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[2015] ZAECBHC 7
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Coppermoon Trading 13 (Pty) Ltd v Government of the Province of the Eastern Cape and Another (451/09) [2015] ZAECBHC 7 (16 April 2015)
IN THE HIGH COURT
OF SOUTH AFRICA
EASTERN CAPE
LOCAL DIVISION, BHISHO
Case
No.: 451/09
Date
Heard: 12 March 2015
Date
Delivered: 16 April 2015
In
the matter between:
COPPERMOON
TRADING 13(PTY)
LTD
............................................................................
Applicant
and
THE
GOVERNMENT OF THE PROVINCE
OF
THE EASTERN
CAPE
............................................................................................
First
Respondent
THE
MEMBER OF THE EXECUTIVE
COUNCIL
OF THE GOVERNMENT OF THE
PROVINCE
OF THE EASTERN CAPE FOR THE
DEPARTMENT
OF ROADS AND PUBLIC
WORKS
...........................................
Second
Respondent
JUDGMENT
EKSTEEN
J:
[1]
During 2004 the parties herein entered into
an agreement relating to the sale of the immovable property being erf
312 Bhisho and
the buildings situated thereon, known as the Amatola
Sun Hotel, Bhisho (hereinafter referred to as “the Amatola
Sun”).
Thereafter a dispute arose between the parties and
the respondents declined to proceed with the sale. Summons was
thereafter
issued for specific performance of the contract in October
2005. In due course and prior to trial settlement negotiations
were entered into and during October 2007 the parties entered to a
“deed of settlement”. The applicant now seeks
the
following relief:
“
1.
That the Deed of Settlement signed by the Applicant on 19 October
2007 and signed by the First and Second Respondents’
on 29
October 2007 and 23 October 2007 respectively, be made an Order of
Court.
2. That the terms of
the court order be embodied in a written lease agreement to be
concluded by the parties within 14 days of the
date of this order.
3. …
4.
That the First and Second Respondents pay the Applicant’s costs
on a scale as between attorney and client.”
[2]
The status and interpretation of and the
legal consequences flowing from the “deed of settlement”
(herein referred to
as “the deed”) are central to the
dispute between the parties. The deed provides as follows:
‘
WHEREAS
the Plaintiff has instituted an action against the First and Second
Defendants for specific performance, alternatively an amount
for
damages;
AND
WHEREAS
the parties have reached
agreement regarding the settlement of the dispute;
The
parties now wish to record the settlement agreement and to have the
terms thereof made an Order of Court;
NOW
THEREFORE
the parties agree as follows:
1.
The First Defendant shall lease to the Plaintiff the portion of erf
312 Bhisho and the buildings situated thereon, known as the
Amatola
Sun Hotel, Bhisho (hereinafter referred to as “the property”)
for a period of 49 years, subject to an option
in favour of the
Plaintiff to renew the lease agreement for a further period of not
less than twenty years.
2.
At the expiration of the initial period of 49 years, the parties
shall negotiate a reasonable market related rental; the
full
terms whereof shall be incorporated in the lease agreement.
3.
The amount of R5 million originally tendered by the Plaintiff for the
purchase of erf 312 Bhisho shall be allocated in the following
manner:
3.1
R3 million in respect of rental for the period of 49 years, and
3.2
R2 million as purchase price for the furniture and fittings contained
in the Amatola Sun Hotel complex.
4.
The amounts referred to in 3.1 and 3.2 above shall be payable on the
date of signature of the lease agreement by the parties.
5.
The Plaintiff shall be liable for all rates, taxes and municipal
service fees for the property (as described in paragraph 1 above)
during the currency of the lease.
6.
The Plaintiff shall at its own costs, refurbish the Amatola Sun Hotel
in order that it be upgraded to a four star status.
7.
The Plaintiff’s attorneys shall be tasked with the drawing of
the lease agreement necessary to give effect to the intention
of the
parties.
8.
Upon signature of the finalised settlement agreement between the
Plaintiff and the First and Second Defendants, the Plaintiff
shall withdraw its action and each party shall pay its own legal
costs.’
[3]
Mr Nassimov, the managing director of the
applicant deposed to the founding affidavit and states that the
settlement negotiations
were aimed at the settlement of the action as
a whole. He declares that this goal was achieved when the
parties concluded
and signed the deed during October 2007.
