About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2013
>>
[2013] ZAGPPHC 39
|
|
Greyling and Another v Reid and Another (39248/2011) [2013] ZAGPPHC 39 (8 February 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT. PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
CASE
NO: 39248/2011
DATE:
08/02/2013
IN
THE MATTER BETWEEN:
LEONARD
GREYLING
....................................................................
First
Plaintiff
CARL
GREYLING
............................................................................
Second
Plaintiff
and
MAGRIETA
CAROLINA
REID
.........................................................
First
Defendant
OLOF
ABRAHAM SERVAAS VON LANDSBERG
.....................
Second
Defendant
JUDGMENT
LEDWABA
J:
[1]
On the 3rd of December 2009 and the 7th of December 2009 the
plaintiffs and defendants, respectively, signed a sale agreement
of
the shares of Clifton Dunes Investments 282 (EDMS) Beperk, (the
company).
[2]
In July 2011 the plaintiffs issued summons against the defendants
wherein they seek an order in the following terms:
“
1.
That a Declarator Order be issued whereby it is declared that the
Plaintiffs validly terminated the Written Agreement, annexure
“A”,
in terms of the provisions of clause 13 of the Agreement;
alternatively
2.
That a Declarator Order be issued whereby it is declared that the
Plaintiffs have validly cancelled the Agreement, annexure [I]
A”,
on 25 March 2010
3.
Payment of the amount of R100,000.00;
4.
Interest a tempore morae at the rate of 15.5% per annum from 25
February 2010 alternatively 26 March 2010 to date of payment;
5.
Cost of suit;”
[3]
The defendants are defending the action and pray that the plaintiffs
claim be dismissed with costs.
[4]
Mr Rudolf Greyling, the plaintiffs’ father and Mr J van der
Westhuizen of Jasper van der Westhuizen & Bodenstein Inc,
Plaintiffs attorneys of record, testified to support the plaintiffs’
claim. After the plaintiffs closed their case. Ms Adri
Strydom of
Pule Incorporated, the defendants Attorneys of record, testified for
the defendants and the defendants closed their
case.
[5]
The purchase prize for the shares and loan accounts of the company
was R4 000 000 (four million rand) payable as follows:
1.
An amount of R100 000 (One hundred thousand) to be paid within 7 days
as a deposit to the defendants’ attorneys trust account
in an
interest bearing account.
2.
The balance of R3 900 000 (Three million nine hundred thousand rand)
to be paid on the date upon which the full purchase price
would be
paid.
[6]
The plaintiffs did pay the deposit of R100 000 (one hundred thousand
rand) in terms of clause 2.1 of the agreement.
[7]
The main issue in this matter is regarding the validity of the
cancellation of the contract by the parties. The plaintiffs alleged
that their cancellation of the contract is based on the provisions of
clause 13 of the contract and that they were therefore entitled
to
the refund of the deposit, alternatively they alleged that the
defendants repudiated the contract in terms of their letter dated
25
March 2010 addressed to the plaintiffs attorney, see page 39 of
bundle A, and the plaintiffs accepted the alleged repudiation,
see
page 41 of bundle A.
[8]
On the contrary the defendants denied that the plaintiffs were
entitled to cancel the contract on the basis set out in the
plaintiffs’ attorneys letter on page 36 of Bundle A. The
defendants’ attorneys also regarded the plaintiffs conduct
set
out in the letter of cancellation as a repudiation. The defendants’
attorneys in the letter dated 22 February 2010 on
page 53 of Bundle B
further said the following:
“
To
enable us to properly advise our client as to whether or not to
accept the purchasers’ repudiation and without acknowledging,
in any manner whatsoever, that the agreement between our clients
entitles your client to resile from the agreement on the basis
that
the seller’s balance sheet discloses an “unacceptable
risk” to your client, we request that you advise in
precisely
what respect it is contended that an “unacceptable risk”
exists. ”
[9]
I will now summarize the evidence of the plaintiffs’ witnesses.
Mr Rudolf Greyling testified that he is in business of
purchasing
farms, revamping them to make them to be productive, and he would
thereafter sell them. The first and second plaintiffs,
his sons, gave
him a power of attorney to deal and negotiate the purchasing of the
shares in the company or the farm.
[10]
He opted to purchase the shares in the company to avoid the payment
of transfer duty.
[11]
Mr van der Westhuizen proposed to the defendants’ attorneys
that clause 13 of the contract should be inserted as early
as on the
23 November 2009 before the contract was signed. Furthermore he
urgently requested the balance sheets of the company
before the
contract was finalized and signed. On the 1st of December 2010 he
sent an email to the defendants’ attorneys requesting
the
company’s balance- sheet.
[12]
The defendants’ attorneys sent the unaudited statements to the
plaintiffs’ attorneys on 18 January 2010 and further
informed
them that there may be an overstatement on the loan account of
approximately R150 000 (one hundred and fifty thousand
rand) which
would be rectified by the auditors.
