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[2013] ZAFSHC 218
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Vlok v Silver Crest Trading 154 (Pty) Ltd and Others (2631/2013) [2013] ZAFSHC 218 (28 November 2013)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No. : 2631/2013
In
the matter between:-
JACQUES
VLOK
….........................................................................................
Applicant
versus
SILVER
CREST TRADING 154 (PTY) LTD
…................................
First
Respondent
MERCANTILE
BANK LTD
............................................................
Second Respondent
ENGEN
PETROLEUM LTD
…..........................................................
Third
Respondent
THE
REGISTER OF DEEDS
….......................................................
Fourth
Respondent
HEARD
ON:
7 NOVEMBER 2013
JUDGMENT
BY:
LEKALE, J
DELIVERED
ON:
28 NOVEMBER 2013
INTRODUCTION
AND BACKGROUND:
[1]
On the 9
th
September 2009 the applicant and the first respondent concluded a
Deed of Sale in terms of which the former sold an immovable property
to the latter for R10 million with the applicant, as the seller,
acknowledging prior receipt of R3 million as an advance on the
purchase price. The Deed of Sale provided,
inter
alia
, for transfer of the property in
favour of the buyer to take place upon payment or provision of
guarantee for payment of the balance
of the purchase price.
[2]
The second respondent ostensibly issued a guarantee for R7 million to
facilitate the sale. The mortgage bond over the relevant
property in
favour of the third respondent was cancelled on the 30
th
November 2009 when the transfer of the property to the first
respondent was registered by the fourth respondent.
[3]
Subsequent to registration of transfer the second respondent declined
to honour the guarantee on the ground that same was issued
fraudulently. The applicant, thereupon, elected to enforce the sale
agreement against the first respondent as opposed to cancelling
the
same. The third respondent, on its part, launched an
application seeking to reverse the transfer and restoring the
status
quo ante
under case number 6133/2009.
The applicant opposed the application but the matter was, eventually,
settled with the applicant
paying the third respondent the
outstanding bond amount. On the 6
th
June 2012 the applicant and the first respondent concluded a second
sale agreement in terms of which the latter sold the property
back to
the former without any purchase price changing hands. The first
respondent, however, failed to fulfil its side of
the bargain and the
applicant, eventually, launched the instant proceedings on the 4
th
July 2013 for the following relief:
“
1.
It is declared that
1.1
the contract of sale concluded
between Applicant and the First Respondent dated 2 January 2009,
alternatively 9 September 2009 was
lawfully cancelled;
1.2
the Contract of Sale concluded
between First Respondent and Applicant dated 6 June 2012 is valid and
binding between the First Respondent
and Applicant;
2.
First Respondent is ordered to sign all documentation necessary to
effect the transfer of the following property into the name
of the
Applicant forthwith and without any delay:
ERF
726 FRANKFORT, UITBREIDING 11,
DISTRIK
FRANKFORT, Provinsie VRYSTAAT
GROOT
8607 Vierkante Meter
(hereinafter
‘the property’
3.
Should First Respondent refuse and/or fail to sign the documentation
referred to in paragraph 2 above, the Sheriff of this Honourable
Court is authorized and ordered to sign such documentation on behalf
of the First Respondent;
4.
Costs of this application to be paid by First Respondent on the scale
as between attorney and client;”
[4]
The first respondent opposes the motion on,
inter
alia
, the grounds that, once it elected
to enforce the contract, the applicant is not entitled to
cancellation of the same and that
the contract of the 6
th
June 2012 is not enforceable because it does not comply with the
provisions of
sections 112
and
115
of the
Companies Act, 71 of 2008
.
[5]
No relief is sought against the second, third and fourth respondents
who, in turn, do no oppose the application, although the
third
respondent filed affidavits in which certain opinions, that do not
call for specific attention on the part of this court,
are expressed.
DISPUTE
[6]
The parties are in dispute over whether or not the applicant
cancelled the contract of the 9
th
September 2009 with the first
respondent contending that the same was never cancelled because no
proof, in the form of notice of
cancellation as prescribed by the
contract, exists and, further, that in any event the applicant is
precluded from cancelling the
contract after it elected to enforce
the same when the second respondent declined to honour the
guarantee. The applicant,
on his part, contends through Mr
Stoop, his counsel, that sufficient proof of such cancellation exists
in the form of a letter
from the parties’ erstwhile mutual
attorney insofar as registered mail is only required as proof that
the notice of cancellation
was given.
[7]
In the replying affidavit the applicant concedes that the contract of
the 6
th
June 2012 is not enforceable because it was not sanctioned by a
special resolution as required by the
Companies Act. The
applicant, further, contends in his reply that he remains the owner
of the property because ownership never passed to the first
respondent as a result of a common material error existing at the
time of the purported transfer to the effect that the guarantee
was
valid when, in fact, it was null and void.
[8]
The first respondent feels prejudiced by the averments in question,
among others, and contends that they constitute a new cause
of action
which cannot, in law and equity, be introduced at such a late stage.
