About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2007
>>
[2007] ZASCA 73
|
|
Botha v Giyose t/a Paragon Fisheries (447/06) [2007] ZASCA 73; [2007] SCA 73 (RSA) (31 May 2007)
Links to summary
REPUBLIC
OF SOUTH AFRICA
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
NOT REPORTABLE
Case
number:
447/06
In
the matter between:
D
B BOTHA ...............................
Appellant
and
GIYOSE
t/a PARAGON FISHERIES ...............................
Respondent
CORAM
:
FARLAM,
COMBRINCK and CACHALIA JJA
HEARD
:
11
MAY 2007
DELIVERED
:
31
MAY 2007
Summary:
Contract
– undisclosed principal – when agent may sue in own name
Neutral
citation:
This
judgment may be cited as
Botha
v Giyose t/a Paragon Fisheries
[2007]
SCA 73 (RSA)
_____________________________________________________________________
JUDGMENT
_____________________________________________________________________
COMBRINCK
JA:
[1]
This appeal has its origin in a disputed sale of a fast-food business
conducted in Queenstown in the Eastern Cape. Mr Botha, the
appellant
(the plaintiff in the magistrates’ court), claimed he had sold
the business to Mr Giyose (the respondent/defendant)
for R90 000
in February 2003. The latter denied the existence of such an
agreement.
[2]
The appellant instituted action against the respondent in the
Queenstown magistrates’ court claiming payment of R90 000.
The
respondent, in his plea, alleged he had taken over the premises from
which the business had been conducted after the appellant
had
abandoned the business. He had, he averred, not entered into any
agreement with the appellant. I shall return later to deal more
fully
with the pleadings.
[3]
The appellant was the only witness to testify at the trial. The
respondent closed his case without leading any evidence. The
magistrate
accepted the appellant’s evidence and her findings
of fact were not challenged by the respondent in his subsequent
appeal to
the Full Bench of the High Court, Eastern Cape Division.
The respondent in this court filed a notice advising he abides the
decision.
There was therefore no appearance for him before us.
[4]
The undisputed facts found were that the appellant had indeed sold
the business, formerly known as ‘Skippers’ but
at the
date of sale known as ‘Food for Africa’, to the
respondent. The agreement was orally concluded on 31 January 2003,
the terms being:
(i) the merx was the
business as a going concern together with all fixtures, fittings and
equipment;
(ii) the purchase price
was R90 000;
(iii)
the price was payable by way of an initial amount of R45 000 payable
immediately;
(iv)
the balance in 24 equal monthly instalments of R1 875 payable on the
first
day
of each and every succeeding month, the first payment to be made on 3
February 2003;
(v)
interest at 5% per annum payable on the amount of R45 000 over 24
months.
At the instance of the
respondent it was subsequently agreed that he pay the initial amount
on or before 12 March 2003. The appellant
handed over possession of
the business to respondent at the beginning of February 2003. The
respondent concluded an agreement of
lease with the owner of the
building in which the business was conducted and commenced trading.
He failed to make any payment.
[5] The magistrate found
in favour of the appellant and made the following order:
‘
1.
That the Contract of Sale between the parties is considered to be
validly cancelled.
2. That judgment is granted in favour of
the Plaintiff in the amount of R90 000,00 same representing the
damages suffered by the Plaintiff
as a result of the defendant’s
breach of contract.
3. That interest at the rate of 15,5%
p.a. shall run with effect from 19/03/2003 same being the date that
the defendant fell into
mora.
4. That the Defendant is ordered to pay
all costs on an attorney and client scale upon presentation of a
taxed bill of costs.’
[6]
The respondent, as mentioned earlier, appealed against the judgment.
He noted a number of grounds in his notice of appeal but
restricted
his argument in the court
a
quo
to
a single ground and that is that the appellant had failed to prove
that he had
locus
standi in iudicio
.
The issue arose as a consequence of questions put to the appellant by
his attorney (Mr Malan) at the end of the examination in chief.
The
following exchange took place:
‘
MR
MALAN: Your Worship, I only need two minutes more. Mr Botha, you,
your wife and your one son also have a closed corporation which
you
run?
PLAINTIFF: That’s correct, Your
Worship.
MR MALAN: Can you tell the court what the
name of the cc is?
PLAINTIFF: The name of the closed
corporation is Dacawi Investments.
MR MALAN: Your Worship, that is Dacawi
Investments CC. Who are the members?
PLAINTIFF: The members are myself, my
wife and my son.
MR MALAN: Name of your son?
PLAINTIFF: Willem Cornelius Botha.
MR MALAN: Mr Botha, the business you sold
to Mr Giyose, did it belong to you or to the cc?
PLAINTIFF: The business was under the
cc’s name, Dacawi Investments.
MR MALAN: Were you fully authorised to
act on behalf of the cc by the members?
