Tahilram v Trustees of the Lukamber Trust and Another (845/2020) [2021] ZASCA 173; 2022 (2) SA 436 (SCA) (9 December 2021)

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[2021] ZASCA 173
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Tahilram v Trustees of the Lukamber Trust and Another (845/2020) [2021] ZASCA 173; 2022 (2) SA 436 (SCA) (9 December 2021)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 845/2020
In the matter
between:
RAJKUMAR
TAHILRAM

APPELLANT
and
THE TRUSTEES FOR
THE TIME BEING OF
THE LUKAMBER
TRUST
FIRST RESPONDENT
A & A DYNAMIC
DISTRIBUTORS (PTY) LTD
SECOND RESPONDENT
Neutral
citation:
Rajkumar
Tahilram v Trustees of the Lukamber Trust and Another
(845/20)
[2021] ZASCA 173
(9 December 2021)
Coram:
Zondi,
Dambuza, Plasket, Hughes JJA and Meyer AJA
Heard:
3
November 2021
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ legal representatives via e-mail, publication on the
Supreme Court of Appeal website and released to SAFLII.  The
date and time for hand-down is deemed to be 09h45 on 9 December
2021.
Summary:
Sale – price – to be fixed by third
party’s valuation –
subject
to limited exceptions and in the absence of agreement to the contrary
or waiver by the parties, whenever parties agree to
refer a matter to
a valuer, then so long as the valuer arrives at his or her decision
honestly and in good faith, the decision is
final and binding on them
and they are bound by it once communicated to them – valuer is then
functus officio
insofar as the
valuation and matters pertaining thereto are concerned – valuer  is
then not permitted to unilaterally withdraw
or cancel the valuation
in order to alter or amend it – only a court has the power to
interfere with the valuer’s decision in
review proceedings -
judicial ambit of the court’s power to interfere is severely
circumscribed.
ORDER
On appeal from:
Gauteng Division of the High Court,
Johannesburg (Sibuyi AJ sitting as court of first instance):
(1)
The appeal is upheld with costs.
(2)
The order of the court a quo is set aside and replaced with the
following:
‘
(a)
The first
respondent is to pay the amount of R2 878 574.70 to the
applicant, being the purchase consideration for the sale
of his
shares in the second respondent to the first respondent.
(b)
The first
respondent is to pay interest at the rate of 10.25% per annum
a
tempore morae
on
the aforementioned amount from the date of this order until final
payment.
(c)
The first
respondent is to pay the costs of the application.’
JUDGMENT
Meyer
AJA (Zondi, Dambuza, Plasket, Hughes JJA concurring):
[1]
This appeal raises the question, when parties agree to refer a matter
to an expert valuer,
whether the valuer is legally permitted to
unilaterally withdraw the valuation in order to alter or amend it,
once the valuer’s
valuation has been communicated to the parties
concerned. The appeal, with leave of the High Court, is against the
judgment and order
of the Gauteng Division of the High Court,
Johannesburg (Sibuyi AJ) delivered on 07 August 2020, dismissing the
claim of the appellant,
Mr Rajkumar Tahilram (Mr Tahilram), against
the first respondent, the three trustees of the Lukamber Trust (the
trust), his sole
co-shareholder in the second respondent, A & A
Dynamic Distributors (Pty) Ltd (the company), for payment of the
purchase consideration
for his shareholding in the company in the
amount of R2 878 574.70 plus interest and costs. In
dismissing Mr Tahilram’s
application, the High Court held that the
expert valuer was legally permitted to withdraw his valuation in
order to modify and correct
it, and that he was not
functus
officio
once he had communicated his valuation to the parties.
[2]
The facts relevant to the determination of the appeal are
straightforward and uncontentious.
The business of the company is the
sale and distribution of electronic components. Mr Andrew Kayser is
one of the trustees of the
trust, which holds 70% of the company’s
issued shares, and Mr Tahilram holds 30% of its issued shares.
Mr
Kayser
is the managing director and responsible for the day-to-day affairs
and activities of the company. Mr Tahilram was the sales
director of
the company until his employment with the company terminated on 27
March 2018. On the termination of Mr Tahilram’s
employment, he was
required to offer his shares in the company to the trust.
[3]
On 29 August 2014, the trust, Mr Tahilram and the company concluded a
shareholders agreement.
It contains an arbitration provision, which
stipulates-
9.1
‘
Save where otherwise provided in this Agreement,
should any
dispute arise between the Parties in connection with-
9.1.1    the
formation or existence of;
9.1.2    the
implementation of;
9.1.3    the
interpretation or application of the provisions of;
9.1.4    the
Parties’ respective rights and obligations in terms of or arising
out of this Agreement or the breach
or termination of;
9.1.5    the
validity, enforceability, rectification, termination or cancellation,
whether in whole or in part of;
9.1.6    any
documents furnished by the Parties pursuant to the provisions of;
this Agreement or which relates in any
way to any matter affecting
the interests of the Parties in terms of this Agreement, that dispute
shall, unless resolved amongst
the Parties to the dispute, be
referred to and be determined by arbitration in terms of this clause
9.’(Own emphasis.)
[4]
As I shall demonstrate, the shareholders agreement provides
‘otherwise’ in the event
of a shareholder exercising its
pre-emptive right to purchase the shares of a    co-shareholder
and a dispute has
arisen between the co-shareholders relating to the
fair market value of such shares. In presently relevant parts, clause
6.2.1 and
its sub-clauses provide that ‘[s]hould any one of the
Shareholders . . . cease to be employed by the Company for whatsoever
reason,
then [he] shall be deemed on the day . . . immediately
preceding his . . . cessation of employment with the Company . . . to
have
offered . . . all the shares . . . held by [him] in and all
[his] claims against the Company . . . to the other Shareholders . .
