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[2007] ZASCA 68
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Cohen and Another v Lench and Another (139/06) [2007] ZASCA 68; [2007] SCA 68 (RSA) ; 2007 (6) SA 132 (SCA) (29 May 2007)
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE
NO
: 139/06
In the
matter between :
RENATA
COHEN ...............................
First
Appellant
CHARLES NIGEL COHEN
...............................
Second Appellant
- and –
STEWART
CHARLES LENCH
...............................
First Respondent
PAMELA PILLAY
...............................
Second Respondent
____________________________________________________________________________
Before: STREICHER, FARLAM, NUGENT, JAFTA &
CACHALIA JJA
Heard: 18 MAY 2007
Delivered: 29 MAY 2007
Summary: Agreement of sale – right to cancel –
whether notice to remedy breach properly delivered – whether
notice
received in fact.
Neutral citation: This judgment
may be referred to as
Cohen
v Lench
[2007]
SCA 68 (RSA)
____________________________________________________________________________
J U D G M E N T
____________________________________________________________________________
NUGENT JA
NUGENT JA
:
[1] This is an appeal against a decision of a Full Court that is
before us with the special leave of this court. It concerns an
agreement
for the purchase and sale of residential property. The
agreement was concluded on 17 October 2003. The purchasers were
Renata and
Charles Cohen (the appellants) to whom I will refer
collectively as the Cohens and individually by their first names. The
sellers
were Stewart Lench and Pamela Pillay (the respondents) to
whom I will refer collectively as the sellers and individually by
their
first names.
[2] The purchase price of the property was R1 675 000. A
deposit of R30 000 was to be paid to the estate agent upon
conclusion of the agreement and the balance (R1 645 000) was to
be paid to the sellers simultaneously with transfer of the property.
Payment of that balance was to be secured by suitable guarantees that
were to be delivered to the sellers’ conveyancer by no
later
than 5 January 2004. The agreement was conditional upon a loan to the
Cohens of R1 300 000 being approved by a financial
institution within ten days of the agreement being concluded. The
Cohens were to take occupation on ‘1 February 2004 or by
mutual
agreement’.
[3] The agreement provided various remedies for breach. Their effect
was that if the Cohens breached any term of the agreement and
they
failed to remedy the breach
‘
within ten days of
posting by pre-paid registered post or by hand delivery to the
domicilium address of a written notice given by
the [sellers] calling
upon the [Cohens] to remedy such breach’
then the sellers would be entitled to cancel the agreement. The
Cohens nominated as their domicilium address 23 Sandalwood, 115
Ballyclare
Drive, Morningside, which was their residence at that
time. It was a unit in a gated townhouse complex.
[4] By 5 January 2004 guarantees for payment of the balance of the
purchase price had not been delivered by the Cohens, in breach
of the
agreement. The sellers allege that that afternoon Stewart delivered a
notice to remedy the breach to the townhouse complex
in which the
Cohens lived. The notice called on the Cohens to deliver the
guarantees by 15 January 2004, failing which the agreement
would be
regarded as having been cancelled. Stewart said that because he could
not gain access to the complex he attached the notice
to the
perimeter gate. It is not disputed that the guarantees were not
furnished within the stipulated time. The Cohens say that
they did
not receive the notice. The sellers say that they did.
[5] On 4 February 2004 the Cohens commenced proceedings on notice of
motion in the High Court at Johannesburg for orders declaring
that
the agreement had not been lawfully cancelled, and compelling the
sellers to comply with their contractual obligations. In view
of the
factual dispute concerning the alleged receipt of the notice the
matter was referred for the hearing of oral evidence. A number
of
questions were posed for answer by the court but I need not consider
them in detail. What the court was asked to decide, essentially,
was
whether notice to remedy the breach had been properly given. If
notice was properly given then the agreement was lawfully cancelled
and the application fell to be dismissed. If it was not properly
given then the agreement was not lawfully cancelled and the Cohens
were entitled to the order that they sought.
[6] The matter came before De Jager AJ. He found that the notice to
remedy the breach was defective in two respects and thus invalid.
First, the notice was given before the Cohens were in breach (they
had until midnight on 5 January 2004 to deliver the guarantees).
And
secondly, the date upon which they were called upon to deliver the
guarantees (15 January 2004) was one day short of the 10 days
within
which they were entitled to remedy the breach. On that ground the
learned judge found that a right to cancel had not accrued
to the
sellers and orders were made accordingly. The learned judge continued
nonetheless to evaluate the evidence so as to determine
whether, as a
matter of probability, the Cohens received the notice, and he
concluded that they probably did.