(Answer
inaudible)
’
Despite
lengthy cross-examination, no questions were asked concerning this
aspect. At a stage the appellant handed in a written resolution
passed by Dacawi Investments CC to the effect that the appellant’s
authority to sell the business on behalf of the close corporation
was
confirmed. The document is dated 1March 2004.
[7]
The issue argued in the court
a
quo
was
whether the appellant acting as agent for an undisclosed principal
(Dacawi Investments CC) was entitled to sue the third party
(the
respondent) in his own name. The learned acting judge referred in his
judgment to the leading case of
Cullinan
v Noord-Kaaplandse Aartappelkernmoerkwekers Koöperasie Bpk
1972
(1) SA 761
(A) and accepted that it laid down that a sale agreement
concluded between an agent acting for an undisclosed principal and a
third
party was valid and enforceable by the agent in his own name.
Later in his judgment he, however, said the following:
‘
To
the extent that the evidence reads that the respondent was at all
material times relevant to the conclusion of the sale agreement
and
the bringing of the action acting on behalf of the close corporation
cannot be interpreted otherwise than that he was an agent.’
He
then referred
to
the case of
Gravett
NO v van der Merwe
1996
(1) SA 531
(D) and quoted the passage at p 537 G-J. He concluded:
‘
Applying
the case of
Gravett
,
supra, to the present matter shows that the respondent was not
entitled to act in his personal capacity on behalf of the close
corporation.
Further, in my view is that as in
Gravett’s
case
the fact that respondent brought the action on behalf of an
undisclosed principal was an afterthought; hence the argument was
only raised at appeal stage. According to the summons as well as
evidence led in the court
a
quo
plaintiff
did not consider himself as an agent of an undisclosed principal. The
conclusion must inevitably be that the respondent
failed to prove
that he had the necessary
locus
standi
at
the time when he initiated the action against the appellant.
Therefore, the court
a
quo
erred
in this regard.’
The
appeal was therefore allowed and the order in the magistrates’
court set aside and an order of absolution from the instance
substituted.
[8]
It would appear that the doctrine of the undisclosed principal was
not fully understood. The rights of the agent as against the
third
party are succinctly summarised by Joubert, LAWSA 2ed paras 228 and
231 as follows:
Par
228:
‘
In
a standard situation of representation the representative acquires no
rights and incurs no liabilities from the contract concluded
by him
or her on behalf of his or her principal. The rights and obligations
come into being between the principal and the third person.
In an
undisclosed principal situation the intermediary and the third person
create
vincula
iuris
between
themselves by the contract concluded in their own names, but also so
it is said, alternative
vincula
iuris
between
the undisclosed principal and the third person.’
Par
231:
‘
The
contract is concluded between the third person and the intermediary
acting in his or her own name. The third person is in terms
of the
contract liable to the intermediary. He or she cannot avoid liability
to the intermediary on the ground that he or she is
liable to the
undisclosed principal, unless and until the undisclosed principal
elects to hold him or her liable.’
The
reliance on
Gravett
NO v Van der Merwe,
supra,
was misplaced. What Booysen J meant in the passage quoted is better
stated in
Sentrakoop
Handelaars Bpk v Lourens
1991
(3) SA 540
(W) (a case relied upon by Booysen J as authority for his
proposition) where Marais J said the following (at 545D):
‘
I
am therefore of the view that both on principle and on the
authorities it is not proper for an agent to sue as representing his
principal by suing in his own (that is the agent’s own) name,
where the claim being enforced is that of the principal and the
principal is the true plaintiff. This does not, of course, apply
where the agent has the right to sue in his own name, as is the
case
where he has contracted on behalf of an undisclosed principal and
sues on the relevant contract.’
The
appellant throughout the negotiations and conclusion of the agreement
acted in his personal capacity. No mention was made of the
close
corporation. It seems clear that what happened, (as so often does
with lay persons), is that the appellant did not see the
close
corporation as a separate legal entity and considered that he and the
close corporation were one and that he was entitled personally
to
sell the business. The appellant’s attorney raised the question
of authority in passing and only when he became aware of
the
existence of the close corporation, it appears, did the question of
authority arise and the resolution was prepared to regularise
the
transaction. The question of
locus
standi
was
in any event not properly raised on the pleadings, contrary to the
finding of the court
a
quo
.
The resolution was clearly an attempt at ratification. As stated in
Durity
Alpha (Pty) Ltd v Vagg
[1991] ZASCA 20
;
1991
(2) SA 840
(A) at 843A authority to act on behalf of an undisclosed
principal must exist at the time of conclusion of the agreement.
There can
be no ratification.
[9]
The appeal in so far as the single issue of
locus
standi
is
concerned should not have succeeded. That however, is not the end of
the matter. There is another aspect which was overlooked by
the
magistrate and the court
a
quo
.
[10]
In his particulars of claim, after pleading the existence of the
contract, its terms and the failure to pay, the appellant continued
with the following allegations:
‘
7.
