About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2012
>>
[2012] ZAFSHC 217
|
|
Gushman NO and Another v Traut NO and Others (3981/2012) [2012] ZAFSHC 217 (22 November 2012)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 3981/2012
In
the matter between:-
LARRINGTON
PHENDULE GUSHMAN N.O.
.....................
1
st
Applicant
MPOYANA
LAZARUS LEDWABA N.O.
.............................
2
nd
Applicant
and
LOUIS
JONAS TRAUT N.O.
.
..........................................
1
st
Respondent
WALTER
SCHULTZE N.O.
............................................
2
nd
Respondent
CENTREPOINT
DEVELOPMENTS (PTY) LTD
..............
3
rd
Respondent
_____________________________________________________
JUDGMENT BY:
DAFFUE, J
_____________________________________________________
HEARD ON:
18 OCTOBER 2012
_____________________________________________________
DELIVERED ON:
22 NOVEMBER 2012
_____________________________________________________
INTRODUCTION
[1] Applicants, being the
two trustees of the Gushman Family Trust, launched this application
on an urgent basis. The first two
respondents are the trustees of the
Erf 4120 Trust. Third respondent is Centrepoint Developments (Pty)
Ltd. 49% of third respondent’s
shares are held by the
applicants on behalf of the Gushman Family Trust and 51% by first and
second respondents on behalf of the
Erf 4120 Trust. For the sake of
convenience first and second respondents will be referred to herein
as “respondents”
and third respondent as “Centrepoint”.
[2] Applicants firstly
seek rectification of a written cession agreement entered into
between them and the respondents, secondly,
confirmation that this
written cession agreement and an associated oral agreement have been
terminated by them and thirdly, that
respondents be ordered to
transfer their 51% shares in Centrepoint to applicants against
payment of the amount of R6 968 506,65.
THE ISSUES
[3] The application was
brought on the basis of alleged urgency. Urgency was put in
contention by respondents. I must mention that
it should have become
evident to applicants in June or early July 2012 already that a
deadlock has arisen. Notwithstanding this
they waited till 24 August
2012 to issue their letter of demand. Instead of responding
immediately to respondents’ reply
of 30 August 2012, they
failed to communicate their election to cancel forthwith, but did so
only about three weeks later. I indicated
to counsel representing the
parties, adv Vorster SC on behalf of applicants and adv Reinders on
behalf of respondents, that I shall
entertain the application and
adjudicate the merits insofar as the parties fully canvassed the
relevant issues in the affidavits
and the heads of argument contained
thorough argument on the merits. Mr Reinders also conceded that there
was no further evidence
available to respondents that needed to be
placed on record and he had sufficient opportunity to prepare proper
argument. Prayer
1 of the notice of motion is therefore granted.
[4] The next issue, being
the application for rectification of the written cession agreement is
not contested. Respondents indicated
there was no need to launch an
application to obtain this relief as they would have agreed thereto
if requested. As the merits
of the matter are conceded, prayer 2 of
the notice of motion should be granted.
[5] The nub of the
dispute is whether applicants are entitled to confirmation of their
cancellation of the written cession agreement
and associated oral
agreement and if so, whether restitution should be ordered on the
basis contained in prayer 4 of the notice
of motion. Applicants aver
that respondents repudiated these agreements, entitling them to
confirmation of their cancellation thereof.
Alternatively applicants
rely on respondents’ breach of contract and their subsequent
cancellation once respondents were
placed in
mora
and failed
to rectify their breach. Consequently they allege that they are
entitled to restitution, i.e. that the parties must
return what they
have received, the effect being that respondents must transfer their
51% shares in Centrepoint which they have
received from applicants
against payment of the amount of R6 968 506,65.
SUMMARY OF THE
FACTS
[6] The following is a
summary of the facts as averred by the parties:
On behalf of
applicants:
Initially Mr Gushman,
the first applicant, held 26% of the shares in Centrepoint and the
Gushman Family Trust 74%.
The Mbhashe Municipality
invited tenders for the development of affordable housing in a
development known as Mzam-omhle. Centrepoint’s
bid was
accepted and following that three agreements were entered into by
Centrepoint with the municipality during the period
August 2009 to
June 2010, to wit a land availability agreement, a development
agreement and finally a deed of sale.