[7] On appeal the Full Court (Boruchowitz, Satchell and Mbha JJ)
found, contrary to the finding of De Jager AJ, that the notice was
valid. The Full Court did not find it necessary to decide whether the
Cohens received the notice. It found instead that the attachment
of
the notice to the perimeter gate of the townhouse complex constituted
delivery for purposes of the agreement, whether or not the
notice was
received. On the basis of those findings the Full Court set aside the
orders that had been made by De Jager AJ and substituted
an order
dismissing the application.
[8] It is convenient first to evaluate the evidence and decide
whether it was established by the sellers – who bore the onus
–
that the Cohens probably received the notice, and only then to turn
to the legal issues, to the extent that they remain relevant.
[9] Oral evidence can only be properly evaluated by testing it
against the inherent probabilities, and the failure to do so
constitutes
a misdirection.
1
In this case De Jager AJ rejected the evidence of the Cohens as
untruthful, and accepted that of the sellers, but with little regard
to the probabilities. And while it might be that some of Renata’s
evidence was not satisfactory, on the crucial question whether
the
Cohens received the notice, the probabilities are overwhelmingly in
her favour. Indeed, I can find nothing to commend Stewart’s
evidence in that regard.
[10] The critical evidence is best understood against the background
of the facts that were clearly established or not susceptible
to
serious dispute.
[11] After the agreement was concluded the deposit of R30 000
was paid by the Cohens to the estate agent. The sellers appointed
Mr
Larry Steinbuch as their conveyancer. Standard Bank approved a loan
to the Cohens in the sum of R1 500 000, to be secured
by a
mortgage over the property, and a firm of conveyancers, Tonkin
Clacey, was appointed by the bank to effect the registration
of the
mortgage bond. In correspondence between the conveyancers Tonkin
Clacey told Steinbuch that guarantees would be available
from
Standard Bank in the sum of R1 500 000, and Steinbuch told
Tonkin Clacey what form the guarantees should take. The
transfer fees
and related charges were paid by the Cohens to Steinbuch and he was
provided with the information that was necessary
to effect the
transfer. All the above had occurred by 12 December 2003 when
Steinbuch’s office closed for the holidays.
[12] Thus on Monday 5 January 2004, when Steinbuch’s office
opened once more, everything that was necessary for the transaction
to be brought to finality was substantially in place. Although
Steinbuch did not yet have guarantees from Standard Bank the loan
had
been approved and the guarantees were to be had for the asking. That
the guarantees had not yet been issued is not surprising.
As pointed
out by Mr Clacey, it is the bank’s conveyancer that arranges
for the guarantees to be issued, and it is usual (for
sound practical
reasons that need not detain us) for the guarantees to be issued only
once the transferring conveyancer is in a position
to proceed with
the formalities of transfer. And although the guarantees from the
bank would not cover the full amount that would
become payable on
registration of transfer (R1 645 000) it is clear that the
Cohens had money immediately available to
make up the balance
(R145 000), which could be deposited to Steinbuch’s trust
account whenever they were requested to
do so.
[13] Meanwhile, Renata had been preparing enthusiastically for the
move to her new house. She had set about making arrangements for
a
net to be made for the swimming pool, and for a wall on the property
to be raised, in anticipation of taking occupation on 1 February
2004. She spoke to Pamela on one occasion to make arrangements for
the alterations to be made, but further attempts at direct
communication
with the sellers proved fruitless. Messages went
unanswered and eventually Renata turned to Steinbuch and his
secretary to assist
in communicating with the sellers. On one
occasion (3 December 2003) Renata sent a signed telefax to
Steinbuch’s secretary
in which she recorded some of the matters
that she wanted the sellers to attend to, and it is probable that
that telefax was forwarded
to the sellers.
[14] On 5 January 2004 Renata telephoned Steinbuch’s office to
find out what she ought to do about paying the balance of the
purchase price that was not covered by the loan, because she needed
to know when to give notice on certain investments that she intended
to liquidate for that purpose. She was told that Steinbuch was still
on holiday and would return the following day. On 7 January
2004
Renata telephoned once more and on this occasion she spoke to
Steinbuch. She asked when she should pay the balance and he told
her
that he would need it to be paid only on about 21 or 22 January. On
the same day Renata also telephoned the office of Tonkin
Clacey to
find out whether anything further was required from her and she was
told that they were waiting for the title deed of the
property but
otherwise all was in order. Renata had a personnel-placement business
that she conducted from home. It is apparent from
her telephone and
e-mail records that she was at home throughout the morning.
[15] On 7 January 2004 the estate agent, Ms Berchowitz, spoke to
Stewart on the telephone to offer good wishes for the coming year
and
they also discussed matters that are unrelated to the matters that
are now in issue.