It, therefore, filed for,
inter alia
,
those averments to be struck out. In oral submissions made on
his behalf, the applicant maintains that there exists no proof
of
prejudice to the first respondent if the allegations in question are
allowed to stand. His view is, further, that in any event
the
relevant averments sustaining the conclusion that he is still the
owner of the property are contained in his founding affidavit
insofar
as he,
inter alia
,
deposed that he was the owner of the property prior to the 30
th
November 2009 when the purported transfer was effected and the fact
that the guarantee, on the basis of which the same took place,
was
null and void is apparent
ex facie
the founding affidavit.
[9]
Mr Van der Walt, for the first respondent, further submits that
failure by the applicant to tender the R3 million paid in respect
of
the property is fatal to the applicant’s claim for
restitution. On behalf of the applicant, Mr Stoop handed in a
draft order providing,
inter alia
,
for the institution of action for recovery of the R3 million by the
first respondent at a later stage.
[10]
For the sake of convenience I shall deal with items against which
objections are raised together with issues in the instant
matter to
which they relate as and when I deal with such issues.
APPLICABLE
PRINCIPLES
[11]
Where parties to a contract agreed on the procedure to be followed to
cancel the same, none of them can, in law, terminate
the contract
without invoking the contractually prescribed procedure. (See
Bekker v Schmidt Bou Ontwikkelings CC
[2007] 4 ALL SA 1231
(C) par [17] and
Godbold
v Tomson
1970 (1) SA 60
(D) at 65C
– D.) Cancellation takes effect from the time it is
communicated to the other party. If it has not previously
been
communicated it takes effect from service of summons or notice of
motion unless the contract prescribes a particular procedure.
(See
Swart v Vosloo
1965 (1) SA 100
(AD) at 112F.)
[12]
In motion proceedings affidavits constitute both pleadings and
evidence and the applicant party’s case must be apparent
ex
facie
its founding affidavit so as to
enable the opposing party a fair opportunity to deal and engage with
the same in its answering
affidavit. The provisions of Rule
6(5)(e) of the Uniform Rules of Court are clear that for extra sets
of affidavits to be
filed leave of the court hearing the matter is a
prerequisite as Mr Van der Walt correctly points out. (See
Transnet Ltd v Rubenstein
2006 (1) SA 591
(SCA) par [28] and
Ferreira
v Premier Free State and Others
2000 (1) SA 241
(O) at 254C and
Papenfus
en ‘n Ander v Torre N.O. en Andere
2012 (5) SA 612
(T) at p 618C – H.)
[13]
It is correct, as submitted for the applicant that in law, in the
absence of a real agreement, a party to a purported sale
does not
become the owner of the
merx
despite an entry in the deeds
registry reflecting him as the new owner. (See
Bester
N.O. v Schmidt Bou Ontwikkelings
2013 (1) SA 125
(SCA) par
[11].)
[14]
As Mr Van der Walt correctly submits, where a breach of contract
occurs, the innocent party has an election to either cancel
the
contract or to enforce the same. Once he has made his election
he is bound thereby and cannot thereafter change his mind
to exercise
it the other way. (See
Segal v
Mazzur
1920 CPD 634
at 644 –
645 and
Peters v Schoeman
[2000] ZASCA 152
;
2001 (1) SA 872
(SCA) at 882.)
[15]
Where the innocent party has elected to enforce the contract as
opposed to cancelling the same and the defaulting party nevertheless
persists in the breach by failing to comply with an order for
specific performance, the innocent party is not obliged to institute
proceedings for committal for contempt but is at liberty to bring a
new action for cancellation. The order for cancellation
being
independent of the earlier one for specific performance. (See
Leaman v Kieswetter
1949 (4) SA 38
(C) and
Papenfus
v Luiken
1950 (2) SA 508
(O).)
FINDINGS
[16]
In argument the applicant contends that it was necessary for him to
rely on the
rei vindicatio
in
the replying affidavit because of the attack mounted against his
claim to the effect that his right to cancel has prescribed.
The first respondent, however, points out that no such necessity
existed because the applicant correctly and clearly pointed out
that
the right to cancel was not a debt as contemplated by the
Prescription Act, 68 of 1969
and, as such, could not prescribe.
[17]
It is correct that the introduction of a new cause of action in the
reply is unfair insofar as it amounts to litigation by
ambush. The
relevant allegations fall to be struck out for that reason. The
question is, therefore, whether or not the allegations
in the
founding affidavit sustain a claim for directing the first respondent
to sign documentation retransferring the property
to the applicant on
the basis that the property, in fact, still belongs to him. In
my view there exist no such averments
in the founding papers regard
being had to the fact that the applicant contends therein to the
effect that he was the owner of
the relevant property before the 30
th
November 2009
viz.
the
date of registration of transfer by the fourth respondent as opposed
to being the owner after the purported transfer.
As correctly
and effectively submitted by Mr Van der Walt, it is not, in my
opinion, fair to conclude on the basis of the common
facts that in
the light of the
Bester NO
decision transfer never took place without the attention of the first
respondent ever having been specifically directed thereto
in the
founding papers so as to enable it to deal pertinently with the
relevant allegations and contentions in its answer.