Centrepoint was required
to provide full services within the township at its own costs. A
total number of 1 300 residential units
would be developed.
Prior to the conclusion
of the deed of sale first applicant on behalf of Centrepoint
conducted negotiations with first respondent
in his personal
capacity which negotiations culminated in an oral agreement being
concluded between the Gushman Family Trust
and the Erf 4120 Trust.
In terms hereof the Gushman Family Trust would transfer 51% of the
shares in Centrepoint to Erf 4120
Trust and in return the last
mentioned trust would act as financier of Centrepoint in respect of
the aforesaid development until
outside funding is sourced and for
the latter purpose to provide security.
It was also agreed that
first respondent in his personal capacity would be appointed as
director of Centrepoint and would act
as chairman of the board of
directors. First respondent also had to approve a viable development
project budget and authorise
all payments due and payable by third
respondent.
It is applicants’
case that first respondent was appointed as director and chairman of
Centrepoint’s board of directors,
that several meetings took
place thereafter and that Centrepoint approved the budget for
township development and the costs of
the professional team.
On 7 September 2010 a
written cession agreement was concluded in terms whereof 51% shares
in Centrepoint held by the Gushman Family
Trust were ceded to Erf
4120 Trust.
Although the development
came of the ground it appeared in May/June 2012 that first
respondent was dissatisfied with a number
of aspects of the project
and he made it clear that no further payments would be made for and
on behalf of Centrepoint until
the problems within the company were
solved.
Creditors and in
particular members of Centrepoint’s professional team were not
prepared to wait for payment and indicated
that they would proceed
with legal action. Consequently applicants forwarded a letter of
demand dated 24 August 2012 to respondents
who did not adhere to the
demands for reasons contained in their written reply of 30 August
2012. Nineteen days later applicants
communicated their cancellation
of the contracts to respondents due to their persistent repudiation
thereof.
Facts relied on by
respondents:
It is denied that an
associated oral agreement existed between the parties as alleged by
applicants as the oral agreement was
superseded by the written
cession agreement. In this regard respondents rely on clauses 9.2
and 9.4 of the written cession agreement
which read as follows:
“
9.2 No
provision of this cession may be amended, substituted or otherwise
varied, and no provision may be added to or incorporated
in this
cession, accept by an agreement in writing, signed by the duly
authorised representatives of the parties.
9.4 This agreement supersedes all
prior representations, communications, negotiations and
understandings between the parties concerning
the subject matter of
this cession.”
(xi) It is alleged that
the written cession agreement is on a proper interpretation thereof a
contract for the benefit of a third
party, being Centrepoint. It was
Centrepoint that intended to develop and who needed financing. It is
also averred that the applicants
were not entitled to cancel the
agreement. In any event Centrepoint who received the benefits was not
cited as an applicant in
the application.
(xii) It is denied that
respondents repudiated the agreement or are in breach thereof and
that applicants had any reason to cancel
it. It is respondents’
case that disputes have arisen as a result of management problems
within Centrepoint insofar as first
applicant took several decisions
with financial repercussions on behalf of the company without any
authorisation and expected respondents
to settle the expenses without
questioning.
The loan account of
Centrepoint is not the amount of R6 959 660,62 (the amount stated in
the notice of motion which was amended
during argument to R6 968
506,65 at the request of Mr Vorster with Mr Reinders’
consent), but R10 553 063,92.
First applicant is
accused of taking decisions on behalf of Centrepoint without
authorisation and the knowledge or consent of
first respondent and
several examples are quoted. It is specifically alleged that
Centrepoint’s directors did not approve
the budget for the
development reflected in annexure “FA 12.1 on 16 January 2012.
First respondent is
inter alia
dissatisfied with the appointment of a third party
(DLR) as building contractor to assist HBT, the appointed contractor
insofar
as his consent was not sought and Centrepoint has not taken
any decision in this regard. Furthermore the number of residential
units has been decreased from 1 300 to 1 000, which will have a
negative impact on profit, without a proper resolution being
taken.
Added to this, the costs of the development increased to more than
double the amount initially budgeted.
It is respondents’
viewpoint that the directors of Centrepoint urgently need to take
proper resolutions pertaining to the
project and that this
application should fail for the reasons advanced.