[16] On 8 January 2004 Renata sent an e-mail to Pamela (at the e-mail
address that had been furnished in the agreement) asking for
details
of the electricity account, the security company, the price that
Pamela wanted for certain items that the Cohens wanted to
purchase,
and to arrange to visit the house the following week so as to obtain
further quotations for the work she wanted to have
done. Renata
received no reply to her letter.
[17] On 14 January 2004 Charles telephoned Steinbuch because Renata
was becoming frustrated at not being able to make contact with
the
sellers. Steinbuch mentioned to him in the course of the conversation
that the guarantees had not yet been furnished but said
that he
(Steinbuch) would take the matter up with Tonkin Clacey.
[18] Thus by the morning of Friday 16 January 2004 matters had
proceeded much as would ordinarily be expected in anticipation of
the
transfer of the property. On that morning matters took a completely
different turn. Stewart telephoned Berchowitz and told her
that the
agreement had been cancelled. Berchowitz was startled. There is some
dispute as to what was said but the following are the
key components
of the conversation. In answer to questions that Berchowitz asked,
Stewart told her that the agreement had been cancelled
because the
guarantees had not been delivered, that he had given notice to the
Cohens to remedy the breach, that he had left the
notice at their
townhouse complex, and that he had witnesses to confirm that he had
done so (he referred to two policeman who had
accompanied him to the
complex).
[19] Berchowitz was clearly distressed. She telephoned Charles and
related what she had been told. Charles said that he went into
a
panic, because this was the first intimation that anything might have
been amiss. Berchowitz suggested that he consult an attorney,
which
he then did. The attorney told him to arrange immediately for the
guarantees to be issued and delivered to Steinbuch, and for
the
balance of the price to be paid to Steinbuch’s trust account
before the close of business that day.
[20] Berchowitz also telephoned Renata who said she was stunned by
what she was told and she telephoned Tonkin Clacey. By the end
of the
day Tonkin Clacey had issued guarantees on behalf of the Bank
(although he did not have express authority from the bank to
do so)
and they had been delivered to Steinbuch. Charles also made two
electronic deposits to Steinbuch’s trust account of
R15 000
and R130 000 respectively. The deposit of R15 000 was
effected to Steinbuch’s account on that day, but
the deposit of
R130 000 was effected only on Monday 19 January 2004.
[21] Mr Clacey of Tonkin Clacey, acting on the instructions of the
Cohens, wrote to Steinbuch on 16 January 2004, recording what
had
occurred. He recorded that the Cohens had not received the notice
that was alleged to have been delivered at the townhouse complex.
He
went on to say that the guarantees had been delivered to Steinbuch’s
office that morning, and that notwithstanding that
Steinbuch had told
Renata that she could pay the balance later in January, they were
making arrangements for it to be paid to Steinbuch’s
trust
account immediately. There was no response to that letter.
[22] On Monday 19 January 2004 Stewart persisted in the cancellation
of the agreement. He met with the Cohens on 22 January 2004.
What
occurred at that meeting is not before us, because the discussion was
held without prejudice, but the dispute was not resolved,
and the
litigation ensued.
[23] All the evidence that I have related thus far is inconsistent
with knowledge on the part of the Cohens that they had been placed
under notice to deliver the guarantees. If they had known that they
were under such notice it is inexplicable why neither of them
did
anything to comply, and counsel for the sellers could not suggest any
rational explanation. Yet according to Stewart the Cohens
indeed
knew, from at least 6 January 2004, that they had been placed under
notice. The circumstances in which they are alleged to
have acquired
that knowledge were as follows.
[24] The sellers said that they returned from holiday at about
lunchtime on Monday 5 January. Stewart said that he telephoned
Steinbuch’s
office, where he spoke to a secretary, to find out
whether the guarantees had been received. He was told that they had
not been received.
He also telephoned Standard Bank to establish
whether they had been issued, and he was told that they had not been
issued. He said
that he then wrote a letter to the Cohens in the
following terms:
‘
I am concerned that
the conveyancer has not yet received the guarantees for the purchase
of the above property and as you are aware
they were due today.
Without the guarantees I am unable to commit myself to another
property deal that I am pursuing and may lose
the property
altogether.
In terms of paragraph 1.2 of
the Agreement of Sale dated 17
th
October 2003 the guarantees are to be delivered by not
later than today 5
th
January
2004.
Should the guarantees not be
received by today 5
th
January
2004 then you will be regarded as being in breach of paragraph 2.1 of
the Agreement of Sale.
