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[2016] ZAGPPHC 524
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Linde v Premax Trading 35 CC (66175/2014) [2016] ZAGPPHC 524 (6 July 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO:
66175/2014
6/7/2016
Reportable:
No
Of
interest to other judges: No
Revised
DAVILINA
MARIA
LINDE PLAINTIFF
AND
PREMAX
TRADING 35
CC DEFENDANT
JUDGMENT
THOBANE
AJ,
INTRODUCTION
[1]
The issue that the parties want the court to
resolve is a very limited one, namely, whether the suspensive
conditions in clause
5 of the agreement have been fulfilled actually
or whether there was fictional fulfillment thereof. The defendant, a
jurisdiction
person, on one hand, was represented by Mr. Rossouw, who
is a sole member thereof and who confirmed that he understood the
implications
around appearing in person on behalf of the Close
Corporation. On the other hand the plaintiff was represented by
counsel.
[2]
At the commencement of proceedings the parties
advised that by agreement between them, the issues were to be
separated and that
the limited issue, stated above, was to be decided
first. The parties further indicated that it would be convenient for
both of
them as well as the court if the matter was to proceed as
agreed. A separation of issues was accordingly ordered in terms of
rule
33(4) of the Uniform Rules of Court.
THE
AGREEMENT
[3]
On 18 September 2011 the parties entered into a
written agreement of sale/purchase of a business known as Adega
Nelspruit, as a
going concern. The plaintiff was the purchaser and
the defendant the seller. The material and relevant terms of the
agreement were
as follows;
"4. Purchase
Price
3.1.
The purchase price for the said business shall
be the sum of
R1 200 000-00
(in
words:
ONE MILLION TWO HUNDRED
THOUSAND RAND)
for
the sale of the assets, fixtures and fittings, goodwill.
3.2.
The purchase price payable in terms of the
agreement shall be paid in accordance with the provisions of clause 4
hereof
4. PAYMENT
The
purchase consideration is to be secured and be said to be paid by the
PURCHASER in the following manner:
The PURCHASER shall
pay a deposit of R47 000-00 (FORTY SEVEN THOUSAND RAND) on acceptance
of this offer, and will be paid to the
agent of which amount will be
held in trust you the agents attorney (ERASMUS ATTORNEYS) Erasmus
Attorneys Trust, ABSA Horizon,
Account number
..................,
please quote Ref: Adega, Nelspruit
The PURCHASER shall,
subject to the fulfillment of the suspensive conditions, pay to the
SELLER the sum of R600 000-00 (SIX HUNDRED
THOUSAND RAND) directly to
the SELLER. The balance of R553 000-00 (FIVE HUNDRED
AND
FIFTY THREE THOUSAND RAND) will be arranged by both parties and paid
directly to the SELLER......................... "
5.
SUSPENSIVE CONDITIONS
5.1.
That a
lease of the premises be granted to the PURCHASER for a minimum
period of 3 years on the same or similar terms and conditions
as the
existing lease between the SELLER and the LESSOR of the premises.
This must be done prior to the effective date.
5.2.
The
sale is further subject to the PURCHASER being approved by the
FRANCHISOR and entering into a new Franchise Agreement.
5.3.
This
sale is further subject to the agreement and settlement of the, /DC
(INDUSTRIAL DEVELOPMENT CORPORATION) Business loan.
The
sale is subject to the fulfillment of these suspensive conditions in
Par 5 and if any condition is not met the sale becomes
null and void
and all payments as per Par 4 must be refunded in full to the
PURCHASER within 48 hours."
[4]
Following conclusion of the agreement, the
plaintiff made the following payments;
4.1.
R47 000-00 on 19 September 2011;
4.2.
R 102 600-00 on 2 November 2011;
4.3.
R456 000-00 on 14 November 2011;
4.4.
R 145 600-00 on 14 November 2011.
THE
PLEADED CASES
[5]
The plaintiff's claim against the defendant is
that the suspensive condition was never fulfilled and as a
consequence she contends
that it is null and void, as stated in 3
supra,
entitling the
plaintiff to a full refund of the payments made as set out in 4
above. The plaintiff further pleaded that in anticipation
of
fulfillment of the suspensive condition, she took control of the
business and incurred expenses on behalf of the business. The
plaintiff further pleaded in the alternative that having taken
possession of the business in the
bona fide
but mistaken belief that the agreement was
valid as stated above, she incurred expenses for which she seeks to
be reimbursed.