. on,
mutatis mutandis
, the terms and conditions set out in
6.1 . . .’. It continues to provide that the purchase price for the
shares shall ‘be a fair
value therefore between a willing buyer and
a willing seller determined on the basis provided in 5.1.8 and
5.1.9.’
[5]
In the absence of agreement between the shareholders on the market
value of the company’s
shares, clause 5.1.8 provides that the fair
market value of shares ‘shall be determined . . . by the Auditors .
. . and the valuation
of the Auditors, communicated to the
Shareholders in writing,
shall be final and binding on the
Shareholders
.’ (Own emphasis.) Clause 1.1.3 defines ‘Auditors’
to mean ‘the auditors of the Company presently being Odendaal and
Co or
such other auditors appointed by the Company from time to
time’. Clause 5.1.9 further provides that ‘[t]he Auditors shall
value
the shares having regard to the fair value of the Business of
the company and its subsidiaries, if any, as a going concern on the
basis of an arm’s length transaction between a willing vendor and a
willing purchaser, and disregarding any restrictions in this
Agreement or the Articles of Association of the Company concerning
the transfer of shares’. The offer to sell the shares to a
co-shareholder
must be accepted by such co-shareholder within a
stated period of time from the date of the determination of the
purchase price for
such shares.
[6]
The relationship between Messrs Kayser and Tahilram soured for
reasons that are presently
not relevant. Ultimately, the employment
of Mr Tahilram with the company was terminated on 27 March 2018. That
event triggered the
operation of clause 6.2.1 of the shareholders
agreement and he was deemed on 26 March 2018 to have offered all his
shares in the
company to the trust. Mr Tahilram and the trust did not
reach agreement on a fair market value of Mr Tahilram’s 30%
shareholding
of the company. That, in terms of clause 6.2.1,
triggered the provisions of clauses 5.1.8 and 5.1.9, and the
company’s auditors,
still Odendaal & Co, were requested to
determine the fair market value of the company’s shares.
[7]
Mr Herman Odendaal of Odendaal & Co (the valuer) determined the
fair value of the
company’s business to be R4,8 million ‘plus any
value unlocked on the obsolete stock as agreed on by a willing
buyer/willing
seller.’ He classified ‘all stock that did not move
for a 24-month period . . . as obsolete’. His written valuation
report
dated               4
July 2018 was communicated to the company’s
co-shareholders. The
valuer thereafter confirmed ‘that the stock value as per the
detailed inventory list supplied by [the company]
for the year ended
31 March 2018 was R14 971 701.51, but based on our
obsolescence tests we believe the fair realisable
value to be
R4 795 249.18’. His written valuation report dated 13
July 2018 was communicated to the company’s co-shareholders.
[8]
In a letter dated 1 August 2018, Mr Tahilram disagreed with the
valuation for reasons
that are presently not relevant, except for his
contention that he should acquire 30% of the obsolete stock.  In
response, the
valuer advised his attorneys in a letter dated 8
November 2018, that he notes Mr Tahilram’s disagreement with his
valuation and
respects his right to disagree. The valuer made it
clear that he was not prepared to change his valuation. Mr Tahilram
ultimately
accepted the valuer’s determination of the fair market
value of the company’s shares.  In a letter dated          15
February 2019, from the attorneys of the trust, represented by Mr
Kayser, addressed to Mr Tahilram’s attorneys, Mr Tahilram was
notified that the trust accepted the valuer’s determination of the
fair market value of the company’s shares, and that the trust
accepted Mr Tahilram’s offer to purchase his 30% shareholding. In
this regard the following is stated in the letter:
‘
7.
In light of the cessation of your client’s employment with the
Company and in light
of the fact that your client’s shares have
been offered up for acceptance in terms of the Shareholders
Agreement, our client herewith
accepts the offer to purchase your
client’s 30% (Thirty Percent) shareholding in the Company.
8.
In light thereof and at the request of our client, the Auditors of
the Company
on               17
January 2019 confirmed that the Company
had a nett asset value of
R4,877,427.00 (Four Million Eight Hundred and Seventy-Seven Thousand
Four Hundred and Twenty-Seven Rand)
as at 31 March 2018.  The
value for your client’s shares in terms thereof is R1,625,809.00
(One Million Six Hundred and Twenty-Five
Thousand Eight Hundred and
Nine Rand).
. . .
13.
In any event, we note that your client is of the view that he should
acquire 30% (Thirty Percent)
of the obsolete stock and in terms
thereof, we place under your attention the following:-
13.1     As
at 31 March 2018, the stock value was approximately R15,000,000.00
(Fifteen Million Rand) (hereinafter
referred to as the “
Stock
Value Figure”
).
13.2
R4,800,000.00 (Four Million Eight Hundred Thousand Rand) was not
considered obsolete stock and was included
in the Net Asset Value
calculation by the auditors and will thus need to be deducted from
the Stock Value Figure above.’
[9]
The trust, however, maintained that various amounts which Mr Tahilram
allegedly owed
to it should be deducted from the purchase price it
was to pay to           Mr
Tahilram. The nature and amounts comprising such alleged indebtedness
on the part of Mr Tahilram to the trust, are presently irrelevant.
