff sought both damages and cancellation,
the person would
be asking a court to acknowledge and enforce the existence of a
contract whilst simultaneously requesting its
unmaking, that is, two
inconsistent damages.
[25] Once a plaintiff elects a remedy, he or she precludes the
pursuit of other inconsistent method of relief. Not all jurisdictions
require a plaintiff to elect remedies and many jurisdictions have
abolished this requirement because of its harsh effects. However,
South Africa has not abolished the doctrine of election. For this, I
find it necessary to deal with how in our own jurisdiction
the courts
revisited the principle of election of remedies.
[26] In
Hlatswayo
v Mare and Deas
1912 AD
242
at 259, De Villiers JP dealing with the doctrine of election of
remedies stated:
"At bottom the doctrine is based upon the
application of the principle that no person can be allowed to take up
two positions
inconsistent with one another, or as is commonly
expressed to blow hot and cold, to approbate and reprobate".
[27]
Similarly, in
Farmers' Co-operations
Society
(Reg)
v
Berry
1912 AD
343
the Court of Appeal had an opportunity to deal with the doctrine
of election when it expressed itself as follows at page 350:
"
...
there
are many cases in which
justice
between the parties
can be fully and conveniently done by an
award of damages.
But
that is different
thing
from saying that
a
defendant who has broken his undertaking has
the opinion to purge his default by payment of money. For in the
words
of
S
Corey,
(Equity
Jurisprudence,
sec
717
(a}
"It
is against
conscience
that
a
party
should
have
a
right
of
election
whether
he
would
perform
his
contract
or
only
pay damages for breach of it. The
"election is rather with injured party, subject to discretion of
the court".
[28] In
Segal v Mazzarr
1929 CPD 634
at
644-645, Watermeyer AJ stated:
"Now, when an event occurs
which entitles one party
to
a
contract to refuse to carry out his part
of the
contract,
that
party
has
the choice
of
two
courses.
He can
either
elect
to
take advantage of the event or can elect no to do so. He is entitled
to
a
reasonable
time in which to make up his mind, but when once he has made his
election he is bound by that election and cannot
afterwards
change
his
mind
...If,
with
the
knowledge
of
the
breach,
he
does
an
unequivocal
act which necessarily implies that he has made his election one way,
he will be held to have made his election that
way".
[29]
In
Bowditch v
Peelmond Magill
1921 AD 561
at page 572 dealing with the doctrine of
election which concerned misrepresentation inducing a contract, Innes
CJ held as follows:
"A
person
who has been induced to a contract by a material and fraudulent
misrepresentation of the other party, may either stand by
the
contract or claim rescission.
(Voet,
4.3 see 3, 4 7). It follows that he must make his election between
those two inconsistent
remedies
within
a reasonable time after knowledge of the deception.
And the choice of one necessary involves
the
abandonment
of
the
other. He
cannot both
approbate and reprobate".
[30]
Regarding an election generally, in
Chamber
of Mines
of South Africa
v National Union
of Mineworkers and Another
1987 (1) SA 6698
(A) at 690 0-G it was held:
"One or other of the two parties between whom
some legal relationship subsists is sometimes faced with two
alternatives and
entirely inconsistent courses of action or remedies.
The principle that in this situation the law will not allow that
party to
blow hot and cold is a fundamental one of general
application . . ."
[31] The Supreme Court of Appeal in
Merry
Hill (PTY) v Engelbrecht
2008 (2) SA 544
SCA, at 550 B-E [par 15] expressly gave
approval to the statement by Friedman JP in
Bekazaku
Properties
(PTY)
Ltd
v Pam
Golding
Properties
(PTY)
Ltd,
1956 (2) SA 537
(C) at 542E-F in which it was held:
"When one party to a contract commits a breach
of a material term, the other party is faced with an election. He may
cancel
the contract or he may insist upon due performance
by the party in breach.
The
remedies
available to innocent party are inconsistent.
The choice of one necessarily
excludes
the
other,
or
as it
is
said,
he
cannot
both
approbate
and
reprobate. Once he has elected
to pursue
one
remedy,
he is
bound
by his
election
and
cannot resile from it without the consent of the
other party".
[31]
If that is so, as stated above, the defendants having known of the
closure of I R, and having accepted that they were bound
by the lease
agreement and continued to pay rental from 7 September 2012 in
accordance with their obligations, should serve as
a bar disentitling
the defendants to 'approbate and reprobate' and not 'to blow both hot
and cold'. By the way, the plaintiffs
in their plea to the
counter-claim challenged the defendants about their entitlement to
cancel the lease agreement and or the claim
for damages. Election to
keep the contract in this case was completed when the second
defendant discussed the closure of I R on
7 September 2012
[8]
.
Therefore, in the circumstances, the defendants would
ordinarily be bound by their election to continue with the agreement
and not
later to cancel it, unless there is another ground upon which
the defendants can rely.
[32]
In
Sandwon
Travel (PTY) Ltd
v Cricket
South Africa
2013 (2) SA 502
(GSJ) at para 39,
Wepener J alluded to the fact that there are decided cases which have
held that, despite an election to keep
a contract alive, the innocent
party may, in the case of anticipatory breach, reconsider its
position when the time for performance
arrive.