Nassimov states, however, that after signature of the deed the
applicant caused
the action to be stayed pending the finalisation of
the terms of the “deed of settlement”. This, it
seems, is
a reference to the “finalised settlement agreement”
envisaged in paragraph 8 of the deed.
[4]
During this period in which the action was
stayed the applicant instructed land surveyors to conduct a survey on
the leased property
as a cadastral description was required for the
notarial deed of lease. Considerable dialogue followed between
the applicant’s
legal representative and the office of the
chief state law adviser, one Benningfield.
[5]
After completion of the necessary survey
referred to above various draft lease agreements were exchanged
between the parties.
Nassimov opines that the various drafts
dealt with minor amendments. The nature of the dissension does
not, however, appear
from the papers. Several meetings were
held with officials from the office of the Premier of the Eastern
Cape, the Director:
Property Administration of the Eastern Cape
Province, the applicant’s attorneys and Nassimov himself during
February and
March 2008 to discuss and attempt to settle the various
amendments on the proposed lease agreements referred to earlier.
In May 2008 a further revised agreement was forwarded by the
applicant’s attorneys to one Fortune of the office of the
Premier
of the Eastern Cape. On 4 August 2008 Nassimov states
that the applicant’s attorney caused the original notarial deed
of lease agreements to be hand delivered to Fortune at the state
attorney’s office. When no response had been received
by
6 October 2008 the applicant’s attorneys contacted Fortune.
Fortune indicted that the notarial lease agreements
had not been
signed and that they would be considered shortly.
[6]
On 11 March 2009 the applicant’s
attorneys were informed by the state attorney that the first
respondent had decided on 25
February 2009 that it was “not in
a position to proceed with the existing terms of the settlement
agreement and the draft
lease agreement”. In these
circumstances the present application was launched.
[7]
An answering affidavit was deposed by one
Muthwa, the Director General of the Eastern Cape Province who serves
also as the secretary
of the Executive Council of the Province.
Muthwa denies that a final and binding settlement agreement was
concluded between
the parties. A number of legal defences were
raised in the answering affidavit. In the final analysis, as
more fully
set out below, none of these defences were persisted with
in argument before me. It is accordingly not necessary to deal
with these legal issues.
[8]
Muthwa sets out the background leading up
to the signature of the settlement agreement. He states that at
a meeting of the
Executive Council held on 12 September 2007 one
Willem Hugh Nel, the then member of the Executive Council (MEC) for
Finance, raised
the question of settlement of the action between the
parties. He advised that he had been approached by Nassimov to
pursue
the question of settlement on the applicant’s behalf.
Nel expressed the view that settlement would be in the best interests
of the Province for the following reasons:
1. The Amatola Sun
was standing empty, not being utilised and in a state of decay.
2. The then existing
state of affairs was costing Government a lot of money to secure the
premises;
3. The refurbishment
of the Amatola Sun would address the problem of scarce conference
facilities in the Bhisho/King William’s
Town area; and
4.
The court action which had been instituted by the applicant was, in
his view, not winnable by the Government.
[9]
Nel advised the Executive Council that the
proposed settlement was that the Amatola Sun should be leased to the
applicant for 49
years and that on the land adjacent to the hotel,
which, together with the hotel, were the subject of the action, an
office park
should be developed. At that stage no draft deed of
settlement was placed before the Executive Council.
[10]
Muthwa declares that the Executive Council
was receptive to the idea of pursuing a possible settlement and it
took a resolution
that an out of court settlement “be
supported”.
[11]
On 10 October 2007, shortly before the
signature of the deed a further meeting of the Executive Council was
held. Muthwa states
that on this occasion the draft deed
forming the subject matter of the current litigation was presented.
Muthwa says that
conditional approval for the signing of the deed was
granted to the MEC for Finance and the MEC for Public Works, both of
whom
were present at the meeting. The approval, he says, was
conditional upon The Head: Shared Legal Services in the Office
of the Premier first seeking and obtaining external legal advice to
ensure that the settlement was not at variance with the relevant
legal prescripts.