Despite demand Plaintiff has persisted in his failure or refusal to
pay.
8.1 In the premises
Plaintiff is entitled to cancel the sale agreement and hereby cancels
the said sale agreement.
8.2
Alternatively
,
Plaintiff is entitled to cancel the sale agreement by virtue of
Defendant’s breach of material terms thereof, and hereby
cancels
the said sale agreement.
9. As
a result of Defendant’s aforesaid breach of the sale agreement
Plaintiff has suffered damages in the amount of R90’000.00,
plus interest thereon
a
temporae morae
.
Wherefore
Plaintiff prays for judgment
against
the Defendant in the following terms:
a. an order declaring the
sale agreement to have been validly cancelled;
b. Payment of the sum of
R90’000.’
c.
interest on R90’000.00
a
temporae morae
;
d. costs of suit;
e. further or alternative
relief.’
When asked in a request
for further particulars how the damages were computed the reply was:
‘
The
amount of R90 000 constitutes the purchase price agreed to by the
parties.’
[11]
It is trite that once there is a breach of a contract the innocent
party has an election to claim enforcement or cancellation
and
damages. The two are inconsistent with each other and mutually
exclusive. The innocent party cannot approbate and reprobate the
contract. (Christie,
The
Law of Contract in South Africa
5ed
p 540.) In the present case appellant claimed cancellation and
payment of the purchase price which is impermissible. On cancellation
his remedy was restitution (return of the business) and damages. He
could not claim that the purchase price represented his damages.
Unfortunately the magistrate was not alive to the problem. The court
a
quo
,
so it appears from the judgment, was under the impression that
appellant had elected to enforce the contract and was claiming the
purchase price.
[12]
The next question is whether the appellant was entitled to any
relief, and if so what form of relief he was entitled to. The
appellant in his particulars of claim alleged that he had by letter
dated 9 May 2003 placed the respondent in
mora
and
when the latter failed to heed the demand within the stipulated 22
days, he was entitled to cancel the agreement. In evidence,
however,
he testified that the letter which was sent by registered post was
returned unclaimed. His attorney then formally withdrew
the
allegation that demand had been made. In doing so he in effect
conceded that the cancellation was invalid. What remains is
appellant’s
claim for payment of the purchase price and his
prayer for alternative relief. The parties did not agree on an
acceleration clause.
Consequently the full purchase price could not
be claimed. What the appellant’s evidence did establish was
that the initial
payment of R45 000 and the instalments payable in
February, March, April, May and June were not paid (summons was
issued on 2 June
2003). In my view the appellant is entitled to
judgment for these amounts together with the agreed interest of 5%.
The appellant’s
evidence in regard to interest was terse in the
extreme. All he said was that he had stipulated for 5% interest on
the balance (of
R45 000) over 24 months. Implicit in that is that the
interest was payable monthly on the reducing balance. What also must
follow
is that the payment of 5% interest ceased after two years.
Thereafter it seems the appellant is entitled to interest at the
statutory
rate of 15,5%.
[13]
The final issue is that of costs. The magistrate granted the
appellant costs on the scale as between attorney and client. In
the
light of respondent’s conduct in contesting the action when he
had no real defence this order was justified. I consider
that, having
regard to the fact that the respondent was entitled to a measure of
success in the court
a
quo
,
(to the extent afforded him in this judgment) a fair order should be
that each party bear his own costs in that court.
[14]
1. The appeal is upheld with costs.
2.
The order in the court
a
quo
is
set aside and each party shall pay his own costs in that appeal.
3.
The magistrates’
court
order is set aside and substituted by the following:
‘
(a)
there will be judgment for the plaintiff as follows:
(i) payment of the amount
of R45 000;
(ii)
interest thereon at the rate of 15,5% per annum from the 13
th
March
2003 to date of payment;
(iii) payment of the
amount of R1 875 being the February 2003 instalment;
(iv) interest thereon at
the rate of 5% per annum from 4 February 2003 to 1 January 2005;
(v) payment of the amount
of R1 875 being the March 2003 instalment;
(vi) interest thereon at
the rate of 5% per annum from 2 March 2003 to 1 January 2005;
(vii) payment of the
amount of R1 875 being the April 2003 instalment;
(viii) interest thereon
at the rate of 5% per annum from 2 April 2003 to 1 January 2005;
(ix) payment of the
amount of R1 875 being the May 2003 instalment;
(x) interest thereon at
the rate of 5% per annum from 2 May 2003 to 1 January 2005;
(xi) payment of the
amount of R1 875 being the June 2003 instalment;
(xii) interest thereon at
the rate of 5% per annum from 2 June 2003 to 1 January 2005;
(xiii) interest at 15.5%
per annum on R9 375 from the 2 January 2005 to date of payment;
(xiv) costs of suit on
the scale as between attorney and client.’
COMBRINCK JA
CONCUR:
FARLAM JA)
CACHALIA JA)