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[2011] ZAKZDHC 16
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Dezzo Projects CC v Victory Parade Trading 81 (Pty) Ltd (967/2010) [2011] ZAKZDHC 16 (26 February 2011)
1
NOT REPORTABLE
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
CASE NO. 967/2010
In the matter between:
DEZZO PROJECTS CC
.....................................................................................
Applicant
and
VICTORY PARADE TRADING 81 (PTY) LTD
…...........................................
Respondent
__________________________________________________________________
JUDGMENT
__________________________________________________________________
GORVEN J:
The applicant seeks to enforce a
settlement agreement concluded with the respondent. It is common
cause that this agreement was
concluded by way of an interchange of
correspondence between the two sets of attorneys representing them
in a dispute. The dispute
arose as a consequence of a contract
concluded between the parties. This involved the applicant
commencing construction work
for the respondent. The contract was
cancelled. The applicant says that this was because the respondent
failed to settle two
payment certificates. A dispute ensued as to
whether the applicant was entitled to exercise a builder’s
lien and as to
what payment, if any, was due. This dispute resulted
in the settlement agreement.
The terms of the settlement were that
the respondent would pay the applicant R 400 000.00 in full and
final settlement of the
applicant’s claim. This was to be paid
on 16 October 2009. It seems likely that this latter aspect was
varied by way of
a request from the respondent on 13 October 2009
for a tax invoice to be rendered in that sum. The applicant acceded
to this
request. The tax invoice, dated 21 October 2009, was
despatched, first by telefax on 22 October 2009 and thereafter by
Docex
on 16 November 2009. I will assume that it was received no
later than 17 November 2009.
The respondent opposed the
application. In its answering affidavit it claimed that the
applicant caused the building to encroach
on the municipal building
line. It further claimed that, at the time the settlement agreement
was concluded, it was unaware of
this. It asserted that the
applicant must have or should have been aware of the encroachment.
It will be useful to set out precisely
what the respondent said in
this regard, since it forms the basis for the only defence raised.
Paragraphs 9 to 14 are set out
below without any corrections:
9.
During the course of such
settlement negotiations and indeed at the time the agreement of
settlement which forms the subject matter
of the application was
concluded the respondent and I as its duly authorised representative
in relation to its Ambassador Hotel
project were not aware that in
the construction work that had already been completed by the
applicant, it, the applicant had encroached
upon the building line
ie. it had gone beyond the point to which it was permissible by law
for construction to extend.
10.
The said encroachment and
breach of the building regulations is serious and material as
described in the expert report, annexed
hereto, marked “B".
I respectfully request that this report be read as if specifically
incorporated herein.
11.
The applicant must have
been aware as at the date when the agreement of settlement was
concluded that there was this major defect
in the construction work
which it had rendered for the respondent. However, it did not draw
such defect to the attention of the
respondent or to me as the
respondent’s duly authorised representative. This constitutes
intentional misrepresentation through
such non-disclosure.
12.
Had the respondent ie.
through me or otherwise been aware of such major defect in the
construction work rendered by the applicant,
the respondent would
most certainly not have concluded the agreement of settlement in
terms whereof it agreed to pay to the applicant
the sum of R 400
000.00 including VAT.
13.
Should the applicant
attempt to argue that it was unaware of this major defect in its
workmanship, this would be incredulous, as
the most basic requirement
relating to construction work is to ensure that the structure being
constructed is erected where it
is supposed to be.
14.
14.1 It is precisely for
this reason that I did not focus on this aspect during the course of
such construction or thereafter during
the course of settlement
negotiations and indeed as at the date when the settlement agreement
was concluded. I discovered this
major defect just before the time
when the respondent was to make payment of the said sum of R 400
000.00 including VAT to the
applicant, pursuant to the agreement of
settlement.
14.2 I then commenced
investigating the implications of such major defect and the costs of
remedying same, if that were possible
and for that reason the said
sum of R 400 000.00 was not paid.
These were the only averments
concerning the defence. The report annexed was not supported by way
of an affidavit deposed to by
the author. In addition, a diagram
said to have been prepared by a land surveyor was annexed to the
report. The report based
its conclusions on this diagram but no
affidavit by the land surveyor was put up. No application was
brought to have this evidence
admitted under
s 3(1)
of the
Law of
Evidence Amendment Act 45 of 1988
.
The respondent went on to aver that
the applicant had intentionally failed to disclose that such a major
defect existed. This,
it said, amounted to a misrepresentation. It
averred in the alternative that if the applicant was negligent in
encroaching upon
the building line but was not aware that it had
done so, this would also vitiate consent to the settlement agreement
on the part
of the respondent.