It is alleged that the
value of the development has increased tremendously and
consequently, the shares in Centrepoint became
substantially more
valuable due to respondents’ financial contributions. Finally
it is respondents’ case that financial
assistance should be
given in a responsible manner and in accordance with proper
resolutions taken by Centrepoint and it cannot
be expected of them
to finance a project or to pay for faulty work or settle expenses
which were never agreed upon by Centrepoint.
FINDINGS OF FACTS
[7] No proper resolutions
of Centrepoint’s board of directors have been placed before the
court as proof of respondents’
obligations to make the payments
which are due and payable as alleged.
[8] No amounts have been
paid by respondents in their capacities as trustees of the Erf 4120
Trust to applicants in their capacities
as the trustees of the
Gushman Family Trust or to their duly authorised agents, either in
terms of the written cession agreement
or the alleged associated oral
agreement.
[9] The payments that
were made by respondents have been paid over to third parties for and
on behalf of Centrepoint and these payments
are indicated in the Erf
4120 Trust’s loan account with Centrepoint.
[10] Respondents refused
to make any further payments since the meeting in June 2012, the
reason being that they were dissatisfied
with the manner in which
transactions were being concluded without resolutions being adopted
by Centrepoint’s board of directors.
[11] Respondents are
prepared to continue with the project, but want to be safe-guarded.
The only way to ensure this is to rectify
the dispute pertaining to
Centrepoint’s management. Although first respondent is the
chairman of the board of directors of
the company and representative
of the majority shareholder, it is evident from the minutes of the
meeting of 4 May 2012 in particular
that first applicant regards
himself as managing director and the person who may act on behalf of
the company. The dispute between
the parties is clearly a management
problem.
LEGAL ARGUMENT OF
THE PARTIES
[12] Mr Vorster argued on
behalf of applicants that the communications by and on behalf of Erf
4120 Trust constituted a repudiation
by the Trust of the oral
agreement between the parties and to the extent necessary, the
written cession agreement. He correctly
pointed out that a subjective
intention to repudiate is not a requirement, but the test is whether,
objectively considered, the
conduct complained of
“fairly
interpreted
(it)
exhibits a deliberate and unequivocal
intention no longer to be bound”
with reference to
VAN ROOYEN v MINISTER VAN OPENBARE WERKE EN
GEMEENSKAPSBOU
1978 (2) SA 835
(A) at
845A – B.
[13] He submitted that,
apart from repudiation, the Erf 4120 Trust was placed
in mora
and given a notice of rescission to which it did not respond
positively and consequently applicants duly cancelled the agreements.
[14] Mr Vorster argued
further that as a result of the termination of the agreement between
the parties they, as a matter of law,
must effect restitution of what
they received. He relied on
BAKER v PROBERT
1985 (3) SA
429
(A) at 438G – 439C. Upon my enquiries Mr Vorster indicated
that his clients did not have the amount of R6 968 506,65 which
they
tendered immediately available, but that they needed to obtain
financial assistance and required four weeks from date of my
order,
should I find in their favour, and the order should provide
accordingly.
[15] Mr Vorster conceded
that the remedies of the
Companies Act, 71 of 2008
and
sections 163
,
165
or
166
in particular could have been opted for by the
dissatisfied shareholders and director of Centrepoint, but he argued
that the available
relief is discretionary in nature and that it
would serve the interest of applicants better to apply for
contractual relief based
on repudiation or breach of contract.
[16] Pertaining to
respondents’ viewpoint that the oral agreement between the
parties has been superseded by the written cession
agreement, Mr
Vorster argued that clause 9.4 of this agreement was not wide enough
for such a construction in that it relates to
“the subject
matter of this cession” only. He submitted that the duty to
cede arose from the oral obligationary agreement
and the counter
performance which Erf 4120 Trust had to make for receiving the shares
was to provide funding in respect of the
development until
alternative funding was sourced. As such the obligation to render
counter performance did not concern the subject
matter of the cession
and therefore the oral agreement has not been superseded.
[17] In the alternative
Mr Vorster argued, based on
VEENSTRA_v COLLINS
1938 TPD
458
, that where an oral agreement induced one of the parties to enter
into the main agreement, the oral agreement might be proved. He
also
submitted that no reason exists why parties may not make two
agreements, one written and one oral, dealing with closely connected
subjects. Consequently he submitted that the oral agreement
co-existed with the written cession agreement and that it was not
superseded by it.