Mr
Tahilram also accepted the valuer’s determination of the fair
market value of the company’s shares and, to no avail, demanded
payment from the trust of an amount equivalent to 30% of the fair
market value of the company’s shares as determined by the valuer.
On 6 June 2019, motion proceedings were instituted in the court
a
quo
wherein he claimed such amount plus interest and costs.
[10]
The trust’s answering affidavit was deposed to by Mr Kayser on 22
July 2019, and filed on the same
day. Annexed thereto was an amended
written valuation report by the valuer dated 16 July 2019.
Therein, he reduced his initial
valuation of the net asset value of
the company’s shares by an amount of R1 260 775.
Such deduction, ex facie the
amended valuation report, was for motor
vehicles allocated to Mr Kayser that were included in his original
valuation. In this regard
Mr Kayser said the following in the trust’s
answering affidavit:
‘
18.60. In
preparation of the answering affidavit, I consulted with Odendaal on
16 July 2019 and relayed the content of the Applicant’s
founding
affidavit to him, more particularly the calculation relied upon to
arrive at the claimed amount. He immediately remarked
to me that the
reliance by the Applicant is misplaced if regard is had to the
earlier objections registered by the Applicant on 1
August 2018.
18.61   After our
consultation, Odendaal supplied me with an updated valuation taking
into account further aspects and arriving
at a revised value of R3,
600, 000.00. A copy of the aforesaid valuation is attached hereto as
annexure “AK44.1” and was sent
to the Applicant’s legal
representatives on 19 July 2019 before the delivery of the answering
affidavit herein.’
[11]
It is remarkable that the reason for the valuer’s reduction of an
amount of R1 260 775 in
respect of motor vehicles allocated
to Mr Kayser from the net asset value of the company’s shares as
initially determined by him,
is not explained by          Mr
Kayser in the answering affidavit or by the valuer,
nor did such
deduction form part of Mr Tahilram’s initial objections to the
valuer’s initial valuation report or of the deductions
which Mr
Kayser maintained should be made from the purchase price payable by
the trust for 30% of Mr Tahilram’s shares in the company.
[12]
The High Court a quo found that ‘[i]t is obvious that the parties
dead locked on the purchase price’
and that ‘the applicant was
obliged to invoke the arbitration clause to resolve the deadlock on
the purchase price and or the value
of the obsolete stock’.
However, instead of ‘calling a halt for arbitration’, the High
Court a quo exercised its discretion
‘to tackle the dispute
itself’. It considered the merits of the application and found the
question ‘whether or not the valuation
of the auditors is final and
binding on the parties to be dispositive of the matter’. The High
Court a quo accordingly dealt with
that question and concluded that
‘valuers function not as arbitrators but as estimators of value’,
‘that such final and binding
clauses of non judicial officers are
not final and binding on the parties’ and ‘that the applicant’s
argument that the valuation
is final and binding on the parties has
no merit’. The High Court accordingly dismissed the application
with costs on that basis.
Subsequently, the High Court granted the
applicant ‘leave to appeal to the Supreme Court of Appeal only in
respect of the application
of the
functus officio
principle to
this matter’.
[13]
Unsurprisingly, this court also refused the appellant’s application
for leave to appeal on the question
whether the dispute between the
parties relating to the variation of the written valuation report
was, in terms of the shareholders
agreement, an arbitral dispute.
Furthermore, the President of this court, on application to her in
terms of
s 17(2)
(f)
of the
Superior Courts Act 10 of 2013
,
refused to refer such decision to this court for reconsideration.
For, as was held by Didcott J in
Parekh v Shah Jehan Cinemas (Pty)
Ltd and Others
1980 (1) SA 304
(D) at 305G-H:
‘
Arbitration
itself is far from an absolute requirement, despite the contractual
provision for it.  If either party takes the
arbitral disputes
straight to Court, and the other does not protest, the litigation
follows its normal course, without a pause. To
check it, the objector
must actively request a stay of the proceedings. Not even that
disruption is decisive. The Court has a discretion
whether to call a
halt for arbitration or to tackle the disputes itself. When it
chooses the latter, the case is resumed, continued
and completed
before it, like any other. Throughout, its jurisdiction, though
sometimes latent, thus remains intact. That all this
is so emerges
from such cases as
Davies v South
British Insurance Co
(1885) 3 SC 416
;
Walters v Allison
1922
NLR 238
;
Rhodesian Railways Ltd v
Mackintosh
1932 AD 359
;
Yorigami
Maritime Construction Co Ltd v Nissho-Iwai Co Ltd
1977
(4) SA 682
(C).’
[14]
I, therefore, turn to the question on appeal before us. It is whether
the valuer was
functus officio
when he determined the fair
value of the company’s business to be R4,8 million ‘plus any
value unlocked on the obsolete stock
as agreed on by a willing
buyer/willing seller’, communicated in his written valuation report
dated 4 July 2018 to the company’s
co-shareholders, and when he
determined the realisable value of the obsolete stock to be
R4 795 249.18, communicated in
his further written
valuation report dated 13 July 2018 to the co-shareholders (the
valuer’s valuation). In other words, the issue
for decision is
whether the valuer was legally permitted to unilaterally withdraw his
valuation in order to correct or modify it,
once his valuation had
been communicated to the parties concerned.