The applicant, in reply, denied
paragraphs 9 and 10 set out above. It said that the project was
still at an early stage when its
work was stopped. The applicant
further stated that it had commenced construction in accordance with
the pegs placed on the site
by the surveyors appointed by the
respondent. The applicant said that it could not have become aware
of any such alleged encroachment,
since the stage in the
construction had not been reached when the applicant would normally
have checked and cross checked measurements
on the ground floor
before proceeding to the next floor. The applicant further made the
point that the respondent, unlike the
applicant, had had every
opportunity to investigate the position prior to concluding the
settlement agreement. At that stage,
the respondent was in
occupation of the building site and had been for some four to five
months. The applicant then referred
to a report, commissioned by it
as a result of the answering affidavit of the respondent, from Singh
& Associates who are
topographical engineers and GPS surveyors.
According to this report, which was also not covered by an
affidavit, the applicant
said that "the only so called
encroachments that [Singh & Associates] could find in respect of
the alleged boundary
line was that column number 3 is of a slightly
enlarged thickness, which could easily have been remedied by the
Applicant, had
it been on site." It can therefore be seen that
the applicant’s reply did not admit that any encroachment
occurred.
It talked of "so called encroachments" and an
“alleged boundary line". The respondent did not apply to
submit
a further affidavit dealing with these averments.
In summary, therefore, the applicant
said the following:
It disputed that the construction
work done by it encroached on the building line.
It did not know at the time of
concluding the settlement agreement that the construction work may
have encroached on the building
line.
There was no means for it to have
established if the construction work done by it encroached on the
building line since it set
out the work according to pegs placed
there by a surveyor and did not reach the stage in the project
where it would have conducted
any independent checks.
The heads of argument submitted on
behalf of the respondent submitted that a tacit term should be
imported into the settlement
agreement to the effect that, if the
underlying assumption of the parties that the building works carried
out by the applicant
did not encroach on the building line was not
correct, the contract would not be binding. This appears to have
been based on
some form of mutual mistake such as was dealt with in
the dicta in
Gollach &
Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co (Pty)
Ltd & others
1
to the following effect where the
court approved the following passage in Williston on
Contracts
2
:
It should be observed,
however, that even a compromise may be based on the assumed existence
of some fact, and then may be set aside
for mutual mistake as to such
basic assumption like any other contract.
The underlying reasoning for this
approach was elaborated on in
Wilson
Bayly Holmes (Pty) Ltd v Maeyane & others
3
where the following was said:
Both in the case of a
mistake going to motive, and a mistake relating to an underlying
assumption, what is in issue is a mistaken
belief by the parties at
the time they contract that a particular state of affairs exists.
What determines whether the contract
is invalid is whether the
parties have agreed, expressly or tacitly, that this should be the
consequence if the state of affairs
does not exist.
The submission in the heads of
argument to the effect that a tacit term had to be imported relating
to the underlying mistaken
assumption of the parties as to a lack of
encroachment was abandoned by Mr
Kissoon Singh, SC
, who did
not prepare the heads of argument but who appeared for the
respondent at the hearing. I therefore need say nothing more
on that
score other than that, in the light of the evidence, I consider this
concession to have been properly made in the circumstances.
The submission of Mr
Kissoon Singh
in argument was along the lines set out in the answering affidavit
to the effect that there had been a material non-disclosure
amounting to a misrepresentation on which the respondent had relied
in concluding the settlement agreement. This therefore vitiated
the
settlement agreement. He conceded that the non-disclosure had not
been fraudulent but contended for either a negligent or
innocent
non-disclosure.
It is so that silence can amount to a
misrepresentation. There is, however, no general rule in our law
that all material facts
must be disclosed and that any
non-disclosure therefore amounts to misrepresentation by silence.
4
The underlying rationale for this
approach was explained in
ABSA
Bank Ltd v Fouche
5
in the following words:
That accords with the
general rule that where conduct takes the form of an omission, such
conduct is
prima facie
lawful (
BOE Bank Ltd v Ries
2002
(2) SA 39
(SCA) at 46G - H). A party is expected to speak when the
information he has to impart falls within his exclusive knowledge (so
that in a practical business sense the other party has him as his
only source) and the information, moreover, is such that the right
to
have it communicated to him 'would be mutually recognised by honest
men in the circumstances' (
Pretorius and Another v Natal South Sea
Investment Trust Ltd (under Judicial Management)
1965 (3) SA 410
(W) at 418E - F).
The court went on, in relation to
actionable misrepresentations, to say the following:
6
Having established a duty
on the defendant to speak, a plaintiff must prove the further
elements for an actionable misrepresentation,
that is, that the
representation was material and induced the defendant to enter into
the contract. In the case of a fraudulent
misrepresentation, that
must have been the result intended by the defendant (
Ex parte
Lebowa Development Corporation Ltd
1989 (3) SA 71
(T) at 103F -
J).