[18] Mr Vorster responded
to the allegation on behalf of respondents that the cession was a
contract for the benefit of a third
party by submitting that it is
trite law that the
stipulator
drops out of the arrangement
after the third party has accepted the promise and that the written
cession agreement cannot be interpreted
in this manner as the Gushman
Family Trust did not fall out of the picture or intended to do so.
[19] Mr Reinders
submitted that the written cession agreement is a contract for the
benefit of a third party in terms whereof respondents
agreed to
finance Centrepoint. He relied on
SAGE LIFE
LTD v VAN DER MERWE
2001 (2) SA 166
(W)
to bolster his argument that in the case of a contract for the
benefit of a third party one of the parties to the contract
does not
necessarily fall out of the picture.
[20] Mr Reinders
emphasised that Centrepoint is not an applicant in the application
and that it, as a party thereto, did not cancel
any agreements with
respondents. He submitted that it is Centrepoint’s prerogative
to take action against respondents for
failing to supply it with
financing allegedly agreed upon.
[21] Mr Reinders
submitted further that the application had to be considered in
accordance with the
PLASCON-EVANS
-rule
and with that in mind, there is at least serious factual disputes
pertaining to the nature of the contractual relationship
between the
parties, whether repudiation or breach of contract occurred and the
amount which was paid on behalf of Centrepoint.
He urged me to find
that there was no repudiation or breach of contract and that the
respondents merely made it clear that they
were not prepared to pay
for expenses not resolved by Centrepoint.
LEGAL PRINCIPLES
DEED OF SALE
[22] Two essential
elements must be present for a contract of sale to exist, to wit the
thing sold and the price agreed upon. There
must be agreement in
respect of these requirements. See
LAWSA
, Vol 24, par 1. Save
for these
essentialia
, parties commonly agree on further terms
and obligations from time to time. It is important to establish the
nature of the agreement
in casu
and its terms in order to
continue with a further investigation as to whether or not
respondents repudiated or breached the agreement(s)
as alleged by
applicants.
REPUDIATION
In
INRYBELANGE
(EDMS) BPK v PRETORIUS
1966 (2) SA 416
(A) at 427 and
VAN
ROOYEN v MINISTER VAN OPENBARE WERKE EN GEMEENSKAPSBOU
,
loc cit
,
the Appellate Division (as it then was) approved of the following
dictum
by
Williamson J in
STREET v DUBLIN
1961 (2) SA 4
(W) at 10:
“
The
test as to whether conduct amounts to such a repudiation (as
justifies cancellation) is whether fairly interpreted it exhibits
a
deliberate and unequivocal intention no longer to be bound;”
Rabie JA put it as
follows in
VAN ROOYEN
,
loc cit
, at 845 –
846:
“
Om
'n ooreenkoms te repudieer, hoef daar nie
...
'n
subjektiewe bedoeling te wees om 'n einde aan die ooreenkoms te maak
nie. Waar 'n party, bv, weier om 'n belangrike bepaling
van 'n
ooreenkoms na te kom, sou sy optrede regtens op 'n repudiëring,
van die ooreenkoms kon neerkom, al sou hy ook meen
dat hy sy
verpligtinge behoorlik nakom.”
REMEDIES IN RESPECT OF
REPUDIATION OR BREACH OF CONTRACT
[23]
The innocent party has several remedies,
inter
alia
the right to cancel and to claim
restitution. According to Christie,
The
Law of Contract in South Africa
, 6
th
Edition, p 561, restitution by either or both
parties should be ordered only to the extent necessary to avoid
unjust enrichment
although he sounded a word of caution with
reference to the following
dictum
of Botha JA in
BAKER
v PROBERT
loc cit
at 438J:
“
a
claim for restitution of performance following on cancellation of a
contract for breach is not a
condictio
.”
There is a distinction
between a restitutionary claim and one in enrichment. The following
dictum
of Botha JA at 438H, is also apposite:
“
It
is not open to doubt that a purchaser, who has validly cancelled a
contract of sale on the ground of the seller's breach of it,
is
entitled in principle to claim repayment of the purchase price,
paid to the seller in terms of the contract prior to its
cancellation. The purchaser's right to claim repayment obviously
exists also where payment of the purchase price was made, not
to the
seller in person, but to his duly authorised agent, since payment to
an agent is equivalent in law to payment to the principal.