[12]
I pause to record that this stage, that
subsequent to the filing of the answering affidavits the applicant
called for the discovery
of the minutes of the Executive Council
meetings held on 12 September 2007 and 10 October 2007 respectively.
The respondents
were not forthcoming and a dispute arose in this
regard. It was ultimately resolved in the applicant’s
favour and the
minutes of the said meetings were discovered.
The minutes of the meeting of 12 September 2007 reflect the following
in respect
of the Amatola Sun building:
“
Advocate
P Benningfield briefed the Executive Council on the latest
developments with respect to the Amatola Sun building.
He
indicated that the legal dispute on this matter is being settled out
of court and a forty-nine (49) year lease agreement will
be signed
with (the) company.
It
was acknowledged that the matter was complex and a memorandum should
be prepared and presented in the next Executive Council.
The
issue of development of office space for the Provincial Government
should be dealt with separately.
Resolutions
:
It was resolved that:
The
out of court settlement for the Amatola Sun building that involves
the forty-nine (49) year lease agreement with the Provincial
Government be supported.
The
development of office space for Provincial Government should be
treated as a separate matter and a memorandum should be submitted
to
the Economic Growth and Infrastructure Cabinet Committee and the
Executive Council for endorsement. The Department of Public
Works
should lead the process.”
[13]
As recorded earlier the draft deed in the
form set out in paragraph 2 above was before the Executive Council on
10 October 2007.
The minutes of the meeting held on 10 October
2007 reflect the following in respect of the settlement of Amatola
Sun dispute:
“
A
memorandum was presented and discussed. The purpose was to
inform the Executive Council of the outcome of the settlement
negotiations in the dispute between the Provincial Government and
Coopermoon (
sic
)
Trading (Pty) Ltd concerning the old Amatola Sun premises.
Further, to request the Executive Council to note the settlement
agreement and approve the signing of such agreement by the MEC for
Finance on behalf of the Provincial Government as First Defendant
and
the MEC for Public Works as Second Defendant.
The
matter was discussed extensively and it was agreed that the
memorandum would be noted but the Executive Council be kept informed
on the progress on this matter.
Resolutions:
It was resolved that:
The
Deed of Settlement in the dispute between the Provincial Government
and Coopermoon (
sic
)
Trading (Pty) Ltd concerning the old Amatola Sun premises be noted.
However, the Executive Council be kept informed on the progress
on
this matter.
The
signing of the draft Deed of Settlement Agreement by the MEC for
Finance on behalf of the Provincial Government as First Defendant
and the MEC for Public Works as Second Defendant be approved.
However, the Head of Shared Legal Services in the Office of the
Premier should receive external legal advice to ensure compliance
with the law.”
[14]
Reverting to the answering affidavit Muthwa
states that as far as he was able to ascertain no such legal advice
was ever obtained.
Ex facie
,
however, the minutes the authority given to the said MEC’s to
sign the draft was clearly not subject to legal advice first
being
obtained. In reply Nassimov adopts the position that the Executive
Council, of which the Premier is a member, resolved on
12 September
2007 to support the settlement of the action on the basis of a 49
year lease and on 10 October 2007 gave its unqualified
approval to
the terms of the deed. He states that the settlement agreement
was of the greatest consequence as it constituted
a settlement of an
action instituted by the applicant against the respondents.
Subsequently, he states, the parties conducted
themselves on the
basis that the settlement agreement was valid and binding.
[15]
There is no dispute that subsequent to the
signature of the settlement agreement numerous attempts were made to
reach agreement
in respect of a lease agreement as envisaged in the
deed. It was, as set out earlier, only on 11 March 2009 that
the applicant’s
attorneys were advised that the first
respondent had decided that it was not in a position to proceed with
the existing terms of
the settlement agreement and the draft lease
agreement. The applicant, as was the case in respect of the
earlier minutes
of the Executive Council, called for discovery of the
minutes of the meeting of 25 February 2009. This too gave rise
to a
dispute. This dispute too was ultimately resolved in the
applicant’s favour. They have now been provided and they
reflect the following in respect of the Amatola Sun matter:
“
The
MEC for Public Works presented a memorandum on the matter. The
purpose was to brief the Members on the out of court settlement
negotiations between the Department of Public Works and Provincial
Treasury and Copper Moon Trading (
sic)
to resolve the dispute regarding the
Amatola Sun complex and the legal opinion of a Senior Counsel on the
matter. The Senior
Counsel advised that the sale agreement with
Copper Moon (
sic)
was
invalid for its lack of compliance with the Act as the Premier did
not delegate or assign an MEC to dispose of the land.
