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[2015] ZAGPPHC 528
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K Carrim Commercial Properties (Pty) Limited v Urban Hip Hop Hotels (Pty) Limited (17146/13) [2015] ZAGPPHC 528 (12 June 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
PRETORIA
CASE NO: 17146/13
DATE: 12 JUNE 2015
In the matter between:
K CARRIM COMMERCIAL PROPERTIES (PTY)
LIMITED
.........................................
Applicant
And
URBAN HIP HOP HOTELS (PTY)
LIMITED
..................................................................
Respondent
JUDGMENT
Ismail J:
[1] This is an application which was
referred to for oral evidence.
[2] The issues which the court had to
determine, by way of oral evidence, in terms of a draft order were
twofold, namely:
(i) did the respondent’s standard
memorandum of agreement form part of the contract between the parties
?
(ii) did the three memorandum of
understandings constitute the exclusive memorial of what was agreed
between the parties ?
[3] On behalf of the applicant Mr Z
Carrim testified. He stated that he was the director of the applicant
company which was engaged
as a property rental and development
company. Its portfolio was worth R1, 2 to R1, 5 billion. One of the
properties which the applicant
was involved in concerned 70 units.
Fifty (50) units apartments and the remainder were commercial and
retail units in a building
called ‘Icon’ situated in Cape
Town.
[4] Initially a concern called V I P
Living [V I P] managed the apartments in the building on behalf of
the applicant. The respondent
managed other apartments in the same
building on behalf of other parties. Mr Kobus Botha [Mr Botha], a
director of respondent and
Mr Carrim, were both trustees of the Icon
which was a sectional title scheme.
Background
[5] The applicant was not happy with
the service which VIP rendered. A meeting was held on the 8 March
2011 where Mr Carrim, Mr
Putter,
Mr Botha and another director of the
respondent met in order to negotiate the respondent taking over the
management of the applicant’s
units.
Mr Carrim testified that he was
prepared to hand over the management to the respondent on certain
conditions. Firstly that he was
only prepared to pay an amount of R1
250,00 per unit as monthly expense . Secondly he was not prepared to
pay the standard 20%
commission to the respondent and it was agreed
that the respondents would charge the applicant 14% as opposed to
their standard
rate of 20%.
[6] On behalf of the respondent, Mr
Botha testified. He in essence confirmed the arrangement between
himself and Mr Carrim. He stated
that he sent the respondent’s
standard management agreement to the applicant as evidenced by the
e-mail dated 9 March 2011.
[7] Pursuant to the meeting of the 8
March 2011, the respondent sent its management agreement to the
applicant. It requested that
the applicant remit the signed agreement
to it. This agreement was not signed by the applicant nor was it ever
signed by the respondent.
[8] Pursuant to Mr Carrim and Mr Botha
testifying, the following aspects appear to be common cause:
1. That the Memorandum of Understanding
was signed on behalf of the applicant and the respondent;
2. That neither party signed the
respondent’s standard agreement and/or varied agreement;
3. Mr Carrim during the meeting, which
was held on 8 March 2011, was clearly negotiating from a position of
strength, as the respondent
was desirous and keen to be the exclusive
management agent in the building;
4. Mr Carrim insisted that he could
sell some of the units if he needed to do so;
5 Mr Botha during cross-examination
conceded that the suggestion to obtain the applicant’s
apartments into the respondents
rental pool emanated from him;
6 The keenness on the part of the
respondent to acquire the applicant’s business into its rental
pool concomitantly resulted
in the respondent deviating from the
terms of its own standard agreement in the following manner:
(i) It reduced the standard management
fee from 20% to 14%;
(ii) It permitted the applicant to pay
a standard levy of R1 250.00;
(iii) It did not insist on the
applicant signing its standard agreement, however it signed the
memorandum of understanding which
the applicant desired;
(iv) It permitted the applicant to sell
units out of the rental pool;
(v) It deviated from its standard five
year period and entered into the MOU for a shorter period;
(vi) It agreed to carry out the repairs
and maintenance to the applicant’s units itself;
(vii) It did not insist on a proxy for
body corporate meetings.
[9] The applicant’s view is that
the MOU is the sole and exclusive memorial of the agreement on the
part of the parties and
that it is the agreement which binds them.
The respondent’s contention on the other hand is that the MOU
as amplified by
the memorandum of agreement or its standard agreement
applied.
[10] During the course of this judgment
I will deal with both contentions in order and deal with each layer
of the proverbial onion
in justifying the conclusion arrived at. In
doing so I will deal with the respondent’s contention first,
even though it may
appear to place cart before the horse. This is
done with the view of approaching this matter on the Plascon Evans
(Pty) Ltd v Van
Riebeeck Paints, principle1984 (3) SA 632 (A) at
634E- 635A.