”
CESSION
[24] Mr Vorster opted to
differentiate between the oral agreement entered into between the
parties and the written cession agreement.
In order to deal with his
argument later it is necessary to briefly deal with the authorities
in this regard. As Nienaber put it
in
LAWSA
, 2
nd
Edition,
Part 2
, par 8, bilateral consensual juristic acts can be
classified as a) obligationary agreements whereby one or more
obligations are
created such as contracts of sale, b) absolving
agreements whereby obligations are discharged such as payment and c)
real agreements
whereby rights are bilaterally transferred such as
the delivery of corporeal or the assignment of immaterial property.
The right
to cession is created in the obligationary agreement whilst
the real agreement is the actual transfer agreement or simply called
the cession. The undertaking to cede and the actual cession often
co-incide and are consolidated in a single document causing the
distinction between the obligationary agreement and the actual
cession to become blurred.
[25] Cession, being an
act of transfer and not an agreement creating obligations, is not
capable of termination in the ordinary
sense. If the underlying
obligationary agreement is cancelled, the cessionary may become
obliged to re-cede the right if the cession
has been implemented. See
LAWSA
,
loc cit
, par 57.
CONTRACT FOR THE BENEFIT OF A
THIRD PARTY
[26]
Unlike as argued by Mr Reinders, the court did not find in
SAGE
LIFE LTD
,
loc
cit
, that once the
third party has accepted the benefit and stepped in, one of the
original parties does not necessarily fall out of
the picture. The
aspect was specifically left open. See p 168H of the judgment. Kerr,
The Principles of
the Law of Contract
,
6
th
Edition, at p 89 refers to two kinds
of contracts for the benefit of a third person, i.e. simple and
complex contracts. In the first
instance, the contract between the
two parties imposes on the one party only one obligation, namely to
keep open the offer for
acceptance by the third party, which is the
subject matter of the contract. Once the third party accepts the
offer, a new contract
comes into being between such third party and
the other party and the old contract between the two original parties
ceases to exist.
In the complex form the contract imposes a number of
obligations on the one party of which at least one is to keep open
the contract
for acceptance by the third party and if it is accepted,
a contract comes into being between the other and the third party
whilst
the original contract between the original parties still
exists. See also
MPAKATHI v KGHOTSO
DEVELOPMENT CC AND OTHERS
2003 (3) SA 429
(W) at 434 – 436. According to Christie,
loc
cit
at 278 with reference to
NEW
CONSORT GOLD MINES LTD v KRITZINGER
1930
TPD 251
at 260, when it is doubtful whether a contract is intended to
be for the benefit of a third party, the fact that the contract
confers
powers on the promisee will point against such a conclusion.
THE STATUS OF THE ORAL AGREEMENT
[27] Where parties
decided to embody their agreement in a written document or in
instances where a contract is by law required to
be in writing, the
document itself becomes the sole memorial of the terms of the
transaction which it was intended to record. In
the absence of a
claim for rectification extrinsic evidence as to the terms of the
agreement or the intention of the parties is
generally irrelevant and
inadmissible. A collateral oral agreement not inconsistent with a
written contract entered into between
the parties may be proved as
long as that oral agreement does not alter, add to or vary the
written contract. See
DE VILLIERS v McKAY NO AND ANOTHER
[2008] ZASCA 16
;
2008 (4) SA 161
(SCA) at para
[4]
of the judgment with reference to a
clause similar to clause 9.4
in casu
and also the following
dictum
in
DU PLESSIS v NEL
1952 (1) SA 513
(A)
at 538A:
“
If
you wish to prove that anything less or more than that which is
promised in the written contract was promised in an oral contract
prior to or simultaneously with the execution of the former, you seek
to contradict, vary, add to or subtract from the terms
of the
instrument, if words mean anything, and if that were permissible, the
rule may as well be cast overboard since it would
have become a
delusion.”
See also in general
Christie,
loc cit
, p 200 – 212.