[6]
The terms of the agreement are undisputed. The
defendant contends that although there is a stipulated effective
date, a new date
was agreed upon and that although such an
"amendment" was not reduced to writing as provided for in
the agreement, it
was nevertheless the intention of the parties that
the effective date be amended. This error, of not reducing the
amendment to
writing, is described by the defendant as
"bona
fide
and mutual".
[7]
The defendant further raises a plethora of
defenses to the claim which can be summarized as follows;
7.1.
that clauses 5.1, 14.1 and 28.2 of the agreement
are to be interpreted to mean that the lessor of the premises had to
agree in principle
that it would conclude a lease agreement with the
new business owner on the same terms and conditions as the existing
lease between
it and the defendant, for a period of three years,
prior to the effective date, alternatively;
7.2.
that the written agreement did not correctly
reflect the common intention of the parties, namely, that the lessor
of the premises
had to agree in principle that it would conclude a
lease agreement with the new business owner with the same terms and
conditions
as the existing lease between it and and the defendant,
for a period of three years, prior to the effective date;
7.3.
that the incorrect wording of clause 5.1. (of the
agreement), was occasioned by a common error of the parties who
signed the written
agreement in the
bona fide
but mistaken belief that it recored the true
agreement between the parties thereto;
7.4.
as a consequence, the defendant is seeking
rectification, the effect of which would be that clause 5.1. was not
to operate as a
suspensive condition of the agreement, but as a term
thereof and that a breach thereof would render the sale voidable at
the option
of the innocent party.
7.5.
that the suspensive condition in clause 5.1. (of
the agreement), was complied with, until it was cancelled by the
defendant on the
29th June 2012, alternatively;
7.6.
that the suspensive condition was included in the
agreement for the sole benefit of the plaintiff, who had the option
to waive it
and did in fact waive it by
inter
alia
paying certain monies, taking occupation
and giving effect to some of the terms of the agreement;
7.7.
that the agreement was dependent on the plaintiff
procuring a controlling interest in a close corporation or company
and that the
plaintiff failed, neglected and/or refused to procure
such controlling interest or to inform the lessor of same, thus the
non-fulfillment
of the suspensive condition, and finally;
7.8.
that there was fictional compliance with the
suspensive condition as a result of which the agreement came into
operation until the
date of cancellation.
7.9.
in the alternative, that there was compliance
with the suspensive condition, in the event it is found that it was a
suspensive condition,
until the agreement was cancelled;
7.10.
further alternatively, that if it is found that
clause 5.1. operated as a suspensive condition, and that the
interpretation pleaded
by the defendant is incorrect, that the
agreements accord with the common intention of the parties, then the
defendant pleads that:
7.10.1.
clause 5.1 was included in the agreement for the
sole benefit of the plaintiff,
7.10.2.
the plaintiff always had the option to waive
compliance with the clause,
7.10.3.
the plaintiff did in fact waive compliance with
the clause in that she;
7.10.3.1.
Paid the amounts pleaded,
7.10.3.2.
Took occupation and control of the business,
7.10.3.3.
Gave effect to the terms of the written agreement
between the parties.
[8]
The parties indicated that they each had one
witness to lead. They further agreed that in light of the plea of
fictional fulfillment,
the defendant had the duty to begin.
DEFENDANT'S
EVIDENCE
[9]
Frederick Jacobus Rossouw confirmed in the main
the details of the written agreement. He stated that following
conclusion of the
agreement, he had advised the plaintiff that he
stood surety with regard to the lease and therefore that he stood
exposed and at
risk should there not be compliance. According to him
there was never an intention on the part of the plaintiff to comply
with
the suspensive condition. This is so because,
inter
alia,
around 13 March 2012, the plaintiff
removed credit card machines and installed new ones. It was partly
why he decided to cancel
the agreement and to then repossess the
business. According to him, the intention of the plaintiff was to
hijack the business and
to not pay a reasonable consideration for it.
To further prove that the plaintiff had no intention to honor the
agreement, so he
testified, she did not want to participate fully in
the training, insisting from time to time that special arrangements
be made
to accommodate her. With regard to the suspensive condition
in his view, there was compliance therewith. Significantly according
to him, there was an agreement to grant a lease to the plaintiff,
this condition was therefore fulfilled. Secondly, the franchise
agreement was signed prior to the plaintiff taking over the business.