[11] The respondent submission is
premised on the argument that the MOU whilst it forms part of the
agreement between the parties
it fails to specify the manner in which
the agreement would be processed from an accounting point of view.
This is done through
the standard agreement which deals with issues
such as the rental net income; the manner in which the ‘turnover’
is
to be calculated as well as what income is apportioned to the
applicant in term of the participation interest expressed as its
percentage interest in the rental pool. For these reasons it was
contended that the MOU cannot be the exclusive memorial of what
was
agreed between them as it is silent on these aspects.
[12] Mr Gauthi SC, acting for the
applicant, submitted that if that was true, which he disputed, the
two agreements, MOU and standard
agreement could not exist side by
side. The reason being that there were material differences between
the two agreemenfs. In this
regard the differences were tabulated in
the heads of arguments presented to me. These differences would
inevitably beg the question
regarding which agreement prevailed and
would result in an absurdity. I have not mentioned the differences in
this judgment, however
I have taken note thereof. The differences are
tabulated at par 14.2.1 up to 14.2.9 of the applicant’s heads
of argument.
[13] The pivotal issue which the
respective parties differed on was paragraph 4.3 of the MOU. That
clause reads as follows:
“ 4.3 Expenses Contribution
The parties agree that the levy rate of
R1 250.00 per rentable unitwill apply for the duration of the agreed
initial term of the
arrangement based on the number of units made
available by KCarrim Commercial Properties and defined in the monthly
residential
list to be supplied by Carrim for the month in advance.
No other expense or payment would be allowed (my underlining) and any
deviation
or adjustment thereof must be recorded in writing with
reference to this provision, dated and signed by both parties.”
It is the words underlined in clause
4.3 above, namely “.. No other expenses or payments would be
allowed” which the
parties have interpreted differently, which
gave rise to this matter. The interpretation given to those words by
the applicant
is that it should be given its literal meaning as it is
unambiguous, and those words means exactly what it says. Mr Swarts
SC,
acting for the respondent, on the other hand submitted that those
words should be read in conjunction with the word levy. In other
words the “ no other expenses or payments would be allowed”
- is only in relation to the Levy.
Those words do not have any
restrictions to other expenses such as operating expenses.
[14] Clause 4.4 of the MOU is headed
Management Fee. It stipulates:
“ The parties agreed that the
monthly management fee payable to Urban Hip will (sic) be calculated
on a rate of 14% of the
turnover; excluding Vat and will be recorded
on a VAT Invoice submitted to Carrim for payment not later at (sic)
the 25th of each
month of operation”
[15] It was put to Mr Carrim during
cross examination that the phrase no other expenses would exclude the
management fees referred
to in clause
4.4 of the MOU. The applicant’s
counsel submitted that the MOU should be read in the context of the
whole agreement. The phrase
should not be read in isolation. In this
regard the court was referred to the judgment of Natal Municipal
Pension Fund v Endumeni
Municipality
2012 (4) SA 593
(SCA) at 604
F-G, where Wallis JA writing for the court stated:
“ Interpretation is the process
of attributing meaning to the words used in a document, be it
legislation, some other statutory
instrument, or contract, having
regard to the context provided by reading the particular provision or
provisions in the light of
the document as a whole and the
circumstances attended upon its coming into existence.”
[16] The respondent’s counsel
submitted that the court should follow the approach set out in Swart
v Cape Matrix (Pty) Ltd
1979 (1) SA195 (A) at 202 C. That a disputed
clause in a contract cannot be interpreted by cutting it out of the
contract and pasting
it on a clean sheet of paper. The correct
approach would be to interpret disputed words or clauses in a
contract in the context
which includes:
(a) Other clauses in the contract; and
(b) The factual matrix evidence of
facts that preceded the conclusion of the agreement.
[17] Having considered the two matters
referred to by the protagonists, in this matter, I am of the view
that the two cases do not
gainsay or contradict each other. They both
suggest that the disputed words should be seen in the light of the
remaining clauses
contained in the agreement, and that the factual
manner in which the agreement was concluded should be considered.
[18] The common cause fact of this
matter is that Mr Carrim was in a position of strength when he
negotiated with Mr Botha. Mr Carrim
was primarily responsible for
drafting the MOU. Mr Botha sought the applicant’s business or
units to be under the respondent’s
rental pool. To that extent
he agreed on behalf of the respondent to deviate from many aspects of
the respondent’s standard
agreement.
