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2012
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[2012] ZAKZDHC 76
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Dazzletide Trading (Pty) Ltd v Yusuf Ismail Attorneys Incorporated and Others (1413/2012) [2012] ZAKZDHC 76 (2 November 2012)
IN
THE HIGH COURT OF SOUTH AFRICA, DURBAN
REPUBLIC
OF SOUTH AFRICA
Case
no.: 1413/2012
In
the matter between:
DAZZLETIDE TRADING (PTY) LTD
............................................................
Applicant
and
YUSUF ISMAIL ATTORNEYS INCORPORATED
...........................
First
Respondent
ISMAIL YUSUF
...........................................................................
Second
Respondent
YELLOWSTAR PROPERTIES 1067 (PTY)
LTD
............................
Third
Respondent
JUDGMENT
Date of Judgment: 02
November 2012
Vahed J:
The applicant, in motion proceedings,
claims payment of the sum of R1 934 927,72, together with
interest thereon, as a consequence
of the cancellation of an
agreement relating to the intended acquisition by it from the third
respondent of certain immovable
property. The amount claimed
represents the balance of the deposit paid by it to the third
respondent in terms of that agreement.
On 11 March 2011 the applicant and
the third respondent concluded a written agreement of purchase and
sale in terms of which the
applicant purchased certain immovable
property from the respondent for a price of R17,6 million plus VAT.
It is not disputed that in terms of
that agreement:-
3.1. A deposit of R2 064 000,00 was
payable by the applicant into the trust account of the first and
second respondents, they being
the attorneys mandated to deal with
conveyancing and related aspects of the sale;
3.2. That that deposit was to be held
in an interest bearing account until the date of registration of
transfer;
3.3. That that deposit would be
invested and interest acccruing thereon would be for the benefit of
the applicant;
3.4. That in the event of a breach by
the third respondent the applicant was obliged to give the third
respondent notice to remedy
that breach within seven days failing
which the applicant would acquire a right to cancel the agreement;
3.5. That that deposit was paid into
the attorneys trust account on 14 March 2011;
3.6. That in due course the agreement
was cancelled by the applicant;
3.7. That of the deposit a sum of R129
072, 28 was refunded to the applicant leaving a balance in the amount
now claimed.
After the exchange of affidavits the
application was, by agreement, withdrawn against the first and
second respondents. The reason
for that withdrawal has not been
disclosed to the court or the third respondent. Nothing turns on
that.
The material portion of the agreement
(concerning payment) is paragraph 5 thereof. I repeat it below,
retaining all the grammatical,
punctuation and other errors:-
“
5.
PAYMENT
5.1.
Payment of the purchase price by the PURCHASER shall (save only as is
otherwise agreed in writing with the SELLER) be made
in the following
manner:
5.1.1.
R2 064 000 (two million, and sixty four thousand rand) including VAT
as 10% DEPOSIT shall be lodged with the ATTORNEYS in
cash OR
transferred into his account within 3 (three) days of signing of this
agreement.
5.1.2.
The sum referred to in 5.1.1 shall be paid to the ATTORNEY, and shall
be held in TRUST in an interest bearing account until
the EFFECTIVE
DATE, when the said sum shall be paid over to the SELLER, Any
interest earned shall be benefit of the purchaser.
5.1.3.
The PURCHASER to assist in arranging with its bankers a bridging
finance of R5 700 000 (five million seven hundred thousand
rand)
which includes VAT shall be transferred into the Trust Account of the
ATTORNEY within 5 days of signing of this agreement.
5.1.4.
The SELLER to bear the cost of bank charges and any other bank cost
for this finance.
5.1.5.
The balance of R12 300 000 (twelve million, three hundred thousand
rand), which is INCLUSIVE of Value Added Tax shall be
paid
immediately on the EFFECTIVE DATE to the SELLER.
5.1.5.1.
The sum referred to in 5.1.3 shall be paid in cash or directly
transferred into the account of the ATTORNEY and shall not
be subject
to a suspensive condition with respect to a first mortgage bond over
the PROPERTY.
5.1.5.2.
A bank guarantee issued by a registered financial institution on
behalf of the PURCHASER shall be delivered to the ATTORNEY
within 7
(seven) days of signing of this agreement.
5.2.
In the event that the PURCHASER occupies the PROPERTY at any time
prior to the registration of transfer or the EFFECTIVE DATE,
the
PARTIES agree that they shall enter into a Supplementary Agreement,
governing such occupation.