Thirdly, an ICD loan offer was made and accepted. The suspensive
conditions, he went further, were fulfilled even though obstacles
were placed on the way by the plaintiff. He concluded his testimony
by stating that if it were to be found that the suspensive conditions
were not fulfilled then it would be so owing to the company
not being
formed. The blame for the non-formation of a company lay squarely at
the door of the plaintiff.
[10]
During cross examination, Mr Rossouw conceded
that the agreement was never amended formally even though the
agreement provided that
it should be so. He confirmed that the
payments that were made by the plaintiff were made as directed by
him. He confirmed further
that the broker failed to pay IDC as
expected of him. Significantly, he confirmed that the agreement was
cancelled before settlement
of the loan. When it was put to him that
there was no agreement due to the non-fulfillment of the suspensive
condition, his reply
was that the plaintiff had moved to Nelspruit in
anticipation of taking over the business. This, so he testified, was
indicative
of the fact that there was an agreement in place. He
readily conceded that there was no lease agreement between the
landlord and
the plaintiff as at the effective date. This was due to
the fact that a company had not been formed as expected. He was
therefore
forced to stand surety.
PLAINTIFF'S
EVIDENCE
[11]
Davilina Maria Linde confirmed the contents of
the agreement between herself and the defendant. She further
confirmed that there
was no lease agreement entered into between
herself and the landlord. There was a person allocated to register a
company however
the attempts were frustrated when the process was
tainted by fraud. She denied that she frustrated the agreement as
alleged by
Rossouw. She further denied that there was collusion
between her and the broker. She only met the broker when the
agreement was
signed. Thereafter communication was only telephonic.
Even then he avoided taking her calls. Eventually, the defendant
cancelled
the agreement on the 1st July 2012.
[12]
During cross examination she denied that she was
ever contacted by a Renee in connection with the contract. The cross
examination
revolved around issues that were not relevant for
purposes of determining whether or not there had been fulfillment of
the suspensive
condition. The cross examination was about rental,
non-disclosure of bank statements, failure to answer emails, move of
bank account
to another banking institution as well as training of
the plaintiff.
ARGUMENT
[13]
The defendant argued that although in his view Ms
Linde had good intentions of buying the business initially, she soon
changed her
mind when she realised that things were not going her
way. He tried to assist her and got her then girlfriend involved. The
plaintiff
however always had excuses. This forced him to obtain legal
advise on the basis of which he proceeded to sign as surety. He was
forced to go the legal route when it became clear to him that if he
did not pay some money to IDC, he would become personally liable
for
payment of exorbitant penalties. He urged the court to understand
that the business broker did not co-operate with him. Finally,
he
submitted that whereas not all the conditions were not complied with,
in particular 5.1., this did not mean that there was no
agreement.
[14]
It was argued on behalf of the plaintiff that two
suspensive conditions in particular were not fulfilled. Firstly, IDC
was paid
only after the agreement had been cancelled by the
defendant. Secondly, the agreement provided that the lease agreement
was to
be concluded prior the effective date. This was however not
done. It was further argued that the agreement stipulated that
deviation
from the agreement was to be in writing in terms of
paragraph 30 of the agreement and that no written deviation was
recorded
in casu.
To
the extent that the defendant relied on fictional fulfillment, it was
submitted that the defendant bore the onus to prove same.
It was
further submitted that in this regard the defendant had failed to
discharge such onus. Instead blame was placed at the door
of the
business broker who was not even part of these proceedings. Further,
that the defendant, on the alternative argument, had
failed to prove
the waiver let alone that it was unequivocal. Neither was
deliberateness proven.
THE
LAW
[15]
The doctrine of fictional fulfillment of a term
of a contract is discussed in detail in
Lekup
Prop
Co
No
4 (Pty) Ltd v Wright
(2012 (5) SA 246
(SCA).
Innes
CJ captures the position as follows on page 591;
"By our law a
condition is deemed to have been fulfilled
as
against a person who would, subject to its
fulfillment, be bound by an obligation, and who has designedly
prevented its fulfillment,
unless the nature of the contract or the
circumstances show an absence of dolus on his part."
[16]
In
Gowan v Bowern
1924
AD 550
,
Wessels JA said the following on
page 571;
"The Court must
hold that if a contract is made subject to a casual condition then if
the person in whose interest it is that
it should not be fulfilled
deliberately does
some
act
by which he hinders the accomplishment of the condition, he is liable
as
if
the condition had been fulfilled. But a party
cannot be said to
frustrate
a
condition unless he
actively does something by which he hinders its performance. There
must be an intention on his part to prevent
his obligation coming
into force.