The draft management agreement,
notwithstanding it being sent to the applicant, was never signed by
either the applicant or by the
respondent.
In addition thereto the standard
agreement was never mentioned in the MOU, nor was it dealt with in
the respondent’s attorneys
letters, or for that matter when Mr
Botha sent the signed MOU to the applicant on 1 April 2011.
[19] The respondent wants us to believe
that the standard agreement spelt out the manner the accounting would
be formulated. One
would expect that the MOU would refer to the
standard agreement with the proviso that management fees would be as
stipulated in
the MOU and in the case of any disputes regarding
expenses the MOU would prevail over the standard agreement. The e-
mail dated
24 March 2011 setting out the terms of the agreement was
sent to the respondent, by Mr Putter on behalf of the applicant. The
respondent
within 7 minutes of receiving the MOU accepted the terms
thereof. The alacrity in accepting the applicant’s offer
clearly
demonstrated the eagerness of the respondent to secure the
applicant’s ‘business’.
[20] The applicant’s submitted
that the parties agreed that the MOU would be the agreement between
them. Where the parties
agreed to reduce their agreement in writing,
such a document becomes the sole memorial of the agreement between
them and their
previous statements are of little or no effect.
Integration rule
[21] In actions between contracting
parties, as in this matter, when a contract has been reduced in
writing, in general, is regarded
as the exclusive memorial of the
transaction and in a dispute between them no evidence to prove its
terms may be given apart from
the document or secondary evidence of
its contents. Nor may the contents of such a document be
contradicted, altered, added to
or varied by parole evidence. See:
Union Government v Viannini Ferro- Concrete (Pty) Ltd 19412 AD 43 at
47 and National Board (Pretoria)
(Pty) Ltd and Another v Estate
Swanepoel
1975 (3) SA 16
(A) at 27A-B.
The Principles of the Law of Contract,
A J Kerr; 6the edition at p348.
[22] In Affirmative Portfolios CC v
Transnet Ltd t/a Metrorail
2009 (1) SA 195
at para [13] the court
referred to the well known statement of Watermeyer JA in Vianni Ferro
matter
“ This court has accepted the
rule that when a contract has been reduced in writing, the writing
is, in general, regarded
as the exclusive memorial of the transaction
and in a suit between the parties no evidence to prove its terms may
be given save
the document or secondary evidence of its contents, nor
may the contents of such document be contradicted altered, added or
varied
by parol evidence. ”
Further on at para [15] of the judgment
Barochowitz AJA continued and stated:
“ A court may look to surrounding
circumstances, including the relevant negotiations of the parties, in
order to determine
whether the parties intended a written contract to
be an intergration of their whole transaction or merely a partial
integration.
See Johnston v Leal
[1980 (3) SA 927
(A)] at 945
D-E....”
[23] I will therefore have to look at
the surrounding circumstances and the relevant negotiations which
took place between the parties
in this matter in order to determine
whether the MOU was intended to be the sole memorial between the
parties. In addition thereto
I would have to interpret the agreement
in the light of the authorities cited by the parties, in para [15]
and [16], supra.
[24] The aprties agreed and intimated
that should any amendments or variations be required, it would be
done in terms of clause
6.2 of the first MOU. The second and third
MOU’s contain the same non-variation clause.
[25] Both the MOU and the standard pool
agreement contain non¬variation clauses. The MOU at clause 6.2 is
headed Variation and
it reads as follows:
“ No variation or consensual
cancellation of this MOU shall be of any force or effect unless
reduced to writing and agreed
upon by all the parties”
The pool agreement at clause 14 thereof
is headed Variation, Cancellation or Waiver- it reads as follows:
“ No variation, addition to,
deletion from or cancellation of this agreement, and no waiver of any
right under this agreement
shall be of any force and effect unless
reduced into writing and signed by or on behalf of the Parties.”
As previously stated that the pool or
standard agreement of the respondent was not signed by either party.
Furthermore nothing was
mentioned about the standard pool agreement
by the attorneys in correspondence between them, as referred to in
para [17], supra.
The MOU and the standard pool agreement
of the respondent have a non variation clause which requires that
amendments or variations
should be reduced in writing and signed by
both parties.
The standard agreement can only be part
of the agreement if it was signed by the parties, which was not. It
cannot co-exist with
the MOU
because there are contradictory clauses
between the MOU and standard agreement, as referred to earlier in the
judgment. In the absence
of the agreements specifying which agreement
will prevail where there are contradictions it would result in an
absurdity.
[27] In the light of the Swart
judgment, the court would not apply a ‘cut and paste’
approach in interpreting the agreement,
however I am enjoined to look
at the factual matrix of facts preceding the agreement and other
clauses in the contract.