[15]
One of the issues which this court in
Transnet National Ports
Authority v Reit Investments (Pty) Limited
[2020] ZASCA 129
; 2020
JDR 2104 (SCA) was required to determine concerns the circumstances
in which the determination made by an expert valuer or
umpire jointly
appointed by two parties to a contract is susceptible to being
reviewed and set aside by a court.  In this regard
Petse DP said
the following:
‘
[32]
Before the contentions of the parties are considered, it is
appropriate to say something about Mr Seota’s
role as umpire. It is
common cause between the disputants that Mr Seota was an expert
valuer and not an arbitrator.  The fundamental
significance of
this distinction lies in this. Our law has for over a century now
always drawn a clear distinction between an arbitrator
and a valuer.
Thus, in
Estate Milne v Donohoe
Investments (Pty) Ltd and Others
1967
(2) SA 359
(A) at 373H-374C, Ogilvie Thompson JA said the following:
“
This
argument assumes something in the nature of an appeal to the
arbitrator against the decision of the auditor. That is, however,
not
the position.  In making his valuation, the auditor hears
neither party. He is not a quasi-judicial function. He reaches
his
decision independently on his knowledge of the company’s affairs.
His function is essentially that of a valuer (
arbitrator,
aestimator
), as distinct from that of
an arbitrator (
arbiter
),
properly so called, who acts in a
quasi
-judicial
capacity. The distinction between
arbitri
and
arbitratores
was well known to our writers (see e.g.
Voet
, Bk.
4, 8, 2; Wassenaer,
Praktijk Judicieel,
Ch. 26,
sec. 17
;
Huber,
Bk. 4, chap. 21,
secs 1
and
2
and other
authorities listed by
Gane
at p. 93 of vol. 2 of his translation of that work). See also
Sachs
v Gillibrand and Others,
1959 SA 233
(T) at p. 236, and
Divisional Council of
Caledon v Divisional Council of Bredasdorp,
4
S.C. 445.
Voet
,
in the above-mentioned passage, distinguishes between the respective
functions of an arbitrator (
arbiter
and a valuer or referee (
arbitrator
))
and, in relation to the latter uses the phrase
in
quibus viri boni arbitrio opus erat
.
This phrase is rendered by Sampson (p. 110) as “requiring the
arbitrament of an impartial person”, but by Gane (vol. 1, p. 738)
as: “in which there is need of the discretion of a good man”.
Although the use of the word “discretion” may perhaps be open
to
criticism,
Gane’s
translation
appears to me to reflect
Voet’s
meaning more correctly. The
arbitrator
or
aestimator
need not necessarily be an entirely impartial person.     In
discharging his function he is of course required
to exercise an
honest judgment, the
arbitrium boni
viri
; but a measure of personal
interest is not necessarily incompatible with the exercise of such
judgment (see
Dharumpal Transport (Pty.)
Ltd., v Dharumpal,
1956 (1) SA 700
(A)
at p. 707).”
[33]
This distinction serves an important purpose in review proceedings
because, as Ponnan JA put it
in
Lufuno Mphaphuli & Associates
(Pty) Ltd v Andrews and Another
[2007] ZASCA 143
;
2008 (2) SA 448
(SCA) para 22: “. . . A finding that Andrews was a valuer would not
assist Lufuno and does not require decision. Unlike an arbitrator,
a
valuer does not perform a quasi-judicial function but reaches his
decision based on his own knowledge, independently or supplemented
if
he thinks fit by material (which need not conform to the rules of
evidence) placed before him by either party. Whenever two parties
agree to refer a matter to a third for decision, and further agree
that his decision to be final and binding on them, then, so long
as
he arrives at his decision honestly and in good faith, the two
parties are bound by it.  . . . “
[34]
Accordingly, the power of the court to interfere with an expert’s
decision in review proceedings
is severely circumscribed. The
judicial ambit of this power was described by this Court in
Wright
v Wright
[2014] ZASCA 126
;
2015 (1) SA 262
(SCA) para 10 as
follows:
“
The
position of a referee under
s 19b
is, as the high court correctly
found, similar to that of an expert valuator who only makes factual
findings but dissimilar to that
of an arbitrator who fulfils a
quasi-judicial function within the parameters of the
Arbitration Act
42 of 1965
. In this regard the dictum of Boruchowitz J in
Perdikis
v Jamieson
is apposite:
“
It was held
in
Bekker v RSA Factors
1983 (4) SA 568
(T) that a valuation can be rectified on equitable
grounds where the valuer does not exercise the judgment of a
reasonable man, that
is, his judgment is exercised unreasonably,
irregularly or wrongly so as to lead to a patently inequitable
result.”
This is also the position in
respect of the referee’s report – it can only be impugned on
these narrow grounds.’
[16]
I revert to the crux of the appeal. Counsel for the trust relies
solely on the following dictum in the
majority decision of the full
court (Boruchowitz J, Mlambo J concurring) in
Perdikis v Jamieson
2002 (6) SA 356
(W) para 9, in support of its contention that the
valuer was not
functus officio
once he had determined the fair
value of the company’s business and had communicated his valuation
to the company’s co-shareholders,
and that he was at liberty to
change his valuation.
[17]
There, Boruchowitz J held as follows:
‘
[9]
I turn now to the question whether it was competent for Chasey – as
opposed to the court
– to rectify the valuation. Recent cases have
confirmed the general power of the Court to correct a manifestly
unjust determination.
See
Hurwitz and
Others NNO v Table Bay Engineering (Pty) Ltd and Another
1994
(3) SA 456E-H.
The question whether a valuer can rectify an award
once made is a matter which did not arise for consideration in any of
the cases
to which I have referred and no authority regarding this
question was drawn to our attention.