INTERPRETATION OF CONTRACTS
[28] The Supreme Court of
Appeal recently summarised the approach to be followed in the
interpretation of written instruments such
as contracts and I quote
the following from the judgment of Wallis JA:
“
Whatever
the nature of the document, consideration must be given to the
language used in the light of the ordinary rules of grammar
and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed; and the material known to
those
responsible for its production. Where more than one meaning is
possible, each possibility must be weighed in the light of
all these
factors. The process is objective, not subjective. A sensible meaning
is to be preferred to one that leads to insensible
or unbusinesslike
results or undermines the apparent purpose of the document.”
See
NATAL
JOINT MUNICIPAL PENSION FUND v ENDUMENI MUNICIPALITY
2012 (4) SA 593
(SCA) at
603F.
Refer
also to the following
dictum
of
Conradie JA in
LLOYDS
OF LONDON v SKILYA
PROPERTY INVESTMENTS (PTY) LTD
[2004]
1 ALL SA 386
(SCA) at para [14]:
“
Sophisticated
semantic analysis is not the best way of arriving at an understanding
of what the parties meant to achieve by [the
provision in their
agreement]. A better way is to look at what, from the point of view
of commercial interest, they hoped to achieve
by [that] provision.”
This
dictum
found
approval in
TRUSTEES, BUS INDUSTRY RESTRUCTURING FUND v BREAK
THROUGH INVESTMENTS CC AND OTHERS
2008 (1) SA 67
(SCA) at
para [14] and the
dictum
by Brand JA in this judgment at para
[21] to the effect that if an alternative interpretation is
available, a court will not accept
a meaning which would lead to
absurd practical and commercial consequences.
THE
COMPANIES ACT
71 OF 2008
[29] A shareholder or
director of a company may apply to the court for relief from
oppressive or prejudicial conduct or abuse of
separate juristic
personality of a company.
Section 163
of the
Companies Act provides
protection in this regard. The powers of the court are very wide and
it may make any order “it considers fit”. See
section
163(2).
Although not specifically mentioned in
section 163(2)
, a
court could, e.g. order that the majority purchase the shares of the
minority or that the majority sell their shares to the
minority. See
Henochsberg on the
Companies Act
>, 71 of 2008, Vol 1, p 573 and
MULLER v LILLY VALLEY (PTY) LTD
[2012] 1 ALL SA 187
(GSJ) at 199e.
[30] It is also possible
for a shareholder or director of a company to utilise the statutory
derivative action procedure of
section 165
of the
Companies Act in
order to obtain leave from the court to bring proceedings in the
company’s name.
Section 166
introduced a brand new form of
alternative dispute resolution and could be utilised
in casu.
APPLICATION OF THE
LAW TO THE FACTS
[31] It is not the
applicants’ case on the papers that they sold 51% of their
shares in Centrepoint to respondents. In any
event, no consideration
has been agreed upon, either in the alleged oral agreement or the
written cession agreement. Insofar as
no consideration has been
agreed upon, no sale could have been effected. The total amount to be
paid by respondents in financial
assistance of Centrepoint was also
not agreed to when the parties entered into their agreements and was
also not objectively determinable.
Would it be applicants’ case
that a sale of shares was entered into with respondents, such
transaction would have been null
and void and unenforceable in that
one of the
essentialia
of a sale has not been agreed upon.
[32] It is trite that
first applicant negotiated also on behalf of Centrepoint pertaining
to the financial assistance required by
Centrepoint, but when the
alleged oral agreement was entered into, on his version, he merely
acted on behalf of his trust, whilst
first respondent acted on behalf
of his trust. Centrepoint is not referred to at all at that stage as
being represented by either
of the parties. However, respondents
admitted the oral agreement although it is their case that this
agreement was superseded by
the written cession agreement and that
applicants could not rely on a repudiation or breach of that
agreement and cancellation
thereof. Insofar as the oral agreement was
entered into to provide financial assistance to Centrepoint (who was
not a party thereto),
the oral agreement could well be defined to be
a
stipulatio
alteri
or a contract for the benefit of a
third party.
[33] Insofar as first
respondent and/or his trust promised to provide financial assistance
to Centrepoint in the oral agreement,
the entering into of the
written cession agreement could be regarded as Centrepoint’s
acceptance of the benefits contractually
agreed upon for and on its
behalf earlier. Both trusts and Centrepoint are parties to the
written cession agreement.