5.3
VAT OR TRANSFER DUTY
5.3.1
VAT
5.3.1.1
The SELLER records that:
i)
It is a registered Vendor;
ii)
It is not carrying on a Vat enterprise in respect of the PROPERTY;
iii)
The PURCHASER is not a Vat Vendor;
iv)
The PARTIES record and agree:
The
PROPERTY is capable of separate operation, disposed of as a
non-going concern until transfer.
v)
In terms of the provisions of Section 11(1) (e) of the VAT Act, as
amended, the transactions contemplated in this Agreement are
not zero
rated, the Purchase Price does not include VAT
vi)
If, notwithstanding the provisions contained herein, VAT is not or
becomes payable by the SELLER in respect of any of the transactions
contemplated in this Agreement at a rate other than zero percent,
then the Purchase Price as stipulated in Clause 4.1 herein shall
be
exclusive of VAT and the PURCHASER shall pay the VAT.
5.3.2
TRANSFER DUTY
5.3.2.1.
The PARTIES record that, in the event of the SELLER not being
registered VAT Vendor as envisaged in the preceding Clause,
and
transfer duty becoming payable on the Purchase Price, then in such
event transfer duty shall be paid by the PURCHASER.
5.4
RATES AND TAXES
5.4.1.
The SELLER warrants that he shall settle all outstanding or back
Municipal rates, water or electricity that are owing on
the PROPERTY,
up to and including the EFFECTIVE DATE. Should the said payment of
these aforementioned fees not be forthcoming from
the SELLER within 7
(seven) days written notice from the ATTORNEY to pay the said fees,
then the SELLER hereby authorises the ATTORNEY
to pay these fees out
of the proceeds of the sale, so that Registration of Transfer is not
unduly delayed.
5.4.2.
The SELLER warrants that it has no outstanding Taxes due by the
SELLER to the South African Revenue Services. Should the
said payment
of these aforementioned taxes not be up to date or forthcoming from
the SELLER within 7 (seven) days written notice
from the ATTORNEY to
pay the said taxes, then the SELLER hereby authorises the ATTORNEY to
pay these taxes out of the proceeds
of the sale, so that the
Registration of Transfer is not unduly delayed.”
There was no time period fixed for
the third respondent’s obligation to effect transfer of the
immovable property. In the
result that obligation had to be
performed within a reasonable time. That much was also common cause.
After the lapse of a period in excess
of six months, the applicant delivered notice to the respondent on
20 September 2011 calling
upon it to perform in terms of the
agreement and proceed with giving effect to the obligation to
transfer. That notice complied
with the agreement and warned of the
applicant’s intention to cancel the agreement should the third
respondent fail to
comply with the demand contained therein. The
third respondent did not comply and on 14 December 2011 the
applicant notified
the third respondent of its election to cancel
the agreement. A demand then ensued for a refund of the deposit paid
by it to
the third respondent.
After some “to-ing and fro-ing”
the sum of R129 072, 28 was paid to the applicant on 3 January 2012.
In response to the applicant’s
claim for a refund of the balance of the deposit the third
respondent contended that certain
disbursements had been made by it
from the deposit contending further that it was entitled to do so
because of the provisions
of clause 5.4 of the agreement, and
alternatively and in any event, because those disbursements were
orally authorised by a director
and representative of the applicant.
It is trite that on cancellation of
an agreement the law requires the parties thereto to make
restitution of part performance.
See
Baker v Probert
1985 (3)
SA 429
(A) at 446 D –I
.
In the letter of 14 December 2011 in
terms of which the applicant cancelled the contract it was intimated
that the applicant would
claim damages as a result of the
cancellation. That letter also recorded that what was stated therein
was without prejudice or
any other rights that the applicant might
have.
In resisting the relief sought, the
third respondent contended:-
12.1. That the applicant ought to have
proceeded by way of action by virtue of the threat to claim damages
in its letter of cancellation;
12.2. That the applicant elected to
sue for specific performance at first and only thereafter elected to
cancel the agreement;
12.3. That the applicant was estopped
from relying on the unauthorised use of the deposit;
12.4. That the third respondent was
entitled to utilise the deposit before registration and transfer in
terms of clause 5.4.1 of
the agreement, alternatively by virtue of
the oral authority allegedly given;
12.5. That the applicant was itself in
breach of the agreement by failing to supply the third respondent
with bridging finance in
the sum of R5,7 million.
I deal with each of these in turn.