Secondly,
the deed of settlement is currently not binding on the Department of
Public Works and the Provincial Government and therefore
is not a
court order at this stage.
The
matter was discussed extensively and it was agreed that the legal
advice of the Senior Counsel be noted.”
[16]
Clearly the letter from the State Attorney
dated 11 March 2009 was prompted by this resolution. The minute
does not reflect
the reasons for senior counsel’s opinion that
the deed is not binding upon the respondents.
[17]
On 12 December 2013 the respondents
delivered a notice of intention to apply for leave to file a further
affidavit consequent upon
the employment of different counsel.
Applicant did not oppose the application. In this affidavit the
respondent now
gave notice of its intention to raise certain legal
points
in limine
.
The affidavit was attested to by one Mgujulwa, a Senior Assistant
State Attorney at the office of the State Attorney, Bhisho.
The
affidavit gives notice that it will be argued on behalf of the
respondents,
inter alia
,
that:
1. The agreement
(the deed) cannot be enforced as an order of court;
2. The wording
thereof is not clear and unambiguous;
3. The enforcement
thereof depends upon the discretion of persons bound thereby;
4.
It does not provide closure. In this regard reference is
specifically made to paragraph 7 of the founding affidavit of
Nassimov where he stated:
“
After
the Deed of Settlement was signed and concluded the Applicant caused
the action to be stayed pending the finalization of the
terms of the
Deed of Settlement.”; and
5.
Clause 8 of the deed specifically provides for signature of a
“finalised settlement agreement”, upon signature
of
which the plaintiff will withdraw its action. This, it is
argued, clearly indicates that a further, comprehensive agreement
still had to be negotiated and concluded.
[18]
In addition to these points
in
limine
Mgujulwa states that the Amatola
Sun, had been badly damaged by fire caused by unknown and unforeseen
circumstances. In these
circumstances it is contended that
performance of the settlement agreement, if valid, had subsequently
become impossible.
[19]
In response the applicant filed yet a
further affidavit. The applicant denies that there is any merit
in the legal points
raised. In respect of the reliance which
the respondents place on the applicant’s conduct after
signature of the agreement
as attested to by Nassinov and as set out
earlier herein Nassimov responds as follows:
“
As
regards paragraph 7 of my founding affidavit, it contains an obvious
typographical error. Consistent with the explicit
term of the
Deed of Settlement that, upon signature of the Settlement Agreement
the Applicant would withdraw its action, the Applicant
did not, and
has not since, taken further steps to prosecute the action. The
Applicant’s obligation to withdraw the
action arose upon
signature of the written Settlement Agreement which had been prepared
in draft for scrutiny by the Respondent’s
legal advisors,
formed the subject of consultation with the affected MEC’s, was
ultimately approved by the Executive Council
and signed by a duly
authorised representative of the provincial government. The
Applicants action was not further prosecuted,
the Applicant paid its
legal costs and bore also the costs of the preparation of a notarial
deed of lease.”
It
is, however, not in dispute that to date the action has not been
withdrawn.
[20]
The applicant further denies that
performance of the obligations in the deed has become impossible.
It contends that the respondents
are obliged to deliver the property
to the applicant in the condition in which it was at the time of the
settlement agreement.
The costs of the restoration of the
building has been estimated at approximately R63 million. Of
this amount R9 800 000,00
is attributed to the fire damage
referred to earlier. The applicant contends, nevertheless, that
it intends to discharge
its obligation in terms of the settlement
agreement, to pay the respondents the sum of R5 million under
reservation of a right
to claim a
pro
rata
reduction of the applicant’s
counter performance and/or prosecute a claim for damages. The
applicant accepts its obligation
to restore the facility to the
status of a four star hotel and to bear the costs thereof calculated
as at the date of the conclusion
of the deed, alternatively within a
reasonable time after that date by which time the agreement of lease
would have been signed.