There is nothing to
prevent his folding his arms and allowing events to take their
course. Paul, in D.45.1. 85.
7,
uses
the word curaverit, and Cujacius also uses this term in dealing with
the promissor's liability. Curare ut or ne here signifies
to bring
actively about
a
certain
set of circumstances
. . .
The
only culpa
for which
a
promissor sub conditione is liable is some
deliberate
act, some
act done with the intention of causing the condition to fail or,
perhaps, also
a
deliberate
omission where there is
a
duty
to do something, by which he frustrates the happening of the
condition in his own interest in order to enrich or benefit
himself."
[17]
In
Ferndale Investments
(Pty) Ltd v DICK Trust (Pty) Ltd 1968 (1)
SA 392 (A) at 395A·C
the
following is said:
"If it is the
fault of the person in whose favour the condition is inserted that
the condition cannot be fulfilled, or if he
intended to prevent the
condition from being fulfilled, the law considers the condition to
have been fulfilled as against him.
The nature of the contract is
always an important element. In some cases the person benefitted by
the non-performance of the condition
can sit still and do nothing to
assist in its fulfillment; in other cases it is his legal duty to
assist in the condition being
fulfilled, and in all cases if he
deliberately and in bad faith prevents the fulfillment of the
condition in order to escape the
consequences of the contract the law
will consider the unfulfilled condition to have been fulfilled as
against the person guilty
of bad faith."
[18]
In
Scott
&
another v Poupard
&
another
1971 (2) SA 373
(A) at 378H
Holmes JA, writing for the majority, said
that the principle underlying the doctrine of fictional fulfillment
may be stated thus:
"Where a party to
a contract, in breach of his duty, prevents the fulfillment of a
condition upon the happening of which he
would become bound in
obligation and does so with the intention of frustrating it, the
unfulfilled condition will be deemed to
have been fulfilled against
him."
[19]
From the above principles it is clear that in
order to successfully invoke the doctrine of fictional fulfillment,
the defendant
bore the onus of proving that the plaintiff, by
deliberate commission or omission, prevented fulfillment of the
suspensive conditions
contained in clause 5 of the agreement, with
the intention of avoiding her obligations under the agreement.
Further that mere negligence
on the part of the plaintiff would not
suffice.
ANALYSIS
[20]
The testimony of Rossouw was to the effect that
no lease agreement was concluded between the plaintiff and the lessor
prior the
effective date, which was, in terms of clause 5.1, supposed
to be for a minimum period of 3 years or would have followed similar
terms and conditions of the then existing lease agreement. His
evidence was that he was responsible for the payment of rental as
he
had signed as surety. It is clear that on his evidence, this
condition was not fulfilled. If one were to apply the doctrine
of
fictional fulfillment to this clause, the onus rested on the
defendant to show that the plaintiff intentionally or deliberately
frustrated compliance. Evidence adduced however points to the fact
that there was agreement that there needed to be a corporate
entity
formed before a lease agreement could be concluded. This did not
materialize in that, as testified to by the plaintiff,
the process of
registering a company was tainted by fraud. There was never a
challenge to her testimony. I further did not understand
Rossouw to
be arguing that failure to register the company was a deliberate act
on the part of the plaintiff aimed at frustrating
or preventing the
fulfillment of the suspensive conditions. Even less, that the
plaintiff was negligent. The person who was tasked
with registration
of the corporate entity had been allocated to her by the defendant,
hence it can not be correct to submit that
there was collusion to
prevent or frustrate fulfillment of the suspensive conditions.
[21]
The defendant seems to emphasize the fact that
the plaintiff relocated temporarily to Nelspruit and that she took
control of the
business as an indication of the fact that there was
fulfillment of the suspensive condition. This approach is over
simplistic.
The agreement provides that a lease agreement must be
concluded prior the effective date. All the parties to the agreement
are
ad idem
that this
never materialized. For purposes of demonstrating that the plaintiff
deliberately or intentionally worked against fulfillment
of the
suspensive conditions, the defendant bore the onus of proving, in
light of the plaintiff's relocation, that it was all a
hoax. The
defendant testified, in contrast, that he believed that the plaintiff
wanted to comply with the agreement but changed
her mind when she
realized that things were not going her way. While this as a stand
alone reason does not point to a deliberate
frustration, what
compounds matters is testimony by the defendant to the effect that in
his view the plaintiff always intended
to "hi-jack the business
and not pay a reasonable consideration for it". All considered,
I do not believe that the plaintiff's
conduct, in so far as clause
5.1 is concerned, evidences an intention not to comply with the
suspensive conditions encapsulated
in clause 5.1.