Although the Court has a general
power of correction there is nothing in the decisions to which I have
referred which establishes
that it is only the Court that has the
power to grant relief by way of rectifying manifestly unjust
valuations. The principle stated
in
Bekker’s
case
supra
at 573E-F [
Bekker v RSA Factors
1983 (4) SA 568
(T)] and
in particular the words “kan die vasstelling of waardasie om
billikheidredes reggestel word” do not preclude a valuer
rectifying
his award. It must be borne in mind that it is the valuer, possessed
of the requisite skills, that the parties have designated
to perform
the valuation and not the Court.  Moreover, as a valuer is
liable for negligence in the discharge of his functions
it is proper
that he be entitled to correct a manifestly wrong award so as to
avoid or ameliorate any loss.
[10]
The legal position as I comprehend it is therefore the following:
where, as in the present case,
a manifestly incorrect or unjust
valuation has taken place, practically speaking there has been no
determination in terms of the
contract between the parties. The
agreement does not
ipso facto
lapse but remains executory
leaving it open for the valuer to still make a correct determination
(see
Hurwitz’s
case
supra
at 456
i
). Once made
there is no reason why the correct determination should not bind the
parties.
In casu
, the contract did not impose any time
constraint for the making of the determination and a reasonable time
for so doing had not elapsed.
A similar approach to that advocated
was followed by Hartzenberg J in
Van Heerden v Basson
1998 (1)
SA 715I-719B.
There, in the context of a dispute concerning the
rectification of a price to be determined by a third party,
Hartzenberg J stated
the following:
“
Die partye
het ooreengekom hoe die prys bepaal sou word en indien dit bepaal
word in ooreenstemming met die terme van hulle ooreenkoms
is hulle
uit die aard van die saak gebonde daaraan. Wanneer die vasstelling
van die prys nou foutiewelik gemaak word, druis dit juis
in teen die
wesenlike grondslag van hulle ooreenkoms, naamlik dat die derde ‘n
behoorlike korrekte prys vasstel. Gevolglik is daar,
prakties
gesproke, geen prys bepaal nie.  Een van die
essentialia
van
die ooreenkoms ontbreek.  Daar is dus nog nie ‘n ooreenkoms
nie. Dit doen egter nie afbreuk aan die ander bepalings van
hulle
ooreenkoms nie. As daar in so ‘n geval later ‘n korrekte
vasstelling uit die lig (sic) uit sou val in ooreenstemming met
hulle
voorskrifte dan kan daar in beginsel nie enige rede wees waarom beide
partye nie gebonde sou wees aan die oorenkoms nie.”’
[1]
[18]
In his dissenting judgment, Van Oosten J said this at 368J-369E:
‘
I regret,
however, that I am unable to agree with the further conclusion that
Chasey could unilaterally and without reference to the
respondent
alter his first determination. I shall briefly explain my reasons for
differing with that conclusion. It is a well-established
principle in
our law that a Court can rectify the award of a third party appointed
by parties to an agreement to perform a valuation
function. It is not
necessary to embark upon a detailed discussion of the authorities
relating to the rule. For present purposes
a reference to
Bekker
v RSA Factors
1983 (4) SA 568
(A) at
572E as well as the more recent discussion of Marais J (as he then
was) of the Court’s general powers to correct an award
in
Hurwitz
and Others NNO v Table Bay Engineering (Pty) Ltd and Another
1994
(3) SA 449
(C) at 456 will suffice. The question whether an appointed
valuer himself can rectify his award unilaterally has, as far as I
have
been able to establish, not been considered before.  Nor
have we been referred to any direct authority concerning this issue.
Counsel for
the appellant submitted that the authorities do not establish that it
is only a Court that has the power to rectify an
erroneous
determination.  He contended that the valuer himself is
empowered to correct his determination.  In support of
the
contention counsel relied on the following passage in the judgment of
Hartzenberg J in
Van
Heerden v Basson
[quoted in the majority judgment]. . . . On a parity of reasoning
counsel submitted that the words ‘uit die lug sou val’
[2]
would allow for a new unilateral determination simply substituting
the erroneous determination with the result that the parties become
bound thereby.  I cannot accede to this argument. In
Van
Heerden v Basson
dealt
with an exception raised to an application for an amendment to the
plaintiff’s particulars of claim regarding the valuation
by a third
party of the subject-matter of a contract.  In the present
matter different considerations apply. The issue is not
whether an
agreement was formed, but rather whether the valuer could
unilaterally correct his determination. What the learned Judge
said
in
Van
Heerden v Basson
was not in the context of illustrating the powers the third party may
have to correct unilaterally his own determination, which in
any
event was not one of the issues he was required to determine.
In my view the fact that Chasey
was not acting as an arbitrator or performing functions of a
quasi-judicial nature in determining
the valuation did not empower
him to rectify his determination unilaterally. Having pronounced his
determination, legal consequences
resulted and his authority over the
subject-matter he was required to determine, ceased. He therefore
became
functus officio
.  (Compare
Firestone South
Africa (Pty) Ltd v Genticuro AG
1977 (4) SA 298
(A).) I see no
good reason for justifying a distinction between judicial functions
on the one hand and
quasi-judicial
functions on the other,
where a determination or judgment falls to be corrected. This is for
obvious reasons: Once the valuer has
made his determination, the
question whether it was erroneously made, no longer requires him to
conduct a valuation. The only issue
would be whether an error was
made. Generally, unless one of the exceptions referred to in
Firestone v Genticuro
applies he would not have the authority
to correct the error.