[33]
Anticipatory breach occurs when a party to a contract repudiates or
reneges on his or her obligations under that contract before
fully
performing those obligations. This can be by word: "I would not
deliver the rest of the goods" or "I cannot
make any more
payments" or by action, for example, not showing up with the
goods or stopping making payments. Anticipatory
breach of a contract
is sometimes described as a failure to live up to a contract term
before the actual time for
performance
has
a
rrived. It often occurs when one party states an intention not
to fulfil or substantially fulfil a contractual obligation before
it
is due. Such a repudiation of contract term is generally required to
be affirmatively stated. The repudiating party may not
later demand
performance under the contract from other party. The result of
anticipatory breach is that the other party does not
have to perform
his obligations and cannot be liable for not doing so. This is often
a defence to a lawsuit for payment or performance.
(The underlining
is emphasis).
[34]
An innocent party may when the other contracting party commits an
anticipatory breach, elect to ignore the breach and keep
the contract
alive in order to allow the defaulting party to repent of his or her
repudiation. In
Culverwell and Anotehr
v Brown
1990
(1) SA 7
(A) at 17E-F Nicholas AJA in a dissenting judgment stated:
"And where
the
injured party
refuses
to
accept
and
thereby
allows
the
defaulting
party
to
repent of his repudiation and giving him an opportunity to carry out
his portion of the bargain, and the defaulting party nevertheless
persists in his repudiation, the injured party is entitled to change
his mind and notify the other party
that
he would no longer
treat
the agreement
as
existing, but that he would now regard it as rescinded and sue for
damages"
[9]
.
[35] In as much as the defendants might have wanted to bring
themselves within the ambit of the principle of "anticipatory
breach", the facts of the present case do not support such
insulation. For several reasons the defendants elected not to cancel
the agreement and claim damages after the fraud or misrepresentation
came to their knowledge on 7 September 2012. The second defendant
stated in her evidence and also as argued by counsel for the
defendants: One, that acting on behalf of the first defendant, she
elected to keep the contract alive despite the fraud or
misrepresentation because more costs and abandonment of the M
business
had already taken place. Two, that I R was only closing down
at the end of December 2012 suggesting therefore that there was no
risk. Lastly, that K made her to believe that the closure of I R will
have no significant implications on the viability of the
first
defendant's business. All of this, in my view, did not justify the
defendants to elect to keep the contract alive and later
seek to rely
on fraud or material representation as their defence and claim for
damages against the plaintiffs. The fact that the
business
deteriorated after the closure of I R, in my view was not a
justification to approbate and reprobate. That is the risk
or chance
the defendants took when they elected to keep the contract alive
despite knowledge of the fraud or misrepresentation.
[36] There is another reason why "anticipatory breach"
will not find application in the present case. The plaintiffs
had
nothing to do in terms of the lease agreement under consideration.
The plaintiffs after the 7 September 2012 when the defendants
elected
to be bound by the lease agreement lived up to terms and conditions
of the agreement and performed in terms of the agreement.
That is,
they provided the defendants with the lease premises. Therefore, they
did not have to wait until their actual time for
performance has
arrived. There was never a need for them to make any U-turn by
approbating and reprobating. In the circumstances
of the case,
whatever motivated the defendants to keep the agreement alive after
they had become aware on 7 September 2012 of the
fraud or
misrepresentation, does not serve as an excuse to deviate from the
doctrine of election of remedies espoused in the preceding
paragraphs. As a result, the defendants must fail in both their
defence and counterclaim for which they carry the burden of proof.
[37] The plaintiffs' quantum has been settled by the parties in the
amount of R350
000.00 plus interest at 15.5% per annum. This was on condition that
the court finds for the plaintiffs.
[38] Consequently judgment is hereby granted against the defendants
as follows:
38.1
Payment of the sum of
R350 000.00 jointly
and
severally.
38.2Interest at
the
rate
of
15.5%
per annum from 8 May 2013.
38.3
Costs of the action.
M F LEGODI
JUDGE
OF THE
HIGH COURT
FOR
THE PLAINTIFFS:
INSTRUCTED
BY: MARK
EFSTRATIOU
INCORPORATED
Suite 12, Avocet Corner
Hazeldean Office Park Silver Lakes Drive,
Tiger
Vallei,
PRETORIA
REF: Mr Efstratiou/E11548 TEL: 012 809 4301/4
FOR THE
DEFENDANTS:
INSTRUCTED
BY: KRITZINGER
ATTORNEYS
1181 Church
Street Hatfield,
PRETORIA
REF: A
Kritzinger/MB/KH0054
[1]
See
Law
of Contract in South Africa
by
Christie 4 edition
Chapter 7 page 313.
[2]
See
Country-Clarke
Bassingthwaighte
1
991
(
1
)
SA 684 (NM)
pg
689.
[3]
See
Feinstein
v Niggli
1
981
(2) SA 684
(A).
4 See
Stainer
v Palmer-Pilgrim
1
982
(4) SA 205
(0).
5
See
Rato
Flour Mills {PTY} Ltd v Moriates
1
957
(3) ALL SA
28
(T).
6
See
Bill Harvey's
Investment Trust PTY} Ltd v Oranjegezicht Citrus Estate (PTY} Ltd
1
958
(2) ALL SA
1
2
(A),
1
958
(
1
)
SA 479
(A).
7
See
Truth and
Reconciliation Commission v Mpumalanga
2001
(3) ALL SA 58 (CK).
[8]
See
Mutual Life Co
o
f
New York v lngly
1
910
TPD 540
at
pg
550.
[9]
See
Cohen v
Orlovski
1
930
SWA
1
25
at
133.