The applicant’s claim is not a
claim for damages but is one for restitution of part payment of the
purchase price. That
is a contractual remedy and is clearly
distinguishable from a remedy in damages.
Baker v Probert, supra,
at 438 H – 439 A
.
See also
National Sorghum v
International Liquor
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA) at 239 H – 240
A. In my view the additional threat indicating an intention to claim
damages is of no moment and the
applicant, upon cancellation, had
available to it any and all of the remedies available to it
consequent upon a termination.
This application evidences its
election to restrict its claim to that of restitution. In any event
further the letter of cancellation
pertinently recorded that what
was stated therein was not an exclusive memorial of its intended
actions consequent upon cancellation.
In the earlier letter calling upon
the third respondent to remedy the breach the applicant demanded of
the third respondent that
it proceed with the transfer of the
immovable property into the applicant’s name. That in my view
does not constitute an
election of the available courses of action
that the applicant had consequent upon cancellation. That notice was
nothing more
than a required step to place the third respondent
in
mora
coupled with a notification of an intention to cancel. In
addition, it in no way creates an estoppel.
The reliance on clause 5.4.1 of the
agreement is also misplaced. In its terms that clause entitles the
seller, ie.
the third respondent
, to authorise the attorneys
to utilise the proceeds of the sale to settle certain debts payable
by the seller to the municipality.
The deposit paid by the applicant
does not qualify as “proceeds of the sale” until the
effective date, i.e. the date
of registration of transfer. It is
clear from the reading of paragraph 5.1.2 of the agreement that the
deposit remained the property
of the applicant until the date of
transfer. The reference in paragraph 5.4 to the proceeds of the sale
is perhaps a reference
to clause 5.1.3 which required the purchaser
to make available bridging finance. On the face of it the third
respondent and its
attorneys were not entitled to make any payments
due to the municipality by the third respondent from the deposit
which was to
be held in trust. This defence is closely related to
the defence that the applicant was in breach of the agreement by
failing
to pay over the bridging finance foreshadowed in clause
5.1.3 of the agreement. While it is factually correct that the
applicant
did not pay that sum over to the attorneys, the third
respondent took no steps to avail itself of the breach provisions in
the
agreement and make a demand of the applicant or to place it
in
mora
with regard to its failure to pay over the bridging
finance. In any event the disbursements made by the third respondent
from
and out of the deposit paid by the applicant extended to
payments made to entities other than the municipality and not
confined
to those debts catered for in clause 5.4.1.
Finally there is the defence raised
by the third respondent that it had oral authorisation from the
applicant’s representative
to utilise the deposit in the
manner that it did. This is denied by the applicant. Quite apart
from the fact that that dispute
is not one convincingly raised on
the papers, the third respondent, on this score, is non-suited by
the terms of the agreement
itself which provided for variations and
deviations from the written terms of the agreement to be recorded in
writing and signed
by the parties to be binding and effective.
In the result I find that all of the
defences raised are bad in law or in fact, or both, and that the
applicant is indeed entitled
to restitution.
That the applicant was entitled to
the interest that it would have earned on the deposit is not
seriously disputed on the papers
and neither is there any suggestion
that the rates of interest claimed are not those provided for in the
agreement. Indeed, this
aspect was not dealt with at all in
argument. In the result judgment must be granted in the applicants
favour.
I make the following order:-
The third respondent is directed to
pay to the applicant:-
The
sum of R1 934 927,72;
Interest
on the sum of R2 064 000,00 from 11 March 2011 to 14 December 2011
at the rate of 3,9 percent per annum;
Interest
on the amount of R2 064 000,00 at the rate of 15,5 percent per annum
from 14 December 2011 to 3 January 2012;
Interest
on the amount of R1 934 927,72 from 3 January 2012 to date of
payment at the rate of 15,5 percent per annum;
Costs
of suit on the scale as between attorney and client, such costs to
include all costs previously reserved in the matter.
_______________________
Vahed
J
CASE
DETAILS:
Date
of Hearing : 17 October 2012
Date
of Judgment : 02 November 2012
For
the Applicant : D W Finnigan
Instructed
by : KG Tserkezis Inc
c/o
Stirling Attorney
42
Laurel Road
Glenwood
Durban
Tel:
031 205 4975
For
the Third Respondent : Attorney R Maniklall
Ravindra
Maniklall & Company Inc
c/o
Lockhat Attorneys
6
th
Floor Royal Towers
30
Dorothy Nyembe Street
Durban