[21]
At the hearing of the matter, as indicated
earlier herein, Mr
de Bruyn
,
who appears on behalf of the respondents, did not persist in any of
the substantive defences set out in the answering affidavit.
He
has contained his argument to the matters raised in the final
affidavit which I have set out in paragraph 17 above. In
the
main Mr
de Bruyn
contends that the deed which the applicant seeks to enforce is not a
final agreement which can be enforced by an order of court.
He
argues, that the document is clearly an unenforceable agreement to
agree and that the terms of the “finalised settlement
agreement” which is foreshadowed in the deed would depend upon
the discretion of the persons who would be bound by the order
sought
by the applicant, namely the applicant and the respondents.
[22]
On behalf of the applicants it is submitted
that the deed is clear and unambiguous and constitutes a valid and
binding agreement
of lease containing all the essential elements of
such a contract and that it therefore constitutes a compromise
agreement.
The essential elements of a lease on which the
parties must agree are:
(a) that the lessor
is to give and the lessee is to receive the temporary use and
enjoyment of the property;
(b) the property
which is let; and
(c)
the rent for its use and enjoyment.
(See
for example
WE Cooper
:
Landlord and Tenant
(2
nd
ed) at p. 3 and the authorities referred to therein.).
[23]
It is argued
that where the essentials of a contract of lease have been agreed
upon and set out in the deed then, notwithstanding
that there may be
other important outstanding issues still to be negotiated a
fully binding contract had come into existence.
[24]
Cooper supra
(at
p. 3) opines, however, that even where the parties agree on all three
essential elements and they “fail to agree on any
additional
term raised during negotiations”, no lease is concluded.
Van der Merwe
et al: Contract: General
Principles
(2007) record at p. 79:
“…
and
statements to the effect that what has been agreed upon is to be
worked out in detail or that agreement will still be finalised
suggest the absence of a contract.”
[25]
In
CGEE
Alsthom Equipments Et Enterprises Electriques, South African Division
v GKN Sankey (Pty) Ltd
1987 (1) SA 81
(A)
at 92A-C Corbett
JA stated:
“
There
is no doubt that, where in the course of negotiating a contract the
parties reach an agreement by offer and acceptance, the
fact that
there are still a number of outstanding matters material
to the contract upon which the parties have not yet
agreed may well
prevent the agreement from having contractual force. A good example
of this kind of situation is provided by the
case of
OK
Bazaars v Bloch (supra
) (see
also
Pitout v North Cape Livestock
Co-operative Ltd (supra
)).
Where the law denies such an agreement contractual force it is
because the evidence shows that the parties contemplated
that
consensus
on
the outstanding matters would have to be reached before a binding
contract could come into existence (see
Pitout's
case
supra
at
851 B-C).”
[26]
Corbett JA,
however, proceeded to state at p. 92C-E
“
The
existence of such outstanding matters does not, however, necessarily
deprive an agreement of contractual force. The parties
may well
intend by their agreement to conclude a binding contract,
while agreeing, either expressly or by implication,
to leave the
outstanding matters to future negotiation with a view to a
comprehensive contract. In the event of agreement being
reached on
all outstanding matters the comprehensive contract would incorporate
and supersede the original agreement. If, however,
the parties should
fail to reach agreement on the outstanding matters, then the
original contract would stand. (See generally
Christie
The
Law of Contract in South Africa
at
27-8.) Whether in a particular case the initial agreement
acquires contractual force or not depends upon the
intention of the
parties, which is to be gathered from their conduct, the terms of the
agreement and the surrounding circumstances
(see
Pitout's
case
supra
at
851D-G).”
(See
also
Titaco Projects (Pty) Ltd v AA
Alloy Foundry (Pty) Ltd
1996 (3) SA
320
(W) at 335F-G.)
[27]
It is
accordingly necessary to have regard to the intention of the parties
as exhibited by their conduct, the terms of the agreement
and the
surrounding circumstances.
[28]
A perusal of the deed reveals that there
are a number of indicators in the document which suggest that the
parties had failed to
reach agreement on a number of important terms
and that they intended to negotiate further in this regard after the
signature of
the deed. Paragraph 1 of the deed provides that
the respondents would lease the Amatola Sun to the respondent for 49
years
subject to an option in favour of the plaintiff to renew the
lease agreement for a further period of not less than 20 years.