[22]
The defendant's aforementioned emphasis seems to
veer toward a defense of waiver, which was pleaded by him. The
defendant's contention
is that the plaintiff;
23.1.
Paid all the amounts;
23.2.
Took occupation of the business;
23.3.
Gave effect to the terms of the agreement.
From
this, the defendant wants this court to conclude that the plaintiff,
through the above actions, waived compliance with the
suspensive
conditions. Much more is however required to be shown for the defense
of waiver to succeed. Defendant must show that
the conduct in
question, as aforementioned, is clear and unequivocal and can bear no
other reasonable interpretation than that
it constitutes a waiver.
Secondly, our courts have found that where the conduct is vague or
ambiguous, an interpretation against
finding that rights have been
waived, will be adopted. Innes CJ in
Laws v Rutherford 1924
(AD) 261
put it thus;
"(t)he onus is
strictly on the appellant. He must show that the respondent with full
knowledge of her right, decided to abandon
it, whether expressly or
by conduct plainly inconsistent with an intention to enforce it."
The
party alleging a waiver of a contractual right retains throughout the
proceedings the overall onus of proving that the other
party had full
knowledge of the right when he allegedly had abandoned it. See also
Feinstein v Niggli and Another
1981
(2)
SA
684
(AD) at 698 F
-
G.)
On the facts of
this case, express abandonment of rights can be excluded as it was
not alleged. I am further of the view that the
conduct of the
plaintiff is not plainly consistent with the intention to forego
compliance with the suspensive conditions. I say
this because the
plaintiff intended to enter into a lease agreement, however her
efforts were frustrated by the fact that the landlord
would not
contract with a natural person. A juristic person needed to be a
party to the lease. She then undertook a process of
registering a
corporate entity, which exercise was also beset by problems. From
this, one can not conclude that the conduct of
the plaintiff is
consistent with that of a person who is waiving compliance. Secondly,
the plaintiff had made all the required
payments as directed by the
agreement. There is therefore nothing that can be deduced with regard
to clause 5.3 in that, having
made payment as directed she was not
responsible for nonpayment of IDC. It therefore can not be correct
that in paying money to
the broker, which money was to be passed over
to IDC, but was not, she waived compliance with the condition that
the money be paid
to IDC.
[23]
The second suspensive condition worth scrutiny is
encapsulated in clause 5.3. Which reads as follows;
"This sale
is
further subject to the agreement and
settlement of the IDC (INDUSTRIAL DEVELOPMENT CORPORATION)
Business loan."
[24]
The agreement was concluded on 18 September 2011.
It provided for the effective date of 1 November 2011. It is common
cause that
there was a huge delay in the payment of money to the IDC.
Rossouw conceded during cross examination that it is the broker,
Global
Business Brokers SA who had been entrusted with the sum of
R456 000-00, that failed to make payment to IDC. The defendant's
pleaded
case is that on 29 June 2012, the agreement, which had come
into operation, was cancelled by him. While this differs to his
testimony
to the effect that the agreement was cancelled in April
2012, this contradiction is insignificant in that it was only in
2013,
that payment was made to IDC. Whether cancellation took place
in April 2012 or June 2012, what is significant is that payment was
made after the agreement had been cancelled by the defendant. From
the above it is clear that the suspensive condition in clause
5.3,
was not complied with as stipulated and in fact could not have been
complied with after cancellation of the agreement by the
defendant.
[25]
I am accordingly of the view that the defendant
has failed to discharge the onus resting on him, based on the
doctrine of fictional
fulfillment or even the defense of waiver. It
follows that both defenses are bad in law and must fail.
[26]
In the result the following orders are made;
26.1.
It is declared that the suspensive conditions in
clauses 5.1 and 5.3 of the agreement entered into between the
plaintiff and the
defendant were not fulfilled;
26.2.
The defendant is ordered to pay the costs.
_____________________
SA
THOBANE
ACTING
JUDGE OF THE HIGH COURT
HEARD
:
19/04/2016
JUDGMENT
:
06/07/2016
ON
BEHALF OF THE PLAINTIFF
:
ADV.
G.J. SCHEEPERS
ON
BEHALF OF THE DEFENDANT
:
MR.
F.J.A ROSSOUW
(IN PERSON)