In this event you are hereby
given notice in terms of paragraph 8 of the Agreement of Sale to
furnish the guarantees within ten days
from the 6
th
January 2004. The ten day period expires on the 15
th
January 2004.
Should the guarantees not be
furnished by the expiry of the ten day period (15
th
January 2004) then the agreement of sale will be
regarded as having been cancelled by us as a result of your breach
and will be of
no further force or effect.
Your urgent attention to this matter is
required.’
[25] Stewart’s explanation for having written the letter, as
expressed in the first paragraph and repeated in his evidence,
was
that he needed certainty that the transaction would proceed because
he intended committing himself to the purchase of another
property.
He said that by 16 January, however, the offer to sell the property
to him had been withdrawn, which was why he then persisted
in the
cancellation. Precisely when the offer was withdrawn was left rather
vague.
[26] Stewart’s explanation for having written the letter is
absurd. If he had wanted to be sure that the transaction would
proceed he would not have wanted to terminate the agreement 10 days
hence (if the guarantees were not delivered by then) but would
have
wanted to hold the Cohens to their obligations. For if Stewart was
considering whether to accept an offer he was not to know
that the
offer would be withdrawn before then. It is most improbable that he
would have chosen to disable himself from accepting
the offer if it
was still open to him at the end of 10 days.
[27] If Stewart had wanted to be assured that the transaction would
proceed he would have wanted to make direct contact with the
Cohens,
or to have Steinbuch do that on his behalf, and to ask them to
deliver the guarantees at the earliest opportunity. He would
hardly
have been content to attach a demand to the gate of the complex, with
no assurance that it would be received, and then to
wait for 10 days
to see what occurred. Everything that Stewart did was inconsistent
with a wish to be assured that the transaction
would proceed. It is
all consistent with a wish to resile from the agreement if he
possibly could. His failure to make any attempt
to contact the
Cohens, or to inform Steinbuch or Berchowitz (who he spoke to on 7
January) that they had been given notice to remedy
the breach, is not
explicable on any basis but that he did not want to alert the Cohens
to the fact that they were in breach until
such time as it was no
longer possible to remedy it. It is with that intention on his part
in mind that the remaining evidence needs
to be evaluated.
[28] On 6 January 2004 at 11h33 a telefax was received on a telefax
machine at Pamela’s place of work and it was given to her.
The
source of the telefax is unknown because the space in which the
number of the sending machine is usually imprinted was blank.
The
telefax was addressed ‘To: Pam and Stewart, From: Renata
Cohen’. The body of the telefax reflected a telephone number
to
which the telefax was intended to be sent, which was the private
telefax number of the sellers. It concluded with what purported
to be
Renata’s signature and it read as follows:
‘
Dear Pam,
As per your letter
yesterday, we will provide the necessary guarantees within the 10-day
period. We confirm that we will be taking
occupation on the 1
st
February 2004.
Yours sincerely,
Renata Cohen’
[29] Renata denied that she wrote or sent the telefax. The
probabilities all support her evidence in that regard.
[30] First, some observations concerning the telefax itself. Neither
the private telefax number of the sellers (the number reflected
in
the telefax) nor the telefax number of Pamela’s place of work
(the number to which the telefax was sent) were readily available
to
the Cohens. The contact details that the sellers had provided in the
agreement were a business telephone number, a cellphone number,
and
Pamela’s e-mail address. The telefax is also not in the
standard form that Renata ordinarily used for telefaxes. And although
the telefax is written in Renata’s characteristic style, and
bore what appeared to be her signature, that style, and her
signature,
were apparent from the telefax that she had sent to
Steinbuch’s secretary during December, which I referred to
earlier, and
could easily have been copied.
[31] On the morning that that telefax was sent Renata was working at
home. She was accustomed to communicating by e-mail and she
had
written a number that morning. For that telefax to have been sent by
Renata would mean that Renata, for no apparent reason, went
to the
trouble of finding the private telefax number of the sellers, as well
as the telefax number at Pamela’s workplace, changing
her
standard telefax form, and then sending a telefax, when she could
have avoided all that trouble by simply sending an e-mail to
Pamela,
as she did the following day.
[32] If the Cohens had indeed received the notice it is extraordinary
that they did nothing to remedy the breach, bearing in mind
that all
that was required in that regard was a telephone call to Tonkin
Clacey. It is most improbable that Renata would not have
mentioned
the notice to Steinbuch when she spoke to him on 7 January,
particularly when he told her that the balance of the purchase
price
need be paid only on about 21
st
or 23
rd
. It is
even more improbable that Charles would not have mentioned the notice
to Steinbuch when he spoke to Steinbuch on 14 January,
particularly
when Steinbuch raised the subject of the guarantees and told Charles
that he would talk to Tonkin Clacey about having
them issued.