In casu
on the face of the award
there is no error. What happened is that Van der Bijl advised Chasey
thereof.  Chasey thereupon arranged
a further consultation with
the appellant and Van der Bijl whereupon his final determination, in
which the error had been taken into
account, was made. In my view it
has not been shown that the first valuation was,
ex facie
the
letter in which the determination was made, wrong.  It was only
after further investigation by Chasey that the casting error
in the
documents supplied to him was discovered.  Chasey was therefore
not required merely to correct an error in expressing
his
determination.  Even if one assumes that Chasey acted upon
patently and materially incorrect information with the result
that
the parties would not be bound by the first valuation, it would, in
my view, still not be competent for the valuer himself to
consider
that issue. It follows from what I have said that Chasey was not
empowered or entitled to correct the determination unilaterally.’
[19]
In
Firestone South Africa (Pty) Ltd v Genticuro AG
1977 (4) SA
298
(A), referred to in the minority judgment, Trollip JA said the
following at 306F-308A:
‘
The general
principle, now well established in our law, is that, once a court has
duly pronounced on a final judgment or order, it
has itself no
authority to correct, alter or supplement it. The reason is that it
thereupon becomes
functus officio
:
its jurisdiction in the case having been finally exercised, its
authority over the subject-matter has ceased. See
West
Rand Estates Ltd. v New Zeeland Insurance Co Ltd.,
1926
A.D. 173
at pp. 176, 178, 186-7 and 192;
Estate
Garlick v Commissioner of Inland Revenue,
1934
A.D. 499
at p. 502.
There are, however, a few
exceptions to that rule which are mentioned in the old authorities
and have been authoritatively accepted
by this Court. Thus, provided
the court is approached within a reasonable time, it may correct,
alter, or supplement it in one or
more of the following cases:
(i)
The principal judgment or order may be
supplemented in respect of accessory or consequential matters, for
example, costs or interest
on the judgment debt, which the Court
overlooked or inadvertently omitted to grant (see
West
Rand
case,
supra
).
. . .
(ii)
The court may clarify its judgment or
order, if on a proper interpretation, the meaning thereof remains
obscure, ambiguous or otherwise
uncertain, so as to give effect to
its true intention, provided it does not thereby alter “the sense
and substance” of the judgment
or order (see the
West
Rand
case,
supra
at pp. 176, 186-7:
Marks
v. Kotze,
1946 A.D. 29).
(iii)
The Court may correct a clerical,
arithmetical or other error in its judgment or order so as to give
effect to its true intention
(see, for example,
Wessels
& Co, v. De Beer,
1919 A.D. 172.
Randfontein Estates Ltd. v. Robinson,
1921 A.D. 515
at p. 520; the
West
Rand
case,
supra
at pp. 186-7).  This exception is confined to the mere
correction of an error in expressing the judgment or order; it does
not
extend to altering its intended sense or substance.  Kotzé.
J.A. made the distinction manifestly clear in the
West
Rand
case,
supra
,
at pp. 186-7, with reference to the old authorities, he said:
“
The Court
can, however, declare and interpret its own order or sentence, and
likewise correct the wording of it, by substituting more
accurate or
intelligent language so long as the sense and substance of the
sentence are in no way affected by such correction: for
to interpret
or correct is held not to be equivalent to altering or amending a
definitive sentence once pronounced.”
. . .
(iv)
Where counsel has argued the merits and not
the costs of a case (which nowadays often happen since the question
of costs may depend
upon the ultimate decision on the merits), but
the Court, in granting judgment, also makes an order concerning the
costs, it may
thereafter correct, alter or supplement that order (see
Estate Garlick’s
case,
supra
,
1934 A.D. 499).
The reason is (see pp. 503-5) that in such a
case the Court is always regarded as having made its original order
“with the
implied understanding” that it is open to the mulcted
party (or perhaps any party “aggrieved” by the order – see p.
505)
to be subsequently heard on the appropriate order as to costs.
But, of course, if after having
heard the parties on the question of costs, either at the original
hearing or at a subsequent hearing
(as happened in the present case),
the Court makes a final order for the costs, there can then be no
such “implied understanding”,
and such an order is as immutable
(subject to the preceding exceptions) as any other final judgment or
order.  . . . ’
[20]
In
Civair Helicopters CC v Executive Turbine CC and Another
2003
(3) SA 475
(W), Wasserman AJ acknowledged that he was bound by the
majority judgment in
Perdikis
that an ‘expert valuer is free
to rectify a manifestly unjust valuation or a patent error in his
report even after the delivery
of same’, but he nevertheless
expressed his views on the issue since the question that had arisen
in the case before him was whether
an expert valuer ‘would have
been
functus officio
after he had issued his report’. He
expressed the view that the majority decision in
Perdikis
‘is
probably not correct’ and he agreed ‘with the views expressed by
the dissenting Judge on these issues’. He concluded that
‘[t]he
correct position therefore appears to be that even an expert will be
functus officio
once he has performed his mandate, ie once he
has delivered his award’.