The inference is that the duration of the option period had not been
finally agreed, however, it can be said with certainty from
the
formulation of term that the option period would not be less than 20
years.
[29]
Paragraph 2 of the deed postulates that at
the expiry of the initial period of 49 years the parties would
“negotiate a reasonable
market related rental”. The
full terms thereof, so the deed records, shall be incorporated in the
lease agreement.
This, to my mind, is a strong indicator that
the parties intended that the mechanism for the determination of the
rental in the
option period was still to be worked out in detail and
the agreement, when it was reached, would be set out in the agreement
of
lease.
[30]
Paragraph 7 of the deed provides that the
plaintiff’s attorney shall be tasked with the drawing of the
lease agreement “necessary
to give effect to the intention of
the parties”. This suggests the need for a further
document which would set out
in greater detail the intention of the
parties in respect of the issues referred to in paragraphs 1 and 2 of
the deed and further
important issues.
[31]
Finally, paragraph 8 of the lease agreement
provides for the plaintiff to withdraw his action “upon
signature of the finalised
settlement agreement between the plaintiff
and the first and second defendants”. On a
consideration of paragraph
8, and attributing to the language used
therein its ordinary English meaning, it envisages that the original
cause of action as
contained in the summons will remain alive and may
still be prosecuted until and unless a subsequent “final
settlement agreement”
is concluded in writing. Only then
will the action proceedings be withdrawn.
[32]
Nassimov declared in his founding affidavit
as set out earlier that after the signature of the deed he caused the
action to be stayed
pending the finalisation of the terms of the
settlement. He did not withdraw the action. This conduct
is consistent
with the linguistic interpretation of clause 8 which I
have set out above.
[33]
When the argument that the deed was merely
a preliminary agreement without contractual force was raised and
reliance placed on the
applicant’s subsequent conduct as
attested to by Nassimov, he sought to explain and amend his initial
position.
[34]
I have quoted earlier the response of
Nassimov when the content of this paragraph in the founding affidavit
was raised. It
is unpersuasive. Nassimov states that
paragraph 7 of his founding affidavit contains “an obvious
typographical error”.
He has made no attempt to explain
where the typographical error occurs or what it is. Mr
Quinn
,
on behalf of the applicant, was unable during argument to identify
the typographical error. Nassimov continues to suggest
that,
consistent with the explicit term of the deed that, upon signature of
the settlement agreement the applicant would withdraw
its action, the
applicant did not and has not since taken further steps to prosecute
the action. This explanation appears
to me to be perfectly
consistent with the statement in the founding affidavit. The
proceedings remained in place and were
stayed pending the signature
of a final settlement agreement. During argument Mr
Quinn
submits that the applicant was not obliged to withdraw the action
because the respondents reneged on the agreement and they indicated
that they would not be bound by the terms of the deed. This,
however, occurred during 2009, some 18 months after the signature
of
the deed.
[35]
The parties
appear to be in agreement that the settlement pursued in the action
proceedings were intended to constitute a compromise.
The
effect of a compromise is in law equivalent to a judgment by consent
and is an absolute bar to an action on the cause of action
compromised (see
RH
Christie & GB Bradfield:
Christie’s:
The law of contract in South Africa
(6
th
ed) 2011 at p. 478). To my mind paragraphs 7 and 8 of the deed
make it clear that a further agreement was required to reflect
the
intention of the parties. The withdrawal of the main action,
and accordingly the rights accruing to the applicant under
the
original cause of action, was designedly deferred until signature of
a “finalised” settlement agreement.
The conduct of
the applicant after signature of the deed is consistent with such an
interpretation. A binding compromise
would therefore only be
achieved upon signature of a further agreement. This militates firmly
in favour of a conclusion that the
deed was not intended to have
contractual force until and unless the further agreement was
concluded.
[36]
I do not think
that the resolution reflected in the minutes of the Executive Council
on 10 October 2007 is destructive of this construction.
It
records that the purpose of the memorandum addressed to it was to
inform the Executive Council of the outcome of negotiations
in the
dispute between the parties in respect of the Amatola Sun and to
request the Executive Council to note the settlement agreement
and
approve the signature of such agreement. The agreement in
issues was, of course, the deed providing, as it does, for
further
negotiation prior to a final settlement. The resolution taken
at such meeting reflects that the deed is noted subject
to the
Executive Council being kept informed on the progress of the matter.