[34] I do not agree with
Mr Vorster’s argument that the oral agreement should be seen as
the obligationary agreement and the
written cession agreement as the
act of transfer. It is apparent from the written cession agreement
that it was not only an act
of transfer, as he conceded, but deals
with the obligations of the parties as well. It must also be
remembered that first respondent
was indeed appointed as director
pursuant to the oral agreement and consequently it was not necessary
to deal with issues pertaining
to directorship again in the written
cession agreement. I also do not agree with Mr Vorster that the oral
agreement induced one
of the parties to enter into the so-called main
agreement, i.e. the written cession agreement and that the oral
agreement may therefore
be proved. It is clear that the parties
agreed that the written cession agreement would embody all terms and
obligations pertaining
to the cession of shares and the financial
assistance to be given to Centrepoint and clause 9.4 thereof
prohibits evidence pertaining
to the prior or collateral oral
agreement.
[35] Even if I am wrong
in this regard, it is apparent from the oral agreement that first
respondent personally had to approve a
viable development project
budget and authorise all payments due and payable by third
respondent. The effect hereof is that the
initial budget as well as
later amendments had to be approved by first respondent. It also
means that third respondent had to resolve
which commitments and
contractual obligations should be incurred as third respondent could
not become liable for payment of any
amounts to third parties unless
it contractually agreed to accept liability. Applicants have not
proven that the revised budget
has been approved by first respondent
and that third respondent resolved to accept it. Third respondent did
not resolve to appoint
a joint venture consisting of HBT and DLR as
building contractors. This is to name just two issues. In fact first
respondent and
his trust as majority shareholder in Centrepoint has
been sidelined. Having read through the May and June 2012 minutes
relied upon
by applicants, and although the correctness thereof are
disputed by respondents, it is apparent that first applicant has
played
a major role in dealing with the professional team and
building contractors. In fact, first applicant is described as the
managing
director in the minutes of 4 May 2012 with the right to
certify payments, totally contrary to the oral agreement that
applicants
so heavily rely on. First applicant is recorded in clause
3.2.1 of these minutes to have said the following:
“
PG
(first applicant) provided the meeting with his understanding of the
responsibilities of the members of Centrepoint and indicated
that he
was of the opinion that he was in certain areas restricted to perform
his duties as managing director. A discussion followed
whereby LT
(first respondent) indicated that he would still require and had the
authority to approve payments.”
I quote the following
from paragraph 3.2 of the same minutes:
“
JJ
will check the same (schedules for payments) and present the approved
payments together with all the individual invoices to PG
for
certification and payment by Centrepoint.”
At clause 3.4 the
following is minuted:
“
It
was confirmed that PG (first applicant) is the implementation
director of Centrepoint and LT (first respondent) will be copied
with
all relevant correspondence and information regarding payment to the
contractors...”
In the minutes of 8 June
2012 the correctness which is also in dispute the following is
minuted:
“
4.4.
LT explained that he the first trustee of 4120 Trust and he is
responsible for the risk which is taken. He also has the
responsibility
towards the trust and that he cannot make decisions
without the second trustee which is Mr Schultze.
4.5. LT also stated that
he has 51% shareholder in Centrepoint had no part in the discussions
where it was decided that DLR will
take over the contract from HBT.”
[36] In an e-mail by
first respondent to first applicant dated 21 June 2012 first
applicant was informed that “DLR must remover
their stuff from
the site because I cannot and will not sign any contract with them”.
DLR is the contractor appointed for
the project to be entering into a
joint venture with HBT, the initial contractor, but whose appointment
has never been agreed to
by either Centrepoint or respondents as the
majority shareholders of Centrepoint. In a letter in response to the
letter of demand
respondents’ attorneys wrote the following:
“
6.
Under these circumstances, our clients cannot be expected to proceed
with the development, as it would mean giving carte blanche
to your
client and the architect and our clients must foot the bill.
We really want to suggest
that your client put on the table an acceptable proposition with
acceptable timetables. Another look must
also be taken to put out
fresh tenders to obtain the services of a building contractors firm.”
I do not intend to repeat
the facts relied upon by respondents, as indicated above and which
are indicative of respondents’
unhappiness with the way that
Centrepoint and respondents were effectively cut out from being
involved in the project, save insofar
as respondents must proceed
with financing of Centrepoint and the development.