In relation to the non-disclosure
contended for in the present matter, therefore, the following is the
position. First, the applicant
must have had actual knowledge of the
encroachment relied upon by the respondent. Secondly, there must
have been a duty to disclose
that fact to the respondent. Put
another way, the respondent must have been in a position where it
had perforce to rely on the
applicant in order to obtain knowledge
of the encroachment. Thirdly, this non-disclosure must have been
material. Fourthly, it
must have induced the respondent to conclude
the settlement agreement.
As regards the first of these, Mr
Kissoon Singh
submitted that the applicant must have been
aware of the encroachment since it was a specialist in the field.
Apart from the
obvious question whether the respondent established
that there was in fact an encroachment and assuming in its favour
that it
did, without deciding the point, the difficulty with this
submission is that the respondent put up no evidence in support of
it. It did not say, for example, that the applicant had itself
established the location of the beacons on the property in order
to
set out the building works. It did not even say that the applicant
had not built according to the plan given to it by the
respondent.
The replying affidavit says that the applicant did not have the
opportunity, whilst doing the work or at any time
prior to
concluding the settlement agreement, to check the measurements set
out by the surveyor who had marked out the site with
pegs on behalf
of the respondent. This evidence was not contradicted or challenged
by the respondent. It did not gainsay the
applicant’s evidence
that it commenced the work in accordance with the surveyor’s
pegs placed on the site or claim
that the applicant knew that these
pegs had been incorrectly placed. In short, that the applicant must
have had knowledge was
a bare assertion made by the respondent
without any factual foundation. I can accordingly find no basis for
concluding that the
applicant had knowledge of the encroachment
alleged by the respondent at the time the settlement agreement was
concluded.
As regards the second of these, it is
clear that the respondent was in occupation of the site at the time.
It gave no evidence
why, despite the dispute regarding payment for
the work done by the applicant, it was obliged to rely on the
applicant’s
knowledge of the encroachment, even assuming that
it had proved that the applicant possessed that knowledge. On the
contrary,
the applicant stated that only the respondent was in a
position to obtain that knowledge by the time the settlement
agreement
was concluded. There can therefore be no finding that, in
the case of the settlement agreement, the respondent was placed in a
position of involuntary reliance on the knowledge of the applicant
about the encroachment and, accordingly, that a duty rested
on the
applicant to disclose any such knowledge had it possessed this
knowledge.
Even if I am wrong on whether the
applicant was aware of the encroachment at the time of the
conclusion of the settlement agreement
and as to the duty on the
applicant to disclose this, the misrepresentation must also be
material for it to vitiate a contract
as was submitted by Mr
Wallis
,
who appeared for the applicant. The only evidence is the concession
by the applicant in reply that the thickness of column 3
was not
within an acceptable tolerance. This does not amount to a material
misrepresentation. The applicant stated that this
could have been
easily and inexpensively remedied by the applicant if it was drawn
to its attention at the time it was on site.
The respondent relied
for materiality on the report annexed to the answering affidavit.
This sets out a number of permutations
which may result from the
alleged encroachment. The report does not mention which of these, in
the opinion of the writer, was
likely to happen. The permutations
range from a total demolition of the building to an application to
the municipality to relax
the building line. The lack of
particularity makes it impossible to find that any failure to
mention the encroachment was material.
It is therefore clear that the
respondent has failed to raise a basis on which it can be concluded
that the applicant is not entitled
to enforce the settlement
agreement.
It is common cause that a settlement
agreement was concluded between the parties which required the
respondent to make payment
to the applicant. The respondent has
failed to do so. In the result, I consider that the applicant is
entitled to the order prayed
for in the notice of motion. Interest
will run from the date on which the respondent received the tax
invoice, 17 November 2009.
The following order shall issue:
The respondent is directed to:
Make payment to the applicant in the
sum of R 400 000.00.
Pay interest on the said sum of R
400 000.00 at the rate of 15.5% per annum from 17 November 2009 to
date of payment.
Pay the costs of the application.
__________________________
GORVEN J
DATE OF HEARING: 15 February 2011
DATE OF JUDGMENT: 26 February 2011
FOR THE APPLICANT: Adv PJ Wallis,
instructed by
Garlicke & Bousfield Inc.
FOR THE RESPONDENT: Adv AK Kissoon
Singh SC, instructed by
Rakesh Maharaj & Company.
Locally represented by Pat
Poovalingham & Hassan.
1
1978
(1) SA 914
(A) at 923
2
3
rd
ed, vol 13, para 1543 pp 75-76
3
1995
(4) SA 340
(T) at 344A-B
4
Speight
v Glass
& another
1961 (1) SA 778
(D) at 781H
5
2003
(1) SA 176
(SCA) para 5
6
Para
6