[13]
On 5 February 2010 the plaintiffs’ attorney sent a letter to
the domicilium address of the defendants and to their attorneys
wherein they were informed that in terms of clause 13 of the
agreement the balance-sheet of the company, duly signed were to be
delivered within 30 days. The defendants were given 7 days to comply,
failing which the contract would be cancelled. (See Bundle
B pages 29
and 30)
[14]
On about the 10th of February 2010 the defendants’ attorneys
sent the audited balance-sheet duly signed to the plaintiffs’
attorneys.
[15]
Importantly, in the letter dated 24 February 2010 the plaintiffs’
attorneys wrote to defendants’ attorneys and
informed them that
the plaintiffs’ instructions are that the balance-sheet
disclosed unacceptable risks for them and they
do not wish to
continue with the purchase of the shares anymore. The said letter
served as notice to cancel the agreement in terms
of clause 13 of the
agreement. The deposit was also claimed.
[16]
Mr Greyling further testified that because he was concerned about the
non-delivery of the balance-sheet timeously, and the
defendants’
mentioning of an overstatement on the loan account in the unaudited
statements, he instructed his attorneys to
cancel the contract
because he was prejudiced in that he wanted to continue with other
projects and could not wait indefinitely
for the balance-sheet. He
further said he cancelled the contract because he was advised that
the capital gains tax was too high.
[17]
Mr Greyling further testified that in March 2010 he, together with
the second plaintiff, met with the first defendant at the
farm. They
had a discussion about the farm and he (Mr Greyling) decided to
negotiate a deal to buy the shares in the company owning
the farm in
his personal capacity. A Draft contract of sale was exchanged between
the attorneys but ultimately a new contract was
not signed.
[18]
I pause to state that the new contract involved a new purchaser and I
cannot regard it as being relevant to the issue that
I need to decide
between the parties in respect of which parties cancellation is valid
and the consequences thereof.
[19]
Mr van der Westhuizen testified that he has been an attorney since
1978 and the plaintiffs have instructed them in various
matters. He
said when he deals with a contract involving a sale of shares of a
company he is very careful and he insists on getting
a balance-sheet
which he would also discuss with an auditor.
[20]
In the e-mail sent to Mr Tjaka Erasmus the estate agent, he insisted
that the balance-sheets should be furnished and further
proposed that
it be a condition in the contract, (see bundle B page 6)
[21]
Mr Van der Westhuizen said his clients wanted the deal to be
finalized as soon as possible. The balance-sheet that was requested
in November 2009 had not yet been furnished in mid January 2010 his
client and himself were ‘onrustig’ concerned. He
further
said the issue of the loan accounts in the unaudited balance sheet
raised some question marks.
[22]
In February 2010 plaintiffs instructed him to put the defendants on
terms (see bundle B p29-30) and he further said after receiving
the
balance-sheet he referred them to an auditor. Thereafter he advised
the plaintiffs accordingly and they instructed him to cancel
the
agreement. He said the issue of purchasing land mentioned in clause
13 was not discussed with the defendants’ attorneys.
[23]
It should be noted that the alleged repudiation mentioned in the
defendant’s attorneys letter dated 22 February 2010,
see bundle
B page 53 was not formally accepted by the defendants.
[24]
During cross-examination the defendants’ counsel strongly
challenged Mr Van der Westhuizen that the capital gains tax
could not
be an issue or a risk on the transaction because it was a legal
requirement to pay same. His response was simply that
the plaintiff
considered same as a risk.
[25]
He was further challenged on why did they not respond to the
defendants’ attorneys letter dated 22 February 2010 (see
bundle
B page 53) as to what was the unacceptable risk mentioned in annexure
B of bundle A. His response was that the contract
had already been
cancelled.
[26]
I will first deal with the issue of whether the cancellation by the
plaintiffs based on clause 13 is valid. The said clause
reads as
follows:
“
Die
VERKOPERS sal binne 30 (DERTIG) dae hiervan die 2009 balansstate van
die MAATSKAPPY voorle aan die KOPERS welke balansstate
deur die
Direkteure goedgekeur en onderteken moet wees. Sou dit blyk dat die
balansstate onaanvaarbare laste of onuitgekeerde winste
bevat of
items wat die transaksie op risiko plaas, sal die KOPERS geregtig
wees om die ooreenkoms te kanselleer en sal die bepalings
van
klousule 2.1 nie van toepassing wees nie. Die MAATSKAPPY verleen dan
aan die kopers of hulie genomineerdes die opsie om die
bates van die
MAATSKAPPY aan te koop op dieselfde terme en voorwaardes en kooprys
as in hierdie ooreenkoms welke opsie binne 14
(VEERTIEN) dae
uitgeoefen moet word na datum waarop die ooreenkoms gakanselleer is.
”
(It
was agreed that in clause 13 reference to clause ‘2.1’ is
incorrect and it should read clause ‘2.2’.)
[27]
I understood Advocate Shepstone, for the defendants, submission to be
that the second sentence in clause 13 “Sou dit
blyk dat die
balansstate onaanvaarbare laste of onuitgekeerde winste bevat of
items wat die transaksie op risiko plaas, sal die
KOPERS geregtig
wees om die ooreenkoms te kanselleer en sal die bepalings van
klousule 2.2 nie van toepassing wees nie” does
not give the
plaintiffs the sole subjective discretion to decide on the existence
of an unacceptable risk in the balance-sheet
and he further submitted
that alleged risk should arise from the items in the balance sheet.