What, one may righty ask, would be the purpose
of being kept informed
of the progress in the matter if a final settlement was intended?
If it were final there could be
no further progress.
[37]
Pursuant to the
conclusion of the deed the parties continued as set out earlier to
negotiate and numerous draft lease agreements
were exchanged,
amendments effected and counter proposals made. There is no
reason to doubt that the parties negotiated in
good faith during this
period, but without reaching an agreement. In these
circumstances I consider that the evidence shows
that the parties
contemplated that consensus on the outstanding matters would have to
be reached before a binding contract could
come into existence.
Put differently, a consideration of the terms of the deed, the
conduct of the parties and the surrounding
circumstances indicates
that the parties did not intend this initial agreement to have
contractual force.
[38]
In respect of the
good faith of the parties in the endeavour to achieve consensus in
respect of the lease agreement envisaged in
the deed I raised with Mr
Quinn
the possibility of making an order that the respondents enter into
negotiations in good faith in order to conclude an agreement
of
lease as envisaged. I referred counsel to the decision in
Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC). In Everfresh the parties had entered into
an agreement of lease with an option to renew the lease on its
expiry, subject
to agreement being reached on rental. At the
conclusion of the initial period Shoprite, being the lessor, sought
to evict
Everfresh. Everfresh contended that Shoprite was
barred from doing so because it was under an obligation under clause
3 of
their lease agreement to make efforts in good faith to reach an
agreement on rental which it could not frustrate by refusing to
participate. The issue which arose in the Constitutional Court,
but which was not decided, was whether the common law of
contract had
to be refashioned by the importation of a requirement of good faith.
Mr
Quinn
disavowed
any reliance on Everfresh and persisted that the applicant sought an
order in the terms set out in the Notice of Motion.
Mr
de
Bruyn
,
correctly in my view, submitted that the issue does not arise as no
case has been made on the papers that the negotiations which
ensued
over an extended period after the signature of the deed were not
pursued in good faith and no case has been made for the
development
of the common law.
Should
the “deed of settlement” be made an order of Court?
[39]
The deed itself
records that the parties “wish to record the settlement
agreement and have the terms thereof made an order
of court”.
I have already concluded, for the reasons set out earlier herein,
that the deed was not intended by the
parties to have contractual
force. I consider that on a proper reading of the deed, in
particular having regard to paragraphs
1, 2, 7 and 8 thereof, the
finalised settlement agreement envisaged was the agreement of lease
which it was envisaged would contain
the intention of the parties
including, but not limited to, the ultimate agreement relating to the
term of the option period and
the full terms relating to the manner
of determination of the rental payable during the option period.
The deed is therefore
an agreement to agree (a
pactum
de contrahendo
).
It left ample room for a breakdown in negotiations prior to the
conclusion of a contract, as indeed occurred. The
deed is
therefore not a final settlement which brings closure to the action.
(Compare
Siebert
& Honey v Van Tonder
1981 (2) SA 146
(O).)
[40]
In
Premier,
Free State, and Others v Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA) the Supreme Court of Appeal had occasion to
consider such an agreement. At p. 431G-H the following is
stated:
“
Nor
does it matter if the provision is cast as a term:
Christie
(op cit
at
109). The result is the same. Accordingly, if the
provision is potestative it does not matter for present purposes
whether it is classified as a condition or a term. In either
case enforcement is dependent upon the will of both parties,
in this
case particularly the will of the province. An agreement that
the parties will negotiate to conclude another agreement
is not
enforceable, because of the absolute discretion vested in the parties
to agree or disagree: … Such a discretion
was vested in
the parties as they were to sign ‘a contract’ the precise
terms of which were not fixed in the letter
of acceptance, …”
[41]
The SCA proceeded to state at p. 431J:
“
There
was, accordingly, room for a breakdown in negotiations before a
contract was concluded.”
(See
also
Namibian Minerals Corporation
Ltd v Benguela Concessions Ltd
[1996] ZASCA 140
;
1997
(2) SA 548
(A) at 567A-C.)
