Jointwo Holdings v Old Mutual Life (115/06) [2007] ZASCA 5; [2007] SCA 5 (RSA) (8 March 2007)

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[2007] ZASCA 5
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Jointwo Holdings v Old Mutual Life (115/06) [2007] ZASCA 5; [2007] SCA 5 (RSA) (8 March 2007)

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case number : 115/06
Not reportable
In the matter between :
JOINTWO HOLDINGS (PTY) LIMITED
.....................
1
ST
APPELLANT
MALENTINO HOLDINGS (PTY) LIMITED
.....................
2
ND
APPELLANT
PIERRE VOSLOO
.....................
3
RD
APPELLANT
DANIEL FRANCOIS DE VILLIERS STEYN
.....................
4
TH
APPELLANT
and
OLD MUTUAL LIFE ASSURANCE COMPANY
(SOUTH AFRICA) LIMITED
.....................
RESPONDENT
CORAM : SCOTT, CLOETE et LEWIS JJA
HEARD : 22 FEBRUARY 2007
DELIVERED : 8 MARCH 2007
Summary: Rectification of contracts - the prior
common intention of the
parties must have been intended to be incorporated in
the written document.
Neutral citation: This judgment may be referred to as
Jointwo Holdings (Pty)
Ltd v Old Mutual Life Assurance Company (South
Africa) Ltd
[2007] SCA 5
(RSA).
___________________________________________________________________
JUDGMENT
CLOETE JA
/
CLOETE JA:
[1] The first and second appellants are private
companies. Each hired premises in terms of a written agreement in a
shopping centre
(the Riverside Mall, Nelspruit) from the respondent,
Old Mutual Life Assurance Co (SA) Ltd, for the purpose of conducting
a restaurant.
The third and fourth appellants, Messrs Vosloo and
Steyn, undertook liability as sureties for the obligations the
companies owed
Old Mutual. Old Mutual, as the plaintiff, sued all
four appellants for payment of arrear amounts owing in terms of the
leases. Old
Mutual’s claims were undisputed but the companies
counterclaimed for damages for breach of contract on the basis that
Old Mutual
had allowed a competitor, a Spur restaurant, to operate in
the Mall which, they said, adversely affected the profits made by
their
restaurants. This defence required rectification of the leases.
Vosloo and Steyn raised various defences to the claim by Old Mutual
based on the suretyships executed by them, but all of these defences
also depend for their success on rectification of the leases.
The
Pretoria High Court (Van der Merwe J) refused the rectification
sought but granted leave to appeal to this court.
[2] The primary question on appeal remains whether
rectification of the leases should have been granted. They each
contain a clause
which reads in part:
‘
5.1 The tenant … acknowledges
that it shall not have an exclusive right to any particular type of
business being conducted in the
building.’
The rectification sought would replace this part of the
clause with a clause which reads:
‘
The landlord undertakes not to let
floor space in the building to anyone for the purpose of establishing
or running a ‘Spur’ restaurant,
for the duration of this lease.’
[3] The relevant facts, simplified somewhat to avoid
unnecessary detail, are the following. The execution of the lease
agreements
was preceded by negotiations between Steyn and Mr Dukes,
who was employed by Colliers RMS. Colliers RMS was the sole letting
agent
in respect of the Mall. It had no authority to contract on
behalf of Old Mutual but it did have authority to inform prospective
tenants
as to what Old Mutual’s policy was in regard to the ‘tenant
mix’ in the mall. During the course of these negotiations Dukes
informed Steyn that it was Old Mutual’s policy that if the
companies entered into agreements of lease with Old Mutual, there
would
be no Spur Restaurant in the Mall. That was in fact Old
Mutual’s intention at the time. Thereafter documents were sent by
Colliers
RMS to the companies which said:
‘
Pursuant to our recent
discussions, we have pleasure in detailing hereunder the provisions
upon which the Landlord will consider entering
into an Agreement of
Lease.
…
16. ACCEPTANCE OF OFFER
16.1 This letter records the basis upon which the tenant
is prepared to enter into an Agreement of Lease with the Landlord for
the
hire of the leased premises and does not constitute an offer by
the Landlord to let the leased premises to the Tenant on the terms
and conditions contained herein.