[28]
He further submitted that the contract does not specifically state
that it is only the plaintiffs (Kopers) who should decide
whether an
unacceptable risk exists. He reinforced his argument by stating that
the plaintiffs’ attorneys failed to respond
to the request that
they should explain why do they allege that an unacceptable risk
exists.
[29]
I carefully perused the provisions of clause 13. In my view, the
language used is clear. The balance-sheet had to be submitted
within
30 days and the defendants failed to comply. The plaintiff had the
discretion to cancel the contract if there were “unacceptable
risks”. The contract does not state that ‘as to whether
unacceptable risks exists or not’ the plaintiffs (kopers)
and
the defendants (verkopers) had to agree or decide on same. I cannot
find any repugnance or inconsistency when clause 13 is
read with the
rest of the contract. See Cooper and Lybrand and Others v Brynt
[1995] ZASCA 64
;
1995
(3) SA 761
AD.
[30]
When the court asked the defendants’ attorney (Ms Strydom) if
the plaintiffs had the discretion to cancel the agreement,
she,
correctly in my view, said they had the discretion.
[31]
The evidence clearly shows, in my view, that clause 13 was inserted
for the benefit of the plaintiffs. Mr van der Westhuizen
testified
that he is the one who proposed that the clause be inserted. He
further explained that he was instructed to cancel the
contract after
the balance-sheet was referred to an auditor.
[32]
In the pre - trial minutes the defendant requested the plaintiff to
disclose the particulars of the unacceptable risk disclosed
by the
balance-sheet and the plaintiffs response was the following:
“
2.1
Despite requests made to the Defendants by the Plaintiffs, their
attorney and Mr Tjaka Erasmus, to provide the financial statements
of
the company since November 2009, the Defendants failed and or refused
to do so until 10 February 2010, and only after written
demand was
made to do so.
2.2
The Defendants provided the Plaintiffs with unaudited statements and
unsigned statements, on 18 February 2010.
2.3
The defendants only supplied the Plaintiffs’ attorney with
signed and audited statements, signed and dated 5 February
2010, on
10 February 2010.
2.4
The audited and signed statements differed markedly from the
unaudited statements.
2.5
The Plaintiffs had the reasonable apprehension that no proper
accounting records were kept by the company, which could place
the
company and its directors at risk.
2.6
The company was at risk to pay substantial tax of a capital nature,
if the property was to be sold at a future date. ”
[33]
Despite the fact that the plaintiff had the discretion to decide if
there was any unacceptable risk, I think their reasons
for cancelling
the contract may not be regarded as unreasonable.
[34]
The plaintiffs’ cancellation of the contract was, in my view,
properly and legally cancelled in terms of clause 13 and
the
plaintiffs should be refunded the deposit of R100 000 (one hundred
thousand rand).
[35]
There is no merit in the reasons advanced by the defendants that the
plaintiffs were not entitled to cancel the agreement and
that there
was a repudiation.
[36]
In the particulars of claim the plaintiff alleged that:
‘‘
If
it was evident from the balance sheet that the company had
unacceptable liabilities or undistributed profits or any other items
which may place the transaction at risk, the Plaintiff shall be
entitled to cancel the agreement in which event the provisions
of
clause 2.2 shall not be applicable (clause 13). ”
[37]
The defendants admitted the said allegations in the plea and in
respect of paragraph 9 even if the defendant pleaded or raised
as a
defence that there were no unacceptable risks, the defendants never
alleged that the plaintiffs’ view that there were
unacceptable
risk was unreasonable and unfounded.
[38]
I therefore think it is not necessary for me to deal with the
plaintiffs’ alternative claim based on the defendants’
repudiation, because the contract had already been canceled nor is it
necessary to deal with the defendants grounds of cancelation
of the
contract, because the contract had already been cancelled.
[39]
The plaintiffs have succeeded on the balance of probabilities to
prove their claim.
[40]
I make the following order:
1.
The plaintiffs validly terminated the contract, (annexure A) in terms
of the provisions of clause 13 of the Agreement.
2.
Defendants are jointly and severally liable to pay the plaintiffs an
amount of R100 000 (one hundred thousand rands).
3.
Defendants are jointly and severally liable to pay interest on the
amount in order 2 above at the rate of 15.5% per annum from
the 25th
of February 2010.
4.
The defendants are jointly and severally liable to pay the
plaintiffs’ costs.
A
P LEDWABA
JUDGE
OF THE HIGH COURT
HEARD
ON: 28 January 2013 FOR THE PLAINTIFF: Adv L de Beer
INSTRUCTED
BY: Jasper van der Westhuizen & Bodenstein Inc,
Pretoria
FOR
THE FIRST DEFENDANT: Adv R Shepstone
INSTRUCTED
BY: Pule Incorporated, Pretoria