[33] The telefax was produced for the first time when it was attached
to the answering affidavits that were filed by the sellers
in
response to the claim on 3 March 2004. At no time until then did
Stewart confront the Cohens with the letter after they denied
that
they had received the notice. He said nothing about the letter to
Berchowitz when he announced to her on the 16
th
that the
agreement had been cancelled. What he told her was that he had a
witness to the delivery of the notice, which was altogether
unnecessary to say if he believed that the Cohens had acknowledged
receiving the notice. Nor did he react to the letter that was
written
by Clacey to Steinbuch on the 16
th
, in which it was
alleged that the Cohens had not received the notice, by immediately
denouncing their denial and producing the telefax.
Not even when he
met the Cohens on 22 January, and knew full well that they denied
having received the notice, did he confront them
with the telefax and
denounce their denial.
[34] None of the facts referred to above are consistent with a belief
on Stewart’s part that the Cohens had received the notice.
It
is consistent only with knowledge on his part that they had not done
so. The sellers bore the onus of establishing that the notice
to
remedy the default was probably received by the Cohens. The evidence
went no way towards establishing that. On the contrary, it
is
probable that the Cohens did not receive the notice, and that the
telefax purporting to acknowledge receipt was forged.
[35] There remains the question whether the attachment of the notice
to the gate of the townhouse complex was sufficient to constitute
delivery for purposes of the agreement, even though it was not
received, which was what the Full Court found. Relying upon what was
said in
Loryan (Pty) Ltd v Solarsh Tea and Coffee (Pty) Ltd,
2
the Full Court said that delivery to a chosen domicilium ‘presupposes
… hand delivery in any appropriate manner by which
in the
ordinary course the notice would come to the attention of and be
received by [the addressee].’ Acceptable methods, it
went on to
say, would include handing the notice to a responsible employee,
pushing it under the door, or by placing it in a mailbox.
But where
none of those methods were possible, as in the present case, so the
court held, appending the notice to the main gate was
an appropriate
method of ensuring that it would in the ordinary course come to the
attention of the Cohens. In support of that conclusion
the court
below relied upon various cases which dealt with the appropriate
manner of delivery when the domicilium was vacant land
or was
unoccupied.
[36] I do not agree with the finding of the Full Court. No doubt it
would be sufficient to attach a document to the door of a chosen
domicilium, or to leave it at some appropriate place at the chosen
domicilium, as indicated by the cases relied upon by the court
below,
but the notice in this case was not left at the domicilium at all.
The chosen domicilium in the present case was not the townhouse
complex but a specific unit in the complex. The fact that the
domicilium could not be reached because the perimeter gate was locked
did not entitle the sellers to choose an alternative place for
delivery, whether or not delivery at that place would ordinarily
bring
it to the attention of the addressee.
[37] The notice to remedy the breach was not delivered at the chosen
domicilium, nor has it been established that it was received
by the
Cohens. On that ground the sellers were not entitled to cancel the
agreement and it is not necessary to decide whether the
notice was
valid.
[38] The parties agreed that if that should be our finding the order
that was granted by De Jager AJ should be altered to reflect
the
success of the application.
[39] The appeal is upheld with costs that include the costs of two
counsel. The order of the Full Court is set aside and the following
is substituted:
‘1. The orders made by the court below are replaced with the
following orders:
“(A) It is declared that the contract of sale between the
applicants and the first and second respondents has not been lawfully
cancelled.
(B) The first and second respondents are ordered within 10 days of
the date of this order to do all things necessary and sign all
documents necessary in order to effect transfer of Stand 250, Sandown
Extension 24, situate at 49A Edward Rubenstein Drive, Sandown,
to the
applicants, failing which the Sherriff of this court is authorised
and directed to do all things necessary and sign all documents
necessary in order to effect such transfer.
(C) The first and second respondents are ordered, jointly and
severally, to pay the costs of the application.”
Subject to paragraph 1 above the appeal is dismissed with costs.’
______________________
RW NUGENT
JUDGE OF APPEAL
CONCUR
:
STREICHER JA)
FARLAM JA)
JAFTA JA)
CACHALIA JA)
1
See,
for example,
Body Corporate of Dumbarton Oaks v Faiga
[1998] ZASCA 101
;
1999
(1) SA 975
(SCA) at 979I;
Medscheme Holdings (Pty) Ltd v Bhamjee
2005 (5) SA 339
(SCA) para 14.
2
1984
(3) SA 834
(W) at 849B.