16.2 We confirm that we require you to sign the
endorsement appearing below, and once signed, this letter will
constitute an irrevocable
offer by the Tenant to enter into an
Agreement of Lease with the Landlord on the terms and conditions
contained herein. Should the
Landlord convey its acceptance, the
essential elements of a lease will have been agreed and the parties
hereby agree to be bound
accordingly. Acceptance by the Landlord will
take the form of an official letter signed by an authorised
representative of the Landlord
and will be accompanied by a formal
Lease Agreement.’
The documents made no mention of an exclusive right to
trade, or the exclusion of a Spur or any other restaurant. Steyn
signed these
documents on behalf of the companies on 12 December
1997. The project executive of Old Mutual, Mr Klostermann, thereafter
on 8 January
1998 approved the companies as tenants and on 9 January
1998 Dukes wrote to the companies in the following terms:
‘
I am pleased to advise that your
offer to lease the abovenamed premises has been accepted by the
landlord.
…
The landlord’s standard lease documentation is being
attended to and will be forwarded to you in due course . . .; we
remind you
that until it is signed, your offer, having been duly
accepted, constitutes the lease.’
On 11 February 1998 Dukes was present at a meeting at
which Old Mutual representatives in principle decided to allow a Spur
restaurant
to hire premises in the Mall. The following day, Steyn
told Dukes that he and Vosloo had heard a rumour that a Spur
Restaurant was
going to be established in the Mall. Dukes
categorically denied this. On the basis of the assurance given by
Dukes, Steyn and Vosloo
signed the lease agreements on behalf of the
companies. The lease agreements were signed on behalf of Old Mutual
by Mr Stuart-Finlay
only in December 1998. Stuart-Finlay had no
intention whatever of granting either of the companies exclusive
trading rights in the
Mall or excluding a Spur restaurant from
operating in the Mall. A Spur restaurant did in fact operate in the
Mall for the entire
period of the leases which the companies had with
Old Mutual. It opened, as did the restaurants run by the companies,
before Stuart-Finlay
signed the lease on behalf of Old Mutual.
[4] The appellants’ case is this: Vosloo and Steyn,
representing the companies, at all times intended that if the
companies hired
premises in the Mall, no Spur Restaurant would be
permitted to operate there for the duration of the leases. That was
then also the
intention of Old Mutual, as (correctly) conveyed to
them by Dukes before Steyn signed the offers to hire on behalf of the
companies
on 12 December 1997. Although Old Mutual changed its
intention before Vosloo and Steyn signed the lease agreements, they
were not
informed of this ─ on the contrary, Dukes expressly said
that Old Mutual’s policy had remained the same. Accordingly, so the
argument concluded, the leases fall to be rectified to accord with
the intention of Vosloo and Steyn and the intention of Old Mutual
as
conveyed to them by Dukes.
[5] The fallacy of the argument is this. In order for
rectification to be granted, it must be established that the written
instrument
did not correctly express what the parties had intended to
set out therein. This appears clearly from
Meyer
v Merchants’ Trust Ltd
1942 AD 244
at 253:
‘
Proof of an antecedent agreement
may be the best proof of the common intention which the parties
intended to express in their written
contract, and in many cases
would be the only proof available, but there is no reason in
principle why that common intention should
not be proved in some
other manner, provided such proof is clear and convincing.’
In the present case, Old Mutual clearly did not, by
allowing its letting agent to convey its letting policy from time to
time to prospective
tenants, intend to bind itself to that policy, as
it existed at a particular time, in contracts it might in the future
execute with
such tenants (when the policy may have changed). It is
clear from the evidence that Old Mutual intended itself to agree the
terms
on which it would contract with prospective lessees.
[6] There is a difference between authorising an agent
to convey a current policy and authorising an agent to agree to a
term of a
contract. In the former case, the principal can change its
mind. In the latter case, it is bound. Dukes had no authority to
agree
to any terms of the lease agreements and whatever he said
cannot constitute an agreement by Old Mutual or a representation
binding
on Old Mutual as to what the leases would contain, so
entitling the companies to rectification of the leases. The same
reasoning
applies to the fraudulent misrepresentation made by Dukes
just before Vosloo and Steyn signed the lease agreements (cf
Ravene
Plantations Ltd v Estate Abrey
1928 AD 143
at
154). It follows that rectification was correctly refused by the
court
a quo
.
[7] The appeal is dismissed with costs.
______________
T D CLOETE
JUDGE OF APPEAL
Concur: Scott JA
Lewis JA