[37] After consideration
of the facts presented by the parties, together with the terms and
conditions of the agreements relied
upon by applicants, I am not
persuaded that respondents repudiated either or both agreements or
breached any of the terms of either
or both agreements to such an
extent that it warranted applicants to cancel the agreements.
Respondents acted within their rights
to withhold further financing
pending resolution of Centrepoint’s internal problems. Their
actions cannot be interpreted
to indicate a deliberate and
unequivocal intention no longer to be bound. Third respondent has a
management problem as vividly
explained by respondents which has to
be sorted out internally and if applicants as minority shareholders
are dissatisfied with
the outcome of meetings to be held in this
regard, they would be fully entitled to utilise the appropriate
procedures in the
Companies Act referred
to above.
[38] Even if I am wrong
and repudiation or breach of contract has been proven, Centrepoint as
the financier’s beneficiary,
and not applicants, had the
prerogative to cancel the agreement(s) if the written cession
agreement is interpreted in order to
ensure businesslike results and
looking at it from the point of view of commercial interest the
parties tried to achieve. Applicants
are also not entitled to
restitution on the basis as claimed in prayer 4 of the notice of
motion. Centrepoint, or any of the third
parties that received
payment, were never appointed as applicants’ agents and it is
clear that no amounts were paid by respondents
to applicants
directly. There is nothing that applicants are legally entitled to
pay back and the facts
in casu
are totally distinguishable
from the facts in
BAKER v PROBERT
,
loc cit
. The
amounts paid on behalf of Centrepoint were paid for the benefit of
Centrepoint as developer. Applicants relinquished 51% of
the shares
in the company, probably in the belief that they would eventually
gain substantially in the future and once the project
is completed
successfully with the assistance of the financier.
[39] Applicants referred
in the letter of demand to respondents’ failure and/or refusal
to sign documents pertaining to a
loan granted by Nedbank to
Centrepoint. However, no evidence whatsoever was placed on record in
the founding affidavit and no case
has been made out that they
repudiated any agreements or are in breach of any agreements based on
failure in this regard as well.
There is no indication who applied
for the loan, the amount that has been granted and applicable
conditions.
[40] To sum up, I have
come to the conclusion that no deed of sale in respect of the shares
in Centrepoint was entered into between
the parties and that no
reciprocal rights and obligations were agreed upon between applicants
and respondents. No repudiation or
breach of contract has been proven
and applicants were not entitled to cancellation. In any event
Centrepoint, and not applicants,
had the prerogative to cancel and
claim relief. Restitution should not be ordered and applicants are
not entitled to re-cession
of the 51% shares in Centrepoint against
payment of the amount paid out by respondents for and on behalf of
Centrepoint. The conflict
between the parties should be dealt with
within the company structures of Centrepoint and if the differences
cannot be solved,
the procedures of the
Companies Act may
be
utilised. The mere fact that applicants are not granted relief herein
as requested, does not mean that they are without any
recourse
whatsoever as an alternative remedy or remedies are available.
RELIEF
[41] As indicated above,
applicants are entitled to rectification and prayer 2 of the notice
of motion should be granted. For the
reasons advanced herein,
applicants cannot succeed with the relief claimed in prayers 3 and 4
of the notice of motion.
COSTS
[42] Respondents made it
clear that it was not necessary to approach the court on an urgent
basis or at all to obtain rectification
as they would accede to a
request in this regard. Although applicants obtained partial success,
it is, based on the allegations
made by respondents apparent that the
application could be prevented, was it not for the fact that
applicants insisted throughout
that they were entitled to
confirmation of their cancellation of the agreements and restitution.
There is no reason why applicants
should not bear the costs of the
application.
ORDER
[43] The following orders
do issue:
43.1. The written cession
agreement entered into between the parties is rectified in accordance
with prayer 2 of the notice of motion.
43.2. Save for the above,
the application is dismissed with costs.
______________
J. P. DAFFUE, J
On behalf of applicants:
Adv J P Vorster SC
Instructed by:
Naudes
BLOEMFONTEIN
On behalf of respondents:
Adv S J Reinders
Instructed by:
Rosendorff Reitz Barry
BLOEMFONTEIN
/eb/sp