[28] The clause “no other expense
would be allowed” in clause 4.3 of the MOU it was submitted on
behalf of the respondents
when read with clause
4.4 renders the expression meaningless
as management fees were also to paid in terms of the MOU. It is clear
that Mr Carrim negotiated
the terms of the MOU which were favourable
to him and that the respondent was prepared to deviate from their
standard terms as
they sought the formers “business”. The
factual background must be considered when interpreting the
agreement, together
with the other clauses in the agreement.
The phrase ‘no other expenses’
should not be interpreted to mean that management fees are to be
excluded. When the agreement
is viewed holistically it means that
apart from management fees the only fees would be the amount of R1
250,00 in respect of levies.
[29] Clauses 4.3 and 4.4 are not
mutually destructive clauses. When read in context of the agreement
it makes complete sense.
[30] R H Christie in The Law of
Contract 4th edition at page 218, etseq referred to the matter of
Johnston v Leal
1980 (3) SA 927
(A) at 943 B where Corbett JA
remarked:
“ It is clear to me that the aim
and effect of this rule is to prevent a party to a contract which has
been integrated into
a single and complete written memorial from
seeking to contradict, add to or modify the writing by reference to
extrinsic evidence
and in that way to redefine the terms of the
contract...
To sum, up, therefore, the integration
rule prevents a party from altering, by the production of extrinsic
evidence, the recorded
terms of the integrated, contract in order to
rely upon the contract as altered.”
See also Du Plessis v Nel
1952 (1) SA
513
(A) at 539, where Van den Heever writing for the majority of the
court stated:
What then is a collateral oral
contract Even where the subject matter of an oral contract is so
closely related to that of the written
instrument that the conclusion
of one is consideration for the other, the oral contract may be
proved if truly extrinsic and therefore
not in conflict with the
written contract.”
[31] In my view the standard pool
agreement of the respondent contained clauses which contradict the
MOU as set out in applicants
heads of argument. The pool agreement is
not consistent with the MOU which was duly negotiated and agreed upon
between the parties.
[32] I am therefore of the view that
the MOU was the sole memorial between the parties for the period that
it existed, albeit for
a short duration of time, and that the
respondent’s standard pool agreement did not form part of the
agreement between the
parties.
Costs
[33] On behalf of the applicant it was
submitted that if the application was successful, costs should be
granted for the use of
two counsel. Mr Swarts’ submitted that
this was not a matter which required that two counsel should have
been engaged. Should
the court be of the view that the MOU was the
sole memorial between the parties than in such an event costs should
only be permitted
for one counsel.
[34] The issue of costs is a matter for
the determination of the court. The court must exercise its
discretion in a judicious manner.
See Kruger Bros & Wasserman v
Ruskin
1918 AD 63
at 68. In the matter of Ferreira v Levin,
Vreyenhoek v Powell
[1996] ZACC 27
;
1996 (2) SA 621
(CC) at 624 Akermann J stated:
“ [3] The Supreme court has over
the years, developed a flexible approach to costs which preceeds from
two basic principles,
the first being that the award of costs ,
unless expressly otherwise enacted, is in the discretion of the
presiding judicial officer,
and the second that the successful party
should, as a general rule , have his or her costs. Even the second
principle is subject
to the first ”
This matter concerned some commercial
significance which required an enquiry into contracts and
interpretations thereof. Although
the amount involved is not
astronomically high it cannot be argued that it was puny.
[35] I am of the view that the matter
was of substantial importance to both parties and the fact that the
applicant chose to utilise
two counsel cannot be described as
litigating extravagantly or on a luxurious scale. For that reason I
am of the view that it would
not be inappropriate to order costs of
two counsel.
[36] Accordingly, I make an order in
favour of the applicant in the following terms:
(1) The respondent is directed to pay
the applicant the sum of R2 248 156,29;
(2) The respondent is ordered to pay
interest on the amount of R2 248 156, 29 at a rate of 15.5% per annum
from 26 March 2013 to
date of payment;
Costs of the application, such
costs to include the costs of two counsel. The costs to include the
costs reserved on the 5 March
2014.
Ismail J
APPEARANCES:
For the Applicant: Adv A Gautchi SC
assisted by Adv J Myburgh
instructed by Errol Goss Inc,
Johannesburg c/o, Morris Pokroy Attorneys Pretoria
For the Respondent : Adv B Swarts SC
instructed by Joubert Swart
Attorneys Johannesburg; c/o Van
Stade Van der Ende Incorporated , Pretoria.
Date of Hearing: 4; 5 & 6 May
2015
Judgment delivered: 12 June 2015.