[21]
In reaching that conclusion, Wasserman AJ reasoned as follows (para
39):
‘
The
position of an expert is, in my view, no different from that of an
architect or engineer, acting as a quasi-arbitrator, who also
has to
arrive at a decision honestly and impartially. The expert is
functus
officio
when he has exhausted his
mandate. In the case of an engineer or architect, he is
functus
officio
once he has issued the final
certificate.  Absent a contrary provision in the contract, he is
thereafter not permitted to correct
or modify previous certificates
(
Construction Law
(
supra
)
at 487 [Loots
Construction Law and
Related Issues
Juta & Co Ltd, 1
st
ed]). The position of an architect, acting as a quasi-arbitrator was
summarised by the Appellate Division in
Ocean
Diners (Pty) Ltd v Golden Hill Construction CC
[1993] ZASCA 41
;
1993
(3) SA 331
(A) at 341-2 as follows:
‘
I proceed
to consider the two remaining defences raised in the plea. The first
of these is based on the purported cancellation of
the certificate by
the architect.  There is in my view no substance in this
defence. If the effect of a contract is to confer
finality upon a
certificate (which clause 25.7, assuming its validity, does), a
certificate validly issued (such as the one we are
dealing with)
cannot, in the absence of a contractual provision to the contrary, or
agreement or waiver by the parties (neither of
which is suggested),
be withdrawn or cancelled by an architect in order to correct
mistakes of fact or value in it (
Hudson’s
Engineering Contracts
10th ed at 484).
The contract does not provide to the contrary; clause 26, if
anything, confirms that there was to be finality as
far as the
architect was concerned. The only person empowered by clause 26 “to
open up, review or reverse any certificate” is
an arbitrator if a
dispute concerning a certificate is submitted to arbitration (which
was not the case here). Once therefore the
architect had issued the
certificate he was
functus officio
insofar as the certificate and matters
pertaining thereto were concerned (
Halsbury’s
Laws of England
4th ed, vol 4(2) para
432). That being so, he was not entitled unilaterally to withdraw or
cancel it.”
It is implicit in the referral of
a dispute to an expert for determination, that finality should be
achieved. Therefore, the principles
enunciated in the judgment of
Ocean Diners
(
supra
) are also of application to the
powers vesting in an expert. Despite the provision in the contract
conferring finality upon the certificate,
I see no reason why the
same principles would not also apply to the final report of or an
award made by an expert. Absent a contrary
term forming part of the
referral agreement, an expert similarly would be precluded from
correcting patent mistakes which will have
the effect of changing or
varying the effect of the report or award.     It
is significant to note also that
an engineer has the power to correct
an interim certificate even in the absence of a specific term in the
contract (compare
Lawrence v Kern
[1910] 14 WRR 337 Ca1). A
distinction therefore can be drawn between the powers vesting in an
engineer acting as a
quasi
-arbitrator when issuing a final
certificate as opposed to performing his functions in correcting
interim certificates. Whereas it
is permissible for a court to
address and correct an ambiguity, obscurity or uncertainty in an
order, there is a rule against variation,
addition or contradiction
[
Firestone South Africa (Pty) Ltd v Genticuro AG
(
supra
at 307)].  These principles were held to be applicable to awards
made by an arbitrator [
Friedman v Mendes
1976 (4) SA 734
(W)
at 736B-G]. In my view these principles also apply to the award made
or report issued by an expert.’
[22]
I subscribe to the views expressed by Van Oosten J in his minority
judgment in
Perdikis
and those expressed by Wasserman AJ in
Civair
. I am respectfully unable to endorse the reasoning and
conclusion reached in the majority judgment in
Perdikis
on the
question under consideration. The distinction between the function of
an expert valuer, who does not perform a
quasi
-judicial
function, and that of an arbitrator, who fulfils a
quasi
-judicial
function within the parameters of the
Arbitration Act 42 of 1965
, has
in principle or in logic, no bearing on the question whether a valuer
has the power or authority to alter or amend his or her
valuation
once made and communicated to the parties. One of the arguments
raised in
Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews
and Another
[2007] ZASCA 143
;
2008 (2) SA 448
(SCA) paras 21-22,
was that Andrews was not in truth an arbitrator but a valuer. Ponnan
JA, as I have mentioned, found that a finding
that Andrews was a
valuer would not assist Lufuno and does not require decision, because
the parties intended the
Arbitration Act to
apply to their agreement.
[23]
Comparable to the position in
Ocean Diners (Pty) Ltd v Golden Hill
Construction CC
[1993] ZASCA 41
;
1993 (3) SA 331
(A) at 341-342, the effect of the
shareholders agreement (clause 5.1.8 thereof)
in casu
is to
confer finality upon the determination by the valuer of the fair
market value of the company’s shares should the co-shareholders
not
reach agreement on such value. Once the valuer’s valuation had been
communicated to the parties (as was done on 04 and 13 July
2018), the
valuation validly issued cannot, in the absence of a contractual
provision to the contrary, or agreement or waiver by
the parties
(neither of which is suggested), be withdrawn or cancelled by the
valuer to correct mistakes of fact or value in it.
The shareholders
agreement does not provide to the contrary; clause 5.1.8, if
anything, expressly confirms that there was to be finality
as far as
the valuer’s valuation was concerned. Once therefore the valuer had
issued his written valuation report, he was
functus officio
.
That being so, the valuer was not legally entitled unilaterally to
withdraw or cancel his valuation report and to issue one that
altered
and amended his definitive pronouncement of the fair market value of
the company’s shares.
[24]
To hold otherwise (as was done by the majority judgment in
Perdikis
)
would lead to uncertainty and a lack of finality; how many times then
may a valuer withdraw his or her valuation and issue an amended
one
to correct mistakes of fact or value in a previous one? Values of
finality and certainty are foundational, especially to administrative
law – even an unlawful and invalid administrative decision exists
in fact and has legal consequences until it is set aside by a
court
in proceedings for judicial review:
Oudekraal Estates (Pty) Ltd v
City of Cape Town and others
2004 (6) SA 222
(SCA) para 26 –
and to contract law.