(See
generally
Ferreira v Premier Free
State and Others
,
supra
.
[18]
The applicant, further, enclosed an affidavit by the erstwhile
director of the first respondent with his replying affidavit
in which
the latter deposes to,
inter alia
,
the effect that she was advised on or about the 15
th
December 2009 by the relevant attorney that the applicant had
cancelled the Deed of Sale. The first respondent applies for
the striking out of those averments on the same grounds that they
belonged in the founding papers so as to afford it proper opportunity
to deal with the same in its answering affidavit. I agree and,
as such, strike the same out together with all other offensive
allegations set out in the first respondent’s application for
striking out.
[19]
It is common cause between the parties that the applicant elected to
enforce the contract following refusal by the second respondent
to
honour the guarantee furnished. The first respondent, however,
contends that as a result of such an election the applicant
is not
entitled to approbate and reprobate the contract at the same time by
seeking to cancel the same. The applicant retorts
that the
breach on the part of the first respondent is continuous and did not
end with the second respondent reneging on the undertaking
in
question. His case is that the contract was amended and the
first respondent undertook to effect monthly instalments pending
finalisation of the third respondent’s application under case
number 6133/2009. The first respondent disputes that
the
contract was amended and points out that the contract contains a
non-variation clause which requires any amendments or additions
to be
in writing and to be signed by both parties. I am not persuaded
that the alleged amendment was, in fact, effected insofar
as same was
not undertaken in accordance with the agreed procedure.
Contentions, on the part of the applicant, to the effect
that
depositions by him and the first respondent’s erstwhile
director constitute the contemplated written amendment beg the
question insofar as such depositions were made in the course of
litigation and as confirmation of the alleged amendment as opposed
to
effecting the actual amendment.
[20]
In the matter of cancellation of a contract the question is whether
or not the conditions on which the right to cancel the
contract are
dependent have been fulfilled. (See
Godbold
v Tomson
,
supra
,
at 64.) The contract between the parties provides for
cancellation in the event of a breach and further prescribes a
procedure
to be followed in such a case. The question is,
therefore, whether or not after the election the applicant carried
the same
through by securing an order for specific performance so as
to enforce his election. Only if the first respondent gave the
applicant cause to avail himself of the contractual opportunity to
opt out of the contract after he had implemented his election
to its
final effect by,
inter alia
,
approaching the court for an order for specific performance can the
applicant, in my view, move for cancellation. Mr Stoop
contends
that the breach in the instant matter is continuous and that no
further demand was necessary to place the first respondent
in
mora
. Mr Van der Walt, on the
part of the first respondent, maintains that as a result of his
election the applicant was not entitled
to cancel the contract for
reason of non-payment of the balance of the purchase price or any
part of it. I am not convinced
that cancellation, as a
contractual option, is available to the applicant at this stage
insofar as he has not yet exhausted his
elected option of specific
performance in vain. In my view the purported amendment of the
contract, further, effectively
attempted to uphold the applicant’s
election insofar as the parties agreed on, inter alia, the right of
the applicant to
insist on payment of the purchase price in the event
of the application under case number 6133/2009 being finalised in a
manner
which leaves the sale contract intact. The purported
amendment, as a distinct interim agreement between the parties, also
served
to delay the implementation of the applicant’s election
by giving the first respondent an opportunity to settle the balance
of the purchase price in monthly instalments pending finalisation of
the said application under case number 6133/2009.
[21]
Even if I am wrong in the aforegoing finding, I am satisfied that the
contract was not cancelled in December 2009 when the
applicant
instructed the parties’ erstwhile mutual attorney accordingly.
It is clear that the contract prescribes a
procedure for cancellation
in the form of a written notice sent to the defaulting party by
registered post. There exists
no proof of such notice having
been sent out and it is not the applicant’s case that same was,
in fact, sent. The applicant
or his agent was obliged to send
such a notice to the first respondent as prescribed. It is not
apparent
ex facie
the founding papers that the attorney in question sent the
contemplated notice to the first respondent for and on
behalf of the applicant. His letter to the applicant only confirms
the latter’s instructions relative to cancellation and
not
communication of the same to the first respondent. In the
absence of such proof the onus on the applicant is to prove
that the
first respondent nevertheless actually received the notice of
cancellation. No such proof existed as at the time
when the
first respondent filed its answer to the applicant’s claim. The
applicant can, in law, not cancel the contract by
way of notice of
motion present the agreed cancellation procedure.
ORDER
[22]
In the result the application is dismissed with costs inclusive of
costs of the application to strike out.
______________
L.
J. LEKALE, J
On
behalf of applicant: Adv B.C. Stoop
Instructed
by:
Schoeman
Maree Inc
BLOEMFONTEIN
On
behalf of first respondent: Adv D.J. van der Walt SC
Instructed
by:
Phatshoane
Henney
BLOEMFONTEIN