[42]
The position may, of course, be different
where the initial agreement contains a deadlock breaking mechanism in
the event of negotiations
breaking down. (Compare for example
Southern Port Developments (Pty) Ltd
v Transnet Ltd
2005 (2) SA 202
(SCA) at 208; and
Letaba Sawmills
(Edms) Bpk v Majovi (Edms) Bpk
[1992] ZASCA 195
;
1993
(1) SA 768
(A).) The deed contains no such deadlock breaking
mechanism. In these circumstances an order in the terms sought
in
paragraph 1 of the Notice of Motion would not be capable of
enforcement.
[43]
In
Mansell
v Mansell
1953 (3) SA 716
(NPD) at
720D Broome JP, quoted from
D’Aubrey
v D’Aubrey
1942 NPD 198
where
it was stated:
“…
assuming
there is a
locus
to
ask the Court to make an agreement part of its order, that agreement
must contain only terms such as the Court can properly approve:
that is to say, such as seem to the Court to be enforceable, both
legally and practically.”
[44]
Broome JP expressed his agreement with this
dictum. (See
Mansell v Mansell
supra
at
p. 720F.) I too find myself in agreement with these
sentiments. For the reasons which I have set out earlier in
this judgment I do not consider that the deed, if made an order of
court, can be both legally and practically carried out.
(Compare also
Titaco Projects v AA
Alloy Foundry
supra
;
and
Contract: General Principles –
Van der Merwe et al supra
at p. 225.)
These considerations find equal application even where the parties,
as in this case, have requested the court
to make their settlement
agreement an order of court. (See
Lebeloane
ve Lebeloane
2001 (1) SA 1079
(W)
at 1085I-1086A.) In all these circumstances I conclude that the
order sought in paragraph 1 of the Notice of Motion cannot
be
granted.
Can
the court order that the terms of the “deed of settlement”
be embodied in a lease agreement to be concluded by the
parties?
[45]
I have concluded earlier that the evidence
shows that the parties contemplated that consensus on outstanding
matters would still
have to be reached. These matters would relate to
the unresolved issues which appear from the deed itself and possibly
certain
additional terms which the parties may have required to be
incorporated in the deed of lease. By virtue of that conclusion
I consider that the relief sought in paragraph 2 of the Notice of
Motion cannot be granted either. (Compare
Titaco
Projects
v
AA Alloy Foundry
supra
at p. 338D.)
Supervening
impossibility
[46]
Mr
de Bruyn
did not pursue the argument in respect of supervening impossibility
with any measure of enthusiasm. He submits that it is
merely an
additional ground upon which I should find that the deed cannot be
implemented. In these circumstances, by virtue
of the
conclusion to which I have come earlier it is not necessary to decide
this issue and I make no finding in this regard.
Costs
[47]
Mr
Quinn
urged upon me during argument that in the event that I find against
the applicant I should make no order as to costs. He
has
referred me to the lengthy history of the matter and in particular to
the numerous defences raised in the answering affidavit,
none of
which were persisted with during argument. He draws my
attention too, to the unnecessary litigation which resulted
from the
respondents’ reluctance to provide the minutes of the meetings
of the Executive Council to which I have referred
earlier.
[48]
It is true that seemingly unnecessary
applications were required to obtain discovery of the minutes,
however, the costs of those
applications were dealt with in those
proceedings and cost orders were made against the respondents in each
case.
[49]
I am not called upon herein to determine
the merits or demerits of the defences which were not persisted in.
The respondents
contented themselves with the limited argument
presented to me. The conclusion to which I have come and which
is fully set
out earlier herein leads inevitably to the conclusion
that the applicant was ill-advised to launch the application in the
first
instance. Irrespective of the merits of the legal
defences raised in the answering affidavit the application could, in
my
view, not succeed. In the circumstances the ordinary rule
that the costs should follow the result is to my mind appropriate.
[50]
In the result, the application is dismissed
with costs, such costs to include the costs of two counsel.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Applicant: Adv R Quinn, SC & Adv M L Beard
instructed by Smith
Tabata Inc, King William’s Town
For
Respondents: Adv P J de Bruyn, SC & Adv M H Sishuba
instructed by the
Office of the State Attorney, East London