[25]
Wearing her academic cap, now retired Justice of the Supreme Court of
Appeal, Carole Lewis, ‘
The
uneven journey to uncertainty in contract’
THRHR
Vol 76 (2013) 80, states:
‘
Bargains
struck by parties should in principle be observed. That is
foundational to our law of contract.’ There may be exceptions
where
public policy determines that the bargain is unconscionable as far as
any party to it is concerned. [That prevailing public
policy should
determine whether or not a contract is enforceable is a principle
applied for decades in South Africa: See in particular
Sasfin
(Pty) Ltd v Beukes
1989 1 SA 1
(A)
cited and followed regularly ever since. Since 1994 the values
informing public policy are also to be found in the Constitution.]
But where that is not so, commerce requires that parties to a
contract must observe it.
. . .
I would argue that the value of
certainty in commercial contracts is one that requires protection.
The principle that contracts
should be complied with (
pacta sunt
servanda
) is recognised for that reason. [See Brand and Brodie
“Good faith in contract law” in Zimmerman, Visser and Reid (eds)
Mixed legal systems in comparative perspective: Property and
obligations in Scotland and South Africa
(2004) 94.] And the
importance of the principle has been recognised by the Constitutional
Court on many occasions, notably in the
majority judgment in
Barkhuizen
.  [
Barkhuizen v Napier
[2007] ZACC 5
;
2007 5 SA 323
(CC) para 85.  See also, most recently, the minority judgment of
Zondo AJ in
Maphango v Aengus Lifestyle Properties (Pty) Ltd
2012
3 SA 531
(CC)]. That does not mean of course that all
pacta
are
enforceable.  Since Roman times, contracts that appear, on the
face of it, to be valid might be regarded as unenforceable
if they
offend public policy, or are induced by fraud undue influence and
duress.  This much is trite.
. . .
And if the parties have
identified a means of agreement (by a calculation or by reference to
a third party, as in
Letaba Sawmills
[
Letaba Sawmills
(Edms) Bpk v Majovi (Edms Bpk
1993 1 SA 768
(A) and
Southernport
[
Southernport Developments (Pty) Ltd v Transnet Ltd
2005
2 SA 202
(SCA)]) [see also
SAFCOL
[
South African Forestry
Co Ltd v York Timbers Ltd
2005 3 SA 323
(SCA) where the
respondent had frustrated the reference to arbitration and was held
to be in breach of contract] an important value
can be achieved –
giving substance to what they had bargained on; holding them to their
bargain. [See the authorities listed in
para 7 of the judgment in
Southernport
.]’
[26]
In their shareholders agreement the parties have identified a means
of agreement on the fair market value
of the company’s shares by
reference to the valuer identified by them, and they must be held to
their bargain. It is not suggested
that their agreement in that
regard offends public policy or is otherwise impeachable.
Similar to judicial and
quasi
-judicial determinations where it
is permissible for a court or arbitrator to address and correct an
obscurity, ambiguity, uncertainty,
clerical, arithmetical or other
error in a judgment or order or arbitral award without thereby
altering the sense and substance of
the judgment, order or arbitral
award (
Firestone
and
Friedman
), the same holds true for
written valuation reports issued by expert valuers (the minority
judgment in
Perdikis
and
Civair
). However, those
exceptions do not find application
in casu
.
[27]
I conclude, therefore, that subject to the above-mentioned
exceptions, and in the absence of a contractual
provision to the
contrary or agreement or waiver by the parties, whenever parties
agree to refer a matter to a valuer, then so long
as the valuer
arrives at his or her decision honestly and in good faith, the
decision is final and binding on them and they are bound
by it once
communicated to them. The valuer is then
functus officio
insofar
as the valuation and matters pertaining thereto are concerned.
That being so, the valuer is then not permitted to unilaterally
withdraw or cancel the valuation in order to alter or amend it.
Only a court has the power to interfere with the valuer’s
decision
in review proceedings. The judicial ambit of the court’s power to
interfere is severely circumscribed, and limited to
the narrow
grounds as enunciated in this court’s jurisprudence to which I have
referred.
[28]
In the result the following order is made:
(1)
The appeal is upheld with costs.
(2)
The order of the court a quo is set aside and replaced with the
following:
‘
(a)
The first
respondent is to pay the amount of R2 878 574.70 to the
applicant, being the purchase consideration for the sale
of his
shares in the second respondent to the first respondent.
(b)
The first
respondent is to pay interest at the rate of 10.25% per annum
a
tempore morae
on
the aforementioned amount from the date of this order until final
payment.
(c)
The first
respondent is to pay the costs of the application.’
P A MEYER
ACTING JUDGE OF
APPEAL
Appearances:
For
appellant:
CE Thompson
Instructed
by:
Chiba-Jivan Inc., Greenside, Johannesburg
Symington
De Kok, Bloemfontein
For
respondent:
IL Posthumus
Instructed
by:
Pagel Schulenburg Inc., Bryanston
Hill,
McHardy & Herbst Inc., Bloemfontein
[1]
The
parties agreed how the price should be determined and if it is
determined in accordance with the terms of their agreement they
are
naturally bound by it. When the determination of the price is made
erroneously, it offends against the fundamental foundation
of their
agreement, namely that the third determines a proper correct price.
Consequently, there is, practically speaking, no price
determined.
One of the essentialia of the agreement is lacking. There is then
not yet an agreement. It does, however, not
detract from the other
provisions of their agreement. If subsequently in such a case a
correct determination should fall from the
sky in accordance with
their prescripts, then in principle there cannot be any reason why
both parties would be bound by the agreement.
(Own translation.)
[2]
[
S]hould
fall from the sky. (Own translation).